Table of Contents
As filed with the Securities and Exchange Commission on May 24, 2007
Securities Act Registration No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ¨
Post-Effective Amendment No. ¨
RUSSELL INVESTMENT COMPANY
(Name of Registrant as Specified in its Charter)
1-800-787-7354
(Area Code and Telephone Number)
909 A STREET
TACOMA, WASHINGTON 98402
Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)
Mary Beth Rhoden
Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
(Name and Address of Agent for Service)
With a copy to:
John V. O’Hanlon
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, Massachusetts 02116
Approximate Date of Proposed Public Offering:
As soon as possible following the effective date
of this Registration Statement.
It is proposed that this filing will become effective on June 25, 2007 pursuant to Rule 488.
The title of the securities being registered is the Fixed Income I Fund.
No filing fee is required because an indefinite number of shares of the
Registrant have previously been registered on Form N-1A (Registration
Nos. 2-71299, 811-3153) pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Registrant’s Rule 24f-2 Notice for the fiscal year ended
October 31, 2006 was filed on January 29, 2007. Pursuant to Rule 429 under the
Securities Act of 1933, this Registration Statement relates to the shares
previously registered on the aforesaid Registration Statement on Form N-1A.
Table of Contents
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
909 A STREET
TACOMA, WASHINGTON 98402
1-800-787-7354
Dear Shareholder:
Enclosed is a Notice of Special Meeting of Shareholders of the Diversified Bond Fund (“Diversified Bond”), a sub-trust of Russell Investment Company (“RIC”). The Special Meeting has been called for October 3, 2007 at 10:00 a.m., local time, at the offices of RIC at 909 A Street, Tacoma, Washington. The accompanying Prospectus/Proxy Statement details the proposal being presented for your consideration.
The meeting will consider one proposal (the “Proposal”):
• | Shareholders are being asked to approve a proposed combination (the “Reorganization”) of Diversified Bond with the Fixed Income I Fund (“Fixed Income” and, together with Diversified Bond, the “Funds”); |
On the date of the Reorganization, Diversified Bond Shareholders will receive:
• | Class C Shares of Fixed Income with an aggregate value at the time the Reorganization is completed equal to that of their Class C Shares of Diversified Bond; |
• | Class E Shares of Fixed Income with an aggregate value at the time the Reorganization is completed equal to that of their Class E Shares of Diversified Bond; and |
• | Class S Shares of Fixed Income with an aggregate value at the time the Reorganization is completed equal to that of their Class S Shares of Diversified Bond on that date. |
After carefully studying the merits of the proposed Reorganization, the Board of Trustees of RIC has determined that consolidation of the Funds is in the best interests of each Fund’s shareholders. In connection with the proposed Reorganization, you should note the following:
• | The Reorganization is expected to qualify as a tax-free transaction. |
• | The value of your investment will not change as a result of the Reorganization. |
Subject to Shareholder approval, the Reorganization is expected to be completed on or about October 22, 2007 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on October 19, 2007, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds. If approved, the Proposal will be effective on the date that the Reorganization is completed.
In a separate document not included herewith, Shareholders of certain RIC funds, including Diversified Bond, are being asked to vote on an amendment to RIC’s Amended and Restated Master Trust Agreement which would allow the liquidation or reorganization of any sub-trust without the specific approval of the Shareholders of such sub-trust.
The enclosed materials provide details of the Proposal. Accordingly, a proxy card for the Special Meeting is enclosed. IT IS IMPORTANT THAT YOU COMPLETE, SIGN AND RETURN YOUR CARD AS SOON AS POSSIBLE TO ENSURE THAT YOUR VOTE IS COUNTED AT THE SPECIAL MEETING.
Sincerely,
Gregory J. Lyons
Secretary
Tacoma, Washington
July [ ], 2007
Table of Contents
RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS OF
DIVERSIFIED BOND FUND
TO BE HELD ON OCTOBER 3, 2007
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders (the “Shareholders”) of the Diversified Bond Fund (“Diversified Bond”), a sub-trust of Russell Investment Company (“RIC”), will be held at RIC’s offices located at 909 A Street, Tacoma, Washington, on October 3, 2007 at 10:00 a.m., local time, for the following purposes:
1. | To approve a Plan of Reorganization for Diversified Bond and Fixed Income I Fund (“Fixed Income”), each a sub-trust of RIC, providing that (i) Diversified Bond would transfer to Fixed Income all of its assets in exchange solely for voting shares of Fixed Income and the assumption by Fixed Income of Diversified Bond’s liabilities, (ii) such shares of Fixed Income would be distributed to Shareholders of Diversified Bond in liquidation of Diversified Bond, and (iii) Diversified Bond would subsequently be dissolved; and |
2. | To transact such other business as may properly come before the Special Meeting or any adjournment(s) thereof. |
The attached Prospectus/Proxy Statement provides more information concerning the Reorganization contemplated by the Plan of Reorganization, upon which Shareholders will be asked to vote. The Plan of Reorganization is attached as Exhibit A.
Shareholders of record as of the close of business on July 9, 2007, are entitled to notice of, and to vote at, the Special Meeting or any adjournment thereof.
By Order of the Board of Trustees, | ||
Gregory J. Lyons | ||
Secretary | ||
Tacoma, Washington | ||
July [ ], 2007 |
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING! WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR TAKE ADVANTAGE OF THE TELEPHONIC OR INTERNET VOTING PROCEDURES DESCRIBED ON THE PROXY CARD. IF YOU DESIRE TO VOTE IN PERSON YOU MAY REVOKE YOUR PROXY PRIOR TO THE MEETING. YOUR VOTE IS IMPORTANT. IF WE DO NOT HEAR FROM YOU AFTER A REASONABLE AMOUNT OF TIME, YOU MAY RECEIVE A TELEPHONE CALL FROM OUR PROXY SOLICITOR, COMPUTERSHARE FUND SERVICES, REMINDING YOU TO VOTE.
Table of Contents
COMBINED PROSPECTUS AND PROXY STATEMENT
DATED JULY [ ], 2007
FIXED INCOME I FUND
(a sub-trust of Russell Investment Company)
to acquire the assets of
DIVERSIFIED BOND FUND
(a sub-trust of Russell Investment Company)
909 A Street
Tacoma, Washington 98402
1-800-787-7354
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
AND THE PROSPECTUS/PROXY STATEMENT
General Information About the Proposal
This summary of the Prospectus/Proxy Statement is provided for your convenience and is qualified in its entirety by reference to the more complete information contained elsewhere in this Prospectus/Proxy Statement which you are urged to read. It is expected that this Prospectus/Proxy Statement will first be sent to Shareholders on or about July 26, 2007.
Q. | What is the purpose of this Prospectus/Proxy Statement? |
A. | You are receiving this combined Prospectus and Proxy Statement (the “Prospectus/Proxy Statement”) because you have the right to vote on an important Proposal concerning your investment in Diversified Bond as defined below. The Proposal is as follows: |
Shareholders are being asked to approve the reorganization of the Diversified Bond Fund (“Diversified Bond”) into the Fixed Income I Fund (“Fixed Income”) (the “Reorganization”), which is described below. Diversified Bond and Fixed Income are referred to herein as the “Funds.” Each of the Funds is a sub-trust of Russell Investment Company (“RIC” or the “Trust”). The Funds currently have identical investment objectives and comparable investment restrictions and policies. At the time of the Reorganization, shareholders of Diversified Bond (the “Shareholders”) will become shareholders of Fixed Income.
This Prospectus/Proxy Statement provides the information about Fixed Income that Shareholders should know in order to evaluate the proposed Reorganization. We suggest that you keep this Prospectus/Proxy Statement for your records and future reference. The following documents are incorporated by reference into this Prospectus/Proxy Statement (and are also attached if indicated). All documents may be obtained without charge by writing to the address shown above or by calling 1-800-787-7354.
— a Statement of Additional Information dated March 1, 2007, as supplemented May 24, 2007, relating to the Funds and a Statement of Additional Information dated May 24, 2007 relating to this Prospectus/Proxy Statement are on file with the U.S. Securities and Exchange Commission (the “SEC”) and are available upon request.
Table of Contents
— RIC’s Prospectus relating to Fixed Income and Diversified Bond, dated March 1, 2007, as supplemented May 24, 2007, is attached as EXHIBIT B.
— RIC’s Annual Report dated October 31, 2006 and RIC’s Semi-Annual Report dated April 30, 2007 relating to Fixed Income and Diversified Bond are available upon request.
Q. | How do the Trustees recommend that I vote for the Proposal? |
A. | The Trustees recommend that Shareholders vote FOR the Proposal. In determining whether to approve the Reorganization and to recommend their approval to Shareholders, the Trustees, including the independent Trustees, considered the potential impact of the Reorganization on the Shareholders and a variety of related factors, including, among others, (1) RIMCo’s advice that the Fund is not viable due to its small asset base and that the Fund is not expected to attract additional assets; (2) the expense involved in operating Diversified Bond as a stand-alone fund; (3) the compatibility of the investment objectives, policies and restrictions of the Funds; (4) the terms and conditions of the Plan of Reorganization, including provisions intended to avoid any dilution of Shareholder interests; (5) the fact the Diversified Bond Fund will pay all costs associated with the solicitation of proxies (however, since Diversified Bond is expected to operate above its stated expense cap, Russell Investment Management Company (“RIMCo”) would ultimately bear a portion of the costs of the proxy); (6) the brokerage costs that will be incurred by the Funds as a result of the Reorganization; (7) the fact that the Reorganization is intended to qualify as a tax-free Reorganization under federal tax laws; (8) the fact that the pro forma gross operating expenses of Fixed Income are estimated to be lower than the current gross operating expenses of Diversified Bond; (9) expense waiver and reimbursement obligations with respect to Diversified Bond will continue in effect until at least February 29, 2008 but are terminable by RIMCo on such date and annually thereafter; and (10) possible alternatives to the Reorganization. |
After careful consideration, the Board of Trustees has concluded that the Reorganization is in the best interests of the Fund’s Shareholders.
Information About Voting
Q. | Who is asking for my vote? |
A. | The Trustees of RIC have requested your vote on these matters at the special meeting of Shareholders (the “Special Meeting”). The Special Meeting will be held at 10:00 a.m., local time, on October 3, 2007, at the offices of RIC located at 909 A Street, Tacoma, Washington. RIC proposes to mail the Notice of the Special Meeting, the proxy card and the Prospectus/Proxy Statement to Shareholders on or about July 26, 2007. |
Q. | Who is eligible to vote? |
A. | Shareholders of record of Diversified Bond at the close of business on July 9, 2007 are entitled to notice of and to vote at the Special Meeting or at any adjournment of the Special Meeting on the Proposal. Shareholders of record will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold on each matter presented at the Special Meeting. |
General Information About the Funds
Q. | How are the Funds managed? |
A. | RIC is an open-end, management investment company organized under the laws of the Commonwealth of Massachusetts, with principal offices located at 909 A Street, Tacoma, Washington 98402. |
Under Massachusetts law, each Fund is a “sub-trust” of RIC. The management of the business and affairs of RIC is the responsibility of the Board. The Board oversees the Funds’ operations, including reviewing and approving the Funds’ contracts with the Funds’ investment adviser, RIMCo, and the Funds’ respective sub-advisers (“Money Managers”). RIC’s officers are responsible for the day-to-day management and administration of the Funds’ operations. The Money Managers are responsible for selection of individual portfolio securities for the assets assigned to them.
Table of Contents
RIMCo selects, subject to the approval of the Fund’s Board, Money Managers for the Funds, allocates Fund assets among Money Managers, oversees the Money Managers and evaluates the performance results. The Funds’ Money Managers select the individual portfolio securities for the assets assigned to them and either RIMCo or the Money Manager arranges for execution of portfolio securities transactions. RIMCo, as agent for RIC, pays the Money Managers’ fees for the Funds, as a fiduciary for the Funds, out of the advisory fee paid by the Funds to RIMCo. The remainder of the advisory fee is retained by RIMCo as compensation for the services described above and to pay expenses.
RIC has received an exemptive order from the SEC which permits RIMCo, with the approval of the Board, to engage and terminate Money Managers without a shareholder vote. If assets of Diversified Bond decline prior to the Special Meeting, which they are expected to do, certain Money Managers of Diversified Bond will be terminated, and Diversified Bond may only have a single Money Manager at the time of the reorganization.
Additional Information Regarding the Proposal
Q. | How do I vote my shares? |
A. | You may vote your shares in writing, by executing the enclosed proxy card and returning it in the envelope provided or by using the telephone or Internet voting procedures described in the proxy card. The giving of such a proxy will not affect your right to vote in person should you decide to attend the Special Meeting. To vote via the Internet, please access the website listed on your proxy card or noted in the enclosed voting instructions. To vote via the Internet, you will need the “control number” that appears on your proxy card. The Internet voting procedures are designed to authenticate Shareholder identities, to allow Shareholders to give their voting instructions and to confirm that Shareholders’ instructions have been recorded properly. If you vote via the Internet, you may incur costs associated with electronic access providers and telephone companies. |
Proxy cards that are properly signed, dated and received at or prior to the Special Meeting and proper voting instructions received via telephone or the Internet will be voted as specified. If you specify a vote for the Proposal, your proxy will be voted as you indicate. If you sign, date and return the proxy card, but do not specify a vote for the Proposal, your shares will be voted by the proxies on the Proposal for which you have not specified a vote IN FAVOR of the reorganization of Diversified Bond into Fixed Income.
Q. | If I send my proxy card in now as requested, can I change my vote later? |
A. | You may revoke your proxy at any time prior to its exercise by voting in person at the Special Meeting or by submitting, before the Special Meeting, written notice of revocation, a later-dated proxy card or a later-dated vote via telephone or the Internet. Even if you plan to attend the Special Meeting, we ask that you return the enclosed proxy card. This will help us ensure that an adequate number of shares are present for the Special Meeting. |
Q. | Who should I call for additional information about this Proxy Statement? |
A. | Please call Computershare Fund Services, your Fund’s information agent, at 1-866-525-2720. |
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED BY REFERENCE. IF ANY PERSON PROVIDES ANY REPRESENTATION OR OTHER INFORMATION, YOU SHOULD NOT RELY ON THOSE REPRESENTATIONS OR OTHER INFORMATION SINCE NEITHER DIVERSIFIED BOND NOR FIXED INCOME HAS AUTHORIZED THOSE REPRESENTATIONS.
Table of Contents
COMBINED PROSPECTUS AND PROXY STATEMENT
TABLE OF CONTENTS
Cover Page | ||
PROPOSAL: TO APPROVE THE PLAN OF REORGANIZATION | ||
Summary and Overview of the Proposed Reorganization | ||
Comparison of Important Features | ||
Reasons for the Reorganization | ||
Information about the Plan of Reorganization | ||
Comparison of Investment Policies and Risks of Investing in the Funds | ||
Other Business | ||
Further Information About Voting and the Special Meeting | ||
Information about RIC and the Funds | ||
Independent Registered Public Accounting Firm | ||
EXHIBIT A: Plan of Reorganization | A-1 | |
EXHIBIT B: RIC Prospectus relating to Fixed Income and Diversified Bond Funds | B-1 | |
EXHIBIT C: Management Discussion and Analysis of Fixed Income | C-1 |
Table of Contents
PROPOSAL
TO APPROVE A PLAN OF REORGANIZATION
FOR DIVERSIFIED BOND AND FIXED INCOME
SUMMARY AND OVERVIEW OF THE PROPOSED REORGANIZATION
The Board is recommending that Shareholders of Diversified Bond approve a plan of reorganization for the Diversified Bond Fund Reorganization (the “Plan”). The Plan and Funds’ Prospectus are each attached to this Prospectus/Proxy Statement as Exhibits A and B, respectively.
At a meeting on May 22, 2007, the Board received a proposal from RIMCo regarding the future of Diversified Bond, given its relatively small and declining asset base. For the reasons set forth below under “REASONS FOR THE REORGANIZATION,” the Board concluded that the Reorganization is in the best interests of the Shareholders of the Fund. Of course, each Shareholder’s decision to become an investor in Fixed Income will involve an assessment of his or her own personal financial situation and objectives. If the Plan is approved by Shareholders and the Reorganization takes place, Diversified Bond will be reorganized with and into Fixed Income, and Shareholders of Diversified Bond will receive Class C, E or S Shares of Fixed Income with an aggregate value equal at the time of the completion of the Reorganization to the aggregate value of their Diversified Bond Class C, E or S Shares. The surviving fund, Fixed Income, currently has share classes E, I and Y. Diversified Bond has Class C, E and S Shares. As a result of the proposed merger, the Diversified Bond Class E Shares would be combined with the Fixed Income Class E Shares and new Class C and Class S Shares will be issued by Fixed Income.
After shares of Fixed Income are distributed to Shareholders of Diversified Bond, Diversified Bond will be dissolved.
Effects of the Reorganization on Shareholders
The Plan approved by the Trustees and presented to Shareholders provides for the reorganization of Diversified Bond with and into Fixed Income in exchange for Class C, E and S Shares issued by Fixed Income. The value of Class C, E and S Shares issued by Fixed Income in connection with the Reorganization will be equal at the time of the Reorganization to the value of the net assets of the Class C, E and S Shares of Diversified Bond acquired by Fixed Income. Pursuant to the Plan, shares issued to Diversified Bond by Fixed Income will be distributed to Shareholders of Diversified Bond as part of the liquidation of Diversified Bond. As a result, each Shareholder of Diversified Bond will cease to be a Shareholder of Diversified Bond and will instead be the owner of that number of full and fractional Class C, E and S Shares of Fixed Income having an aggregate net asset value equal at the time of the Reorganization to the aggregate net asset value of the Class C, E and S Shares of Diversified Bond held by that Shareholder at the Effective Time of the Reorganization, as defined herein.
Required vote
The affirmative vote of a majority of the outstanding voting securities of Diversified Bond as of July 9, 2007, the record date (the “Record Date”), is necessary to approve the Reorganization. Under the 1940 Act, the vote of the holders of a “majority” of the outstanding shares of the fund means the vote of the holders of the lesser of (a) 67% or more of its shares present at the special meeting or represented by proxy if the holders of 50% or more of its shares are so present or represented; or (b) more than 50% of its outstanding shares.
If the Reorganization is not approved, Diversified Bond will continue to operate as a sub-trust of RIC, and the Trustees will consider what further action, if any, is in the best interests of Diversified Bond and its Shareholders, including the possible liquidation of Diversified Bond.
Table of Contents
In a separate document not included herewith, Shareholders of certain RIC funds, including Diversified Bond, are being asked to vote on an amendment to RIC’s Amended and Restated Master Trust Agreement which would allow the liquidation or reorganization of any sub-trust without the specific approval of the Shareholders of such sub-trust.
IF YOU RETURN A SIGNED PROXY CARD WITH NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED IN FAVOR OF THE REORGANIZATION.
Tax consequences
Completion of the Reorganization is subject to the receipt of a tax opinion from Dechert LLP to the effect that, based on certain facts, assumptions and representations, the Reorganization will constitute a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Consequently, in general, no gain or loss will be recognized for federal income tax purposes by Diversified Bond or its Shareholders. There is additional information about the federal income tax consequences of the Reorganization under “Information About the Plan of Reorganization—Tax Considerations.”
COMPARISON OF IMPORTANT FEATURES OF THE FUNDS
Investment Objectives and Strategies of the Funds
The investment objectives of the Funds are identical. Each Fund seeks to provide current income and the preservation of capital. Diversified Bond’s investment objective is non-fundamental and may be changed by the Board of Trustees without shareholder approval. Fixed Income’s investment objective is fundamental and may not be changed by the Board of Trustees without shareholder approval.
The principal investment strategies of the Funds are identical. Each Fund’s principal investment strategies are as follows:
The Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple Money Managers, each with its own investment style. Fund assets not allocated to Money Managers are managed by RIMCo.
The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a Money Manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
Table of Contents
The fundamental investment restrictions of the Funds are identical. See “Comparison of Investment Policies and Risks of Investing in the Funds” in this Prospectus/Proxy Statement.
Management of the Funds
The Board of Trustees is responsible for overseeing generally the operation of the Funds, including reviewing and approving the Funds’ contracts with RIMCo and the Money Managers. RIC’s officers, all of whom are employed by and are officers of RIMCo or its affiliates, are responsible for the day-to-day management and administration of the Funds’ operations.
The Funds’ investment advisor is RIMCo, 909 A Street, Tacoma, Washington 98402. RIMCo is a wholly owned subsidiary of Frank Russell Company (“Russell”), which provides comprehensive asset management consulting services to institutional pools of investment assets. RIMCo provides or oversees the provision of all general management and administration, investment advisory and portfolio management services for the Funds. RIMCo provides the Funds with office space, equipment and the personnel necessary to operate and administer the Funds’ business and to supervise the provision of services by third parties such as the Money Managers and custodian. RIMCo also develops the investment programs for each of the Funds, selects Money Managers for the Funds (subject to approval by the Board), allocates assets among Money Managers, monitors the Money Managers’ investment programs and results, and may exercise investment discretion over assets invested in the Funds’ Liquidity Portfolio. RIMCo also acts as RIC’s transfer agent and dividend disbursing agent. RIMCo, as agent for RIC, pays the Money Managers’ fees for the Funds, as a fiduciary for the Funds, out of the advisory fee paid by the Funds to RIMCo. The remainder of the advisory fee is retained by RIMCo as compensation for the services described above and to pay expenses.
Michael R. Ruff is the RIMCo employee who manages the Funds, oversees the Money Managers of the Funds and has primary responsibility for the management of the Funds (the “RIMCo Manager”). Mr. Ruff has been a portfolio manager since November 2002.
Please see the Funds’ Statement of Additional Information for additional information about the RIMCo Manager’s compensation, other accounts managed by the RIMCo Manager and the RIMCo Manager’s ownership of securities in the Funds.
Each Fund conducts its business through a number of service providers who act on its behalf. Each of the Fund’s money managers makes all investment decisions for the portion of the Fund assigned to it by RIMCo. The Funds’ custodian, State Street Bank and Trust Company, maintains custody of all of the Funds’ assets. RIMCo, in its capacity as the Funds’ transfer agent, is responsible for maintaining the Funds’ shareholder records and carrying out shareholder transactions. When a Fund acts in one of these areas, it does so through the service provider responsible for that area.
RIMCo, as the Funds’ advisor, may change the allocation of a Fund’s assets among money managers at any time. The Funds received an exemptive order from the SEC that permits a Fund to engage or terminate a money manager at any time, subject to the approval by the Funds’ Board, without a shareholder vote. A Fund notifies its shareholders within 60 days of when a money manager begins providing services. Each Fund selects money managers based primarily upon the research and recommendations of RIMCo. RIMCo, utilizing the money manager research provided by Russell, evaluates quantitatively and qualitatively the money manager’s investment style, process, performance record and portfolio characteristics in managing assets for specific asset classes, investment styles and strategies. Short-term investment performance, by itself, is not a controlling factor in the selection or termination of any money manager.
Each money manager has complete discretion to select portfolio securities for its segment of a Fund. At the same time, however, each money manager must operate within each Fund’s investment objectives, restrictions and policies. Additionally, each money manager must operate within more specific constraints developed from time to time by RIMCo. RIMCo develops such constraints for each money manager based on RIMCo’s assessment of the money manager’s expertise and investment style. By assigning more specific constraints to each money manager,
Table of Contents
RIMCo attempts to capitalize on the strengths of each money manager and to combine their investment activities in a complementary fashion. Although the money managers’ activities are subject to general oversight by the Board and the Funds’ officers, neither the Board, the officers, RIMCo nor Russell evaluate the investment merits of a money manager’s individual security selections.
As of the date of this Proxy Statement, the Money Managers for Diversified Bond are:
Bear Stearns Asset Management Inc., 383 Madison Avenue, New York, NY 10179.
Lehman Brothers Asset Management LLC, 200 South Wacker Drive, Suite 2100, Chicago, IL 60606.
Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.
Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA 91101.
Western Asset Management Company Limited, 10 Exchange Square Primrose Street, London, England EC2A 2EN.
It is expected that one or more of these managers may be terminated prior to the date of the Shareholder Meeting as assets of Diversified Bond are expected to continue to decline.
As of the date of this Proxy Statement, the Money Managers for Fixed Income are:
Bear Stearns Asset Management Inc., 383 Madison Avenue, New York, NY 10179.
Lehman Brothers Asset Management LLC, 200 South Wacker Drive, Suite 2100, Chicago, IL 60606.
Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.
Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA 91101.
Western Asset Management Company Limited, 10 Exchange Square Primrose Street, London, England EC2A 2EN.
The investment styles employed by the Money Managers may not be complementary. The interplay of the various strategies employed by a Fund’s multiple Money Managers may result in a Fund holding a concentration of certain types of securities. This concentration may be beneficial or detrimental to a Fund’s performance depending upon the performance of those securities and the overall economic environment.
At the Effective Time (as defined below) of the Reorganization, it is expected that Fixed Income’s Money Managers will be the same as they are as of the date of this Proxy Statement.
As noted above, a Fund, including Diversified Bond and Fixed Income, may engage new Money Managers or terminate any of these Money Managers at any time subject to the approval of the Board without a shareholder vote. Therefore, the Money Managers of the Funds at the Effective Time of the Reorganization may be different than those listed above. A complete list of current money managers for the Funds can also be found at www.Russell.com.
Investment Advisory Fees
Under its Advisory Agreement with RIC, RIMCo receives an advisory fee from each Fund for RIMCo’s advisory services provided to that Fund. From its advisory fee, RIMCo, as RIC’s agent, pays the Money Managers for their investment selection services. The remainder of the advisory fee is retained by RIMCo as compensation for the services described above and to pay expenses. The annual rate of advisory fees payable by each of Diversified Bond Fund and Fixed Income monthly on a pro rata basis is .40% and .25%, respectively, of the Fund’s average daily net assets. For the Diversified Bond Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 0.45% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.75% of the average daily net assets of that Fund for the period from March 1, 2007 to February 29, 2008. This waiver may not be terminated during this period except at the Board’s discretion. Direct fund-level expenses for the Diversified Bond Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
Table of Contents
A discussion regarding the basis for the Board of Trustees’ approval of the investment advisory contract between RIMCo and the Funds is available in the Funds’ semi-annual report to shareholders covering the period ended April 30, 2007, which may be obtained at no charge by contacting the Funds at:
Russell Investment Company
909 A Street
Tacoma, WA 98402
800-787-7354
Fax: 253-591-3495
The Funds’ annual report and semi-annual report are also available, free of charge, on the Funds’ Web site at www.russell.com.
Fees and Expenses
The Funds, like all mutual funds, incur certain expenses in their operations and Shareholders indirectly bear these expenses. These expenses include advisory fees as well as the costs of maintaining accounts, administration and other activities. The following tables (a) compare the fees and expenses that you may pay for each class of Diversified Bond and the corresponding class of Fixed Income and (b) show the estimated fees and expenses that you may pay for each class of Fixed Income on a pro forma basis as of that date after giving effect to the Reorganization.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases | Maximum Sales Charge (Load) Imposed on Reinvested Dividends | Maximum Deferred Sales Charge (Load) | Redemption Fees* | Exchange Fees | ||||||
Diversified Bond | None | None | None | None | None | |||||
Fixed Income | None | None | None | None | None | |||||
Fixed Income after the Reorganization | None | None | None | None | None |
* | Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. For more information, please refer to the section “Purchases, Redemptions and Exchanges.” |
Table of Contents
Annual Fund Operating Expenses#
(expenses that are deducted from Fund assets)
(% of net assets)
Advisory Fee | Distribution (12b-1) Fees** | Other Expenses*** | Acquired Fund Fees and Expenses*** | Total Annual Fund Operating Expenses*** | Less Fee Waivers and Expense Reimbursements## | Net Annual Fund Operating Expenses*** | |||||||||||||||
Diversified Bond* | |||||||||||||||||||||
Class C | .40 | % | .75 | % | .59 | % | .01 | % | 1.75 | % | .00 | % | 1.75 | % | |||||||
Class E | .40 | % | .00 | % | .59 | % | .01 | % | 1.00 | % | .00 | % | 1.00 | % | |||||||
Class S | .40 | % | .00 | % | .34 | % | .01 | % | .75 | % | .00 | % | .75 | % | |||||||
Fixed Income* | |||||||||||||||||||||
Class E | .25 | % | .00 | % | .42 | % | .01 | % | .68 | % | (.02 | )% | .66 | % | |||||||
Fixed Income pro forma for Reorganization* | |||||||||||||||||||||
Class C | .25 | % | .75 | % | .61 | % | .01 | % | 1.62 | % | (.02 | )% | 1.60 | % | |||||||
Class E | .25 | % | .00 | % | .41 | % | .01 | % | .67 | % | (.02 | )% | .65 | % | |||||||
Class S | .25 | % | .00 | % | .29 | % | .01 | % | .55 | % | (.02 | )% | .53 | % |
* | “Other Expenses” includes a shareholder services fee of 0.25% of average daily net assets for Class C and E Shares, and an administrative fee of 0.05% of average daily net assets for Class C, Class E and Class S Shares. |
** | Pursuant to the rules of the National Association of Securities Dealers, Inc. (“NASD”), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on Class C Shares of the Fund may not exceed 6.25% of total gross sales, subject to certain exclusions. These limitations are imposed at the class level on each Class of Shares of each Fund rather than on a per shareholder basis. Therefore, long-term shareholders of the Class C Shares may pay more than the economic equivalent of the maximum sales charges permitted by the NASD. |
*** | Funds of Funds Re-allocation. Certain funds of funds (“Russell Funds of Funds”) also managed by RIMCo invest their assets in certain other RIC Funds. The Russell Funds of Funds investment allocations to the underlying funds in which they invest are reviewed and may be changed periodically by RIMCo in pursuing the investment objectives of the Russell Funds of Funds. Effective March 1, 2007, the Russell Funds of Funds changed their allocations to underlying Funds in which they invest. The Russell Funds of Funds no longer allocate any assets to the Diversified Bond Fund. These re-allocations resulted in a substantial decrease in the assets under management of the Diversified Bond Fund. As a result, “Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for Diversified Bond have been restated higher to reflect the impact of lower assets under management. |
Acquired Fund Fees and Expenses. In addition to the advisory and administrative fees payable by the Funds to RIMCo, each Fund that invests its cash reserves in one or more of RIC’s money market funds pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of that money market fund’s operating expenses, which include the advisory and administrative fees that such money market fund pays to RIMCo. Currently, the cash reserves for all Funds are invested in RIC’s Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves invested in RIC’s Money Market Fund is 0.10% (net of fee waivers and reimbursements).
“Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Funds have been restated to reflect the Fund’s proportionate share of the money market funds’ operating expenses. The Funds’ proportionate share of the money market funds’ operating expenses are reflected under “Acquired Fund Fees and Expenses.”
# | If you purchase Shares through a Financial Intermediary, such as a bank or an investment advisor, you may also pay additional fees to the intermediary for services provided by the intermediary. You should contact your Financial Intermediary for information concerning what additional fees, if any, will be charged. |
## | For Fixed Income, RIMCo has contractually agreed to waive 0.02% of its administrative fees. |
For the Diversified Bond Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 0.45% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.75% of the average daily net assets of that Fund for the period from March 1, 2007 to February 29, 2008. This waiver may not be terminated during the relevant period except at the Board’s discretion. Direct fund-level expenses for the Diversified Bond Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
Example
The following example is intended to help you compare the cost of investing in each Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes your investment has a 5% return each year and that operating expenses remain the same. The calculation of costs for the one year period takes into account the effect of any current fee waiver contractually agreed to by RIMCo through February 29, 2008. The calculation of costs for the three, five and ten year periods takes such waivers into account only for the first year of the periods.
Table of Contents
Although your actual costs may be higher or lower, under these assumptions your costs would be:
1 Year | 3 Years | 5 Years | 10 Years | |||||||||
Diversified Bond Fund | ||||||||||||
Class C | $ | 178 | $ | 552 | $ | 950 | $ | 2063 | ||||
Class E | $ | 102 | $ | 318 | $ | 552 | $ | 1224 | ||||
Class S | $ | 77 | $ | 240 | $ | 417 | $ | 930 | ||||
Fixed Income | ||||||||||||
Class E | $ | 67 | $ | 210 | $ | 367 | $ | 822 | ||||
Fixed Income pro forma for Reorganization | ||||||||||||
Class C | $ | 163 | $ | 505 | $ | 871 | $ | 1,901 | ||||
Class E | $ | 66 | $ | 207 | $ | 361 | $ | 808 | ||||
Class S | $ | 54 | $ | 170 | $ | 297 | $ | 665 |
Performance
The following bar charts illustrate the risks of investing in the Funds by showing how the performance of Class S Shares of Diversified Bond and Class E Shares of Fixed Income varies from year to year over a 10-year period. The return for other Classes of Shares offered by the Funds (both before and after tax) may be lower than the returns shown in the bar chart, depending on the fees and expenses of that Class. The highest and lowest returns for a full quarter during the periods shown in the bar charts for the Funds’ Class S and E Shares, as applicable, are set forth below in the bar charts.
Diversified Bond Fund
Annual Total Returns
(for the years ended December 31)
Class S
Best Quarter: | 4.65% (3Q/01) | |
Worst Quarter: | (2.28)% (2Q/04) |
Fixed Income I Fund
Annual Total Returns
(for the years ended December 31)
Class E
Best Quarter: | 4.49% (3Q/01) | |
Worst Quarter: | -2.32% (2Q/04) |
The Funds’ average annual returns for 1, 5 and 10 years are presented below for each class of the Funds’ shares and are compared with the returns of an index that measures broad market performance. Index returns do not reflect deduction for fees, expenses or taxes. After-tax returns are shown only for one class. The after-tax returns for other classes will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. If a Fund has realized capital losses, the total return after taxes on distributions and sale of Fund shares may be higher than the total return before taxes and the total return after taxes on distributions. The calculation of total return after taxes on distributions and sale of Fund shares assumes that a shareholder has sufficient capital gains of the same character to offset any capital losses on a sale of Fund shares and that the shareholder may therefore deduct the entire capital loss.
Past performance, both before-tax and after-tax, is no indication of future results. A more detailed description of how returns are calculated can be found in the Funds’ Statement of Additional Information in the section entitled “Yield and Total Return Quotations.”
Average annual total returns for the periods ended December 31, 2006 | 1 Year | 5 Years | 10 Years | ||||||
Diversified Bond Fund | |||||||||
Return Before Taxes, Class C* | 2.85 | % | 3.51 | % | 4.79 | % | |||
Return Before Taxes, Class E** | 3.61 | % | 4.28 | % | 5.42 | % | |||
Return Before Taxes, Class S | 3.88 | % | 4.54 | % | 5.74 | % | |||
Return After Taxes on Distributions, Class S | 2.24 | % | 2.92 | % | 3.62 | % | |||
Return After Taxes on Distributions and Sale of Fund Shares, Class S | 2.50 | % | 2.94 | % | 3.61 | % | |||
Fixed Income I Fund | |||||||||
Return Before Taxes, Class E*** | 3.92 | % | 4.58 | % | 5.81 | % | |||
Return After Taxes on Distributions, Class E*** | 2.29 | % | 2.82 | % | 3.62 | % | |||
Return After Taxes on Distributions and Sale of Fund Shares, Class E*** | 2.52 | % | 2.93 | % | 3.65 | % | |||
Lehman Brothers Aggregate Bond Index | 4.33 | % | 5.06 | % | 6.24 | % |
* | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the returns of the Fund’s Class E Shares from January 1, 1997 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
Table of Contents
** | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares from May 27, 1997 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that dates. The returns shown have not been increased to reflect the elimination of those fees. |
*** | The Fund first issued Class E Shares on May 14, 1999. The returns shown prior to that date are those of the Fund’s Class I Shares and therefore do not reflect the deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. |
For additional information about the Fixed Income’s performance, including a discussion about market conditions and investment strategies that significantly affected its performance during its last fiscal year, please refer to Management’s Discussion and Analysis attached as Exhibit C.
Distribution of the Funds
Russell Fund Distributors, Inc. (the “Distributor”) serves as the distributor of RIC Shares. The Distributor receives no compensation from RIC for its services other than Rule 12b-1 compensation and shareholder services compensation for certain classes of Shares pursuant to RIC’s Rule 12b-1 Distribution Plan and Shareholder Services Plan, respectively. The Distributor distributes shares of the Funds continuously, but reserves the right to suspend or discontinue distribution on that basis. The Distributor is not obligated to sell any specific amount of Fund shares. The Distributor is a wholly owned subsidiary of RIMCo and its mailing address is 909 A Street, Tacoma, WA 98402.
Purchases, Redemptions and Exchanges
For Shares of Diversified Bond, there is no required minimum investment. However, the Fund reserves the right to close any account whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares.
For Fixed Income Class E Shares, there is currently a $100,000 minimum initial investment for each account. After the Reorganization has been completed, Fixed Income Class E Shares will have no minimum initial investment. There will be no required minimum investment for Classes C and S of Fixed Income.
Through your Financial Intermediary you may exchange Shares you own in one RIC Fund for Shares of any other RIC Fund on the basis of the current net asset value per share at the time of the exchange. Shares of a RIC Fund may only be exchanged for shares of a RIC Fund under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.
Contact your Financial Intermediary for assistance in exchanging Shares and, because Financial Intermediaries’ processing times may vary, to find out when your account will be credited or debited. To request an exchange in writing, please contact your Financial Intermediary.
An exchange between Funds involves the redemption of Shares, which is treated as a sale for income tax purposes. Thus, capital gains or losses may be realized. Please consult your tax adviser for more information.
Table of Contents
Shares to be acquired will be purchased when the proceeds from the redemption become available (up to seven days from the receipt of the request) at the next net asset value per share calculated after a Fund receives the exchange request in good order.
Shares may be redeemed through your Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Redemption requests are processed at the next net asset value per share calculated after a Fund receives an order in proper form as determined by your Financial Intermediary. The Funds will close early if the NYSE closes early. Any redemption requests received following an early closure will be processed on the following business day at the next calculated net asset value per share. Shares recently purchased by check may not be available for redemption for 15 days following the purchase or until the check clears, whichever occurs first, to assure that a Fund has received payment for your purchase.
Redemption requests must be received by the Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Please contact your Financial Intermediary for instructions on how to place redemption requests. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be debited.
Payment will ordinarily be made within seven days of receipt of your request in proper form. Each Fund reserves the right to suspend redemptions or postpone the date of payment for more than seven days if an emergency condition (as determined by the SEC) exists.
Your redemption proceeds will be paid in one of the following manners: (1) if you invest through certain Financial Intermediaries, your redemption proceeds will be sent directly to your Financial Intermediary who is then responsible for settling the redemption with you as agreed between you and your Financial Intermediary; (2) a check for the redemption proceeds may be sent to the shareholder(s) of record at the address of record within seven days after the Funds receive a redemption request in proper form; or (3) if you have established the electronic redemption option, your redemption proceeds can be (a) wired to your predesignated bank account on the next bank business day after a Fund receives your redemption request in proper form or (b) sent by Electronic Funds Transfer (EFT) to your predesignated bank account on the second business day after a Fund receives your redemption request in proper form. On Federal Reserve holidays, funds will settle on the next day the Federal Reserve is open. Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. The Funds will always charge a fee when sending an international wire transfer. The Funds reserve the right to charge a fee when sending a domestic wire transfer for redemptions. The Funds do not charge for EFT though your bank may charge a fee to receive the EFT. Wire transfers and EFTs can be sent to U.S. financial institutions that are members of the Federal Reserve System.
Frequent Purchases and Redemptions
A detailed description of the Funds’ policies with respect to frequent trading of Fund shares is available in the “Frequent Trading Policies and Limitations on Trading Activity” section of the Funds’ Prospectus, which is attached as Exhibit B.
Taxes
A detailed description of the tax consequences of buying, holding, exchanging and selling the Funds’ shares is available in the “Taxes” section of the Funds’ Prospectus, which is attached as Exhibit B.
How Net Asset Value is Determined
A detailed description of the Funds’ methods for calculating net asset value per share is available in the “How Net Asset Value is Determined” section of the Funds’ Prospectus, which is attached as Exhibit B.
Table of Contents
Dividends and Distributions
Each Fund distributes substantially all of its net investment income and net capital gains to shareholders each year.
Income Dividends
The amount and frequency of distributions are not guaranteed; all distributions are at the Board’s discretion. Currently, the Board intends to declare dividends from net investment income, if any, according to the following schedule:
Declared | Payable | Fund | ||
Monthly | Early in the following month | Diversified Bond | ||
Quarterly | April, July, October and December | Fixed Income |
After the Reorganization, the Board intends to continue to declare dividends from net investment income, if any, for Fixed Income, on a quarterly basis.
An additional distribution of net investment income may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund.
Risk Factors and the Investment Policies
Because of the comparability of the investment objectives and investment restrictions and the substantially similar nature of the investment policies of the Funds, the investment risks associated with an investment in Fixed Income are very similar to those of Diversified Bond. See “Comparison of Investment Policies and Risks of Investing in the Funds” below and the “Risks” section of the attached prospectus.
Financial Highlights
The financial highlights tables of Fixed Income are intended to help you understand Fixed Income’s financial performance for at least the last 60 months. Certain information reflects results for a single Fund share. The total returns in the table represent how much your investment in the Fixed Income would have increased (or decreased) during each period assuming reinvestment of all dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with Fixed Income’s financial statements, is included in Fixed Income’s annual report, which is incorporated by reference.
Fixed Income I Fund - Class E Shares | ||||||||||||||||||||
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 20.75 | $ | 21.88 | $ | 22.12 | $ | 22.15 | $ | 22.32 | ||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss) (a) | 0.92 | 0.74 | 0.63 | 0.72 | 0.90 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.04 | (0.61 | ) | 0.48 | 0.36 | 0.17 | ||||||||||||||
Total income from operations | 0.96 | 0.13 | 1.11 | 1.08 | 1.07 | |||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (0.89 | ) | (0.73 | ) | (0.69 | ) | (0.67 | ) | (0.97 | ) | ||||||||||
From net realized gain | — | (0.53 | ) | (0.66 | ) | (0.44 | ) | (0.27 | ) | |||||||||||
Total distributions | (0.89 | ) | (1.26 | ) | (1.35 | ) | (1.11 | ) | (1.24 | ) | ||||||||||
Net Asset Value, End of Period | $ | 20.82 | $ | 20.75 | $ | 21.88 | $ | 22.12 | $ | 22.15 | ||||||||||
Total Return (%) | 4.79 | 0.60 | 5.22 | 5.01 | 5.10 | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 31,504 | $ | 29,632 | $ | 27,515 | $ | 27,009 | $ | 27,576 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | 0.64 | 0.65 | 0.65 | 0.67 | 0.64 | |||||||||||||||
Operating expenses, gross | 0.67 | 0.68 | 0.66 | 0.67 | 0.66 | |||||||||||||||
Net investment income (loss) (b) | 4.45 | 3.49 | 2.88 | 3.25 | 4.17 | |||||||||||||||
Portfolio turnover rate (%) | 125.38 | 201.90 | 153.79 | 184.29 | 165.28 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
Table of Contents
REASONS FOR THE REORGANIZATION
Board Considerations
The Trustees, including all of the Trustees who are not “interested persons” of RIC, have unanimously determined that the Reorganization would be in the best interests of the Shareholders of Diversified Bond and Fixed Income and that the interests of the Shareholders of each of the Funds would not be diluted as a result of the Reorganization. At a meeting held on May 22, 2007, RIMCo informed the Trustees that Diversified Bond Fund and Fixed Income had assets of $401,808,182 and $1,347,975,364, respectively, at April 30, 2007, and that the relatively small and declining size of Diversified Bond will impair efforts to manage the Funds efficiently and to achieve a competitive expense ratio.
RIMCo expressed its belief that Diversified Bond is unlikely to achieve sufficient asset growth in the near future to assure its viability and that operating Diversified Bond as a stand-alone fund is no longer in the best interests of Diversified Bond’s Shareholders. Conversely, RIMCo believes that Fixed Income, with the addition of Diversified Bond’s assets, is likely to be viable and maintain its assets. Consequently, RIMCo presented a proposal to effect the Reorganization to the Trustees. In support of its proposal, RIMCo expressed its belief that Shareholders in each of the Funds would benefit from the Reorganization because Fixed Income would then have a larger asset base to invest, which should provide greater opportunities for diversifying investments and realizing economies of scale.
Based on current restated expense estimates for the fiscal year ending October 31, 2006, the Shareholders of Diversified Bond would pay between 0.15% and 0.35% less in net annual fund operating expenses as a result of the Reorganization. RIMCo also noted that Diversified Bond currently is invested in a significant percentage of securities that would be eligible for investment by Fixed Income, although there can be no assurance as to whether and to what extent Fixed Income will invest in such securities in the future. In addition, RIMCo expects that the Reorganization will result in lower operating expenses than those currently borne by Diversified Bond on a stand-alone basis, although there can be no assurance that operational savings will be realized.
In determining whether to approve the Reorganization and to recommend their approval to Shareholders of Diversified Bond, the Trustees, including the independent Trustees, considered the potential impact of the Reorganization on those Funds’ Shareholders and a variety of related factors, including, among others, (1) RIMCo’s advice that the Fund is not viable due to its small asset base and that the Fund is not expected to attract additional assets; (2) the expense involved in operating Diversified Bond as a stand-alone fund; (3) the compatibility of the investment objectives, policies and restrictions of the Funds; (4) the terms and conditions of the Plan of Reorganization, including provisions intended to avoid any dilution of Shareholder interests; (5) the fact the Diversified Bond Fund will pay all costs associated with the solicitation of proxies (however, since Diversified Bond is expected to operate above its stated expense cap, RIMCo would ultimately bear a portion of the costs of the proxy); (6) the brokerage costs that will be incurred by the Funds as a result of the Reorganization; (7) the fact that the Reorganization is intended to qualify as a tax-free Reorganization under federal tax laws; (8) the fact that the pro forma gross operating expenses of Fixed Income are estimated to be lower than the current gross operating expenses of Diversified Bond; (9) expense waiver and reimbursement obligations with respect to Diversified Bond will continue in effect until at least February 29, 2008 but are terminable by RIMCo on such date and annually thereafter; and (10) possible alternatives to the Reorganization.
The Board, including a majority of the Trustees who are not interested persons of RIC, unanimously concluded that the Reorganization is in the best interests of the Shareholders of each of the Funds and that no dilution of value would result to the Shareholders of any of the Funds from the Reorganization. Consequently, the Board approved the Plan and recommended that Shareholders of Diversified Bond vote to approve the Reorganization.
Costs of the Shareholder Meeting and Reorganization
During the course of its deliberations, the Board determined that Diversified Bond would bear all expenses with respect to the Shareholder Meeting and Reorganization regardless of whether the Reorganization is approved by Shareholders. However, since Diversified Bond is currently operating above its stated expense cap, it is expected that RIMCo will bear the costs of the Reorganization.
Table of Contents
Effects of the Reorganization
In reaching the decision to recommend that Shareholders of Diversified Bond vote to approve the Reorganization, the Trustees concluded that the Reorganization is in the best interests of the shareholders of Diversified Bond and that no material dilution would result to the Shareholders of Diversified Bond from the Reorganization or as a result of the Fund bearing all of the expenses with respect to the Reorganization.
The Trustees also determined that the Reorganization was in the best interests of the shareholders of Fixed Income and that no dilution would result to the current shareholders of Fixed Income as a result of the Reorganization.
If the Plan is not approved by the Shareholders at the meeting, Diversified Bond will continue as a separate sub-trust of RIC. In that event, the Board would determine what additional actions, if any, it would recommend to the Shareholders of Diversified Bond, including possible liquidation of Diversified Bond.
INFORMATION ABOUT THE PLAN OF REORGANIZATION
The following is a summary of the Plan of Reorganization. It is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Plan, which is attached as Exhibit A.
If the Shareholders approve the Plan, it is expected that the Reorganization will be consummated shortly after the various conditions to the obligations of each of the parties are satisfied (see “Conditions Precedent to Closing”). Consummation of the Reorganization (the “Effective Time of the Reorganization”) is expected to occur on or about October 22, 2007 at 8:00 a.m. Eastern Time, or such other date as is agreed to by the Funds, on the basis of values calculated as of the close of regular trading on the NYSE on October 19, 2007. The Plan may be terminated at any time before or after its approval by Shareholders by action of the Board.
The Plan provides that all of the assets of Diversified Bond will be transferred to Fixed Income, which will assume all of Diversified Bond’s liabilities. Diversified Bond Class C, E and S Shareholders will receive a number of Class C, E and S Shares, respectively, of Fixed Income with the same aggregate net asset value as the Class C, E and S Shares of Diversified Bond held at the Effective Time, as defined in the Plan, of the Reorganization. In addition to the Class C, E and S Shares, each Diversified Bond Shareholder will have a right to receive any declared and unpaid dividends or other distributions. Following the Reorganization, Shareholders of Diversified Bond will be shareholders of Fixed Income. The Diversified Bond’s Shareholders will not pay a sales charge, commission or other transaction cost in connection with their receipt of shares of Fixed Income.
The Plan provides that Diversified Bond will declare a dividend and/or capital gain distribution prior to the Reorganization which, together with all previous distributions, will have the effect of distributing to the Shareholders of Diversified Bond all of their investment company taxable income and net capital gain, if any, realized by Diversified Bond up to and including the Effective Time of the Reorganization. Dividends and capital gain distributions generally will be taxable to shareholders who are subject to federal income taxation.
Conditions Precedent to Consummation of the Reorganization
The Reorganization is subject to a number of conditions, including the following: (1) approval of the Plan and the transactions contemplated thereby as described in this Prospectus/Proxy Statement by the Shareholders of Diversified Bond; (2) the receipt of certain legal opinions described in the Plan; (3) the receipt of certain certificates from the parties concerning the continuing accuracy of the representations and warranties in the Plan and other matters; and (4) the parties’ performance in all material respects of their agreements and undertakings in the Plan.
Table of Contents
Tax Considerations
It is anticipated that the Reorganization will be a tax-free reorganization within the meaning of Section 368(a) of the Code. Fixed Income and Diversified Bond will receive an opinion from Dechert LLP substantially to the effect that, based on certain facts, assumptions and representations, for federal income tax purposes:
(1) the Reorganization will constitute a “reorganization” within the meaning of Code Section 368(a);
(2) the Shareholders will recognize no gain or loss on their receipt of voting shares of Fixed Income solely in exchange for their voting shares of Diversified Bond pursuant to the Reorganization;
(3) Diversified Bond will not recognize gain or loss on the transfer of all of its assets to Fixed Income solely in exchange for voting shares of Fixed Income and the assumption by Fixed Income of Diversified Bond’s Liabilities pursuant to the Reorganization;
(4) Diversified Bond will not recognize gain or loss on its distribution of the voting shares of Fixed Income to its Shareholders pursuant to the liquidation of Diversified Bond;
(5) Fixed Income will not recognize gain or loss on its acquisition of all of the assets of Diversified Bond solely in exchange for voting shares of Fixed Income and the assumption by Fixed Income of Diversified Bond’s liabilities;
(6) the aggregate tax basis of the voting shares of Fixed Income received by each of Diversified Bond’s Shareholders pursuant to the Reorganization will equal the aggregate tax basis of the voting shares of Diversified Bond surrendered in exchange therefor;
(7) the holding period of the voting shares of Fixed Income received by each of the Shareholders pursuant to the Reorganization will include the period that the Shareholder held the voting shares of Diversified Bond exchanged therefor, provided that the Shareholder held such shares as a capital asset on the date of the Reorganization;
(8) Fixed Income’s basis in the assets of Diversified Bond received pursuant to the Reorganization will equal Diversified Bond’s basis in the assets immediately before the Reorganization; and
(9) Fixed Income’s holding period in Diversified Bond’s assets received pursuant to the Reorganization will include the period during which Diversified Bond held the assets.
No opinion will be expressed by Dechert LLP, however, as to whether any gain or loss will be recognized (a) by Diversified Bond in connection with the transfer from Diversified Bond to Fixed Income of any Section 1256 contracts (as defined in Section 1256 of the Code) or any stock in a passive foreign investment company (as defined in Section 1297(a) of the Code) or (b) by Diversified Bond or Fixed Income in connection with any disposition of assets by Diversified Bond or Fixed Income prior to or following the Reorganization.
Shareholders of Diversified Bond should consult their tax advisors regarding the effect, if any, of the Reorganization in light of their individual circumstances and, since the foregoing discussion only relates to the federal income tax consequences of the Reorganization, should consult their tax advisors as to state and local tax consequences, if any, of the Reorganization.
As of October 31, 2006, Diversified Bond Fund had a net capital loss carry forward of approximately $21,743,901; net capital gains for the current taxable year through April 30, 2007 of $11,351,447 excluding year-end tax adjustment considerations; and net unrealized built-in capital gains through April 30, 2007 of $1,450,095. If the merger is carried out, the net capital loss carry forward, if any, for the five-year period beginning on the date of the merger and the net unrealized built-in losses, if any, of Diversified Bond as of the date of the merger that would otherwise be available for use by Diversified Bond for each taxable year ending after the Closing Date will be limited under the Code. As a result of this limitation, it is possible that the Fixed Income I Fund will not be
Table of Contents
able to use the loss as rapidly as Diversified Bond might have been able to, and part or all of the loss may not be usable by the Fixed Income I Fund at all. If either Fund that is a party to the merger has a net unrealized gain, any built-in gain recognized during the five-year period beginning on the date of the merger may not be offset by pre-acquisition losses of the other Fund. At October 31, 2006, the following capital loss carry forwards for Diversified Bond will expire as follows:
Capital Loss Carry Forwards Expire | Diversified Bond | ||
10/31/2013 | $ | 4,923,732 | |
10/31/2014 | $ | 16,820,169 | |
Total capital loss carry forwards | $ | 21,743,901 | |
Description of the Shares of Fixed Income
RIC issues shares of beneficial interest divisible into an unlimited number of sub-trusts, each of which sub-trusts is a separate trust under Massachusetts law, and the sub-trusts’ shares may be offered in multiple classes. As of the date of this Prospectus/Proxy Statement, Fixed Income offers Class E, Y and I Shares. Shares of each class of a sub-trust, including Fixed Income’s Class E, Y and I Shares, represent proportionate interests in the assets of the specific sub-trust attributable to that class, and have the same voting and other rights and preferences as the shares of other classes of the sub-trust. Shares of each class of a sub-trust are entitled to such dividends and distributions earned on the assets belonging to the sub-trust as may be declared by the Board. Shares of each class of a sub-trust have a par value of $.01 per share, are fully paid and nonassessable, and have no preemptive or conversion rights. Each share of a class of a sub-trust has one vote; there are no cumulative voting rights.
As a result of the Reorganization, new Class C and Class S Shares would be created in Fixed Income. Class C, E and S Shares of Fixed Income will be issued to Class C, E and S Shareholders, respectively, of Diversified Bond in accordance with the procedures under the Plan as described above. Each Fixed Income share issued will be fully paid and nonassessable when issued with no personal liability attaching to the ownership thereof, have no preemptive or conversion rights and be transferable upon the books of Fixed Income. In accordance with Fixed Income’s normal procedures as specified in its prospectuses, Fixed Income will not issue certificates for shares of beneficial interest to former Shareholders of Diversified Bond. As of the Effective Time of the Reorganization, any and all certificates representing shares of Diversified Bond shall be deemed to represent an interest of the Shareholder in the Class C, E or S Shares, as applicable, of Fixed Income issued to the Shareholder in the Reorganization. If a certificate for Class C, E or S Shares of Diversified Bond is outstanding, a new certificate for Class C, E or S Shares, as applicable, of Fixed Income issued in the Reorganization will not be issued.
As shareholders of Fixed Income, former Shareholders of Diversified Bond will generally have the same voting rights and rights upon dissolution with respect to Fixed Income as they currently have with respect to Diversified Bond. However, in a separate document not included herewith, Shareholders of certain RIC funds, including Diversified Bond and Fixed Income, are being asked to vote on an amendment to RIC’s Amended and Restated Master Trust Agreement which would allow the liquidation or reorganization of any sub-trust without the specific approval of the Shareholders of such sub-trust.
The terms of RIC’s Amended and Restated Master Trust Agreement do not confer upon Shareholders of Diversified Bond any appraisal rights. However, after the Effective Time of the Reorganization, such Shareholders may redeem their shares in Fixed Income at net asset value or exchange their Fixed Income shares into shares of certain other sub-trusts of RIC as described in the attached prospectus.
Table of Contents
RIC is an entity of the type commonly known as a “Massachusetts business trust.” Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the Amended and Restated Master Trust Agreement of RIC contains an express disclaimer of shareholder liability for acts or obligations of RIC and provides for indemnification and reimbursement of expenses out of RIC’s property for any shareholder held personally liable for the obligations of RIC. The Amended and Restated Master Trust Agreement also provides that RIC may maintain appropriate insurance (for example, fidelity bonding and errors and omissions insurance) for the protection of RIC, the shareholders of the sub-trusts, Trustees, officers, employees and agents covering possible tort and other liabilities. Thus, the risk of a Shareholder incurring financial loss on account of shareholder liability is also limited to circumstances in which both inadequate insurance exists and RIC itself is unable to meet its obligations.
Under Massachusetts law, RIC is not required to hold Shareholder annual meetings. In the past, the Funds have availed themselves of these provisions of state law to achieve cost savings by eliminating printing costs, mailing charges and other expenses involved to hold routine annual meetings. The Funds may, however, hold a meeting for such purposes as changing fundamental investment objectives or restrictions, approving a new investment advisory agreement or any other matters which are required to be acted on by shareholders under the 1940 Act. In addition, a meeting also may be called by shareholders holding at least 10% of the shares entitled to vote at the meeting for the purpose of voting upon the removal of Trustees, in which case shareholders may receive assistance in communicating with other shareholders such as that provided in Section 16(c) of the 1940 Act. Diversified Bond is holding the Special Meeting because of the Proposal described herein to be presented for Shareholders’ consideration and approval.
Disclosure of Portfolio Holdings
A detailed description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio securities is available in the “Disclosure of Portfolio Holdings” section of the Funds’ Statement of Additional Information (“SAI”), which is incorporated by reference. Disclosure of the Funds’ complete holdings as of the end of each fiscal quarter is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-Q. These reports are available, free of charge, on the EDGAR database on the SEC’s website at www.sec.gov. The Funds will also make these reports available on their website, www.russell.com. Disclosure of the Funds’ top ten portfolio holdings as of the last day of each month will be available on the Funds’ website no later than 15 calendar days after the end of such month.
Capitalization
The following tables set forth, as of April 30, 2007 the capitalization of Fixed Income, Diversified Bond Fund, and the pro forma capitalization of Fixed Income as adjusted to give effect to the Diversified Bond Reorganization. The capitalization of Fixed Income is likely to be different when the Reorganization is consummated.
Fixed Income Pro Forma for
Diversified Bond Reorganization
(unaudited)
Fixed Income I | Diversified Bond | Pro Forma Adjustments | Fixed Income I Pro Forma | |||||||||
Net Asset Value, offering and redemption price per share: | ||||||||||||
Class C: | ||||||||||||
Net asset value per share (c) | $ | 23.76 | n/a | $ | 20.84 | |||||||
Net assets | $ | 50,717,451 | n/a | $ | 50,717,451 | |||||||
Shares outstanding ($.01 par value) (a)(b) | 2,134,607 | 299,052 | 2,433,659 | (d) | ||||||||
Class E: | ||||||||||||
Net asset value per share (c) | $ | 20.84 | $ | 23.84 | n/a | $ | 20.84 | |||||
Net assets | $ | 32,762,253 | $ | 17,747,053 | n/a | $ | 50,509,306 | |||||
Shares outstanding ($.01 par value) (a)(b) | 1,572,413 | 744,489 | 107,097 | 2,423,999 | ||||||||
Class I: | ||||||||||||
Net asset value per share (c) | $ | 20.83 | n/a | $ | 20.83 | |||||||
Net assets | $ | 752,395,502 | n/a | $ | 752,395,502 | |||||||
Shares outstanding ($.01 par value) | 36,121,470 | n/a | 36,121,470 | |||||||||
Class S: | ||||||||||||
Net asset value per share (c) | $ | 23.19 | n/a | $ | 20.83 | (e) | ||||||
Net assets | $ | 333,343,678 | n/a | $ | 333,343,678 | |||||||
Shares outstanding ($.01 par value) (a)(b) | 14,376,351 | 1,626,706 | 16,003,057 | |||||||||
Class Y: | ||||||||||||
Net asset value per share (c) | $ | 20.84 | n/a | $ | 20.84 | |||||||
Net assets | $ | 562,817,609 | n/a | $ | 562,817,609 | |||||||
Shares outstanding ($.01 par value) | 27,008,346 | n/a | 27,008,346 |
(a) | Pro Forma shares outstanding have been adjusted to reflect the impact of the lower Net Asset Value per share of the Fixed Income I Fund. |
(b) | The Diversified Bond Class E Shares will be combined with the Fixed Income I Class E Shares and new Class C and Class S Shares will be issued by Fixed Income. |
(c) | Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
(d) | Shares of Fixed Income I Class C will be issued at the Net Asset Value per share price of the Fixed Income I Class E shares. |
(e) | Shares of Fixed Income I Class S will be issued at the Net Asset Value per share price of the Fixed Income I Class I shares. |
Table of Contents
COMPARISON OF INVESTMENT POLICIES AND RISKS
OF INVESTING IN THE FUNDS
Investment Objectives and Strategies.
The investment objectives of the Funds are identical: to provide current income and the preservation of capital. The investment strategies of each Fund are described below.
For Diversified Bond: Diversified Bond invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. Fund assets not allocated to money managers are managed by RIMCo.
The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
For Fixed Income: Fixed Income invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. Fund assets not allocated to money managers are managed by RIMCo.
The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
Table of Contents
For a complete description of the Funds’ investment strategies and restrictions, please refer to the Funds’ prospectus, dated March 1, 2007 as supplemented May 24, 2007, which is attached to this Prospectus/Proxy Statement as Exhibit B.
Risk Factors. The investment risks of the Funds are similar. The principal risks of investing in the Funds are those associated with investing in fixed-income securities, mortgage backed securities and international securities, employing derivatives, using a multi-manager approach and security selection. Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Corporate debt securities have a higher risk of default than fixed income securities issued or guaranteed by the U.S. government. Mortgage backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Since the Funds invest in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Funds’ foreign assets may be affected by changes in exchange rates of foreign currencies. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Funds buy a derivative, the hedge may not be effective. The investment styles employed by the Funds’ managers may not be complementary, and the use of a multi-manager approach could result in the Funds holding a concentration of certain types of securities and/or having a high level of portfolio turnover.
These and other risks are further described in the “Risks” section of the Funds’ prospectus, which is attached as Exhibit B to this Prospectus/Proxy Statement, and in Fixed Income’s Statement of Additional Information, dated March 1, 2007, as supplemented May 24, 2007, which is available upon request.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF
TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF
THE REORGANIZATION AS DESCRIBED IN THE PROPOSAL.
ANY EXECUTED UNMARKED PROXY CARDS THAT ARE RETURNED ON
A TIMELY BASIS WILL BE SO VOTED.
Table of Contents
OTHER BUSINESS
The Trustees know of no other business to be presented at the Special Meeting other than the Proposal, and do not intend to bring any other matters before the Special Meeting. However, if any additional matters should be properly presented, proxies will be voted in the discretion of the persons named as proxies.
FURTHER INFORMATION ABOUT VOTING AND THE SPECIAL MEETING
This Prospectus/Proxy Statement is provided on behalf of the Board in connection with the Special Meeting of RIC to be held at the offices of RIC at 909 A Street, Tacoma, Washington 98402, on October 3, 2007, at 10:00 a.m., local time, and any or all adjournments thereof. This Prospectus/Proxy Statement is first being mailed to Shareholders on or about July 26, 2007. You may revoke your proxy at any time before it is exercised by signing and forwarding to RIC a later-dated proxy card, or by attending the Special Meeting and casting your votes in person.
RIC requests that broker-dealer firms, custodians, nominees and fiduciaries forward proxy material to the beneficial owners of the shares held of record by such persons. RIC may reimburse such broker-dealer firms, custodians, nominees and fiduciaries for their reasonable expenses incurred in connection with such proxy solicitation. The cost of soliciting these proxies will be borne by Diversified Bond. However, since Diversified Bond is currently operating above its stated expense cap, it is expected that RIMCo will bear the costs of the reorganization. RIC has engaged Computershare Fund Services to solicit proxies from brokers, banks, other institutional holders and individual Shareholders for an estimated fee, including out-of-pocket expenses, of $31,000.
Record Date
Shareholders of record at the close of business on the Record Date, July 9, 2007, are entitled to be present and to vote at the Special Meeting or any adjournment of the Special Meeting. Each share of record is entitled to one vote on each matter presented at the Special Meeting, with proportionate votes for fractional shares.
As of June 15, 2007 there were the following number of shares of beneficial interest outstanding of Diversified Bond:
Diversified Bond | Number of Shares Outstanding | |||||
Class C | ||||||
Class E | ||||||
Class S |
Quorum, Voting and Adjournment
The Amended and Restated Master Trust Agreement provides that a quorum shall be present at a meeting when a majority of the shares entitled to vote is present at the meeting, but any lesser number shall be sufficient for adjournments. In the event that a quorum is not present at the Special Meeting or sufficient votes to approve a proposal are not received, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. A Shareholder vote may be taken on any other matter to properly come before the Special Meeting prior to such adjournment if sufficient votes to approve such matters have been received and such vote is otherwise appropriate. Any adjournment of the Special Meeting will require the affirmative vote of a majority of those shares present at the Special Meeting or represented by proxy and voting. The persons named as proxies on the proxy card will vote against any such adjournment those proxies required to be voted against such proposal. They will vote in favor of an adjournment all other proxies that they are entitled to vote. The costs of any such additional solicitation and of any adjourned session will be borne by Diversified Bond.
Table of Contents
Abstentions and broker “non-votes” (i.e., proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other person entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be counted as shares that are present for purposes of determining the presence of a quorum, but which have not been voted, and will not be voted for or against any adjournment. Abstentions and broker non-votes will have the effect of a “no” vote on the Proposal. Accordingly, Shareholders are urged to forward their voting instructions promptly.
Beneficial Owners
As of May 7, 2007, the officers and Trustees, including the nominees, of RIC as a group beneficially owned less than 1% of the shares of each class of Diversified Bond outstanding on such date. As of June 15, 2007, to the best of RIC’s knowledge, no person owned beneficially more than 5% of any class of Diversified Bond, except for the following:
[INSERT ANY 5% BENEFICIAL OWNERS]
Shareholder Proposals
RIC is not required, and does not intend, to hold regular annual meetings of Shareholders. Shareholders wishing to submit proposals for consideration for inclusion in a proxy statement for the next meeting of Shareholders should send their written proposals to RIC’s offices, 909 A Street, Tacoma, Washington 98402, Attn: Secretary, so they are received within a reasonable time before any such meeting. The Trustees know of no business, other than the matters mentioned in the Notice and described above, that is expected to come before the Special Meeting. An opportunity will be provided at the Special Meeting for Shareholders present in person to present a motion to the Special Meeting. Should any properly presented motion or any other matter requiring a vote of Shareholders arise, including any question as to an adjournment or postponement of the Special Meeting, the persons named as proxies will vote on such matters according to their best judgment in the interests of RIC.
Annual and Semi-Annual Reports
The Funds’ most recent audited financial statements and Annual Report, for the fiscal year ended October 31, 2006, and Semi-Annual Report for the period ended April 30, 2007, have been previously mailed to Shareholders, and are available free of charge. If you have not received an Annual Report for Diversified Bond or Fixed Income, or would like to receive additional copies, free of charge, please contact your financial intermediary or contact RIC by mailing a request to Russell Investment Company, 909 A Street, Tacoma, WA 98402, or by calling 1-800-787-7354.
INFORMATION ABOUT RIC AND THE FUNDS
Information about RIC and the Funds is incorporated herein by reference from the current Prospectus dated March 1, 2007 as supplemented May 24, 2007, which is attached to this Prospectus/Proxy Statement (Exhibit B) and Annual Report dated October 31, 2006. Additional information about the Funds is included in RIC’s Statement of Additional Information, dated March 1, 2007 as supplemented May 24, 2007, the Statement of Additional Information relating to this Prospectus/Proxy Statement, dated July [ ], 2007 and the Semi-Annual Report dated April 30, 2007 which has previously been mailed to Shareholders, copies of which may be obtained without charge by writing or calling RIC at the address and telephone number shown on the cover page of this Prospectus/Proxy Statement.
Reports and other information filed by the Funds may be inspected and copied at prescribed rates, at the Public Reference Facilities maintained by the SEC at 450 Fifth Street NW, Washington, DC 20549. Information may also be obtained from the Internet Web site maintained by the Securities and Exchange Commission at http://www.sec.gov.
RIC is subject to the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act, as applicable, and, in accordance with such requirements, files proxy materials, reports and other information with
Table of Contents
the Securities and Exchange Commission. These materials may be inspected and copied, at prescribed rates, at the Public Reference Facilities maintained by the Securities and Exchange Commission at 450 Fifth Street NW, Washington, DC 20549. Information may also be obtained from the Internet Web site maintained by the Securities and Exchange Commission at http://www.sec.gov.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP (“PwC”) serves as the Independent Registered Public Accounting Firm of the Trust. PwC is responsible for performing annual audits of the financial statements and financial highlights of the Funds in accordance with the auditing standards of the Public Company Accounting Oversight Board and a review of federal tax returns. The mailing address of PwC is 1420 Fifth Avenue, Suite 1900, Seattle, WA 98101.
Audit Fees. The aggregate fees billed by PwC for professional services rendered for the audit of RIC’s annual financial statements for the fiscal years ended October 31, 2005 and 2006 were $933,179 and $1,069,000, respectively.
Audit-Related Fees. The aggregate fees billed by PwC for assurance and related services rendered that are reasonably related to the audit of RIC’s annual financial statements but not reported under “Audit-Fees” above for the fiscal years ended October 31, 2005 and 2006 were $94,530 and $110,799, respectively.
Tax Fees. The aggregate fees billed by PwC for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended October 31, 2005 and 2006 were $613,073 and $615,975, respectively.
All Other Fees. The aggregate fees billed by PwC for professional services rendered for products and services other than those described above for the fiscal years ended October 31, 2005 and 2006 were $16,250 and $17,500, respectively.
The Audit Committee has considered whether the services described above are compatible with PwC’s independence. The Audit Committee has also considered whether the provision of all other non-audit services rendered to RIMCo, or an affiliate thereof that provides ongoing services to RIC, is compatible with maintaining PwC’s independence. The Audit Committee has adopted a policy requiring pre-approval by the committee of all services (audit and non-audit) to be provided to RIC by its independent auditor. In accordance with that policy, the Audit Committee has given its approval for the provision of audit services by PwC for the fiscal year ended October 31, 2006 and has also given its general pre-approval (“general pre-approval”) for up to a year in advance for the provision by PwC of particular categories or types of audit-related, tax and permitted non-audit services (including permitted non-audit services to RIC, RIMCo and any entity controlling, controlled by, or under common control with RIMCo that provides ongoing services to RIC), subject to specific budgets. Services which have not received general pre-approval or which exceed their budgets must receive specific approval of the Audit Committee (“specific approval”). In cases where the Audit Committee’s pre-approval is not covered by one of those approvals, the policy provides that the Audit Committee may delegate general or specific pre-approval authority to one or more of its members, and that any such pre-approvals will then be communicated for informational purposes only to the full Audit Committee at its next scheduled meeting. To date, no such delegation of authority has been made by the Audit Committee.
Pre-approval has not been waived in respect of services described under “Audit-Related Fees,” “Tax Fees” or “All Other Fees” since the date on which the aforementioned pre-approval procedures were adopted by the Audit Committee.
The aggregate non-audit fees billed by PwC for services rendered to RIC and to RIMCo, or an affiliate thereof that provides ongoing services to RIC, for the fiscal years ended October 31, 2005 and 2006 were $77,450 and $61,500, respectively.
Representatives of PwC are not expected to be present at the Special Meeting, but will be given the opportunity to make a statement if they so desire and will be available should any matter arise requiring their presence.
Table of Contents
EXHIBITS TO COMBINED
PROSPECTUS / PROXY STATEMENT
EXHIBIT INDEX
Form of Agreement and Plan of Reorganization by Russell Investment Company (“RIC”), for Diversified Bond Fund and Fixed Income I Fund | A | |
RIC Prospectus relating to Fixed Income and Diversified Bond Funds | B | |
Management Discussion and Analysis of Fixed Income I Fund | C |
Table of Contents
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this 22nd day of May, 2007 by RUSSELL INVESTMENT COMPANY (the “Trust”), a Massachusetts business trust, on behalf of the Fixed Income I Fund (the “Acquiring Fund”), and the Trust on behalf of the Diversified Bond Fund (the “Target Fund” and together with the Acquiring Fund, each a “Fund” and collectively the “Funds”), each a separate series of the Trust. The principal place of business of the Trust is 909 A Street, Tacoma, Washington 98402.
This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). The reorganization (the “Reorganization”) will consist of the transfer of all or substantially all of the assets of the Target Fund to the Acquiring Fund in exchange solely for voting shares of beneficial interest ($0.01 par value per share) of the Acquiring Fund (the “Acquiring Fund Shares”), the assumption by the Acquiring Fund of all of the liabilities of the Target Fund and the distribution of the Acquiring Fund Shares to the shareholders of the Target Fund in complete liquidation of the Target Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
(1) Transfer of Assets of the Target Fund to the Acquiring Fund in Exchange for Acquiring Fund Shares, the Assumption of All Target Fund Liabilities and the Liquidation of The Target Fund
1.1. Subject to the terms and conditions set forth herein and on the basis of the representations and warranties contained herein, the Target Fund agrees to transfer to the Acquiring Fund all or substantially all of the Target Fund’s assets as set forth in section 1.2, and the Acquiring Fund agrees in exchange therefor (i) to deliver to the Target Fund that number of full and fractional Class C, Class E and Class S Acquiring Fund Shares determined by dividing the value of the Target Fund’s assets net of any liabilities of the Target Fund, computed in the manner and as of the time and date set forth in section 2.1, by the net asset value of one Acquiring Fund Share, computed in the manner and as of the time and date set forth in section 2.2; and (ii) to assume all of the liabilities of the Target Fund. All Acquiring Fund Shares delivered to the Target Fund shall be delivered at net asset value without a sales load, commission or other similar fee being imposed. Such transactions shall take place at the closing provided for in section 3.1 (the “Closing”).
1.2. The assets of the Target Fund to be acquired by the Acquiring Fund (the “Assets”) shall consist of all assets, including, without limitation, all cash, cash equivalents, securities, commodities and futures interests and dividends or interest or other receivables that are owned by the Target Fund and any deferred or prepaid expenses shown on the unaudited statement of assets and liabilities of the Target Fund prepared as of the effective time of the Closing in accordance with generally accepted accounting principles (“GAAP”) applied consistently with those of the Target Fund’s most recent audited balance sheet. The Assets shall constitute at least 90% of the fair market value of the net assets, and at least 70% of the fair market value of the gross assets, held by the Target Fund immediately before the Closing (excluding for these purposes assets used to pay the dividends and other distributions paid pursuant to section 1.4).
1.3. The Target Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date as defined in section 3.6.
Table of Contents
1.4. On or as soon as practicable prior to the Closing Date as defined in section 3.1, the Target Fund will declare and pay to its shareholders of record one or more dividends and/or other distributions so that it will have distributed all of its investment company taxable income (computed without regard to any deduction for dividends paid) and realized net capital gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section 1.1, the Target Fund will distribute to the Target Fund’s shareholders of record (the “Target Fund Shareholders”), determined as of the Valuation Time (as defined in section 2.1), on a pro rata basis, the Acquiring Fund Shares received by the Target Fund pursuant to section 1.1 and will completely liquidate. Such distribution and liquidation will be accomplished with respect to the Target Fund by the transfer of the Acquiring Fund Shares then credited to the account of the Target Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Target Fund Shareholders. The Acquiring Fund shall have no obligation to inquire as to the validity, propriety or correctness of such records, but shall assume that such transaction is valid, proper and correct. The aggregate net asset value of the Class C, Class E and Class S Acquiring Fund Shares to be so credited to the Class C, Class E and Class S shareholders of Target Fund, shall be equal to the aggregate net asset value of the applicable Target Fund shares owned by such shareholders as of the Valuation Time. All issued and outstanding shares of the Target Fund will simultaneously be cancelled on the books of the Target Fund, although share certificates representing interests in shares of the Target Fund will represent a number of Acquiring Fund Shares after the Closing Date as determined in accordance with section 2.3. The Acquiring Fund will not issue certificates representing Acquiring Fund Shares in connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner described in the Acquiring Fund’s then-current prospectus and statement of additional information.
1.7. Any reporting responsibility of the Target Fund including, without limitation, the responsibility for filing of regulatory reports, tax returns, or other documents with the Securities and Exchange Commission (the “Commission”), any state securities commission, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Target Fund.
1.8. All books and records of the Target Fund, including all books and records required to be maintained under the Investment Company Act of 1940, as amended (the “1940 Act”), and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the Closing Date and shall be turned over to the Acquiring Fund as soon as practicable following the Closing Date.
(2) Valuation
2.1. The value of the Assets shall be computed as of the close of regular trading on the New York Stock Exchange (the “NYSE”) on the business day immediately preceding the Closing Date, as defined in section 3.1 (the “Valuation Time”) after the declaration and payment of any dividends and/or other distributions on that date, using the valuation procedures set forth in the Trust’s Amended and Restated Master Trust Agreement as amended, and then-current prospectus or statement of additional information, copies of which have been delivered to the Target Fund.
2.2. The net asset value of a Class C, Class E and Class S Acquiring Fund Share shall be the net asset value per share computed as of the Valuation Time using the valuation procedures referred to in section 2.1.
Table of Contents
2.3. The number of Class C, Class E and Class S Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Assets shall be determined by dividing the value of the Assets with respect to Class C, Class E or Class S, as applicable, of the Target Fund determined in accordance with section 2.1 by the net asset value of an Acquiring Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the direction of each Fund’s respective accounting agent, if applicable, in accordance with its regular practice and the requirements of the 1940 Act and shall be subject to confirmation by each Fund’s respective independent accountants upon the reasonable request of the other Fund.
(3) Closing and Closing Date
3.1. The Closing of the transactions contemplated by this Agreement shall be October 22, 2007, or such later date as the parties may agree in writing (the “Closing Date”). All acts taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the Closing Date, unless otherwise agreed to by the parties. The Closing shall be held at the offices of the Trust, 909 A Street, Tacoma, Washington 98402, or at such other place and time as the parties may agree.
3.2. The Target Fund shall deliver to the Acquiring Fund on the Closing Date a schedule of Assets.
3.3. State Street Bank and Trust Company (“State Street”), custodian for the Target Fund, shall deliver at the Closing a certificate of an authorized officer stating that (a) the Assets shall have been delivered in proper form to State Street, custodian for the Acquiring Fund, prior to or on the Closing Date and (b) all necessary taxes in connection with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. The Target Fund’s portfolio securities represented by a certificate or other written instrument shall be presented by the custodian for the Target Fund to the custodian for the Acquiring Fund for examination no later than five business days preceding the Closing Date and transferred and delivered by the Target Fund as of the Closing Date by the Target Fund for the account of the Acquiring Fund duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof. The Target Fund’s portfolio securities and instruments deposited with a securities depository, as defined in Rule 17f-4 under the 1940 Act, shall be delivered as of the Closing Date by book entry in accordance with the customary practices of such depositories and the custodian for the Acquiring Fund. The cash to be transferred by the Target Fund shall be delivered by wire transfer of federal funds on the Closing Date.
3.4. Russell Investment Management Company (“RIMCo”), as transfer agent for the Target Fund, on behalf of the Target Fund, shall deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of the Target Fund Shareholders and the number and percentage ownership (to three decimal places) of outstanding Class C, Class E and Class S Target Fund shares, as applicable, owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date to the Target Fund or provide evidence satisfactory to the Target Fund that such Acquiring Fund Shares have been credited to the Target Fund’s account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, if any, receipts or other documents as such other party or its counsel may reasonably request to effect the transactions contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the NYSE or another primary trading market for portfolio securities of the Acquiring Fund or the Target Fund shall be closed to
Table of Contents
trading or trading thereupon shall be restricted, or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of the Board members of either party to this Agreement, accurate appraisal of the value of the net assets with respect to the Class C, Class E or Class S shares of the Acquiring Fund or the Target Fund is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored.
3.6. The liabilities of the Target Fund shall include all of the Target Fund’s liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at the Closing Date, and whether or not specifically referred to in this Agreement including but not limited to any deferred compensation to the Target Fund’s board members.
(4) Representations and Warranties
4.1. The Trust, on behalf of the Target Fund, represents and warrants to the Acquiring Fund as follows:
4.1.1. The Trust is duly formed and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts with power under the Trust’s Amended and Restated Trust Agreement, to own all of its properties and assets and to carry on its business as it is now being conducted and, subject to approval of shareholders of the Target Fund, to carry out the Agreement. The Target Fund is a separate series of the Trust duly designated in accordance with the applicable provisions of the Trust’s Amended and Restated Trust Agreement. The Trust and Target Fund are qualified to do business in all jurisdictions in which they are required to be so qualified, except jurisdictions in which the failure to so qualify would not have material adverse effect on the Trust or Target Fund. The Target Fund has all material federal, state and local authorizations necessary to own all of the properties and assets and to carry on its business as now being conducted, except authorizations that the failure to so obtain would not have a material adverse effect on the Target Fund;
4.1.2. The Trust is registered with the Commission as an open-end management investment company under the 1940 Act, and such registration is in full force and effect and the Target Fund is in compliance in all material respects with the 1940 Act and the rules and regulations thereunder;
4.1.3. No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Target Fund of the transactions contemplated herein, except such as have been obtained under the Securities Act of 1933, as amended (the “1933 Act”), the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the 1940 Act and such as may be required by state securities laws;
4.1.4. Other than with respect to contracts entered into in connection with the portfolio management of the Target Fund which shall terminate on or prior to the Closing Date, the Trust is not, and the execution, delivery and performance of this Agreement by the Trust will not result in (i) a violation of Massachusetts law or of the Trust’s Amended and Restated Master Trust Agreement or By-Laws, (ii) a violation or breach of, or constitute a default under, any material agreement, indenture, instrument, contract, lease or other undertaking to which the Target Fund is a party or by which it is bound, and the execution, delivery and performance of this Agreement by the Target Fund will not result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Target Fund is a party or by which it is bound, or (iii) the creation or imposition of any lien, charge or encumbrance on any property or assets of the Target Fund;
Table of Contents
4.1.5. No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Target Fund or any properties or assets held by it. The Target Fund knows of no facts that might form the basis for the institution of such proceedings that would materially and adversely affect its business and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated;
4.1.6. The Statements of Assets and Liabilities, Operations, and Changes in Net Assets, the Financial Highlights, and the Investment Portfolio of the Target Fund at and for the fiscal year ended October 31, 2006, have been audited by PricewaterhouseCoopers LLP (“PwC”), independent registered public accounting firm, and are in accordance with GAAP consistently applied, and such statements (a copy of each of which has been furnished to the Acquiring Fund) present fairly, in all material respects, the financial position of the Target Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Target Fund required to be reflected on the statement of assets and liabilities (including the notes thereto) in accordance with GAAP as of such date not disclosed therein;
4.1.7. Since October 31, 2006, there has not been any material adverse change in the Target Fund’s financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Target Fund of indebtedness maturing more than one year from the date such indebtedness was incurred except as otherwise disclosed to and accepted in writing by the Acquiring Fund. For purposes of this subsection (g), a decline in net asset value per share of the Target Fund due to declines in market values of securities in the Target Fund’s portfolio, the discharge of Target Fund liabilities, or the redemption of Target Fund shares by Target Fund Shareholders shall not constitute a material adverse change;
4.1.8. At the date hereof and at the Closing Date, all federal and other tax returns and reports of the Target Fund required by law to have been filed by such dates (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof, and, to the best of the Target Fund’s knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns;
4.1.9. For each taxable year of its operation (including the taxable year ending on the Closing Date), the Target Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and has elected to be treated as such, has been eligible to and has computed its federal income tax under Section 852 of the Code, and will have distributed all of its investment company taxable income and net capital gain (as defined in the Code) that has accrued through the Closing Date;
4.1.10. All issued and outstanding shares of the Target Fund (i) have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws, (ii) are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable and not subject to preemptive or dissenter’s rights, and (iii) will be held at the time of the Closing by the persons and in the amounts set forth in the records of RIMCo, as provided in section 3.4. The Target Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Target Fund shares, nor is there outstanding any security convertible into any of the Target Fund shares;
4.1.11. At the Closing Date, the Target Fund will have good and marketable title to the Target Fund’s assets to be transferred to the Acquiring Fund pursuant to section 1.2 and full right, power
Table of Contents
and authority to sell, assign, transfer and deliver such assets hereunder free of any liens or other encumbrances, except those liens or encumbrances as to which the Acquiring Fund has received notice at or prior to the Closing, and upon delivery and payment for such assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act and the 1940 Act, except those restrictions as to which the Acquiring Fund has received notice and necessary documentation at or prior to the Closing;
4.1.12. The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of the Board members of the Trust, (including the determinations required by Rule 17a-8(a) under the 1940 Act), and, subject to the approval of the Target Fund Shareholders, this Agreement constitutes a valid and binding obligation of the Trust, on behalf of the Target Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
4.1.13. The information to be furnished by the Target Fund for use in applications for orders, registration statements or proxy materials or for use in any other document filed or to be filed with any federal, state or local regulatory authority (including the National Association of Securities Dealers, Inc. (the “NASD”)), which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto;
4.1.14. The current prospectus and statement of additional information of the Target Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading; and
4.1.15. The proxy statement of the Target Fund to be included in the Registration Statement referred to in section 5.7 (the “Proxy Statement”), insofar as it relates to the Target Fund, will, on the effective date of the Registration Statement and on the Closing Date, (i) comply in all material respects with the provisions and Regulations of the 1933 Act, 1934 Act and 1940 Act, as applicable, and (ii) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements are made, not materially misleading; provided, however, that the representations and warranties in this section shall not apply to statements in or omissions from the Proxy Statement and the Registration Statement made in reliance upon and in conformity with information that was furnished or should have been furnished by the Acquiring Fund for use therein.
4.2. The Trust, on behalf of the Acquiring Fund, represents and warrants to the Target Fund as follows:
4.2.1. The Trust is duly formed and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts with power under the Trust’s Amended and Restated Master Trust Agreement, to own all of its properties and assets and to carry on its business as it is now being conducted and, subject to the approval of shareholders of the Target Fund, to carry out the Agreement. The Acquiring Fund is a separate series of the Trust duly designated in accordance with the applicable provisions of the Trust’s Amended and Restated Master Trust Agreement. The Trust and Acquiring Fund are qualified to do business in all jurisdictions in which they are required to be so qualified, except jurisdictions in which the failure to so qualify would not have material adverse effect on the Trust or
Table of Contents
Acquiring Fund. The Acquiring Fund has all material federal, state and local authorizations necessary to own all of the properties and assets and to carry on its business as now being conducted, except authorizations that the failure to so obtain would not have a material adverse effect on the Acquiring Fund;
4.2.2. The Trust is registered with the Commission as an open-end management investment company under the 1940 Act, and such registration is in full force and effect and the Acquiring Fund is in compliance in all material respects with the 1940 Act and the rules and regulations thereunder;
4.2.3. No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state securities laws;
4.2.4. The Trust is not, and the execution, delivery and performance of this Agreement by the Trust will not result in (i) a violation of Massachusetts law or of the Trust’s Amended and Restated Master Trust Agreement, or By-Laws, (ii) a violation or breach of, or constitute a default under, any material agreement, indenture, instrument, contract, lease or other undertaking known to counsel to which the Acquiring Fund is a party or by which it is bound, and the execution, delivery and performance of this Agreement by the Acquiring Fund will not result in the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquiring Fund is a party or by which it is bound, or (iii) the creation or imposition of any lien, charge or encumbrance on any property or assets of the Acquiring Fund;
4.2.5. No material litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any properties or assets held by it. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings that would materially and adversely affect its business and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated;
4.2.6. The Statements of Assets and Liabilities, Operations, and Changes in Net Assets, the Financial Highlights, and the Investment Portfolio of the Acquiring Fund at and for the fiscal year ended October 31, 2006, have been audited by PwC, independent public accountants, and are in accordance with GAAP consistently applied, and such statements (a copy of each of which has been furnished to the Target Fund) present fairly, in all material respects, the financial position of the Acquiring Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquiring Fund required to be reflected on the statement of assets and liabilities (including the notes thereto) in accordance with GAAP as of such date not disclosed therein;
4.2.7. Since October 31, 2006, there has not been any material adverse change in the Acquiring Fund’s financial condition, assets, liabilities or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred except as otherwise disclosed to and accepted in writing by the Target Fund. For purposes of this subsection 4.2.7, a decline in net asset value per share of the Acquiring Fund due to declines in market values of securities in the Acquiring Fund’s portfolio, the discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund shares by Acquiring Fund shareholders shall not constitute a material adverse change;
Table of Contents
4.2.8. At the date hereof and at the Closing Date, all federal and other tax returns and reports of the Acquiring Fund required by law to have been filed by such dates (including any extensions) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof, and, to the best of the Acquiring Fund’s knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns;
4.2.9. For each taxable year of its operation, the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and has elected to be treated as such, has been eligible to and has computed its federal income tax under Section 852 of the Code, and will do so for the taxable year including the Closing Date;
4.2.10. All issued and outstanding shares of the Acquiring Fund (i) have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws and (ii) are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable, and not subject to preemptive or dissenter’s rights. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the Acquiring Fund shares, nor is there outstanding any security convertible into any of the Acquiring Fund shares;
4.2.11. The Acquiring Fund Shares to be issued and delivered to the Target Fund, for the account of the Target Fund Shareholders, pursuant to the terms of this Agreement, will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued and outstanding Acquiring Fund Shares, and will be fully paid and non-assessable;
4.2.12. At the Closing Date, the Acquiring Fund will have good and marketable title to the Acquiring Fund’s assets, free of any liens or other encumbrances, except those liens or encumbrances as to which the Target Fund has received notice at or prior to the Closing;
4.2.13. The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of the Board members of the Trust (including the determinations required by Rule 17a-8(a) under the 1940 Act), and this Agreement will constitute a valid and binding obligation of the Trust, on behalf of the Acquiring Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
4.2.14. The information to be furnished by the Acquiring Fund for use in applications for orders, registration statements or proxy materials or for use in any other document filed or to be filed with any federal, state or local regulatory authority (including the NASD), which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto;
4.2.15. The current prospectus and statement of additional information of the Acquiring Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading;
Table of Contents
4.2.16. The Proxy Statement to be included in the Registration Statement, only insofar as it relates to the Acquiring Fund, will, on the effective date of the Registration Statement and on the Closing Date, (i) comply in all material respects with the provisions and Regulations of the 1933 Act, 1934 Act, and 1940 Act and (ii) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading; provided, however, that the representations and warranties in this section shall not apply to statements in or omissions from the Proxy Statement and the Registration Statement made in reliance upon and in conformity with information that was furnished or should have been furnished by the Target Fund for use therein; and
4.2.17. The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state securities laws as may be necessary in order to continue its operations after the Closing Date.
(5) Covenants of the Acquiring Fund and the Target Fund
5.1. Each Fund covenants to operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that (a) such ordinary course of business will include (i) the declaration and payment of customary dividends and other distributions and (ii) such changes as are contemplated by the Fund’s normal operations; and (b) each Fund shall retain exclusive control of the composition of its portfolio until the Closing Date. No party shall take any action that would, or reasonably would be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect. Each Fund covenants and agrees to coordinate the respective portfolios of the Acquiring Fund and the Target Fund from the date of the Agreement up to and including the Closing Date in order that at Closing, when the Assets are added to the Acquiring Fund’s portfolio, the resulting portfolio will meet the Acquiring Fund’s investment objective, policies and restrictions, as set forth in the Acquiring Fund’s Prospectus, a copy of which has been delivered to the Target Fund.
5.2. Upon reasonable notice, the Acquiring Fund’s officers and agents shall have reasonable access to the Target Fund’s books and records necessary to maintain current knowledge of the Target Fund and to ensure that the representations and warranties made by the Target Fund are accurate.
5.3. The Target Fund covenants to call a meeting of the Target Fund Shareholders entitled to vote thereon to consider and act upon this Agreement and to take all other reasonable action necessary to obtain approval of the transactions contemplated herein. Such meeting shall be scheduled for no later than October 31, 2007.
5.4. The Target Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement.
5.5. The Target Fund covenants that it will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Target Fund shares.
5.6. Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper and/or advisable to consummate and make effective the transactions contemplated by this Agreement.
Table of Contents
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the 1934 Act and the 1940 Act the Registration Statement on Form N-14 (the “Registration Statement”) in connection with the meeting of the Target Fund Shareholders to consider approval of this Agreement and the transactions contemplated herein. The Acquiring Fund will file the Registration Statement, including the Proxy Statement, with the Commission. The Target Fund will provide the Acquiring Fund with information reasonably necessary for the preparation of a prospectus, which will include the Proxy Statement referred to in section 4.1(o), all to be included in the Registration Statement, in compliance in all material respects with the 1933 Act, the 1934 Act and the 1940 Act.
5.8. The Target Fund covenants that it will, from time to time, as and when reasonably requested by the Acquiring Fund, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action as the Acquiring Fund may reasonably deem necessary or desirable in order to vest in and confirm the Acquiring Fund’s title to and possession of all the assets and otherwise to carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act and 1940 Act, and such of the state securities laws as it deems appropriate in order to continue its operations after the Closing Date and to consummate the transactions contemplated herein; provided, however, that the Acquiring Fund may take such actions it reasonably deems advisable after the Closing Date as circumstances change.
5.10. The Acquiring Fund covenants that it will, from time to time, as and when reasonably requested by the Target Fund, execute and deliver or cause to be executed and delivered all such assignments, assumption agreements, releases, and other instruments, and will take or cause to be taken such further action, as the Target Fund may reasonably deem necessary or desirable in order to (i) vest and confirm to the Target Fund title to and possession of all Acquiring Fund shares to be transferred to the Target Fund pursuant to this Agreement and assume the liabilities from the Target Fund.
5.11. As soon as reasonably practicable after the Closing, the Target Fund shall make a liquidating distribution to its shareholders consisting of the Acquiring Fund Shares received at the Closing.
5.12. Each Fund shall use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to effect the transactions contemplated by this Agreement as promptly as practicable.
5.13. The intention of the parties is that the Reorganization will qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither the Trust nor the Funds shall take any action, or cause any action to be taken (including, without limitation, the filing of any tax return) that is inconsistent with such treatment or results in the failure of a transaction to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the Trust and each Fund will take such action, or cause such action to be taken, as is reasonably necessary to enable Dechert LLP to render the tax opinion contemplated herein in section 8.5.
5.14. At or immediately prior to the Closing, the Target Fund will declare and pay to its stockholders a dividend or other distribution in an amount large enough so that it will have distributed all of its investment company taxable income (computed without regard to any deduction for dividends paid) and realized net capital gain, if any, for the current taxable year through the Closing Date.
Table of Contents
(6) Conditions Precedent to Obligations of the Target Fund. With respect to the Reorganization, the obligations of the Target Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Trust, on behalf of the Acquiring Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; and there shall be (i) no pending or threatened litigation brought by any person (other than the Target Fund, its adviser or any of their affiliates) against the Acquiring Fund or its investment adviser(s), Board members or officers arising out of this Agreement and (ii) no facts known to the Acquiring Fund which the Acquiring Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the Target Fund on the Closing Date a certificate executed in its name by its President or a Vice President, in a form reasonably satisfactory to the Trust, on behalf of the Target Fund, and dated as of the Closing Date, to the effect that the representations and warranties of the Trust with respect to the Acquiring Fund made in this Agreement are true and correct on and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Target Fund shall reasonably request.
6.3. The Target Fund shall have received on the Closing Date an opinion of counsel, in a form reasonably satisfactory to the Target Fund, and dated as of the Closing Date, to the effect that:
6.3.1. the Trust is duly formed and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts;
6.3.2. the Acquiring Fund has the power to carry on its business as presently conducted in accordance with the description thereof in the Trust’s registration statement under the 1940 Act;
6.3.3. the Agreement has been duly authorized, executed and delivered by the Trust, on behalf of the Acquiring Fund, and constitutes a valid and legally binding obligation of the Trust, on behalf of the Acquiring Fund, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and laws of general applicability relating to or affecting creditors’ rights and to general equity principles;
6.3.4. the execution and delivery of the Agreement did not, and the exchange of the Target Fund’s assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the Trust’s Amended and Restated Master Trust Agreement or By-Laws; and
6.3.5. to the knowledge of such counsel, and without any independent investigation, (i) the Trust is not subject to any litigation or other proceedings that might have a materially adverse effect on the operations of the Trust, (ii) the Trust is duly registered as an investment company with the Commission and is not subject to any stop order; and (iii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Acquiring Fund under the federal laws of the United States or the laws of the Commonwealth of Massachusetts for the exchange of the Target Fund’s assets for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made. In rendering such opinion, such counsel may (1) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (2) limit such opinion to applicable federal and state law, and (3) define the word “knowledge” and related terms to mean the knowledge of attorneys then with such counsel who have devoted substantive attention to
Table of Contents
matters directly related to this Agreement and the Reorganization. The delivery of such opinion is conditioned upon receipt by counsel of customary representations it shall reasonably request of the Trust, on behalf of each of the Acquiring Fund and the Target Fund, respectively.
6.3.6. The Acquiring Fund shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Acquiring Fund on or before the Closing Date.
(7) Conditions Precedent to Obligations of the Acquiring Fund with respect to the Reorganization. The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Target Fund of all of the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following further conditions:
7.1. All representations and warranties of the Trust, on behalf of the Target Fund, contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; and there shall be (i) no pending or threatened litigation brought by any person (other than the Acquiring Fund, its adviser or any of their affiliates) against the Target Fund or its investment adviser(s), Board members or officers arising out of this Agreement and (ii) no facts known to the Target Fund which the Target Fund reasonably believes might result in such litigation.
7.2. The Target Fund shall have delivered to the Acquiring Fund a statement of the Target Fund’s assets and liabilities as of the Closing Date, certified by the Treasurer of the Target Fund.
7.3. The Target Fund shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by its President, in a form reasonably satisfactory to the Trust, on behalf of the Acquiring Fund, and dated as of the Closing Date, to the effect that the representations and warranties of the Trust with respect to the Target Fund made in this Agreement are true and correct on and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Acquiring Fund shall reasonably request.
7.4. The Acquiring Fund shall have received on the Closing Date an opinion of counsel, in a form reasonably satisfactory to the Acquiring Fund, and dated as of the Closing Date, to the effect that:
7.4.1. the Trust is duly formed and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts;
7.4.2. the Target Fund has the power to carry on its business as presently conducted in accordance with the description thereof in the Trust’s registration statement under the 1940 Act;
7.4.3. the Agreement has been duly authorized, executed and delivered by the Trust, on behalf of the Target Fund, and constitutes a valid and legally binding obligation of the Trust, on behalf of the Target Fund, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and laws of general applicability relating to or affecting creditors’ rights and to general equity principles;
7.4.4. the execution and delivery of the Agreement did not, and the exchange of the Target Fund’s assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the Trust’s Amended and Restated Master Trust Agreement, or By-Laws; and
Table of Contents
7.4.5. to the knowledge of such counsel, and without any independent investigation, (i) the Trust is not subject to any litigation or other proceedings that might have a materially adverse effect on the operations of the Trust, (ii) the Trust is duly registered as an investment company with the Commission and is not subject to any stop order, and (iii) all regulatory consents, authorizations, approvals or filings required to be obtained or made by the Target Fund under the federal laws of the United States or the laws of the Commonwealth of Massachusetts for the exchange of the Target Fund’s assets for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made. In rendering such opinion, such counsel may (1) make assumptions regarding the authenticity, genuineness, and/or conformity of documents and copies thereof without independent verification thereof, (2) limit such opinion to applicable federal and state law, and (3) define the word “knowledge” and related terms to mean the knowledge of attorneys then with such counsel who have devoted substantive attention to matters directly related to this Agreement and the Reorganization. The delivery of such opinion is conditioned upon receipt by counsel of customary representations it shall reasonably request of the Trust, on behalf of each of the Acquiring Fund and the Target Fund, respectively.
7.5. The Target Fund shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Target Fund on or before the Closing Date.
(8) Further Conditions Precedent to Obligations of the Acquiring Fund and the Target Fund. If any of the conditions set forth below have not been met on or before the Closing Date with respect to the Target Fund or the Acquiring Fund, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein, with respect to the Target Fund, shall have been approved by the requisite vote of the holders of the outstanding shares of the Target Fund in accordance with the provisions of the Trust’s Amended and Restated Master Trust Agreement, as amended, and By-Laws, applicable Massachusetts law and the 1940 Act, and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Target Fund may waive the conditions set forth in this section.
8.2. On the Closing Date, no action, suit or other proceeding shall be pending or to its knowledge threatened before any court or governmental agency in which it is sought to restrain or prohibit, or obtain material damages or other relief in connection with, this Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities deemed necessary by the Acquiring Fund or the Target Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Target Fund, provided that either party hereto may for itself waive any of such conditions.
8.4. The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
8.5. With respect to the Reorganization, the parties shall have received an opinion of Dechert LLP addressed to each of the Acquiring Fund and the Target Fund, in a form reasonably satisfactory to
Table of Contents
each such party, substantially to the effect that, based upon certain facts, assumptions and representations of the parties, for federal income tax purposes: (i) the transfer to the Acquiring Fund of all or substantially all of the assets of the Target Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all of the liabilities of the Target Fund, followed by the distribution of such shares to the Target Fund Shareholders in exchange for their shares of the Target Fund in complete liquidation of the Target Fund, will constitute a “reorganization” within the meaning of Section 368(a)(1) of the Code, and the Acquiring Fund and the Target Fund will each be “a party to a reorganization” within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized by the Target Fund upon the transfer of all or substantially all of its assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all of the liabilities of the Target Fund; (iii) the basis of the assets of the Target Fund in the hands of the Acquiring Fund will be the same as the basis of such assets of the Target Fund immediately prior to the transfer; (iv) the holding period of the assets of the Target Fund in the hands of the Acquiring Fund will include the period during which such assets were held by the Target Fund; (v) no gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Target Fund in exchange solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all of the liabilities of the Target Fund; (vi) no gain or loss will be recognized by Target Fund Shareholders upon the receipt of the Acquiring Fund Shares solely in exchange for their shares of the Target Fund as part of the transaction; (vii) the basis of the Acquiring Fund Shares received by Target Fund Shareholders will be the same as the basis of the shares of the Target Fund exchanged therefor; and (viii) the holding period of Acquiring Fund Shares received by Target Fund Shareholders will include the holding period during which the shares of the Target Fund exchanged therefore were held, provided that at the time of the exchange the shares of the Target Fund were held as capital assets in the hands of Target Fund Shareholders. The delivery of such opinion is conditioned upon receipt by Dechert LLP of representations it shall request of the Trust. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Target Fund may waive the condition set forth in this section 8.5. No opinion will be expressed by Dechert LLP, however, as to whether any gain or loss will be recognized (i) by the Target Fund in connection with the transfer from the Target Fund to the Acquiring Fund of any section 1256 contracts (as defined in Section 1256 of the Code) or any stock in a passive foreign investment company (as defined in Section 1297(a) of the Code) or (ii) by the Target Fund or the Acquiring Fund in connection with any dispositions of assets by such Fund prior to or following the Reorganization.
(9) Indemnification
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Target Fund and each of the Target Fund’s Board members and officers from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which jointly and severally, the Target Fund or any of its Board members or officers may become subject, insofar as any such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Acquiring Fund of any of its representations, warranties, covenants or agreements set forth in this Agreement.
9.2. The Target Fund agrees to indemnify and hold harmless the Acquiring Fund and each of the Acquiring Fund’s Board members and officers from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which jointly and severally, the Acquiring Fund or any of its Board members or officers may become subject, insofar as any such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Target Fund of any of its representations, warranties, covenants or agreements set forth in this Agreement.
Table of Contents
(10) Fees and Expenses
10.1. Each of the Trust, on behalf of the Acquiring Fund, and the Trust, on behalf of the Target Fund, represents and warrants to the other that it has no obligations to pay any brokers or finders fees in connection with the transactions provided for herein.
10.2. The Target Fund will bear the direct operational expenses with respect to the Reorganization.
(11) Entire Agreement; Survival of Warranties
11.1. Each Fund agrees that no party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section 11.2, the representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder. The covenants to be performed after the Closing and the obligations of each of the Acquiring Fund and the Target Fund in sections 9.1 and 9.2 shall survive the Closing.
(12) Termination
12.1. This Agreement may be terminated and the transactions contemplated hereby may be abandoned by any party as it relates to the transaction applicable to such party (i) by the mutual agreement of the parties, or (ii) by either party if the Closing shall not have occurred on or before January 31, 2008 unless such date is extended by mutual agreement of the parties, or (iii) by either party if the other party shall have materially breached its obligations under this Agreement or made a material and intentional misrepresentation herein or in connection herewith. In the event of any such termination, this Agreement shall become void and there shall be no liability hereunder on the part of any party or their respective Board members or officers, except for any such material breach or intentional misrepresentation, as to each of which all remedies at law or in equity of the party adversely affected shall survive.
(13) Amendments
This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by any authorized officer of the Target Fund and any authorized officer of the Acquiring Fund; provided, however, that following each meeting of the Target Fund Shareholders called by the Target Fund pursuant to section 5.3 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of the Acquiring Fund Shares to be issued to the Target Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
(14) Notices
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be deemed duly given if delivered by hand (including by Federal Express or similar express courier) or transmitted by facsimile or three days after being mailed by prepaid registered or certified mail, return receipt requested, addressed to the Target Fund, 909 A Street, Tacoma, Washington 98402, with a copy to Dechert LLP, 200 Clarendon Street, Boston, Massachusetts 02116, Attention: John V. O’Hanlon, Esq., or to the Acquiring Fund, 909 A Street, Tacoma, Washington 98402, with a copy to Dechert LLP, 200 Clarendon Street, Boston, Massachusetts 02116, Attention: John V. O’Hanlon, Esq., or to any other address that the Target Fund or the Acquiring Fund shall have last designated by notice to the other party.
Table of Contents
(15) Headings; Counterparts; Assignment; Limitation of Liability
15.1. The Article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and the shareholders of the Acquiring Fund and the Target Fund and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
15.4. Notwithstanding anything to the contrary contained in this Agreement, the obligations, agreements, representations and warranties with respect to each Fund shall constitute the obligations, agreements, representations and warranties of that Fund only (the “Obligated Fund”), and in no event shall any other series of the Trust or the assets of any such series be held liable with respect to the breach or other default by the Obligated Fund of its obligations, agreements, representations and warranties as set forth herein.
15.5. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts, without regard to its principles of conflicts of laws.
Table of Contents
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by an authorized officer and its seal to be affixed thereto and attested by its Secretary or Assistant Secretary.
Attest: | RUSSELL INVESTMENT COMPANY, on behalf of Fixed Income I Fund | |||||
| By: |
| ||||
Secretary | Title: | |||||
Attest: | RUSSELL INVESTMENT COMPANY, on behalf of Diversified Bond Fund | |||||
| By: |
| ||||
Secretary | Title: |
Table of Contents
EXHIBIT B
RUSSELL INVESTMENT
COMPANY
PROSPECTUS
DIVERSIFIED BOND FUND
Class C, E and S Shares
FIXED INCOME I FUND
Class E and I Shares
March 1, 2007 as Supplemented , 2007
909 A STREET, TACOMA, WA 98402 ¨ 800-787-7354
As with all mutual funds, the Securities and Exchange Commission has neither determined that the information in this Prospectus is accurate or complete, nor approved or disapproved of these securities. It is a criminal offense to state otherwise.
Table of Contents
RUSSELL INVESTMENT COMPANY
Supplement dated May 24, 2007 to
PROSPECTUS DATED MARCH 1, 2007
I. | The following information relates to the proposed reorganization of the Diversified Bond Fund into the Fixed Income I Fund and supplements this Prospectus. |
In connection with the potential reorganization involving the Diversified Bond Fund, Russell Investment Company will file a proxy statement/prospectus with the Securities and Exchange Commission (“SEC”). All shareholders are advised to read the proxy statement/prospectus in its entirety when it becomes available because it will contain important information regarding the proposal, the persons soliciting proxies in connection with the proposal and the interests of these persons in the proposal and related matters. The proxy statement/prospectus will be mailed to record date shareholders once it is effective. Shareholders may obtain a free copy of the proxy statement/prospectus, when available, and other documents filed with the SEC at the SEC’s website at WWW.SEC.GOV. Copies of such documents will also be available, once they are filed with the SEC, at no charge by contacting Russell Investment Company at 909 A Street, Tacoma, WA 98402, or by calling 1-800-787-7354.
At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment Company, upon the recommendation of Russell Investment Management Company (“RIMCo”), approved, subject to shareholder approval, an Agreement and Plan of Reorganization (the “Plan”) to reorganize the Diversified Bond Fund into the Fixed Income I Fund (the “Reorganization”).
The Reorganization can be consummated only if, among other things, it is approved by shareholders of the Diversified Bond Fund. A Special Meeting of the shareholders of the Diversified Bond Fund is expected to be held on or about October 3, 2007 and shareholders will be given the opportunity to vote on the Plan. It is currently anticipated that on or about July 23, 2007, proxy materials regarding the Reorganization will be distributed to shareholders of record as of July 9, 2007. It is expected that effective at the close of business on July 9, 2007, the Diversified Bond Fund will be closed to new shareholders.
The Plan provides that (i) the Diversified Bond Fund would transfer to the Fixed Income I Fund all of its assets in exchange solely for voting shares of the Fixed Income I Fund and the assumption by the Fixed Income I Fund of the Diversified Bond Fund’s liabilities, (ii) such shares of the Fixed Income I Fund would be distributed to shareholders of the Diversified Bond Fund in liquidation of the Diversified Bond Fund and (iii) the Diversified Bond Fund would be subsequently dissolved.
If the Plan is approved by shareholders, shareholders of the Diversified Bond Fund will receive Class C, Class E or Class S shares of the Fixed Income I Fund with an aggregate value equal at the time of the completion of the Reorganization to the aggregate value of their Diversified Bond Fund Class C, Class E, or Class S Shares, respectively.
As of April 30, 2007, the Diversified Bond Fund had assets of approximately $402 million. Assets of the Diversified Bond Fund have recently decreased significantly and assets are expected to continue to decline. Therefore, the Diversified Bond Fund is unlikely to achieve sufficient asset growth in the near future to assure its viability. The number of money managers used by the Fund depends, in part, upon the Fund’s asset level. Therefore, as a result of the declining assets, one or more money managers of the Fund may be terminated. However, RIMCo currently anticipates that the Diversified Bond Fund will be able to continue to pursue its investment objective pursuant to the investment strategies described in the Prospectus pending the Reorganization.
Shareholders of the Diversified Bond Fund should benefit from the Reorganization because the Fixed Income I Fund would have a larger asset base which should provide greater opportunities for diversifying investments and realizing economies of scale. After the Reorganization, as shareholders of the Fixed Income I Fund, the current shareholders of the Diversified Bond Fund should bear lower operating expenses than those they currently bear as shareholder of the Diversified Bond Fund. However, there can be no assurance that operational savings will be realized.
If the Reorganization is not approved by shareholders, the Diversified Bond Fund will continue to operate and the Trustees will consider what further action, if any, is in the best interests of the Diversified Bond Fund and its shareholders, including the possible liquidation of the Diversified Bond Fund. The Board has also approved, subject
Table of Contents
to approval by shareholders, an amendment to RIC’s Amended and Restated Master Trust Agreement which would allow the liquidation or reorganization of any Fund, including the Diversified Bond Fund, without the approval of the shareholders of such Fund.
II. | All Funds: The following language is added to the section entitled “How To Purchase Shares” in this Prospectus: |
Except for the Money Market Fund, Class E, I and S Shares of each Fund may only be purchased by:
(1) | clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for their services for the shareholder account in which the Class E, I or S Shares are held; |
(2) | employee benefit and other plans, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing plans, money purchase plans, defined benefit plans and non-qualified deferred compensation plans; |
(3) | clients of Financial Intermediaries who are members of Russell Investment Group; |
(4) | Russell employee investment programs; or |
(5) | current and retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell such Class E, I or S Shares. |
The Funds generally do not have the ability to enforce these limitations on access to Class E, I and S Shares. It is the sole responsibility of each Financial Intermediary to ensure that it only makes Class E, I and S Shares available to those categories of investors listed above that qualify for access to Class E, I and S Shares. However, the Funds will not knowingly sell Class E, I or S Shares to any investor not meeting one of the foregoing criteria.
III. | All Funds: The following language is added to the section entitled “Right to Reject or Restrict Purchase and Exchange Orders” in this Prospectus: |
The Funds may be unable to compel Financial Intermediaries to apply the steps described in the Funds’ Prospectus in the section entitled “Right to Reject or Restrict Purchase and Exchange Orders” to curtail frequent trading in Fund shares. The Funds reserve the right, in their sole discretion, to allow Financial Intermediaries to apply alternative frequent trading policies and trading restrictions reasonably designed to reduce incentives to engage in frequent trading. The Funds will use reasonable diligence to confirm that such intermediaries are applying the Funds’ frequent trading policy or an acceptable alternative.
Table of Contents
Table of Contents
Risk/Return Summary | 1 | |
Investment Objective, Principal Investment Strategies and Principal Risks | 1 | |
Performance | 3 | |
Fees and Expenses | 6 | |
Management of the Funds | 8 | |
The Money Managers | 9 | |
Investment Objective and Investment Strategies | 10 | |
Risks | 12 | |
Portfolio Turnover | 16 | |
Portfolio Disclosure | 16 | |
Dividends and Distributions | 16 | |
Taxes | 17 | |
How Net Asset Value is Determined | 17 | |
Choosing a Class of Shares to Buy | 18 | |
Distribution and Shareholder Services Arrangements and Payments to Financial Intermediaries | 19 | |
How to Purchase Shares | 20 | |
Exchange Privilege | 21 | |
Right to Reject or Restrict Purchase and Exchange Orders | 22 | |
How to Redeem Shares | 24 | |
Payment of Redemption Proceeds | 24 | |
Other Information About Share Transactions | 24 | |
Financial Highlights | 26 | |
Money Manager Information | 32 |
Table of Contents
RISK/RETURN SUMMARY
Investment Objective, Principal Investment Strategies and Principal Risks
Each of the following Funds has either a fundamental or a non-fundamental investment objective as noted below. A fundamental investment objective may only be changed with shareholder approval. A non-fundamental investment objective may be changed by the Board of Trustees of a Fund without shareholder approval. If a Fund’s investment objective is changed by the Board of Trustees, the Prospectus will be amended to reflect the new investment objective.
DIVERSIFIED BOND FUND
Non-Fundamental Investment Objective
Seeks to provide current income and the preservation of capital.
Principal Investment Strategies
The Diversified Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. Fund assets not allocated to money managers are managed by RIMCo.
The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.
Principal Risks
An investment in the Diversified Bond Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, mortgage backed securities and international securities, employing derivatives, using a multi-manager approach and security selection.
Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Corporate debt securities have a higher risk of default than fixed income securities issued or guaranteed by the U.S. government. Mortgage backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.
Please refer to the “Risks” section later in this Prospectus for further details.
Table of Contents
FIXED INCOME I FUND
Fundamental Investment Objective
Seeks to provide current income and the preservation of capital.
Principal Investment Strategies
The Fixed Income I Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations. The Fund also invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. Fund assets not allocated to money managers are managed by RIMCo.
The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.
Principal Risks
An investment in the Fixed Income I Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, mortgage backed securities and international securities, employing derivatives, using a multi-manager approach and security selection.
Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Corporate debt securities have a higher risk of default than fixed income securities issued or guaranteed by the U.S. government. Mortgage backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.
Please refer to the “Risks” section later in this Prospectus for further details.
An investment in any Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
2
Table of Contents
Performance
The following bar charts illustrate the risks of investing in the Funds by showing how the performance of Class S Shares of Diversified Bond Fund and Class I Shares of the Fixed Income I Fund varies from year to year over a 10-year period. The return for other Classes of Shares offered by the Funds (both before and after tax) may be lower than the returns shown in the bar chart, depending upon the fees and expenses of that Class. The highest and lowest returns for a full quarter during the periods shown in the bar charts for the Diversified Bond Fund’s Class S Shares and Fixed Income I Fund’s Class I Shares are set forth below the bar charts.
The tables accompanying the bar charts further illustrate the risks of investing in the Funds by showing how each Fund’s average annual returns for 1, 5 and 10 years compare with the returns of certain indexes that measure broad market performance. Index returns do not reflect deduction for fees, expenses or taxes. Index returns do not include fair valuation adjustments which may be included in fund returns. After-tax returns are shown only for one class. The after-tax returns for other classes will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. If a Fund has realized capital losses, the total return after taxes on distributions and sale of Fund Shares may be higher than the total return before taxes and the total return after taxes on distributions. The calculation of total return after taxes on distributions and sale of Fund Shares assumes that a shareholder has sufficient capital gains of the same character to offset any capital losses on a sale of Fund Shares and that the shareholder may therefore deduct the entire capital loss.
Past performance, both before-tax and after-tax, is no indication of future results. A more detailed description of how returns are calculated can be found in the Funds’ Statement of Additional Information in the section entitled “Yield and Total Return Quotations.”
3
Table of Contents
Diversified Bond Fund
Annual Total Returns
(for the years ended December 31)
Class S
Best Quarter: | 4.65 | % | (3Q/01) | ||
Worst Quarter: | (2.28 | )% | (2Q/04) |
Average annual total returns for the periods ended December 31, 2006 | 1 Year | 5 Years | 10 Years | ||||||
Return Before Taxes, Class C* | 2.85 | % | 3.51 | % | 4.79 | % | |||
Return Before Taxes, Class E** | 3.61 | % | 4.28 | % | 5.42 | % | |||
Return Before Taxes, Class S | 3.88 | % | 4.54 | % | 5.74 | % | |||
Return After Taxes on Distributions, Class S | 2.24 | % | 2.92 | % | 3.62 | % | |||
Return After Taxes on Distributions and Sale of Fund Shares, Class S | 2.50 | % | 2.94 | % | 3.61 | % | |||
Lehman Brothers Aggregate Bond Index | 4.33 | % | 5.06 | % | 6.24 | % |
* | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the returns of the Fund’s Class E Shares from January 1, 1997 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
** | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares from May 27, 1997 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
To obtain current yield information, please call 1-800-787-7354.
4
Table of Contents
Fixed Income I Fund
Annual Total Returns
(for the years ended December 31)
Class I
Best Quarter: | 4.49 | % | (3Q/01) | ||
Worst Quarter: | (2.27 | )% | (2Q/04) |
Average annual total returns for the periods ended December 31, 2006 | 1 Year | 5 Years | 10 Years | ||||||
Return Before Taxes, Class E* | 3.92 | % | 4.58 | % | 5.81 | % | |||
Return Before Taxes, Class I | 4.18 | % | 4.86 | % | 6.02 | % | |||
Return After Taxes on Distributions, Class I | 2.47 | % | 3.00 | % | 3.74 | % | |||
Return After Taxes on Distributions and Sale of Fund Shares, Class I | 2.70 | % | 3.11 | % | 3.77 | % | |||
Lehman Brothers Aggregate Bond Index | 4.33 | % | 5.06 | % | 6.24 | % |
* | Class E Shares of the Fund commenced operations on May 14, 1999. The returns shown prior to that date are the returns of the Class I Shares of the Fund and therefore do not reflect the deduction of shareholder services fees that apply to Class E Shares. Had it done so, the returns shown would have been lower. |
To obtain current yield information, please call 1-800-787-7354.
5
Table of Contents
Fees and Expenses
The following tables describe the fees and expenses that you may pay if you buy and hold Shares of the Funds.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases | Maximum Sales Charge (Load) Imposed on Reinvested Dividends | Maximum Deferred Sales Charge (Load) | Redemption Fees** | Exchange Fees | ||||||
All Funds, all classes | None | None | None | None | None |
** | Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. For more information, please refer to the section “Payment of Redemption Proceeds.” |
Annual Fund Operating Expenses#
(expenses that are deducted from Fund assets)
(% of net assets)
Advisory Fee | Distribution (12b-1) Fees** | Other Expenses*** | Acquired Fund Fees | Total Annual Fund Operating Expenses*** | Less Fee Waivers and Expense Reimbursements## | Net Annual Fund Operating Expenses*** | |||||||||||||||
Class C Shares* | |||||||||||||||||||||
Diversified Bond | 0.40 | % | 0.75 | % | 0.59 | % | 0.01 | % | 1.75 | % | 0.00 | % | 1.75 | % | |||||||
Class E Shares* | |||||||||||||||||||||
Diversified Bond | 0.40 | % | 0.00 | % | 0.59 | % | 0.01 | % | 1.00 | % | 0.00 | % | 1.00 | % | |||||||
Class S Shares* | |||||||||||||||||||||
Diversified Bond | 0.40 | % | 0.00 | % | 0.34 | % | 0.01 | % | 0.75 | % | 0.00 | % | 0.75 | % | |||||||
Class E Shares* | |||||||||||||||||||||
Fixed Income I Fund | 0.25 | % | 0.00 | % | 0.42 | % | 0.01 | % | 0.68 | % | (0.02 | %) | 0.66 | % | |||||||
Class I Shares* | |||||||||||||||||||||
Fixed Income I Fund | 0.25 | % | 0.00 | % | 0.17 | % | 0.01 | % | 0.43 | % | (0.02 | )% | 0.41 | % |
* | “Other Expenses” includes a shareholder services fee of 0.25% of average daily net assets for Class C and E Shares and an administrative fee of 0.05% of average daily net assets for Class C, Class E, Class I and Class S Shares. |
** | Pursuant to the rules of the National Association of Securities Dealers, Inc. (“NASD”), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on Class C Shares of the Diversified Bond Fund may not exceed 6.25% of total gross sales, subject to certain exclusions. This limitation is imposed at the class level on each Class of Shares of the Fund rather than on a per shareholder basis. Therefore, long-term shareholders of Class C Shares may pay more than the economic equivalent of the maximum sales charges permitted by the NASD. |
*** | Funds of Funds Re-allocation. Certain funds of funds (“Russell Funds of Funds”) also managed by RIMCo invest their assets in certain of the funds. The Russell Funds of Funds investment allocations to the underlying funds in which they invest are reviewed and may be changed periodically by RIMCo in pursuing the investment objectives of the Russell Funds of Funds. Effective March 1, 2007, the Russell Funds of Funds changed their allocations to underlying Funds in which they invest. The Russell Funds of Funds no longer allocate any assets to the Diversified Bond Fund. These re-allocations resulted in a substantial decrease in the assets under management in the Diversified Bond Fund. As a result, “Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Diversified Bond have been restated higher to reflect the impact of lower assets under management for these funds. |
Acquired Fund Fees and Expenses. In addition to the advisory and administrative fees payable by the Funds to RIMCo, each Fund that invests its cash reserves in one or more of RIC’s money market funds pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of that money market fund’s operating expenses, which include the advisory and administrative fees that such money market fund pays to RIMCo. Currently, the cash reserves for all Funds are invested in RIC’s Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves invested in RIC’s Money Market Fund are 0.10% (net of fee waivers and reimbursements).
“Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Funds have been restated to reflect each Fund’s proportionate share of the money market funds’ operating expenses. For the Diversified Bond and the Fixed Income I Funds, the Funds’ proportionate share of the money market funds’ operating expenses are reflected under “Acquired Fund Fees and Expenses.”
# | If you purchase Shares through a Financial Intermediary, such as a bank or an investment adviser, you may also pay additional fees to the intermediary for services provided by the intermediary. You should contact your Financial Intermediary for information concerning what additional fees, if any, will be charged. |
## | For the Fixed Income I Fund, RIMCo has contractually agreed to waive 0.02% of its administrative fees. |
6
Table of Contents
For the Diversified Bond Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 0.45% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.75% of the average daily net assets of that Fund for the period from March 1, 2007 to February 29, 2008. This waiver may not be terminated during the relevant period except at the Board’s discretion. Direct fund-level expenses for the Diversified Bond Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Example
This example is intended to help you compare the cost of investing in each Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your Shares at the end of those periods. The example also assumes your investment has a 5% return each year and that operating expenses remain the same. The calculation of costs for the one year period takes into account the effect of any current fee waivers contractually agreed to by RIMCo through February 29, 2008. The calculation of costs for the three, five and ten year periods takes such waivers into account only for the first year of the periods.
Although your actual costs may be higher or lower, under these assumptions your costs would be:
1 Year | 3 Years | 5 Years | 10 Years | |||||||||
Class C Shares | ||||||||||||
Diversified Bond Fund | $ | 178 | $ | 552 | $ | 950 | $ | 2,063 | ||||
Class E Shares | ||||||||||||
Diversified Bond Fund | 102 | 318 | 552 | 1,224 | ||||||||
Class S Shares | ||||||||||||
Diversified Bond Fund | 77 | 240 | 417 | 930 | ||||||||
Class E Shares | ||||||||||||
Fixed Income I Fund | 67 | 210 | 367 | 822 | ||||||||
Class I Shares | ||||||||||||
Fixed Income I Fund | 42 | 132 | 230 | 517 |
7
Table of Contents
MANAGEMENT OF THE FUNDS
The Funds’ investment adviser is RIMCo, 909 A Street, Tacoma, Washington 98402. RIMCo pioneered the “multi-style, multi-manager” investment method in mutual funds and, as of December 31, 2006, managed over $37.1 billion in 39 mutual fund portfolios. RIMCo was established in 1982 to serve as the investment management arm of Russell.
The Russell Investment Company (“RIC”) funds (“RIC Funds”) are offered through certain banks (including bank trust departments), registered investment advisers, broker-dealers and other financial services organizations that have been selected by the Funds’ adviser or distributor (“Financial Intermediaries”). Most RIC Funds are designed to provide a means for investors to use Russell Investment Management Company’s (“RIMCo”) and Frank Russell Company’s (“Russell”) “multi-style, multi-manager diversification” investment method and to obtain RIMCo’s and Russell’s money manager research services. On July 1, 2006, Frank Russell Investment Company changed its name to Russell Investment Company, and Frank Russell Investment Management Company changed its name to Russell Investment Management Company.
Russell was founded in 1936 and has been providing comprehensive asset management consulting services for over 30 years to institutional investors, principally large corporate employee benefit plans. Russell provides RIMCo and the RIC Funds with the money manager research services that it provides to its other clients. The Funds do not compensate Russell for these services. Russell and its affiliates have offices around the world, in Tacoma, New York, Toronto, London, Paris, Sydney, Auckland, Singapore and Tokyo.
Russell is a subsidiary of The Northwestern Mutual Life Insurance Company. Founded in 1857, Northwestern Mutual is a mutual insurance company headquartered in Milwaukee, Wisconsin. In the life and health insurance category, it was named the most admired company in the U.S. in Fortune’s corporate reputation survey published in 2006.
Unlike most investment companies that have a single organization that acts as investment adviser, the Funds divide responsibility for investment advice between RIMCo and a number of money managers. RIMCo utilizes the money manager research and other resources of Russell in providing services to the Funds. Russell’s money manager research services include evaluating and recommending to RIMCo professional investment advisory and management organizations (“money managers”) to make specific portfolio investments for each asset class, according to designated investment objectives, styles and strategies. Fund assets, are invested using a “multi-style, multi-manager diversification” technique.
Each Fund conducts its business through a number of service providers who act on their behalf. RIMCo, the Funds’ administrator and investment adviser, performs the Funds’ day to day corporate management and also evaluates and oversees the Funds’ money managers as more fully described below. Each of the Fund’s money managers makes investment decisions for the portion of the Fund assigned to it by RIMCo. The Funds’ custodian, State Street Bank, maintains custody of all of the Funds’ assets. RIMCo, in its capacity as the Funds’ transfer agent, is responsible for maintaining the Funds’ shareholder records and carrying out shareholder transactions. When a Fund acts in one of these areas, it does so through the service provider responsible for that area.
RIMCo provides or oversees the provision of all general management and administration, investment advisory and portfolio management services for the Funds, including developing the investment program for each Fund. RIMCo allocates most of each Fund’s assets to multiple money managers. The Funds’ custodian, State Street Bank, maintains custody of all of the Funds’ assets. RIMCo, in its capacity as the Funds’ transfer agent, is responsible for maintaining the Funds’ shareholder records and carrying out shareholder transactions. When a Fund acts in one of these areas, it does so through the service provider responsible for that area.
RIMCo exercises investment discretion over the portion of each Fund’s assets that RIMCo 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. RIMCo may also directly manage portions of a Fund during transitions between money managers.
RIMCo selects, subject to the approval of the Funds’ Board, money managers for the Funds, allocates Fund assets among money managers, oversees the money managers and evaluates their performance results. The Funds’ money managers select the individual portfolio securities for the assets assigned to them and either RIMCo or the money manager may arrange for execution of portfolio transactions.
Michael R. Ruff is the RIMCo employee who manages the Funds, oversees the Money Managers of the Funds and has primary responsibility for the management of the Funds (the “RIMCo Manager”). Mr. Ruff has been a portfolio manager since November 2002.
Please see the Funds’ Statement of Additional Information for additional information about the RIMCo Manager’s compensation, other accounts managed by the RIMCo Manager and the RIMCo Manager’s ownership of securities in the Funds.
8
Table of Contents
In the last fiscal year, the aggregate annual rate of advisory and administrative fees, paid to RIMCo monthly on a pro rata basis as a percentage of average daily net assets was: Diversified Bond Fund, 0.45%; Fixed Income I Fund, 0.28%. Of these aggregate amounts 0.05% and 0.03% is attributable to administrative services for the Diversified Bond and Fixed Income I Funds, respectively.
In addition to the advisory and administrative fees payable by the Funds to RIMCo, each Fund that invests its collateral received in securities lending transactions in one or more of RIC’s money market funds pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of that money market fund’s operating expenses, which include the advisory and administrative fees that such money market fund pays to RIMCo. Currently, the collateral for all Funds is invested in RIC’s Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the collateral invested in RIC’s Money Market Fund is 0.10% (net of fee waivers and reimbursements).
A discussion regarding the basis for the Board of Trustees’ approval of the investment advisory contract between RIMCo and the Funds is available in the Funds’ annual report to shareholders covering the period ended October 31, 2006.
THE MONEY MANAGERS
Each Fund allocates most of its assets among the money managers listed under “Money Manager Information” at the end of this Prospectus. Assets not allocated to money managers are managed by RIMCo. RIMCo, as the Funds’ adviser, may change the allocation of a Fund’s assets among money managers at any time. The Funds received an exemptive order from the Securities and Exchange Commission (SEC) that permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Funds’ Board of Trustees (Board), without a shareholder vote. A Fund notifies its shareholders within 60 days of when a money manager begins providing services. Each Fund selects money managers based primarily upon the research and recommendations of RIMCo. RIMCo, utilizing the money manager research provided by Russell, evaluates quantitatively and qualitatively the money managers’ investment style and process, performance record and portfolio characteristics in managing assets for specific asset classes, investment styles and strategies. Short-term investment performance, by itself, is not a controlling factor in the selection or termination of any money manager.
Each money manager has complete discretion to select portfolio securities for its segment of a Fund. At the same time, however, each money manager must operate within each Fund’s investment objectives, restrictions and policies. Additionally, each money manager must operate within more specific constraints developed from time to time by RIMCo. RIMCo develops such constraints for each money manager based on RIMCo’s assessment of the money manager’s expertise and investment style. By assigning more specific constraints to each money manager, RIMCo attempts to capitalize on the strengths of each money manager and to combine their investment activities in a complementary fashion. Although the money managers’ activities are subject to general oversight by the Board and the Funds’ officers, neither the Board, the officers, RIMCo nor Russell evaluate the investment merits of a money manager’s individual security selections.
9
Table of Contents
INVESTMENT OBJECTIVE AND INVESTMENT STRATEGIES
Each of the following Funds has either a fundamental or a non-fundamental investment objective as noted below. A fundamental investment objective may only be changed with shareholder approval. A non-fundamental investment objective may be changed by the Board of Trustees of a Fund without shareholder approval. If a Fund’s investment objective is changed by the Board of Trustees, the Prospectus will be amended to reflect the new investment objective.
DIVERSIFIED BOND FUND
Non-Fundamental Investment Objective
Seeks to provide current income and the preservation of capital.
Principal Investment Strategies
The Diversified Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). A majority of the Fund’s holdings are U.S. dollar denominated but the Fund may invest in non-U.S. debt securities. The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in bonds. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.
The Fund employs multiple money managers, each with its own investment style. When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment style, process and performance record as well as the characteristics of the money manager’s typical portfolio investments. These characteristics include portfolio biases, magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. For example, the money managers may identify sectors of the fixed-income market that they believe are undervalued and focus their investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. However, a portion of the Fund’s assets may be allocated to money managers who focus specifically on security selection rather than sector rotation and interest rate strategies.
The Fund may (though it will not necessarily) purchase and sell interest rate futures contracts and enter into options on futures contracts, when issued or forward commitment transactions and a variety of swap agreements as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other credit derivatives as an alternative to buying or selling the debt securities themselves or otherwise to increase the Fund’s total return.
The Fund will invest principally in securities of “investment grade” quality at the time of purchase, meaning either that a nationally recognized statistical rating organization (for example, Moody’s Investor Service, Inc., Standard & Poor’s Rating Service, or Fitch Investors Service, Inc.) has rated the securities Baa3 or BBB- (or the equivalent) or better, or a Fund’s money manager has determined the securities to be of comparable quality.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
10
Table of Contents
Non-Principal Investment Strategies
The Fund, like any mutual fund, maintains cash reserves, (i.e. cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including certain RIC money market funds. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by exposing its cash reserves to the performance of appropriate markets by purchasing fixed income securities and/or derivatives. This is intended to cause the Fund to perform as though its cash reserves were actually invested in those markets.
The Fund may invest in other investment companies. From time to time, the Fund may invest in municipal debt securities.
The Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally the next business day).
The Fund may lend its portfolio securities in an amount up to one-third of its total assets to earn income. These loans may be terminated at any time. The Fund will receive either cash or U.S. government debt obligations as collateral.
A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).
The Fund may also invest in emerging markets debt securities.
On rare occasions, the Fund may take a temporary defensive position that may be inconsistent with its long-term principal investment strategies in an attempt to respond to adverse market, economic, political or other conditions. If this occurs, the Fund may not achieve its investment objective during such times. The Fund may take a defensive position by raising cash levels and/or reducing or eliminating the strategy to expose its cash reserves to the performance of appropriate markets.
FIXED INCOME I FUND
Fundamental Investment Objective
Seeks to provide current income and the preservation of capital.
Principal Investment Strategies
The Fixed Income I Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. It also holds mortgage-backed securities, including collateralized mortgage obligations and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). A majority of the Fund’s holdings are U.S. dollar denominated but the Fund may invest in non-U.S. debt securities. The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in bonds. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.
The Fund employs multiple money managers, each with its own investment style. When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment style, process and performance record as well as the characteristics of the money manager’s typical portfolio investments. These characteristics include portfolio biases, magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.
The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. For example, the money managers may identify sectors of the fixed-income market that they believe are undervalued and focus their investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. However, a portion of the Fund’s assets may be allocated to money managers who focus specifically on security selection rather than sector rotation and interest rate strategies.
The Fund may (though it will not necessarily) purchase and sell interest rate futures contracts and enter into options on futures contracts, when issued or forward commitment transactions and a variety of swap agreements as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other credit derivatives as an alternative to buying or selling the debt securities themselves or otherwise to increase the Fund’s total return.
The Fund will invest principally in securities of “investment grade” quality at the time of purchase, meaning either that a nationally recognized statistical rating organization (for example, Moody’s Investor Service, Inc., Standard & Poor’s
11
Table of Contents
Rating Service, or Fitch Investors Service, Inc.) has rated the securities Baa3 or BBB- (or the equivalent) or better, or a Fund’s money manager has determined the securities to be of comparable quality.
The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.46 years as of December 31, 2006, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.
The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.
Non-Principal Investment Strategies
The Fund, like any mutual fund, maintains cash reserves, (i.e. cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including certain RIC money market funds. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by exposing its cash reserves to the performance of appropriate markets by purchasing fixed income securities and/or derivatives. This is intended to cause the Fund to perform as though its cash reserves were actually invested in those markets.
The Fund may invest in other investment companies. From time to time, the Fund may invest in municipal debt securities.
The Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally the next business day).
The Fund may lend its portfolio securities in an amount up to one-third of its total assets to earn income. These loans may be terminated at any time. The Fund will receive either cash or U.S. government debt obligations as collateral.
A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).
The Fund may also invest in emerging markets debt securities.
On rare occasions, the Fund may take a temporary defensive position that may be inconsistent with its long-term principal investment strategies in an attempt to respond to adverse market, economic, political or other conditions. If this occurs, the Fund may not achieve its investment objective during such times. The Fund may take a defensive position by raising cash levels and/or reducing or eliminating the strategy to expose its cash reserves to the performance of appropriate markets.
RISKS
An investment in the Funds, like any investment, has risks. The value of each Fund fluctuates and you could lose money. The following section describes the types of risks that each Fund is subject to and lists the Funds most likely to be affected by each risk. Other Funds that are not listed may be subject to one or more of the risks, but not in a way that is expected to principally affect the performance of such Funds as a whole. Please refer to the Funds’ Statement of Additional Information for a discussion of risks associated with types of securities held by the Funds and the investment practices employed by the individual Funds.
Principal Risks
Multi-Manager Approach
(Diversified Bond, Fixed Income I)
The investment styles employed by a Fund’s money managers may not be complementary. The interplay of the various strategies employed by a Fund’s multiple money managers may result in a Fund holding a concentration of certain types of securities. This concentration may be beneficial or detrimental to a Fund’s performance depending upon the performance of those securities and the overall economic environment. The money managers selected for a Fund may underperform the market generally or other money managers that could have been selected for that Fund. The multi-manager approach could increase a Fund’s portfolio turnover rates which may result in higher levels of realized capital gains or losses with respect to a Fund’s portfolio securities, higher brokerage commissions and other transaction costs.
12
Table of Contents
Security Selection and Market Risk
(Diversified Bond, Fixed Income I)
The securities chosen by RIMCo or a money manager to be in a Fund’s portfolio may decline in value. Security selection risk may cause a Fund to underperform other funds with similar investment objectives and investment strategies. The use of the select holdings strategy by certain equity Funds will amplify those Funds’ security risk and potential underperformance. Despite the Funds’ strategies to achieve positive investment returns regardless of general market conditions, the values of the Funds’ investments will change with market conditions, and so will the value of any investment in the Funds. Investment in the Funds could be lost or the Funds could underperform other investments.
Fixed-Income Securities
(Diversified Bond, Fixed Income I)
Prices of fixed-income securities rise and fall in response to interest rate changes. Generally, when interest rates rise, prices of fixed-income securities fall. The longer the duration of the security, the more sensitive the security is to this risk. A 1% increase in interest rates would reduce the value of a $100 note by approximately one dollar if it had a one-year duration. There is also a risk that fixed income securities will be downgraded in credit rating or go into default. Lower-rated bonds, and bonds with longer final maturities, generally have higher credit risks.
• | Government Issued or Guaranteed Securities, U.S. Government Securities |
(Diversified Bond, Fixed Income I)
Bonds guaranteed by a government are subject to inflation risk and price depreciation risk. Bonds issued by non-U.S. governments are also subject to default risk. No assurance can be given that the U.S. government will provide financial support to certain U.S. government agencies or instrumentalities since it is not obligated to do so by law. Accordingly, bonds issued by U.S. government agencies or instrumentalities may involve risk of loss of principal and interest. These risks could result in losses to a Fund.
• | Mortgage or Asset Backed Securities |
(Diversified Bond, Fixed Income I)
Prepayment of principal on mortgage and asset backed securities may expose a Fund to a lower rate of return upon reinvestment of principal. Also, if a security subject to prepayment has been purchased at a premium, in the event of prepayment the value of the premium would be lost. A Fund that purchases mortgage backed securities is subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage backed securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage backed securities may exhibit additional volatility. This is known as extension risk.
International Securities
(Diversified Bond, Fixed Income I)
A Fund’s return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country. Non-U.S. markets, economies and political systems may be less stable than U.S. markets, and changes in exchange rates of foreign currencies can affect the value of a Fund’s foreign assets. Non-U.S. laws and accounting standards typically are not as comprehensive as they are in the U.S. and there may be less public information available about foreign companies. Non-U.S. securities markets may be less liquid and have fewer transactions than U.S. securities markets. Additionally, international markets may experience delays and disruptions in securities settlement procedures for a Fund’s portfolio securities.
• | Non-U.S. Debt Securities |
(Diversified Bond, Fixed Income I)
A Fund’s non-U.S. debt securities are typically obligations of sovereign governments and corporations. To the extent that a Fund invests a significant portion of its assets in a concentrated geographic area like Eastern Europe or Asia, the Fund will generally have more exposure to regional economic risks associated with foreign investments.
• | Instruments of U.S. and Foreign Banks and Foreign Corporations |
(Diversified Bond, Fixed Income I)
13
Table of Contents
Non-U.S. corporations and banks issuing dollar denominated instruments in the U.S. are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks, such as accounting, auditing and recordkeeping standards, the public availability of information and, for banks, reserve requirements, loan limitations and examinations. This complicates efforts to analyze these securities, and may increase the possibility that a non-U.S. corporation or bank may become insolvent or otherwise unable to fulfill its obligations on these instruments.
• | Currency Risk |
(Diversified Bond, Fixed Income I)
Foreign (non-U.S.) securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time due to the imposition of currency controls or other political developments in the U.S. or abroad. As a result, the Fund’s investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Funds.
Derivatives (e.g. Futures Contracts, Options on Futures, Forwards and Currency, Credit or Interest Rate Swaps)
(Diversified Bond, Fixed Income I)
Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Fund may use are described in more detail under “Other Financial Instruments Including Derivatives” in the Statement of Additional Information. The Fund typically uses derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as currency risk. The Fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks such as liquidity risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. A fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.
Participation in the options or futures markets, as well as the use of various swap instruments and forward contracts, involves investment risks and transaction costs to which a Fund would not be subject absent the use of these strategies. If the Fund’s predictions of movements in the direction of the securities, currencies or interest rate markets are inaccurate, the adverse consequences to a Fund may leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of options, futures contracts, options on futures contracts, forwards and swaps include: (i) dependence on the Fund’s ability to predict correctly movements in the direction of interest rates and securities prices; (ii) imperfect correlation between the price of options and futures contracts and options thereon and movements in the prices of the securities being hedged; (iii) the fact that skills needed to use these strategies are different from those needed to select portfolio securities; (iv) the absence of a liquid secondary market for any particular instrument at any time; (v) the possible need to defer closing out certain hedged positions to avoid adverse tax consequences; (vi) for swaps, the risk of counterparty default and (vii) the possible inability of a Fund to purchase or sell a portfolio security at a time that otherwise would be favorable for it to do so, or the possible need for the Fund to sell the security at a disadvantageous time, due to the requirement that the Fund maintain “cover” or collateral securities in connection with use of certain derivatives. The Fund could lose the entire amount it invests in futures. The loss from investing in other derivatives is potentially unlimited. There also is no assurance that a liquid secondary market will exist for futures contracts and options in which a Fund may invest. Each Fund limits its investment in futures contracts so that the notional value (meaning the stated contract value) of the futures contracts does not exceed the net assets of the Fund.
Furthermore, regulatory requirements for the Funds to set aside assets to meet their obligations with respect to derivatives may result in a Fund being unable to purchase or sell securities when it would otherwise be favorable to do so, or in a Fund needing to sell securities at a disadvantageous time. The Fund may also be unable to close out its derivatives positions when desired. Investments in derivatives can cause the Fund to be more volatile, and can result in significant losses. Certain derivatives have the potential for unlimited loss. The Fund may also use derivatives for leverage, in which case their use would involve leveraging risk.
Leveraging Risk
(Diversified Bond, Fixed Income I)
Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, borrowing, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment
14
Table of Contents
transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, the Funds will segregate or “earmark” liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.
Non-Principal Risks
Repurchase Agreements
(Diversified Bond, Fixed Income I)
The use of repurchase agreements involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the Fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under bankruptcy or other laws, a court may determine that the underlying securities are collateral for a loan by the Fund not within its control and therefore the realization by the Fund on such collateral may be automatically stayed. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying securities and may be deemed an unsecured creditor of the other party to the agreement.
Exposing Cash Reserves to Appropriate Markets
(Diversified Bond, Fixed Income I)
By exposing its cash reserves to the performance of appropriate markets by purchasing equity securities (in the case of equity funds) or fixed income securities (in the case of fixed income funds) and/or derivatives, a Fund’s performance tends to correlate more closely to the performance of that market as a whole. However, the market performance of these instruments may not correlate precisely to the performance of the corresponding market. This approach increases a Fund’s performance if the particular market rises and reduces a Fund’s performance if the particular market declines.
Illiquid Securities
(Diversified Bond, Fixed Income I)
An illiquid security is one without an active secondary market, making it difficult for an owner of the security to sell it. A Fund with an investment in an illiquid security may not be able to sell the security quickly and at a fair price, which could cause the Fund to realize losses on the security if the security is sold at a price lower than that at which it had been valued. An illiquid security may also have large price volatility.
Emerging Markets Debt
(Diversified Bond, Fixed Income I)
A Fund’s emerging markets debt securities may include obligations of governments and corporations. These securities are particularly subject to a risk of default from political instability. There is also the risk that the emerging markets debt securities will be downgraded in credit rating or go into default.
Securities Lending
(Diversified Bond, Fixed Income I)
If a borrower of a Fund’s securities fails financially, the Fund’s recovery of the loaned securities may be delayed or the Fund may lose its rights to the collateral which could result in a loss to a Fund.
15
Table of Contents
Municipal Obligations
(Diversified Bond, Fixed Income I)
Municipal obligations are affected by economic, business or political developments. These securities may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors, or may become subject to future laws extending the time for payment of principal and/or interest, or limiting the rights of municipalities to levy taxes.
PORTFOLIO TURNOVER
The portfolio turnover rates for multi-manager funds are likely to be somewhat higher than the rates for comparable mutual funds with a single money manager. Each of the Funds’ money managers makes decisions to buy or sell securities independently from other money managers. Thus, one money manager for a Fund may be selling a security when another money manager for the Fund (or for another Fund) is purchasing the same security. Also, when a Fund replaces a money manager, the new money manager may significantly restructure the investment portfolio. These practices may increase the Funds’ portfolio turnover rates which may result in higher levels of realized gains or losses with respect to a Fund’s portfolio securities, higher brokerage commissions and other transaction costs. When a Fund realizes capital gains upon selling portfolio securities, your tax liability increases. The annual portfolio turnover rates for each of the Funds are shown in the Financial Highlights tables in this Prospectus.
PORTFOLIO DISCLOSURE
A description of the Funds’ policies and procedures with respect to the disclosure of each Fund’s portfolio securities is available in the Funds’ Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income and net capital gains to shareholders each year.
Income Dividends
The amount and frequency of distributions are not guaranteed; all distributions are at the Board’s discretion. Currently, the Board intends to declare dividends from net investment income, if any, according to the following schedule:
Declared | Payable | Funds | ||
Monthly | Early in the following month | Diversified Bond | ||
Quarterly | April, July, October and December | Fixed Income I |
An additional distribution of net investment income may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund.
Capital Gains Distributions
The Board will declare capital gains distributions (both short-term and long-term) once a year in mid-December to reflect any net short-term and net long-term capital gains, if any, realized by a Fund in the prior fiscal year. An additional distribution may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund. Distributions that are declared in October, November or December to shareholders of record in such months, and paid in January of the following year, will be treated for tax purposes as if received on December 31 of the year in which they were declared.
Buying a Dividend
If you purchase Shares just before a distribution, you will pay the full price for the Shares and receive a portion of the purchase price back as a taxable distribution. This is called “buying a dividend.” Unless your account is a tax-deferred account, dividends paid to you would be included in your gross income for tax purposes even though you may not have participated in the increase of the net asset value of a Fund, regardless of whether you reinvested the dividends. To avoid “buying a dividend,” check a Fund’s distribution dates before you invest.
16
Table of Contents
Automatic Reinvestment
Your dividends and other distributions will be automatically reinvested at the closing net asset value on the record date, in additional Shares of the appropriate Fund, unless you elect to have the dividends or distributions paid in cash or invested in another Fund. You may change your election by delivering written notice no later than ten days prior to the record date to your Financial Intermediary.
TAXES
In general, distributions from a Fund are taxable to you as either ordinary income or capital gains. This is true whether you reinvest your distributions in additional Shares or receive them in cash. Any long-term capital gains distributed by a Fund are taxable to you as long-term capital gains no matter how long you have owned your Shares. Every January, you will receive a statement that shows the tax status of distributions you received for the previous year.
If you are an individual investor, a portion of the dividends you receive from a Fund may be treated as “qualified dividend income” which is taxable to individuals at the same rates that are applicable to long-term capital gains. A Fund distribution is treated as qualified dividend income to the extent that the Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that certain holding period and other requirements are met. Fund distributions generally will not qualify as qualified dividend income to the extent attributable to interest, capital gains, REIT distributions and, in many cases, distributions from non-U.S. corporations.
When you sell or exchange Shares, you may have capital gains or losses. Any losses you incur if you sell or exchange Shares that you have held for six months or less will be treated as long-term capital losses, but only to the extent that the Fund has paid you long-term capital gains dividends with respect to those Shares during that period. The tax rate on any gains from the sale or exchange of your Shares depends on how long you have held your Shares.
The Funds make no representation as to the amount or variability of each Fund’s capital gains distributions which may vary as a function of several factors including, but not limited to, prevailing dividend yield levels, general market conditions, shareholders’ redemption patterns and Fund cash equitization activity.
Fund distributions and gains from the sale or exchange of your Shares will generally be subject to state and local income tax. Non-U.S. investors may be subject to U.S. withholding and estate taxes. For Fund taxable years beginning after December 31, 2004 and before January 1, 2008, a portion of Fund distributions received by a non-U.S. investor may, however, be exempt from U.S. withholding tax to the extent attributable to U.S. source interest income and short-term capital gains earned by the Fund. Also, for that same three-year period, U.S. estate taxes may not apply to that portion of Shares held by a non-U.S. investor that is attributable to Fund assets consisting of certain debt obligations or other property treated as not within the United States for U.S. estate tax purposes. You should consult your tax professional about federal, state, local or foreign tax consequences of holding Shares.
When a Fund invests in securities of certain foreign countries, the Fund may have taxes withheld on the income received from these securities. If more than 50% of the total fair market value of the Fund’s assets at the close of its taxable year is made up of foreign securities, the Fund may elect to pass through such taxes to shareholders who may then (subject to limitations) claim a foreign tax credit.
By law, a Fund must withhold the legally required amount of your distributions and proceeds if you do not provide your correct taxpayer identification number, or certify that such number is correct, or if the IRS instructs the Fund to do so.
The tax discussion set forth above is included for general information only. You should consult your own tax adviser concerning the federal, state, local or foreign tax consequences of an investment in a Fund.
Additional information on these and other tax matters relating to each Fund and its shareholders is included in the section entitled “Taxes” in the Funds’ Statement of Additional Information.
HOW NET ASSET VALUE IS DETERMINED
Net Asset Value Per Share
The net asset value per share is calculated for Shares of each Class of each Fund on each business day on which Shares are offered or redemption orders are tendered. For each Fund, a business day is one on which the New York Stock Exchange (NYSE) is open for regular trading. Each Fund determines net asset value at 4:00 p.m. Eastern time or as of the close of the NYSE, whichever is earlier. The price of Fund Shares is computed by dividing the current value of a Fund’s assets (less liabilities) by the number of Shares of the Fund outstanding and rounding to the nearest cent. Share value for purchase, redemption or exchange will be based on the net asset value next calculated after your order is received in good form (i.e., when all required documents and your check or wired funds are received) by the Funds or an authorized Fund agent. See “How to Purchase Shares,” “How to Redeem Shares” and “Exchange Privilege” for more information.
17
Table of Contents
Valuation of Portfolio Securities
The Funds value portfolio securities according to Board-approved Securities Valuation Procedures, including Market Value Procedures, Fair Value Procedures and Pricing Services. Under the Board-approved Securities Valuation Procedures, the Board has delegated the day-to-day valuation functions to RIMCo. However, the Board retains oversight over the valuation process.
Money market fund securities are priced using the amortized cost method of valuation, as are debt obligation securities maturing within 60 days of the date of purchase, unless the Board determines that amortized cost does not represent market value of short-term debt obligations. 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 circumstances under which these companies will use fair value pricing and the effects of using fair value pricing can be found in the other mutual funds’ prospectuses.
Ordinarily, the Funds value each portfolio security based on market quotations provided by Pricing Services or dealers (when permitted by the Market Value Procedures).
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 be calculated using current market values. 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. RIC 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. RIC 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. RIC Funds that invest in low rated debt securities are also likely to use fair value pricing more often since the markets in which such securities are traded are generally thinner, more limited and less active than those for higher rated securities. Examples of events that could trigger fair value pricing of one or more securities are: a material market movement of the U.S. Securities Market (defined in the Fair Value Procedures as the movement by any two of four major U.S. 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 markets closed combined); a company event such as a material business development, dividend declaration, stock split or rights offering; a natural disaster or emergency situation; 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.
CHOOSING A CLASS OF SHARES TO BUY
The Funds offer more than one class of shares. Each class of shares has different expenses, allowing you to choose the class that best meets your needs. Which class is more beneficial to an investor depends on the amount and intended length of the investment.
The Diversified Bond Fund offers three Classes of Shares in this Prospectus: Class C Shares, Class E Shares and Class S Shares. The Fixed Income I Fund offers one Classes of Shares in this Prospectus: Class E Shares.
18
Table of Contents
COMPARING THE FUNDS’ CLASSES
Your Financial Intermediary can help you decide which class of Shares meets your goals. Your Financial Intermediary may receive different compensation depending upon which class you choose.
Each Class of Shares has its own sales charge and expense structure, which enables you to choose the Class of Shares (and pricing) that best meets your specific needs and circumstances. In making your decision regarding which Class of Shares may be best for you to invest in, please keep in mind that your Financial Intermediary may receive different compensation depending on the Class of Shares that you invest in and you may receive different services in connection with investments in different Classes of Shares. You should consult with your Financial Intermediary about the comparative pricing and features of each Class, the services available for shareholders in each Class, the compensation that will be received by the Financial Intermediary in connection with each Class and other factors that may be relevant to your decision as to which Class of Shares to buy.
Class C Shares | ||
Initial sales charge | None | |
Deferred Sales Charge | None | |
Annual 12b-1 fees and Service Fees | Up to 1.00% of average daily assets | |
Class E Shares | ||
Initial sales charge | None | |
Deferred Sales Charge | None | |
Annual 12b-1 fees and Service Fees | Up to 0.25% of average daily assets | |
Class I Shares | ||
Initial sales charge | None | |
Deferred Sales Charge | None | |
Annual 12b-1 fees and Service Fees | None | |
Class S Shares | ||
Initial sales charge | None | |
Deferred Sales Charge | None | |
Annual 12b-1 fees and Service Fees | None |
DISTRIBUTION AND SHAREHOLDER
SERVICES ARRANGEMENTS
AND PAYMENTS TO FINANCIAL INTERMEDIARIES
The Funds offer multiple Classes of Shares in this Prospectus: Class C Shares, Class E Shares and Class S Shares of Diversified Bond Fund and Class E Shares and Class I Shares of Fixed Income I Fund.
Class C Shares participate in the Funds’ Rule 12b-1 distribution plan and in the Funds’ shareholder services plan. Under the distribution plan, the Funds’ Class C Shares pay distribution fees of 0.75% annually for the sale and distribution of Class C Shares. Under the shareholder services plan, the Funds’ Class C Shares pay shareholder services fees of 0.25% on an annualized basis for services provided to Class C shareholders. Because both of these fees are paid out of the Funds’ Class C Share assets on an ongoing basis, over time these fees will increase the cost of your investment in Class C Shares of the Funds, and the distribution fee may cost an investor more than paying other types of sales charges.
Class E Shares participate in the Funds’ shareholder services plan. Under the shareholder services plan, the Funds’ Class E Shares pay shareholder services fees of 0.25% on an annualized basis for services provided to Class E shareholders. The shareholder services fees are paid out of the Funds’ Class E Share assets on an ongoing basis, and over time will increase the cost of your investment in the Funds.
Class S Shares and Class I Shares participate in neither the Funds’ distribution plan nor the Funds’ shareholder services plan.
Financial Intermediaries may receive distribution compensation and shareholder services compensation from the Funds’ Distributor with respect to Class C Shares of the Diversified Bond Fund pursuant to the Funds’ Rule 12b-1 distribution plan and the Funds’ shareholder services plan. Financial Intermediaries may receive shareholder services compensation from the Funds’ Distributor with respect to Class E Shares of the Funds pursuant to the Funds’ shareholder services plan. These payments are reflected in the fees and expenses listed in the annual fund operating expenses table earlier in the Prospectus.
19
Table of Contents
In addition to the foregoing payments, RIMCo, in its capacity as the Funds’ transfer agent or Adviser, or the Funds’ Distributor may make cash payments, from its own resources, to key Financial Intermediaries (including those who may offer Fund Shares through specialized programs such as tax deferred retirement programs) in recognition of, or to pay a portion of costs related to, marketing, account consolidation, education, transaction processing and/or administrative services support. These compensation arrangements may vary by Financial Intermediary and may increase as the dollar value of Fund Shares held through a particular Financial Intermediary increases. Because these payments are not made by the Funds, these payments are not reflected in the fees and expenses listed in the annual fund operating expenses table.
RIMCo or the Funds’ Distributor may pay or allow other promotional incentive payments to Financial Intermediaries to the extent permitted by the rules adopted by the Securities and Exchange Commission and the National Association of Securities Dealers relating to the sale of mutual fund shares.
To enable Financial Intermediaries to provide a higher level of service and information to prospective and current Fund shareholders, RIMCo also offers them a range of complimentary software tools and educational services. RIMCo provides such tools and services from its own resources.
Ask your Financial Intermediary for additional information as to what compensation, if any, it receives from the Funds, the Funds’ Distributor or RIMCo.
HOW TO PURCHASE SHARES
Unless you are eligible to participate in a Russell employee investment program, Shares are only available through a select network of Financial Intermediaries. If you are not currently working with one of these Financial Intermediaries, please call 800-787-7354 for assistance in contacting an investment professional near you.
There is currently no required minimum initial investment for the Diversified Bond Fund. However, the Fund reserves the right to close any account whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares.
Minimum Investment for the Fixed Income I Fund. For each of the Class E and Class I Shares of the Fund, there is a $100,000 minimum initial investment for each account in the Fixed Income I Fund. If the Fund detects a pattern of trading that appears to be designed to evade the minimum initial investment requirement, the Fund reserves the right to close the account. The Fund reserves the right to close any account invested in Class E Shares whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares or the required minimum investment amounts. You may be eligible to purchase Shares if you do not meet the required initial minimum investment. You should consult your Financial Intermediary for details, which are summarized in the Funds’ Statement of Additional Information.
If you purchase, redeem, exchange or hold Shares through a Financial Intermediary, your Financial Intermediary may charge you transaction-based fees, activity based fees and other fees for its services based upon its own policies and procedures. Those fees are retained entirely by your Financial Intermediary and no part of those fees are paid to RIMCo, the Funds’ Distributor or the Funds. Please contact your Financial Intermediary for more information about these fees as they may apply to your investments and your accounts.
You may purchase Shares through a Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Purchase orders are processed at the next net asset value per share calculated after a Fund receives your order in proper form (as determined by your Financial Intermediary). The Funds will close early if the NYSE closes early. Any purchase order received after the close of the NYSE will be processed on the following business day at the next calculated net asset value per share. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be credited.
All purchases must be made in U.S. dollars. Checks and other negotiable bank drafts must be drawn on U.S. banks and made payable to “Russell Investment Company” or as otherwise instructed by your Financial Intermediary. Each Fund may reject purchase orders if a payment check does not clear the bank or payment does not arrive in proper form by the settlement date. Generally, the settlement date is the first business day following receipt by the Funds of your order. However, Financial Intermediaries settling through National Securities Clearing Corporation, or in limited circumstances with prior arrangement with the Funds, may settle trades on the third business day following receipt by the Funds of your order. If you fail to properly settle a purchase, you will be responsible for any resulting loss to the Funds (i.e. any difference in the net asset value between the trade date and the settlement date). In the case of insufficient funds checks, an overdraft charge may also be applied. Third party checks are generally not accepted, however exceptions may be made by prior special arrangements with certain Financial Intermediaries. Cash, checks drawn on credit card accounts, cashiers checks, money orders, traveler checks, and other cash equivalents will not be accepted.
20
Table of Contents
Customer Identification Program: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account and to determine whether such person’s name appears on government lists of known or suspected terrorists and terrorist organizations. When you open a new account to buy Shares of the Funds, the Funds or your Financial Intermediary will ask your name, address, date of birth, taxpayer identification or other government identification numbers and other information that will allow the Funds to identify you. If the Funds or your Financial Intermediary are unable to adequately identify you within the time frames set forth in the law, your Shares may be automatically redeemed. If the net asset value per share has decreased since your purchase, you will lose money as a result of this redemption.
Offering Dates and Times
Orders must be received by a Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Purchases can be made on any day when Shares are offered. Certain authorized Fund agents are contractually designated by RIMCo to receive and accept orders for the purchase and redemption of Shares of the Funds. Some, but not all, Financial Intermediaries are authorized Fund agents, and some, but not all, authorized Fund agents are Financial Intermediaries.
Order and Payment Procedures
Generally, you must place purchase orders for Shares through your Financial Intermediary. You may pay for your purchase by mail or funds transfer. Please contact your Financial Intermediary for instructions on how to place orders and make payment to the Funds.
Automated Investment Program
If you invest through certain Financial Intermediaries, you may choose to make regular investments (with a minimum of $25 per Fund) in an established account on a monthly, quarterly, semiannual, or annual basis by automatic electronic funds transfer from an account held within U.S. financial institutions that are members of the Federal Reserve System. Depending on the capabilities of your Financial Intermediary, a separate transfer may be made for each Fund in which you purchase Shares. You may change the amount or stop the automatic purchase at any time. Contact your Financial Intermediary for further information on this program.
EXCHANGE PRIVILEGE
How to Exchange Shares
Through your Financial Intermediary you may exchange Shares you own in one Fund for Shares of any other Fund offered by this Prospectus on the basis of the current net asset value per share at the time of the exchange. Shares of a Fund offered by this Prospectus may only be exchanged for shares of a RIC Fund offered through another Prospectus under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.
Contact your Financial Intermediary for assistance in exchanging Shares and, because Financial Intermediaries’ processing times may vary, to find out when your account will be credited or debited. To request an exchange in writing, please contact your Financial Intermediary.
An exchange between Funds involves the redemption of Shares, which is treated as a sale for income tax purposes. Thus, capital gains or losses may be realized. Please consult your tax adviser for more information.
Systematic Exchange Program
If you invest through certain Financial Intermediaries, the Funds offer a systematic exchange program which allows you to redeem Shares from one or more Funds and purchase Shares of certain other RIC Funds. Systematic exchanges may be established to occur on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic exchange program, please contact your Financial Intermediary.
A systematic exchange involves the redemption of Shares, which is treated as a sale for income tax purposes. Thus, capital gains or losses may be realized. Please consult your tax adviser for more information.
21
Table of Contents
RIGHT TO REJECT OR RESTRICT
PURCHASE AND EXCHANGE ORDERS
For the RIC Funds, the Board of Trustees has adopted frequent trading policies which are described below.
The RIC Funds discourage frequent purchases and redemptions of Fund Shares by Fund shareholders. The Funds do not accommodate frequent purchases and redemptions of Fund Shares by Fund shareholders. Each Fund reserves the right to restrict or reject, without prior notice, any purchase or exchange order for any reason, including transactions representing frequent trading. For example, a Fund may, in its discretion, restrict or reject a purchase or exchange order even if the transaction is not subject to the specific limitations on frequent trading described below if the Fund or its agents determine that accepting the order could interfere with the efficient management of a Fund’s portfolio or otherwise not be in a Fund’s best interests. In the event that a Fund rejects an exchange request, the Fund will not process the purchase side of the exchange and will seek additional instructions from the Financial Intermediary regarding whether or not to proceed with the redemption side of the exchange. The Funds’ frequent trading policies have been approved by the Funds’ Board of Trustees.
Frequent Trading Policies and Limitations on Trading Activity
Frequent trading of Fund Shares, often in response to short-term fluctuations in the market, also known as “market timing,” is not knowingly permitted by the Funds. Frequent traders and market-timers should not invest in the Funds. The Funds are intended for long-term investors.
The Funds, subject to the limitations described below, take steps reasonably designed to curtail frequent trading practices by investors or Financial Intermediaries.
The Funds have principal investment strategies to invest in fixed income securities and are not considered to have the same risks associated with frequent trading as equity funds. However, these Funds or their agents will take the steps described below to curtail any frequent trading activity that is identified:
• | Review the trading history for that account to determine if two round trips have occurred in a 90 day period to establish whether the pattern of trading activity may constitute impermissible frequent trading. |
• | If a potential impermissible frequent trading pattern has been identified, the Funds will contact the Financial Intermediary to remind that Financial Intermediary of the Funds’ frequent trading policy and to notify the Financial Intermediary that if the trading pattern continues, the Funds’ will exercise their right to restrict or reject purchase and exchange orders. |
• | The Funds will continue to monitor trading activity in the account and if a third round trip is detected, the Funds will again contact the Financial Intermediary to remind that Financial Intermediary of the Funds’ frequent trading policy and to notify the Financial Intermediary that if the trading pattern continues, the Funds’ will exercise their right to restrict or reject purchase and exchange orders. |
• | The Funds will continue to monitor trading activity in the account and if another round trip occurs, the Funds will generally exercise their right to restrict or reject all purchase and exchange orders for that Financial Intermediary. However, if the Financial Intermediary does not have the ability to control the trading activity of the shareholder in question due to retirement plan exchange limits, ERISA considerations or Department of Labor regulations or if the termination of the Financial Intermediary’s trading relationship with the Funds may not be in the best interest of the Fund or its shareholders, the Funds will seek the advice of legal counsel regarding how to proceed in this situation and will provide a report to the Board of Trustees regarding the situation and its resolution. |
The Funds, through their agents, will use their best efforts to exercise the Funds’ right to restrict or reject purchase and exchange orders as described above.
These trading limits may be modified for accounts held by certain retirement plans to conform to plan exchange limits, ERISA considerations or Department of Labor regulations. These trading limits are subject to the Funds’ ability to monitor trading activity as described below. Automated or pre-established exchange, asset allocation and dollar cost averaging long-term investment programs of Financial Intermediaries are not subject to these trading limitations.
The Funds will make best efforts to enforce the policy described above, however there may be limitations on the ability of the Funds to detect and curtail frequent trading practices for a significant percentage of a Fund’s shareholders, depending on the structure of a Fund’s shareholder accounts. In applying the policy on limitations on trading activity, the Funds consider the information available to them at the time and reserve the right to consider trading history in any RIC fund including trading history in other accounts under common ownership or control in determining whether to suspend or terminate trading privileges. This policy will not affect any shareholder’s redemption rights.
22
Table of Contents
Risks of Frequent Trading
Short-term or excessive trading into and out of a Fund may harm a Fund’s performance by disrupting portfolio management strategies and by increasing expenses. These expenses are borne by all Fund shareholders, including long-term investors who do not generate such costs. Frequent trading may interfere with the efficient management of a Fund’s portfolio, and may result in the Fund engaging in certain activities to a greater extent than it otherwise would, such as maintaining higher cash balances, using its line of credit and engaging in portfolio transactions. Increased portfolio transactions and use of the line of credit would correspondingly increase the Fund’s operating expenses and decrease the Fund’s performance. Since the Funds use hedging strategies to ensure that each Fund is fully invested, maintenance of a higher level of cash balances would not decrease a Fund’s exposure to market moves but would decrease the proportion of the Fund that is actively managed.
Additionally, to the extent that a Fund invests significantly in foreign securities traded on markets which may close prior to when the Fund determines its net asset value (referred to as the valuation time), frequent trading by certain shareholders may cause dilution in the value of Fund Shares held by other shareholders. Because events may occur after the close of these foreign markets and before the valuation time of the Funds that influence the value of these foreign securities, investors may seek to trade Fund Shares in an effort to benefit from their understanding of the value of these foreign securities as of the Fund’s valuation time (referred to as price arbitrage). These Funds have procedures designed to adjust closing market prices of foreign securities under certain circumstances to better reflect what they believe to be the fair value of the foreign securities as of the valuation time. To the extent that a Fund does not accurately value foreign securities as of its valuation time, investors engaging in price arbitrage may cause dilution in the value of Fund Shares held by other shareholders.
Because certain small cap equity securities may be traded infrequently, to the extent that a Fund invests significantly in small cap equity securities investors may seek to trade Fund Shares in an effort to benefit from their understanding of the value of these securities (referred to as price arbitrage). Any such frequent trading strategies may interfere with efficient management of a Fund’s portfolio to a greater degree than Funds which invest in highly liquid securities, in part because the Fund may have difficulty selling these small cap portfolio securities at advantageous times or prices to satisfy large and/or frequent redemption requests. Any successful price arbitrage may also cause dilution in the value of Fund Shares held by other shareholders.
Limitations on the Ability to Detect and Curtail Frequent Trading
The Funds may not be able to identify frequent trading activity in certain circumstances. These circumstances include:
• | Shareholders seeking to engage in frequent trading activities may use a variety of strategies to avoid detection and, despite the efforts of the Funds to prevent frequent trading, there is no guarantee that the Funds or their agents will be able to identify each such shareholder or curtail their trading practices. |
• | The ability of the Funds and their agents to detect and curtail frequent trading activity may also be limited by operation systems and technological limitations. |
• | The Funds generally receive purchase, exchange and redemption orders through Financial Intermediaries and cannot always know or reasonably detect frequent trading which may be facilitated by certain Financial Intermediaries. |
• | Omnibus account arrangements are common forms of holding Fund Shares, particularly among certain Financial Intermediaries such as brokers and retirement plans. These arrangements permit the Financial Intermediary to aggregate their clients’ transactions and ownership positions into one account with a Fund. Generally, in these circumstances, the identities of individual shareholders are not known to a Fund. |
23
Table of Contents
HOW TO REDEEM SHARES
Shares may be redeemed through your Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Redemption requests are processed at the next net asset value per share calculated after a Fund receives an order in proper form as determined by your Financial Intermediary. The Funds will close early if the NYSE closes early. Any redemption requests received following an early closure will be processed on the following business day at the next calculated net asset value per share. Shares recently purchased by check may not be available for redemption for 15 days following the purchase or until the check clears, whichever occurs first, to assure that a Fund has received payment for your purchase.
Redemption Dates and Times
Redemption requests must be received by the Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Please contact your Financial Intermediary for instructions on how to place redemption requests. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be debited.
Systematic Withdrawal Program
If you invest through certain Financial Intermediaries, the Funds offer a systematic withdrawal program which allows you to redeem your Shares and receive regular payments from your account on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic withdrawal program, please contact your Financial Intermediary. You will generally receive your payment by the end of the month in which a payment is scheduled. When you redeem your Shares under a systematic withdrawal program, it may be a taxable transaction.
You may discontinue the systematic withdrawal program, or change the amount and timing of withdrawal payments by contacting your Financial Intermediary.
PAYMENT OF REDEMPTION PROCEEDS
Payment will ordinarily be made within seven days of receipt of your request in proper form. Each Fund reserves the right to suspend redemptions or postpone the date of payment for more than seven days if an emergency condition (as determined by the SEC) exists.
Your redemption proceeds will be paid in one of the following manners: (1) if you invest through certain Financial Intermediaries, your redemption proceeds will be sent directly to your Financial Intermediary who is then responsible for settling the redemption with you as agreed between you and your Financial Intermediary; (2) a check for the redemption proceeds may be sent to the shareholder(s) of record at the address of record within seven days after the Funds receive a redemption request in proper form; or (3) if you have established the electronic redemption option, your redemption proceeds can be (a) wired to your predesignated bank account on the next bank business day after a Fund receives your redemption request in proper form or (b) sent by Electronic Funds Transfer (EFT) to your predesignated bank account on the second business day after a Fund receives your redemption request in proper form. On Federal Reserve holidays, funds will settle on the next day the Federal Reserve is open. Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. The Funds will always charge a fee when sending an international wire transfer. The Funds reserve the right to charge a fee when sending a domestic wire transfer for redemptions. The Funds do not charge for EFT though your bank may charge a fee to receive the EFT. Wire transfers and EFTs can be sent to U.S. financial institutions that are members of the Federal Reserve System.
OTHER INFORMATION ABOUT SHARE TRANSACTIONS
Written Instructions
The Funds require that written instructions be in proper form and reserve the right to reject any written instructions that are not in proper form. Your Financial Intermediary will assist you in preparing and submitting transaction instructions to the Funds to insure proper form. Generally, your instructions must include:
• | The Fund name and account number |
• | Details related to the transaction including type and amount |
24
Table of Contents
• | Signatures of all owners exactly as registered on the account |
• | Any supporting legal documentation that may be required |
Responsibility for Fraud
Please take precautions to protect yourself from fraud. Keep your account information private and immediately review any account confirmations or statements that the Funds or your Financial Intermediary send you. Contact your Financial Intermediary immediately about any transactions that you believe to be unauthorized.
Signature Guarantee
Each Fund reserves the right to require a signature guarantee for any request related to your account including, but not limited to, requests for transactions or address maintenance. A signature guarantee verifies the authenticity of your signature. You should be able to obtain a signature guarantee from a bank, broker, credit union, savings association, clearing agency, or securities exchange or association, but not a notary public. If a signature guarantee is required, the Funds will only accept STAMP2000 Medallion Imprints. Contact your Financial Intermediary for assistance in obtaining a signature guarantee.
In-Kind Exchange of Securities
RIMCo, in its capacity as each Fund’s investment adviser, may, at its discretion, permit you to acquire Shares in exchange for securities you currently own. Any securities exchanged must meet the investment objective, policies, and limitations of the appropriate Fund; have a readily ascertainable market value; be liquid; not be subject to restrictions on resale; and have a market value, plus any additional monetary investments, equal to at least $100,000.
Shares purchased in exchange for securities generally may not be redeemed or exchanged for 15 days following the purchase by exchange or until the transfer has settled, whichever comes first. If you are a taxable investor, you will generally realize gains or losses on the exchange for federal income tax purposes. If you are contemplating an in-kind exchange you should consult your tax adviser.
The price at which the exchange will take place will depend upon the relative net asset value of the Shares purchased and securities exchanged. Securities accepted by a Fund will be valued in the same way the Fund values its assets. Any interest earned on the securities following their delivery to a Fund and prior to the exchange will be considered in valuing the securities. All interest, dividends, subscription or other rights attached to the securities becomes the property of the Funds, along with the securities. Please contact your Financial Intermediary for further information.
Redemption In-Kind
A Fund may pay for any portion of a redemption amount in excess of $250,000 by a distribution of in-kind securities from the Fund’s portfolio, instead of in cash. Each Fund reserves the right to pay for any portion of a redemption amount less than $250,000 by a distribution of in-kind securities from the Fund’s portfolio, instead of in cash, where a shareholder’s pattern of redemptions is, in the opinion of the Fund, an attempt to circumvent the Fund’s redemption in-kind policy. It is possible that an in-kind distribution of portfolio securities could include illiquid securities. Illiquid securities may not be able to be sold quickly and at a fair price, which could cause you to realize losses on the security if the security is sold at a price lower than that at which it had been valued. If you receive an in-kind distribution of portfolio securities, and choose to sell them, you will incur brokerage charges and continue to be subject to tax consequences and market risk pending any sale.
Uncashed Checks
Please make sure you promptly cash checks issued to you by the Funds. If you do not cash a dividend, distribution, or redemption check, the Funds will act to protect themselves and you. This may include restricting certain activities in your account until the Funds are sure that they have a valid address for you. After 180 days, the Funds will no longer honor the issued check and, after attempts to locate you, the Funds will follow governing escheatment regulations in disposition of check proceeds. No interest will accrue on amounts represented by uncashed checks.
Registration of Fund Accounts
Many brokers, employee benefit plans and bank trusts combine their clients’ holdings in a single omnibus account with the Funds held in the brokers’, plans’, or bank trusts’ own name or “street name.” Therefore, if you hold Shares through a brokerage account, employee benefit plan or bank trust fund, a Fund may have records only of that Financial Intermediary’s omnibus account. In this case, your broker, employee benefit plan or bank is responsible for keeping track of your account information. This means that you may not be able to request transactions in your Shares directly through the Funds, but can do so only through your broker, plan administrator or bank. Ask your Financial Intermediary for information on whether your Shares are held in an omnibus account.
25
Table of Contents
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you understand the Funds’ financial performance for at least the past 60 months (or, if a Fund or Class has not been in operation for 60 months, since the beginning of operations for that Fund or Class). Certain information reflects financial results for a single Fund Share throughout each of the periods shown below. The total returns in the table represent how much your investment in a Fund would have increased (or decreased) during each period, assuming reinvestment of all dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund’s financial statements, are included in the Fund’s annual report, which are available upon request.
The information in the following tables represents the Financial Highlights for the Diversified Bond Fund’s Class C, Class E and Class S Shares, and the Fixed Income I Fund’s Class E and I Shares, respectively, for the periods shown.
26
Table of Contents
Diversified Bond Fund—Class C Shares
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.80 | $ | 24.54 | $ | 24.49 | $ | 24.68 | $ | 24.49 | ||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss)(a) | .81 | .58 | .41 | .48 | .74 | |||||||||||||||
Net realized and unrealized gain (loss) | .05 | (.67 | ) | .58 | .38 | .23 | ||||||||||||||
Total income from operations | .86 | (.09 | ) | .99 | .86 | .97 | ||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (.76 | ) | (.53 | ) | (.41 | ) | (.49 | ) | (.78 | ) | ||||||||||
From net realized gain | — | (.12 | ) | (.53 | ) | (.56 | ) | — | ||||||||||||
Total distributions | (.76 | ) | (.65 | ) | (.94 | ) | (1.05 | ) | (.78 | ) | ||||||||||
Net Asset Value, End of Period | $ | 23.90 | $ | 23.80 | $ | 24.54 | $ | 24.49 | $ | 24.68 | ||||||||||
Total Return (%) | 3.72 | (.39 | ) | 4.16 | 3.58 | 4.11 | ||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 60,670 | $ | 53,204 | $ | 45,970 | $ | 36,159 | $ | 26,915 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | 1.62 | 1.65 | 1.66 | 1.69 | 1.66 | |||||||||||||||
Operating expenses, gross | 1.63 | 1.66 | 1.66 | 1.70 | 1.66 | |||||||||||||||
Net investment income (loss)(b) | 3.43 | 2.38 | 1.71 | 1.94 | 3.09 | |||||||||||||||
Portfolio turnover rate (%) | 105.80 | 225.67 | 140.92 | 147.44 | 156.21 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
27
Table of Contents
Diversified Bond Fund—Class E Shares
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.87 | $ | 24.62 | $ | 24.56 | $ | 24.74 | $ | 24.54 | ||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss)(a) | .99 | .76 | .60 | .67 | .92 | |||||||||||||||
Net realized and unrealized gain (loss) | .06 | (.68 | ) | .58 | .37 | .24 | ||||||||||||||
Total income from operations | 1.05 | .08 | 1.18 | 1.04 | 1.16 | |||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (.94 | ) | (.71 | ) | (.59 | ) | (.66 | ) | (.96 | ) | ||||||||||
From net realized gain | — | (.12 | ) | (.53 | ) | (.56 | ) | — | ||||||||||||
Total distributions | (.94 | ) | (.83 | ) | (1.12 | ) | (1.22 | ) | (.96 | ) | ||||||||||
Net Asset Value, End of Period | $ | 23.98 | $ | 23.87 | $ | 24.62 | $ | 24.56 | $ | 24.74 | ||||||||||
Total Return (%) | 4.52 | .32 | 4.97 | 4.36 | 4.90 | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 55,949 | $ | 49,514 | $ | 43,724 | $ | 34,339 | $ | 26,985 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | .87 | .90 | .91 | .94 | .91 | |||||||||||||||
Operating expenses, gross | .88 | .91 | .91 | .94 | .91 | |||||||||||||||
Net investment income (loss)(b) | 4.19 | 3.12 | 2.46 | 2.70 | 3.85 | |||||||||||||||
Portfolio turnover rate (%) | 105.80 | 225.67 | 140.92 | 147.44 | 156.21 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
28
Table of Contents
Diversified Bond Fund—Class S Shares
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.28 | $ | 24.04 | $ | 24.00 | $ | 24.21 | $ | 24.03 | ||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss)(a) | 1.03 | .80 | .64 | .71 | .97 | |||||||||||||||
Net realized and unrealized gain (loss) | .05 | (.67 | ) | .58 | .36 | .23 | ||||||||||||||
Total income from operations | 1.08 | .13 | 1.22 | 1.07 | 1.20 | |||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (1.00 | ) | (.77 | ) | (.65 | ) | (.72 | ) | (1.02 | ) | ||||||||||
From net realized gain | — | (.12 | ) | (.53 | ) | (.56 | ) | — | ||||||||||||
Total distributions | (1.00 | ) | (.89 | ) | (1.18 | ) | (1.28 | ) | (1.02 | ) | ||||||||||
Net Asset Value, End of Period | $ | 23.36 | $ | 23.28 | $ | 24.04 | $ | 24.00 | $ | 24.21 | ||||||||||
Total Return (%) | 4.77 | .54 | 5.22 | 4.63 | 5.18 | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 2,023,212 | $ | 1,570,581 | $ | 1,232,576 | $ | 977,601 | $ | 783,332 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | .62 | .65 | .66 | .69 | .66 | |||||||||||||||
Operating expenses, gross | .63 | .66 | .66 | .69 | .66 | |||||||||||||||
Net investment income (loss)(b) | 4.45 | 3.38 | 2.71 | 2.95 | 4.11 | |||||||||||||||
Portfolio turnover rate (%) | 105.80 | 225.67 | 140.92 | 147.44 | 156.21 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
29
Table of Contents
Fixed Income I Fund—Class E Shares
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 20.75 | $ | 21.88 | $ | 22.12 | $ | 22.15 | $ | 22.32 | ||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss)(a) | .92 | .74 | .63 | .72 | .90 | |||||||||||||||
Net realized and unrealized gain (loss) | .04 | (.61 | ) | .48 | .36 | .17 | ||||||||||||||
Total income from operations | .96 | .13 | 1.11 | 1.08 | 1.07 | |||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (.89 | ) | (.73 | ) | (.69 | ) | (.67 | ) | (.97 | ) | ||||||||||
From net realized gain | — | (.53 | ) | (.66 | ) | (.44 | ) | (.27 | ) | |||||||||||
Total distributions | (.89 | ) | (1.26 | ) | (1.35 | ) | (1.11 | ) | (1.24 | ) | ||||||||||
Net Asset Value, End of Period | $ | 20.82 | $ | 20.75 | $ | 21.88 | $ | 22.12 | $ | 22.15 | ||||||||||
Total Return (%) | 4.79 | .60 | 5.22 | 5.01 | 5.10 | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 31,504 | $ | 29,632 | $ | 27,515 | $ | 27,009 | $ | 27,576 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | .64 | .65 | .65 | .67 | .64 | |||||||||||||||
Operating expenses, gross | .67 | .68 | .66 | .67 | .66 | |||||||||||||||
Net investment income (loss)(b) | 4.45 | 3.49 | 2.88 | 3.25 | 4.17 | |||||||||||||||
Portfolio turnover rate (%) | 125.38 | 201.90 | 153.79 | 184.29 | 165.28 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
30
Table of Contents
Fixed Income I Fund—Class I Shares
Fiscal Year Ended October 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net Asset Value, Beginning of Period | $20.75 | $21.87 | $22.11 | $22.15 | $22.32 | |||||||||||||||
Income From Operations | ||||||||||||||||||||
Net investment income (loss)(a) | .97 | .80 | .68 | .78 | .96 | |||||||||||||||
Net realized and unrealized gain (loss) | .05 | (.61 | ) | .49 | .35 | .17 | ||||||||||||||
Total income from operations | 1.02 | .19 | 1.17 | 1.13 | 1.13 | |||||||||||||||
Distributions | ||||||||||||||||||||
From net investment income | (.95 | ) | (.78 | ) | (.75 | ) | (.73 | ) | (1.03 | ) | ||||||||||
From net realized gain | — | (.53 | ) | (.66 | ) | (.44 | ) | (.27 | ) | |||||||||||
Total distributions | (.95 | ) | (1.31 | ) | (1.41 | ) | (1.17 | ) | (1.30 | ) | ||||||||||
Net Asset Value, End of Period | $ | 20.82 | $ | 20.75 | $ | 21.87 | $ | 22.11 | $ | 22.15 | ||||||||||
Total Return (%) | 5.06 | .88 | 5.52 | 5.26 | 5.38 | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net Assets, end of period (in thousands) | $ | 829,914 | $ | 788,808 | $ | 752,229 | $ | 639,846 | $ | 713,210 | ||||||||||
Ratios to average net assets (%): | ||||||||||||||||||||
Operating expenses, net (b) | .40 | .38 | .39 | .41 | .38 | |||||||||||||||
Operating expenses, gross | .42 | .40 | .40 | .41 | .38 | |||||||||||||||
Net investment income (loss)(b) | 4.70 | 3.76 | 3.15 | 3.50 | 4.42 | |||||||||||||||
Portfolio turnover rate (%) | 125.38 | 201.90 | 153.79 | 184.29 | 165.28 |
(a) | Average month-end shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements. |
31
Table of Contents
MONEY MANAGER INFORMATION
The money managers have no affiliations with the Funds or the Funds’ service providers other than their management of Fund assets. Each money manager is principally engaged in managing institutional investment accounts. These managers may also serve as managers or advisers to other investment companies unaffiliated with RIC, other RIC funds, or to other clients of RIMCo or of Frank Russell Company, including Frank Russell Company’s wholly-owned subsidiary, Russell Trust Company. The Funds may engage or terminate a money manager at any time, subject to the approval of the Funds’ Board of Trustees, without a shareholder vote. A complete list of current money managers for the Funds can also be found at www.Russell.com. Assets not allocated to money managers are managed by RIMCo.
Diversified Bond Fund
Bear Stearns Asset Management Inc., 383 Madison Avenue, New York, NY 10179.
Lehman Brothers Asset Management LLC, 200 South Wacker Drive, Suite 2100, Chicago, IL 60606.
Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.
Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA 91101.
Western Asset Management Company Limited, 10 Exchange Square Primrose Street, London, England EC2A 2EN.
Fixed Income I Fund
Bear Stearns Asset Management Inc., 383 Madison Avenue, New York, NY 10179.
Lehman Brothers Asset Management LLC, 200 South Wacker Drive, Suite 2100, Chicago, IL 60606.
Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.
Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA 91101.
Western Asset Management Company Limited, 10 Exchange Square Primrose Street, London, England EC2A 2EN.
When considering an investment in the Funds, do not rely on any information unless it is contained in this Prospectus or in the Funds’ Statement of Additional Information. The Funds have not authorized anyone to add any information or to make any additional statements about the Funds. The Funds may not be available in some jurisdictions or to some persons. The fact that you have received this Prospectus should not, in itself, be treated as an offer to sell Shares to you. Changes in the affairs of the Funds or in the Funds’ money managers may occur after the date on the cover page of this Prospectus. This Prospectus will be amended or supplemented to reflect any material changes to the information it contains.
32
Table of Contents
The following notice does not constitute part of and is not incorporated into the Prospectus
NOTICE OF PRIVACY AND SECURITY
RUSSELL INVESTMENT GROUP
The Russell Investment Group has a long history of respecting every individual’s right to the privacy of his or her personal information. We consider our relationship with consumers to be a very valuable asset. You should know that we do not sell or rent to anyone the information you have entrusted to us. In addition, we do not share your information with marketers outside the Russell Investment Group.
This notice describes our privacy policy and security procedures, which are designed to cover all personally identifiable information. As required by law, we will advise you of our privacy policy and security procedures at least once annually and at any time there is a material change.
CONFIDENTIALITY AND SECURITY
Confidentiality and privacy of personal information are responsibilities we have always taken very seriously. We have and maintain strict policies and procedures to protect the confidentiality of your information during all stages of your relationship with us. For example, our associates are bound by a Code of Ethics that requires them to treat all personal information as confidential, and they are subject to disciplinary action if they fail to follow this Code. In addition, we maintain physical, electronic and procedural safeguards to protect your personal information from unauthorized access and anticipated threats or hazards. Access to your information by our employees and other representatives is restricted to those individuals having a business need for such information in order to service your account.
INFORMATION WE MAY COLLECT AND USE
In order to service your account, from time to time, we collect personal information about you from the following sources:
• | Information we or our agents receive from you on applications or other forms; and |
• | Information about your transactions with us, our affiliates, our agents or others. Other information may, from time to time, be provided to us as we facilitate transactions that you have requested. |
INFORMATION WE MAY DISCLOSE
We occasionally disclose nonpublic personal information about you to affiliates and third parties as permitted by law. Some instances when we have shared information include:
• | Disclosing information to a third party to process account transactions that you request or authorize; |
• | Disclosing information to an affiliate to process accounting statements that you request or authorize; |
• | Disclosing your name and address to companies that mail fund-related materials such as shareholder reports; and |
• | Disclosing information in connection with legal proceedings. |
In situations where we have shared information with third parties, they are contractually obligated to keep the information that we provide to them confidential, and are not permitted to use the information for any purpose other than to assist in the servicing of your account.
RUSSELL INVESTMENT GROUP
The following is a list of the members of the Russell Investment Group to which this policy applies:
• | U.S. open-end or private funds managed or advised by a member of the Russell Investment Group, including Russell Investment Company or Russell Investment Funds |
• | Frank Russell Company |
• | Russell Real Estate Advisors Inc. |
• | Russell Implementation Services Inc. |
• | Russell Investment Management Company |
• | Russell Trust Company |
• | Russell International Services Company Inc. |
• | Russell Investments Delaware Inc. |
• | Russell Fund Distributors, Inc. |
• | Pantheon Ventures Inc. |
• | Russell Institutional Services Inc. |
Table of Contents
Tickers and CUSIPs of the Funds
Class C, E and S Shares: | Class C Shares Ticker | Class C Shares CUSIP | Class E Shares Ticker | Class E Shares CUSIP | Class S Shares Ticker | Class S Shares CUSIP | ||||||
Diversified Bond Fund | RDBCX | 782493415 | RDBEX | 782493639 | RDBSX | 782493860 |
Class E and Class I Shares: | Class E Shares Ticker | Class E Shares CUSIP | Class I Shares Ticker | Class I Shares CUSIP | ||||
Fixed Income I Fund | RFAEX | 782493183 | RFASX | 782493407 |
Table of Contents
For more information about the Funds, the following documents are available without charge:
ANNUAL/SEMIANNUAL REPORTS: Additional information about the Funds’ investments is available in the Funds’ annual and semiannual reports to shareholders. In each Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information about the Funds.
The annual report for each Fund and the SAI are incorporated into this Prospectus by reference. You may obtain free copies of the annual report, semi-annual report or the SAI, and may request other information or make other inquiries, by contacting your Financial Intermediary or the Funds at:
Russell Investment Company
909 A Street
Tacoma, WA 98402
Telephone: 1-800-787-7354
Fax: 253-591-3495
The Funds’ SAI and annual and semiannual reports to shareholders are available, free of charge, on the Funds’ Web site at www.russell.com.
Each year you are automatically sent an updated prospectus and annual and semi-annual reports for the funds. You may also occasionally receive notifications of prospectus changes and proxy statements for the funds. In order to reduce the volume of mail you receive, when possible, only one copy or one mailing of these documents will be sent to shareholders who are part of the same family, sharing the same name and the same household address. If you would like to opt out of the household-based mailings, please call your Financial Intermediary.
Some Financial Intermediaries may offer electronic delivery of the Fund’s prospectus and annual and semiannual reports. Please contact your Financial Intermediary for further details.
You can review and copy information about the Funds (including the SAI) at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-202-551-8090. Reports and other information about the Funds are available on the EDGAR Database on the Commission’s Internet website at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549-0102.
For a list of the tickers and CUSIPs of the Funds, please see the inside back cover of this prospectus.
On July 1, 2006, Frank Russell Investment Company changed its name to Russell Investment Company, and Frank Russell Investment Management Company changed its name to Russell Investment Management Company.
Distributor: Russell Fund Distributors, Inc. | ||
Russell Investment Company’s SEC File No. 811-03153 |
Table of Contents
EXHIBIT C
Russell Investment Company Fixed Income I Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Fixed Income I Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.06 | % | |
5 Years | 4.40 | %§ | |
10 Years | 6.06 | %§ |
Fixed Income I Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.79 | % | |
5 Years | 4.13 | %§ | |
10 Years | 5.86 | %§ |
Fixed Income I Fund - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.11 | % | |
5 Years | 4.47 | %§ | |
10 Years | 6.11 | %§ |
Lehman Brothers Aggregate Bond Index **
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.19 | % | |
5 Years | 4.51 | %§ | |
10 Years | 6.26 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide current income and the preservation of capital.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Fixed Income I Fund Class I, Class E and Class Y gained 5.06%, 4.79% and 5.11%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 5.19% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 4.61%. This return serves as a peer comparison and is expressed net of operating expenses.
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Corporate bonds have performed well over the last four years, leaving the yield spread between corporates and Treasuries for bearing credit risk very thin. As a result, the Fund’s money managers were modestly underweight in this sector, which detracted from Fund performance as the corporate sector continued to post strong earnings and had very few defaults. Given low yields across the globe, strong demand also drove the corporate market as investors searched for any possible incremental yield. This led to continued strong market demand for corporate bonds.
As illustrated by the average actively managed mutual fund underperforming the benchmark, volatile markets over the fiscal year made it difficult for active money managers to correctly gauge the direction and magnitude of interest rate changes. While 10 year Treasuries started and ended the fiscal year with nearly the same yield, over the year, yields ranged from 4.33% to 5.24%. Further, the Federal Reserve’s aggressive rate hikes surprised the market as evidenced by futures markets that trade based on the probability of Fed rate hikes. Despite this volatility, over the fiscal year, the Fund was able to effectively offset losses from an underweight to the corporate market through modest interest rate timing and security selection.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund’s money managers successfully moved their duration (a measure of a bond price’s sensitivity to a change in interest rates) exposure longer as interest rates rose and shorter when interest rates fell. A longer duration increases returns in a falling interest rate environment as longer duration bonds outperform more when interest rates fall. This duration management added modestly to the Fund’s incremental return in a volatile market.
At the money manager level, Bear Stearns Asset Management Inc. was the best performer due to its overweight to corporate bonds and strong security selection within this sector. Lehman Brothers Asset Management, LLC also did well in security selection and through an overweight to both the asset-backed and mortgage sectors. Believing the Fed would be finished raising interest rates by year end of 2005, Pacific Investment Management Company, LLC (PIMCO) struggled early in the year by taking positions in short maturity bonds which fell in price as short-term interest rates rose. Near the end of the fiscal period, PIMCO’s positioning was rewarded and its performance rebounded to end modestly positive for the year. Lastly, Western Asset Management Company also struggled with a long duration view in the spring when interest rates rose. Western’s corporate overweight helped it have a very modest excess return for the year as well.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
Bear Stearns Asset Management, Inc. | Sector Rotation | |
Lehman Brothers Asset Management, LLC | Enhanced Core | |
Pacific Investment Management Company, LLC | Fully Discretionary | |
Western Asset Management Company, Ltd. | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
Table of Contents
* | Assumes initial investment on November 1, 1996. |
** | Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. |
‡‡‡ | The Fund first issued Class Y Shares on March 29, 2000. The returns shown for Class Y Shares prior to March 29, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Table of Contents
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED July [ ], 2007
FIXED INCOME I FUND
(a sub-trust of Russell Investment Company)
to acquire the assets of
DIVERSIFIED BOND FUND
(a sub-trust of Russell Investment Company)
909 A Street
Tacoma, Washington 98402
1-800-787-7354
This Statement of Additional Information relates specifically to the reorganization of Diversified Bond Fund, a series of Russell Investment Company (the “Target Fund”) into Fixed Income I Fund, also a series of Russell Investment Company (the “Acquiring Fund”). Pursuant to this reorganization, the Acquiring Fund would acquire all of the assets and all of the liabilities of the Target Fund, and Acquiring Fund shares would be distributed pro rata by the Target Fund to the holders of its shares, in complete liquidation of the Target Fund.
This Statement of Additional Information consists of this cover page and the following documents, certain of which are incorporated by reference herein as indicated below:
1. | The Statement of Additional Information dated March 1, 2007 as supplemented May 24, 2007 of the Target Fund and the Acquiring Fund, previously filed on EDGAR on May 24, 2007 (SEC File Nos. 2-71299/811-3153). |
2. | The audited financial statements of the Target Fund and the Acquiring Fund included in the Institutional Funds and Russell Funds Annual Reports of Russell Investment Company for the fiscal year ended October 31, 2006, previously filed on EDGAR on January 5, 2007. |
3. | The unaudited financial statements of the Target Fund and the Acquiring Fund included in the Institutional Funds and Russell Funds Semi-Annual Reports of Russell Investment Company for the six months ended April 30, 2007, previously filed on EDGAR on June , 2007. |
4. | The pro forma condensed financial statements and schedules of the Target Fund and the Acquiring Fund required by Rule 11-01 of Regulation S-X are filed herein. |
This Statement of Additional Information dated July [ ], 2007 is not a prospectus. A Prospectus/Proxy Statement dated July [ ], 2007 relating to the above-referenced matters may be obtained from the Acquiring Fund or the Target Fund at the addresses and telephone numbers shown above. This Statement of Additional Information should be read in conjunction with such Prospectus/Proxy Statement.
Pro Forma Condensed Financial Statements and Notes to the Pro Forma Condensed
Financial Statements
Presented below is a set of pro forma condensed financial statements relating to Fixed Income I Fund pro forma to give effect to the Diversified Bond Reorganization. The pro forma financial statements show you what the Fixed Income financial statements would have looked like had the Reorganization already occurred as of the dates specified in the Notes. For further information regarding the Reorganization please carefully read the Proxy Statement.
Table of Contents
Fixed Income I Pro Forma for Diversified Bond Reorganization
Pro Forma Condensed Statement of Assets and Liabilities - October 31, 2006 (Unaudited)
Amounts in thousands (except per share amounts and shares outstanding)
Fixed Income I | Diversified Bond | Pro Forma Adjustments | Fixed Income I Pro Forma | |||||||||||
Investments, at identified cost | $ | 1,900,501 | $ | 2,910,458 | $ | 4,810,959 | ||||||||
Assets | ||||||||||||||
Investments, at market | 1,903,413 | 2,916,732 | 4,820,145 | |||||||||||
Other assets | 89,987 | 135,014 | 225,001 | |||||||||||
Total Assets | 1,993,400 | 3,051,746 | 5,045,146 | |||||||||||
Liabilities | ||||||||||||||
Payable for investments purchased | 302,713 | 461,264 | 763,977 | |||||||||||
Payable upon return of securities loaned | 275,976 | 445,812 | 721,788 | |||||||||||
Other liabilities | 2,910 | 4,839 | 7,749 | |||||||||||
Total Liabilities | 581,599 | 911,915 | 1,493,514 | |||||||||||
Net Assets | $ | 1,411,801 | $ | 2,139,831 | $ | 3,551,632 | ||||||||
Net Assets Consist of: | ||||||||||||||
Undistributed net investment income | $ | 5,612 | $ | 9,110 | $ | 14,722 | ||||||||
Accumulated net realized gain (loss) | (19,703 | ) | (24,479 | ) | (44,182 | ) | ||||||||
Unrealized Appreciation (depreciation) | 2,580 | 6,288 | 8,868 | |||||||||||
Shares of beneficial interest | 678 | 915 | 1,593 | |||||||||||
Additional paid-in capital | 1,422,634 | 2,147,997 | 3,570,631 | |||||||||||
Net Assets | $ | 1,411,801 | $ | 2,139,831 | $ | 3,551,632 | ||||||||
Net Asset Value, offering and redemption price per share: | ||||||||||||||
Class C: | ||||||||||||||
Net asset value per share (c) | $ | 23.90 | n/a | $ | 20.82 | |||||||||
Net assets | $ | 60,670 | n/a | $ | 60,670 | |||||||||
Shares outstanding ($.01 par value) (a)(b) | 2,538,693 | 375,339 | 2,914,032 | |||||||||||
Class E: | ||||||||||||||
Net asset value per share (c) | $ | 20.82 | $ | 23.98 | n/a | $ | 20.82 | |||||||
Net assets | $ | 31,505 | $ | 55,949 | n/a | $ | 87,454 | |||||||
Shares outstanding ($.01 par value) (a)(b) | 1,512,846 | 2,333,491 | 353,768 | 4,200,105 | ||||||||||
Class I: | ||||||||||||||
Net asset value per share (c) | $ | 20.82 | n/a | $ | 20.82 | |||||||||
Net assets | $ | 829,914 | n/a | $ | 829,914 | |||||||||
Shares outstanding ($.01 par value) | 39,863,382 | n/a | 39,863,382 | |||||||||||
Class S: | ||||||||||||||
Net asset value per share (c) | $ | 23.36 | n/a | $ | 20.82 | |||||||||
Net assets | $ | 2,023,212 | n/a | $ | 2,023,212 | |||||||||
Shares outstanding ($.01 par value) (a)(b) | 86,594,933 | 10,581,428 | 97,176,361 | |||||||||||
Class Y: | ||||||||||||||
Net asset value per share (c) | $ | 20.83 | n/a | $ | 20.83 | |||||||||
Net assets | $ | 550,382 | n/a | $ | 550,382 | |||||||||
Shares outstanding ($.01 par value) | 26,425,276 | n/a | 26,425,276 |
(a) | Pro Forma shares outstanding have been adjusted to reflect the impact of the lower Net Asset Value per share of the Fixed Income I Fund. |
(b) | The Diversified Bond Class E Shares would be combined with the Fixed Income I Class E Shares and new Class C and Class S Shares would be created in Fixed Income I. |
(c) | Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
Table of Contents
Fixed Income I Pro Forma for Diversified Bond Reorganization
Pro Forma Condensed Statement of Operations - For the Fiscal Year Ended October 31, 2006 (Unaudited)
Amounts in thousands
Fixed Income I | Diversified Bond | Pro Forma Adjustments | Fixed Income I Pro Forma | |||||||||||||
Interest Income | $ | 62,938 | $ | 87,784 | $ | — | $ | 150,722 | ||||||||
Other Income | 4,982 | 7,872 | — | 12,854 | ||||||||||||
Investment Income | 67,920 | 95,656 | — | 163,576 | ||||||||||||
Advisory fees (d) | 3,328 | 7,553 | (2,832 | ) | 8,049 | |||||||||||
Other expenses (e) | 2,140 | 4,991 | (96 | ) | 7,035 | |||||||||||
Expenses before reductions | 5,468 | 12,544 | (2,928 | ) | 15,084 | |||||||||||
Expense reductions (f) | (352 | ) | (139 | ) | (378 | ) | (869 | ) | ||||||||
Net expenses | 5,116 | 12,405 | (3,306 | ) | 14,215 | |||||||||||
Net investment income (loss) | 62,804 | 83,251 | 3,306 | 149,361 | ||||||||||||
Net Realized and Unrealized Gain (Loss) | ||||||||||||||||
Net realized gain (loss) | (15,439 | ) | (20,962 | ) | — | (36,401 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | 18,982 | 28,923 | — | 47,905 | ||||||||||||
Net realized and unrealized gain (loss) | 3,543 | 7,961 | — | 11,504 | ||||||||||||
Net Increase (Decrease) in Net Assets from Operations | $ | 66,347 | $ | 91,212 | $ | 3,306 | $ | 160,865 | ||||||||
(d) | Pro Forma Advisory Fees have been adjusted to reflect the net decrease in advisory fees, caused by a 15 bp decrease in the advisory fees of Diversified Bond Fund. |
(e) | Pro Forma Other Expenses have been reduced to reflect the known duplication of services once the reorganization occur. |
(f) | Pro Forma Expense Reductions have been adjusted to reflect the increased expense waiver related to RIMCo’s existing contractual obligation to waive 0.02% of its administrative fees in the Fixed Income I Fund. |
Table of Contents
Note 1. General
The accompanying pro forma condensed financial statements are presented to show the effect of the proposed Reorganization of the Diversified Bond Fund into the Fixed Income I Fund. The Pro Forma Condensed Statement of Assets and Liabilities is presented as if such Reorganization had taken place as of October 31, 2006. The Pro Forma Condensed Statement of Operations is presented as if such Reorganization had taken place at the beginning of the fiscal year ended October 31, 2006.
Under the terms of the Plan of Reorganization, the Reorganization of the Diversified Bond Fund into the Fixed Income I Fund will be treated as a tax-free business combination and, accordingly, the historical cost basis of investments of the Diversified Bond Fund will be carried forward to the Fixed Income I Fund. Shareholders of Diversified Bond Fund will receive Class C, E and S Shares of Fixed Income I Fund with an aggregate value equal at the time of the completion of the Reorganization to the aggregate value of their Diversified Bond Fund Class C, E and S Shares. The surviving fund, Fixed Income I, currently has share classes E, I and Y. Diversified Bond has Class C, E and S Shares. As a result of the proposed merger, Diversified Bond Class E Shares will be combined with Fixed Income I Fund Class E shares and new Class C and S Shares will be issued by the Fixed Income I Fund.
The accompanying pro forma condensed financial statements have been presented for the Fixed Income I Fund pro Forma for the Diversified Bond Fund Reorganization.
The accompanying pro forma condensed financial statements should be read in conjunction with the financial statements and statements of net assets of the Diversified Bond and the Fixed Income I Funds which are included in their respective annual reports dated October 31, 2006.
Note 2. Securities Valuation
The Funds value portfolio securities according to Board-approved Securities Valuation Procedures, including Market Value Procedures, Fair Value Procedures and Pricing Services. Money market fund securities are priced using the amortized cost method of valuation, as are debt obligation securities maturing within 60 days at the time of purchase are priced using the amortized cost method of valuation, unless the Board determines that amortized cost does not represent market value of short-term debt obligations. The Board has delegated the responsibility for administration of the Securities Valuation Procedures to Russell Investment Management Company.
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; |
Table of Contents
• | 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 New York Stock Exchange, 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 Fund’s 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 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. RIC 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. RIC 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. RIC 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
Table of Contents
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.
Note 3. Reorganization Expenses
Expenses of the Reorganization have been reflected in the pro forma financial statements. The Diversified Bond Fund will pay all direct Fund-level costs associated with the reorganization. However, since Diversified Bond is currently operating above its stated expense cap, it is expected that Russell Investment Management Company (“RIMCo”) will bear the costs of the reorganization. For the Diversified Bond Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 0.45% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.75% of the average daily net assets of that Fund for the period from March 1, 2007 to February 29, 2008. This waiver may not be terminated during this period except at the Board’s discretion. Direct fund-level expenses for the Diversified Bond Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
Note 4. Advisory Fees and Other Expenses
The combined fund will incur advisory fees at .25% of the combined average daily net assets of the Fund. The adjustments in the Pro Forma Condensed Statement of Operations reflect the impact of the reduction in advisory fees of the Diversified Bond Fund from .40% to .25% for the period reported. Other expenses have been reduced to reflect the known duplication of expenses.
Note 5. Fee Waivers
Russell Investment Management Company has contractually agreed to waive .02% of its administrative fees in the combined fund. The adjustments in the Pro Forma Condensed Statement of Operations reflect the impact of the continued administrative fee waiver.
Note 6. Use of Estimates
The pro forma financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
Note 7. Federal Income Taxes
At October 31, 2006, the Diversified Bond and Fixed Income I 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:
Funds | 10/31/13 | 10/31/14 | Totals | ||||||
Diversified Bond | $ | 4,923,732 | $ | 16,820,169 | $ | 21,743,901 | |||
Fixed Income I | 3,855,225 | 14,386,926 | 18,242,151 |
Table of Contents
Schedule of Investments - October 31, 2006
Amounts in thousands (except share amounts)(unaudited)
Fixed Income I | Diversified Bond | Fixed Income I Pro Forma | ||||||||||
Principal Amount ($) or Shares | Market Value $ | Principal Amount ($) or Shares | Market Value $ | Principal Amount ($) or Shares | Market $ | |||||||
Long-Term Investments - 101.2% | ||||||||||||
Asset-Backed Securities - 8.1% | ||||||||||||
Aames Mortgage Investment Trust (Ê)(Å) | ||||||||||||
Series 2005-3 Class A1 | ||||||||||||
5.480% due 08/25/35 | 919 | 920 | 919 | 920 | ||||||||
ABSC NIMs Trust (þ) | ||||||||||||
Series 2005-HE6 Class A1 | ||||||||||||
5.050% due 08/27/35 | 143 | 142 | 163 | 162 | 306 | 304 | ||||||
Accredited Mortgage Loan Trust (Ê) | ||||||||||||
Series 2004-2 Class A2 | ||||||||||||
5.620% due 07/25/34 | 105 | 106 | 155 | 155 | 260 | 261 | ||||||
ACE Securities Corp. (Ê) | ||||||||||||
Series 2001-HE1 Class A | ||||||||||||
6.060% due 11/20/31 | 105 | 105 | 105 | 105 | ||||||||
Series 2005-SD3 Class A | ||||||||||||
5.720% due 08/25/45 | 674 | 675 | 935 | 936 | 1,609 | 1,611 | ||||||
Series 2006-ASP Class A2A | ||||||||||||
5.404% due 10/25/36 | 786 | 786 | 786 | 786 | ||||||||
Series 2006-FM1 Class A2A | ||||||||||||
5.370% due 07/25/36 | 1,304 | 1,304 | 1,844 | 1,844 | 3,148 | 3,148 | ||||||
Series 2006-FM1 Class A2B | ||||||||||||
5.420% due 07/25/36 | 1,825 | 1,825 | 2,580 | 2,580 | 4,405 | 4,405 | ||||||
Aegis Asset Backed Securities Trust (Ê) | ||||||||||||
Series 2003-3 Class M2 | ||||||||||||
6.970% due 01/25/34 | 350 | 353 | 450 | 454 | 800 | 807 | ||||||
American Express Credit Account Master Trust (Ê)(þ) | ||||||||||||
Series 2006-A Class A | ||||||||||||
5.310% due 01/15/09 | 1,680 | 1,680 | 2,420 | 2,419 | 4,100 | 4,099 | ||||||
Ameriquest Mortgage Securities, Inc. (Ê) | ||||||||||||
Series 2002-D Class M1 | ||||||||||||
7.820% due 02/25/33 | 155 | 155 | 205 | 205 | 360 | 360 | ||||||
Series 2004-R10 Class A5 | ||||||||||||
5.710% due 11/25/34 | 109 | 109 | 150 | 150 | 259 | 259 | ||||||
Series 2004-R4 Class A1A (þ) | ||||||||||||
5.660% due 06/25/34 | 773 | 773 | 773 | 773 | ||||||||
Series 2004-R8 Class A5 | ||||||||||||
5.700% due 09/25/34 | 437 | 437 | 437 | 437 | ||||||||
Argent Securities, Inc. (Ê) | ||||||||||||
Series 2005-W5 Class A2A | ||||||||||||
5.410% due 01/25/36 | 1,585 | 1,585 | 1,585 | 1,585 | ||||||||
Series 2006-M2 Class A2A | ||||||||||||
5.378% due 09/25/36 | 578 | 578 | 578 | 578 | ||||||||
Asset Backed Funding Certificates (Ê) | ||||||||||||
Series 2006-OPT Class A3A | ||||||||||||
5.370% due 10/25/36 | 991 | 990 | 991 | 990 | ||||||||
Asset Backed Funding Corp. NIMs Trust (þ) | ||||||||||||
Series 2005-WF1 Class N1 | ||||||||||||
4.750% due 03/26/35 | 94 | 94 | 101 | 100 | 195 | 194 | ||||||
Asset Backed Securities Corp. Home Equity (Ê) | ||||||||||||
Series 2006-HE2 Class A1A | ||||||||||||
5.570% due 06/25/35 | 2,141 | 2,143 | 2,141 | 2,143 | ||||||||
Bank One Issuance Trust (Ê) | ||||||||||||
Series 2003-A1 Class A1 | ||||||||||||
5.440% due 09/15/10 | 1,600 | 1,602 | 1,600 | 1,602 | ||||||||
Bayview Financial Acquisition Trust | ||||||||||||
Series 2004-C Class A1 (Ê) | ||||||||||||
5.744% due 05/28/44 | 854 | 856 | 854 | 856 | ||||||||
Series 2006-A Class 1A3 | ||||||||||||
5.865% due 02/28/41 | 325 | 326 | 450 | 451 | 775 | 777 | ||||||
Burlington Northern Santa Fe Corp. Pass-Through Certificate | ||||||||||||
4.967% due 04/01/23 | 222 | 218 | 302 | 296 | 524 | 514 | ||||||
Chase Credit Card Master Trust (Ê) | ||||||||||||
Series 2002-1 Class A | ||||||||||||
5.430% due 06/15/09 | 3,100 | 3,101 | 3,100 | 3,101 | ||||||||
Series 2004-2 Class A | ||||||||||||
5.360% due 09/15/09 | 2,190 | 2,191 | 2,190 | 2,191 | ||||||||
Chase Issuance Trust | ||||||||||||
Series 2005-A1 Class A1 |
Table of Contents
5.330% due 12/15/10 | 10,375 | 10,376 | 10,375 | 10,376 | ||||||||
Series 2005-A3 Class A (Ê) | ||||||||||||
5.340% due 10/17/11 | 3,095 | 3,096 | 4,450 | 4,452 | 7,545 | 7,548 | ||||||
Citigroup Mortgage Loan Trust, Inc. | ||||||||||||
Series 2004-RES Class A1 (Ê) | ||||||||||||
5.620% due 11/25/34 | 628 | 629 | 628 | 629 | ||||||||
Series 2006-SHL Class A1 (Ê)(Å) | ||||||||||||
5.443% due 11/25/45 | 2,100 | 2,100 | 2,100 | 2,100 | ||||||||
Series 2006-WFH Class A1 (Ê) | ||||||||||||
5.370% due 08/25/36 | 965 | 965 | 965 | 965 | ||||||||
Series 2006-WFH Class A1B | ||||||||||||
5.440% due 01/25/36 | 2,490 | 2,491 | 2,490 | 2,491 | ||||||||
Countrywide Asset-Backed Certificates | ||||||||||||
Series 2001-BC3 Class A (Ê) | ||||||||||||
5.810% due 12/25/31 | 81 | 81 | 92 | 92 | 173 | 173 | ||||||
Series 2004-13 Class AF3 | ||||||||||||
3.989% due 02/25/31 | 203 | 201 | 283 | 280 | 486 | 481 | ||||||
Series 2004-BC1 Class M1 (Ê) | ||||||||||||
5.820% due 02/25/34 | 190 | 191 | 235 | 236 | 425 | 427 | ||||||
Series 2005-11 Class AF1 (Ê) | ||||||||||||
5.510% due 02/25/36 | 1,281 | 1,282 | 1,281 | 1,282 | ||||||||
Series 2005-17 Class 1AF1 (Ê) | ||||||||||||
5.510% due 12/25/36 | 410 | 410 | 1,455 | 1,456 | 1,865 | 1,866 | ||||||
Series 2005-17 Class 4AV1 (Ê) | ||||||||||||
5.430% due 05/25/36 | 954 | 954 | 1,205 | 1,205 | 2,159 | 2,159 | ||||||
Series 2005-5N Class N (þ) | ||||||||||||
5.000% due 07/25/36 | 75 | 73 | 101 | 98 | 176 | 171 | ||||||
Series 2005-AB3 Class 2A1 (Ê) | ||||||||||||
5.450% due 02/25/36 | 712 | 712 | 712 | 712 | ||||||||
Series 2006-11 Class 1AF4 | ||||||||||||
6.300% due 09/25/46 | 505 | 516 | 685 | 701 | 1,190 | 1,217 | ||||||
Series 2006-13 Class 3AV1 (Ê) | ||||||||||||
5.380% due 07/25/46 | 1,830 | 1,830 | 1,830 | 1,830 | ||||||||
Series 2006-15 Class A1 (Ê) | ||||||||||||
5.434% due 10/25/46 | 1,100 | 1,100 | 1,100 | 1,100 | ||||||||
Series 2006-16 Class 2A1 (Ê) | ||||||||||||
5.374% due 12/25/46 | 500 | 500 | 500 | 500 | ||||||||
Series 2006-19 Class 2A1 (Ê) | ||||||||||||
5.409% due 07/25/36 | 1,300 | 1,300 | 1,300 | 1,300 | ||||||||
Series 2006-BC1 Class 1A (Ê) | ||||||||||||
5.520% due 04/25/36 | 3,762 | 3,763 | 3,762 | 3,763 | ||||||||
Series 2006-BC4 Class 2A2 (Ê) | ||||||||||||
5.484% due 07/25/36 | 2,220 | 2,220 | 2,220 | 2,220 | ||||||||
Countrywide Home Equity Loan Trust (Ê) | ||||||||||||
Series 2005-A Class 2A | ||||||||||||
5.570% due 04/15/35 | 180 | 180 | 260 | 260 | 440 | 440 | ||||||
Series 2005-G Class 2A | ||||||||||||
5.560% due 12/15/35 | 909 | 909 | 1,283 | 1,284 | 2,192 | 2,193 | ||||||
Series 2006-E Class 2A | ||||||||||||
5.470% due 12/25/31 | 1,788 | 1,789 | 1,788 | 1,789 | ||||||||
Credit-Based Asset Servicing and Securitization (Ê) | ||||||||||||
Series 2005-CB5 Class AV2 | ||||||||||||
5.580% due 08/25/35 | 360 | 362 | 520 | 522 | 880 | 884 | ||||||
Credit-Based Asset Servicing and Securitization LLC | ||||||||||||
Series 2004-CB7 Class AF5 | ||||||||||||
4.585% due 10/25/34 | 550 | 529 | 770 | 740 | 1,320 | 1,269 | ||||||
Series 2005-CB1 Class AF2 | ||||||||||||
4.090% due 12/25/35 | 305 | 304 | 419 | 417 | 724 | 721 | ||||||
Series 2006-CB3 Class AV1 | ||||||||||||
5.380% due 03/25/36 | 1,221 | 1,221 | 1,221 | 1,221 | ||||||||
Series 2006-CB6 Class A21 (Ê) | ||||||||||||
5.370% due 07/25/36 | 2,556 | 2,556 | 3,613 | 3,613 | 6,169 | 6,169 | ||||||
Daimler Chrysler Auto Trust | ||||||||||||
Series 2006-C Class A2 | ||||||||||||
5.330% due 05/08/09 | 1,200 | 1,200 | 1,200 | 1,200 | ||||||||
Daimler Chrysler Master Owner Trust (Ê) | ||||||||||||
Series 2005-A Class A | ||||||||||||
5.370% due 04/15/10 | 6,720 | 6,721 | 8,255 | 8,256 | 14,975 | 14,977 | ||||||
Discover Card Master Trust I (Ê) | ||||||||||||
Series 2005-1 Class A | ||||||||||||
5.330% due 09/16/10 | 3,075 | 3,076 | 3,870 | 3,871 | 6,945 | 6,947 | ||||||
Equifirst Mortgage Loan Trust (Ê) | ||||||||||||
Series 2004-3 Class A2 | ||||||||||||
5.650% due 12/25/34 | 1,789 | 1,791 | 2,036 | 2,039 | 3,825 | 3,830 |
Table of Contents
Equifirst Mortgage Loan Trust NIMs Notes (þ) | ||||||||||||
Series 2005-1 Class N1 | ||||||||||||
4.458% due 04/25/35 | 229 | 228 | 222 | 222 | 451 | 450 | ||||||
Fannie Mae Grantor Trust (Ê) | ||||||||||||
Series 2002-T13 Class A1 | ||||||||||||
5.420% due 08/25/32 | — | — | — | — | ||||||||
Series 2002-T5 Class A1 | ||||||||||||
5.560% due 05/25/32 | 520 | 520 | 273 | 273 | 793 | 793 | ||||||
Series 2003-T4 Class 1A | ||||||||||||
5.440% due 09/26/33 | 303 | 303 | 303 | 303 | ||||||||
Fannie Mae Whole Loan (Ê) | ||||||||||||
Series 2002-W2 Class AV1 | ||||||||||||
5.580% due 06/25/32 | 8 | 8 | 8 | 8 | ||||||||
Series 2003-W5 Class A | ||||||||||||
5.440% due 04/25/33 | 328 | 328 | 328 | 328 | ||||||||
Series 2003-W9 Class A | ||||||||||||
5.450% due 06/25/33 | 512 | 510 | 512 | 510 | ||||||||
Series 2003-W16 Class AV1 | ||||||||||||
5.470% due 11/25/33 | 20 | 20 | 20 | 20 | ||||||||
First Franklin Mortgage Loan Asset Backed Certificates | ||||||||||||
Series 2004-FF1 Class A2 (Ê) | ||||||||||||
5.720% due 12/25/32 | 671 | 672 | 947 | 949 | 1,618 | 1,621 | ||||||
Series 2004-FFH Class 2A1 (Ê) | ||||||||||||
5.700% due 10/25/34 | 437 | 439 | 451 | 453 | 888 | 892 | ||||||
Series 2005-FF1 Class A2A (Ê) | ||||||||||||
5.420% due 11/25/36 | 267 | 267 | 267 | 267 | ||||||||
Series 2006-FF1 Class 2A2 (Ê) | ||||||||||||
5.430% due 08/25/36 | 4,005 | 4,005 | 4,005 | 4,005 | ||||||||
Series 2006-FF1 Class A3 (Ê) | ||||||||||||
5.370% due 11/25/36 | 1,400 | 1,400 | 1,400 | 1,400 | ||||||||
Series 2006-FF3 Class A2A | ||||||||||||
5.400% due 02/25/36 | 926 | 926 | 1,273 | 1,273 | 2,199 | 2,199 | ||||||
Series 2006-FF5 Class 2A1 | ||||||||||||
5.380% due 04/25/36 | 1,504 | 1,504 | 1,504 | 1,504 | ||||||||
First Franklin NIMs Trust (þ) | ||||||||||||
Series 2005-FF1 Class N1 | ||||||||||||
4.213% due 01/25/35 | 75 | 74 | 42 | 42 | 117 | 116 | ||||||
Ford Credit Floorplan Master Owner Trust (Ê) | ||||||||||||
Series 2004-1 Class A | ||||||||||||
5.360% due 07/15/09 | 1,770 | 1,769 | 2,275 | 2,274 | 4,045 | 4,043 | ||||||
Fremont Home Loan Trust (Ê) | ||||||||||||
Series 2004-4 Class 1A1 | ||||||||||||
5.700% due 03/25/35 | 5,032 | 5,046 | 7,752 | 7,772 | 12,784 | 12,818 | ||||||
Series 2006-3 Class 2A1 | ||||||||||||
5.390% due 02/27/37 | 492 | 492 | 900 | 899 | 1,392 | 1,391 | ||||||
Fremont NIMs Trust (þ) | ||||||||||||
Series 2005-A | ||||||||||||
3.750% due 01/25/35 | 77 | 77 | 97 | 97 | 174 | 174 | ||||||
Series 2005-C Class NOTE | ||||||||||||
5.584% due 07/25/35 | 66 | 65 | 81 | 80 | 147 | 145 | ||||||
GE Dealer Floorplan Master Note Trust (Ê) | ||||||||||||
Series 2004-2 Class A | ||||||||||||
5.400% due 07/20/09 | 955 | 956 | 1,240 | 1,241 | 2,195 | 2,197 | ||||||
Series 2005-1 Class A | ||||||||||||
5.360% due 04/20/10 | 1,425 | 1,425 | 1,800 | 1,801 | 3,225 | 3,226 | ||||||
Series 2006-3 Class A | ||||||||||||
5.330% due 07/20/11 | 1,980 | 1,980 | 3,045 | 3,045 | 5,025 | 5,025 | ||||||
GE-WMC Mortgage Securities LLC (Ê) | ||||||||||||
Series 2006-1 Class A2A | ||||||||||||
5.365% due 08/25/36 | 480 | 480 | 480 | 480 | ||||||||
GMAC Mortgage Corp. Loan Trust | ||||||||||||
Series 2004-HE5 Class A3 | ||||||||||||
3.970% due 09/25/34 | 550 | 544 | 676 | 669 | 1,226 | 1,213 | ||||||
Government National Mortgage Association | ||||||||||||
Series 1998-23 Class ZA | ||||||||||||
6.500% due 09/20/28 | 2,651 | 2,732 | 2,651 | 2,732 | ||||||||
GSAA Home Equity Trust | ||||||||||||
Series 2006-4 Class 1A2 | ||||||||||||
5.977% due 03/25/36 | 501 | 503 | 686 | 689 | 1,187 | 1,192 | ||||||
GSAA Trust (Ê) | ||||||||||||
Series 2006-2 Class 2A3 | ||||||||||||
5.590% due 12/25/35 | 570 | 571 | 785 | 787 | 1,355 | 1,358 | ||||||
GSAMP Trust (Ê) | ||||||||||||
Series 2003-HE2 Class M1 |
Table of Contents
5.970% due 08/25/33 | 300 | 301 | 420 | 421 | 720 | 722 | ||||||
Series 2006-FM2 Class A2A (Ê) | ||||||||||||
5.394% due 09/25/36 | 1,068 | 1,068 | 1,068 | 1,068 | ||||||||
HFC Home Equity Loan Asset Backed Certificates (Ê) | ||||||||||||
Series 2006-2 Class A1 | ||||||||||||
5.520% due 03/20/36 | 2,411 | 2,411 | 3,413 | 3,414 | 5,824 | 5,825 | ||||||
Home Equity Asset Trust | ||||||||||||
Series 2003-5 Class M1 (Ê) | ||||||||||||
6.020% due 12/25/33 | 345 | 347 | 620 | 623 | 965 | 970 | ||||||
Series 2005-2 Class 2A2 | ||||||||||||
5.520% due 07/25/35 | 275 | 275 | 398 | 398 | 673 | 673 | ||||||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||||||||||
Series 2005-FLD Class A1 | ||||||||||||
5.450% due 07/25/35 | 504 | 504 | 593 | 594 | 1,097 | 1,098 | ||||||
Series 2006-WMC Class A2 | ||||||||||||
5.380% due 08/25/36 | 366 | 366 | 548 | 548 | 914 | 914 | ||||||
Lehman XS Trust (Ê) | ||||||||||||
Series 2005-1 Class 2A1 | ||||||||||||
4.660% due 07/25/35 | 880 | 868 | 1,221 | 1,206 | 2,101 | 2,074 | ||||||
Series 2005-1 Class 2A2 | ||||||||||||
4.660% due 07/25/35 | 298 | 298 | 394 | 394 | 692 | 692 | ||||||
Series 2006-16N Class A1A | ||||||||||||
5.410% due 11/25/46 | 900 | 900 | 900 | 900 | ||||||||
Series 2006-17 Class WF11 | ||||||||||||
5.440% due 11/25/36 | 2,400 | 2,400 | 2,400 | 2,400 | ||||||||
Long Beach Mortgage Loan Trust (Ê) | ||||||||||||
Series 2004-4 Class 1A1 | ||||||||||||
5.610% due 10/25/34 | 182 | 182 | 263 | 263 | 445 | 445 | ||||||
Series 2006-1 Class 2A1 | ||||||||||||
5.410% due 02/25/36 | 439 | 439 | 439 | 439 | ||||||||
Series 2006-9 Class 2A1 | ||||||||||||
5.390% due 10/25/36 | 2,600 | 2,600 | 2,600 | 2,600 | ||||||||
Mastr Asset Backed Securities Trust (Ê) | ||||||||||||
Series 2003-WMC Class M2 | ||||||||||||
6.970% due 08/25/33 | 84 | 84 | 133 | 133 | 217 | 217 | ||||||
Series 2004-OPT Class A3 | ||||||||||||
5.590% due 02/25/34 | 3 | 3 | 3 | 3 | ||||||||
Series 2005-NC1 Class A1 | ||||||||||||
5.610% due 12/25/34 | 3,102 | 3,103 | 4,778 | 4,780 | 7,880 | 7,883 | ||||||
MBNA Credit Card Master Note Trust | ||||||||||||
Series 2002-A4 Class A4 | ||||||||||||
5.440% due 08/17/09 | 3,155 | 3,157 | 3,155 | 3,157 | ||||||||
Merrill Auto Trust Securitization (Ê) | ||||||||||||
Series 2005-1 Class A2B | ||||||||||||
5.334% due 04/25/08 | 369 | 369 | 359 | 359 | 728 | 728 | ||||||
Morgan Stanley ABS Capital I (Ê) | ||||||||||||
Series 2003-NC8 Class M3 | ||||||||||||
7.420% due 09/25/33 | 131 | 132 | 192 | 193 | 323 | 325 | ||||||
Series 2004-NC5 Class A2 | ||||||||||||
5.620% due 05/25/34 | 689 | 689 | 961 | 962 | 1,650 | 1,651 | ||||||
Series 2006-HE7 Class A2A | ||||||||||||
5.424% due 09/25/36 | 2,600 | 2,600 | 2,600 | 2,600 | ||||||||
Series 2006-NC5 Class A2A | ||||||||||||
5.360% due 10/25/36 | 1,000 | 1,000 | 1,000 | 1,000 | ||||||||
Morgan Stanley Mortgage Loan Trust | ||||||||||||
Series 2006-12X Class A6A | ||||||||||||
5.726% due 10/25/36 | 415 | 415 | 580 | 581 | 995 | 996 | ||||||
MSDWCC Heloc Trust (Ê) | ||||||||||||
Series 2005-1 Class A | ||||||||||||
5.520% due 07/25/17 | 134 | 134 | 134 | 134 | ||||||||
Navistar Financial Corp. Owner Trust (Ê) | ||||||||||||
Series 2003-B Class A3 | ||||||||||||
5.520% due 04/15/08 | 181 | 181 | 169 | 169 | 350 | 350 | ||||||
New Century Home Equity Loan Trust (Ê) | ||||||||||||
Series 2004-4 Class M2 | ||||||||||||
5.850% due 02/25/35 | 370 | 372 | 515 | 518 | 885 | 890 | ||||||
Series 2005-B Class A2A | ||||||||||||
5.450% due 10/25/35 | 524 | 524 | 524 | 524 | ||||||||
Newcastle Mortgage Securities Trust (Ê) | ||||||||||||
Series 2006-1 Class A1 | ||||||||||||
5.400% due 03/25/36 | 1,271 | 1,271 | 1,271 | 1,271 | ||||||||
Nissan Master Owner Trust Receivables (Ê) | ||||||||||||
Series 2005-A Class A | ||||||||||||
5.350% due 07/15/10 | 1,305 | 1,305 | 2,065 | 2,065 | 3,370 | 3,370 |
Table of Contents
Option One Mortgage Loan Trust (Ê) | ||||||||||||
Series 2001-4 Class A | ||||||||||||
5.930% due 01/25/32 | 5 | 5 | 5 | 5 | ||||||||
Series 2002-2 Class A | ||||||||||||
5.870% due 06/25/32 | 137 | 137 | 137 | 137 | ||||||||
Series 2003-2 Class M2 | ||||||||||||
7.020% due 04/25/33 | 124 | 125 | 154 | 155 | 278 | 280 | ||||||
Series 2003-3 Class M3 | ||||||||||||
7.320% due 06/25/33 | 86 | 87 | 114 | 116 | 200 | 203 | ||||||
Series 2003-4 Class M2 | ||||||||||||
6.970% due 07/25/33 | 228 | 229 | 286 | 288 | 514 | 517 | ||||||
Option One Mortgage Securities Corp. NIMs Trust (Ê)(þ) | ||||||||||||
Series 2006-1A | ||||||||||||
5.430% due 12/25/10 | 1,575 | 1,575 | 1,999 | 1,999 | 3,574 | 3,574 | ||||||
Origen Manufactured Housing | ||||||||||||
Series 2005-B Class A4 | ||||||||||||
5.910% due 01/15/37 | 100 | 100 | 400 | 399 | 500 | 499 | ||||||
Ownit Mortgage Loan Asset Backed Certificates (Ê) | ||||||||||||
Series 2006-6 Class A2C | ||||||||||||
5.484% due 09/25/37 | 2,390 | 2,390 | 3,380 | 3,380 | 5,770 | 5,770 | ||||||
Park Place Securities, Inc. (Ê) | ||||||||||||
Series 2004-MCW Class A1 | ||||||||||||
5.642% due 10/25/34 | 3,606 | 3,599 | 3,606 | 3,599 | ||||||||
Series 2004-WWF Class A1D | ||||||||||||
5.780% due 02/25/35 | 729 | 731 | 1,009 | 1,012 | 1,738 | 1,743 | ||||||
Series 2005-WCW Class M1 | ||||||||||||
5.770% due 09/25/35 | 370 | 372 | 510 | 513 | 880 | 885 | ||||||
Popular ABS Mortgage Pass-Through Trust | ||||||||||||
Series 2005-1 Class AF2 | ||||||||||||
3.914% due 05/25/35 | 116 | 116 | 145 | 145 | 261 | 261 | ||||||
Series 2005-6 Class A3 | ||||||||||||
5.680% due 01/25/36 | 390 | 390 | 565 | 565 | 955 | 955 | ||||||
RAAC Series (Ê)(Å) | ||||||||||||
Series 2006-RP2 Class A | ||||||||||||
5.580% due 02/25/37 | 1,267 | 1,269 | 1,267 | 1,269 | ||||||||
Ramp NIMs Trust (þ) | ||||||||||||
Series 2005-NM2 | ||||||||||||
5.193% due 04/25/35 | 91 | 90 | 106 | 105 | 197 | 195 | ||||||
Renaissance Home Equity Loan Trust | ||||||||||||
Series 2005-1 Class M1 | ||||||||||||
5.357% due 05/25/35 | 225 | 222 | 315 | 310 | 540 | 532 | ||||||
Series 2005-2 Class AF4 | ||||||||||||
4.934% due 08/25/35 | 245 | 241 | 340 | 334 | 585 | 575 | ||||||
Series 2005-3 Class AF1 (Ê) | ||||||||||||
5.480% due 11/25/35 | 529 | 529 | 515 | 515 | 1,044 | 1,044 | ||||||
Series 2005-3 Class AV1 (Ê) | ||||||||||||
5.470% due 10/25/35 | 712 | 712 | 712 | 712 | ||||||||
Series 2005-4 Class N (þ) | ||||||||||||
7.142% due 02/25/36 | 271 | 270 | 336 | 334 | 607 | 604 | ||||||
Series 2006-1 Class AF6 | ||||||||||||
5.746% due 05/25/36 | 305 | 309 | 425 | 430 | 730 | 739 | ||||||
Residential Asset Mortgage Products, Inc. | ||||||||||||
Series 2002-RS5 Class AII (Ê) | ||||||||||||
5.700% due 09/25/32 | 4 | 4 | 4 | 4 | ||||||||
Series 2003-RS1 Class AI6A | ||||||||||||
5.980% due 12/25/33 | 345 | 349 | 480 | 486 | 825 | 835 | ||||||
Series 2003-RS1 Class AII (Ê) | ||||||||||||
5.720% due 02/25/33 | 6 | 6 | 6 | 6 | ||||||||
Series 2003-RS2 Class AII (Ê) | ||||||||||||
5.670% due 03/25/33 | 167 | 167 | 113 | 113 | 280 | 280 | ||||||
Series 2003-RS3 Class AII (Ê) | ||||||||||||
5.690% due 04/25/33 | 115 | 115 | 79 | 79 | 194 | 194 | ||||||
Series 2004-RS2 Class AIIB (Ê) | ||||||||||||
5.580% due 02/25/34 | 54 | 54 | 54 | 54 | ||||||||
Residential Asset Securities Corp. | ||||||||||||
Series 2001-KS1 Class AII (Ê) | ||||||||||||
5.800% due 03/25/32 | 102 | 102 | 76 | 76 | 178 | 178 | ||||||
Series 2001-KS3 Class AII (Ê) | ||||||||||||
5.780% due 09/25/31 | 78 | 78 | 97 | 97 | 175 | 175 | ||||||
Series 2002-KS3 Class A1B (Ê) | ||||||||||||
5.830% due 05/25/32 | 169 | 169 | 118 | 118 | 287 | 287 | ||||||
Series 2003-KS1 Class M2 (Ê) | ||||||||||||
7.070% due 01/25/33 | 109 | 109 | 125 | 125 | 234 | 234 |
Table of Contents
Series 2003-KS2 Class MI1 | ||||||||||||
4.800% due 04/25/33 | 755 | 740 | 1,055 | 1,034 | 1,810 | 1,774 | ||||||
Series 2006-KS6 Class A1 (Ê) | ||||||||||||
5.364% due 08/25/36 | 468 | 468 | 656 | 656 | 1,124 | 1,124 | ||||||
Series 2006-KS9 Class A11 (Ê) | ||||||||||||
5.390% due 11/25/36 | 1,200 | 1,200 | 1,200 | 1,200 | ||||||||
Residential Funding Mortgage Securities II, Inc. (Ê) | ||||||||||||
Series 2005-HI2 Class A1 | ||||||||||||
5.470% due 05/25/35 | 145 | 145 | 145 | 145 | ||||||||
Series 2005-HS1 Class AI1 | ||||||||||||
5.450% due 09/25/35 | 912 | 910 | 1,234 | 1,231 | 2,146 | 2,141 | ||||||
Saxon Asset Securities Trust (Ê) | ||||||||||||
Series 2004-1 Class A | ||||||||||||
5.600% due 03/25/35 | 125 | 125 | 128 | 128 | 253 | 253 | ||||||
Series 2006-3 Class A1 | ||||||||||||
5.382% due 11/25/36 | 590 | 590 | 590 | 590 | ||||||||
SBI Heloc Trust (Ê)(Å) | ||||||||||||
Series 2006-1A Class 1A2A | ||||||||||||
5.494% due 08/25/36 | 700 | 700 | 700 | 700 | ||||||||
Securitized Asset Backed Receivables LLC Trust (Ê) | ||||||||||||
Series 2005-FR4 Class A3 | ||||||||||||
5.530% due 01/25/36 | 396 | 396 | 527 | 527 | 923 | 923 | ||||||
SLM Student Loan Trust (Ê) | ||||||||||||
Series 2006-3 Class A2 | ||||||||||||
5.485% due 01/25/16 | 1,079 | 1,079 | 1,079 | 1,079 | ||||||||
Series 2006-5 Class A2 | ||||||||||||
5.367% due 07/25/17 | 2,700 | 2,700 | 2,700 | 2,700 | ||||||||
Series 2006-9 Class A1 | ||||||||||||
5.338% due 10/25/12 | 1,900 | 1,900 | 1,900 | 1,900 | ||||||||
Small Business Administration | ||||||||||||
Series 2000-P10 Class 1 | ||||||||||||
7.449% due 08/01/10 | 72 | 76 | 36 | 38 | 108 | 114 | ||||||
Soundview Home Equity Loan Trust | ||||||||||||
Series 2006-WF1 Class A2 | ||||||||||||
5.645% due 10/25/36 | 825 | 825 | 825 | 825 | ||||||||
Series 2006-EQ1 Class A1 (Ê) | ||||||||||||
5.380% due 10/25/36 | 781 | 781 | 781 | 781 | ||||||||
Series 2006-WF1 Class A2 | ||||||||||||
5.645% due 10/25/36 | 1,215 | 1,215 | 1,215 | 1,215 | ||||||||
Soundview NIMs Trust | ||||||||||||
Series 2005-DO1 Class N1 | ||||||||||||
4.703% due 06/25/35 | 52 | 51 | 16 | 16 | 68 | 67 | ||||||
Specialty Underwriting & Residential Finance | ||||||||||||
Series 2003-BC1 Class A (Ê) | ||||||||||||
5.670% due 01/25/34 | 15 | 15 | 11 | 11 | 26 | 26 | ||||||
Series 2004-BC2 Class A2 | ||||||||||||
5.600% due 05/25/35 | 10 | 10 | 10 | 10 | ||||||||
Series 2006-AB1 Class A2 | ||||||||||||
5.470% due 12/25/36 | 850 | 850 | 1,225 | 1,226 | 2,075 | 2,076 | ||||||
Structured Asset Investment Loan Trust | ||||||||||||
Series 2004-7 Class A1 (Ê) | ||||||||||||
5.585% due 08/25/34 | 314 | 316 | 425 | 427 | 739 | 743 | ||||||
Series 2005-3 Class M2 | ||||||||||||
5.760% due 04/25/35 | 210 | 211 | 290 | 291 | 500 | 502 | ||||||
Structured Asset Securities Corp. | ||||||||||||
Series 2002-AL1 Class A3 | ||||||||||||
3.450% due 02/25/32 | 228 | 213 | 319 | 299 | 547 | 512 | ||||||
Series 2002-HF1 Class A (Ê) | ||||||||||||
5.620% due 01/25/33 | 13 | 13 | 13 | 13 | ||||||||
Series 2004-19X Class A2 | ||||||||||||
4.370% due 10/25/34 | 765 | 757 | 900 | 890 | 1,665 | 1,647 | ||||||
Series 2005-WF1 Class A2 (Ê) | ||||||||||||
5.530% due 02/25/35 | 2,304 | 2,306 | 3,150 | 3,153 | 5,454 | 5,459 | ||||||
Series 2005-WF3 Class A1 (Ê) | ||||||||||||
5.420% due 07/25/35 | 390 | 390 | 390 | 390 | ||||||||
Series 2006-BC3 Class A2 (Ê) | ||||||||||||
5.370% due 10/25/36 | 800 | 800 | 1,300 | 1,300 | 2,100 | 2,100 | ||||||
Tenaska Alabama II Partners, LP (þ) | ||||||||||||
Series 2003 | ||||||||||||
6.125% due 03/30/23 | 226 | 230 | 252 | 256 | 478 | 486 | ||||||
Textron Financial Floorplan Master Note Trust (Ê)(þ) | ||||||||||||
Series 2005-1A Class A | ||||||||||||
5.440% due 05/13/10 | 1,640 | 1,643 | 2,405 | 2,409 | 4,045 | 4,052 |
Table of Contents
Truman Capital Mortgage Loan Trust (Ê)(Å) | ||||||||||||
Series 2006-1 Class A | ||||||||||||
5.584% due 03/25/36 | 1,845 | 1,845 | 1,845 | 1,845 | ||||||||
Volkswagen Credit Auto Master Trust (Ê) | ||||||||||||
Series 2005-1 Class A | ||||||||||||
5.350% due 07/20/10 | 1,485 | 1,485 | 1,870 | 1,870 | 3,355 | 3,355 | ||||||
Wachovia Asset Securitization, Inc. (Ê) | ||||||||||||
Series 2003-HE3 Class A | ||||||||||||
5.580% due 11/25/33 | 233 | 233 | 209 | 210 | 442 | 443 | ||||||
Wachovia Mortgage Loan Trust LLC (Ê) | ||||||||||||
Series 2005-WMC Class A1 | ||||||||||||
5.440% due 10/25/35 | 171 | 170 | 231 | 231 | 402 | 401 | ||||||
Waverly Community School (Ê) | ||||||||||||
Series 2006-1 Class A1 | ||||||||||||
5.420% due 05/25/36 | 1,196 | 1,196 | 1,559 | 1,559 | 2,755 | 2,755 | ||||||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||||||||||
Series 2005-4 Class AI1 | ||||||||||||
5.450% due 12/25/35 | 839 | 839 | 1,328 | 1,328 | 2,167 | 2,167 | ||||||
112,495 | 174,448 | 286,943 | ||||||||||
Corporate Bonds and Notes - 15.8% | ||||||||||||
Abbott Laboratories | ||||||||||||
5.600% due 05/15/11 | 280 | 285 | 545 | 555 | 825 | 840 | ||||||
5.875% due 05/15/16 | 4,425 | 4,600 | 6,275 | 6,523 | 10,700 | 11,123 | ||||||
Alamosa Delaware, Inc. | ||||||||||||
8.500% due 01/31/12 | 180 | 191 | 245 | 261 | 425 | 452 | ||||||
Allstate Life Global Funding Trusts | ||||||||||||
3.850% due 01/25/08 | 1,355 | 1,331 | 1,865 | 1,832 | 3,220 | 3,163 | ||||||
Altria Group, Inc. | ||||||||||||
7.000% due 11/04/13 | 710 | 778 | 1,220 | 1,337 | 1,930 | 2,115 | ||||||
American Electric Power Co., Inc. | ||||||||||||
Series C | ||||||||||||
5.375% due 03/15/10 | 35 | 35 | 85 | 85 | 120 | 120 | ||||||
American Express Bank (Ê) | ||||||||||||
Series BKNT | ||||||||||||
5.330% due 10/16/08 | 800 | 800 | 1,200 | 1,200 | 2,000 | 2,000 | ||||||
American General Finance Corp. (Ê) | ||||||||||||
Series MTNI | ||||||||||||
5.498% due 06/27/08 | 1,300 | 1,303 | 1,600 | 1,603 | 2,900 | 2,906 | ||||||
American International Group, Inc. | ||||||||||||
5.370% due 06/16/09 (Ê)(þ) | 700 | 700 | 700 | 700 | ||||||||
4.700% due 10/01/10 | 445 | 439 | 635 | 626 | 1,080 | 1,065 | ||||||
5.375% due 10/18/11 | 480 | 484 | 670 | 676 | 1,150 | 1,160 | ||||||
5.050% due 10/01/15 (Ñ) | 440 | 430 | 645 | 630 | 1,085 | 1,060 | ||||||
American RE Corp. (Ñ) | ||||||||||||
Series B | ||||||||||||
7.450% due 12/15/26 | 435 | 493 | 595 | 675 | 1,030 | 1,168 | ||||||
Ameriprise Financial, Inc. | ||||||||||||
5.650% due 11/15/15 | 835 | 845 | 1,135 | 1,149 | 1,970 | 1,994 | ||||||
Anadarko Petroleum Corp. | ||||||||||||
5.790% due 09/15/09 (Ê) | 480 | 481 | 680 | 681 | 1,160 | 1,162 | ||||||
5.950% due 09/15/16 | 1,090 | 1,107 | 1,535 | 1,559 | 2,625 | 2,666 | ||||||
6.450% due 09/15/36 | 550 | 570 | 720 | 746 | 1,270 | 1,316 | ||||||
Anheuser-Busch Cos., Inc. (Ñ) | ||||||||||||
4.950% due 01/15/14 | 395 | 385 | 545 | 532 | 940 | 917 | ||||||
ASIF Global Financing (Å) | ||||||||||||
4.900% due 01/17/13 | 50 | 49 | 70 | 69 | 120 | 118 | ||||||
AT&T, Inc. | ||||||||||||
5.612% due 11/14/08 (Ê) | 500 | 501 | 500 | 501 | ||||||||
5.100% due 09/15/14 | 325 | 317 | 465 | 453 | 790 | 770 | ||||||
BAE Systems Holdings, Inc.(þ) | ||||||||||||
6.400% due 12/15/11 | 1,025 | 1,063 | 1,670 | 1,733 | 2,695 | 2,796 | ||||||
Bank of America Corp. | ||||||||||||
5.875% due 02/15/09 | 180 | 183 | 120 | 122 | 300 | 305 | ||||||
5.400% due 06/19/09 (Ê) | 2,700 | 2,701 | 3,600 | 3,601 | 6,300 | 6,302 | ||||||
7.800% due 02/15/10 | 120 | 129 | 120 | 129 | ||||||||
4.375% due 12/01/10 | 1,520 | 1,480 | 2,035 | 1,981 | 3,555 | 3,461 | ||||||
5.375% due 08/15/11 | 460 | 465 | 980 | 990 | 1,440 | 1,455 | ||||||
5.750% due 08/15/16 | 2,395 | 2,441 | 3,385 | 3,450 | 5,780 | 5,891 | ||||||
Bank of America NA | ||||||||||||
6.000% due 10/15/36 | 2,240 | 2,310 | 3,550 | 3,661 | 5,790 | 5,971 | ||||||
Bank of New York Co., Inc. | ||||||||||||
5.125% due 11/01/11 | 540 | 540 | 795 | 795 | 1,335 | 1,335 | ||||||
Banque Paribas | ||||||||||||
6.875% due 03/01/09 | 350 | 364 | 440 | 457 | 790 | 821 |
Table of Contents
Bear Stearns Cos., Inc. (The) | ||||||||||||
5.489% due 08/21/09 (Ê) | 800 | 801 | 1,200 | 1,201 | 2,000 | 2,002 | ||||||
Series MTNB (Ê) | ||||||||||||
5.457% due 03/30/09 | 900 | 901 | 900 | 901 | ||||||||
BellSouth Corp. | ||||||||||||
5.580% due 08/15/08 (Ê) | 1,300 | 1,300 | 1,300 | 1,300 | ||||||||
4.750% due 11/15/12 (Ñ) | 20 | 19 | 30 | 29 | 50 | 48 | ||||||
6.550% due 06/15/34 | 1,080 | 1,116 | 1,530 | 1,582 | 2,610 | 2,698 | ||||||
Boeing Capital Corp.(Ñ) | ||||||||||||
6.100% due 03/01/11 | 150 | 156 | 165 | 171 | 315 | 327 | ||||||
Boston Scientific Corp. | ||||||||||||
6.400% due 06/15/16 | 650 | 660 | 905 | 919 | 1,555 | 1,579 | ||||||
Burlington Northern Santa Fe Corp. | ||||||||||||
6.875% due 12/01/27 | 80 | 89 | 55 | 61 | 135 | 150 | ||||||
Campbell Soup Co. (Ñ) | ||||||||||||
5.875% due 10/01/08 | 165 | 167 | 160 | 162 | 325 | 329 | ||||||
Carolina Power & Light Co. | ||||||||||||
6.500% due 07/15/12 | 15 | 16 | 15 | 16 | ||||||||
5.150% due 04/01/15 | 840 | 825 | 1,115 | 1,096 | 1,955 | 1,921 | ||||||
Caterpillar Financial Services Corp.(Ê) | ||||||||||||
5.454% due 10/09/09 | 2,100 | 2,100 | 2,100 | 2,100 | ||||||||
Caterpillar, Inc. | ||||||||||||
6.050% due 08/15/36 | 1,435 | 1,504 | 2,035 | 2,133 | 3,470 | 3,637 | ||||||
CenterPoint Energy Houston Electric LLC | ||||||||||||
Series J2 | ||||||||||||
5.700% due 03/15/13 | 195 | 197 | 210 | 212 | 405 | 409 | ||||||
CenterPoint Energy Resources Corp. | ||||||||||||
Series B | ||||||||||||
7.875% due 04/01/13 | 440 | 491 | 675 | 754 | 1,115 | 1,245 | ||||||
Cingular Wireless Services, Inc. | ||||||||||||
7.875% due 03/01/11 | 1,125 | 1,233 | 1,480 | 1,623 | 2,605 | 2,856 | ||||||
8.750% due 03/01/31 | 1,920 | 2,516 | 2,740 | 3,590 | 4,660 | 6,106 | ||||||
Cisco Systems, Inc. | ||||||||||||
5.500% due 02/22/16 | 2,995 | 3,030 | 4,380 | 4,430 | 7,375 | 7,460 | ||||||
CIT Group Holdings, Inc.(Ê) | ||||||||||||
5.635% due 01/30/09 | 2,400 | 2,405 | 800 | 802 | 3,200 | 3,207 | ||||||
CIT Group, Inc. | ||||||||||||
5.540% due 12/19/08 (Ê) | 900 | 902 | 900 | 902 | ||||||||
5.500% due 06/08/09 (Ê) | 100 | 100 | 100 | 100 | ||||||||
5.546% due 08/17/09 (Ê) | 1,400 | 1,401 | 1,400 | 1,401 | ||||||||
6.875% due 11/01/09 | 80 | 84 | 100 | 104 | 180 | 188 | ||||||
4.125% due 11/03/09 | 50 | 49 | 50 | 49 | ||||||||
5.780% due 07/28/11 (Ê) | 900 | 901 | 900 | 901 | ||||||||
Citicorp | ||||||||||||
7.250% due 10/15/11 | 455 | 493 | 370 | 401 | 825 | 894 | ||||||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||||||||||
Series MTNM | ||||||||||||
5.430% due 03/07/08 | 1,300 | 1,301 | 1,300 | 1,301 | ||||||||
Citigroup, Inc. | ||||||||||||
3.500% due 02/01/08 | 985 | 965 | 1,900 | 1,860 | 2,885 | 2,825 | ||||||
5.408% due 12/26/08 (Ê) | 700 | 700 | 700 | 700 | ||||||||
5.525% due 01/30/09 (Ê) | 2,000 | 2,001 | 500 | 500 | 2,500 | 2,501 | ||||||
4.125% due 02/22/10 | 630 | 612 | 1,070 | 1,040 | 1,700 | 1,652 | ||||||
6.500% due 01/18/11 | 300 | 315 | 695 | 730 | 995 | 1,045 | ||||||
5.100% due 09/29/11 | 970 | 968 | 970 | 968 | ||||||||
5.000% due 09/15/14 | 5,475 | 5,348 | 7,810 | 7,628 | 13,285 | 12,976 | ||||||
6.125% due 08/25/36 | 100 | 104 | 400 | 415 | 500 | 519 | ||||||
Clear Channel Communications, Inc. | ||||||||||||
4.250% due 05/15/09 | 100 | 96 | 150 | 145 | 250 | 241 | ||||||
6.250% due 03/15/11 (Ñ) | 290 | 279 | 30 | 29 | 320 | 308 | ||||||
5.500% due 09/15/14 | 400 | 339 | 400 | 339 | ||||||||
Clorox Co. | ||||||||||||
4.200% due 01/15/10 | 165 | 160 | 250 | 243 | 415 | 403 | ||||||
Columbus Southern Power Co. | ||||||||||||
Series C | ||||||||||||
5.500% due 03/01/13 | 85 | 85 | 100 | 100 | 185 | 185 | ||||||
Comcast Cable Communications, Inc. | ||||||||||||
6.875% due 06/15/09 | 480 | 499 | 665 | 691 | 1,145 | 1,190 | ||||||
Comcast Corp. | ||||||||||||
5.800% due 07/14/09 (Ê) | 1,000 | 1,002 | 1,000 | 1,002 | ||||||||
6.500% due 01/15/15 (Ñ) | 855 | 895 | 1,185 | 1,240 | 2,040 | 2,135 | ||||||
5.900% due 03/15/16 | 65 | 65 | 120 | 121 | 185 | 186 | ||||||
6.500% due 01/15/17 | 450 | 472 | 600 | 629 | 1,050 | 1,101 | ||||||
6.500% due 11/15/35 | 945 | 965 | 1,330 | 1,358 | 2,275 | 2,323 |
Table of Contents
6.450% due 03/15/37 | 200 | 203 | 255 | 258 | 455 | 461 | ||||||
ConocoPhillips Holding Co. | ||||||||||||
6.950% due 04/15/29 | 1,155 | 1,333 | 1,780 | 2,055 | 2,935 | 3,388 | ||||||
Consolidated Edison Co. of New York(Ñ) | ||||||||||||
5.375% due 12/15/15 | 545 | 544 | 960 | 958 | 1,505 | 1,502 | ||||||
Consolidated Natural Gas Co. | ||||||||||||
6.850% due 04/15/11 | 385 | 406 | 510 | 537 | 895 | 943 | ||||||
Constellation Energy Group, Inc. | ||||||||||||
6.125% due 09/01/09 | 635 | 649 | 785 | 802 | 1,420 | 1,451 | ||||||
COX Communications, Inc. | ||||||||||||
3.875% due 10/01/08 | 240 | 233 | 300 | 291 | 540 | 524 | ||||||
6.750% due 03/15/11 | 2,895 | 3,028 | 3,945 | 4,126 | 6,840 | 7,154 | ||||||
Credit Suisse First Boston USA, Inc. | ||||||||||||
3.875% due 01/15/09 | 625 | 609 | 820 | 799 | 1,445 | 1,408 | ||||||
4.875% due 08/15/10 | 120 | 119 | 155 | 153 | 275 | 272 | ||||||
6.500% due 01/15/12 | 20 | 21 | 55 | 58 | 75 | 79 | ||||||
5.500% due 08/15/13 (Ñ) | 95 | 96 | 115 | 117 | 210 | 213 | ||||||
Credit Suisse USA, Inc. (Ñ) | ||||||||||||
5.250% due 03/02/11 | 310 | 311 | 405 | 406 | 715 | 717 | ||||||
CRH America, Inc. | ||||||||||||
6.000% due 09/30/16 | 1,355 | 1,365 | 1,915 | 1,929 | 3,270 | 3,294 | ||||||
CVS Corp. | ||||||||||||
5.750% due 08/15/11 | 250 | 254 | 350 | 355 | 600 | 609 | ||||||
6.125% due 08/15/16 | 665 | 685 | 940 | 969 | 1,605 | 1,654 | ||||||
DaimlerChrysler NA Holding Corp. | ||||||||||||
4.750% due 01/15/08 | 300 | 297 | 300 | 297 | ||||||||
4.050% due 06/04/08 | 165 | 161 | 285 | 279 | 450 | 440 | ||||||
5.875% due 03/15/11 | 300 | 302 | 300 | 302 | 600 | 604 | ||||||
8.500% due 01/18/31 (Ñ) | 975 | 1,172 | 1,335 | 1,604 | 2,310 | 2,776 | ||||||
DaimlerChrysler North America Holding Corp.(Ê) | ||||||||||||
5.918% due 08/03/09 | 800 | 800 | 800 | 800 | ||||||||
Detroit Edison Co. | ||||||||||||
6.125% due 10/01/10 | 120 | 124 | 325 | 335 | 445 | 459 | ||||||
6.350% due 10/15/32 | 105 | 111 | 95 | 100 | 200 | 211 | ||||||
Devon Energy Corp. | ||||||||||||
7.950% due 04/15/32 | 770 | 960 | 1,210 | 1,508 | 1,980 | 2,468 | ||||||
Dominion Resources, Inc. | ||||||||||||
4.750% due 12/15/10 | 90 | 88 | 110 | 107 | 200 | 195 | ||||||
5.700% due 09/17/12 | 390 | 395 | 695 | 704 | 1,085 | 1,099 | ||||||
Series B | ||||||||||||
6.250% due 06/30/12 | 90 | 93 | 80 | 83 | 170 | 176 | ||||||
Series C | ||||||||||||
5.150% due 07/15/15 | 950 | 922 | 1,245 | 1,208 | 2,195 | 2,130 | ||||||
DPL, Inc. | ||||||||||||
6.875% due 09/01/11 | 430 | 454 | 600 | 633 | 1,030 | 1,087 | ||||||
DR Horton, Inc. | ||||||||||||
6.500% due 04/15/16 | 660 | 658 | 900 | 897 | 1,560 | 1,555 | ||||||
Dresdner Funding Trust I(þ) | ||||||||||||
8.151% due 06/30/31 | 410 | 495 | 565 | 683 | 975 | 1,178 | ||||||
DTE Energy Co. (Ñ) | ||||||||||||
7.050% due 06/01/11 | 1,400 | 1,486 | 1,835 | 1,948 | 3,235 | 3,434 | ||||||
Duke Energy Corp. | ||||||||||||
6.250% due 01/15/12 | 150 | 157 | 170 | 177 | 320 | 334 | ||||||
5.625% due 11/30/12 | 185 | 188 | 290 | 295 | 475 | 483 | ||||||
Duke Energy Field Services LLC | ||||||||||||
6.875% due 02/01/11 | 35 | 37 | 40 | 42 | 75 | 79 | ||||||
Duke Realty, LP | ||||||||||||
5.950% due 02/15/17 | 740 | 752 | 1,045 | 1,061 | 1,785 | 1,813 | ||||||
Eastman Kodak Co.(Ñ) | ||||||||||||
7.250% due 11/15/13 | 30 | 30 | 40 | 40 | 70 | 70 | ||||||
Electronic Data Systems Corp. | ||||||||||||
7.125% due 10/15/09 | 460 | 481 | 600 | 627 | 1,060 | 1,108 | ||||||
Eli Lilly & Co.(Ñ) | ||||||||||||
6.770% due 01/01/36 | 485 | 566 | 715 | 834 | 1,200 | 1,400 | ||||||
Embarq Corp. | ||||||||||||
7.082% due 06/01/16 | 1,055 | 1,079 | 1,435 | 1,468 | 2,490 | 2,547 | ||||||
Erac USA Finance Co. (þ) | ||||||||||||
5.900% due 11/15/15 | 1,145 | 1,158 | 1,570 | 1,588 | 2,715 | 2,746 | ||||||
Exelon Corp. | ||||||||||||
4.900% due 06/15/15 | 1,065 | 1,007 | 1,395 | 1,319 | 2,460 | 2,326 | ||||||
5.625% due 06/15/35 | 520 | 494 | 720 | 684 | 1,240 | 1,178 | ||||||
FedEx Corp. | ||||||||||||
5.500% due 08/15/09 | 1,290 | 1,298 | 1,870 | 1,882 | 3,160 | 3,180 | ||||||
7.600% due 07/01/97 | 135 | 160 | 180 | 213 | 315 | 373 |
Table of Contents
Financing Corp. | ||||||||||||
Principal Only STRIP | ||||||||||||
Series 10P | ||||||||||||
Zero coupon due 11/30/17 | 940 | 543 | 1,165 | 673 | 2,105 | 1,216 | ||||||
Series 15P | ||||||||||||
Zero coupon due 03/07/19 | 165 | 89 | 165 | 89 | ||||||||
Series 2P | ||||||||||||
Zero coupon due 11/30/17 | 100 | 58 | 140 | 81 | 240 | 139 | ||||||
Series 6P | ||||||||||||
Zero coupon due 08/03/18 | 510 | 283 | 715 | 397 | 1,225 | 680 | ||||||
FirstEnergy Corp. (Ñ) | ||||||||||||
Series B | ||||||||||||
6.450% due 11/15/11 | 2,470 | 2,584 | 4,015 | 4,201 | 6,485 | 6,785 | ||||||
Series C | ||||||||||||
7.375% due 11/15/31 | 1,125 | 1,316 | 2,480 | 2,901 | 3,605 | 4,217 | ||||||
Ford Motor Co.(Ñ) | ||||||||||||
7.450% due 07/16/31 | 290 | 227 | 360 | 282 | 650 | 509 | ||||||
Ford Motor Credit Co. | ||||||||||||
4.950% due 01/15/08 | 320 | 312 | 410 | 400 | 730 | 712 | ||||||
7.375% due 10/28/09 | 2,430 | 2,365 | 3,210 | 3,125 | 5,640 | 5,490 | ||||||
Freddie Mac(Ñ) | ||||||||||||
5.250% due 05/21/09 | 1,960 | 1,979 | 2,735 | 2,761 | 4,695 | 4,740 | ||||||
General Electric Capital Corp. | ||||||||||||
5.410% due 01/05/09 (Ê) | 800 | 800 | 800 | 800 | ||||||||
3.250% due 06/15/09 | 1,065 | 1,019 | 1,400 | 1,339 | 2,465 | 2,358 | ||||||
5.570% due 01/20/10 (Ê) | 600 | 601 | 800 | 801 | 1,400 | 1,402 | ||||||
5.500% due 04/28/11 | 170 | 173 | 550 | 559 | 720 | 732 | ||||||
4.250% due 06/15/12 (Ñ) | 860 | 822 | 1,125 | 1,076 | 1,985 | 1,898 | ||||||
4.875% due 03/04/15 | 805 | 785 | 950 | 927 | 1,755 | 1,712 | ||||||
Series mtn (Ê) | ||||||||||||
5.410% due 10/26/09 | 2,700 | 2,699 | 2,700 | 2,699 | ||||||||
Series MTNA | ||||||||||||
4.250% due 01/15/08 | 220 | 218 | 280 | 277 | 500 | 495 | ||||||
4.125% due 09/01/09 (Ñ) | 780 | 761 | 400 | 390 | 1,180 | 1,151 | ||||||
5.410% due 10/26/09 (Ê) | 2,200 | 2,199 | 2,200 | 2,199 | ||||||||
6.000% due 06/15/12 | 220 | 229 | 915 | 952 | 1,135 | 1,181 | ||||||
5.450% due 01/15/13 (Ñ) | 2,540 | 2,578 | 3,295 | 3,344 | 5,835 | 5,922 | ||||||
General Electric Co. | ||||||||||||
5.000% due 02/01/13 | 260 | 258 | 375 | 372 | 635 | 630 | ||||||
General Motors Corp. | ||||||||||||
8.375% due 07/05/33 | 70 | 82 | 70 | 82 | ||||||||
8.375% due 07/15/33 (Ñ) | 90 | 80 | 120 | 107 | 210 | 187 | ||||||
Glencore Funding LLC(þ) | ||||||||||||
6.000% due 04/15/14 | 395 | 384 | 540 | 525 | 935 | 909 | ||||||
GMAC LLC | ||||||||||||
5.625% due 05/15/09 | 1,375 | 1,348 | 1,765 | 1,731 | 3,140 | 3,079 | ||||||
7.750% due 01/19/10 | 230 | 238 | 300 | 311 | 530 | 549 | ||||||
Goldman Sachs Group, Inc. | ||||||||||||
5.478% due 06/23/09 (Ê) | 500 | 500 | 1,700 | 1,701 | 2,200 | 2,201 | ||||||
5.000% due 01/15/11 (Ñ) | 150 | 149 | 200 | 198 | 350 | 347 | ||||||
6.875% due 01/15/11 | 1,170 | 1,241 | 1,620 | 1,718 | 2,790 | 2,959 | ||||||
4.750% due 07/15/13 | 1,055 | 1,018 | 1,380 | 1,332 | 2,435 | 2,350 | ||||||
5.350% due 01/15/16 | 940 | 929 | 1,567 | 1,548 | 2,507 | 2,477 | ||||||
Series MTNB (Ê) | ||||||||||||
5.480% due 07/29/08 | 2,000 | 2,003 | 2,000 | 2,003 | ||||||||
Goldman Sachs Group, LP (Ñ) | ||||||||||||
4.500% due 06/15/10 | 1,055 | 1,032 | 1,360 | 1,331 | 2,415 | 2,363 | ||||||
Hartford Financial Services Group, Inc. | ||||||||||||
5.550% due 08/16/08 | 785 | 789 | 1,070 | 1,076 | 1,855 | 1,865 | ||||||
5.250% due 10/15/11 | 630 | 631 | 915 | 916 | 1,545 | 1,547 | ||||||
Hess Corp. | ||||||||||||
7.300% due 08/15/31 | 845 | 958 | 1,115 | 1,264 | 1,960 | 2,222 | ||||||
Historic TW, Inc. | ||||||||||||
8.050% due 01/15/16 | 460 | 519 | 485 | 547 | 945 | 1,066 | ||||||
6.625% due 05/15/29 | 95 | 97 | 95 | 97 | ||||||||
HJ Heinz Co. | ||||||||||||
6.428% due 12/01/08 | 100 | 102 | 100 | 102 | ||||||||
HJ Heinz Finance Co. | ||||||||||||
6.000% due 03/15/12 | 40 | 41 | 40 | 41 | ||||||||
Home Depot, Inc. | ||||||||||||
5.400% due 03/01/16 | 1,015 | 1,013 | 1,435 | 1,433 | 2,450 | 2,446 | ||||||
HSBC Bank USA NA (Ê) | ||||||||||||
Series BKNT | ||||||||||||
5.530% due 06/10/09 | 800 | 803 | 500 | 502 | 1,300 | 1,305 |
Table of Contents
HSBC Finance Corp. | ||||||||||||
4.625% due 01/15/08 | 1,060 | 1,053 | 1,060 | 1,053 | ||||||||
5.520% due 09/15/08 (Ê) | 900 | 902 | 900 | 902 | ||||||||
5.531% due 12/05/08 (Ê) | 500 | 501 | 500 | 501 | ||||||||
4.750% due 05/15/09 (Ñ) | 4,580 | 4,549 | 6,155 | 6,110 | 10,735 | 10,659 | ||||||
4.125% due 11/16/09 | 2,870 | 2,784 | 3,510 | 3,405 | 6,380 | 6,189 | ||||||
6.750% due 05/15/11 | 1,280 | 1,359 | 2,100 | 2,230 | 3,380 | 3,589 | ||||||
7.000% due 05/15/12 | 1,485 | 1,608 | 2,435 | 2,636 | 3,920 | 4,244 | ||||||
6.375% due 11/27/12 | 410 | 433 | 710 | 749 | 1,120 | 1,182 | ||||||
5.000% due 06/30/15 | 305 | 296 | 400 | 388 | 705 | 684 | ||||||
HSBC Financial Capital Trust IX | ||||||||||||
5.911% due 11/30/35 | 700 | 704 | 700 | 704 | ||||||||
ILFC E-Capital Trust II(Å) | ||||||||||||
6.250% due 12/21/65 | 290 | 294 | 50 | 51 | 340 | 345 | ||||||
International Business Machines Corp. (Ñ) | ||||||||||||
7.125% due 12/01/96 | 430 | 504 | 620 | 727 | 1,050 | 1,231 | ||||||
International Lease Finance Corp. | ||||||||||||
3.500% due 04/01/09 | 570 | 548 | 745 | 716 | 1,315 | 1,264 | ||||||
4.750% due 07/01/09 | 1,435 | 1,421 | 1,820 | 1,803 | 3,255 | 3,224 | ||||||
5.750% due 06/15/11 | 190 | 194 | 130 | 133 | 320 | 327 | ||||||
5.625% due 09/20/13 | 1,845 | 1,859 | 2,730 | 2,751 | 4,575 | 4,610 | ||||||
International Paper Co. | ||||||||||||
6.750% due 09/01/11 | 230 | 245 | 310 | 330 | 540 | 575 | ||||||
5.500% due 01/15/14 | 285 | 282 | 390 | 386 | 675 | 668 | ||||||
International Steel Group, Inc. | ||||||||||||
6.500% due 04/15/14 | 300 | 300 | 435 | 435 | 735 | 735 | ||||||
ITT Corp. | ||||||||||||
7.400% due 11/15/25 | 195 | 230 | 240 | 283 | 435 | 513 | ||||||
John Deere Capital Corp. | ||||||||||||
5.424% due 07/15/08 (Ê) | 800 | 800 | 800 | 800 | ||||||||
4.875% due 03/16/09 | 1,315 | 1,308 | 1,895 | 1,884 | 3,210 | 3,192 | ||||||
JP Morgan Chase Capital XV | ||||||||||||
5.875% due 03/15/35 | 2,040 | 1,986 | 3,095 | 3,014 | 5,135 | 5,000 | ||||||
JP Morgan Chase Capital XX | ||||||||||||
Series T | ||||||||||||
6.550% due 09/29/36 | 100 | 104 | 100 | 104 | 200 | 208 | ||||||
JPMorgan Chase & Co. | ||||||||||||
5.600% due 06/01/11 | 190 | 193 | 255 | 260 | 445 | 453 | ||||||
5.125% due 09/15/14 | 1,520 | 1,493 | 735 | 722 | 2,255 | 2,215 | ||||||
5.150% due 10/01/15 (Ñ) | 770 | 753 | 1,145 | 1,120 | 1,915 | 1,873 | ||||||
Kellogg Co. | ||||||||||||
Series B | ||||||||||||
6.600% due 04/01/11 | 950 | 1,002 | 1,430 | 1,508 | 2,380 | 2,510 | ||||||
Kinder Morgan Energy Partners, LP | ||||||||||||
7.125% due 03/15/12 | 185 | 197 | 255 | 271 | 440 | 468 | ||||||
5.000% due 12/15/13 (Ñ) | 115 | 110 | 175 | 167 | 290 | 277 | ||||||
Kinder Morgan Finance | ||||||||||||
Series WI | ||||||||||||
5.350% due 01/05/11 | 985 | 962 | 1,405 | 1,372 | 2,390 | 2,334 | ||||||
Kraft Foods, Inc. | ||||||||||||
4.000% due 10/01/08 | 1,180 | 1,153 | 1,575 | 1,539 | 2,755 | 2,692 | ||||||
5.625% due 11/01/11 | 1,335 | 1,353 | 2,035 | 2,062 | 3,370 | 3,415 | ||||||
Kroger Co. (The) | ||||||||||||
6.750% due 04/15/12 | 50 | 53 | 50 | 53 | ||||||||
7.500% due 04/01/31 (Ñ) | 65 | 73 | 70 | 78 | 135 | 151 | ||||||
Lehman Brothers Holdings, Inc. | ||||||||||||
4.000% due 01/22/08 | 390 | 384 | 870 | 858 | 1,260 | 1,242 | ||||||
5.374% due 11/24/08 (Ê) | 1,400 | 1,400 | 1,400 | 1,400 | ||||||||
5.460% due 04/03/09 (Ê) | 1,000 | 1,001 | 700 | 701 | 1,700 | 1,702 | ||||||
5.493% due 08/21/09 (Ê) | 500 | 500 | 900 | 900 | 1,400 | 1,400 | ||||||
5.000% due 01/14/11 | 455 | 452 | 660 | 655 | 1,115 | 1,107 | ||||||
5.594% due 07/18/11 (Ê)(Ñ) | 600 | 601 | 600 | 601 | ||||||||
5.500% due 04/04/16 (Ñ) | 265 | 265 | 415 | 415 | 680 | 680 | ||||||
Manufacturers & Traders Trust Co. | ||||||||||||
5.585% due 12/28/20 | 180 | 180 | 163 | 163 | 343 | 343 | ||||||
Marshall & Ilsley Corp. | ||||||||||||
5.350% due 04/01/11 | 1,345 | 1,352 | 1,795 | 1,805 | 3,140 | 3,157 | ||||||
Merrill Lynch & Co., Inc. | ||||||||||||
5.685% due 07/25/11 (Ê) | 700 | 701 | 1,100 | 1,101 | 1,800 | 1,802 | ||||||
6.220% due 09/15/26 | 2,800 | 2,891 | 3,965 | 4,094 | 6,765 | 6,985 | ||||||
Series MTn (Ê) | ||||||||||||
5.492% due 08/14/09 | 700 | 700 | 700 | 700 | ||||||||
Series MTNB | ||||||||||||
3.125% due 07/15/08 | 1,125 | 1,087 | 1,490 | 1,439 | 2,615 | 2,526 |
Table of Contents
Series MTNC | ||||||||||||
5.440% due 06/16/08 (Ê) | 1,900 | 1,903 | 1,900 | 1,903 | ||||||||
4.250% due 02/08/10 | 1,235 | 1,201 | 1,860 | 1,809 | 3,095 | 3,010 | ||||||
Metlife, Inc. | ||||||||||||
5.700% due 06/15/35 | 780 | 770 | 1,080 | 1,066 | 1,860 | 1,836 | ||||||
Midamerican Energy Holdings Co. | ||||||||||||
Series WI | ||||||||||||
6.125% due 04/01/36 | 4,150 | 4,268 | 5,690 | 5,851 | 9,840 | 10,119 | ||||||
Miller Brewing Co.(þ) | ||||||||||||
5.500% due 08/15/13 | 275 | 272 | 385 | 381 | 660 | 653 | ||||||
Monumental Global Funding II(þ) | ||||||||||||
4.625% due 03/15/10 | 200 | 196 | 190 | 187 | 390 | 383 | ||||||
Morgan Stanley | ||||||||||||
5.440% due 03/07/08 (Ê) | 500 | 500 | 500 | 500 | ||||||||
3.625% due 04/01/08 | 100 | 98 | 195 | 190 | 295 | 288 | ||||||
3.875% due 01/15/09 | 840 | 819 | 1,050 | 1,023 | 1,890 | 1,842 | ||||||
5.751% due 01/22/09 (Ê) | 400 | 400 | 400 | 400 | ||||||||
5.625% due 01/09/12 | 370 | 376 | 690 | 701 | 1,060 | 1,077 | ||||||
4.750% due 04/01/14 (Ñ) | 250 | 239 | 280 | 268 | 530 | 507 | ||||||
5.375% due 10/15/15 | 265 | 263 | 360 | 357 | 625 | 620 | ||||||
Series GMTN (Ê) | ||||||||||||
5.550% due 02/09/09 | 100 | 100 | 100 | 100 | ||||||||
Series MTNF (Ê) | ||||||||||||
5.499% due 01/18/08 | 1,100 | 1,102 | 1,400 | 1,402 | 2,500 | 2,504 | ||||||
Motorola, Inc. | ||||||||||||
5.220% due 10/01/97 | 780 | 635 | 1,100 | 895 | 1,880 | 1,530 | ||||||
Natexis Ambs Co. LLC(ƒ)(þ) | ||||||||||||
8.440% due 12/29/49 | 300 | 314 | 270 | 283 | 570 | 597 | ||||||
National Rural Utilities Cooperative Finance Corp. | ||||||||||||
5.750% due 08/28/09 | 2,005 | 2,036 | 2,555 | 2,595 | 4,560 | 4,631 | ||||||
News America Holdings, Inc. | ||||||||||||
7.750% due 12/01/45 | 35 | 39 | 130 | 146 | 165 | 185 | ||||||
7.900% due 12/01/95 | 250 | 277 | 230 | 255 | 480 | 532 | ||||||
8.250% due 10/17/96 | 50 | 58 | 75 | 86 | 125 | 144 | ||||||
News America, Inc. | ||||||||||||
6.200% due 12/15/34 | 195 | 190 | 265 | 259 | 460 | 449 | ||||||
Series WI | ||||||||||||
6.400% due 12/15/35 | 2,215 | 2,221 | 3,150 | 3,159 | 5,365 | 5,380 | ||||||
Nisource Finance Corp. | ||||||||||||
7.875% due 11/15/10 | 295 | 319 | 410 | 443 | 705 | 762 | ||||||
Norfolk Southern Corp. | ||||||||||||
6.200% due 04/15/09 | 645 | 659 | 845 | 863 | 1,490 | 1,522 | ||||||
7.050% due 05/01/37 | 195 | 229 | 310 | 364 | 505 | 593 | ||||||
7.900% due 05/15/97 | 795 | 996 | 1,090 | 1,366 | 1,885 | 2,362 | ||||||
6.000% due 03/15/2105 | 410 | 396 | 565 | 545 | 975 | 941 | ||||||
Northern States Power Co. | ||||||||||||
Series B | ||||||||||||
8.000% due 08/28/12 | 1,110 | 1,258 | 1,615 | 1,831 | 2,725 | 3,089 | ||||||
Northern Trust Corp. | ||||||||||||
5.300% due 08/29/11 | 825 | 832 | 1,170 | 1,180 | 1,995 | 2,012 | ||||||
Occidental Petroleum Corp. | ||||||||||||
9.250% due 08/01/19 | 150 | 199 | 185 | 246 | 335 | 445 | ||||||
Ohio Power Co. | ||||||||||||
Series F | ||||||||||||
5.500% due 02/15/13 | 45 | 45 | 35 | 35 | 80 | 80 | ||||||
ONEOK Partners, LP | ||||||||||||
6.650% due 10/01/36 | 1,240 | 1,276 | 1,750 | 1,801 | 2,990 | 3,077 | ||||||
Owens Corning, Inc.(Å) | ||||||||||||
6.500% due 12/01/16 | 725 | 737 | 1,080 | 1,098 | 1,805 | 1,835 | ||||||
Pacific Gas & Electric Co. | ||||||||||||
3.600% due 03/01/09 | 75 | 72 | 195 | 188 | 270 | 260 | ||||||
4.200% due 03/01/11 | 640 | 615 | 1,005 | 965 | 1,645 | 1,580 | ||||||
6.050% due 03/01/34 | 495 | 506 | 650 | 664 | 1,145 | 1,170 | ||||||
Pemex Project Funding Master Trust | ||||||||||||
7.375% due 12/15/14 (Ñ) | 600 | 659 | 1,600 | 1,756 | 2,200 | 2,415 | ||||||
8.625% due 02/01/22 | 100 | 122 | 100 | 122 | ||||||||
Series 144a (þ) | ||||||||||||
5.750% due 12/15/15 | 200 | 198 | 300 | 296 | 500 | 494 | ||||||
6.625% due 06/15/35 (Å) | 390 | 393 | 390 | 393 | ||||||||
Progress Energy, Inc. | ||||||||||||
5.850% due 10/30/08 | 760 | 774 | 850 | 865 | 1,610 | 1,639 | ||||||
7.100% due 03/01/11 | 175 | 187 | 485 | 519 | 660 | 706 | ||||||
7.750% due 03/01/31 | 95 | 116 | 170 | 207 | 265 | 323 | ||||||
7.000% due 10/30/31 | 165 | 186 | 110 | 124 | 275 | 310 |
Table of Contents
ProLogis | ||||||||||||
5.625% due 11/15/15 | 1,535 | 1,536 | 2,010 | 2,012 | 3,545 | 3,548 | ||||||
Rabobank Capital Funding II(ƒ)(Å) | ||||||||||||
5.260% due 12/31/49 | 20 | 20 | 30 | 29 | 50 | 49 | ||||||
Rabobank Capital Funding Trust(ƒ)(Å) | ||||||||||||
5.254% due 12/29/49 | 40 | 39 | 60 | 58 | 100 | 97 | ||||||
RBS Capital Trust III(ƒ) | ||||||||||||
5.512% due 09/29/49 | 515 | 507 | 765 | 753 | 1,280 | 1,260 | ||||||
Regions Financial Corp. | ||||||||||||
4.500% due 08/08/08 | 1,220 | 1,206 | 1,625 | 1,606 | 2,845 | 2,812 | ||||||
Residential Capital Corp. | ||||||||||||
6.125% due 11/21/08 | 290 | 292 | 350 | 352 | 640 | 644 | ||||||
6.000% due 02/22/11 (Ñ) | 685 | 687 | 1,345 | 1,349 | 2,030 | 2,036 | ||||||
Safeway, Inc.(Ñ) | ||||||||||||
7.250% due 02/01/31 | 45 | 49 | 60 | 66 | 105 | 115 | ||||||
SBC Communications, Inc. | ||||||||||||
4.125% due 09/15/09 | 1,715 | 1,665 | 2,325 | 2,257 | 4,040 | 3,922 | ||||||
5.300% due 11/15/10 | 2,730 | 2,734 | 3,670 | 3,675 | 6,400 | 6,409 | ||||||
6.150% due 09/15/34 | 215 | 215 | 300 | 300 | 515 | 515 | ||||||
Sigma Finance, Inc.(Ê)(Å) | ||||||||||||
8.500% due 08/11/16 | 690 | 690 | 970 | 970 | 1,660 | 1,660 | ||||||
Simon Property Group, LP | ||||||||||||
4.600% due 06/15/10 | 990 | 969 | 1,350 | 1,322 | 2,340 | 2,291 | ||||||
4.875% due 08/15/10 | 1,100 | 1,083 | 1,450 | 1,428 | 2,550 | 2,511 | ||||||
5.750% due 12/01/15 | 2,765 | 2,814 | 3,685 | 3,751 | 6,450 | 6,565 | ||||||
6.100% due 05/01/16 | 850 | 886 | 1,415 | 1,474 | 2,265 | 2,360 | ||||||
SLM Corp. | ||||||||||||
5.400% due 10/25/11 | 1,065 | 1,070 | 1,545 | 1,552 | 2,610 | 2,622 | ||||||
Series MTNA | ||||||||||||
4.000% due 01/15/09 | 1,155 | 1,126 | 1,675 | 1,633 | 2,830 | 2,759 | ||||||
5.625% due 07/27/09 (Ê) | 600 | 601 | 600 | 601 | ||||||||
Southern California Edison Co. | ||||||||||||
5.566% due 02/02/09 | 600 | 601 | 600 | 601 | ||||||||
Southern Copper Corp. | ||||||||||||
7.500% due 07/27/35 | 555 | 593 | 755 | 807 | 1,310 | 1,400 | ||||||
Sovereign Bank | ||||||||||||
5.125% due 03/15/13 | 400 | 393 | 445 | 437 | 845 | 830 | ||||||
Sprint Capital Corp. | ||||||||||||
7.625% due 01/30/11 | 2,665 | 2,872 | 3,545 | 3,821 | 6,210 | 6,693 | ||||||
8.375% due 03/15/12 | 360 | 405 | 120 | 135 | 480 | 540 | ||||||
6.875% due 11/15/28 | 420 | 430 | 425 | 435 | 845 | 865 | ||||||
8.750% due 03/15/32 | 1,750 | 2,162 | 1,910 | 2,360 | 3,660 | 4,522 | ||||||
State Street Bank & Trust Co. (Ñ) | ||||||||||||
Series BKNT | ||||||||||||
5.300% due 01/15/16 | 250 | 249 | 250 | 249 | 500 | 498 | ||||||
Suntrust Bank | ||||||||||||
5.000% due 09/01/15 | 1,900 | 1,846 | 2,595 | 2,521 | 4,495 | 4,367 | ||||||
Tele-Communications-TCI Group | ||||||||||||
9.800% due 02/01/12 | 385 | 455 | 330 | 390 | 715 | 845 | ||||||
7.875% due 08/01/13 | 790 | 884 | 1,305 | 1,460 | 2,095 | 2,344 | ||||||
Time Warner Entertainment Co., LP | ||||||||||||
Series * | ||||||||||||
8.375% due 07/15/33 | 1,280 | 1,560 | 1,780 | 2,169 | 3,060 | 3,729 | ||||||
Time Warner, Inc. | ||||||||||||
6.875% due 05/01/12 | 485 | 515 | 610 | 648 | 1,095 | 1,163 | ||||||
7.700% due 05/01/32 | 420 | 478 | 535 | 609 | 955 | 1,087 | ||||||
TXU Corp. | ||||||||||||
Series P (Ñ) | ||||||||||||
5.550% due 11/15/14 | 110 | 105 | 150 | 143 | 260 | 248 | ||||||
Series R | ||||||||||||
6.550% due 11/15/34 | 475 | 453 | 610 | 582 | 1,085 | 1,035 | ||||||
TXU Electric Delivery Co. | ||||||||||||
6.375% due 05/01/12 | 25 | 26 | 25 | 26 | 50 | 52 | ||||||
6.375% due 01/15/15 | 30 | 31 | 30 | 31 | 60 | 62 | ||||||
TXU Energy Co. LLC | ||||||||||||
7.000% due 03/15/13 | 465 | 490 | 545 | 574 | 1,010 | 1,064 | ||||||
Tyson Foods, Inc. | ||||||||||||
6.600% due 04/01/16 | 115 | 118 | 155 | 159 | 270 | 277 | ||||||
Unilever Capital Corp. | ||||||||||||
5.900% due 11/15/32 | 315 | 320 | 325 | 331 | 640 | 651 | ||||||
Union Pacific Corp. | ||||||||||||
3.625% due 06/01/10 | 450 | 426 | 625 | 592 | 1,075 | 1,018 | ||||||
United Technologies Corp. | ||||||||||||
5.400% due 05/01/35 | 70 | 69 | 80 | 79 | 150 | 148 |
Table of Contents
UnitedHealth Group, Inc. | ||||||||||||
5.250% due 03/15/11 | 220 | 220 | 305 | 304 | 525 | 524 | ||||||
US Bancorp | ||||||||||||
5.300% due 04/28/09 | 1,450 | 1,456 | 1,980 | 1,989 | 3,430 | 3,445 | ||||||
US Bank NA | ||||||||||||
5.700% due 12/15/08 | 70 | 71 | 70 | 71 | 140 | 142 | ||||||
USB Capital IX (ƒ) | ||||||||||||
6.189% due 04/15/42 | 100 | 102 | 100 | 102 | 200 | 204 | ||||||
Verizon Communications, Inc. | ||||||||||||
5.350% due 02/15/11 | 775 | 779 | 1,120 | 1,126 | 1,895 | 1,905 | ||||||
5.550% due 02/15/16 | 310 | 309 | 320 | 319 | 630 | 628 | ||||||
Verizon Global Funding Corp. | ||||||||||||
7.375% due 09/01/12 | 275 | 302 | 130 | 143 | 405 | 445 | ||||||
5.850% due 09/15/35 | 300 | 288 | 530 | 509 | 830 | 797 | ||||||
Verizon Maryland, Inc. (Ñ) | ||||||||||||
Series A | ||||||||||||
6.125% due 03/01/12 | 585 | 601 | 795 | 817 | 1,380 | 1,418 | ||||||
Verizon Virginia, Inc. (Ñ) | ||||||||||||
Series A | ||||||||||||
4.625% due 03/15/13 | 885 | 830 | 1,165 | 1,092 | 2,050 | 1,922 | ||||||
Viacom, Inc. | ||||||||||||
5.750% due 04/30/11 | 340 | 340 | 440 | 441 | 780 | 781 | ||||||
Wachovia Bank NA (ƒ) | ||||||||||||
Series BKNT | ||||||||||||
5.358% due 06/27/08 (Ê) | 800 | 800 | 800 | 800 | ||||||||
5.800% due 12/01/08 | 280 | 284 | 340 | 345 | 620 | 629 | ||||||
Series DPNT (Ê) | ||||||||||||
5.440% due 03/23/09 | 1,500 | 1,500 | 1,500 | 1,500 | ||||||||
Wachovia Capital Trust III | ||||||||||||
5.800% due 03/15/42 | 250 | 252 | 350 | 353 | 600 | 605 | ||||||
Wachovia Corp. | ||||||||||||
5.506% due 10/15/11 (Ê) | 1,800 | 1,799 | 1,800 | 1,799 | ||||||||
5.700% due 08/01/13 | 2,260 | 2,315 | 3,195 | �� | 3,273 | 5,455 | 5,588 | |||||
5.250% due 08/01/14 | 795 | 788 | 1,155 | 1,145 | 1,950 | 1,933 | ||||||
5.625% due 10/15/16 | 400 | 404 | 400 | 404 | ||||||||
Waste Management, Inc. | ||||||||||||
6.375% due 11/15/12 | 555 | 580 | 835 | 873 | 1,390 | 1,453 | ||||||
WellPoint, Inc. | ||||||||||||
5.850% due 01/15/36 | 100 | 98 | 160 | 157 | 260 | 255 | ||||||
Wells Fargo & Co. | ||||||||||||
5.490% due 09/15/09 (Ê) | 2,900 | 2,905 | 2,900 | 2,905 | ||||||||
5.300% due 08/26/11 | 340 | 342 | 1,680 | 1,692 | 2,020 | 2,034 | ||||||
4.950% due 10/16/13 | 215 | 210 | 240 | 235 | 455 | 445 | ||||||
Wells Fargo Bank NA | ||||||||||||
5.750% due 05/16/16 | 220 | 226 | 425 | 437 | 645 | 663 | ||||||
Weyerhaeuser Co. | ||||||||||||
6.750% due 03/15/12 | 1,675 | 1,754 | 2,435 | 2,550 | 4,110 | 4,304 | ||||||
Wyeth | ||||||||||||
6.950% due 03/15/11 | 1,985 | 2,115 | 2,850 | 3,037 | 4,835 | 5,152 | ||||||
5.500% due 03/15/13 | 100 | 101 | 130 | 131 | 230 | 232 | ||||||
5.500% due 02/01/14 | 55 | 55 | 85 | 85 | 140 | 140 | ||||||
XTO Energy, Inc. | ||||||||||||
7.500% due 04/15/12 | 40 | 44 | 210 | 230 | 250 | 274 | ||||||
Zurich Capital Trust I(þ) | ||||||||||||
8.376% due 06/01/37 | 1,365 | 1,434 | 1,250 | 1,313 | 2,615 | 2,747 | ||||||
230,061 | 331,208 | 561,269 | ||||||||||
International Debt - 3.5% | ||||||||||||
Abbey National PLC(Ê)(ƒ) | ||||||||||||
6.700% due 06/29/49 | 720 | 734 | 550 | 561 | 1,270 | 1,295 | ||||||
Aiful Corp.(Å) | ||||||||||||
5.000% due 08/10/10 | 300 | 292 | 300 | 292 | 600 | 584 | ||||||
Anadarko Finance Co. | ||||||||||||
Series B | ||||||||||||
7.500% due 05/01/31 | 515 | 597 | 770 | 892 | 1,285 | 1,489 | ||||||
ANZ National International, Ltd.(Ê)(þ) | ||||||||||||
5.539% due 08/07/09 | 2,800 | 2,797 | 2,800 | 2,797 | ||||||||
Apache Finance Canada Corp. | ||||||||||||
4.375% due 05/15/15 | 440 | 408 | 545 | 506 | 985 | 914 | ||||||
Arch Capital Group, Ltd. | ||||||||||||
7.350% due 05/01/34 | 175 | 195 | 240 | 267 | 415 | 462 | ||||||
AXA SA | ||||||||||||
8.600% due 12/15/30 | 1,245 | 1,635 | 1,655 | 2,174 | 2,900 | 3,809 |
Table of Contents
Banque Centrale de Tunisie | ||||||||||||
8.250% due 09/19/27 | 550 | 674 | 550 | 674 | ||||||||
BNP Paribas(ƒ)(þ) | ||||||||||||
5.186% due 06/29/49 | 800 | 763 | 800 | 763 | ||||||||
British Telecommunications PLC (Ê) (ƒ) | ||||||||||||
8.875% due 12/15/30 | 145 | 196 | 215 | 291 | 360 | 487 | ||||||
China Development Bank | ||||||||||||
5.000% due 10/15/15 | 100 | 98 | 100 | 98 | 200 | 196 | ||||||
CIT Group Funding Co. of Canada | ||||||||||||
5.600% due 11/02/11 | 220 | 222 | 310 | 313 | 530 | 535 | ||||||
Conoco Funding Co. | ||||||||||||
6.350% due 10/15/11 | 885 | 931 | 1,330 | 1,400 | 2,215 | 2,331 | ||||||
Corp. Nacional del Cobre de Chile(Ñ)(Å) | ||||||||||||
6.150% due 10/24/36 | 100 | 102 | 100 | 102 | ||||||||
Crest, Ltd. (þ) | ||||||||||||
Series 2003-2A Class C2 | ||||||||||||
5.709% due 12/28/38 | 1,710 | 1,689 | 2,130 | 2,104 | 3,840 | 3,793 | ||||||
Deutsche Telekom International Finance BV | ||||||||||||
5.569% due 03/23/09 (Ê) | 900 | 900 | 900 | 900 | ||||||||
8.000% due 06/15/10 | 545 | 595 | 710 | 775 | 1,255 | 1,370 | ||||||
5.750% due 03/23/16 | 300 | 296 | 300 | 296 | 600 | 592 | ||||||
8.250% due 06/15/30 | 155 | 193 | 255 | 317 | 410 | 510 | ||||||
Egypt Government AID Bonds | ||||||||||||
4.450% due 09/15/15 | 660 | 639 | 915 | 886 | 1,575 | 1,525 | ||||||
Eksportfinans ASA | ||||||||||||
5.500% due 05/25/16 | 450 | 465 | 610 | 630 | 1,060 | 1,095 | ||||||
Export-Import Bank of China(þ) | ||||||||||||
4.875% due 07/21/15 | 465 | 450 | 640 | 620 | 1,105 | 1,070 | ||||||
Export-Import Bank of Korea | ||||||||||||
4.125% due 02/10/09 (þ) | 255 | 249 | 290 | 283 | 545 | 532 | ||||||
5.125% due 02/14/11 | 235 | 234 | 235 | 234 | ||||||||
Falconbridge, Ltd. | ||||||||||||
6.000% due 10/15/15 | 405 | 407 | 565 | 568 | 970 | 975 | ||||||
Glitnir Banki HF(Å) | ||||||||||||
6.330% due 07/28/11 | 270 | 278 | — | — | 270 | 278 | ||||||
6.693% due 06/15/16 | 450 | 464 | 570 | 588 | 1,020 | 1,052 | ||||||
HBOS PLC(ƒ)(þ) | ||||||||||||
5.920% due 09/29/49 | 100 | 98 | 100 | 98 | 200 | 196 | ||||||
HBOS Treasury Services PLC (Ê)(þ) | ||||||||||||
Series Mtn | ||||||||||||
5.414% due 07/17/09 | 1,300 | 1,300 | 1,300 | 1,300 | ||||||||
HSBC Holdings PLC | ||||||||||||
6.500% due 05/02/36 | 145 | 157 | 200 | 217 | 345 | 374 | ||||||
Ispat Inland ULC | ||||||||||||
9.750% due 04/01/14 | 610 | 683 | 835 | 935 | 1,445 | 1,618 | ||||||
Kaupthing Bank Hf | ||||||||||||
6.062% due 04/12/11 (Ê)(þ) | 750 | 750 | 1,020 | 1,020 | 1,770 | 1,770 | ||||||
5.750% due 10/04/11 (Ñ)(Å) | 100 | 100 | 110 | 110 | 210 | 210 | ||||||
7.125% due 05/19/16 (Å) | 1,250 | 1,332 | 1,730 | 1,843 | 2,980 | 3,175 | ||||||
Klio Funding, Ltd. (Ê)(þ) | ||||||||||||
Series 2004-1A Class A1 | ||||||||||||
6.030% due 04/23/39 | 1,515 | 1,526 | 2,180 | 2,196 | 3,695 | 3,722 | ||||||
Korea Development Bank(Ñ) | ||||||||||||
4.250% due 11/13/07 | 605 | 598 | 725 | 717 | 1,330 | 1,315 | ||||||
Korea Electric Power Corp.(þ) | ||||||||||||
5.125% due 04/23/34 | 125 | 124 | 145 | 143 | 270 | 267 | ||||||
Mexico Government International Bond | ||||||||||||
5.625% due 01/15/17 | 16 | 16 | 26 | 26 | 42 | 42 | ||||||
8.300% due 08/15/31 | 945 | 1,202 | 855 | 1,087 | 1,800 | 2,289 | ||||||
Series MTNA | ||||||||||||
7.500% due 04/08/33 | 1,071 | 1,256 | 1,641 | 1,925 | 2,712 | 3,181 | ||||||
Mizuho Financial Group Cayman, Ltd.(þ) | ||||||||||||
5.790% due 04/15/14 | 315 | 319 | 445 | 451 | 760 | 770 | ||||||
MUFG Capital Finance 1, Ltd.(ƒ) | ||||||||||||
6.346% due 07/25/49 | 200 | 202 | 270 | 273 | 470 | 475 | ||||||
National Australia Bank, Ltd.(Ê)(þ) | ||||||||||||
1.000% due 09/11/09 | 500 | 500 | 500 | 500 | ||||||||
Newcastle CDO, Ltd. (þ) | ||||||||||||
Series 2004-4A Class 3FX | ||||||||||||
5.110% due 03/24/39 | 845 | 803 | 1,090 | 1,036 | 1,935 | 1,839 | ||||||
Petrobras International Finance Co. | ||||||||||||
6.125% due 10/06/16 | 390 | 390 | 550 | 550 | 940 | 940 | ||||||
Petroleum Export, Ltd. (þ) | ||||||||||||
5.265% due 06/15/11 | 93 | 90 | 93 | 91 | 186 | 181 |
Table of Contents
Province of Quebec Canada | ||||||||||||
5.000% due 07/17/09 (Ñ) | 40 | 40 | 40 | 40 | ||||||||
Series PJ | ||||||||||||
6.125% due 01/22/11 | 1,100 | 1,144 | 1,430 | 1,487 | 2,530 | 2,631 | ||||||
Ras Laffan Liquefied Natural Gas Co., Ltd. II (þ) | ||||||||||||
5.298% due 09/30/20 | 435 | 420 | 600 | 579 | 1,035 | 999 | ||||||
Ras Laffan Liquefied Natural Gas Co., Ltd. III(þ) | ||||||||||||
5.838% due 09/30/27 | 250 | 243 | 300 | 291 | 550 | 534 | ||||||
Resona Bank, Ltd.(ƒ)(þ) | ||||||||||||
5.850% due 09/29/49 | 375 | 367 | 575 | 563 | 950 | 930 | ||||||
Resona Preferred Global Securities Cayman, Ltd.(ƒ)(Ñ)(Å) | ||||||||||||
7.191% due 12/29/49 | 300 | 315 | 375 | 393 | 675 | 708 | ||||||
Royal Bank of Scotland Group PLC (ƒ) | ||||||||||||
Series 1 | ||||||||||||
9.118% due 03/31/49 | 200 | 223 | 200 | 223 | ||||||||
Royal Bank of Scotland PLC | ||||||||||||
5.570% due 07/21/08 | 800 | 800 | 800 | 800 | ||||||||
5.770% due 07/06/12 (Ê) | 2,400 | 2,404 | 3,300 | 3,305 | 5,700 | 5,709 | ||||||
Royal KPN NV | ||||||||||||
8.000% due 10/01/10 | 550 | 596 | 730 | 792 | 1,280 | 1,388 | ||||||
Russia Government International Bond | ||||||||||||
5.000% due 03/31/30 (þ) | 565 | 633 | 775 | 868 | 1,340 | 1,501 | ||||||
Series REGS | ||||||||||||
5.000% due 03/31/30 | 1,150 | 1,288 | 1,690 | 1,893 | 2,840 | 3,181 | ||||||
Santander Financial Issuances | ||||||||||||
6.375% due 02/15/11 | 120 | 125 | 120 | 125 | 240 | 250 | ||||||
Sanwa Finance Aruba AEC | ||||||||||||
8.350% due 07/15/09 | 460 | 495 | 510 | 548 | 970 | 1,043 | ||||||
Shinsei Finance Cayman, Ltd. (Å) (ƒ) | ||||||||||||
6.418% due 01/29/49 | 400 | 402 | 660 | 664 | 1,060 | 1,066 | ||||||
Siemens Financieringsmaatschappij NV (þ) | ||||||||||||
5.466% due 08/14/09 (Ê) | 1,500 | 1,499 | 1,500 | 1,499 | ||||||||
5.750% due 10/17/16 | 1,025 | 1,046 | 1,445 | 1,475 | 2,470 | 2,521 | ||||||
6.125% due 08/17/26 | 3,725 | 3,875 | 5,265 | 5,477 | 8,990 | 9,352 | ||||||
Sumitomo Mitsui Banking Corp. (ƒ)(þ) | ||||||||||||
5.625% due 07/29/49 | 145 | 142 | 200 | 196 | 345 | 338 | ||||||
Systems 2001 AT LLC(þ) | ||||||||||||
7.156% due 12/15/11 | 271 | 281 | 181 | 187 | 452 | 468 | ||||||
Telecom Italia Capital SA | ||||||||||||
6.108% due 07/18/11 (Ê) | 1,100 | 1,097 | 1,100 | 1,097 | ||||||||
5.250% due 10/01/15 | 2,470 | 2,310 | 3,500 | 3,273 | 5,970 | 5,583 | ||||||
Telefonica Emisiones SAU(Ê) | ||||||||||||
5.629% due 06/19/09 | 800 | 801 | 1,000 | 1,001 | 1,800 | 1,802 | ||||||
Telefonica Europe BV | ||||||||||||
7.750% due 09/15/10 | 1,910 | 2,067 | 2,615 | 2,830 | 4,525 | 4,897 | ||||||
Telefonos de Mexico SA de CV | ||||||||||||
4.500% due 11/19/08 | 515 | 505 | 495 | 486 | 1,010 | 991 | ||||||
TELUS Corp. | ||||||||||||
8.000% due 06/01/11 | 755 | 833 | 1,180 | 1,301 | 1,935 | 2,134 | ||||||
TNK-BP Finance SA (Å) | ||||||||||||
Series 144a | ||||||||||||
7.500% due 07/18/16 | 400 | 419 | 430 | 450 | 830 | 869 | ||||||
Transocean, Inc.(Ê) | ||||||||||||
5.591% due 09/05/08 | 500 | 500 | 800 | 800 | 1,300 | 1,300 | ||||||
Tyco International Group SA | ||||||||||||
6.750% due 02/15/11 | 600 | 635 | 885 | 936 | 1,485 | 1,571 | ||||||
6.375% due 10/15/11 | 355 | 373 | 445 | 467 | 800 | 840 | ||||||
6.000% due 11/15/13 | 720 | 747 | 905 | 940 | 1,625 | 1,687 | ||||||
7.000% due 06/15/28 | 30 | 34 | 40 | 45 | 70 | 79 | ||||||
6.875% due 01/15/29 | 90 | 101 | 120 | 135 | 210 | 236 | ||||||
UFJ Finance Aruba AEC | ||||||||||||
6.750% due 07/15/13 | 60 | 64 | 60 | 64 | ||||||||
Unicredit Luxembourg Finance SA(Ê)(Å) | ||||||||||||
5.426% due 10/24/08 | 4,100 | 4,099 | 4,100 | 4,099 | ||||||||
Vale Overseas, Ltd. | ||||||||||||
6.250% due 01/11/16 | 200 | 201 | 265 | 267 | 465 | 468 | ||||||
Vodafone Group PLC | ||||||||||||
7.750% due 02/15/10 | 375 | 402 | 525 | 563 | 900 | 965 | ||||||
VTB Capital SA(Ê)(Å) | ||||||||||||
5.970% due 08/01/08 | 800 | 800 | 800 | 800 | ||||||||
WEA Finance LLC/WCI Finance LLC(Å) | ||||||||||||
5.700% due 10/01/16 | 1,820 | 1,823 | 2,575 | 2,579 | 4,395 | 4,402 | ||||||
49,368 | 74,225 | 123,593 | ||||||||||
Table of Contents
Loan Agreements - 0.3% | ||||||||||||
Starbound Reinsurance, Ltd., Term Loan B | ||||||||||||
6.738% due 03/31/08 | 4,000 | 4,000 | 6,000 | 6,000 | 10,000 | 10,000 | ||||||
Mortgage-Backed Securities - 53.0% | ||||||||||||
Adjustable Rate Mortgage Trust (Ê) | ||||||||||||
Series 2005-3 Class 8A2 | ||||||||||||
5.560% due 07/25/35 | 545 | 547 | 793 | 794 | 1,338 | 1,341 | ||||||
American Home Mortgage Investment Trust (Ê) | ||||||||||||
Series 2004-4 Class 4A | ||||||||||||
4.390% due 02/25/45 | 346 | 337 | 518 | 505 | 864 | 842 | ||||||
Series 2005-2 Class 5A2 | ||||||||||||
5.470% due 09/25/35 | 719 | 719 | 955 | 955 | 1,674 | 1,674 | ||||||
Series 2005-3 Class 3A2 | ||||||||||||
5.500% due 09/25/35 | 570 | 570 | 940 | 940 | 1,510 | 1,510 | ||||||
Series 2005-4 Class 1A1 | ||||||||||||
5.610% due 11/25/45 | 1,360 | 1,367 | 1,921 | 1,929 | 3,281 | 3,296 | ||||||
Arcap Reit, Inc. (þ) | ||||||||||||
Series 2004-RR3 Class B | ||||||||||||
5.040% due 09/21/45 | 420 | 407 | 460 | 446 | 880 | 853 | ||||||
Banc of America Commercial Mortgage, Inc. | ||||||||||||
Series 2004-3 Class A3 | ||||||||||||
4.875% due 06/10/39 | 885 | 880 | 1,050 | 1,044 | 1,935 | 1,924 | ||||||
Series 2004-4 Class A3 | ||||||||||||
4.128% due 07/10/42 | 580 | 565 | 685 | 668 | 1,265 | 1,233 | ||||||
Series 2005-2 Class A4 | ||||||||||||
4.783% due 07/10/43 | 865 | 849 | 1,205 | 1,182 | 2,070 | 2,031 | ||||||
Series 2005-3 Class A2 | ||||||||||||
4.501% due 07/10/43 | 445 | 436 | 610 | 598 | 1,055 | 1,034 | ||||||
Series 2005-3 Class A4 | ||||||||||||
4.668% due 07/10/43 | 1,200 | 1,150 | 1,700 | 1,630 | 2,900 | 2,780 | ||||||
Series 2005-5 Class A4 | ||||||||||||
5.115% due 10/10/45 | 1,625 | 1,605 | 2,225 | 2,198 | 3,850 | 3,803 | ||||||
Series 2005-6 Class A1 | ||||||||||||
5.001% due 09/10/47 | 1,766 | 1,762 | 2,658 | 2,652 | 4,424 | 4,414 | ||||||
Series 2005-6 Class A2 | ||||||||||||
5.165% due 09/10/47 | 1,275 | 1,277 | 1,760 | 1,762 | 3,035 | 3,039 | ||||||
Series 2006-1 Class A4 | ||||||||||||
5.372% due 09/10/45 | 305 | 307 | 420 | 423 | 725 | 730 | ||||||
Series 2006-3 Class A4 | ||||||||||||
5.889% due 07/10/44 | 1,030 | 1,074 | 1,420 | 1,481 | 2,450 | 2,555 | ||||||
Banc of America Funding Corp. | ||||||||||||
Series 2005-5 Class 1A11 | ||||||||||||
5.500% due 09/25/35 | 937 | 918 | 1,293 | 1,266 | 2,230 | 2,184 | ||||||
Series 2005-D Class A1 (Ê) | ||||||||||||
4.114% due 05/25/35 | 484 | 473 | 565 | 552 | 1,049 | 1,025 | ||||||
Series 2006-3 Class 5A8 | ||||||||||||
5.500% due 03/25/36 | 820 | 816 | 1,130 | 1,125 | 1,950 | 1,941 | ||||||
Series 2006-A Class 3A2 | ||||||||||||
5.919% due 02/20/36 | 4,201 | 4,243 | 5,818 | 5,876 | 10,019 | 10,119 | ||||||
Series 2006-A Class 4A1 (Ê) | ||||||||||||
5.567% due 02/20/36 | 906 | 906 | 1,603 | 1,603 | 2,509 | 2,509 | ||||||
Series 2006-B Class 7A1 (Ê) | ||||||||||||
5.899% due 03/20/36 | 941 | 944 | 1,792 | 1,797 | 2,733 | 2,741 | ||||||
Series 2006-G Class 2A1 (Ê) | ||||||||||||
5.550% due 07/20/36 | 1,206 | 1,204 | 1,710 | 1,707 | 2,916 | 2,911 | ||||||
Series 2006-G Class 2A2 (Ê) | ||||||||||||
5.410% due 07/20/36 | 1,148 | 1,146 | 1,625 | 1,623 | 2,773 | 2,769 | ||||||
Banc of America Mortgage Securities | ||||||||||||
Series 2003-9 Class 1A12 (Ê) | ||||||||||||
5.770% due 12/25/33 | 1,212 | 1,217 | 1,690 | 1,697 | 2,902 | 2,914 | ||||||
Series 2004-1 Class 5A1 | ||||||||||||
6.500% due 09/25/33 | 40 | 40 | 40 | 40 | 80 | 80 | ||||||
Series 2004-11 Class 2A1 | ||||||||||||
5.750% due 01/25/35 | 759 | 749 | 1,104 | 1,090 | 1,863 | 1,839 | ||||||
Series 2004-2 Class 5A1 | ||||||||||||
6.500% due 10/25/31 | 138 | 141 | 138 | 141 | ||||||||
Series 2005-L Class 3A1 (Ê) | ||||||||||||
5.453% due 01/25/36 | 443 | 441 | 611 | 609 | 1,054 | 1,050 | ||||||
Series 2006-2 Class A15 | ||||||||||||
6.000% due 07/25/36 | 962 | 968 | 1,344 | 1,353 | 2,306 | 2,321 |
Table of Contents
Bank of America Alternative Loan Trust | ||||||||||||
Series 2003-10 Class 2A2 (Ê) | ||||||||||||
5.770% due 12/25/33 | 455 | 458 | 631 | 635 | 1,086 | 1,093 | ||||||
Series 2003-2 Class CB2 (Ê) | ||||||||||||
5.820% due 04/25/33 | 198 | 199 | 288 | 289 | 486 | 488 | ||||||
Series 2006-5 Class CB17 | ||||||||||||
6.000% due 06/25/36 | 737 | 739 | 1,002 | 1,004 | 1,739 | 1,743 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust | ||||||||||||
Series 2002-11 Class 1A1 | ||||||||||||
5.623% due 02/25/33 | 39 | 39 | 39 | 39 | ||||||||
Series 2002-11 Class 1A2 | ||||||||||||
5.328% due 02/25/33 | 57 | 57 | 57 | 57 | ||||||||
Series 2003-1 Class 6A1 | ||||||||||||
5.059% due 04/25/33 | 145 | 145 | 145 | 145 | ||||||||
Series 2004-4 Class A4 | ||||||||||||
3.516% due 06/25/34 | 380 | 371 | 580 | 567 | 960 | 938 | ||||||
Bear Stearns Alt-A Trust | ||||||||||||
Series 2005-4 Class 23A1 | ||||||||||||
5.393% due 05/25/35 | 699 | 701 | 890 | 892 | 1,589 | 1,593 | ||||||
Series 2006-4 Class 32A1 | ||||||||||||
6.486% due 07/25/36 | 3,616 | 3,689 | 8,029 | 8,193 | 11,645 | 11,882 | ||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||
Series 2005-PWR Class A1 | ||||||||||||
4.386% due 02/11/41 | 429 | 424 | 560 | 554 | 989 | 978 | ||||||
Chase Mortgage Finance Corp. (Ê) | ||||||||||||
Series 2005-A1 Class 2A2 | ||||||||||||
5.250% due 12/25/35 | 1,804 | 1,788 | 2,518 | 2,496 | 4,322 | 4,284 | ||||||
Series 2006-A1 Class 1A1 | ||||||||||||
6.075% due 09/25/36 | 1,776 | 1,783 | 2,452 | 2,461 | 4,228 | 4,244 | ||||||
Series 2006-A1 Class 4A1 | ||||||||||||
6.072% due 09/25/36 | 1,299 | 1,302 | 1,577 | 1,581 | 2,876 | 2,883 | ||||||
Citigroup Mortgage Loan Trust, Inc. | ||||||||||||
Series 2004-HYB Class A2 (Ê) | ||||||||||||
4.306% due 02/25/34 | 142 | 142 | 142 | 142 | ||||||||
Series 2005-11 Class A2A (Ê) | ||||||||||||
4.700% due 12/25/35 | 182 | 179 | 274 | 269 | 456 | 448 | ||||||
Series 2006-WF1 Class A2F | ||||||||||||
5.657% due 03/01/36 | 565 | 565 | 780 | 780 | 1,345 | 1,345 | ||||||
Series 2006-WFH Class A1 (Ê) | ||||||||||||
5.410% due 11/25/36 | 2,600 | 2,602 | 2,600 | 2,602 | ||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||||||||||
Series 2006-CD3 Class A5 | ||||||||||||
5.617% due 10/15/48 | 540 | 543 | 750 | 754 | 1,290 | 1,297 | ||||||
Citimortgage Alternative Loan Trust | ||||||||||||
Series 2006-A3 Class 1A5 | ||||||||||||
6.000% due 07/25/36 | 498 | 501 | 733 | 736 | 1,231 | 1,237 | ||||||
Commercial Mortgage Acceptance Corp. | ||||||||||||
Series 1998-C2 Class A3 | ||||||||||||
6.040% due 09/15/30 | 3,715 | 3,751 | 4,770 | 4,816 | 8,485 | 8,567 | ||||||
Countrywide Alternative Loan Trust | ||||||||||||
5.500% due 05/31/35 | 800 | 800 | 800 | 800 | ||||||||
Series 2004-2CB Class 1A4 (Ê) | ||||||||||||
5.720% due 03/25/34 | 810 | 812 | 1,120 | 1,123 | 1,930 | 1,935 | ||||||
Series 2005-56 Class 3A1 (Ê) | ||||||||||||
5.620% due 11/25/35 | 1,119 | 1,123 | 1,119 | 1,123 | ||||||||
Series 2005-56 Class 4A1 (Ê) | ||||||||||||
5.640% due 11/25/35 | 1,521 | 1,526 | 2,029 | 2,035 | 3,550 | 3,561 | ||||||
Series 2005-59 Class 1A1 (Ê) | ||||||||||||
5.656% due 11/20/35 | 1,775 | 1,781 | 2,397 | 2,404 | 4,172 | 4,185 | ||||||
Series 2005-J12 Class 2A1 (Ê) | ||||||||||||
5.600% due 11/25/35 | 1,374 | 1,377 | 1,894 | 1,898 | 3,268 | 3,275 | ||||||
Series 2005-J13 Class 2A3 | ||||||||||||
5.500% due 11/25/35 | 289 | 289 | 393 | 392 | 682 | 681 | ||||||
Series 2005-J8 Class 1A3 | ||||||||||||
5.500% due 07/25/35 | 689 | 688 | 964 | 963 | 1,653 | 1,651 | ||||||
Series 2006-9T1 Class A7 | ||||||||||||
6.000% due 05/25/36 | 383 | 387 | 531 | 537 | 914 | 924 | ||||||
Series 2006-J2 Class A3 | ||||||||||||
6.000% due 04/25/36 | 573 | 579 | 803 | 810 | 1,376 | 1,389 | ||||||
Countrywide Asset-Backed Certificates (Ê) | ||||||||||||
Series 2005-IM2 Class A3 | ||||||||||||
5.590% due 01/25/36 | 2,535 | 2,539 | 3,475 | 3,481 | 6,010 | 6,020 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust | ||||||||||||
Series 2004-16 Class 1A1 (Ê) | ||||||||||||
5.720% due 09/25/34 | 705 | 708 | 976 | 980 | 1,681 | 1,688 |
Table of Contents
Series 2004-7 Class 5A2 (Ê) | ||||||||||||
5.600% due 05/25/34 | 132 | 132 | 132 | 132 | ||||||||
Series 2005-3 Class 1A2 (Ê) | ||||||||||||
5.620% due 04/25/35 | 106 | 106 | 158 | 159 | 264 | 265 | ||||||
Series 2005-3 Class 1A3 (Ê) | ||||||||||||
5.570% due 04/25/35 | 533 | 533 | 533 | 533 | ||||||||
Series 2005-HYB Class 3A2A (Ê) | ||||||||||||
5.250% due 02/20/36 | 174 | 172 | 174 | 172 | ||||||||
Series 2005-R3 Class AF (Å)(Ê) | ||||||||||||
5.730% due 09/25/35 | 1,323 | 1,330 | 1,868 | 1,878 | 3,191 | 3,208 | ||||||
Series 2006-HYB Class 2A1A | ||||||||||||
5.702% due 05/20/36 | 914 | 922 | 1,188 | 1,199 | 2,102 | 2,121 | ||||||
Countrywide Securities Corp. | ||||||||||||
5.500% due 12/25/46 | 900 | 900 | 900 | 900 | ||||||||
Credit Suisse First Boston Mortgage Securities Corp. | ||||||||||||
Series 2003-C5 Class A1 | ||||||||||||
3.093% due 12/15/36 | 1,349 | 1,313 | 1,760 | 1,713 | 3,109 | 3,026 | ||||||
Series 2004-C1 Class A3 | ||||||||||||
4.321% due 01/15/37 | 1,096 | 1,062 | 1,096 | 1,062 | ||||||||
Series 2005-C4 Class A3 | ||||||||||||
5.120% due 08/15/38 | 5,050 | 5,025 | 6,620 | 6,587 | 11,670 | 11,612 | ||||||
Series 2005-C6 Class A1 | ||||||||||||
4.938% due 12/15/40 | 1,175 | 1,170 | 1,693 | 1,685 | 2,868 | 2,855 | ||||||
Series 2005-C6 Class A4 | ||||||||||||
5.230% due 12/15/40 | 1,265 | 1,259 | 1,825 | 1,817 | 3,090 | 3,076 | ||||||
Credit Suisse Morgan Stanley Commercial Mortgage Trust (Ê)(þ) | ||||||||||||
Series 2006-HC1 Class A1 | ||||||||||||
5.510% due 05/15/23 | 1,445 | 1,445 | 1,970 | 1,971 | 3,415 | 3,416 | ||||||
Credit Suisse Mortgage Capital Certificates | ||||||||||||
Series 2006-C1 Class A1 | ||||||||||||
4.367% due 07/15/10 | 399 | 393 | 550 | 542 | 949 | 935 | ||||||
Series 2006-C1 Class AAB | ||||||||||||
5.681% due 02/15/39 | 945 | 960 | 1,305 | 1,326 | 2,250 | 2,286 | ||||||
Series 2006-C2 Class A1 | ||||||||||||
5.250% due 03/15/39 | 864 | 867 | 1,176 | 1,181 | 2,040 | 2,048 | ||||||
Series 2006-C2 Class A2 | ||||||||||||
5.659% due 03/15/39 | 870 | 893 | 1,185 | 1,216 | 2,055 | 2,109 | ||||||
Series 2006-C4 Class A1 | ||||||||||||
4.771% due 09/15/39 | 2,390 | 2,369 | 3,384 | 3,354 | 5,774 | 5,723 | ||||||
Series 2006-C4 Class A3 | ||||||||||||
5.467% due 09/15/39 | 1,210 | 1,223 | 1,710 | 1,728 | 2,920 | 2,951 | ||||||
Series 2006-TFL Class A1 (Ê)(þ) | ||||||||||||
5.440% due 04/15/21 | 1,841 | 1,841 | 2,512 | 2,513 | 4,353 | 4,354 | ||||||
CS First Boston Mortgage Securities Corp. | ||||||||||||
Series 1998-C2 Class A2 | ||||||||||||
6.300% due 11/15/30 | 284 | 289 | 417 | 424 | 701 | 713 | ||||||
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||||||||||
Series 2005-AR1 Class 2A3 | — | — | ||||||||||
5.024% due 08/25/35 | 840 | 856 | 1,145 | 1,166 | 1,985 | 2,022 | ||||||
DLJ Commercial Mortgage Corp. | ||||||||||||
Series 1998-CF1 Class A1B | ||||||||||||
6.410% due 02/18/31 | 572 | 577 | 708 | 714 | 1,280 | 1,291 | ||||||
Downey Savings & Loan Association Mortgage Loan Trust (Ê) | ||||||||||||
Series 2004-AR3 Class 1A1B | ||||||||||||
6.910% due 07/19/44 | 282 | 285 | 351 | 354 | 633 | 639 | ||||||
Series 2005-AR6 Class 2A1A (Ê) | ||||||||||||
5.610% due 10/19/45 | 1,410 | 1,415 | 1,410 | 1,415 | ||||||||
Fannie Mae | ||||||||||||
7.000% due 2008 | 7 | 7 | 7 | 7 | ||||||||
7.000% due 2009 | 20 | 20 | 20 | 20 | ||||||||
8.000% due 2010 | 1 | 1 | 1 | 1 | ||||||||
7.000% due 2011 | 8 | 8 | 10 | 10 | 18 | 18 | ||||||
8.000% due 2011 | 4 | 4 | 2 | 2 | 6 | 6 | ||||||
5.363% due 2012 (Ê) | 598 | 599 | 835 | 837 | 1,433 | 1,436 | ||||||
7.000% due 2012 | 4 | 4 | 4 | 4 | ||||||||
5.500% due 2013 | 14 | 14 | 14 | 14 | ||||||||
6.500% due 2013 | 48 | 49 | 27 | 28 | 75 | 77 | ||||||
5.500% due 2014 | 31 | 31 | 31 | 31 | ||||||||
6.500% due 2015 | 29 | 30 | 20 | 20 | 49 | 50 | ||||||
7.000% due 2015 | 10 | 10 | 12 | 12 | 22 | 22 | ||||||
5.500% due 2016 | 6 | 6 | 6 | 6 | ||||||||
6.000% due 2016 | 112 | 114 | 82 | 83 | 194 | 197 | ||||||
6.500% due 2016 | 33 | 34 | 116 | 119 | 149 | 153 | ||||||
9.000% due 2016 | 3 | 3 | 3 | 3 | ||||||||
5.000% due 2017 | 252 | 249 | 1,698 | 1,677 | 1,950 | 1,926 |
Table of Contents
5.500% due 2017 | 20 | 20 | 907 | 911 | 927 | 931 | ||||||
6.000% due 2017 | 1,472 | 1,497 | 171 | 173 | 1,643 | 1,670 | ||||||
6.500% due 2017 | 356 | 363 | 460 | 470 | 816 | 833 | ||||||
7.500% due 2017 | 1 | 1 | 1 | 1 | ||||||||
8.000% due 2017 | 38 | 40 | 38 | 40 | ||||||||
8.500% due 2017 | 6 | 6 | 6 | 6 | ||||||||
9.000% due 2017 | 1 | 1 | 1 | 1 | ||||||||
4.500% due 2018 | 4,052 | 3,929 | 4,912 | 4,764 | 8,964 | 8,693 | ||||||
5.000% due 2018 | 3,334 | 3,292 | 1,980 | 1,956 | 5,314 | 5,248 | ||||||
5.500% due 2018 | 401 | 402 | 614 | 617 | 1,015 | 1,019 | ||||||
6.500% due 2018 | 372 | 385 | 332 | 344 | 704 | 729 | ||||||
4.500% due 2019 | 1,311 | 1,270 | 4,842 | 4,689 | 6,153 | 5,959 | ||||||
5.000% due 2019 | 10,660 | 10,514 | 10,257 | 10,116 | 20,917 | 20,630 | ||||||
6.500% due 2019 | 191 | 196 | 148 | 151 | 339 | 347 | ||||||
4.000% due 2020 | 3,458 | 3,274 | 6,148 | 5,822 | 9,606 | 9,096 | ||||||
4.500% due 2020 | 8,621 | 8,346 | 9,627 | 9,320 | 18,248 | 17,666 | ||||||
5.000% due 2020 | 12,165 | 11,992 | 5,204 | 5,135 | 17,369 | 17,127 | ||||||
6.500% due 2020 | 74 | 76 | 57 | 59 | 131 | 135 | ||||||
8.000% due 2020 | 6 | 6 | 6 | 6 | ||||||||
4.000% due 2021 | 882 | 836 | 182 | 172 | 1,064 | 1,008 | ||||||
4.500% due 2021 | 599 | 579 | 599 | 579 | ||||||||
5.000% due 2021 | 995 | 980 | 3,349 | 3,299 | 4,344 | 4,279 | ||||||
6.000% due 2021 | 996 | 1,010 | 996 | 1,010 | ||||||||
6.500% due 2022 | 84 | 87 | 84 | 87 | ||||||||
8.000% due 2024 | 141 | 149 | 98 | 103 | 239 | 252 | ||||||
8.500% due 2024 | 27 | 28 | 27 | 28 | ||||||||
9.000% due 2024 | 7 | 7 | 7 | 7 | ||||||||
7.000% due 2025 | 29 | 30 | 8 | 8 | 37 | 38 | ||||||
8.000% due 2025 | 1 | 1 | 1 | 1 | ||||||||
8.500% due 2025 | 25 | 26 | 4 | 4 | 29 | 30 | ||||||
7.000% due 2026 | 30 | 31 | 5 | 5 | 35 | 36 | ||||||
9.000% due 2026 | 6 | 6 | 6 | 6 | ||||||||
7.000% due 2027 | 10 | 10 | 10 | 10 | ||||||||
9.000% due 2027 | 1 | 1 | 1 | 1 | ||||||||
6.500% due 2028 | 558 | 571 | 405 | 419 | 963 | 990 | ||||||
7.000% due 2028 | 369 | 382 | 369 | 382 | ||||||||
6.500% due 2029 | 1,202 | 1,236 | 1,386 | 1,425 | 2,588 | 2,661 | ||||||
7.000% due 2029 | 167 | 173 | 167 | 173 | ||||||||
6.500% due 2030 | 9 | 10 | 195 | 201 | 204 | 211 | ||||||
8.000% due 2030 | 169 | 179 | 178 | 187 | 347 | 366 | ||||||
6.500% due 2031 | 189 | 194 | 805 | 825 | 994 | 1,019 | ||||||
8.000% due 2031 | 165 | 174 | 165 | 174 | ||||||||
5.500% due 2032 | 78 | 77 | 78 | 77 | ||||||||
6.000% due 2032 | 1,687 | 1,703 | 1,444 | 1,458 | 3,131 | 3,161 | ||||||
6.500% due 2032 | 2,023 | 2,073 | 2,578 | 2,642 | 4,601 | 4,715 | ||||||
7.000% due 2032 | 748 | 771 | 916 | 945 | 1,664 | 1,716 | ||||||
8.000% due 2032 | 6 | 7 | 6 | 7 | ||||||||
3.950% due 2033 (Ê) | 609 | 595 | 839 | 820 | 1,448 | 1,415 | ||||||
4.500% due 2033 | 1,060 | 997 | 1,596 | 1,502 | 2,656 | 2,499 | ||||||
4.644% due 2033 (Ê) | 377 | 376 | 518 | 517 | 895 | 893 | ||||||
5.000% due 2033 | 8,181 | 7,919 | 11,697 | 11,322 | 19,878 | 19,241 | ||||||
5.500% due 2033 | 20,772 | 20,585 | 37,061 | 36,723 | 57,833 | 57,308 | ||||||
6.000% due 2033 | 900 | 907 | 2,330 | 2,351 | 3,230 | 3,258 | ||||||
6.500% due 2033 | 1,154 | 1,180 | 1,423 | 1,455 | 2,577 | 2,635 | ||||||
7.000% due 2033 | 379 | 391 | 379 | 391 | ||||||||
4.500% due 2034 | 1,371 | 1,288 | 754 | 709 | 2,125 | 1,997 | ||||||
5.000% due 2034 | 12,932 | 12,514 | 17,949 | 17,367 | 30,881 | 29,881 | ||||||
5.500% due 2034 | 35,222 | 34,876 | 34,422 | 34,086 | 69,644 | 68,962 | ||||||
6.000% due 2034 | 9,346 | 9,418 | 11,058 | 11,143 | 20,404 | 20,561 | ||||||
6.500% due 2034 | 1,039 | 1,061 | 2,352 | 2,401 | 3,391 | 3,462 | ||||||
4.500% due 2035 | 3,895 | 3,658 | 6,857 | 6,437 | 10,752 | 10,095 | ||||||
4.554% due 2035 (Ê) | 1,026 | 1,020 | 1,026 | 1,020 | ||||||||
5.000% due 2035 | 7,705 | 7,448 | 13,681 | 13,219 | 21,386 | 20,667 | ||||||
5.500% due 2035 | 56,622 | 56,008 | 82,424 | 81,549 | 139,046 | 137,557 | ||||||
6.000% due 2035 | 4,347 | 4,377 | 6,986 | 7,029 | 11,333 | 11,406 | ||||||
6.500% due 2035 | 139 | 143 | 139 | 143 | ||||||||
6.559% due 2035 (Ê) | 898 | 924 | 898 | 924 | ||||||||
6.565% due 2035 (Ê) | 1,466 | 1,509 | 1,466 | 1,509 | ||||||||
6.566% due 2035 (Ê) | 642 | 661 | 642 | 661 | ||||||||
6.663% due 2035 (Ê) | 372 | 382 | 372 | 382 | ||||||||
6.665% due 2035 (Ê) | 451 | 464 | 451 | 464 | ||||||||
6.665% due 2035 | 460 | 473 | 460 | 473 | ||||||||
6.666% due 2035 (Ê) | 357 | 367 | 357 | 367 | ||||||||
6.671% due 2035 (Ê) | 443 | 456 | 443 | 456 |
Table of Contents
4.500% due 2036 | 54 | 51 | 54 | 51 | ||||||||
5.000% due 2036 | 12,979 | 12,535 | 12,979 | 12,535 | ||||||||
5.500% due 2036 | 993 | 981 | 2,970 | 2,936 | 3,963 | 3,917 | ||||||
6.000% due 2036 | 8,405 | 8,457 | 13,238 | 13,319 | 21,643 | 21,776 | ||||||
6.500% due 2036 | 354 | 360 | 493 | 503 | 847 | 863 | ||||||
Series 1992-10 Class ZD | ||||||||||||
8.000% due 11/25/21 | 484 | 490 | 484 | 490 | ||||||||
Series 1992-158 Class ZZ | ||||||||||||
7.750% due 08/25/22 | 286 | 303 | 286 | 303 | ||||||||
Series 1993-134 Class H | ||||||||||||
6.500% due 08/25/08 | 1,011 | 1,015 | 744 | 747 | 1,755 | 1,762 | ||||||
Series 1999-56 Class Z | ||||||||||||
7.000% due 12/18/29 | 376 | 391 | 516 | 536 | 892 | 927 | ||||||
Series 2003-32 Class FH (Ê) | ||||||||||||
5.720% due 11/25/22 | 293 | 295 | 952 | 959 | 1,245 | 1,254 | ||||||
Series 2003-337 Class 1 | ||||||||||||
Principal Only STRIP | ||||||||||||
Zero coupon due 07/01/33 | 895 | 659 | 1,247 | 918 | 2,142 | 1,577 | ||||||
Series 2003-343 Class 6 | ||||||||||||
Interest Only STRIP | ||||||||||||
5.000% due 10/01/33 | 882 | 196 | 1,241 | 275 | 2,123 | 471 | ||||||
Series 2003-78 Class FI (Ê) | ||||||||||||
5.720% due 01/25/33 | 651 | 652 | 901 | 903 | 1,552 | 1,555 | ||||||
Series 2004-21 Class FL (Ê) | ||||||||||||
5.670% due 11/25/32 | 338 | 338 | 469 | 469 | 807 | 807 | ||||||
Series 2005-65 Class FP (Ê) | ||||||||||||
5.570% due 08/25/35 | 503 | 503 | 696 | 695 | 1,199 | 1,198 | ||||||
15 Year TBA (Ï) | ||||||||||||
4.00% | 135 | 128 | 135 | 128 | ||||||||
4.50% | 1,705 | 1,649 | 4,570 | 4,420 | 6,275 | 6,069 | ||||||
5.00% | 14,460 | 14,239 | 19,010 | 18,719 | 33,470 | 32,958 | ||||||
5.50% | 3,000 | 3,003 | 6,030 | 6,036 | 9,030 | 9,039 | ||||||
6.00% | 2,485 | 2,523 | 2,435 | 2,472 | 4,920 | 4,995 | ||||||
30 Year TBA (Ï) | ||||||||||||
4.50% | 1,780 | 1,670 | 2,045 | 1,918 | 3,825 | 3,588 | ||||||
5.00% | 49,485 | 47,759 | 51,855 | 50,049 | 101,340 | 97,808 | ||||||
5.50% | 48,150 | 47,572 | 92,125 | 91,026 | 140,275 | 138,598 | ||||||
6.00% | 27,615 | 27,779 | 51,685 | 51,990 | 79,300 | 79,769 | ||||||
6.50% | 21,910 | 22,322 | 32,345 | 32,954 | 54,255 | 55,276 | ||||||
Fannie Mae Grantor Trust | ||||||||||||
Series 2001-T6 Class B | ||||||||||||
6.088% due 05/25/11 | 1,810 | 1,889 | 1,150 | 1,200 | 2,960 | 3,089 | ||||||
Fannie Mae REMICS (Ê) | ||||||||||||
Series 2006-5 Class 3A2 | ||||||||||||
4.677% due 05/25/35 | 100 | 99 | 200 | 197 | 300 | 296 | ||||||
Fannie Mae Whole Loan | ||||||||||||
Series 2003-W1 Class 1A1 | ||||||||||||
6.500% due 12/25/42 | 79 | 81 | 79 | 81 | ||||||||
Series 2004-W2 Class 5AF (Ê) | ||||||||||||
5.680% due 03/25/44 | 658 | 658 | 658 | 658 | ||||||||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities (Ê) | ||||||||||||
Series 2005-63 Class 1A1 | ||||||||||||
5.632% due 02/25/45 | 127 | 127 | 127 | 127 | ||||||||
FHA Project Citi 68 NP | ||||||||||||
7.430% due 06/27/21 | 251 | 254 | 251 | 254 | ||||||||
First Horizon Alternative Mortgage Securities (Ê) | ||||||||||||
Series 2006-AA5 Class A2 | ||||||||||||
6.626% due 09/25/36 | 576 | 590 | 805 | 825 | 1,381 | 1,415 | ||||||
Series 2006-FA3 Class A6 | ||||||||||||
6.000% due 07/25/36 | 480 | 486 | 655 | 662 | 1,135 | 1,148 | ||||||
First Horizon Asset Securities, Inc. (Ê) | ||||||||||||
Series 2005-AR5 Class 3A1 | ||||||||||||
5.525% due 10/25/35 | 211 | 211 | 295 | 295 | 506 | 506 | ||||||
Freddie Mac | ||||||||||||
4.500% due 01/15/13 (Ñ) | 2,140 | 2,092 | 2,550 | 2,493 | 4,690 | 4,585 | ||||||
9.000% due 04/01/16 | 45 | 47 | 45 | 47 | ||||||||
9.000% due 06/01/16 | 53 | 55 | 53 | 55 | ||||||||
5.000% due 01/01/18 | 336 | 332 | 336 | 332 | ||||||||
4.500% due 05/01/18 | 96 | 93 | 96 | 93 | ||||||||
5.000% due 05/01/18 | 572 | 564 | 572 | 564 | ||||||||
5.000% due 01/01/19 | 695 | 685 | 695 | 685 | ||||||||
5.000% due 02/01/19 | 660 | 650 | 660 | 650 | ||||||||
4.500% due 02/01/20 | 540 | 521 | 540 | 521 | ||||||||
4.500% due 09/01/20 | 917 | 886 | 917 | 886 |
Table of Contents
4.500% due 01/01/21 | 769 | 743 | 769 | 743 | ||||||||
7.078% due 07/01/27 (Ê) | 40 | 41 | 40 | 41 | ||||||||
5.500% due 03/01/32 | 440 | 437 | 440 | 437 | ||||||||
5.500% due 08/01/33 | 110 | 109 | 631 | 626 | 741 | 735 | ||||||
4.688% due 04/01/34 | 577 | 579 | 577 | 579 | ||||||||
4.688% due 08/01/34 (Ê) | 419 | 420 | 419 | 420 | ||||||||
5.000% due 10/01/35 | 2,555 | 2,471 | 7,977 | 7,711 | 10,532 | 10,182 | ||||||
5.000% due 01/01/36 | 4,600 | 4,446 | 4,600 | 4,446 | ||||||||
5.000% due 03/01/36 | 2,875 | 2,779 | 2,875 | 2,779 | ||||||||
8.500% due 01/01/36 | 1 | 1 | 1 | 1 | ||||||||
5.500% due 10/01/36 | 190 | 188 | 190 | 188 | ||||||||
Series 1991-105 Class G | ||||||||||||
7.000% due 03/15/21 | 47 | 47 | 47 | 47 | ||||||||
Series 1993-160 Class I | ||||||||||||
Interest Only STRIP | ||||||||||||
6.500% due 11/15/08 | 93 | 4 | 93 | 4 | ||||||||
Series 1998-210 Class ZM | ||||||||||||
6.000% due 12/15/28 | 732 | 738 | 732 | 738 | ||||||||
Series 2000-226 Class F (Ê) | ||||||||||||
5.780% due 11/15/30 | 13 | 13 | 13 | 13 | ||||||||
Series 2001-229 Class KF (Ê) | ||||||||||||
5.570% due 07/25/22 | 455 | 459 | 623 | 627 | 1,078 | 1,086 | ||||||
Series 2003-262 Class AB | ||||||||||||
2.900% due 11/15/14 | 684 | 662 | 902 | 872 | 1,586 | 1,534 | ||||||
Series 2004-277 Class UF (Ê) | ||||||||||||
5.630% due 06/15/33 | 828 | 829 | 1,203 | 1,205 | 2,031 | 2,034 | ||||||
Series 2004-281 Class DF (Ê) | ||||||||||||
5.780% due 06/15/23 | 251 | 253 | 350 | 352 | 601 | 605 | ||||||
Series 2005-292 Class IG | ||||||||||||
Interest Only STRIP | ||||||||||||
5.000% due 04/15/23 | 376 | 57 | 469 | 71 | 845 | 128 | ||||||
Series 2005-294 Class FA (Ê) | ||||||||||||
5.500% due 03/15/20 | 490 | 489 | 680 | 680 | 1,170 | 1,169 | ||||||
Series 2005-305 Class JF (Ê) | ||||||||||||
5.620% due 10/15/35 | 555 | 555 | 771 | 771 | 1,326 | 1,326 | ||||||
15 Year TBA (Ï) | ||||||||||||
5.00% | 4,000 | 3,936 | 5,100 | 5,019 | 9,100 | 8,955 | ||||||
30 Year TBA (Ï) | ||||||||||||
5.00% | 14,100 | 13,620 | 21,155 | 20,434 | 35,255 | 34,054 | ||||||
5.50% | 15,030 | 14,860 | 27,245 | 26,934 | 42,275 | 41,794 | ||||||
6.00% | 14,580 | 14,676 | 21,520 | 21,661 | 36,100 | 36,337 | ||||||
Freddie Mac Gold | ||||||||||||
7.000% due 2008 | 8 | 8 | 14 | 14 | 22 | 22 | ||||||
8.000% due 2009 | 6 | 6 | 7 | 7 | 13 | 13 | ||||||
6.000% due 2010 | 44 | 44 | 44 | 44 | ||||||||
7.000% due 2010 | 75 | 77 | 8 | 8 | 83 | 85 | ||||||
8.000% due 2010 | 18 | 19 | 1 | 1 | 19 | 20 | ||||||
6.000% due 2011 | 165 | 169 | 277 | 279 | 442 | 448 | ||||||
7.000% due 2011 | 9 | 9 | 4 | 4 | 13 | 13 | ||||||
8.000% due 2011 | 15 | 16 | 15 | 16 | ||||||||
6.000% due 2012 | 4 | 4 | 6 | 6 | 10 | 10 | ||||||
8.000% due 2012 | 7 | 7 | 7 | 7 | ||||||||
6.000% due 2013 | 100 | 102 | 100 | 102 | ||||||||
7.000% due 2014 | 62 | 64 | 62 | 64 | ||||||||
12.000% due 2014 | 22 | 23 | 11 | 12 | 33 | 35 | ||||||
6.000% due 2016 | 353 | 358 | 10 | 10 | 363 | 368 | ||||||
9.000% due 2016 | 24 | 25 | 24 | 25 | ||||||||
6.000% due 2017 | 404 | 412 | 350 | 355 | 754 | 767 | ||||||
8.000% due 2017 | 21 | 22 | 21 | 22 | ||||||||
4.500% due 2018 | 2,123 | 2,053 | 1,743 | 1,687 | 3,866 | 3,740 | ||||||
5.000% due 2018 | 744 | 734 | 478 | 472 | 1,222 | 1,206 | ||||||
4.500% due 2019 | 666 | 645 | 666 | 645 | ||||||||
5.000% due 2019 | 437 | 430 | 437 | 430 | ||||||||
5.500% due 2019 | 875 | 876 | 951 | 953 | 1,826 | 1,829 | ||||||
4.500% due 2020 | 797 | 770 | 797 | 770 | ||||||||
5.000% due 2020 | 694 | 683 | 694 | 683 | ||||||||
5.500% due 2020 | 2,227 | 2,231 | 2,998 | 3,003 | 5,225 | 5,234 | ||||||
9.000% due 2024 | 5 | 6 | 5 | 6 | ||||||||
6.500% due 2025 | 18 | 19 | 5 | 5 | 23 | 24 | ||||||
8.000% due 2025 | 33 | 35 | 33 | 35 | ||||||||
8.500% due 2025 | 24 | 26 | 24 | 26 | ||||||||
9.000% due 2025 | 8 | 9 | 8 | 9 | ||||||||
9.000% due 2026 | 1 | 1 | 1 | 1 | 2 | 2 | ||||||
6.500% due 2027 | 3 | 3 | 3 | 3 |
Table of Contents
8.500% due 2027 | 68 | 73 | 101 | 109 | 169 | 182 | ||||||
6.500% due 2028 | 217 | 224 | 217 | 224 | ||||||||
6.500% due 2029 | 386 | 395 | 175 | 179 | 561 | 574 | ||||||
7.222% due 2030 (Ê) | 7 | 8 | 5 | 5 | 12 | 13 | ||||||
6.000% due 2031 | 17 | 17 | 17 | 17 | ||||||||
6.500% due 2031 | 659 | 676 | 1,632 | 1,674 | 2,291 | 2,350 | ||||||
5.500% due 2032 | 3,048 | 3,024 | 4,914 | 4,875 | 7,962 | 7,899 | ||||||
6.000% due 2032 | 216 | 219 | 216 | 219 | ||||||||
6.500% due 2032 | 678 | 695 | 678 | 695 | ||||||||
7.000% due 2032 | 322 | 333 | 266 | 273 | 588 | 606 | ||||||
7.500% due 2032 | 85 | 89 | 85 | 89 | ||||||||
5.000% due 2033 | 567 | 549 | 609 | 590 | 1,176 | 1,139 | ||||||
5.500% due 2033 | 5,936 | 5,888 | 7,400 | 7,340 | 13,336 | 13,228 | ||||||
6.000% due 2033 | 590 | 596 | 320 | 323 | 910 | 919 | ||||||
6.500% due 2033 | 605 | 618 | 605 | 618 | ||||||||
4.500% due 2034 | 156 | 147 | 205 | 193 | 361 | 340 | ||||||
5.000% due 2034 | 2,513 | 2,434 | 3,349 | 3,245 | 5,862 | 5,679 | ||||||
5.500% due 2034 | 2,862 | 2,836 | 5,129 | 5,083 | 7,991 | 7,919 | ||||||
6.000% due 2034 | 861 | 868 | 1,192 | 1,202 | 2,053 | 2,070 | ||||||
6.500% due 2034 | 59 | 60 | 224 | 228 | 283 | 288 | ||||||
5.000% due 2035 | 5,175 | 5,003 | 911 | 881 | 6,086 | 5,884 | ||||||
5.500% due 2035 | 2,100 | 2,081 | 1,052 | 1,042 | 3,152 | 3,123 | ||||||
5.000% due 2036 | 1,495 | 1,445 | 3,856 | 3,727 | 5,351 | 5,172 | ||||||
Freddie Mac Reference REMICs | ||||||||||||
Series 2006-R00 Class AK | ||||||||||||
5.750% due 12/15/18 | 638 | 641 | 875 | 879 | 1,513 | 1,520 | ||||||
Freddie Mac REMICS | ||||||||||||
Series 2003-269 Class FE (Ê) | ||||||||||||
5.930% due 12/15/28 | 685 | 688 | 952 | 956 | 1,637 | 1,644 | ||||||
Series 2004-277 Class KE | ||||||||||||
3.500% due 12/15/17 | 456 | 451 | 636 | 630 | 1,092 | 1,081 | ||||||
Series 2006-314 Class LF (Ê) | ||||||||||||
5.620% due 05/15/36 | 600 | 599 | 600 | 599 | ||||||||
Series 2006-323 Class PA | ||||||||||||
6.000% due 03/15/26 | 825 | 837 | 1,215 | 1,233 | 2,040 | 2,070 | ||||||
GE Capital Commercial Mortgage Corp. | ||||||||||||
Series 2005-C1 Class A1 | ||||||||||||
4.012% due 06/10/48 | 550 | 539 | 707 | 693 | 1,257 | 1,232 | ||||||
Series 2005-C1 Class A5 | ||||||||||||
4.772% due 06/10/48 | 400 | 387 | 620 | 600 | 1,020 | 987 | ||||||
Series 2006-C1 Class A4 | ||||||||||||
5.339% due 03/10/44 | 905 | 912 | 1,250 | 1,260 | 2,155 | 2,172 | ||||||
Ginnie Mae I | ||||||||||||
6.500% due 2008 | 3 | 4 | 5 | 5 | 8 | 9 | ||||||
6.500% due 2009 | 32 | 32 | 118 | 118 | 150 | 150 | ||||||
6.500% due 2010 | 6 | 6 | 6 | 6 | ||||||||
7.000% due 2011 | 14 | 14 | 1 | 1 | 15 | 15 | ||||||
9.500% due 2016 | 1 | 1 | 1 | 1 | 2 | 2 | ||||||
8.000% due 2017 | 11 | 11 | 11 | 11 | ||||||||
10.500% due 2020 | 36 | 40 | 12 | 13 | 48 | 53 | ||||||
8.000% due 2022 | 23 | 24 | 26 | 27 | 49 | 51 | ||||||
8.500% due 2022 | 1 | 1 | 9 | 10 | 10 | 11 | ||||||
8.500% due 2024 | 12 | 13 | 12 | 13 | ||||||||
8.000% due 2025 | 13 | 13 | 38 | 41 | 51 | 54 | ||||||
9.000% due 2025 | 230 | 246 | 230 | 246 | ||||||||
8.000% due 2026 | 115 | 122 | 115 | 122 | ||||||||
7.000% due 2029 | 6 | 6 | 6 | 6 | ||||||||
8.000% due 2029 | 61 | 65 | 61 | 65 | ||||||||
8.500% due 2029 | 21 | 22 | 21 | 22 | ||||||||
8.000% due 2030 | 61 | 66 | 468 | 499 | 529 | 565 | ||||||
8.500% due 2030 | 15 | 16 | 6 | 6 | 21 | 22 | ||||||
7.000% due 2031 | 259 | 268 | 405 | 419 | 664 | 687 | ||||||
8.000% due 2031 | 2 | 2 | 2 | 2 | ||||||||
7.000% due 2032 | 128 | 132 | 11 | 11 | 139 | 143 | ||||||
8.000% due 2032 | 16 | 17 | 16 | 17 | ||||||||
5.000% due 2033 | 3,233 | 3,157 | 3,942 | 3,850 | 7,175 | 7,007 | ||||||
7.000% due 2033 | 17 | 18 | 17 | 18 | ||||||||
5.000% due 2035 | 523 | 510 | 697 | 680 | 1,220 | 1,190 | ||||||
6.000% due 2035 | 4,829 | 4,896 | 6,128 | 6,214 | 10,957 | 11,110 | ||||||
5.500% due 2036 | 104 | 103 | 104 | 103 | ||||||||
30 Year TBA (Ï) | ||||||||||||
5.50% | 5,495 | 5,471 | 8,615 | 8,577 | 14,110 | 14,048 | ||||||
6.00% | 1,000 | 1,013 | 1,100 | 1,115 | 2,100 | 2,128 | ||||||
6.50% | 3,200 | 3,285 | 4,000 | 4,106 | 7,200 | 7,391 |
Table of Contents
Ginnie Mae II | ||||||||||||
5.125% due 02/20/23 (Ê) | 295 | 297 | 295 | 297 | ||||||||
5.375% due 02/20/23 (Ê) | 219 | 221 | 219 | 221 | ||||||||
5.375% due 05/20/24 (Ê) | 49 | 49 | 49 | 49 | ||||||||
5.125% due 10/20/27 (Ê) | 54 | 54 | 54 | 54 | ||||||||
5.375% due 05/20/30 (Ê) | 39 | 39 | 39 | 39 | ||||||||
5.000% due 07/20/30 (Ê) | 222 | 223 | 222 | 223 | ||||||||
7.500% due 07/20/32 | 20 | 21 | 20 | 21 | ||||||||
4.500% due 04/20/35 | 755 | 709 | 1,001 | 941 | 1,756 | 1,650 | ||||||
GMAC Commercial Mortgage Securities, Inc. | ||||||||||||
Series 2001-C1 Class A2 | ||||||||||||
6.465% due 04/15/34 | 510 | 533 | 760 | 795 | 1,270 | 1,328 | ||||||
Series 2005-C1 Class A2 | ||||||||||||
4.471% due 05/10/43 | 465 | 456 | 605 | 594 | 1,070 | 1,050 | ||||||
GMAC Mortgage Corp. Loan Trust | ||||||||||||
Series 2005-AR6 Class 3A1 | ||||||||||||
5.297% due 11/19/35 | 747 | 743 | 1,033 | 1,027 | 1,780 | 1,770 | ||||||
Series 2006-AR1 Class 1A1 (Ê) | ||||||||||||
5.633% due 03/19/36 | 1,836 | 1,844 | 2,545 | 2,556 | 4,381 | 4,400 | ||||||
Government National Mortgage Association (Ê) | ||||||||||||
Series 1999-40 Class FE | ||||||||||||
5.870% due 11/16/29 | 441 | 446 | 652 | 658 | 1,093 | 1,104 | ||||||
Greenpoint Mortgage Funding Trust (Ê) | ||||||||||||
Series 2006-AR5 Class A1A | ||||||||||||
5.400% due 10/25/46 | 1,994 | 1,993 | 2,900 | 2,899 | 4,894 | 4,892 | ||||||
Greenwich Capital Commercial Funding Corp. | ||||||||||||
Series 2004-GG1 Class A7 | ||||||||||||
5.317% due 06/10/36 | 1,380 | 1,384 | 1,885 | 1,890 | 3,265 | 3,274 | ||||||
Series 2005-GG3 Class A1 | ||||||||||||
3.919% due 08/10/42 | 704 | 692 | 888 | 873 | 1,592 | 1,565 | ||||||
Series 2005-GG5 Class A41 | ||||||||||||
5.243% due 04/10/37 | 695 | 696 | 525 | 526 | 1,220 | 1,222 | ||||||
GS Mortgage Securities Corp. II | ||||||||||||
Series 1998-C1 Class A2 | ||||||||||||
6.620% due 10/18/30 | 1,215 | 1,235 | 1,306 | 1,327 | 2,521 | 2,562 | ||||||
Series 2005-GG4 Class AABA | ||||||||||||
4.680% due 07/10/39 | 600 | 584 | 800 | 779 | 1,400 | 1,363 | ||||||
Series 2006-FL8 Class A1 (Å)(Ê) | ||||||||||||
5.430% due 01/06/08 | 2,680 | 2,680 | 3,780 | 3,780 | 6,460 | 6,460 | ||||||
Series 2006-GG6 Class A4 | ||||||||||||
5.553% due 04/10/38 | 305 | 311 | 420 | 428 | 725 | 739 | ||||||
Series 2006-GG8 Class AAB | ||||||||||||
5.535% due 11/10/39 | 575 | 585 | 805 | 819 | 1,380 | 1,404 | ||||||
GSMPS Mortgage Loan Trust (Ê)(þ) | ||||||||||||
Series 2004-4 Class 1AF | ||||||||||||
5.720% due 06/25/34 | 1,211 | 1,217 | 1,579 | 1,586 | 2,790 | 2,803 | ||||||
Harborview Mortgage Loan Trust | ||||||||||||
Series 2004-4 Class 3A (Ê) | ||||||||||||
2.975% due 06/19/34 | 1,838 | 1,824 | 2,535 | 2,515 | 4,373 | 4,339 | ||||||
Series 2005-14 Class 3A1A | ||||||||||||
5.319% due 12/19/35 | 219 | 218 | 308 | 307 | 527 | 525 | ||||||
Series 2005-2 Class 2A1A (Ê) | ||||||||||||
5.550% due 05/19/35 | 281 | 281 | 281 | 281 | ||||||||
Series 2006-2 Class 1A | ||||||||||||
5.454% due 02/25/36 | 519 | 530 | 779 | 795 | 1,298 | 1,325 | ||||||
Series 2006-3 Class 1A1A (Ê) | ||||||||||||
6.474% due 06/19/36 | 6,616 | 6,775 | 8,593 | 8,799 | 15,209 | 15,574 | ||||||
HSI Asset Securitization Corp. Trust (Ê) | ||||||||||||
Series 2005-I1 Class 2A1 | ||||||||||||
5.440% due 11/25/35 | 1,160 | 1,161 | 1,542 | 1,543 | 2,702 | 2,704 | ||||||
Impac CMB Trust (Ê) | ||||||||||||
Series 2004-2 Class A2 | ||||||||||||
5.830% due 04/25/34 | 99 | 99 | 99 | 99 | ||||||||
Series 2004-3 Class 1A | ||||||||||||
5.570% due 06/25/34 | 116 | 116 | 155 | 155 | 271 | 271 | ||||||
Series 2004-5 Class 1A1 | ||||||||||||
5.690% due 10/25/34 | 455 | 456 | 455 | 456 | ||||||||
Impac Secured Assets CMN Owner Trust (Ê) | ||||||||||||
Series 2005-2 Class A1 | ||||||||||||
5.650% due 03/25/36 | 1,418 | 1,420 | 2,085 | 2,089 | 3,503 | 3,509 | ||||||
Indymac Index Mortgage Loan Trust | ||||||||||||
Series 2005-AR1 Class A2 | ||||||||||||
5.099% due 09/25/35 | 353 | 344 | 493 | 480 | 846 | 824 |
Table of Contents
Series 2005-AR2 Class 4A1 | ||||||||||||
5.437% due 11/25/35 | 26 | 26 | 35 | 34 | 61 | 60 | ||||||
Series 2006-AR1 Class 1A1A (Ê) | ||||||||||||
5.410% due 11/25/46 | 800 | 800 | 800 | 800 | ||||||||
Series 2006-AR3 Class 2A1A | ||||||||||||
6.410% due 03/25/36 | 8,191 | 8,367 | 11,345 | 11,589 | 19,536 | 19,956 | ||||||
Indymac Loan Trust (Ê) | ||||||||||||
Series 2004-L1 Class A1 (þ) | ||||||||||||
5.610% due 07/25/09 | 292 | 292 | 301 | 301 | 593 | 593 | ||||||
Series 2005-L1 Class A | ||||||||||||
5.520% due 06/25/10 | 1,000 | 1,002 | 1,229 | 1,231 | 2,229 | 2,233 | ||||||
Series 2005-L2 Class A1 | ||||||||||||
5.540% due 01/25/11 | 1,292 | 1,295 | 3,048 | 3,054 | 4,340 | 4,349 | ||||||
JP Morgan Alternative Loan Trust | ||||||||||||
Series 2006-A2 Class 3A1 | ||||||||||||
5.925% due 05/25/36 | 3,026 | 3,062 | 4,206 | 4,256 | 7,232 | 7,318 | ||||||
Series 2006-A2 Class 5A1 | ||||||||||||
6.360% due 05/25/36 | 1,740 | 1,748 | 2,383 | 2,394 | 4,123 | 4,142 | ||||||
Series 2006-A3 Class 1A2 (Ê) | ||||||||||||
5.400% due 07/25/36 | 1,486 | 1,483 | 2,021 | 2,018 | 3,507 | 3,501 | ||||||
Series 2006-A4 Class A4 (Ê) | ||||||||||||
5.400% due 08/25/36 | 1,143 | 1,142 | 1,545 | 1,545 | 2,688 | 2,687 | ||||||
Series 2006-A6 Class 1A2 (Ê) | ||||||||||||
5.390% due 11/25/36 | 1,610 | 1,610 | 2,335 | 2,335 | 3,945 | 3,945 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||||||||||
Series 2003-CB7 Class A3 | ||||||||||||
4.449% due 01/12/38 | 940 | 916 | 1,250 | 1,219 | 2,190 | 2,135 | ||||||
Series 2004-LN2 Class A1 | ||||||||||||
4.475% due 07/15/41 | 689 | 673 | 849 | 829 | 1,538 | 1,502 | ||||||
Series 2005-CB1 Class A1 | ||||||||||||
4.520% due 08/12/37 | 1,024 | 1,012 | 1,336 | 1,321 | 2,360 | 2,333 | ||||||
Series 2005-CB1 Class A2 | ||||||||||||
5.247% due 01/12/43 | 2,550 | 2,558 | 3,515 | 3,526 | 6,065 | 6,084 | ||||||
Series 2005-CB1 Class A4 | ||||||||||||
4.895% due 09/12/37 | 80 | 78 | 80 | 78 | 160 | 156 | ||||||
5.294% due 01/12/43 | 200 | 201 | 200 | 201 | ||||||||
Series 2005-FL1 Class A1 (þ)(Ê) | ||||||||||||
5.430% due 02/15/19 | 940 | 940 | 1,225 | 1,225 | 2,165 | 2,165 | ||||||
Series 2005-LDP Class A1 | ||||||||||||
5.035% due 12/15/44 | 3,225 | 3,216 | 4,443 | 4,431 | 7,668 | 7,647 | ||||||
4.116% due 03/15/46 | 512 | 504 | 639 | 628 | 1,151 | 1,132 | ||||||
Series 2005-LDP Class A3 | ||||||||||||
4.959% due 08/15/42 | 690 | 680 | 915 | 902 | 1,605 | 1,582 | ||||||
5.208% due 12/15/44 | 2,845 | 2,849 | 3,925 | 3,931 | 6,770 | 6,780 | ||||||
Series 2005-LDP Class A3A1 | ||||||||||||
4.871% due 10/15/42 | 630 | 620 | 860 | 847 | 1,490 | 1,467 | ||||||
Series 2005-LDP Class A4 | ||||||||||||
4.918% due 10/15/42 | 400 | 390 | 900 | 877 | 1,300 | 1,267 | ||||||
5.179% due 12/15/44 | 1,375 | 1,374 | 1,940 | 1,939 | 3,315 | 3,313 | ||||||
Series 2006-CB1 Class A3A (þ) | ||||||||||||
5.491% due 12/12/44 | 1,370 | 1,388 | 1,875 | 1,900 | 3,245 | 3,288 | ||||||
Series 2006-CB1 Class A4 | ||||||||||||
5.814% due 06/12/43 | 725 | 753 | 985 | 1,023 | 1,710 | 1,776 | ||||||
5.481% due 12/12/44 | 460 | 466 | 630 | 638 | 1,090 | 1,104 | ||||||
5.817% due 05/12/45 | 1,685 | 1,715 | 2,370 | 2,413 | 4,055 | 4,128 | ||||||
Series 2006-CB1 Class ASB | ||||||||||||
5.506% due 12/12/44 | 365 | 369 | 500 | 506 | 865 | 875 | ||||||
Series 2006-FL1 Class A1A (þ)(Ê) | ||||||||||||
5.410% due 02/15/20 | 2,584 | 2,585 | 3,545 | 3,546 | 6,129 | 6,131 | ||||||
Series 2006-LDP Class A2 | ||||||||||||
5.862% due 04/15/45 | 1,975 | 2,037 | 2,685 | 2,769 | 4,660 | 4,806 | ||||||
Series 2006-LDP Class A4 | ||||||||||||
5.876% due 04/15/45 | 2,790 | 2,925 | 3,800 | 3,984 | 6,590 | 6,909 | ||||||
5.561% due 05/15/45 | 830 | 835 | 1,160 | 1,167 | 1,990 | 2,002 | ||||||
JP Morgan Mortgage Trust | ||||||||||||
Series 2005-A2 Class 3A1 | ||||||||||||
4.909% due 04/25/35 | 1,213 | 1,199 | 1,520 | 1,502 | 2,733 | 2,701 | ||||||
Series 2005-A3 Class 6A1 | ||||||||||||
4.913% due 06/25/35 | 1,613 | 1,591 | 2,226 | 2,195 | 3,839 | 3,786 | ||||||
Series 2005-A6 Class 2A2 | ||||||||||||
4.977% due 08/25/35 | 1,168 | 1,155 | 1,554 | 1,537 | 2,722 | 2,692 | ||||||
Series 2006-A2 Class 1A1 | ||||||||||||
5.473% due 04/25/36 | 1,781 | 1,774 | 2,442 | 2,433 | 4,223 | 4,207 | ||||||
Series 2006-A6 Class 3A1 | ||||||||||||
6.165% due 10/25/36 | 1,377 | 1,386 | 4,058 | 4,085 | 5,435 | 5,471 |
Table of Contents
LB-UBS Commercial Mortgage Trust | ||||||||||||
Series 2001-C3 Class A1 | ||||||||||||
6.058% due 06/15/20 | 248 | 252 | 178 | 181 | 426 | 433 | ||||||
Series 2003-C3 Class A1 | ||||||||||||
2.599% due 05/15/27 | 519 | 504 | 680 | 660 | 1,199 | 1,164 | ||||||
Series 2004-C2 Class A1 | ||||||||||||
2.946% due 03/15/29 | 1,398 | 1,343 | 1,765 | 1,697 | 3,163 | 3,040 | ||||||
Series 2004-C4 Class A3 | ||||||||||||
5.154% due 06/15/29 | 1,180 | 1,184 | 1,455 | 1,460 | 2,635 | 2,644 | ||||||
Series 2005-C3 Class A5 | ||||||||||||
4.739% due 07/15/30 | 340 | 328 | 480 | 463 | 820 | 791 | ||||||
Series 2005-C3 Class AAB | ||||||||||||
4.664% due 07/15/30 | 400 | 389 | 600 | 584 | 1,000 | 973 | ||||||
Series 2006-C4 Class A4 | ||||||||||||
5.900% due 06/15/38 | 315 | 331 | 430 | 452 | 745 | 783 | ||||||
Lehman Brothers Floating Rate Commercial Mortgage Trust (Ê)(þ) | ||||||||||||
Series 2006-LLF Class A1 | ||||||||||||
5.400% due 09/15/21 | 580 | 580 | 870 | 870 | 1,450 | 1,450 | ||||||
Lehman Mortgage Trust | ||||||||||||
Series 2005-3 Class 1A3 | ||||||||||||
5.500% due 01/25/36 | 1,155 | 1,158 | 1,605 | 1,609 | 2,760 | 2,767 | ||||||
Lehman XS Trust (Ê) | ||||||||||||
Series 2005-5N Class 1A1 | ||||||||||||
5.630% due 11/25/35 | 1,160 | 1,164 | 1,569 | 1,574 | 2,729 | 2,738 | ||||||
Series 2005-7N Class 1A1B | ||||||||||||
5.630% due 12/25/35 | 786 | 790 | 786 | 790 | ||||||||
Mach One Trust Commercial Mortgage-Backed (þ) | ||||||||||||
Series 2004-1A Class A3 | ||||||||||||
5.220% due 05/28/40 | 1,350 | 1,318 | 1,480 | 1,445 | 2,830 | 2,763 | ||||||
Mastr Adjustable Rate Mortgages Trust | ||||||||||||
Series 2006-2 Class 3A1 | ||||||||||||
4.848% due 01/25/36 | 956 | 946 | 1,242 | 1,230 | 2,198 | 2,176 | ||||||
Mastr Alternative Loans Trust | ||||||||||||
Series 2003-4 Class B1 | ||||||||||||
5.660% due 06/25/33 | 348 | 350 | 481 | 485 | 829 | 835 | ||||||
Series 2004-10 Class 5A6 | ||||||||||||
5.750% due 09/25/34 | 505 | 505 | 690 | 690 | 1,195 | 1,195 | ||||||
Mastr Asset Securitization Trust | ||||||||||||
Series 2003-11 Class 6A8 (Ê) | ||||||||||||
5.820% due 12/25/33 | 766 | 770 | 1,063 | 1,068 | 1,829 | 1,838 | ||||||
Series 2003-7 Class 4A35 (Ê) | ||||||||||||
5.720% due 09/25/33 | 808 | 809 | 1,128 | 1,129 | 1,936 | 1,938 | ||||||
Series 2004-4 Class 2A2 (Ê) | ||||||||||||
5.770% due 04/25/34 | 324 | 324 | 452 | 452 | 776 | 776 | ||||||
Series 2005-2 Class 1A1 | ||||||||||||
5.250% due 11/25/35 | 1,235 | 1,217 | 1,798 | 1,772 | 3,033 | 2,989 | ||||||
Mastr Reperforming Loan Trust (Å) | ||||||||||||
Series 2005-1 Class 1A1 | ||||||||||||
6.000% due 08/25/34 | 686 | 688 | 823 | 825 | 1,509 | 1,513 | ||||||
Merrill Lynch Mortgage Investors, Inc. | ||||||||||||
5.619% due 07/12/34 | 4,300 | 4,300 | 4,300 | 4,300 | ||||||||
Merrill Lynch Mortgage Trust | ||||||||||||
Series 2004-MKB Class A2 | ||||||||||||
4.353% due 02/12/42 | 820 | 804 | 925 | 907 | 1,745 | 1,711 | ||||||
Series 2005-LC1 Class A1 | ||||||||||||
5.017% due 01/12/44 | 1,126 | 1,123 | 1,621 | 1,617 | 2,747 | 2,740 | ||||||
Series 2005-LC1 Class A2 | ||||||||||||
5.202% due 01/12/44 | 1,265 | 1,267 | 1,795 | 1,798 | 3,060 | 3,065 | ||||||
Series 2005-MKB Class A1 | ||||||||||||
4.446% due 09/12/42 | 914 | 902 | 1,193 | 1,177 | 2,107 | 2,079 | ||||||
Series 2005-MKB Class A4 | ||||||||||||
5.204% due 09/12/42 | 555 | 552 | 825 | 820 | 1,380 | 1,372 | ||||||
Series 2006-C1 Class A4 | ||||||||||||
5.844% due 05/12/39 | 660 | 682 | 900 | 929 | 1,560 | 1,611 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust | ||||||||||||
Series 2006-3 Class A2 | ||||||||||||
5.291% due 07/12/46 | 1,400 | 1,406 | 1,975 | 1,984 | 3,375 | 3,390 | ||||||
MLCC Mortgage Investors, Inc. (Ê) | ||||||||||||
Series 2004-HB1 Class A2 | ||||||||||||
5.930% due 04/25/29 | 150 | 150 | 216 | 216 | 366 | 366 | ||||||
Morgan Stanley Capital I | ||||||||||||
Series 2004-HQ3 Class A1 | ||||||||||||
3.100% due 01/13/41 | 941 | 914 | 1,209 | 1,175 | 2,150 | 2,089 |
Table of Contents
Series 2004-RR2 Class A2 (þ) | ||||||||||||
5.450% due 10/28/33 | 1,370 | 1,353 | 1,575 | 1,555 | 2,945 | 2,908 | ||||||
Series 2005-HQ5 Class A4 | ||||||||||||
5.168% due 01/14/42 | 880 | 873 | 1,150 | 1,140 | 2,030 | 2,013 | ||||||
Series 2005-HQ6 Class A4A | ||||||||||||
4.989% due 08/13/42 | 530 | 519 | 720 | 705 | 1,250 | 1,224 | ||||||
Series 2005-IQ1 Class AAB | ||||||||||||
5.178% due 09/15/42 | 750 | 748 | 985 | 982 | 1,735 | 1,730 | ||||||
Series 2005-IQ9 Class A1 | ||||||||||||
3.990% due 07/15/56 | 574 | 563 | 717 | 703 | 1,291 | 1,266 | ||||||
Series 2005-T17 Class A5 | ||||||||||||
4.780% due 12/13/41 | 250 | 242 | 285 | 276 | 535 | 518 | ||||||
Series 2006-HQ8 Class A4 | ||||||||||||
5.388% due 03/12/44 | 810 | 821 | 1,120 | 1,136 | 1,930 | 1,957 | ||||||
Series 2006-HQ9 Class A4 | ||||||||||||
5.731% due 07/20/44 | 585 | 603 | 820 | 845 | 1,405 | 1,448 | ||||||
Series 2006-XLF Class A1 (Ê)(þ) | ||||||||||||
5.410% due 07/15/19 | 2,774 | 2,774 | 2,774 | 2,774 | ||||||||
Morgan Stanley Dean Witter Capital I | ||||||||||||
Series 2001-TOP Class A3 | ||||||||||||
6.200% due 07/15/33 | 317 | 319 | 297 | 298 | 614 | 617 | ||||||
Morgan Stanley Mortgage Loan Trust | ||||||||||||
Series 2006-11 Class 1A6 | ||||||||||||
6.231% due 08/25/36 | 650 | 667 | 905 | 928 | 1,555 | 1,595 | ||||||
Series 2006-3AR Class 2A3 | ||||||||||||
5.901% due 03/25/36 | 541 | 547 | 812 | 820 | 1,353 | 1,367 | ||||||
Mortgage Capital Funding, Inc. | ||||||||||||
Series 1998-MC2 Class A2 | ||||||||||||
6.423% due 06/18/30 | 1,679 | 1,696 | 1,293 | 1,307 | 2,972 | 3,003 | ||||||
Nomura Asset Securities Corp. | ||||||||||||
Series 1998-D6 Class A1B | ||||||||||||
6.590% due 03/15/30 | 784 | 796 | 978 | 993 | 1,762 | 1,789 | ||||||
Novastar Mortgage-Backed Notes (Ê) | ||||||||||||
Series 2006-MTA Class 2A1A | ||||||||||||
5.520% due 09/25/46 | 1,458 | 1,458 | 1,458 | 1,458 | ||||||||
Novastar NIMs Trust (þ) | ||||||||||||
Series 2005-N1 | ||||||||||||
4.777% due 10/26/35 | 65 | 65 | 68 | 68 | 133 | 133 | ||||||
Prime Mortgage Trust | ||||||||||||
Series 2004-CL1 Class 1A2 (Ê) | ||||||||||||
5.720% due 02/25/34 | 104 | 105 | 104 | 104 | 208 | 209 | ||||||
Series 2004-CL1 Class 2A2 (Ê) | ||||||||||||
5.730% due 02/25/19 | 25 | 25 | 25 | 25 | 50 | 50 | ||||||
Series 2006-DR1 Class 2A2 | ||||||||||||
6.000% due 11/25/36 | 2,300 | 2,284 | 2,900 | 2,880 | 5,200 | 5,164 | ||||||
Residential Accredit Loans, Inc. | ||||||||||||
Series 2004-QS5 Class A6 (Ê) | ||||||||||||
5.920% due 04/25/34 | 133 | 134 | 185 | 186 | 318 | 320 | ||||||
Series 2004-QS8 Class A4 (Ê) | ||||||||||||
5.720% due 06/25/34 | 662 | 665 | 916 | 920 | 1,578 | 1,585 | ||||||
Series 2005-QA1 Class A41 | ||||||||||||
5.725% due 09/25/35 | 837 | 841 | 1,163 | 1,169 | 2,000 | 2,010 | ||||||
Series 2005-QA8 Class NB3 | ||||||||||||
5.504% due 07/25/35 | 480 | 482 | 634 | 637 | 1,114 | 1,119 | ||||||
Series 2005-QO3 Class A1 (Ê) | ||||||||||||
5.730% due 10/25/45 | 1,432 | 1,436 | 1,909 | 1,915 | 3,341 | 3,351 | ||||||
Series 2006-QA1 Class A21 | ||||||||||||
6.001% due 01/25/36 | 2,662 | 2,693 | 3,743 | 3,788 | 6,405 | 6,481 | ||||||
Series 2006-QO7 Class 3A2 (Ê) | ||||||||||||
5.535% due 09/25/46 | 1,340 | 1,339 | 1,940 | 1,939 | 3,280 | 3,278 | ||||||
Series 2006-QS6 Class 1A13 | ||||||||||||
6.000% due 06/25/36 | 1,325 | 1,334 | 1,810 | 1,823 | 3,135 | 3,157 | ||||||
Residential Asset Securities Corp. (Ê) | ||||||||||||
Series 2003-KS4 Class AIIB | ||||||||||||
5.610% due 06/25/33 | 176 | 176 | 243 | 243 | 419 | 419 | ||||||
Residential Asset Securitization Trust (Ê) | ||||||||||||
Series 2003-A15 Class 1A2 | ||||||||||||
5.770% due 02/25/34 | 769 | 772 | 1,063 | 1,067 | 1,832 | 1,839 | ||||||
Residential Funding Mortgage Securities II (Ê) | ||||||||||||
Series 2003-S14 Class A5 | ||||||||||||
5.720% due 07/25/18 | 938 | 941 | 568 | 570 | 1,506 | 1,511 | ||||||
Series 2003-S20 Class 1A7 | ||||||||||||
5.820% due 12/25/33 | 243 | 244 | 161 | 161 | 404 | 405 | ||||||
Series 2003-S5 Class 1A2 | ||||||||||||
5.770% due 11/25/18 | 389 | 391 | 539 | 542 | 928 | 933 |
Table of Contents
Salomon Brothers Mortgage Securities VII | ||||||||||||
Series 2003-UP2 Class A1 | ||||||||||||
4.000% due 12/25/18 | 440 | 415 | 440 | 415 | ||||||||
Sequoia Mortgage Trust (Ê) | ||||||||||||
Series 2004-3 Class A | ||||||||||||
5.306% due 04/20/34 | 968 | 968 | 1,341 | 1,341 | 2,309 | 2,309 | ||||||
Small Business Administration | ||||||||||||
Series 1999-P10 Class 1 | ||||||||||||
7.540% due 08/10/09 | 260 | 272 | 433 | 453 | 693 | 725 | ||||||
Series 2000-10B Class 1 | ||||||||||||
7.452% due 09/01/10 | 1,200 | 1,263 | 1,200 | 1,263 | ||||||||
Small Business Administration Participation Certificates | ||||||||||||
Series 2003-20I Class 1 | ||||||||||||
5.130% due 09/01/23 | 80 | 80 | 80 | 80 | ||||||||
Series 2005-20G Class 1 | ||||||||||||
4.750% due 07/01/25 | 2,847 | 2,768 | 2,847 | 2,768 | ||||||||
Structured Adjustable Rate Mortgage Loan Trust (Ê) | ||||||||||||
Series 2005-19X Class 1A1 | ||||||||||||
5.650% due 10/25/35 | 1,091 | 1,096 | 1,476 | 1,482 | 2,567 | 2,578 | ||||||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||||||||||
Series 2006-AR6 Class 1A3 | ||||||||||||
5.514% due 07/25/36 | 2,644 | 2,650 | 2,644 | 2,650 | ||||||||
Structured Asset Securities Corp. | ||||||||||||
Series 2004-21X Class 1A3 | ||||||||||||
4.440% due 12/25/34 | 1,230 | 1,213 | 1,515 | 1,494 | 2,745 | 2,707 | ||||||
Thornburg Mortgage Securities Trust | ||||||||||||
Series 2005-3 Class A3 (Ê) | ||||||||||||
5.590% due 10/25/35 | 2,174 | 2,176 | 2,174 | 2,176 | ||||||||
Series 2006-1 Class A2 (Ê) | ||||||||||||
5.480% due 01/25/36 | 2,700 | 2,695 | 2,700 | 2,695 | ||||||||
Series 2006-1 Class A3 (Ê) | ||||||||||||
5.500% due 01/25/36 | 2,598 | 2,594 | 2,598 | 2,594 | ||||||||
Series 2006-2 Class A1B | ||||||||||||
5.380% due 04/25/36 | 1,619 | 1,616 | 1,619 | 1,616 | ||||||||
Series 2006-3 Class A3 (Ê) | ||||||||||||
5.440% due 06/25/36 | 1,953 | 1,948 | 1,953 | 1,948 | ||||||||
Series 2006-5 Class A1 (Ê) | ||||||||||||
5.450% due 08/25/36 | 1,968 | 1,964 | 1,968 | 1,964 | ||||||||
Tobacco Settlement Authority of Iowa | ||||||||||||
6.500% due 06/01/23 | 100 | 100 | 100 | 100 | ||||||||
Wachovia Bank Commercial Mortgage Trust | ||||||||||||
Series 2003-C9 Class A1 | ||||||||||||
3.291% due 12/15/35 | 940 | 916 | 1,295 | 1,261 | 2,235 | 2,177 | ||||||
Series 2005-C16 Class A2 | ||||||||||||
4.380% due 10/15/41 | 1,195 | 1,171 | 1,510 | 1,480 | 2,705 | 2,651 | ||||||
Series 2005-C17 Class A1 | ||||||||||||
4.430% due 03/15/42 | 2,367 | 2,337 | 3,089 | 3,049 | 5,456 | 5,386 | ||||||
Series 2005-C22 Class A3 | ||||||||||||
5.461% due 12/15/44 | 1,865 | 1,876 | 2,685 | 2,701 | 4,550 | 4,577 | ||||||
Series 2006-WL7 Class A1 (þ)(Ê) | ||||||||||||
5.490% due 08/11/18 | 3,100 | 3,100 | 3,100 | 3,100 | ||||||||
Washington Mutual Alternative Mortgage Pass-Through Certificates | ||||||||||||
Series 2005-4 Class CB11 | ||||||||||||
5.500% due 06/25/35 | 275 | 270 | 375 | 368 | 650 | 638 | ||||||
Washington Mutual, Inc. | ||||||||||||
Series 2003-S9 Class A2 (Ê) | ||||||||||||
5.870% due 10/25/33 | 691 | 694 | 960 | 964 | 1,651 | 1,658 | ||||||
Series 2004-AR1 Class A1B1 (Ê) | ||||||||||||
5.665% due 11/25/34 | 220 | 220 | 234 | 235 | 454 | 455 | ||||||
Series 2005-AR1 Class 1A1 | ||||||||||||
4.839% due 10/25/35 | 596 | 589 | 991 | 978 | 1,587 | 1,567 | ||||||
Series 2005-AR1 Class A1A1 (Ê) | ||||||||||||
5.614% due 10/25/45 | 1,411 | 1,419 | 1,975 | 1,986 | 3,386 | 3,405 | ||||||
Series 2005-AR1 Class A1A2 (Ê) | ||||||||||||
5.620% due 11/25/45 | 1,433 | 1,439 | 2,023 | 2,031 | 3,456 | 3,470 | ||||||
5.610% due 12/25/45 | 722 | 725 | 1,204 | 1,209 | 1,926 | 1,934 | ||||||
5.620% due 12/25/45 | 2,254 | 2,260 | 2,254 | 2,260 | ||||||||
Series 2005-AR1 Class A1C1 (Ê) | ||||||||||||
5.510% due 12/26/45 | 263 | 263 | 382 | 382 | 645 | 645 | ||||||
Series 2005-AR6 Class B3 (Ê) | ||||||||||||
5.980% due 04/25/45 | 473 | 473 | 588 | 587 | 1,061 | 1,060 | ||||||
Series 2006-AR1 Class 2A (Ê) | ||||||||||||
5.777% due 09/25/46 | 797 | 797 | 797 | 797 |
Table of Contents
Wells Fargo Mortgage Backed Securities Trust | ||||||||||||||
Series 2006-2 Class 2A3 | ||||||||||||||
5.500% due 03/25/36 | 907 | 907 | 1,247 | 1,246 | 2,154 | 2,153 | ||||||||
Series 2006-AR2 Class 2A1 | ||||||||||||||
4.950% due 03/25/36 | 742 | 736 | 1,020 | 1,012 | 1,762 | 1,748 | ||||||||
Series 2006-AR8 Class 2A3 | ||||||||||||||
5.240% due 04/25/36 | 176 | 175 | 176 | 175 | ||||||||||
Zuni Mortgage Loan Trust (Ê) | ||||||||||||||
Series 2006-OA1 Class A1 | ||||||||||||||
5.615% due 08/25/36 | 1,690 | 1,688 | 2,401 | 2,398 | 4,091 | 4,086 | ||||||||
787,973 | 1,096,194 | 1,884,167 | ||||||||||||
Municipal Bonds - 0.2% | ||||||||||||||
Badger TOB Asset Securitization Corp. Revenue Bonds weekly demand | ||||||||||||||
6.375% due 06/01/32 | 700 | 760 | 700 | 760 | ||||||||||
Golden State Tobacco Securitization Corp. Revenue Bonds weekly demand | ||||||||||||||
5.000% due 06/01/21 | 505 | 507 | 505 | 507 | ||||||||||
Golden State Tobacco Securitization Corp. Revenue Bonds weekly demand | ||||||||||||||
6.250% due 06/01/33 | 650 | 725 | 650 | 725 | ||||||||||
New York City Municipal Water Finance Authority Revenue Bonds weekly demand | ||||||||||||||
4.750% due 06/15/38 | 1,700 | 1,741 | 1,700 | 1,741 | ||||||||||
State of Texas General Obligation Unlimited weekly demand | ||||||||||||||
4.750% due 04/01/35 | 300 | 308 | 300 | 308 | ||||||||||
Tobacco Settlement Financing Corp. Revenue Bonds weekly demand | ||||||||||||||
5.500% due 06/01/26 | 1,500 | 1,599 | 1,500 | 1,599 | ||||||||||
6.125% due 06/01/24 | 150 | 163 | 150 | 163 | ||||||||||
6.750% due 06/01/39 | 700 | 800 | 700 | 800 | ||||||||||
1,996 | 4,607 | 6,603 | ||||||||||||
Non-US Bonds - 0.2% | ||||||||||||||
Bundesrepublik Deutschland | ||||||||||||||
Series 04 | ||||||||||||||
3.750% due 01/04/15 | EUR | 790 | 1,011 | 1,110 | 1,420 | 1,900 | 2,431 | |||||||
Canadian Government Bond | ||||||||||||||
4.000% due 12/01/31 | CAD | 517 | 676 | 721 | 944 | 1,238 | 1,620 | |||||||
General Motors Corp. | ||||||||||||||
8.375% due 07/05/33 | EUR | 90 | 106 | 90 | 106 | |||||||||
Poland Government Bond | ||||||||||||||
Series 0509 | ||||||||||||||
6.000% due 05/24/09 | PLN | 2,400 | 814 | 2,840 | 963 | 5,240 | 1,777 | |||||||
Quebec Residual | ||||||||||||||
Zero coupon due 12/01/36 | CAD | 830 | 182 | 1,200 | 263 | 2,030 | 445 | |||||||
2,683 | 3,696 | 6,379 | ||||||||||||
United States Government Agencies - 4.5% | ||||||||||||||
Fannie Mae | ||||||||||||||
3.500% due 03/28/08 | 1,790 | 1,754 | 1,925 | 1,887 | 3,715 | 3,641 | ||||||||
2.500% due 06/15/08 (Ñ) | 3,065 | 2,950 | 4,270 | 4,110 | 7,335 | 7,060 | ||||||||
4.875% due 04/15/09 (Ñ) | 5,480 | 5,481 | 7,555 | 7,557 | 13,035 | 13,038 | ||||||||
7.250% due 01/15/10 (Ñ) | 940 | 1,005 | 3,965 | 4,242 | 4,905 | 5,247 | ||||||||
3.875% due 02/15/10 (Ñ) | 1,495 | 1,450 | 1,630 | 1,581 | 3,125 | 3,031 | ||||||||
4.750% due 04/19/10 | 2,950 | 2,920 | 3,845 | 3,806 | 6,795 | 6,726 | ||||||||
4.125% due 05/15/10 (Ñ) | 565 | 551 | 625 | 610 | 1,190 | 1,161 | ||||||||
7.125% due 06/15/10 (Ñ) | 700 | 752 | 1,000 | 1,074 | 1,700 | 1,826 | ||||||||
4.250% due 08/15/10 (Ñ) | 7,620 | 7,456 | 11,230 | 10,989 | 18,850 | 18,445 | ||||||||
5.125% due 04/15/11 (Ñ) | 2,615 | 2,640 | 5,960 | 6,018 | 8,575 | 8,658 | ||||||||
4.375% due 09/15/12 (Ñ) | 740 | 721 | 740 | 721 | ||||||||||
4.375% due 03/15/13 (Ñ) | 140 | 136 | 140 | 136 | ||||||||||
Zero coupon due 07/05/14 | 2,280 | 1,571 | 2,570 | 1,771 | 4,850 | 3,342 | ||||||||
5.250% due 03/24/15 | 495 | 489 | 730 | 721 | 1,225 | 1,210 | ||||||||
5.375% due 07/15/16 | 115 | 119 | 115 | 119 | ||||||||||
5.000% due 04/26/17 | 945 | 914 | 1,755 | 1,697 | 2,700 | 2,611 | ||||||||
Zero coupon due 06/01/17 (Ñ) | 1,375 | 809 | 2,180 | 1,282 | 3,555 | 2,091 | ||||||||
6.625% due 11/15/30 (Ñ) | 425 | 513 | 750 | 905 | 1,175 | 1,418 | ||||||||
6.210% due 08/06/38 | 420 | 488 | 240 | 279 | 660 | 767 |
Table of Contents
Federal Farm Credit Bank(Ñ) | ||||||||||||
5.125% due 08/25/16 | 740 | 751 | 1,010 | 1,025 | 1,750 | 1,776 | ||||||
Federal Home Loan Bank System | ||||||||||||
5.000% due 09/18/09 (Ñ) | 6,755 | 6,790 | 9,505 | 9,554 | 16,260 | 16,344 | ||||||
5.375% due 08/19/11 (Ñ) | 490 | 500 | 330 | 337 | 820 | 837 | ||||||
5.375% due 05/15/19 (Ñ) | 315 | 321 | 500 | 510 | 815 | 831 | ||||||
5.125% due 08/15/19 | 330 | 332 | 420 | 422 | 750 | 754 | ||||||
5.500% due 07/15/36 | 310 | 327 | 840 | 887 | 1,150 | 1,214 | ||||||
Series 567 | ||||||||||||
4.375% due 09/17/10 | 350 | 344 | 400 | 393 | 750 | 737 | ||||||
Series 627 | ||||||||||||
4.625% due 02/08/08 | — | — | — | — | ||||||||
Series VB15 (Ñ) | ||||||||||||
5.000% due 12/21/15 | 1,500 | 1,500 | 1,920 | 1,920 | 3,420 | 3,420 | ||||||
Financing Corp. | ||||||||||||
Principal Only STRIP | ||||||||||||
Zero coupon due 09/26/19 | 1,355 | 707 | 1,340 | 699 | 2,695 | 1,406 | ||||||
Series 1 | ||||||||||||
Zero coupon due 05/11/16 | 140 | 88 | 185 | 116 | 325 | 204 | ||||||
Series 1P | ||||||||||||
Zero coupon due 05/11/18 | 90 | 51 | 90 | 51 | ||||||||
Series 12P | ||||||||||||
Zero coupon due 12/06/18 | 420 | 229 | 765 | 417 | 1,185 | 646 | ||||||
Series 13 | ||||||||||||
Zero coupon due 12/27/16 | 490 | 297 | 645 | 391 | 1,135 | 688 | ||||||
Series 13P | ||||||||||||
Zero coupon due 12/27/18 | 1,135 | 617 | 1,620 | 880 | 2,755 | 1,497 | ||||||
Series 16P | ||||||||||||
Zero coupon due 04/05/19 | 1,200 | 642 | 875 | 468 | 2,075 | 1,110 | ||||||
Series 19 | ||||||||||||
Zero coupon due 06/06/16 | 410 | 256 | 545 | 340 | 955 | 596 | ||||||
Series 3P | ||||||||||||
Zero coupon due 11/30/17 | 300 | 173 | 395 | 228 | 695 | 401 | ||||||
Series 5P | ||||||||||||
Zero coupon due 02/08/18 | 110 | 63 | 155 | 88 | 265 | 151 | ||||||
Series 8P | ||||||||||||
Zero coupon due 08/03/18 | 1,085 | 603 | 1,455 | 809 | 2,540 | 1,412 | ||||||
Series 9P | ||||||||||||
Zero coupon due 10/06/17 | 540 | 314 | 710 | 413 | 1,250 | 727 | ||||||
Series A-P | ||||||||||||
Zero coupon due 10/06/17 | 260 | 151 | 345 | 201 | 605 | 352 | ||||||
Series B-P | ||||||||||||
Zero coupon due 04/06/18 | 565 | 320 | 785 | 444 | 1,350 | 764 | ||||||
Series C-P | ||||||||||||
Zero coupon due 11/30/17 | 870 | 502 | 1,170 | 675 | 2,040 | 1,177 | ||||||
Series E-P | ||||||||||||
Zero coupon due 11/02/18 | 835 | 458 | 1,105 | 606 | 1,940 | 1,064 | ||||||
Freddie Mac | ||||||||||||
4.000% due 12/15/09 (Ñ) | 3,215 | 3,136 | 4,515 | 4,404 | 7,730 | 7,540 | ||||||
6.875% due 09/15/10 (Ñ) | 670 | 717 | 950 | 1,016 | 1,620 | 1,733 | ||||||
5.625% due 03/15/11 (Ñ) | 650 | 669 | 910 | 937 | 1,560 | 1,606 | ||||||
4.500% due 11/15/11 | 870 | 855 | 1,095 | 1,076 | 1,965 | 1,931 | ||||||
5.750% due 01/15/12 (Ñ) | 2,415 | 2,510 | 3,195 | 3,320 | 5,610 | 5,830 | ||||||
5.125% due 07/15/12 (Ñ) | 1,170 | 1,183 | 4,210 | 4,256 | 5,380 | 5,439 | ||||||
4.875% due 11/15/13 (Ñ) | 2,200 | 2,190 | 3,250 | 3,236 | 5,450 | 5,426 | ||||||
5.050% due 01/26/15 (Ñ) | 1,155 | 1,150 | 1,485 | 1,478 | 2,640 | 2,628 | ||||||
5.250% due 04/18/16 | 265 | 271 | 265 | 271 | ||||||||
5.500% due 07/18/16 (Ñ) | 860 | 895 | 1,880 | 1,956 | 2,740 | 2,851 | ||||||
6.750% due 03/15/31 | 130 | 160 | 130 | 160 | ||||||||
5.625% due 11/23/35 (Ñ) | 520 | 508 | 720 | 703 | 1,240 | 1,211 | ||||||
Tennessee Valley Authority | ||||||||||||
6.150% due 01/15/38 | 1,560 | 1,812 | 2,145 | 2,491 | 3,705 | 4,303 | ||||||
64,629 | 95,707 | 160,336 | ||||||||||
United States Government Treasuries - 15.6% | ||||||||||||
United States Treasury Inflation Indexed Bonds | ||||||||||||
2.375% due 04/15/11 (Ñ) | 2,616 | 2,602 | 3,663 | 3,643 | 6,279 | 6,245 | ||||||
3.375% due 01/15/12 (Ñ) | 1,941 | 2,029 | 2,647 | 2,767 | 4,588 | 4,796 | ||||||
2.000% due 07/15/14 (Ñ) | 5,727 | 5,579 | 8,064 | 7,855 | 13,791 | 13,434 | ||||||
1.625% due 01/15/15 (Ñ) | 53 | 50 | 160 | 151 | 213 | 201 | ||||||
1.875% due 07/15/15 (Ñ) | 2,474 | 2,382 | 3,795 | 3,654 | 6,269 | 6,036 | ||||||
2.500% due 07/15/16 | 2,110 | 2,140 | 2,948 | 2,990 | 5,058 | 5,130 | ||||||
2.375% due 01/15/25 (Ñ) | 4,943 | 5,004 | 6,111 | 6,186 | 11,054 | 11,190 | ||||||
2.000% due 01/15/26 (Ñ) | 2,116 | 2,022 | 3,575 | 3,417 | 5,691 | 5,439 | ||||||
3.625% due 04/15/28 (Ñ) | 756 | 934 | 630 | 778 | 1,386 | 1,712 |
Table of Contents
United States Treasury Notes | ||||||||||||
3.000% due 11/15/07 (Ñ) | 800 | 785 | 800 | 785 | ||||||||
4.375% due 12/31/07 (Ñ) | 6,360 | 6,324 | 22,425 | 22,298 | 28,785 | 28,622 | ||||||
3.000% due 02/15/08 (Ñ) | 130 | 127 | 130 | 127 | ||||||||
3.375% due 02/15/08 (Ñ) | 820 | 805 | 1,335 | 1,311 | 2,155 | 2,116 | ||||||
3.750% due 05/15/08 (Ñ) | 10,600 | 10,443 | 770 | 759 | 11,370 | 11,202 | ||||||
3.125% due 09/15/08 (Ñ) | 8,925 | 8,676 | 8,925 | 8,676 | ||||||||
4.375% due 11/15/08 | 17,080 | 16,975 | 17,080 | 16,975 | ||||||||
3.250% due 01/15/09 (Ñ) | 14,345 | 13,927 | 17,630 | 17,116 | 31,975 | 31,043 | ||||||
3.875% due 05/15/09 (Ñ) | 580 | 570 | 580 | 570 | ||||||||
4.000% due 06/15/09 (Ñ) | 325 | 320 | 6,630 | 6,529 | 6,955 | 6,849 | ||||||
3.375% due 10/15/09 | 2,690 | 2,646 | 3,000 | 2,900 | 5,690 | 5,546 | ||||||
3.625% due 01/15/10 (Ñ) | 12,010 | 11,664 | 12,010 | 11,664 | ||||||||
3.500% due 02/15/10 (Ñ) | 9,540 | 9,224 | 9,540 | 9,224 | ||||||||
4.000% due 03/15/10 (Ñ) | 14,010 | 13,754 | 18,665 | 18,324 | 32,675 | 32,078 | ||||||
4.000% due 04/15/10 (Ñ) | 230 | 226 | 230 | 226 | ||||||||
4.125% due 08/15/10 (Ñ) | 455 | 448 | 1,560 | 1,536 | 2,015 | 1,984 | ||||||
3.875% due 09/15/10 (Ñ) | 4,200 | 4,096 | 6,680 | 6,515 | 10,880 | 10,611 | ||||||
4.375% due 12/15/10 (Ñ) | 2,475 | 2,456 | 6,630 | 6,581 | 9,105 | 9,037 | ||||||
4.500% due 02/28/11 | 880 | 878 | 880 | 878 | ||||||||
4.875% due 04/30/11 (Ñ) | 9,635 | 9,750 | 21,565 | 21,822 | 31,200 | 31,572 | ||||||
4.625% due 08/31/11 (Ñ) | 3,400 | 3,407 | 3,400 | 3,407 | ||||||||
14.000% due 11/15/11 (Ñ) | 1,170 | 1,174 | 1,170 | 1,174 | ||||||||
4.375% due 08/15/12 (Ñ) | 7,140 | 7,075 | 8,875 | 8,794 | 16,015 | 15,869 | ||||||
4.000% due 11/15/12 (Ñ) | 4,810 | 4,667 | 9,925 | 9,630 | 14,735 | 14,297 | ||||||
10.375% due 11/15/12 (Ñ) | 2,090 | 2,206 | 2,090 | 2,206 | ||||||||
4.250% due 08/15/13 (Ñ) | 3,880 | 3,805 | 8,095 | 7,938 | 11,975 | 11,743 | ||||||
12.000% due 08/15/13 (Ñ) | 315 | 354 | 315 | 354 | ||||||||
4.250% due 11/15/13 (Ñ) | 3,775 | 3,700 | 6,320 | 6,194 | 10,095 | 9,894 | ||||||
4.750% due 05/15/14 (Ñ) | 3,970 | 4,010 | 7,655 | 7,732 | 11,625 | 11,742 | ||||||
13.250% due 05/15/14 (Ñ) | 510 | 614 | 510 | 614 | ||||||||
12.500% due 08/15/14 (Ñ) | 760 | 915 | 760 | 915 | ||||||||
4.250% due 11/15/14 (Ñ) | 4,550 | 4,445 | 3,985 | 3,893 | 8,535 | 8,338 | ||||||
4.125% due 05/15/15 (Ñ) | 8,095 | 7,827 | 13,280 | 12,841 | 21,375 | 20,668 | ||||||
4.250% due 08/15/15 (Ñ) | 3,070 | 2,993 | 6,475 | 6,312 | 9,545 | 9,305 | ||||||
5.125% due 05/15/16 (Ñ) | 2,950 | 3,067 | 11,445 | 11,897 | 14,395 | 14,964 | ||||||
8.750% due 05/15/17 (Ñ) | 1,885 | 2,521 | 1,765 | 2,360 | 3,650 | 4,881 | ||||||
8.875% due 08/15/17 (Ñ) | 695 | 940 | 1,050 | 1,421 | 1,745 | 2,361 | ||||||
8.125% due 08/15/19 (Ñ) | 6,230 | 8,230 | 7,130 | 9,419 | 13,360 | 17,649 | ||||||
8.125% due 08/15/21 (Ñ) | 8,125 | 10,965 | 13,475 | 18,185 | 21,600 | 29,150 | ||||||
Principal Only STRIP | ||||||||||||
Zero coupon due 11/15/21 (Ñ) | 4,835 | 2,338 | 3,640 | 1,760 | 8,475 | 4,098 | ||||||
7.125% due 02/15/23 (Ñ) | 8,865 | 11,159 | 13,690 | 17,232 | 22,555 | 28,391 | ||||||
6.000% due 02/15/26 (Ñ) | 8,010 | 9,193 | 14,310 | 16,423 | 22,320 | 25,616 | ||||||
6.125% due 08/15/29 (Ñ) | 1,040 | 1,231 | 2,370 | 2,806 | 3,410 | 4,037 | ||||||
5.375% due 02/15/31 (Ñ) | 3,835 | 4,164 | 6,980 | 7,579 | 10,815 | 11,743 | ||||||
4.500% due 02/15/36 (Ñ) | 9,444 | 9,115 | 18,985 | 18,325 | 28,429 | 27,440 | ||||||
202,545 | 352,279 | 554,824 | ||||||||||
Total Long-Term Investments (cost $3,584,830) | 1,455,750 | 2,138,364 | 3,594,114 | |||||||||
Preferred Stocks- 0.1% | ||||||||||||
Auto and Transportation - 0.0% | ||||||||||||
General Motors Corp. | 13,100 | 271 | 18,625 | 385 | 31,725 | 656 | ||||||
Financial Services - 0.1% | ||||||||||||
DG Funding Trust (ƒ)(Å) | 152 | 1,618 | 240 | 2,553 | 392 | 4,171 | ||||||
Total Preferred Stocks (cost $4,720) | 1,889 | 2,938 | 4,827 | |||||||||
Table of Contents
Notional Amount $ | Notional Amount $ | Notional Amount $ | ||||||||||
Options Purchased - 0.0% (Number of Contracts) | ||||||||||||
Eurodollar Futures | ||||||||||||
Dec 2006 91.75 Put (96) | 918 | — | 21,103 | 1 | 22,021 | 1 | ||||||
Dec 2006 92.00 Put (482) | 66,930 | 2 | 43,930 | 1 | 110,860 | 3 | ||||||
Dec 2006 92.25 Put (192) | 44,280 | 1 | 44,280 | 1 | ||||||||
Dec 2006 92.50 Put (702) | 73,538 | 2 | 88,800 | 3 | 162,338 | 5 | ||||||
Dec 2006 92.75 Put (56) | 12,985 | — | 12,985 | — | ||||||||
Dec 2006 93.38 Put (42) | 9,400 | — | 9,400 | — | ||||||||
Dec 2006 94.13 Put (150) | 35,297 | 1 | 35,297 | 1 | ||||||||
Jun 2007 91.25 Put (325) | 31,938 | 1 | 42,203 | 1 | 74,141 | 2 | ||||||
Jun 2007 91.75 Put (190) | 43,581 | 1 | 43,581 | 1 | ||||||||
Sep 2007 90.50 Put (200) | 45,250 | 1 | 45,250 | 1 | ||||||||
Sep 2007 90.75 Put (393) | 51,501 | 1 | 37,661 | 1 | 89,162 | 2 | ||||||
Sep 2007 91.00 Put (60) | 13,650 | — | 13,650 | — | ||||||||
Sep 2007 91.25 Put (198) | 45,169 | 1 | 45,169 | 1 | ||||||||
Dec 2007 91.25 Put (671) | 35,588 | 1 | 117,484 | 3 | 153,072 | 4 | ||||||
Dec 2007 91.50 Put (3) | 686 | — | 686 | — | ||||||||
United States Treasury Notes 10 Year Futures | ||||||||||||
Nov 2006 102.03 (USD) Call (101) | 193,859 | 1 | 10,203 | — | 204,062 | 1 | ||||||
Nov 2006 107.00 (USD) Put (14) | 642 | 1 | 856 | 1 | 1,498 | 2 | ||||||
Total Options Purchased (cost $55) | 10 | 15 | 25 | |||||||||
Principal Amount ($) or Shares | Principal Amount ($) or Shares | Principal Amount ($) or Shares | ||||||||||
Short-Term Investments- 14.1% | ||||||||||||
American General Finance Corp. (Ê) | ||||||||||||
Series MTNG | ||||||||||||
5.429% due 03/23/07 | 100 | 100 | 100 | 100 | 200 | 200 | ||||||
AT&T Wireless Services, Inc. | ||||||||||||
7.500% due 05/01/07 | 2,605 | 2,631 | 3,650 | 3,687 | 6,255 | 6,318 | ||||||
AT&T, Inc.(þ) | ||||||||||||
4.214% due 06/05/07 | 800 | 794 | 1,100 | 1,092 | 1,900 | 1,886 | ||||||
Bank of America Corp. | ||||||||||||
5.275% due 12/01/06 | 400 | 396 | 400 | 396 | ||||||||
Bank of Ireland Governor & Co. | ||||||||||||
5.260% due 12/05/06 | 7,100 | 7,065 | 10,800 | 10,746 | 17,900 | 17,811 | ||||||
Barclays Bank PLC | ||||||||||||
5.343% due 01/29/07 | 2,500 | 2,506 | 2,500 | 2,506 | ||||||||
Barclays US Funding Corp | ||||||||||||
5.300% due 11/15/06 | 10,600 | 10,578 | 10,600 | 10,578 | ||||||||
5.275% due 11/21/06 | 5,300 | 5,284 | 1,200 | 1,196 | 6,500 | 6,480 | ||||||
Bundesobligation | ||||||||||||
Series 139 | ||||||||||||
4.000% due 02/16/07 | 1,300 | 1,661 | 1,300 | 1,661 | ||||||||
ChevronTexaco Capital Co. | ||||||||||||
3.500% due 09/17/07 | 470 | 463 | 590 | 581 | 1,060 | 1,044 | ||||||
CIT Group, Inc. | ||||||||||||
5.605% due 02/15/07 (Ê) | 2,000 | 2,001 | 2,000 | 2,001 | ||||||||
5.750% due 09/25/07 | 120 | 120 | 155 | 155 | 275 | 275 | ||||||
Countrywide Home Loans, Inc. | ||||||||||||
Series MTNK | ||||||||||||
5.500% due 02/01/07 | 100 | 100 | 110 | 110 | 210 | 210 | ||||||
DaimlerChrysler NA Holding Corp.(Ê) | ||||||||||||
5.640% due 03/07/07 | 2,200 | 2,201 | 2,200 | 2,201 | ||||||||
Danske Corp. | ||||||||||||
5.270% due 12/27/06 | 1,300 | 1,289 | 1,300 | 1,289 | ||||||||
5.240% due 01/30/07 | 2,900 | 2,876 | 11,500 | 11,349 | 14,400 | 14,225 | ||||||
Dexia Delaware LLC | ||||||||||||
5.265% due 11/21/06 | 600 | 599 | 600 | 599 | ||||||||
DNB Nor Bank ASA | ||||||||||||
5.255% due 12/07/06 | 7,900 | 7,883 | 7,900 | 7,883 | ||||||||
Duke Energy Field Services LLC | ||||||||||||
5.750% due 11/15/06 | 50 | 50 | 60 | 60 | 110 | 110 | ||||||
Fannie Mae (§) | ||||||||||||
Zero coupon due 06/25/07 | 430 | 416 | 500 | 484 | 930 | 900 | ||||||
Ford Motor Credit Co.(Ê) | ||||||||||||
6.340% due 03/21/07 | 1,800 | 1,799 | 1,800 | 1,799 | ||||||||
Fortis Bank | ||||||||||||
5.265% due 04/28/07 | 1,900 | 1,899 | 1,900 | 1,899 |
Table of Contents
France Treasury Bill BTF | ||||||||||||
Zero coupon due 11/02/06 | 1,130 | 1,442 | 1,130 | 1,442 | ||||||||
Zero coupon due 12/21/06 | 1,300 | 1,651 | 2,400 | 3,049 | 3,700 | 4,700 | ||||||
General Electric Capital Corp. | ||||||||||||
5.250% due 01/16/07 | 500 | 499 | 7,900 | 7,813 | 8,400 | 8,312 | ||||||
5.480% due 03/09/07 (Ê) | 2,200 | 2,201 | 2,200 | 2,201 | ||||||||
GMAC LLC | ||||||||||||
6.125% due 08/28/07 | 760 | 758 | 970 | 967 | 1,730 | 1,725 | ||||||
Golden West Financial Corp. | ||||||||||||
4.125% due 08/15/07 | 270 | 267 | 220 | 218 | 490 | 485 | ||||||
Goldman Sachs Group, Inc. (Ê) | ||||||||||||
Series MTNB | ||||||||||||
5.467% due 03/30/07 | 2,000 | 2,001 | 2,000 | 2,001 | ||||||||
Government of Canada | 250 | 248 | 340 | 338 | 590 | 586 | ||||||
Harrah’s Operating Co., Inc. | ||||||||||||
7.125% due 06/01/07 | 755 | 759 | 1,040 | 1,045 | 1,795 | 1,804 | ||||||
HBOS Treasury Services PLC | ||||||||||||
5.365% due 11/01/06 | 1,100 | 1,094 | 7,500 | 7,500 | 8,600 | 8,594 | ||||||
HSBC Finance Corp.(Ê) | ||||||||||||
5.590% due 02/09/07 | 2,000 | 2,001 | 2,000 | 2,001 | ||||||||
IXIS Corp. | ||||||||||||
5.270% due 11/08/06 | 10,600 | 10,589 | 10,600 | 10,589 | ||||||||
Metropolitan Life Global Funding I(Ê)(þ) | ||||||||||||
5.460% due 03/16/07 | 2,000 | 2,001 | 2,000 | 2,001 | ||||||||
Morgan Stanley(Ê) | ||||||||||||
5.512% due 01/12/07 | 2,000 | 2,001 | 2,000 | 2,001 | ||||||||
Rabobank USA Financial Corp. | ||||||||||||
5.300% due 11/01/06 | 10,000 | 10,000 | 10,000 | 10,000 | ||||||||
Russell Investment Company Money Market Fund | 78,184,183 | 78,184 | 160,036,031 | 160,036 | 238,220,214 | 238,220 | ||||||
Skandinaviska Enskilda Banken | ||||||||||||
5.255% due 12/08/06 | 7,100 | 7,062 | 1,400 | 1,392 | 8,500 | 8,454 | ||||||
Societe Generale NA | �� | |||||||||||
5.265% due 12/21/06 | 7,900 | 7,836 | 11,200 | 11,113 | 19,100 | 18,949 | ||||||
Spintab Swedish Mortgage | ||||||||||||
5.270% due 11/20/06 | 7,100 | 7,080 | 7,100 | 7,080 | ||||||||
Sprint Capital Corp. | ||||||||||||
6.000% due 01/15/07 | 975 | 975 | 1,225 | 1,226 | 2,200 | 2,201 | ||||||
Swedbank | ||||||||||||
5.275% due 11/09/06 | 500 | 499 | 500 | 499 | ||||||||
TELUS Corp. | ||||||||||||
7.500% due 06/01/07 | 770 | 779 | 1,070 | 1,082 | 1,840 | 1,861 | ||||||
Total SA | ||||||||||||
5.290% due 11/01/06 | 11,700 | 11,700 | 11,700 | 11,700 | ||||||||
UBS Financial Del LLC | ||||||||||||
5.265% due 11/16/06 | 1,300 | 1,297 | 1,300 | 1,297 | ||||||||
5.280% due 11/16/06 | 8,800 | 8,781 | 8,800 | 8,781 | ||||||||
5.260% due 12/01/06 | 5,000 | 4,989 | 5,000 | 4,989 | ||||||||
5.245% due 01/08/07 | 1,100 | 1,089 | 1,100 | 1,089 | ||||||||
United States Treasury Bills (z)(§) | ||||||||||||
5.092% due 11/30/06 | 255 | 254 | 255 | 254 | ||||||||
5.093% due 11/30/06 (ç) | 1,485 | 1,479 | 1,485 | 1,479 | ||||||||
4.898% due 12/07/06 (ç) | 200 | 199 | 500 | 498 | 700 | 697 | ||||||
4.987% due 12/07/06 (ç) | 100 | 100 | 100 | 100 | ||||||||
4.937% due 12/14/06 (ç) | 1,665 | 1,655 | 1,425 | 1,417 | 3,090 | 3,072 | ||||||
4.943% due 02/15/07 | 35 | 34 | 35 | 34 | ||||||||
4.961% due 02/15/07 | 75 | 74 | 75 | 74 | ||||||||
4.964% due 02/15/07 | 50 | 49 | 50 | 49 | ||||||||
5.034% due 02/15/07 | 160 | 158 | 160 | 158 | ||||||||
5.035% due 02/15/07 | 220 | 217 | 220 | 217 | ||||||||
5.131% due 02/15/07 | 75 | 74 | 150 | 148 | 225 | 222 | ||||||
United States Treasury Notes (Ñ) | ||||||||||||
3.500% due 11/15/06 | 440 | 440 | 440 | 440 | ||||||||
2.875% due 11/30/06 | 8,170 | 8,154 | 13,210 | 13,185 | 21,380 | 21,339 | ||||||
3.000% due 12/31/06 | 1,000 | 996 | 4,510 | 4,493 | 5,510 | 5,489 | ||||||
3.125% due 05/15/07 | 1,805 | 1,787 | 1,805 | 1,787 | ||||||||
4.375% due 05/15/07 | 3,630 | 3,617 | 4,185 | 4,170 | 7,815 | 7,787 | ||||||
6.625% due 05/15/07 | 515 | 519 | 1,920 | 1,936 | 2,435 | 2,455 | ||||||
4.250% due 10/31/07 | 6,150 | 6,110 | 6,150 | 6,110 | ||||||||
Westpac Banking Corp. | ||||||||||||
5.265% due 11/17/06 | 1,800 | 1,795 | 1,800 | 1,795 | ||||||||
Total Short-Term Investments (cost $499,566) | 169,788 | 329,603 | 499,391 | |||||||||
Table of Contents
Other Securities- 20.3% | |||||||||||||||
Russell Investment Company Money Market Fund (×) | 70,817,070 | 70,817 | 114,398,091 | 114,398 | 185,215,161 | 185,215 | |||||||||
State Street Securities Lending Quality Trust (×) | 205,158,768 | 205,159 | 331,414,043 | 331,414 | 536,572,811 | 536,573 | |||||||||
Total Other Securities (cost $721,788) | 275,976 | 445,812 | 721,788 | ||||||||||||
Total Investments - 135.7% (identified cost $4,810,959) | 1,903,413 | 2,916,732 | 4,820,145 | ||||||||||||
Other Assets and Liabilities, Net - (35.7%) | (491,612 | ) | (776,901 | ) | (1,268,513 | ) | |||||||||
Net Assets - 100.0% | 1,411,801 | 2,139,831 | 3,551,632 | ||||||||||||
Table of Contents
Russell Investment Company
Presentation of Portfolio Holdings - October 31, 2006 (Unaudited)
Fixed Income I Fund | Diversified Bond Fund | Fixed Income I Fund Proforma | |||||||
Categories | % of Net Assets | % of Net Assets | % of Net Assets | ||||||
Asset-Backed Securities | 8.0 | 8.1 | 8.1 | ||||||
Corporate Bonds and Notes | 16.3 | 15.5 | 15.8 | ||||||
International Debt | 3.5 | 3.5 | 3.5 | ||||||
Loan Agreements | 0.3 | 0.3 | 0.3 | ||||||
Mortgage-Backed Securities | 55.8 | 51.2 | 53.0 | ||||||
Municipal Bonds | 0.1 | 0.2 | 0.2 | ||||||
Non-US Bonds | 0.2 | 0.2 | 0.2 | ||||||
United States Government Agencies | 4.6 | 4.5 | 4.5 | ||||||
United States Government Treasuries | 14.3 | 16.4 | 15.6 | ||||||
Preferred Stocks | 0.2 | 0.2 | 0.1 | ||||||
Options Purchased | — | * | — | * | — | * | |||
Short-Term Investments | 12.0 | 15.4 | 14.1 | ||||||
Other Securities | 19.5 | 20.8 | 20.3 | ||||||
Total Investments | 134.8 | 136.3 | 135.7 | ||||||
Other Assets and Liabilities, Net | (34.8 | ) | (36.3 | ) | (35.7 | ) | |||
100.0 | 100.0 | 100.0 | |||||||
Futures Contracts | (— | *) | — | * | — | * | |||
Options Written | (— | *) | (— | *) | (— | *) | |||
Foreign Currency Exchange Contracts | (— | *) | (— | *) | (— | *) | |||
Interest Rate Swap Contracts | (— | *) | (— | *) | (— | *) | |||
Credit Default Swap Contracts | — | * | — | * | — | * |
* | Less than .05% of net assets. |
Table of Contents
Russell Investment Company
Schedule of Investments, continued - October 31, 2006
Amounts in thousands | Fixed Income I Fund | Diversified Bond Fund | Fixed Income I Fund Proforma | ||||||||||||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | Notional Amount $ | Market Value $ | Notional Amount $ | Market Value $ | |||||||||
Eurodollar Futures | |||||||||||||||
Dec 2006 95.00 Put (64) | 6,175 | (24 | ) | 9,025 | (35 | ) | 15,200 | (59 | ) | ||||||
Dec 2006 95.50 Put (30) | 7,162 | (65 | ) | 7,162 | (65 | ) | |||||||||
Mar 2007 94.75 Put (21) | 2,381 | (2 | ) | 2,843 | (3 | ) | 5,224 | (5 | ) | ||||||
Mar 2007 95.25 Put (24) | 2,132 | (12 | ) | 3,334 | (17 | ) | 5,466 | (29 | ) | ||||||
Federal National Mortgage Association | |||||||||||||||
Nov 2006 100.40 Call (2) | 501,992 | (1 | ) | 30,120 | — | 532,112 | (1 | ) | |||||||
United States Treasury Bonds | |||||||||||||||
Nov 2006 111.00 Call (60) | 4,107 | (64 | ) | 2,553 | (40 | ) | 6,660 | (104 | ) | ||||||
Nov 2006 104.00 Put (51) | 2,912 | — | 2,392 | (1 | ) | 5,304 | (1 | ) | |||||||
Nov 2006 105.00 Put (10) | 945 | — | 105 | — | 1,050 | — | |||||||||
Feb 2007 109.00 Put (45) | 1,962 | (7 | ) | 2,943 | (10 | ) | 4,905 | (17 | ) | ||||||
United States Treasury Notes | |||||||||||||||
2 Year Futures | |||||||||||||||
Nov 2006 101.75 Put (835) | 71,632 | (11 | ) | 98,290 | (15 | ) | 169,922 | (26 | ) | ||||||
10 Year Futures | |||||||||||||||
Nov 2006 105.00 Call (48) | 2,100 | (64 | ) | 2,940 | (90 | ) | 5,040 | (154 | ) | ||||||
Nov 2006 106.00 Call (36) | 1,590 | (34 | ) | 2,226 | (47 | ) | 3,816 | (81 | ) | ||||||
Nov 2006 109.00 Call (19) | 436 | (1 | ) | 1,635 | (2 | ) | 2,071 | (3 | ) | ||||||
Feb 2007 110.00 Call (27) | 1,210 | (4 | ) | 1,760 | (6 | ) | 2,970 | (10 | ) | ||||||
Nov 2006 106.00 Put (19) | 424 | — | 1,590 | — | 2,014 | — | |||||||||
Total Liability for Options Written (premiums received $416) | (289 | ) | (266 | ) | (555 | ) | |||||||||
Table of Contents
Russell Investment Company
Schedule of Investments, continued - October 31, 2006
Amounts in thousands | Fixed Income I Fund | Diversified Bond Fund | Fixed Income I Fund Proforma | ||||||||||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||||||||
Long Positions | |||||||||||||||
Euribor Futures | |||||||||||||||
expiration date 06/07 (63) | 9,201 | (8 | ) | 10,121 | (9 | ) | 19,322 | (17 | ) | ||||||
Eurodollar Futures (CME) | |||||||||||||||
expiration date 12/06 (318) | 32,649 | (212 | ) | 42,586 | (277 | ) | 75,235 | (489 | ) | ||||||
expiration date 03/07 (1,089) | 109,945 | (279 | ) | 148,094 | (351 | ) | 258,039 | (630 | ) | ||||||
expiration date 06/07 (932) | 90,915 | (86 | ) | 130,319 | (103 | ) | 221,234 | (189 | ) | ||||||
expiration date 09/07 (1,998) | 180,738 | 137 | 294,412 | 261 | 475,150 | 398 | |||||||||
expiration date 12/07 (1,467) | 125,723 | 269 | 223,588 | 478 | 349,311 | 747 | |||||||||
expiration date 03/08 (27) | 2,859 | — | 3,572 | 1 | 6,431 | 1 | |||||||||
LIBOR Futures | |||||||||||||||
expiration date 06/07 (24) | 2,256 | (3 | ) | 3,159 | (4 | ) | 5,415 | (7 | ) | ||||||
expiration date 09/07 (43) | 3,837 | (4 | ) | 5,868 | (6 | ) | 9,705 | (10 | ) | ||||||
expiration date 12/07 (67) | 6,095 | (5 | ) | 9,030 | (7 | ) | 15,125 | (12 | ) | ||||||
expiration date 03/08 (17) | 1,581 | (1 | ) | 2,259 | (2 | ) | 3,840 | (3 | ) | ||||||
expiration date 06/08 (13) | 1,130 | (1 | ) | 1,808 | (1 | ) | 2,938 | (2 | ) | ||||||
expiration date 09/08 (18) | 1,582 | (1 | ) | 2,486 | (2 | ) | 4,068 | (3 | ) | ||||||
United States Treasury Bonds | |||||||||||||||
expiration date 12/06 (161) | 7,999 | 145 | 10,139 | 163 | 18,138 | 308 | |||||||||
United States Treasury 2 Year Notes | |||||||||||||||
expiration date 12/06 (349) | 26,164 | 44 | 45,174 | 59 | 71,338 | 103 | |||||||||
United States Treasury 5 Year Notes | |||||||||||||||
expiration date 12/06 (1,030) | 41,381 | 262 | 67,349 | 403 | 108,730 | 665 | |||||||||
United States Treasury 10 Year Notes | |||||||||||||||
expiration date 12/06 (518) | 13,419 | 133 | 42,638 | 420 | 56,057 | 553 | |||||||||
Short Positions | |||||||||||||||
Eurodollar Futures (CME) | |||||||||||||||
expiration date 03/08 (33) | 3,335 | (20 | ) | 4,526 | (27 | ) | 7,861 | (47 | ) | ||||||
United States Treasury Bonds | |||||||||||||||
expiration date 12/06 (206) | 7,323 | (119 | ) | 15,885 | (258 | ) | 23,208 | (377 | ) | ||||||
United States Treasury 10 Year Notes | |||||||||||||||
expiration date 12/06 (430) | 25,540 | (278 | ) | 20,994 | (265 | ) | 46,534 | (543 | ) | ||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | (27 | ) | 473 | 446 | |||||||||||
Table of Contents
Russell Investment Company
Schedule of Investments, continued - October 31, 2006
Amounts in thousands Credit Default Swap Contracts | Fixed Income I Fund | ||||||||||
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Russian Federation | JP Morgan | 100 | 0.460 | % | 06/20/07 | — | |||||
Total Market Value of Open Credit Default Contracts | |||||||||||
Premiums Paid (Received) - ($0) | — | ||||||||||
Table of Contents
Diversified Bond Fund
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Russian Federation | JP Morgan | 200 | 0.460 | % | 06/20/07 | — | |||||
American International Group | JP Morgan | 3,200 | 0.050 | % | 12/20/07 | 1 | |||||
Total Market Value of Open Credit Default Swap Contracts | |||||||||||
Premiums Paid (Received) - ($0) | 1 | ||||||||||
Table of Contents
Fixed Income I Fund Proforma
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Russian Federation | JP Morgan | 300 | 0.460 | % | 06/20/07 | — | |||||
American International Group | JP Morgan | 3,200 | 0.050 | % | 12/20/07 | 1 | |||||
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - ($0) | 1 | ||||||||||
Table of Contents
Russell Investment Company
Schedule of Investments, continued - October 31, 2006
Fixed Income I Fund
Amounts in thousands
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized (Depreciation) | ||||||||
USD | 832 | AUD | 1,089 | 11/07/06 | 10 | ||||||
USD | 456 | CAD | 519 | 11/07/06 | 6 | ||||||
USD | 941 | CAD | 1,063 | 11/07/06 | 5 | ||||||
USD | 2,140 | CAD | 2,380 | 11/07/06 | (21 | ) | |||||
USD | 386 | CAD | 439 | 11/30/06 | 6 | ||||||
USD | 317 | CAD | 356 | 02/07/07 | 2 | ||||||
USD | 258 | CNY | 1,996 | 03/19/07 | (2 | ) | |||||
USD | 993 | EUR | 791 | 11/07/06 | 16 | ||||||
USD | 511 | EUR | 400 | 03/23/07 | 3 | ||||||
USD | 398 | GBP | 214 | 11/30/06 | 10 | ||||||
USD | 3,011 | JPY | 342,993 | 11/15/06 | (72 | ) | |||||
USD | 3,019 | JPY | 342,993 | 11/15/06 | (80 | ) | |||||
USD | 596 | JPY | 69,000 | 12/20/06 | (2 | ) | |||||
USD | 2,511 | JPY | 291,900 | 12/20/06 | 3 | ||||||
USD | 2,095 | JPY | 247,044 | 02/07/07 | 46 | ||||||
USD | 827 | PLN | 2,556 | 11/07/06 | 17 | ||||||
USD | 97 | SGD | 154 | 11/27/06 | 2 | ||||||
USD | 95 | TWD | 3,080 | 11/22/06 | (3 | ) | |||||
AUD | 1,089 | USD | 821 | 11/07/06 | (22 | ) | |||||
CAD | 2,380 | JPY | 247,044 | 11/07/06 | 19 | ||||||
CAD | 2,380 | JPY | 247,044 | 11/07/06 | (23 | ) | |||||
CAD | 162 | USD | 145 | 11/07/06 | — | ||||||
CAD | 356 | USD | 316 | 11/07/06 | (2 | ) | |||||
CAD | 1,063 | USD | 935 | 11/07/06 | (12 | ) | |||||
CAD | 1,063 | USD | 944 | 02/07/07 | (5 | ) | |||||
EUR | 222 | USD | 285 | 11/07/06 | 1 | ||||||
EUR | 569 | USD | 723 | 11/07/06 | (3 | ) | |||||
EUR | 623 | USD | 793 | 12/08/06 | (4 | ) | |||||
EUR | 1,339 | USD | 1,708 | 12/08/06 | (5 | ) | |||||
EUR | 791 | USD | 998 | 02/07/07 | (17 | ) | |||||
JPY | 247,044 | USD | 2,069 | 11/07/06 | (45 | ) | |||||
JPY | 64,100 | USD | 555 | 12/20/06 | 4 | ||||||
PLN | 2,556 | USD | 829 | 11/07/06 | (14 | ) | |||||
PLN | 2,556 | USD | 829 | 02/07/07 | (18 | ) | |||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (200 | ) | |||||||||
Diversified Bond Fund
Amount Sold | Amount Bought | Settlement Date | Unrealized (Depreciation) | ||||||||
USD | 1,066 | AUD | 1,401 | 11/07/06 | 18 | ||||||
USD | 945 | CAD | 1,068 | 11/07/06 | 6 | ||||||
USD | 2,932 | CAD | 3,260 | 11/07/06 | (28 | ) | |||||
USD | 517 | CAD | 589 | 11/30/06 | 8 | ||||||
USD | 363 | CNY | 2,809 | 03/19/07 | (2 | ) | |||||
USD | 1,396 | EUR | 1,112 | 11/07/06 | 24 | ||||||
USD | 1,445 | EUR | 1,130 | 11/20/06 | (1 | ) | |||||
USD | 702 | EUR | 550 | 03/23/07 | 4 | ||||||
USD | 491 | GBP | 264 | 11/30/06 | 12 | ||||||
USD | 4,103 | JPY | 467,350 | 11/15/06 | (99 | ) | |||||
USD | 4,114 | JPY | 467,350 | 11/15/06 | (109 | ) | |||||
USD | 838 | JPY | 97,000 | 12/20/06 | (3 | ) | |||||
USD | 3,499 | JPY | 406,750 | 12/20/06 | 3 | ||||||
USD | 2,870 | JPY | 338,388 | 02/07/07 | 63 | ||||||
USD | 978 | PLN | 3,025 | 11/07/06 | 20 | ||||||
USD | 131 | SGD | 208 | 11/27/06 | 2 | ||||||
USD | 128 | TWD | 4,140 | 11/22/06 | (3 | ) | |||||
AUD | 1,401 | USD | 1,057 | 11/07/06 | (28 | ) | |||||
CAD | 3,260 | JPY | 338,388 | 11/07/06 | 26 | ||||||
CAD | 3,260 | JPY | 338,388 | 11/07/06 | (33 | ) | |||||
CAD | 1,068 | USD | 955 | 11/07/06 | 3 | ||||||
CAD | 1,068 | USD | 948 | 02/07/07 | (6 | ) | |||||
EUR | 1,130 | USD | 1,443 | 11/02/06 | 1 | ||||||
EUR | 192 | USD | 246 | 11/07/06 | 1 | ||||||
EUR | 920 | USD | 1,170 | 11/07/06 | (5 | ) | |||||
EUR | 2,108 | USD | 2,683 | 12/08/06 | (13 | ) | |||||
EUR | 1,112 | USD | 1,402 | 02/07/07 | (25 | ) | |||||
JPY | 338,388 | USD | 2,834 | 11/07/06 | (62 | ) | |||||
JPY | 89,800 | USD | 778 | 12/20/06 | 7 | ||||||
PLN | 3,025 | USD | 981 | 11/07/06 | (17 | ) | |||||
PLN | 3,025 | USD | 981 | 02/07/07 | (20 | ) | |||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (256 | ) | |||||||||
Fixed Income I Fund Proforma
Amount Sold | Amount Bought | Settlement Date | Unrealized (Depreciation) | ||||||||
USD | 832 | AUD | 1,089 | 11/07/06 | 10 | ||||||
USD | 1,066 | AUD | 1,401 | 11/07/06 | 18 | ||||||
USD | 456 | CAD | 519 | 11/07/06 | 6 | ||||||
USD | 941 | CAD | 1,063 | 11/07/06 | 5 | ||||||
USD | 2,140 | CAD | 2,380 | 11/07/06 | (21 | ) | |||||
USD | 945 | CAD | 1,068 | 11/07/06 | 6 | ||||||
USD | 2,932 | CAD | 3,260 | 11/07/06 | (28 | ) | |||||
USD | 386 | CAD | 439 | 11/30/06 | 6 | ||||||
USD | 517 | CAD | 589 | 11/30/06 | 8 | ||||||
USD | 317 | CAD | 356 | 02/07/07 | 2 | ||||||
USD | 258 | CNY | 1,996 | 03/19/07 | (2 | ) | |||||
USD | 363 | CNY | 2,809 | 03/19/07 | (2 | ) | |||||
USD | 993 | EUR | 791 | 11/07/06 | 16 | ||||||
USD | 1,396 | EUR | 1,112 | 11/07/06 | 24 | ||||||
USD | 1,445 | EUR | 1,130 | 11/20/06 | (1 | ) | |||||
USD | 511 | EUR | 400 | 03/23/07 | 3 | ||||||
USD | 702 | EUR | 550 | 03/23/07 | 4 | ||||||
USD | 398 | GBP | 214 | 11/30/06 | 10 | ||||||
USD | 491 | GBP | 264 | 11/30/06 | 12 | ||||||
USD | 3,011 | JPY | 342,993 | 11/15/06 | (72 | ) | |||||
USD | 3,019 | JPY | 342,993 | 11/15/06 | (80 | ) | |||||
USD | 4,103 | JPY | 467,350 | 11/15/06 | (99 | ) | |||||
USD | 4,114 | JPY | 467,350 | 11/15/06 | (109 | ) | |||||
USD | 596 | JPY | 69,000 | 12/20/06 | (2 | ) | |||||
USD | 2,511 | JPY | 291,900 | 12/20/06 | 3 | ||||||
USD | 838 | JPY | 97,000 | 12/20/06 | (3 | ) | |||||
USD | 3,499 | JPY | 406,750 | 12/20/06 | 3 | ||||||
USD | 2,095 | JPY | 247,044 | 02/07/07 | 46 | ||||||
USD | 2,870 | JPY | 338,388 | 02/07/07 | 63 | ||||||
USD | 827 | PLN | 2,556 | 11/07/06 | 17 | ||||||
USD | 978 | PLN | 3,025 | 11/07/06 | 20 | ||||||
USD | 97 | SGD | 154 | 11/27/06 | 2 | ||||||
USD | 131 | SGD | 208 | 11/27/06 | 2 | ||||||
USD | 95 | TWD | 3,080 | 11/22/06 | (3 | ) | |||||
USD | 128 | TWD | 4,140 | 11/22/06 | (3 | ) | |||||
AUD | 1,089 | USD | 821 | 11/07/06 | (22 | ) | |||||
AUD | 1,401 | USD | 1,057 | 11/07/06 | (28 | ) | |||||
CAD | 2,380 | JPY | 247,044 | 11/07/06 | 19 | ||||||
CAD | 2,380 | JPY | 247,044 | 11/07/06 | (23 | ) | |||||
CAD | 3,260 | JPY | 338,388 | 11/07/06 | 26 | ||||||
CAD | 3,260 | JPY | 338,388 | 11/07/06 | (33 | ) | |||||
CAD | 162 | USD | 145 | 11/07/06 | — | ||||||
CAD | 356 | USD | 316 | 11/07/06 | (2 | ) | |||||
CAD | 1,063 | USD | 935 | 11/07/06 | (12 | ) | |||||
CAD | 1,068 | USD | 955 | 11/07/06 | 3 | ||||||
CAD | 1,063 | USD | 944 | 02/07/07 | (5 | ) | |||||
CAD | 1,068 | USD | 948 | 02/07/07 | (6 | ) | |||||
EUR | 1,130 | USD | 1,443 | 11/02/06 | 1 | ||||||
EUR | 222 | USD | 285 | 11/07/06 | 1 | ||||||
EUR | 569 | USD | 723 | 11/07/06 | (3 | ) | |||||
EUR | 192 | USD | 246 | 11/07/06 | 1 | ||||||
EUR | 920 | USD | 1,170 | 11/07/06 | (5 | ) | |||||
EUR | 623 | USD | 793 | 12/08/06 | (4 | ) | |||||
EUR | 1,339 | USD | 1,708 | 12/08/06 | (5 | ) | |||||
EUR | 2,108 | USD | 2,683 | 12/08/06 | (13 | ) | |||||
EUR | 791 | USD | 998 | 02/07/07 | (17 | ) | |||||
EUR | 1,112 | USD | 1,402 | 02/07/07 | (25 | ) | |||||
JPY | 247,044 | USD | 2,069 | 11/07/06 | (45 | ) | |||||
JPY | 338,388 | USD | 2,834 | 11/07/06 | (62 | ) | |||||
JPY | 64,100 | USD | 555 | 12/20/06 | 4 | ||||||
JPY | 89,800 | USD | 778 | 12/20/06 | 7 | ||||||
PLN | 2,556 | USD | 829 | 11/07/06 | (14 | ) | |||||
PLN | 3,025 | USD | 981 | 11/07/06 | (17 | ) | |||||
PLN | 2,556 | USD | 829 | 02/07/07 | (18 | ) | |||||
PLN | 3,025 | USD | 981 | 02/07/07 | (20 | ) | |||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (456 | ) | |||||||||
Table of Contents
Russell Investment Company
Schedule of Investments, continued - October 31, 2006
Fixed Income I Fund
Amounts in thousands
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||||
Bank of America | USD | 600 | 5.000 | % | Three Month LIBOR | 12/20/36 | (23 | ) | ||||||
Barclays Bank PLC | GBP | 6,200 | 5.000 | % | Six Month LIBOR | 06/15/07 | (11 | ) | ||||||
Barclays Bank PLC | USD | 10,700 | 5.000 | % | Three Month LIBOR | 12/20/08 | (7 | ) | ||||||
BNP Paribas | EUR | 1,200 | 2.090 | % | Consumer Price Index (France) | 10/15/10 | 16 | |||||||
Deutsche Bank AG | USD | 400 | 5.000 | % | Three Month LIBOR | 12/20/36 | (15 | ) | ||||||
Goldman Sachs | USD | 300 | 5.000 | % | Three Month LIBOR | 12/20/36 | (11 | ) | ||||||
Lehman Brothers | GBP | 3,300 | 4.500 | % | Six Month LIBOR | 09/20/09 | (86 | ) | ||||||
Lehman Brothers | USD | 500 | 5.000 | % | Three Month LIBOR | 12/15/35 | (15 | ) | ||||||
Merrill Lynch | GBP | 5,700 | 4.500 | % | Six Month LIBOR | 09/20/09 | (148 | ) | ||||||
Merrill Lynch | GBP | 200 | Six Month LIBOR | | 4.000% | 12/15/35 | (6 | ) | ||||||
Morgan Stanley | EUR | 1,300 | 6.000 | % | Six Month LIBOR | 06/18/34 | 301 | |||||||
Royal Bank of Scotland | USD | 2,100 | 5.000 | % | Three Month LIBOR | 12/20/36 | (106 | ) | ||||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($83) | (111 | ) | ||||||||||||
Table of Contents
Diversified Bond Fund
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||||
Bank of America | USD | 1,100 | 5.000 | % | Three Month LIBOR | 12/20/36 | (42 | ) | ||||||
Barclays Bank PLC | GBP | 7,700 | 5.000 | % | Six Month LIBOR | 06/15/07 | (13 | ) | ||||||
Barclays Bank PLC | USD | 8,300 | 5.000 | % | Three Month LIBOR | 12/20/08 | (6 | ) | ||||||
BNP Paribas | EUR | 1,300 | 2.090 | % | Consumer Price Index (France) | 10/15/10 | 18 | |||||||
Deutsche Bank AG | USD | 1,000 | 5.000 | % | Three Month LIBOR | 12/20/36 | (38 | ) | ||||||
Goldman Sachs | USD | 500 | 5.000 | % | Three Month LIBOR | 12/20/36 | (19 | ) | ||||||
Lehman Brothers | GBP | 4,200 | 4.500 | % | Six Month LIBOR | 09/20/09 | (109 | ) | ||||||
Lehman Brothers | EUR | 2,100 | 4.000 | % | Six Month LIBOR | 12/15/11 | 15 | |||||||
Lehman Brothers | USD | 500 | 5.000 | % | Three Month LIBOR | 12/15/35 | (15 | ) | ||||||
Merrill Lynch | GBP | 10,500 | 4.500 | % | Six Month LIBOR | 09/20/09 | (273 | ) | ||||||
Merrill Lynch | GBP | 200 | Six Month LIBOR | | 4.000% | 12/15/35 | (6 | ) | ||||||
Morgan Stanley | EUR | 1,900 | 6.000 | % | Six Month LIBOR | 06/18/34 | 439 | |||||||
Royal Bank of Scotland | USD | 7,900 | 5.000 | % | Three Month LIBOR | 12/20/36 | (397 | ) | ||||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($292) | (446 | ) | ||||||||||||
Table of Contents
Fixed Income I Fund Proforma
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||||
Bank of America | USD | 1,700 | 5.000 | % | Three Month LIBOR | 12/30/36 | (65 | ) | ||||||
Barclays Bank PLC | GBP | 13,900 | 5.000 | % | Six Month LIBOR | 06/15/07 | (24 | ) | ||||||
Barclays Bank PLC | USD | 19,000 | 5.000 | % | Three Month LIBOR | 12/20/08 | (13 | ) | ||||||
BNP Paribas | EUR | 2,500 | 2.090 | % | Consumer Price Index (France) | 10/15/10 | 34 | |||||||
Deutsche Bank AG | USD | 1,400 | 5.000 | % | Three Month LIBOR | 12/20/36 | (53 | ) | ||||||
Goldman Sachs | USD | 800 | 5.000 | % | Three Month LIBOR | 12/20/36 | (30 | ) | ||||||
Lehman Brothers | GBP | 7,500 | 4.500 | % | Six Month LIBOR | 09/20/09 | (195 | ) | ||||||
Lehman Brothers | EUR | 2,100 | 4.000 | % | Six Month LIBOR | 12/15/11 | 15 | |||||||
Lehman Brothers | USD | 1,000 | 5.000 | % | Three Month LIBOR | 12/15/35 | (30 | ) | ||||||
Merrill Lynch | GBP | 16,200 | 4.500 | % | Six Month LIBOR | 09/20/09 | (421 | ) | ||||||
Merrill Lynch | GBP | 400 | Six Month LIBOR | 4.000% | 12/15/35 | (12 | ) | |||||||
Morgan Stanley | EUR | 3,200 | 6.000 | % | Six Month LIBOR | 06/18/34 | 740 | |||||||
Royal Bank of Scotland | USD | 10,000 | 5.000 | % | Three Month LIBOR | 12/20/36 | (503 | ) | ||||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($375) | (557 | ) | ||||||||||||
Table of Contents
RUSSELL INVESTMENT COMPANY*
909 A Street
Tacoma, Washington 98402
Telephone 1-800-787-7354
STATEMENT OF ADDITIONAL INFORMATION
Non-Fund of Funds
March 1, 2007
As Supplemented May 24, 2007
Russell Investment Company (“RIC”) is a single legal entity organized as a Massachusetts business trust. RIC operates investment portfolios referred to as “Funds.” RIC offers Shares of beneficial interest in the Funds in multiple separate Prospectuses.
This Statement of Additional Information (“Statement”) is not a prospectus; this Statement should be read in conjunction with the Funds’ Prospectuses. Prospectuses may be obtained without charge by telephoning or writing RIC at the number or address shown above.
Capitalized terms not otherwise defined in this Statement shall have the meanings assigned to them in the Prospectuses.
This Statement incorporates by reference RIC’s Annual Reports to Shareholders for the year ended October 31, 2006. Copies of the Funds’ Annual Reports accompany this Statement.
As of the date of this Statement, RIC is comprised of 35 Funds, 24 of which commenced operations on the date indicated below:
Fund | Fund Inception Date | Prospectus Date | ||
Equity I | October 15, 1981 | March 1, 2007# | ||
Equity II | December 28, 1981 | March 1, 2007# | ||
Equity Q | May 29, 1987 | March 1, 2007# | ||
Tax-Managed Large Cap | October 7, 1996 | March 1, 2007# | ||
Tax-Managed Mid & Small Cap | December 1, 1999 | March 1, 2007# | ||
International | January 31, 1983 | March 1, 2007# | ||
Emerging Markets | January 29, 1993 | March 1, 2007# | ||
Fixed Income I | October 15, 1981 | March 1, 2007# | ||
Fixed Income III | January 29, 1993 | March 1, 2007# | ||
Money Market | October 15, 1981 | March 1, 2007# | ||
Diversified Equity | September 5, 1985 | March 1, 2007# | ||
Special Growth | September 5, 1985 | March 1, 2007# | ||
Quantitative Equity | May 15, 1987 | March 1, 2007# | ||
International Securities | September 5, 1985 | March 1, 2007# | ||
Global Equity | March 1, 2007 | February 16, 2007# | ||
Real Estate Securities | July 28, 1989 | March 1, 2007# | ||
Diversified Bond | September 5, 1985 | March 1, 2007# | ||
Short Duration Bond1 | October 30, 1981 | March 1, 2007# | ||
Multistrategy Bond | January 29, 1993 | March 1, 2007# | ||
Tax Exempt Bond | September 5, 1985 | March 1, 2007# | ||
U.S. Government Money Market | September 5, 1985 | March 1, 2007# | ||
Tax Free Money Market | May 8, 1987 | March 1, 2007# | ||
Select Growth | January 31, 2001 | March 1, 2007# | ||
Select Value | January 31, 2001 | March 1, 2007# |
1 | On September 15, 2004, the Short Term Bond Fund was renamed the Short Duration Bond Fund. |
# | As supplemented May 24, 2007 |
* | On July 1, 2006 Frank Russell Investment Company changed its name to Russell Investment Company. |
Table of Contents
Each of the Funds (except the U.S. Government Money Market and Tax Free Money Market Funds) presently offers interests in different classes of Shares as described in the table below. For purposes of this Statement, each Fund that issues multiple classes of Shares is referred to as a “Multiple Class Fund.” Six of the Funds, the Equity I, Equity II, Equity Q, International, Fixed Income I and Fixed Income III Funds, are referred to in this Statement as the “Institutional Funds.” Unless otherwise indicated, this Statement relates to all classes of Shares of the Funds.
Fund | Class A | Class C | Class E | Class S | Class I | Class Y | ||||||
Equity I | X | X | X | |||||||||
Equity II | X | X | X | |||||||||
Equity Q | X | X | X | |||||||||
Tax-Managed Large Cap | X | X | X | |||||||||
Tax-Managed Mid & Small Cap | X | X | X | |||||||||
International | X | X | X | |||||||||
Emerging Markets | X | X | X | X | ||||||||
Fixed Income I | X | X | X | |||||||||
Fixed Income III | X | X | X | |||||||||
Money Market | X | X | ||||||||||
Diversified Equity | X | X | X | X | ||||||||
Special Growth | X | X | X | X | ||||||||
Quantitative Equity | X | X | X | X | ||||||||
International Securities | X | X | X | X | ||||||||
Global Equity | X | X | X | X | ||||||||
Real Estate Securities | X | X | X | X | ||||||||
Diversified Bond | X | X | X | |||||||||
Short Duration Bond | X | X | X | X | ||||||||
Multistrategy Bond | X | X | X | X | ||||||||
Tax Exempt Bond | X | X | X | |||||||||
U.S. Government Money Market | X | |||||||||||
Tax Free Money Market | X | |||||||||||
Select Growth | X | X | X | X | ||||||||
Select Value | X | X | X | X |
Table of Contents
1 | ||
1 | ||
1 | ||
2 | ||
11 | ||
18 | ||
18 | ||
18 | ||
19 | ||
22 | ||
24 | ||
25 | ||
25 | ||
27 | ||
27 | ||
27 | ||
27 | ||
30 | ||
30 | ||
32 | ||
33 | ||
33 | ||
36 | ||
36 | ||
37 | ||
37 | ||
38 | ||
39 | ||
40 | ||
42 | ||
44 | ||
46 | ||
47 | ||
49 | ||
53 | ||
74 | ||
79 | ||
85 | ||
91 |
Table of Contents
ORGANIZATION AND BUSINESS HISTORY. RIC commenced business operations as a Maryland corporation on October 15, 1981. On January 2, 1985, RIC reorganized by changing its domicile and legal status to a Massachusetts business trust.
RIC is currently organized and operating under an Amended and Restated Master Trust Agreement dated August 19, 2002, as amended, and the provisions of Massachusetts’s law governing the operation of a Massachusetts business trust. The Board of Trustees (“Board” or the “Trustees”) may amend the Master Trust Agreement from time to time; provided, however, that any amendment which would materially and adversely affect shareholders of RIC as a whole, or shareholders of a particular Fund, must be approved by the holders of a majority of the Shares of RIC or the Fund, respectively. RIC is a registered open-end management investment company. Each of the Funds is diversified. Under the Investment Company Act of 1940 as amended (the “1940 Act”), a diversified company is defined as a management company which meets the following requirements: at least 75% of the value of its total assets is represented by cash and cash items (including receivables), Government securities, securities of other investment companies, and other securities for the purposes of this calculation limited in respect of any one issuer to an amount not greater in value than five percent of the value of the total assets of such management company and to not more than 10% of the outstanding voting securities of such issuer.
RIC is authorized to issue Shares of beneficial interest, and may divide the Shares into two or more series, each of which evidences a pro rata ownership interest in a different investment portfolio – a “Fund.” Each Fund is a separate trust under Massachusetts law. The Trustees may, without seeking shareholder approval, create additional Funds at any time. The Master Trust Agreement provides that shareholders may be required to redeem their shares at any time (1) if the Trustees determine in their sole discretion that failure to so redeem may have material adverse consequences to the shareholders of RIC or of any Fund or (2) upon such other conditions as may from time to time be determined by the Trustees and set forth in the prospectuses with respect to the maintenance of shareholder accounts of a minimum amount. However, shareholders can only be required to redeem their Shares to the extent consistent with the 1940 Act, the rules thereunder and Securities and Exchange Commission interpretations thereof.
RIC’s Funds are authorized to issue Shares of beneficial interest in one or more classes. Shares of each class of a Fund have a par value of $.01 per share, are fully paid and nonassessable, and have no preemptive or conversion rights. Shares of each class of a Fund represent proportionate interests in the assets of that Fund and have the same voting and other rights and preferences as the Shares of other classes of the Fund. Shares of each class of a Fund are entitled to the dividends and distributions earned on the assets belonging to the Fund that the Board declares. Each class of Shares is designed to meet different investor needs. Class A Shares of the Money Market Fund are not subject to an initial sales charge but are subject to a Rule 12b-1 fee of up to 0.75% (currently limited to 0.15%). Class A Shares of certain Russell Funds are subject to an initial sales charge and a Rule 12b-1 fee of up to 0.75% (presently limited to 0.25%). Class C Shares are subject to a Rule 12b-1 fee of up to 0.75% and a shareholder services fee of up to 0.25%. Class E Shares are subject to a shareholder services fee of up to 0.25%. The Class I, Class Y, and Class S Shares are not subject to either a Rule 12b-1 fee or a shareholder services fee. Unless otherwise indicated, “Shares” in this Statement refers to all classes of Shares of the Funds.
Under certain unlikely circumstances, as is the case with any Massachusetts business trust, a shareholder of a Fund may be held personally liable for the obligations of the Fund. The Master Trust Agreement provides that shareholders shall not be subject to any personal liability for the acts or obligations of a Fund and that every written agreement, obligation or other undertaking of the Funds shall contain a provision to the effect that the shareholders are not personally liable thereunder. The amended Master Trust Agreement also provides that RIC shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of a Fund and satisfy any judgment thereon. Thus, the risk of any shareholder incurring financial loss beyond his investment on account of shareholder liability is limited to circumstances in which a Fund itself would be unable to meet its obligations.
Frank Russell Company (“FRC”) has the right to grant (and withdraw) the nonexclusive use of the name “Frank Russell” or any variation.
SHAREHOLDER MEETINGS. RIC will not hold annual meetings of shareholders, but special meetings may be held. Special meetings may be convened (i) by the Board, (ii) upon written request to the Board by shareholders holding at least 10% of RIC’s outstanding Shares, or (iii) upon the Board’s failure to honor the shareholders’ request described above, by shareholders holding at least 10% of the outstanding Shares by giving notice of the special meeting to shareholders. The Trustees will provide the assistance required by the Investment Company Act of 1940 in connection with any special meeting called by shareholders following a failure of the Board to honor a shareholder request for a special meeting. Each share of a class of a Fund has one vote in Trustee elections and other matters submitted for shareholder vote. On any matter which affects only a particular Fund or class, only Shares of that Fund or class are entitled to vote. There are no cumulative voting rights.
Table of Contents
CONTROLLING SHAREHOLDERS. The Trustees have the authority and responsibility to manage the business of RIC, and hold office for life unless they resign or are removed by, in substance, a vote of two-thirds of RIC Shares outstanding. Under these circumstances, no one person, entity or shareholder “controls” RIC.
At January 31, 2007, the following shareholders owned 5% or more of any Class of any Fund’s Shares:
Diversified Bond Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 19.33%, Record.
Diversified Bond Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 15.47%, Record.
Diversified Bond Fund - Class S - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 47.21%, Record.
MODERATE STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 14.17%, Record.
Diversified Equity Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 9.28%, Record.
Diversified Equity Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 8.48%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 6.60%, Record.
Diversified Equity Fund - Class S - GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 21.28%, Record.
BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 20.98%, Record.
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401- 13.17%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 5.67%, Record.
Emerging Markets Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 12.18%, Record.
Emerging Markets Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 23.47%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 9.85%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 7.49%, Record.
Emerging Markets Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 23.68%, Record.
BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 13.09%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 12.21%, Record.
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401- 7.48%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 6.32%, Record.
2
Table of Contents
Equity I Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 21.36%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 13.57%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 12.47%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 9.27%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702- 7140, 7.85%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 5.08%, Record.
Equity I Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 42.39%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 7.68%, Record.
Equity I Fund - Class Y - VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 10.43%, Record.
RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 8.26%, Record.
SOCIETY FOR HUMAN RESOURCE, MANAGEMENT, 1800 DUKE ST, ALEXANDRIA VA 22314-3494, 6.94%, Record.
RTC AS TTEE FOR THE, NATIVE HAWAIIAN TRUST FUND, 711 KAPIOLANI BLVD STE 500, HONOLULU HI 96813-5255, 6.77%, Record.
TRIANGLE COMMUNITY FOUNDATION, CORE EQUITY, 4813 EMPEROR BLVD STE 130, DURHAM NC 27703-8467, 5.29%, Record.
STEELCASE FOUNDATION, ATTN SUSAN BROMAN, PO BOX 1967, GRAND RAPIDS MI 49501-1967, 5.01%, Record.
Equity II Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 27.04%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 8.40%, Record.
FM CO, HUNTINGTON NATIONAL BANK, 7 EASTON OVAL EA4E70, COLUMBUS OH 43219-6010, 7.57%, Record. AST TRUST COMPANY TTEE, FBO ORTHOPEDIC CONSULTANTS OF WA, 401K, PO BOX 52129, PHOENIX AZ 85072-2129, 7.30%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 6.76%, Record.
AST TRUST COMPANY CUST, FBO SHANNON & WILSON PSP &, 401K PLAN, PO BOX 52129, PHOENIX AZ 85072-2129, 5.28%, Record.
AST TRUST COMPANY CUST, FBO OVERLAKE INTL MED ASSOC, 401K PROFIT SHARING PLAN, PO BOX 52129, PHOENIX AZ 85072-5.07%, Record.
Equity II Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 44.54%, Record.
Equity II Fund - Class Y - ALCOA FOUNDATION, ATTN ROBERT WENNEMER, 201 ISABELLA ST, PITTSBURGH PA 15212-5827, 20.52%, Record.
RTC AS TTEE FOR THE, NATIVE HAWAIIAN TRUST FUND, 711 KAPIOLANI BLVD STE 500, HONOLULU HI 96813-5255, 15.76%, Record.
STATE STREET BANK & TRUST CO TTEE, PG & E POST RETMNT MEDICAL PL TRUST, NON-MANAGEMENT EMPLOYEES & RETIREES, ATTN: LUKE MCCABE, PO BOX 1992, BOSTON MA 02130-0017, 13.20%, Record.
VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 10.01%, Record.
NEW YORK BOTANICAL GARDEN, POOLED ENDOWMENT, ATTN SUSAN MAIER, 200TH STREET AND KAZIMIROFF BLVD, BRONX NY 8.63%, Record.
RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 8.01%, Record.
3
Table of Contents
NEW YORK BOTANICAL GARDEN, HAUPT ENDOWMENT, ATTN SUSAN MAIER, 200TH STREET AND KAZIMIROFF BLVD, BRONX NY 6.93%, Record.
FREDERIK MEIJER CHARITABLE TRUST, DTD 05/23/1996, ATTN MIKE JULIEN, 2929 WALKER NW, GRAND RAPIDS MI 49544-9424, 6.65%, Record.
Equity Q Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 21.23%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 19.74%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 10.61%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 9.66%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 6.22%, Record.
Equity Q Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 45.24%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 8.51%, Record.
Equity Q Fund - Class Y - VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 13.49%, Record.
RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 10.70%, Record.
RTC AS TTEE FOR THE, NATIVE HAWAIIAN TRUST FUND, 711 KAPIOLANI BLVD STE 500, HONOLULU HI 96813-5255, 8.71%, Record.
STEELCASE FOUNDATION, ATTN SUSAN BROMAN, PO BOX 1967, GRAND RAPIDS MI 49501-1967, 6.48%, Record.
TOYOTA USA FOUNDATION INC, TREAS ANALYTICS DEPT MAIL STOP G315, 19001 S WESTERN AVE, TORRANCE CA 90501-1106, 5.50%, Record.
DIOCESAN INVESTMENT TRUST OF THE, DIOCESE OF LOS ANGELES, EPISCOPAL DIOCESE OF LOS ANGELES, TED FORBATH CHIEF FINANCIAL OFFICER, 840 ECHO PARK AVENUE, LOS ANGELES CA 5.04%, Record.
NEW YORK BOTANICAL GARDEN, POOLED ENDOWMENT, ATTN SUSAN MAIER, 200TH STREET AND KAZIMIROFF BLVD, BRONX NY 5.02%, Record.
Fixed Income I Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 52.95%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 11.69%, Record.
FM CO, HUNTINGTON NATIONAL BANK, 7 EASTON OVAL EA4E70, COLUMBUS OH 43219-6010, 9.48%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 7.46%, Record.
AST TRUST COMPANY TTEE, KARR TUTTLE CAMPBELL, RETIREMENT SAVINGS PLAN, PO BOX 52129, PHOENIX AZ 85072-5.33%, Record.
Fixed Income I Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 27.40%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 7.25%, Record.
Fixed Income I Fund - Class Y - VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 17.00%, Record.
TOYOTA USA FOUNDATION INC, TREAS ANALYTICS DEPT MAIL STOP G315, 19001 S WESTERN AVE, TORRANCE CA 90501-1106, 12.89%, Record.
RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 7.32%, Record.
STEELCASE FOUNDATION, ATTN SUSAN BROMAN, PO BOX 1967, GRAND RAPIDS MI 49501-1967, 6.28%, Record.
4
Table of Contents
DIOCESAN INVESTMENT TRUST OF THE, DIOCESE OF LOS ANGELES, EPISCOPAL DIOCESE OF LOS ANGELES, TED FORBATH CHIEF FINANCIAL OFFICER, 840 ECHO PARK AVENUE, LOS ANGELES CA 5.70%, Record.
AXA EQUITABLE LIFE INSURANCE CO, ON BEHALF OF SEPARATE ACCT 159T, FOSTER WHEELER, ATTN: ANNUITY SEPARATE ACCOUNT UNIT, 1290 AVENUE OF THE AMERICAS, NEW YORK NY 5.08%, Record.
Fixed Income III Fund - Class E - FIRST UNION NATIONAL BANK, MUTUAL FUNDS BLDG -3C4; TRUST OPS NC-1151, 1525 WEST WT HARRIS BLVD., CHARLOTTE, NC, 35.45%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 15.76%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 12.77%, Record.
WELLS FARGO BANK N.A.,, 11.55%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 9.34%, Record.
PANHANDLE STATE BNK & ITS DVNS, INTERMOUNTAIN COMM BNK &, MAGIC VALLEY BNK, PO BOX 3822, COEUR D ALENE ID 83816-5.24%, Record.
Fixed Income III Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 50.12%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 7.52%, Record.
Fixed Income III Fund - Class Y - RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 39.02%, Record.
VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 34.50%, Record.
RTC AS TRUSTEE FOR, RUTLAND REGIONAL MEDICAL CTR, ATTN MR EDWARD OGORZALEK, 160 ALLEN ST, RUTLAND VT 05701-4560,15.44%, Record.
VIRTUA HEALTH FOUNDATION INC, CORPORATE FINANCE DEPT, ATTN ANITA HO ACCOUNTING MANAGER, 20 W STOW RD STE 8, MARLTON NJ 08053-3160, 10.66%, Record.
International Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 24.80%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 22.44%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 16.11%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 9.51%, Record.
International Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 46.59%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 7.32%, Record.
International Fund - Class Y - SUNTRUST BANK INC CUSTODIAN, FOR SCI CORPORATION, PO BOX 105870, ATLANTA GA 30348-5870, 15.30%, Record.
VIRTUA WEST JERSEY, HEALTH SYSTEM INC, MR ROBERT OSLER, 20 WEST STOW ROAD STE 8, MARLTON NJ 08053-3160, 11.46%, Record.
RAYMOND JAMES & ASSOCIATES INC, ATTN SECURITY AUDIT, PO BOX 14547, ST PETERSBURG FL 33733-4547, 10.48%, Record.
FUNCO, ATTN MUTUAL FUNDS - SRV, 2121 SAGE RD STE 150, HOUSTON TX 77056-4341, 9.46%, Record.
RTC AS TTEE FOR THE, NATIVE HAWAIIAN TRUST FUND, 711 KAPIOLANI BLVD STE 500, HONOLULU HI 96813-5255, 5.20%, Record.
International Securities Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 10.79%, Record.
5
Table of Contents
International Securities Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 7.23%, Record.
International Securities Fund - Class S - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 22.88%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 19.10%, Record.
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401- 11.83%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 7.73%, Record.
Money Market Fund - Class A - DONALDSON LUFKIN & JENRETTE SEC. CORP, PO BOX 2052, JERSEY CITY, NJ, 07303-2052, 5.38%, Record.
Money Market Fund - Class S - STATE STREET BANK & TRUST COMPANY, FBO FRIC SECURITIES LENDING, PORTFOLIO, 2 AVENUE DE LAFAYETTE UNIT ECA1, BOSTON MA 02111-1724, 19.50%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 9.33%, Record.
DIVERSIFIED EQUITY MASTER, ACCOUNT # GU0C, C/O RIMCO OPERATIONS FL 7, 909 A ST, TACOMA WA 98402-5111, 6.47%, Record.
Multistrategy Bond Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 15.03%, Record.
Multistrategy Bond Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 6.46%, Record.
Multistrategy Bond Fund - Class S - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 37.92%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 26.80%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 5.73%, Record.
Quantitative Equity Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 8.65%, Record.
Quantitative Equity Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 9.34%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 6.31%, Record.
Quantitative Equity Fund - Class S - GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 20.66%, Record.
BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 20.39%, Record.
6
Table of Contents
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401- 12.77%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 6.56%, Record.
Real Estate Securities Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 5.74%, Record.
Real Estate Securities Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 21.99%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 13.77%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 13.34%, Record.
FM CO, HUNTINGTON NATIONAL BANK, 7 EASTON OVAL EA4E70, COLUMBUS OH 43219-6010, 6.85%, Record.
Real Estate Securities Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 18.91%, Record.
BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 13.15%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 11.04%, Record.
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-6.21%, Record.
Select Growth Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 65.79%, Record.
A.G. EDWARDS & SONS, INC., ONE NORTH JEFFERSON, ST LOUIS, MO, 63103, 15.31%, Record.
Select Growth Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 19.36%, Record.
APEX FOUNDATION, ATTN STEPHEN ROMANO, PO BOX 1607, BELLEVUE WA 98009-1607, 15.80%, Record.
LEVI STRAUSS FOUNDATION, C/O LEVI STRAUSS- PAUL KIM, 1155 BATTERY ST, SAN FRANCISCO CA 94111-1264, 7.71%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 6.37%, Record.
Select Growth Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 23.75%, Record.
Select Value Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 40.95%, Record.
GPC SECURITIES INC AS AGENT FOR, MERRILL LYNCH TR CO FSB TTEE FBO, NORWOOD CLINIC, INC. 401(K) PS, RETIREMENT PLAN, PO BOX 105117, ATLANTA GA 30348-5117, 10.25%, Record.
SEI TRUST, ONE FREEDOM VALLEY DR., OAKS, PA, 19456, 7.23%, Record.
Select Value Fund - Class I - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 32.66%, Record.
APEX FOUNDATION, ATTN STEPHEN ROMANO, PO BOX 1607, BELLEVUE WA 98009-1607, 12.05%, Record.
7
Table of Contents
LEVI STRAUSS FOUNDATION, C/O LEVI STRAUSS- PAUL KIM, 1155 BATTERY ST, SAN FRANCISCO CA 94111-1264, 5.41%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 5.03%, Record.
Select Value Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 26.44%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 5.47%, Record.
Short Duration Bond Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 6.94%, Record.
Short Duration Bond Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 31.02%, Record.
IDAHO TRUST NATIONAL BANK, 888 W BROAD ST, BOISE ID 83702-7140, 11.05%, Record.
Short Duration Bond Fund - Class S - MODERATE STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 33.24%, Record.
CONSERVATIVE STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 23.28%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 12.52%, Record.
Special Growth Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 7.36%, Record.
Special Growth Fund - Class E - PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 10.98%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 10.52%, Record.
PRINCOR FINANCIAL SERVICES, 245 LONG HILL ROAD, MIDDLETOWN, CT, 06457-4063, 9.88%, Record.
Special Growth Fund - Class S - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 17.57%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 15.48%, Record.
NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 11.49%, Record.
EQUITY GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401- 9.06%, Record.
Tax Exempt Bond Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 11.70%, Record.
A.G. EDWARDS & SONS, INC., ONE NORTH JEFFERSON, ST LOUIS, MO, 63103, 5.64%, Record. A.G. EDWARDS & SONS, INC., ONE NORTH JEFFERSON, ST LOUIS, MO, 63103, 5.03%, Record.
Tax Exempt Bond Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 10.83%, Record.
PANHANDLE STATE BNK & ITS DVNS, INTERMOUNTAIN COMM BNK &, MAGIC VALLEY BNK, PO BOX 3822, COEUR D ALENE ID 83816-9.23%, Record.
8
Table of Contents
Tax Exempt Bond Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 41.32%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 15.97%, Record.
Tax Free Money Market Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 20.19%, Record.
MARIL & CO, FBO NORTHWESTERN MUTUAL TRUST, ATTN ACM DEPARTMENT, 11270 W PARK PL STE 400, MILWAUKEE WI 53224-17.18%, Record.
NATIONAL ADVISORS TRUST CO FSB, 10881 LOWELL AVE STE 100, OVERLAND PARK KS 66210-1666, 12.05%, Record.
TAX EXEMPT BOND MASTER, ACCOUNT # GU8C, C/O RIMCO OPERATIONS FL 7, 909 A ST, TACOMA WA 98402-5111, 10.45%, Record.
NIAGARA MOHAWK POST RETIREMENT, SENIOR EXECUTIVE BOARD BENEFIT FUND, ATTN NANCY KELLOGG, 25 RESEARCH DR, WESTBOROUGH MA 01582-0001, 9.16%, Record.
NIAGARA MOHAWK POWER CORPORATION, ATTN NANCY KELLOGG, 25 RESEARCH DR, WESTBOROUGH MA 01582-0001, 8.19%, Record.
Tax-Managed Large Cap Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 18.08%, Record.
Tax-Managed Large Cap Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 55.67%, Record.
TAX MANAGED GLOBAL EQUITY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-8.66%, Record.
CHARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 7.61%, Record.
Tax-Managed Mid & Small Cap Fund - Class C - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 10.91%, Record.
Tax-Managed Mid & Small Cap Fund - Class E - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 17.08%, Record.
A.G. EDWARDS & SONS, INC., ONE NORTH JEFFERSON, ST LOUIS, MO, 63103, 7.09%, Record.
Tax-Managed Mid & Small Cap Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 60.06%, Record.
HARLES SCHWAB, 101 MONTGOMERY STREET, MUTUAL FUNDS, SAN FRANCISCO, CA, 94104-4122, 6.83%, Record.
TAX MANAGED GLOBAL EQUITY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-5.81%, Record.
U.S. Government Money Market Fund - Class S - NATIONAL FINANCIAL SERVICES CO CUST FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS ONE WORLD FINANCIAL CENTER ATTN MUTUAL FUNDS DEPT 5TH FLOOR 200 LIBERTY ST, NEW YORK NY 10281-1003, 22.37%, Record.
LP95 LLC, COLORADO LTD LIABILITY CO, 2315 BRIARGATE PKWY STE 100, COLORADO SPGS CO 80920-7646, 18.42%, Record.
9
Table of Contents
FRANK RUSSELL TRUST CO TTEE, A C NIELSEN CORPORATION - RBEP TR, UA DTD 08/01/1997, RUSSELL INVEST GRP CLNT SRVC CNTR, 909 A ST 7TH FLOOR, TACOMA WA 98402-5111, 9.71%, Record.
MONTENAY EXECUTIVE DEF COMP PLAN, MONTENAY INTERNATIONAL CORP, 1 PENNSYLVANIA PLAZA STE 400, NEW 6.37%, Record.
PETER W BRUCE &, JOAN M BRUCE JT TEN, 3452 N LAKE DRIVE, MILWAUKEE WI 53211-2918, 5.13%, Record.
At January 31, 2007, the following shareholders could be deemed to “control” the following Funds because such shareholder owns more than 25% of the voting Shares of the indicated Fund. A shareholder who “controls” a Fund has the ability to exert a greater influence over the outcome of any proposals on which it is entitled to vote concerning the Fund than do non-controlling shareholders.
Diversified Bond Fund - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 44.79%, Record.
Equity I Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 28.77%, Record.
Equity II Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 34.26%, Record.
Equity Q Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 33.37%, Record.
Fixed Income III Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 43.80%, Record.
International Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 36.36%, Record.
Multistrategy Bond Fund - BALANCED STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 36.00%, Record.
GROWTH STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 25.45%, Record.
Select Value Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 27.19%, Record.
Short Duration Bond Fund - MODERATE STRATEGY FUND, RUSSELL IM&R, FUND OF FUNDS PORTFOLIO MANAGER, PO BOX 1616, TACOMA WA 98401-1616, 31.90%, Record.
Tax Exempt Bond Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH
FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 38.85%, Record.
Tax-Managed Large Cap Fund -NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 52.77%, Record.
Tax-Managed Mid & Small Cap Fund - NATIONAL FINANCIAL SERVICES CO CUST, FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS, ONE WORLD FINANCIAL CENTER, ATTN MUTUAL FUNDS DEPT 5TH FLOOR, 200 LIBERTY ST, NEW YORK NY 10281-1003, 56.59%, Record.
10
Table of Contents
The Trustees and officers of RIC, as a group, own less than 1% of any Class of each Fund.
TRUSTEES AND OFFICERS. The Board of Trustees is responsible for overseeing generally the operation of the Funds, including reviewing and approving the Funds’ contracts with Russell Investment Management Company (“RIMCo”), the Funds’ Adviser, and the money managers. On July 1, 2006 Frank Russell Investment Management Company changed its name to Russell Investment Management Company. Generally, a Trustee may be removed at any time by a vote of two-thirds of RIC Shares. A vacancy in the Board shall be filled by a vote of a majority of the remaining Trustees so long as after filling such vacancy, two-thirds of the Trustees have been elected by shareholders. There are six Trustees Emeritus. Trustees Emeritus do not have the power to vote on matters coming before the Board, or to direct the vote of any Trustee, and generally are not responsible or accountable in any way for the performance of the Board’s responsibilities. The officers, all of whom are employed by and are officers of RIMCo or its affiliates, are responsible for the day-to-day management and administration of the Funds’ operations.
The trustees and officers of certain Funds also serve in similar positions for funds of funds (the “Funds of Funds”) which invest in different combinations of some of the Funds. Thus, if the interests of a Fund and a Fund of Funds were to diverge, it is possible that a conflict of interest could arise. If such conflict arises, the trustees and officers of the affected Funds, respectively, will take all steps they believe reasonable to manage, and where possible, minimize the potential conflict, including possibly by disclosing the conflict to shareholders.
The Board of Trustees has established a standing Audit Committee, a standing Nominating and Governance Committee and a standing Investment Committee.
RIC’s Board of Trustees has adopted and approved a formal written charter for the Audit Committee, which sets forth the Audit Committee’s current responsibilities. The Audit Committee’s primary functions are: (1) oversight of the Funds’ accounting and financial reporting policies and practices and their internal controls, and, as appropriate, the internal controls of certain service providers; (2) oversight of the quality and objectivity of the Funds’ financial statements and the independent audit thereof; and (3) to act as liaison between the Funds’ Independent Registered Public Accounting Firm and the full Board. The Audit Committee reviews the maintenance of the Funds’ records and the safekeeping arrangements of RIC’s custodian, reviews both the audit and non-audit work of RIC’s Independent Registered Public Accounting Firm, submits a recommendation to the Board as to the selection of Independent Registered Public Accounting Firm, and pre-approves (i) all audit and non-audit services to be rendered by the Independent Registered Public Accounting Firm for RIC, (ii) all audit services provided to RIMCo, or any affiliate thereof that provides ongoing services to RIC, relating to the operations and financial reporting of RIC, and (iii) all non-audit services relating to the operations and financial reporting of RIC, provided to RIMCo, or any affiliate thereof that provides ongoing services to RIC, by any auditors with an ongoing relationship with RIC. It is management’s responsibility to maintain appropriate systems for accounting and internal control and the auditor’s responsibility to plan and carry out a proper audit. Currently, the Audit Committee members consist of Messrs. Raymond P. Tennison, Jr., Daniel P. Connealy and Jonathan Fine, each of whom is an independent Trustee. For the fiscal year ending October 31, 2006, the Audit Committee held four meetings.
RIC’s Board of Trustees has adopted and approved a formal written charter for the Nominating and Governance Committee, which sets forth the Nominating and Governance Committee’s current responsibilities. The primary functions of the Nominating and Governance Committee are to: (1) nominate and evaluate individuals for Trustee membership on the Board, including individuals who are not interested persons of RIC for independent Trustee membership; (2) supervise an annual assessment by the Trustees taking into account such factors as the Committee may deem appropriate; (3) review the composition of the Board; (4) review Trustee compensation; and (5) make nominations for membership on all Board committees and review the responsibilities of each committee. The Committee will not consider nominees recommended by Shareholders of the Funds. Currently, the Nominating and Governance Committee members consist of Messr. Raymond P. Tennison and Mses. Julie W. Weston and Kristianne Blake, each of whom is an independent Trustee. For the fiscal year ending October 31, 2006, the Nominating and Governance Committee held two meetings.
RIC’s Board of Trustees has adopted and approved a formal written charter for the Investment Committee, which sets forth the Investment Committee’s current responsibilities. The Investment Committee: (1) shall regularly review and monitor the investment strategies and investment performance of the Funds; (2) shall review the kind, scope, and format of, and the time periods covered by, the investment performance data and related reports provided to the Board; (3) may review the investment performance benchmarks and peer groups used in reports delivered to the Board; (4) may review such matters that are related to the investments, investment strategies and investment performance of the Trust’s funds as would be considered by the Board as the Committee may deem to be necessary or appropriate; and (5) may meet with any officer of the Trusts, or officer or other representative of RIMCo, any subadviser to a fund or other service provider to the Trusts. Currently, the Investment Committee members consist of Mses. Julie W. Weston and Kristianne Blake and Messrs. Thaddas L. Alston and Mr. Jack R. Thompson, each of whom is an independent Trustee. For the fiscal year ending October 31, 2006, the Investment Committee held three meetings.
11
Table of Contents
RIC paid in aggregate $907,207 for the fiscal year ended October 31, 2006 to the Trustees who are not officers or employees of RIMCo or its affiliates. Trustees are paid an annual retainer plus meeting attendance and chairperson fees, both at the Board and Committee levels, in addition to any travel and other expenses incurred in attending Board and Committee meetings. RIC’s officers and employees are paid by RIMCo or its affiliates.
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 35 funds, and Russell Investment Funds (“RIF”), which has 9 funds. Each of the trustees is a trustee of both RIC and RIF. The first table provides information for the independent trustees. The second table provides information for the trustees emeritus. The third table provides information for the officers.
12
Table of Contents
Name, Age, Address | Position(s) Held With Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | |||||
INDEPENDENT TRUSTEES | ||||||||||
Thaddas L. Alston Born April 7, 1945
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2006 | Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. | 44 | None | |||||
Kristianne Blake, Born January 22, 1954
909 A Street Tacoma, Washington 98402-1616 | • Trustee since 2000
• Chairperson since 2005 | • Appointed until successor is duly elected and qualified
• Annual | • President, Kristianne Gates Blake, P.S. (accounting services)
• Director and Chairman of the Audit Committee, Avista Corp.
• Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds, 1999-2006
• February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF
• Regent, University of Washington | 44 | • Director, Avista Corp;
• Trustee, Principal Investors Fund (investment company);
• Trustee, Principal Variable Contracts Fund (investment company) | |||||
Daniel P. Connealy Born June 6, 1946
909 A Street Tacoma, Washington 98402-1616 | • Trustee since 2003
• Chairman of Audit Committee since 2005 | • Appointed until successor is duly elected and qualified
• Appointed until successor is duly elected and qualified | • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc.
• 2003, Retired
• 2001 – 2003, Vice President and Chief Financial Officer, Janus Capital Group Inc.
• 1979 – 2001, Audit and Accounting Partner, PricewaterhouseCoopers LLP | 44 | None |
13
Table of Contents
Name, Age, Address | Position(s) Held With Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | |||||
INDEPENDENT TRUSTEES | ||||||||||
Jonathan Fine Born July 8, 1954
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 44 | None | |||||
Raymond P. Tennison, Jr. Born December 21, 1955
909 A Street Tacoma, Washington 98402-1616 | • Trustee since 2000
• Chairman of the Nominating and Governance Committee since 2007 | • Appointed until successor is duly elected and qualified.
• Appointed until successor is duly elected and qualified | • President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 44 | None | |||||
Jack R. Thompson, Born March 21, 1949
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to present, Independent Board Chair and Chairman of the Audit Committee, Sparx Japan Fund
• May 1999 to May 2003, President, Chief Executive Officer and Director, Berger Financial Group, LLC
• May 1999 to May 2003, President and Trustee, Berger Funds | 44 | Director, Sparx Japan Fund | |||||
Julie W. Weston, Born October 2, 1943
909 A Street Tacoma, Washington 98402-1616 | • Trustee since 2002
• Chairperson of the Investment Committee since 2006 | • Appointed until successor is duly elected and qualified
• Appointed until successor is duly elected and qualified | • Retired since 2000
• 1987 to 2002, Director, Smith Barney Fundamental Value Fund | 44 | None |
14
Table of Contents
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | |||||
TRUSTEES EMERITUS | ||||||||||
*George F. Russell, Jr., Born July 3, 1932
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo
• Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non-depository trust company (“RTC”))
• Chairman, Sunshine Management Services, LLC (investment adviser) | 44 | None | |||||
Paul E. Anderson, Born October 15, 1931
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2007 | Five year term | • President, Anderson Management Group LLC (private investments consulting)
• February 2002 to June 2005, Lead Trustee, RIC and RIF
• Trustee of RIC and RIF Until 2006
• Chairman of the Nominating and Governance Committee 2006 | 44 | None | |||||
Paul Anton, Ph.D., Born December 1, 1919
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2003 | Five year term | • Retired since 1997
• Trustee of RIC and RIF Until 2002 | 44 | None | |||||
William E. Baxter, Born June 8, 1925
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1986
• Trustee of RIC and RIF Until 2004 | 44 | None | |||||
Lee C. Gingrich, Born October 6, 1930
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2006 | Five year term | • Retired since 1995
• Trustee of RIC and RIF Until 2005
• Chairman of the Nominating and Governance Committee 2001-2005 | 44 | None | |||||
Eleanor W. Palmer, Born May 5, 1926
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1981
• Trustee of RIC and RIF Until 2004 | 44 | None |
* | Mr. Russell is also a director emeritus of one or more affiliates of RIC and RIF. |
15
Table of Contents
Name , Age, Address | Position(s) Held | Term of Office | Principal Occupation(s) During the Past 5 Years | |||
OFFICERS | ||||||
Cheryl Wichers Born December 16, 1966
909 A Street Tacoma, Washington 98402-1616 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | • Chief Compliance Officer, RIC
• Chief Compliance Officer, RIF
• Chief Compliance Officer, RIMCo
• April 2002-May 2005, Manager, Global Regulatory Policy
• 1998-2002, Compliance Supervisor, Russell Investment Group | |||
Greg J. Stark, Born May 3, 1968
909 A Street Tacoma, Washington 98402-1616 | President and Chief Executive Officer since 2004 | Until successor is chosen and qualified by Trustees | • President and CEO, RIC and RIF
• Chairman of the Board, President and CEO, RIMCo
• Chairman of the Board, President and CEO, RFD
• Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • Until 2004, Managing Director of Individual Investor Services, FRC
• 2000 to 2004, Managing Director, Sales and Client Service, RIMCo | |||
Mark E. Swanson, Born November 26, 1963
909 A Street Tacoma, Washington 98402-1616 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | • Treasurer, Chief Accounting Officer and CFO, RIC and RIF
• Director, Funds Administration, RIMCo, RTC and RFD
• Treasurer and Principal Accounting Officer, SSgA Funds | |||
Thomas F. Hanly, Born November 17, 1964
909 A Street Tacoma, Washington 98402-1616 | Chief Investment Officer since 2004 | Until removed by Trustees | • Chief Investment Officer, RIC, RIF, FRC, RTC
• Director and Chief Investment Officer, RIMCo and RFD
• 1999 to 2003, Chief Financial Officer, FRC, RIC and RIF | |||
Gregory J. Lyons, Born August 24, 1960
909 A Street Tacoma, Washington 98402-1616 | Secretary since 2007 | Until successor is chosen and qualified by Trustees | • Associate General Counsel and Assistant Secretary FRC and RIA
• Director and Secretary, RIMCo and RFD
• Secretary and Chief Legal Counsel, RIC and RIF |
16
Table of Contents
TRUSTEE COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2006
AGGREGATE COMPENSATION FROM RIC | PENSION OR RETIREMENT BENEFITS ACCRUED AS PART OF RIC EXPENSES | ESTIMATED ANNUAL BENEFITS UPON RETIREMENT | TOTAL COMPENSATION FUND COMPLEX | |||||||||
INTERESTED TRUSTEES | ||||||||||||
Lynn L. Anderson* | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Michael J. Phillips** | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
INDEPENDENT TRUSTEES | ||||||||||||
Thaddas L. Alston*** | $ | 41,362 | $ | 0 | $ | 0 | $ | 43,000 | ||||
Kristianne Blake | $ | 139,880 | $ | 0 | $ | 0 | $ | 145,500 | ||||
Daniel P. Connealy | $ | 99,983 | $ | 0 | $ | 0 | $ | 104,000 | ||||
Jonathan Fine | $ | 87,966 | $ | 0 | $ | 0 | $ | 91,500 | ||||
Raymond P. Tennison, Jr. | $ | 90,369 | $ | 0 | $ | 0 | $ | 94,000 | ||||
Jack R. Thompson | $ | 88,446 | $ | 0 | $ | 0 | $ | 92,000 | ||||
Julie W. Weston | $ | 94,696 | $ | 0 | $ | 0 | $ | 98,500 | ||||
TRUSTEES EMERITUS | ||||||||||||
George F. Russell, Jr. | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||
Paul E. Anderson# | $ | 94,696 | $ | 0 | $ | 0 | $ | 98,500 | ||||
Paul Anton, PhD. | $ | 39,994 | $ | 0 | $ | 0 | $ | 41,600 | ||||
William E. Baxter | $ | 39,994 | $ | 0 | $ | 0 | $ | 41,600 | ||||
Lee C. Gingrich## | $ | 49,827 | $ | 0 | $ | 0 | $ | 51,833 | ||||
Eleanor W. Palmer | $ | 39,994 | $ | 0 | $ | 0 | $ | 41,600 |
* | Effective December 31, 2005, Mr. Lynn Anderson retired from the Board of Trustees. |
** | Effective December 31, 2006, Mr. Phillips retired from the Board of Trustees |
*** | Mr. Alston was elected to the Board of Trustees effective May 1, 2006. |
# | Mr. Paul Anderson was elected Trustee Emeritus effective January 1, 2007. |
## | Mr. Gingrich was elected Trustee Emeritus effective January 1, 2006. |
EQUITY SECURITIES BENEFICIALLY OWNED BY TRUSTEES
FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2006
DOLLAR RANGE OF EQUITY SECURITIES IN EACH FUND | AGGREGATE DOLLAR RANGE OF SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES OVERSEEN BY TRUSTEES IN RUSSELL FUND COMPLEX | |||||
INTERESTED TRUSTEES | ||||||
Michael J. Phillips* | None | None | $50,001-$100,000 | |||
INDEPENDENT TRUSTEES | ||||||
Thaddas L. Alston** | None | None | None | |||
Kristianne Blake | Equity Q Fund Select Value Fund | Over $100,00 Over $100,000 | Over $100,000 | |||
Daniel P. Connealy | Equity I Fund Select Growth Fund Select Value Fund International Fund Emerging Markets Fund Fixed Income III Fund | $50,001-$100,000 $10,001-$50,000 $10,001-$50,000 $10,001-$50,000 $10,001-$50,000 $10,001-$50,000 | Over $100,000 | |||
Jonathan Fine | Emerging Markets Fund Fixed Income III Fund International Fund Money Market Fund Real Estate Securities Fund Select Value Fund Equity I Fund Equity II Fund Equity Q Fund Tax Exempt Bond Fund Tax Free Money Market Fund | $50,001-$100,000 $10,001-$50,000 Over $100,000 Over $100,000 $10,001-$50,000 $10,001-$50,000 $50,001-$100,000 $10,001-$50,000 $50,001-$100,00 $10,001-$50,000 $10,001-$50,000 | Over $100,000 |
17
Table of Contents
Raymond P. Tennison, Jr. | Equity I Fund Equity II Fund Equity Q Fund International Fund Real Estate Securities Fund Select Value Fund Tax Exempt Bond Fund Tax Free Money Market Fund | Over $100,000 Over $100,000 Over $100,000 Over $100,000 $50,001-$100,000 $50,001-$100,000 $10,001-$50,000 $1-$10,000 | Over $100,000 | |||
Jack R. Thompson | Emerging Markets Fund Real Estate Securities Fund | $10,001-$50,000 $10,001-$50,000 | $50,001-$100,000 | |||
Julie W. Weston | Fixed Income III Fund International Fund Real Estate Securities Fund Fixed Income I Fund | $10,001-$50,000 $1-$10,000 $10,001-$50,000 $10,001-$50,000 | $50,001-$100,000 | |||
TRUSTEES EMERITUS | ||||||
George F. Russell, Jr. | None | None | None | |||
Paul E. Anderson | None | None | Over $100,000 | |||
Paul Anton, Ph.D. | Real Estate Securities Fund Equity II Fund International Fund Emerging Markets Fund | $50,001-$100,000 $10,001-$50,000 $10,001-$50,000 $10,001-$50,000 | Over $100,000 | |||
William E. Baxter | Equity Q Fund | $1-$10,000 | $1-$10,000 | |||
Lee C. Gingrich | Real Estate Securities Fund Equity II Fund Equity Q Fund | Over $100,000 $10,001-$50,000 $10,001-$50,000 | Over $100,000 | |||
Eleanor W. Palmer | None | None | None |
* | Effective December 31, 2006, Mr. Phillips retired from the Board of Trustees. |
** | Mr. Alston was elected to the Board of Trustees effective May 1, 2006. |
SERVICE PROVIDERS. Most of RIC’s necessary day-to-day operations are performed by separate business organizations under contract to RIC. The principal service providers are:
Money Manager Research Services and Trade Placement Agent | Frank Russell Company | |
Adviser, Administrator and Transfer and Dividend Disbursing Agent | Russell Investment Management Company | |
Money Managers | Multiple professional discretionary investment management organizations | |
Custodian and Portfolio Accountant | State Street Bank and Trust Company |
MONEY MANAGER RESEARCH SERVICES AND TRADE PLACEMENT AGENT. FRC, the corporate parent of RIMCo, was responsible for organizing RIC and provides ongoing money manager research and trade placement services to RIC and RIMCo, as described in the Prospectuses. Neither RIMCo nor RIC compensates FRC for its services.
FRC provides comprehensive money manager evaluation services to institutional clients, including RIMCo. FRC provides other services to large pools of investment assets, including: (i) investment management services for Russell subsidiary-sponsored funds; and (ii) transition management and portfolio implementation services.
18
Table of Contents
As affiliates, FRC and RIMCo may establish certain intercompany cost allocations that reflect the services supplied to RIMCo. George F. Russell, Jr., Trustee Emeritus and Chairman Emeritus of RIC, is the Chairman Emeritus of FRC. RIMCo is a wholly owned subsidiary of FRC.
FRC is a subsidiary of The Northwestern Mutual Life Insurance Company (“Northwestern Mutual”). Founded in 1857, Northwestern Mutual is a mutual insurance company organized under the laws of Wisconsin. Northwestern Mutual, its subsidiaries and affiliates offer insurance and investment products and advisory services that address client needs for financial protection, capital accumulation, and estate preservation and distribution. Products and services for the personal, business, estate and pension markets include permanent and term life insurance, disability income insurance, long-term care insurance, annuities, trust services and mutual funds.
ADVISER AND ADMINISTRATOR. RIMCo provides or oversees the provision of all general management and administration, investment advisory and portfolio management services for the Funds, including developing the investment program for each Fund. RIMCo, with the assistance of FRC, provides the Funds with office space, equipment and the personnel necessary to operate and administer the Funds’ business and to supervise the provision of services by third parties such as the money managers and custodian.
Except for money market funds, RIMCo allocates most of each Fund’s assets to multiple money managers. RIMCo exercises investment discretion over the portion of each Fund’s assets that RIMCo 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. RIMCo may also directly manage portions of a Fund during transitions between money managers.
RIMCo selects, subject to the approval of the Fund’s Board, money managers for the Funds, allocates Fund assets among money managers, oversees the money managers and evaluates the performance results. The Funds’ money managers select the individual portfolio securities for the assets assigned to them and either RIMCo or the money manager arranges for execution of portfolio securities transactions. RIMCo acts as money manager for the Money Market and U.S. Government Money Market Funds. RIMCo, as agent for RIC, pays the money managers’ fees for the Funds, as a fiduciary for the Funds, out of the advisory fee paid by the Funds to RIMCo. The remainder of the advisory fee is retained by RIMCo as compensation for the services described above and to pay expenses.
Each of the Funds pays an advisory fee and an administrative fee directly to RIMCo, billed monthly on a pro rata basis and calculated as a specified percentage of the average daily net assets of each of the Funds. Services which are administrative in nature are provided by RIMCo pursuant to an Administrative Agreement for an annual fee of 0.05% of the average daily net asset value of each Fund. (See the applicable Prospectus for the Funds’ annual advisory percentage rates.)
In addition to the advisory and administrative fees payable by the Funds to RIMCo, each Fund that invests its cash reserves or collateral received in securities lending transactions in one or more of RIC’s money market funds pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of that money market fund’s operating expenses, which include the advisory and administrative fees that such money market fund pays to RIMCo. Currently, the cash reserves and collateral for all Funds (except the Tax Exempt Bond Fund) are invested in RIC’s Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves and collateral invested in the Money Market Fund is 0.10% (net of fee waivers and reimbursements). Currently, the cash reserves and collateral for the Tax Exempt Bond Fund are invested in RIC’s Tax Free Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves and collateral invested in the Tax Free Money Market Fund is 0.25%.
The Funds paid RIMCo the following advisory fees (gross of reimbursements and/or waivers) for the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, respectively:
Fund | $Amount Paid | Annual rate (as a % of average daily net assets) | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||
Diversified Equity | $ | 23,621,115 | $ | 17,834,938 | $ | 13,435,580 | 0.73 | % | 0.73 | % | 0.73 | % | ||||||
Special Growth | 9,554,277 | 8,092,790 | 6,689,189 | 0.90 | % | 0.90 | % | 0.90 | % | |||||||||
Quantitative Equity | 24,355,453 | 18,600,421 | 14,320,815 | 0.73 | % | 0.73 | % | 0.73 | % | |||||||||
International Securities | 26,954,023 | 19,548,964 | 14,088,594 | 0.90 | % | 0.90 | % | 0.90 | % | |||||||||
Real Estate Securities | 14,117,404 | 11,429,600 | 8,495,904 | 0.80 | % | 0.80 | % | 0.80 | % | |||||||||
Diversified Bond | 7,552,994 | 6,029,607 | 4,736,838 | 0.40 | % | 0.40 | % | 0.40 | % | |||||||||
Multistrategy Bond | 13,388,732 | 9,887,816 | 6,981,735 | 0.60 | % | 0.60 | % | 0.60 | % | |||||||||
Tax Exempt Bond | 813,614 | 695,404 | 549,244 | 0.30 | % | 0.30 | % | 0.30 | % | |||||||||
U.S. Government Money Market | 58,111 | 85,932 | 114,686 | 0.20 | % | 0.20 | % | 0.20 | % | |||||||||
Tax Free Money Market | 121,179 | 218,530 | 272,071 | 0.20 | % | 0.20 | % | 0.20 | % | |||||||||
Equity I | 7,838,325 | 5,567,594 | 4,180,776 | 0.55 | % | 0.55 | % | 0.55 | % | |||||||||
Equity II | 4,546,511 | 6,114,869 | 6,297,505 | 0.70 | % | 0.70 | % | 0.70 | % | |||||||||
Equity Q | 8,472,726 | 7,881,044 | 7,215,402 | 0.55 | % | 0.55 | % | 0.55 | % | |||||||||
Tax-Managed Large Cap | 3,164,647 | 2,776,806 | 2,437,197 | 0.70 | % | 0.70 | % | 0.70 | % | |||||||||
Tax-Managed Mid & Small Cap | 1,905,548 | 1,483,682 | 1,183,492 | 0.98 | % | 0.98 | % | 0.98 | % | |||||||||
International | 12,724,054 | 11,426,606 | 9,202,521 | 0.70 | % | 0.70 | % | 0.70 | % | |||||||||
Emerging Markets | 11,961,392 | 8,499,025 | 5,680,194 | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||
Fixed Income I | 3,327,844 | 2,906,656 | 2,757,774 | 0.25 | % | 0.25 | % | 0.25 | % | |||||||||
Fixed Income III | 3,607,880 | 2,670,565 | 1,818,645 | 0.50 | % | 0.50 | % | 0.50 | % | |||||||||
Short Duration Bond | 5,172,197 | 5,437,276 | 4,915,805 | 0.45 | % | 0.45 | % | 0.45 | % | |||||||||
Money Market | 7,373,062 | 5,919,767 | 5,721,202 | 0.20 | % | 0.20 | % | 0.20 | % | |||||||||
Select Value | 2,674,939 | 2,418,537 | 1,777,257 | 0.70 | % | 0.70 | % | 0.70 | % | |||||||||
Select Growth | 1,495,224 | 1,299,453 | 837,476 | 0.80 | % | 0.80 | % | 0.80 | % |
19
Table of Contents
Since no shares of the Global Equity Fund were issued during the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, the Fund did not pay RIMCo any advisory fees.
RIMCo has contractually agreed to waive all or a portion of its combined advisory and administrative fees for certain Funds.
This arrangement is not part of the Advisory Agreement with RIC or the Administrative Agreement and may be changed or discontinued. RIMCo currently calculates its advisory fee based on a Fund’s average daily net assets. The following paragraphs list the current waivers and those that were in effect during the last three fiscal years.
For the Money Market Fund, RIMCo has contractually agreed to waive, until February 28, 2008, 0.15% of its 0.25% combined advisory and administrative fee. RIMCo waived fees in the amounts of $4,303,054, $4,424,757 and $5,529,795 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively. As a result of the waivers, the Fund paid advisory and administrative fees equal to $2,836,296, $2,974,952 and $3,686,532 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively.
For the Tax-Managed Mid & Small Cap Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 1.03% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 1.25% of the average daily net assets of that Fund on an annual basis. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. RIMCo waived fees in the amount of $112,624, $187,394 and $178,899 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively. There was no reimbursement for the fiscal years ended October 31, 2004, 2005 and 2006, respectively. As a result of the waivers and reimbursements, the Fund paid advisory and administrative fees of $1,131,250, $1,371,986 and $1,823,871 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively.
Effective March 1, 2007, for the Short Duration Bond Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its 0.50% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.75% of the average daily net assets of that Fund on an annual basis. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Short Duration Bond Fund, RIMCo had contractually agreed to waive, between March 1, 2003 and February 29, 2004, up to the full amount of its 0.50% combined advisory and administrative fees and to reimburse the Fund to the extent that Fund-level expenses exceed 0.52% of average daily net assets of that Fund on an annual basis. Until February 28, 2003 RIMCo had contractually agreed to waive up to the full amount of its 0.50% combined advisory and administrative fees and to reimburse the Fund to the extent that Fund-level expenses exceed 0.47% of average daily net assets of that Fund on an annual basis. Fund-level expenses for the Fund do not include administrative fees, 12b-1 fees or shareholder services fees. RIMCo waived fees in the amount of $293,361 for the fiscal year ended October 31, 2004. As a result of the waivers the Fund paid advisory and administrative fees of $5,168,645 for the fiscal year ended October 31, 2004, respectively.
For the Class Y Shares of each Institutional Fund, RIMCo has contractually agreed to waive, at least until February 29, 2008, up to the full amount of its transfer agency fees to the extent that those fees would affect “Other Expenses” of Class Y Shares of an Institutional Fund by one basis point or more. For the fiscal years ended October 31, 2004, 2005 and 2006, respectively, RIMCo did not waive any portion of its transfer agency fees for any of the Institutional Funds.
For the Select Growth Fund, RIMCo has contractually agreed to waive until at least February 29, 2008, up to the full amount of its 0.85% combined advisory and administrative fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.98% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
20
Table of Contents
From March 1, 2003 through February 28, 2007, RIMCo had contractually agreed to waive up to the full amount of its transfer agency fees, administrative fees, and advisory fees, to the extent that expenses for each of Class C, Class E, Class I and Class S of the Select Growth Fund exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory fees is required for any class of shares of the Fund, advisory fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expenses for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively.
RIMCo waived fees in the amounts of $222,875, $166,194 and $234,128 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively.
For the Select Value Fund, RIMCo had contractually agreed to waive through February 28, 2007, up to the full amount of its transfer agency fees, administrative fees, and advisory fees, to the extent that expenses for Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory fees is required for any class of shares of the Fund, advisory fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expenses for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively. Prior to March 1, 2003, RIMCo had contractually agreed to waive up to the full amount of its 0.75% combined advisory and administrative fees for that Fund and to reimburse the Fund to the extent that Fund-level expenses exceed 0.73% of the average daily net assets of that Fund on an annual basis. Fund-level expenses for the Select Value Fund do not include transfer agency fees, 12b-1 fees or shareholder services fees. In addition, prior to March 1, 2003, after applying the foregoing waiver, RIMCo contractually agreed to waive up to the full amount of its transfer agency fees to the extent transfer agency fees for Class C, E, S or I exceed 0.26%, 0.26%, 0.26% or 0.01%, respectively, of the average daily net assets of those Classes, on an annual basis. RIMCo waived fees in the amount of $13,123, $0 and $0 for the fiscal years ended October 31, 2004, 2005 and 2006, respectively.
Effective September 15, 2004, for the Institutional Funds, RIMCo has contractually agreed to waive 0.02% of its 0.05% administrative fee. For the fiscal years ended October 31, 2004, 2005 and 2006 RIMCo waived administrative fees in the amounts of $20,599, $202,458 and $285,030 for the Equity I Fund, $23,109, $174,710 and $129,900 for the Equity II Fund, $34,853, $286,583 and $308,099 for the Equity Q Fund, $35,283, $326,474 and $363,544 for the International Fund, $27,035, $232,533 and $266,228 for the Fixed Income I Fund and $10,781, $106,823 and $144,315 for the Fixed Income III Fund, respectively.
From its advisory fees, RIMCo, as agent for RIC, pays all fees to the money managers for their investment selection services. The table in the next section entitled “Money Managers” sets forth the fees paid to money managers. The following table sets forth the net advisory fees retained by RIMCo:
Fund | $Amount Paid | Annual rate (as a % of average daily net assets) | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||
Diversified Equity | $ | 16,734,198 | $ | 12,476,501 | $ | 9,538,985 | 0.52 | % | 0.51 | % | 0.52 | % | ||||||
Special Growth | 5,057,933 | 4,343,908 | 3,668,372 | 0.48 | % | 0.48 | % | 0.49 | % | |||||||||
Quantitative Equity | 20,034,195 | 15,063,701 | 11,420,719 | 0.60 | % | 0.59 | % | 0.58 | % | |||||||||
International Securities | 18,085,404 | 13,129,587 | 9,353,876 | 0.60 | % | 0.60 | % | 0.60 | % | |||||||||
Real Estate Securities | 10,033,298 | 8,033,791 | 5,878,630 | 0.57 | % | 0.56 | % | 0.55 | % | |||||||||
Diversified Bond | 6,192,741 | 4,951,006 | 4,032,955 | 0.33 | % | 0.33 | % | 0.34 | % | |||||||||
Multistrategy Bond | 10,777,185 | 7,961,513 | 5,524,967 | 0.48 | % | 0.48 | % | 0.47 | % | |||||||||
Tax Exempt Bond | 312,699 | 239,050 | 169,482 | 0.12 | % | 0.10 | % | 0.09 | % | |||||||||
US Government Money Market | 58,111 | 85,932 | 114,686 | 0.20 | % | 0.20 | % | 0.20 | % | |||||||||
Tax Free Money Market | 60,781 | 116,066 | 155,823 | 0.10 | % | 0.11 | % | 0.11 | % | |||||||||
Equity I | 4,822,806 | 3,366,246 | 2,564,417 | 0.34 | % | 0.33 | % | 0.34 | % | |||||||||
Equity II | 1,682,923 | 2,368,588 | 2,580,563 | 0.26 | % | 0.27 | % | 0.29 | % | |||||||||
Equity Q | 6,511,796 | 5,929,651 | 5,336,308 | 0.42 | % | 0.41 | % | 0.41 | % | |||||||||
Tax-Managed Large Cap | 1,790,336 | 1,630,879 | 1,418,202 | 0.40 | % | 0.41 | % | 0.41 | % | |||||||||
Tax-Managed Mid & Small Cap | 1,225,531 | 946,086 | 662,608 | 0.63 | % | 0.62 | % | 0.55 | % | |||||||||
International | 7,226,834 | 6,494,575 | 5,124,416 | 0.40 | % | 0.40 | % | 0.39 | % | |||||||||
Emerging Markets | 6,976,508 | 4,812,407 | 3,112,728 | 0.67 | % | 0.65 | % | 0.63 | % | |||||||||
Fixed Income I | 2,440,213 | 2,144,328 | 2,171,273 | 0.18 | % | 0.18 | % | 0.20 | % | |||||||||
Fixed Income III | 2,795,816 | 2,071,681 | 1,378,738 | 0.39 | % | 0.39 | % | 0.38 | % | |||||||||
Short Duration Bond | 3,678,839 | 3,882,962 | 3,457,651 | 0.32 | % | 0.32 | % | 0.32 | % | |||||||||
Money Market | 7,373,062 | 5,919,767 | 5,721,202 | 0.20 | % | 0.20 | % | 0.20 | % | |||||||||
Select Value | 1,758,670 | 1,579,749 | 1,134,872 | 0.46 | % | 0.46 | % | 0.45 | % | |||||||||
Select Growth | 978,117 | 859,313 | 530,283 | 0.52 | % | 0.53 | % | 0.51 | % |
21
Table of Contents
Since no shares of the Global Equity Fund were issued during the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, no advisory fees were paid to money managers for this Fund.
RIMCo is a wholly-owned subsidiary of FRC, a subsidiary of The Northwestern Mutual Life Insurance Company. RIMCo’s mailing address is 909 A Street, Tacoma, WA 98402.
PORTFOLIO MANAGERS. The RIMCo Managers (RIMCo’s employees who manage the Funds, oversee the money managers and have primary responsibility for the management of the Funds) are compensated by RIMCo with salaries, bonuses (paid in cash), profit sharing contributions and a long-term incentive plan. Salaries are fixed annually and are driven by the market place. Bonuses are based on the RIMCo Manager’s performance, which performance is measured both quantitatively (evaluated based on the pre-tax performance of the accounts versus relevant market indexes and peer groups, with both 1 and 3-year horizons included) and qualitatively (evaluated based on the RIMCo Manager’s quality of decisions made for the accounts, contributions to client services efforts and improvement of RIMCo’s investment process). Bonus determinations are made based on performance of all accounts managed by a RIMCo Manager taking into consideration the number of accounts and the assets under management in each account. The market indexes and peer group averages used to evaluate the performance of the Funds are as follows:
Equity I Fund Diversified Equity Fund | Lipper Large-Cap Core Funds Average Russell 1000® Index | |
Equity Q Fund Quantitative Equity Fund | Lipper Large-Cap Core Funds Average Russell 1000® Index | |
Equity II Fund Special Growth Fund | Lipper Small-Cap Core Funds Average Lipper Mid-Cap Core Funds Average Russell 2500™ Index | |
International Fund International Securities Fund | Lipper International Funds Average MSCI EAFE® Index | |
Global Equity Fund | Lipper Global Multi-Cap Core Funds Average MSCI World Index | |
Fixed Income I Fund Diversified Bond Fund | Lipper Intermediate Investment Grade Debt Funds Average Lehman Brothers Aggregate Bond Index | |
Fixed Income III Fund Multistrategy Bond Fund | Lipper Corporate Debt Funds BBB-Rated Average Lipper Intermediate Investment Grade Debt Funds Average Lehman Brothers Aggregate Bond Index | |
Select Growth Fund | Lipper Large-Cap Growth Funds Average Russell 1000® Growth Index | |
Select Value Fund | Lipper Large-Cap Value Funds Average Russell 1000® Value Index | |
Tax-Managed Large Cap Fund | Lipper Large-Cap Core Funds Average S&P 500® Index | |
Tax-Managed Mid & Small Cap Fund | Lipper Small-Cap Core Funds Average Lipper Mid-Cap Core Fund Average Russell 2500™ Index | |
Real Estate Securities Fund | Lipper Real Estate Funds Average FTSE NAREIT Equity REIT Index | |
Emerging Markets Fund | Lipper Emerging Markets Funds Average MSCI Emerging Markets Index | |
Short Duration Bond Fund | Lipper Short-Investment Grade Debt Funds Average Merrill Lynch U.S. Treasuries 1-3 Yr | |
Tax Exempt Bond Fund | Lipper Intermediate Municipal Debt Funds Average Lehman Brothers Municipal 1-10 Yr | |
Money Market Fund | iMoneyNet First Tier Institutional Average Citigroup 3-Month Treasury Bill Index | |
US Government Money Market Fund | iMoneyNet U.S. Government & Agencies Institutional Average Citigroup 3-Month Treasury Bill Index | |
Tax-Free Money Market Fund | iMoneyNet Tax-Free National Institutional Average Citigroup 3-Month Treasury Bill Index |
22
Table of Contents
Citigroup 3-Month Treasury Bill Index |
RIMCo Manager evaluations are conducted by asset class directors. Salary and bonus recommendations of the asset class directors are reviewed by the regional chief investment officers. Russell’s compensation committee approves salaries and bonuses after the regional chief investment officers’ recommendations have been reviewed by the Chief Investment Officer.
Profit sharing contributions are made quarterly and are calculated as a percentage of the RIMCo Manager’s salary. The percentage is fixed and is the same percentage for all RIMCo employees who receive profit sharing contributions.
The long-term incentive plan provides key professionals with future cash payments the value of which is tied to FRC’s financial performance. Awards under the long-term incentive plan are based on perceived expected future contribution to the success of FRC. The assessment of expected future contribution is qualitative in nature and is determined by a RIMCo Manager’s manager and approved by senior executives.
RIMCo Managers earning over a specified amount of cash compensation (salary plus bonus) are eligible to participate in the deferred compensation plan which allows the RIMCo Manager to elect to defer a portion of her/his cash compensation. Deferred amounts earn the return of an asset allocated mix of funds of Russell Investment Funds selected by the RIMCo Manager.
EQUITY SECURITIES BENEFICIALLY OWNED BY RIMCO MANAGERS IN THE FUNDS
THEY MANAGE FOR THE FISCAL YEAR ENDED OCTOBER 31, 2006
RIMCO MANAGERS OF THE FUNDS | DOLLAR RANGE OF EQUITY SECURITIES IN THE FUNDS MANAGED BY THE RIMCO MANAGER | |||
Scott Crawshaw | None | Emerging Markets | ||
Bruce A. Eidelson | $10,001- $50,0000 | Real Estate Securities | ||
Tereasa Gandhi | None | Tax-Managed Large Cap | ||
None | Tax-Managed Mid & Small Cap | |||
Phillip Hoffman | None | Global Equity* | ||
Dennis Jensen | None | Select Value | ||
James A. Jornlin | None | International | ||
None | International Securities | |||
Brian Mock | None | Mr. Mock has primary responsibility for the management of the portions of the portfolios of certain Funds allocated to the select holdings strategy which may be employed by certain Funds as described in the prospectuses. | ||
Tom Monroe | None | Equity Q | ||
None | Quantitative Equity | |||
Michael R. Ruff | None | Fixed Income I | ||
None | Fixed Income III | |||
None | Diversified Bond | |||
None | Multistrategy Bond | |||
None | Short Duration Bond | |||
None | Tax Exempt Bond | |||
Stephen W. Skatrud | None | Select Growth | ||
Christopher D. Tessin | None | Equity II | ||
None | Special Growth | |||
Dennis J. Trittin | None | Equity I | ||
None | Diversified Equity |
* | No shares of this Fund were issued or outstanding on October 31, 2006. |
RIMCo Managers typically manage multiple portfolios. These portfolios may include mutual funds, separate accounts and commingled trusts. Russell’s investment process, which includes money manager selection and allocation, is guided by the principal that all portfolios will be treated in a fair and equitable manner. To adhere to this guiding principal, RIMCo Managers follow a process of constructing portfolios in accordance with regulatory and investment guidelines and then select money
23
Table of Contents
managers to fulfill those needs. Specifically, RIMCo Managers make money manager selection and allocation decisions for each portfolio based on a variety of factors relevant to that portfolio. The investment process dictates that RIMCo Managers utilize Russell’s manager research analysis and manager rankings to assist in selecting the most suitable money manager(s) to meet the unique investment needs of the various portfolios they manage.
At the core of Russell’s investment process is a robust oversight and peer review program for money manager selection. It includes the hiring, termination and retention of money managers. This process is overseen by Russell’s Investment Strategy Committee (ISC) and the Asset Class Directors who are responsible for monitoring the portfolio management duties performed within their specific asset class.
Occasionally, a particular money manager may restrict the total amount of capacity they will allocate to Russell portfolios. If, however, the total allocation is too small to be shared in a meaningful size across all Russell portfolios or if the money manager restricts the absolute number of assignments they will accept from Russell, it is the RIMCo Manager’s responsibility to determine which portfolios receive the allocation. These allocations are reviewed and approved by the ISC before implementation. In cases where a RIMCo Manager is managing multiple portfolios and must allocate a manager differently across his funds, both the Asset Class Director and the ISC must review and ratify the recommendations.
OTHER ACCOUNTS MANAGED BY RIMCO MANAGERS
AND ASSETS UNDER MANAGEMENT IN THE ACCOUNTS
AS OF OCTOBER 31, 2006
RIMCo Manager | Number of Registered Investment Companies | Assets Under (in millions) | Number of Pooled Investment Vehicles | Assets Under (in millions) | Other Types of Accounts | Assets (in millions) | Asset Total (in millions) | ||||||||||||
Scott Crawshaw | 0 | $ | 0 | 3 | $ | 2,256.3 | 0 | $ | 0 | $ | 2,256.3 | ||||||||
Bruce A. Eidelson | 1 | 596.6 | 5 | 1,718.1 | 0 | 0 | 2,314.7 | ||||||||||||
Tereasa Gandhi | 1 | 189.3 | 1 | 366.4 | 0 | * | 0 | 555.7 | |||||||||||
Phillip Hoffman | 0 | 0 | 1 | 2,920.1 | 0 | 0 | 2,920.1 | ||||||||||||
Dennis Jensen | 0 | 0 | 1 | 765.2 | 0 | 0 | 765.2 | ||||||||||||
James A. Jornlin | 1 | 255.6 | 7 | 8,667.6 | 1 | 242.5 | 9,165.7 | ||||||||||||
Brian Mock | 0 | 0 | 11 | 1,505 | 0 | 0 | 1,505 | ||||||||||||
Tom Monroe | 0 | 0 | 9 | 8,022.2 | 2 | 582.7 | 8,604.9 | ||||||||||||
Michael R. Ruff | 1 | 226.9 | 5 | 2,479 | 2 | ** | 1,107.8 | 3,813.7 | |||||||||||
Stephen W. Skatrud | 0 | 0 | 7 | 3,799.7 | 0 | 0 | 3,799.7 | ||||||||||||
Christopher D. Tessin | 1 | 400.8 | 6 | 3,991 | 1 | 317.1 | 4,708.9 | ||||||||||||
Dennis J. Trittin | 1 | 363.4 | 3 | 6,606.7 | 0 | 0 | 6,970.1 |
* | Does not include 1904 accounts that are part of Russell Managed Account Strategies’ Separate Account Manager Mixes, a managed separate accounts program sponsored by RIMCo. Ms. Gandhi does not exercise investment discretion over these accounts. |
** | Does not include 62 accounts that are part of Russell Managed Account Strategies’ Separate Account Manager Mixes, a managed separate accounts program sponsored by RIMCo. Mr. Ruff does not exercise investment discretion over these accounts. |
MONEY MANAGERS. Except with respect to the Money Market and US Government Money Market Funds, the Funds’ money managers are not affiliates of RIC or RIMCo other than as discretionary managers for a portion of a Fund’s portfolio. Some money managers (and their affiliates) may effect brokerage transactions for the Funds (see, “Brokerage Allocations” and “Brokerage Commissions”). Money managers may serve as advisers or discretionary managers for Russell Trust Company, other investment vehicles sponsored or advised by FRC or its affiliates, other consulting clients of FRC, other off-shore vehicles and/or for accounts which have no business relationship with the FRC organization.
24
Table of Contents
From its advisory fees, RIMCo, as agent for RIC, pays all fees to the money managers for their investment selection services. Quarterly, each money manager is paid the pro rata portion of an annual fee, based on the average for the quarter of all the assets allocated to the money manager. For the fiscal years ended October 31, 2006, 2005 and 2004, management fees paid to the money managers were:
Fund | $Amount Paid | Annual rate (as a % of average daily net assets) | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||
Diversified Equity | $ | 6,886,917 | $ | 5,358,437 | $ | 3,896,595 | 0.21 | % | 0.22 | % | 0.21 | % | ||||||
Special Growth | 4,496,344 | 3,748,882 | 3,020,817 | 0.42 | % | 0.42 | % | 0.41 | % | |||||||||
Quantitative Equity | 4,321,258 | 3,536,720 | 2,900,096 | 0.13 | % | 0.14 | % | 0.15 | % | |||||||||
International Securities | 8,868,619 | 6,419,377 | 4,734,718 | 0.30 | % | 0.30 | % | 0.30 | % | |||||||||
Real Estate Securities | 4,084,106 | 3,395,809 | 2,617,274 | 0.23 | % | 0.24 | % | 0.25 | % | |||||||||
Diversified Bond | 1,360,253 | 1,078,601 | 703,883 | 0.07 | % | 0.07 | % | 0.06 | % | |||||||||
Multistrategy Bond | 2,611,547 | 1,926,303 | 1,456,768 | 0.12 | % | 0.12 | % | 0.13 | % | |||||||||
Tax Exempt Bond | 500,915 | 456,354 | 379,762 | 0.18 | % | 0.20 | % | 0.21 | % | |||||||||
Tax Free Money Market | 60,398 | 102,464 | 116,248 | 0.10 | % | 0.09 | % | 0.09 | % | |||||||||
Equity I | 3,015,519 | 2,201,348 | 1,616,359 | 0.21 | % | 0.22 | % | 0.21 | % | |||||||||
Equity II | 2,863,588 | 3,746,281 | 3,716,942 | 0.44 | % | 0.43 | % | 0.41 | % | |||||||||
Equity Q | 1,960,930 | 1,951,393 | 1,879,094 | 0.13 | % | 0.14 | % | 0.14 | % | |||||||||
Tax-Managed Large Cap | 1,374,311 | 1,145,927 | 1,018,995 | 0.30 | % | 0.29 | % | 0.29 | % | |||||||||
Tax-Managed Mid & Small Cap | 680,017 | 537,596 | 520,884 | 0.35 | % | 0.36 | % | 0.43 | % | |||||||||
International | 5,497,220 | 4,932,031 | 4,078,105 | 0.30 | % | 0.30 | % | 0.31 | % | |||||||||
Emerging Markets | 4,984,884 | 3,686,618 | 2,567,466 | 0.48 | % | 0.50 | % | 0.52 | % | |||||||||
Fixed Income I | 887,631 | 762,328 | 586,501 | 0.07 | % | 0.07 | % | 0.05 | % | |||||||||
Fixed Income III | 812,064 | 598,884 | 439,907 | 0.11 | % | 0.11 | % | 0.12 | % | |||||||||
Short Duration Bond | 1,493,358 | 1,554,314 | 1,458,154 | 0.13 | % | 0.13 | % | 0.13 | % | |||||||||
Select Value | 916,269 | 838,788 | 642,385 | 0.24 | % | 0.24 | % | 0.25 | % | |||||||||
Select Growth | 517,107 | 440,140 | 307,193 | 0.28 | % | 0.27 | % | 0.29 | % |
Since no shares of the Global Equity Fund were issued during the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, the Fund did not pay any management fees to the money managers.
Each money manager has agreed that it will look only to RIMCo for the payment of the money manager’s fee, after RIC has paid RIMCo. Fees paid to the money managers are not affected by any voluntary or statutory expense limitations. Some money managers may benefit as a result of brokerage commissions received by their broker-dealer affiliates that execute portfolio transactions for the Funds.
DISTRIBUTOR. Russell Fund Distributors, Inc. (the “Distributor”) serves as the distributor of RIC Shares. The Distributor receives no compensation from RIC for its services other than Rule 12b-1 compensation and shareholder services compensation for certain classes of Shares pursuant to RIC’s Rule 12b-1 Distribution Plan and Shareholder Services Plan, respectively. The Distributor distributes shares of the Funds continuously, but reserves the right to suspend or discontinue distribution on that basis. The Distributor is not obligated to sell any specific amount of Fund shares. The Distributor is a wholly owned subsidiary of RIMCo and its mailing address is 909 A Street, Tacoma, WA 98402.
CUSTODIAN AND PORTFOLIO ACCOUNTANT. State Street Bank and Trust Company (“State Street”) serves as the custodian for RIC. State Street also provides basic portfolio recordkeeping required for each of the Funds for regulatory and financial reporting purposes. For these services, State Street is paid the following annual fees, which will be billed and payable on a monthly basis:
CUSTODY:
Domestic Custody
• | First $10 billion in average daily net assets – .005%, |
• | Over $10 billion – .004%. |
25
Table of Contents
Global Custody
• | First $1 billion in month end net assets – 0.06% - 0.35% depending on the geographic classification of the investments in the international funds, |
• | Over $1 billion – 0.03% - 0.35% depending on the geographic classification of the investments in the international funds; and |
• | A transaction charge ranging from $20 - $110 depending on the geographic classification of the investments in the international funds. |
All Custody
• | Portfolio transaction charges range from $5.00 - $25.00 depending on the type of transaction; |
• | Futures and Options charges are $5.00; |
• | Monthly pricing fees of $375.00 per portfolio and $8.25 per security (not applicable to money market funds); |
• | Annual fee per fund using fair valuation pricing service of $4,000; |
• | On-line access charges of $2,500 per fund; and |
• | Reimbursement of out-of-pocket expenses including postage, transfer fees, stamp duties, taxes, wire fees, telexes and freight. In addition, interest earned on cash reserves will be used to offset the Funds’ custodian expense. |
FUND ACCOUNTING (subject to a minimum fund accounting fee per fund of $30,000):
Domestic Fund Accounting
• | $7,500 per portfolio; and |
• | 0.0125% of month end net assets. |
International Fund Accounting
• | $7,500 per portfolio per year; and |
• | 0.02% of month end net assets. |
Yield Calculation Services
• | $4,200 per fixed income fund. |
Tax Accounting Services
• | $3,000 per fund annually (not applicable to money market funds). |
• | Wash sales $3,000 per fund annually (not applicable to money market funds). |
• | Qualified dividend income reporting $500 per fund (for up to 3 reports per fund in calendar year). |
Loan Servicing
Fees are billed monthly and will be the greater of the Per Loan Calculation or the Asset Based Calculation detailed below:
Per Loan Calculation
• | Minimum monthly charge for a Fund that holds up to 5 loans - $750 |
• | Minimum monthly charge for a Fund that holds up to 10 loans - $1,000 |
• | Minimum monthly charge for a Fund that holds up to 15 loans - $1,500 |
• | Minimum monthly charge for a Fund that holds up to 25 loans - $2,500 |
• | Minimum monthly charge for a Fund that holds up to 50 loans - $3,750 |
• | Monthly additional per loan charge in excess of 50 loans - $55 |
Asset Based Fee
• | First $500 million in loan assets – 3.0 basis points |
• | Next $500 million in loan assets – 2.5 basis points |
• | Excess thereafter – 2.0 basis points |
• | Incoming wire charge – $5.00 |
• | Outgoing wire charge – $5.25 |
Multiple Class Charges. In addition to the charges listed above, the Funds pay multiple class charges as follows: 1 class, no charge; each additional class, $5,100 annually per class.
The mailing address for State Street Bank and Trust Company is: Josiah Quincy Building 200 Newport Avenue North Quincy, MA 02171.
26
Table of Contents
TRANSFER AND DIVIDEND DISBURSING AGENT. RIMCo serves as transfer and dividend disbursing agent for RIC. For this service, RIMCo is paid a fee for transfer agency and dividend disbursing services provided to RIC. RIMCo retains a portion of this fee for its services provided to RIC and pays the balance to unaffiliated agents who assist in providing these services. RIMCo’s mailing address is 909 A Street, Tacoma, WA 98402.
ORDER PLACEMENT DESIGNEES. RIC has authorized certain Financial Intermediaries to accept on its behalf purchase and redemption orders for RIC Shares. Certain Financial Intermediaries are authorized, subject to approval of RIC’s Distributor, to designate other intermediaries to accept purchase and redemption orders on RIC’s behalf. With respect to those intermediaries, RIC will be deemed to have received a purchase or redemption order at the time such a Financial Intermediary or, if applicable, an authorized designee, accepts the order. The customer orders will be priced at the applicable Fund’s net asset value next computed after they are accepted by such a Financial Intermediary or an authorized designee, provided that Financial Intermediary or an authorized designee timely transmits the customer order to RIC.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. PricewaterhouseCoopers LLP serves as the Independent Registered Public Accounting Firm of RIC. PricewaterhouseCoopers LLP is responsible for performing annual audits of the financial statements and financial highlights of the Funds in accordance with the auditing standards of the Public Company Accounting Oversight Board and a review of federal tax returns. The mailing address of PricewaterhouseCoopers LLP is 1420 Fifth Avenue, Suite 1900, Seattle, WA 98101.
CODES OF ETHICS. RIC, RIMCo and the Distributor have each adopted a Code of Ethics as required under SEC Rule 17j-1. These Codes permit personnel subject to the Codes to invest in securities, which may include securities in which the Funds can invest. Personal investments are subject to the regulatory and disclosure provisions of the respective Codes. In addition, each Money Manager has adopted a Code of Ethics under Rule 17j-1. The table below indicates whether each Money Manager’s Code of Ethics permits personnel covered by the Code of Ethics to invest in securities and, where appropriate, to invest in securities in which a Fund advised by that Money Manager may invest.
MONEY MANAGER | Personal investing allowed? | Are investments in securities owned by the advised sub-trust | Does the code contain all of the required Rule 17j-1 provisions? | |||
AEW Management and Advisors, L.P. | Yes | No | Yes | |||
AllianceBernstein L.P. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Altrinsic Global Advisors, LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
AQR Capital Management, LLC | Yes | Yes, but not in securities on a restricted list | Yes | |||
Ark Asset Management Co., Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Armstrong Shaw Associates Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Aronson + Johnson + Ortiz, LP | Yes | Yes, subject to blackout periods | Yes | |||
Arrowstreet Capital, Limited Partnership | Yes | Yes, subject to blackout periods | Yes | |||
Axiom International Investors LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Bear Stearns Asset Management Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Berkeley Capital Management LLC | Yes | Yes | Yes | |||
Chartwell Investment Partners | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
ClariVest Asset Management, LLC | Yes | No | Yes | |||
Columbus Circle Investors | Yes | Yes, subject to blackout periods | Yes |
27
Table of Contents
MONEY MANAGER | Personal investing allowed? | Are investments in securities owned by the advised sub-trust | Does the code contain all of the required Rule 17j-1 provisions? | |||
David J. Greene and Company, LLC | Yes | Yes | Yes | |||
Delaware Management Company, a series of Delaware Management Business Trust | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Delphi Management, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
DePrince, Race & Zollo, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Franklin Portfolio Associates, LLC | Yes | Yes, subject to blackout periods | Yes | |||
Fuller & Thaler Asset Management, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Genesis Asset Managers , LLP | Yes | Yes, subject to blackout periods | Yes | |||
Goldman Sachs Asset Management, L.P. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Gould Investment Partners LLC | Yes | Yes | Yes | |||
Harding, Loevner Management, L.P. | Yes | Yes, subject to blackout periods | Yes | |||
Heitman Real Estate Securities LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Institutional Capital LLC | Yes | No | Yes | |||
INVESCO Institutional (N.A.), Inc., through its INVESCO Real Estate Division | Yes | Yes, subject to blackout periods | Yes | |||
Iridian Asset Management LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
J.P. Morgan Investment Management Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Jacobs Levy Equity Management, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
JS Asset Management, LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Lehman Brothers Asset Management LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Marsico Capital Management Company, LLC | Severely restricts personal trading except for certain specific transactions such as the purchase of mutual fund shares, commercial paper, etc. | No | Yes | |||
Merganser Capital Management L.P. | Yes | Yes, but may not enter into transactions that may result in conflicts of interest with clients | Yes | |||
MFS Institutional Advisors, Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Mondrian Investment Partners Ltd. | Yes | Yes, subject to blackout periods | Yes |
28
Table of Contents
MONEY MANAGER | Personal investing allowed? | Are investments in securities owned by the advised sub-trust | Does the code contain all of the required Rule 17j-1 provisions? | |||
Montag & Caldwell, Inc. | Yes | Yes, but not in securities on a restricted stock list | Yes | |||
Morgan Stanley Investment Management Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Netols Asset Management, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Neuberger Berman Management | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Nicholas-Applegate Capital Management LLC | Yes | Yes, subject to blackout periods | Yes | |||
Pacific Investment Management Company LLC | Yes, but must use a registered broker for transactions in publicly traded securities | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
Palisades Investment Partners, LLC | Yes | Yes, subject to blackout periods | Yes | |||
PanAgora Asset Management, Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Parametric Portfolio Associates LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
RREEF America L.L.C. | Yes | Yes, subject to blackout periods | Yes | |||
Russell Investment Management Company | Yes | Yes, subject to blackout periods | Yes | |||
Sands Capital Management, Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Schneider Capital Management Corporation | Yes | Yes, subject to blackout periods | Yes | |||
Standish Mellon Asset Management Company LLC | Yes | Yes, subject to blackout periods | Yes | |||
STW Fixed Income Management Ltd. | Yes | Yes | Yes | |||
Suffolk Capital Management, LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders or in securities of which 10% or more are held in portfolios managed by Suffolk | Yes | |||
Sustainable Growth Advisers, LP | Yes | Severely restricts personal trading, except for certain specific transactions such as the purchase of mutual fund shares, U.S. government securities and municipal securities. | Yes | |||
Systematic Financial Management, L.P. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
T. Rowe Price International, Inc. | Yes | Yes, but not in securities with pending or possible client buy or sell orders | Yes | |||
The Boston Company Asset Management, LLC | Yes | Yes, but not in securities with pending or possible client buy or sell orders, also, certain persons may not purchase securities issued by financial services organizations | Yes |
29
Table of Contents
MONEY MANAGER | Personal investing allowed? | Are investments in securities owned by the advised sub-trust | Does the code contain all of the required Rule 17j-1 provisions? | |||
Transamerica Investment Partners, Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Turner Investment Partners, Inc. | Yes | No | Yes | |||
Tygh Capital Management, Inc. | Yes | Yes, subject to blackout periods | Yes | |||
Wellington Management Company, LLP | Yes | Yes, subject to blackout periods | Yes | |||
Western Asset Management Company | Yes | Yes, subject to blackout periods | Yes | |||
Western Asset Management Company Limited | Yes | Yes, subject to blackout periods | Yes |
PLAN PURSUANT TO RULE 18f-3. Securities and Exchange Commission (the “SEC”) Rule 18f-3 under the 1940 Act, permits a registered open-end investment company to issue multiple classes of Shares in accordance with a written plan approved by the investment company’s board of trustees that is filed with the SEC. For purposes of this Statement of Additional Information, each Fund that issues multiple classes of Shares is referred to as a “Multiple Class Fund.” The key features of the Rule 18f-3 plan are as follows: Shares of each class of a Multiple Class Fund represent an equal pro rata interest in the underlying assets of that Fund, and generally have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, except that: (1) each class of Shares offered in connection with a Rule 12b-1 plan may bear certain fees under its respective Rule 12b-1 plan and may have exclusive voting rights on matters pertaining to that plan and any related agreements; (2) each class of Shares may contain a conversion feature; (3) each class of Shares may bear differing amounts of certain class expenses; (4) different policies may be established with respect to the payment of distributions on the classes of Shares of a Multiple Class Fund to equalize the net asset values of the classes or, in the absence of such policies, the net asset value per share of the different classes may differ at certain times; (5) each class of Shares of a Multiple Class Fund may have different exchange privileges from another class; (6) each class of Shares of a Multiple Class Fund may have a different class designation from another class of that Fund; and (7) each class of Shares offered in connection with a shareholder servicing plan would bear certain fees under its respective plan.
DISTRIBUTION PLANS. Under the 1940 Act, the SEC has adopted Rule 12b-1, which regulates the circumstances under which mutual funds may, directly or indirectly, bear distribution expenses. Rule 12b-1 provides that mutual funds may pay for such expenses only pursuant to a plan adopted in accordance with Rule 12b-1. Each Multiple Class Fund has adopted a distribution plan (the “Distribution Plan”) in accordance with the Rule.
Description of the Distribution Plan for Multiple Class Funds
In adopting the Distribution Plan for each Multiple Class Fund, a majority of the Trustees, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of RIC and who have no direct or indirect financial interest in the operation of any Distribution Plan or in any agreements entered into in connection with any Distribution Plan (the “Independent Trustees”), have concluded, in conformity with the requirements of the 1940 Act, that there is a reasonable likelihood that the Distribution Plan will benefit each respective Multiple Class Fund and its shareholders. In connection with the Trustees’ consideration of whether to adopt the Distribution Plan for each Multiple Class Fund, the Distributor, as the Multiple Class Funds’ principal underwriter, represented to the Trustees that the Distributor believed that the Distribution Plan was expected to result in increased sales and asset retention for those Multiple Class Funds by enabling those Multiple Class Funds to reach and retain more investors and Financial Intermediaries (such as brokers, banks, financial planners, investment advisers and other financial institutions), although it is impossible to know for certain, in the absence of a Distribution Plan or under an alternative distribution arrangement, the level of sales and asset retention that a particular Multiple Class Fund would have.
For each Multiple Class Fund, the 12b-1 fees may be used to compensate (a) Selling Agents (as defined below) for sales support services provided, and related expenses incurred with respect to Class A and Class C Shares, by such Selling Agents, and (b) the Distributor for distribution services provided by it, and related expenses incurred, including payments by the Distributor to compensate Selling Agents for providing support services. The Distribution Plan is a compensation-type plan. As such, RIC makes no distribution payments to the Distributor with respect to Class A or Class C Shares except as described above. Therefore, RIC does not pay for unreimbursed expenses of the Distributor, including amounts expended by the Distributor in excess of amounts received by it from RIC, interest, carrying or other financing charges in connection with excess amounts expended, or the Distributor’s overhead expenses. However, the Distributor may be able to recover such amount or may earn a profit from future payments made by RIC under the Distribution Plan.
30
Table of Contents
For each Multiple Class Fund, the Distribution Plan provides that each Multiple Class Fund may spend annually, directly or indirectly, up to 0.75% of the average daily net asset value of its Class A and Class C Shares for any activities or expenses primarily intended to result in the sale of Class A and Class C Shares of such Multiple Class Fund. Such payments by RIC will be calculated daily and paid as billed. Any amendment to increase materially the costs that Shares may bear for distribution pursuant to the Distribution Plan shall be effective upon a vote of the holders of the affected Class of the lesser of (a) more than fifty percent (50%) of the outstanding Shares of the affected Class of a Multiple Class Fund or (b) sixty-seven percent (67%) or more of the Shares of the affected Class of a Multiple Class Fund present at a shareholders’ meeting, if the holders of more than 50% of the outstanding Shares of the affected Class of such Fund are present or represented by proxy (a “1940 Act Vote”) and a vote of the Trustees, including a majority of the Independent Trustees. For the Multiple Class Funds, the Distribution Plan does not provide for those Funds to be charged for interest, carrying or any other financing charges on any distribution expenses carried forward to subsequent years. A quarterly report of the amounts expended under the Distribution Plan, and the purposes for which such expenditures are incurred, must be made to the Trustees for their review. To remain in effect, the Distribution Plan must be approved annually by a vote of the Trustees, including a majority of the Independent Trustees. Also, any material amendments must be approved by a vote of the Trustees, including a majority of the Independent Trustees. While the Distribution Plan is in effect, the selection and nomination of the Independent Trustees shall be committed to the discretion of such Independent Trustees. For each Multiple Class Fund, the Distribution Plan is terminable without penalty at any time by (a) a vote of a majority of the Independent Trustees, or (b) a vote of the holders of the lesser of (i) more than fifty percent (50%) of the outstanding Shares of the affected Class of a Multiple Class Fund or (ii) a 1940 Act Vote.
Selling Agent Agreements for Multiple Class Funds
Under the Distribution Plans, the Multiple Class Funds may also enter into agreements (“Selling Agent Agreements”) with Financial Intermediaries and with the Distributor to provide sales support services with respect to Multiple Class Fund Shares held by or for the customers of the Financial Intermediaries. Financial Intermediaries that have entered into Selling Agent Agreements are referred to in this Statement as “Selling Agents.”
Under the Distribution Plan, the following Multiple Class Funds’ C Shares accrued expenses in the following amounts, payable as compensation to the Distributor, for the fiscal years ended October 31, 2006, 2005 and 2004 (these amounts were for compensation to dealers):
10/31/06 | 10/31/05 | 10/31/04 | |||||||
Diversified Equity | $ | 1,062,092 | $ | 862,955 | $ | 622,945 | |||
Special Growth | 479,688 | 398,709 | 332,521 | ||||||
Quantitative Equity | 1,081,573 | 883,659 | 637,723 | ||||||
International Securities | 1,079,128 | 783,724 | 500,251 | ||||||
Real Estate Securities | 714,378 | 550,456 | 352,192 | ||||||
Diversified Bond | 416,612 | 378,881 | 314,307 | ||||||
Tax-Managed Large Cap | 134,658 | 120,141 | 95,641 | ||||||
Tax-Managed Mid & Small Cap | 81,406 | 60,614 | 43,787 | ||||||
Short Duration Bond | 187,325 | 247,430 | 304,817 | ||||||
Multistrategy Bond | 574,181 | 472,878 | 338,516 | ||||||
Tax Exempt Bond | 82,627 | 83,549 | 82,134 | ||||||
Emerging Markets | 322,261 | 212,216 | 127,329 | ||||||
Select Growth | 70,483 | 56,018 | 37,410 | ||||||
Select Value | 181,349 | 150,593 | 106,183 |
Under the Distribution Plan, the following Multiple Class Funds’ A Shares accrued expenses in the following amounts, payable as compensation to the Distributor, for the fiscal years ended October 31, 2006, 2005 and 2004 (these amounts were for compensation to dealers):
10/31/06 | 10/31/05 | 10/31/04 | |||||||
Money Market | $ | 36,497 | $ | 10,047 | $ | 2,191 |
Since no shares of the Global Equity Fund were issued during the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, Class A Shares and Class C Shares of this Fund did not accrue any expenses payable as compensation to the Distributor.
31
Table of Contents
SHAREHOLDER SERVICES PLANS. A majority of the Trustees, including a majority of Independent Trustees, adopted and amended a Shareholder Services Plan for certain classes of Shares of the Funds. This plan is referred to as the “Service Plan.”
Under the Service Plan, RIC may compensate the Distributor or any investment advisers, banks, broker-dealers, financial planners or other financial institutions that are dealers of record or holders of record or that have a servicing relationship with the beneficial owners or record holders of Shares of the Class C or Class E, offering such Shares (“Servicing Agents”), for any activities or expenses primarily intended to assist, support or service their clients who beneficially own or are primarily intended to assist, support or service their clients who beneficially own or are record holders of Shares of RIC’s Class C or Class E. Such payments by RIC will be calculated daily and paid quarterly at a rate or rates set from time to time by the Trustees, provided that no rate set by the Trustees for any Class C or Class E Shares may exceed, on an annual basis, 0.25% of the average daily net asset value of that Fund’s Shares.
Among other things, the Service Plan provides that (1) the Distributor shall provide to RIC’s officers and Trustees, and the Trustees shall review at least quarterly, a written report of the amounts expended by it pursuant to the Service Plan, or by Servicing Agents pursuant to Service Agreements, and the purposes for which such expenditures were made; (2) the Service Plan shall continue in effect for so long as its continuance is specifically approved at least annually by the Trustees, and any material amendment thereto is approved by a majority of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose; (3) while the Service Plan is in effect, the selection and nomination of the Independent Trustees shall be committed to the discretion of such Independent Trustees; and (4) the Service Plan is terminable, as to a Multiple Class Fund’s Shares, by a vote of a majority of the Independent Trustees.
Under the Service Plan, the following Multiple Class Funds’ Class C and Class E Shares accrued expenses in the following amounts payable to the Distributor, for the fiscal year ended October 31, 2006:
Class C | Class E | |||||
Diversified Equity | $ | 354,031 | $ | 153,837 | ||
Special Growth | 159,896 | 58,739 | ||||
Quantitative Equity | 360,524 | 160,435 | ||||
International Securities | 359,710 | 155,794 | ||||
Real Estate Securities | 238,126 | 120,727 | ||||
Diversified Bond | 138,872 | 130,848 | ||||
Tax-Managed Large Cap | 44,886 | 26,489 | ||||
Tax-Managed Mid & Small Cap | 27,135 | 5,160 | ||||
Short Duration Bond | 62,442 | 63,573 | ||||
Equity I | NA | 101,558 | ||||
Equity II | NA | 95,107 | ||||
Fixed I | NA | 77,353 | ||||
Fixed III | NA | 24,873 | ||||
International | NA | 118,783 | ||||
Equity Q | NA | 128,385 | ||||
Emerging Markets | 107,420 | 63,320 | ||||
Multistrategy Bond | 191,394 | 112,313 | ||||
Tax Exempt Bond | 27,542 | 24,632 | ||||
Select Growth | 23,494 | 13,492 | ||||
Select Value | 60,450 | 24,171 |
Since no shares of the Global Equity Fund were issued during the fiscal year ended October 31, 2006, the Fund’s Class C Shares and Class E Shares did not accrue any expenses payable to the Distributor.
32
Table of Contents
FUND EXPENSES. The Funds will pay all their expenses other than those expressly assumed by RIMCo. The principal expense of the Funds is the annual advisory fee and the annual administrative fee, each payable to RIMCo. The Funds’ other expenses include: fees for independent accountants, legal, transfer agent, registrar, custodian, dividend disbursement, portfolio and shareholder recordkeeping services, and maintenance of tax records (except for Money Market, Tax Exempt Bond, US Government Money Market, Tax Free Money Market and Tax-Managed Large Cap Funds); state taxes; brokerage fees and commissions; insurance premiums; association membership dues; fees for filing of reports and registering Shares with regulatory bodies; and such extraordinary expenses as may arise, such as federal taxes and expenses incurred in connection with litigation proceedings and claims and the legal obligations of RIC to indemnify the Trustees, officers, employees, shareholders, distributors and agents with respect thereto. Whenever an expense can be attributed to a particular Fund, the expense is charged to that Fund. Other common expenses are allocated among the Funds based primarily upon their relative net assets.
As of the date of this Statement, RIMCo has contractually agreed to waive and/or reimburse until February 29, 2008 all or a portion of its aggregate combined advisory and administrative fees with respect to certain Funds.
PURCHASE, EXCHANGE AND REDEMPTION OF FUND SHARES. As described in the Prospectus, the Funds provide you with different classes of shares based upon your individual investment needs.
Each class of shares of a Fund represents an interest in the same portfolio of investments. Each class is identical in all respects except that each class bears its own class expenses, including distribution and service fees, and each class has exclusive voting rights with respect to any service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary for each class of shares. There are no conversion, preemptive or other subscription rights.
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. The expenses that may be borne by specific classes of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) payments pursuant to a distribution plan or shareholder services plan for that specific class, (iii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iv) SEC and state securities registration fees incurred by a specific class, (v) the expense of administrative personnel and services required to support the shareholders of a specific class of shares, (vi) litigation or other legal expenses relating to a specific class of shares, (vii) audit or accounting expenses relating to a specific class of shares, (viii) the expense of holding meetings solely for shareholders of a specific class and (ix) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
The following classes of shares are available for purchase. See the applicable Prospectus for a discussion of factors to consider in selecting which class of shares to purchase and for applicable service/distribution fees.
Class A Shares of Certain Russell Funds (except the Money Market Fund)
Class A shares are sold at offering price, which is the net asset value plus a front-end sales charge as follows.
The Funds receive the entire net asset value of all Class A shares that are sold. The Distributor receives the full applicable sales charge from which it pays the broker/dealer commission shown in the table below. The equity Funds and the fixed income Funds have different front-end sales charges. The equity Funds include the Diversified Equity, Quantitative Equity, Special Growth, Real Estate Securities, Global Equity, International Securities and Emerging Markets Funds. The fixed income Funds include the Multistrategy Bond and Short Duration Bond Funds.
Equity Funds Front-End Sales Charge
Amount of your investment | Front-end sales charge as a % of offering price | Front-end sales charge as a % of net amount invested | BrokerDealer commission as a % of offering price | ||||||
Less than $ 50,000 | 5.75 | % | 6.10 | % | 5.00 | % | |||
$50,000 but less than $ 100,000 | 4.50 | % | 4.71 | % | 3.75 | % | |||
$100,000 but less than $ 250,000 | 3.50 | % | 3.63 | % | 2.75 | % | |||
$250,000 but less than $ 500,000 | 2.50 | % | 2.56 | % | 2.00 | % | |||
$500,000 but less than $ 1,000,000 | 2.00 | % | 2.04 | % | 1.60 | % | |||
$1,000,000 or more | —0— | —0— | up to 1.00 | % |
33
Table of Contents
Fixed Income Funds Front-End Sales Charge
Amount of your investment | Front-end sales charge as a % of offering price | Front-end sales charge as a % of net amount invested | BrokerDealer commission as a % of offering price | ||||||
Less than $ 50,000 | 3.75 | % | 3.90 | % | 3.00 | % | |||
$50,000 but less than $ 100,000 | 3.50 | % | 3.63 | % | 2.75 | % | |||
$100,000 but less than $ 250,000 | 2.50 | % | 2.56 | % | 2.00 | % | |||
$250,000 but less than $ 500,000 | 2.00 | % | 2.04 | % | 1.60 | % | |||
$500,000 but less than $ 1,000,000 | 1.50 | % | 1.52 | % | 1.20 | % | |||
$1,000,000 or more | —0— | —0— | up to 1.00 | % |
Investments of $1,000,000 or more. You do not pay a front-end sales charge when you buy $1,000,000 or more of shares of RIC Funds (other than money market funds). However, if your Financial Intermediary was paid a commission by the Funds’ Distributor on those Class A Shares and you redeem those Class A Shares within one year of purchase, you will pay a deferred sales charge of up to 1.00%.
The Funds’ distributor keeps a portion of the front-end sales charge imposed on Class A Shares. Financial Intermediaries receive the remaining amount of the front-end sales charge imposed on Class A Shares and may be deemed to be underwriters of the Funds as defined in the Securities Act of 1933. Financial Intermediaries that sell Class A shares may also receive the distribution fee payable under the Funds’ distribution plan at an annual rate equal to up to 0.75% (presently limited to 0.25%) of the average daily net assets represented by the Class A Shares sold by them.
Sales Charge Waivers and Reductions
Please see the applicable Russell Funds’ prospectus for information about sales charge waivers and reductions, including front-end sales charge waivers, cumulative purchase discounts, accumulation privileges, letters of intent, reinstatement privileges, exchange privileges, and deferred sales charge waivers.
Class A Shares of the Money Market Fund
Class A shares of the Money Market Fund are sold without a front-end sales charge. Financial Intermediaries that sell Class A shares will receive the distribution fee payable under the Distribution Plan at an annual rate equal to 0.75% (presently limited to 0.15%) of the average daily net assets represented by the Class A shares sold by them.
Class C Shares of all Funds
Financial intermediaries that sell Class C shares will receive the shareholder services fee payable under the Funds’ shareholder services plan at an annual rate equal to 0.25% of the average daily net assets represented by Class C shares sold by them and the distribution fee payable under the Funds’ Distribution Plan at an annual rate equal to 0.75% of the average daily net assets represented by the Class C shares sold by them.
Class E Shares of all Funds
Financial intermediaries that sell Class E shares will receive the shareholder services fee payable under the Funds’ shareholder services plan at an annual rate equal to 0.25% of the average daily net assets represented by Class E shares sold by them.
Class I, S and Y Shares of all Funds
Financial intermediaries will receive no shareholder services or distribution fees for these classes of shares.
Class S Shares of all Funds
MOVING FROM CLASS S TO CLASS A SHARES - You can redeem Class S shares held in an account that charges an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for services and with the redemption proceeds purchase Class A shares without paying a front-end sales charge if all of the following are met: (a) you are leaving or have left the fee-based program, (b) you have held the Class S shares in the program for at least one year, and (c) you
34
Table of Contents
notify your Financial Intermediary and you purchase the Class A shares within 90 days after redeeming the Class S shares. Russell believes that an exchange between classes of the same Fund is not a taxable event, however please consult with your tax adviser for more information.
Class S, E and I Shares of All Funds
Except for the Money Market Fund, Class S, E and I Shares of each Fund may only be purchased by:
(1) | clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for their services for the shareholder account in which the Class S, E or I Shares are held; |
(2) | employee benefit and other plans, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing plans, money purchase plans, defined benefit plans and non-qualified deferred compensation plans; |
(3) | clients of Financial Intermediaries who are members of Russell Investment Group; |
(4) | Russell employee investment programs; or |
(5) | current and retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell such Class E, S or I Shares. |
The Funds generally do not have the ability to enforce these limitations on access to Class S, E and I Shares. It is the sole responsibility of each Financial Intermediary to ensure that it only makes Class S, E and I Shares available to those categories of investors listed above that qualify for access to Class S, E and I Shares. However, the Funds will not knowingly sell Class S, E or I Shares to any investor not meeting one of the foregoing criteria.
Minimum Initial Investment Requirements. If you invest less than the required minimum investment in a Fund, the Funds reserve the right to refuse your order or to correct, within a reasonable period, your purchase transaction and notify you promptly of that correction. The Funds reserve the right to close any account whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares.
The following lists the exceptions to the minimum initial investment requirements:
1. A transfer of an existing account from one Financial Intermediary or financial platform to another is not subject to the minimum initial investment requirements. For the purpose of this exception, a transfer is a transfer-in-kind or the sale and purchase of shares of the same class of the same Fund within 30 days.
2. For Class Y Shares, multiple related party accounts will not be subject to the minimum initial investment requirements if the average Class Y account balance per Fund of these related party accounts exceeds $5 million.
3. Except for Class Y Shares of the Institutional Funds, a Fund will waive the initial minimum investment requirement for employee benefit plans and other plans that have at least $2.5 million in total plan assets at the time the plan made the decision to invest in the Fund and that consolidate and hold all fund Shares in plan level or omnibus accounts on behalf of participants. With respect to Class Y Shares of the Institutional Funds, a Fund will waive the initial minimum investment requirement for employee benefit plans and other plans that have at least $5.0 million in total plan assets at the time the plan made the decision to invest in the Fund and that consolidate and hold all fund positions in one or more accounts on behalf of participants.
4. If an employee benefit plan or other plan offers Class I or E Shares of an Institutional Fund, Class I Shares of the Select Growth Fund or Class I Shares of the Select Value Fund as an investment option to its participants and that plan subsequently decides to add Class I or E Shares of an Institutional Fund, Class I Shares of the Select Growth Fund or Class I Shares of the Select Value Fund as another investment option, the required initial minimum investment for Class I shares of that added fund will be waived.
5. The following categories of investor are not subject to any initial minimum investment requirement: (i) U.S. Russell associates and their spouses, domestic partners and dependent children; (ii) UTMAs or UGMAs opened by a U.S. Russell associate for the benefit of their dependent child, grandchild, great-grandchild, niece or nephew; (iii) retired Russell associates and their spouses, domestic partners and dependent children; (iv) directors, trustees, retired directors or retired trustees of Frank Russell Company, any of its subsidiaries, Russell Investment Company or Russell Investment Funds; (v) Northwestern Mutual
35
Table of Contents
Home Office Employees and their spouses, domestic partners and dependent children; and (vi) retired Northwestern Mutual Home Office Employees and their spouses, domestic partners and dependent children. A dependent child is one under the age of 21 that is a child by blood, adoption or a stepchild under a current marriage or domestic partnership.
6. Letter of Intent - Class Y Shares only. You may be eligible to purchase Class Y shares of the Institutional Funds if you do not meet the required minimum investment by establishing a non-binding letter of intent (“LOI”). A LOI allows you to combine purchases of all Class Y Shares of a single Institutional Fund you intend to make over a 13-month period in order to meet the required initial minimum investment amount for that Fund. At your request, purchases made during the previous 90 days may be included, but any appreciation of your investment or reinvested dividends will not be included.
Uncashed Checks. Please make sure you promptly cash checks issued to you by the Funds. If you do not cash a dividend, distribution, or redemption check, the Funds will act to protect themselves and you. This may include restricting certain activities in your account until the Funds are sure that they have a valid address for you. After 180 days, the Funds will no longer honor the issued check and, after attempts to locate you, the Funds will follow governing escheatment regulations in disposition of check proceeds. No interest will accrue on amounts represented by uncashed checks.
VALUATION OF FUND SHARES. The net asset value per share is calculated for each Fund Class on each business day on which Shares are offered or orders to redeem are tendered. A business day is one on which the New York Stock Exchange (“NYSE”) is open for regular trading. Currently, the NYSE is open for trading every weekday except New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value per share is computed for each class of Shares of a Fund by dividing the current value of the Fund’s assets attributable to each class of Shares, less liabilities attributable to that class of Shares, by the number of each individual class of Shares of the Fund outstanding, and rounding to the nearest cent.
The International, Global Equity, Emerging Markets, International Securities, Fixed Income I, Diversified Bond, Fixed Income III and Multistrategy Bond Funds’ portfolio securities actively trade on foreign exchanges which may trade on Saturdays and on days that the Funds do not offer or redeem Shares. The trading of portfolio securities on foreign exchanges on such days may significantly increase or decrease the net asset value of Fund Shares when the shareholder is not able to purchase or redeem Fund Shares. Further, because foreign securities markets may close prior to the time the Funds determine their net asset values, events affecting the value of the portfolio securities occurring between the time prices are determined and the time the Funds calculate their net asset values may not be reflected in the calculations of net asset value unless RIMCo determines that a particular event would materially affect the net asset value.
VALUATION OF PORTFOLIO SECURITIES. With the exceptions noted below, the Funds value their portfolio securities at “fair market value.” This generally means that equity securities listed and principally traded on any national securities exchange are valued on the basis of the last sale price or, if there were no sales, at the closing bid price, on the primary exchange on which the security is traded. Equity securities traded over-the-counter (“OTC”) are valued on the basis of official closing price. Fixed–income securities are valued on the basis of the closing bid price, and options and futures contracts are valued on the basis of last sale price or settlement price for futures.
Because many fixed–income securities do not trade each day, last sale or bid prices often are not available. As a result, these securities may be valued using prices provided by a pricing service or broker when the prices are believed to be reliable—that is, when the prices reflect the fair market value of the securities.
International equity securities traded on a national securities exchange or OTC are valued on the basis of official closing price.
Short term securities maturing within 60 days of the valuation date held by the Funds are valued using the amortized cost method. Under this method, a portfolio instrument is initially valued at cost, and thereafter a constant accretion/amortization to maturity of any discount or premium is assumed. The Funds utilize the amortized cost valuation method in accordance with Rule 2(a)–7 of the 1940 Act. The money market instruments are valued at “amortized cost” unless the Board determines that amortized cost does not represent fair value. Short-term securities maturing within 60 days at time of purchase held by the non–money market Funds are also valued at “amortized cost” unless the Board determines that amortized cost does not represent fair value. While amortized cost provides certainty in valuation, it may result in periods when the value of an instrument is higher or lower than the price a Fund would receive if it sold the instrument.
Municipal obligations are appraised or priced by an independent pricing source, approved by the Board, which utilizes relevant information, such as bond transactions, quotations from bond dealers, market transactions in comparable securities and various relationships between securities.
36
Table of Contents
The Funds may value certain securities for which market quotations are not readily available at “fair value,” as determined in good faith pursuant to procedures established by the Board of Trustees and delegated to RIMCo to administer. Market quotations for non-U.S. securities, either individually or collectively, may not be considered to be readily available if a significant event, including but not limited to an increase or decrease in U.S. market indices meeting standards of significance specified in the procedures established by the Board (which standards of significance are subject to change), occurs after the close of the non-U.S. markets on which such securities are traded. If you hold Shares in a Fund that holds portfolio securities listed primarily on non-U.S. exchanges, the net asset value of that Fund’s Shares may change on a day when you will not be able to purchase or redeem that Fund’s Shares. This is because the value of those portfolio securities may change on weekends or other days when that Fund does not price its Shares.
PORTFOLIO TRANSACTION POLICIES. Generally, securities are purchased for the Equity I, Equity Q, International, Global Equity, Emerging Markets, Fixed Income I, Diversified Equity, Quantitative Equity, International Securities, Real Estate Securities, Select Growth, Select Value and Diversified Bond Funds for investment income and/or capital appreciation and not for short–term trading profits. However, these Funds may dispose of securities without regard to the time they have been held when such action, for defensive or other purposes, appears advisable to their money managers. The Equity II, Fixed Income III, Special Growth, Short Duration Bond, Multistrategy Bond and Tax Exempt Bond Funds trade more actively to realize gains and/or to increase yields on investments by trading to take advantage of short–term market variations. This policy is expected to result in higher portfolio turnover for these Funds. Conversely, the Tax–Managed Large Cap Fund and the Tax–Managed Mid & Small Cap Fund, which seek to minimize the impact of taxes on their shareholders, attempt to limit short–term capital gains and to minimize the realization of net long–term capital gains. These policies are expected to result in a lower portfolio turnover rate for the Tax–Managed Large Cap Fund and the Tax–Managed Mid & Small Cap Fund.
The portfolio turnover rates for certain multi–manager Funds are likely to be somewhat higher than the rates for comparable mutual funds with a single money manager. Decisions to buy and sell securities for each Fund are made by a money manager independently from other money managers. Thus, one money manager could decide to sell a security when another money manager for the same Fund decides to purchase the same security, thereby increasing the Fund’s portfolio turnover ratios and brokerage commissions. The Funds’ changes of money managers may also result in a significant number of portfolio sales and purchases as the new money manager restructures the former money manager’s portfolio.
The Funds, except the Tax Exempt Bond, Tax–Managed Large Cap and Tax–Managed Mid & Small Cap Funds, do not give significant weight to attempting to realize long–term capital gains when making portfolio management decisions.
PORTFOLIO TURNOVER RATE. The portfolio turnover rate for each Fund is calculated by dividing the lesser of purchases or sales of portfolio securities for the particular year, by the monthly average value of the portfolio securities owned by the Fund during the past 13 months. For purposes of determining the rate, all short–term securities, including options, futures, forward contracts, and repurchase agreements, are excluded. Significant variations in the portfolio turnover rates for any Fund generally are primarily attributable to money manager changes, market volatility, and/or duration of portfolio investments
The portfolio turnover rates for the fiscal years ended October 31, 2006 and 2005 for each Fund (other than the Money Market, US Government Money Market and Tax Free Money Market Funds) were:
10/31/06 | 10/31/05 | |||||
Equity I | 98.17 | % | 109.71 | % | ||
Equity II | 154.76 | 156.39 | ||||
Equity Q | 106.45 | 117.34 | ||||
Tax–Managed Large Cap | 60.63 | 42.92 | ||||
Tax–Managed Mid & Small Cap | 54.34 | 57.90 | ||||
International | 83.09 | 80.36 | ||||
Emerging Markets | 68.52 | 71.86 | ||||
Fixed Income I | 125.38 | 201.90 | ||||
Fixed Income III | 270.24 | 197.66 | ||||
Diversified Equity | 96.67 | 110.70 | ||||
Special Growth | 154.79 | 153.63 | ||||
Quantitative Equity | 104.52 | 108.48 | ||||
International Securities | 76.65 | 79.49 | ||||
Real Estate Securities | 48.64 | 63.95 | ||||
Diversified Bond | 105.80 | 225.67 | ||||
Short Duration Bond | 111.57 | 202.53 | ||||
Multistrategy Bond | 261.90 | 196.81 | ||||
Tax Exempt Bond | 63.34 | 43.13 | ||||
Select Growth | 148.35 | 127.68 | ||||
Select Value | 86.60 | 84.74 |
37
Table of Contents
The Global Equity Fund does not yet have portfolio turnover rates since it is a new fund.
A high portfolio turnover rate generally will result in higher brokerage transaction costs and may result in higher levels of realized capital gains or losses with respect to a Fund’s portfolio securities (see “Taxes”).
DISCLOSURE OF PORTFOLIO HOLDINGS The Funds maintain portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio investments held by a Fund. These portfolio holdings disclosure policies have been approved by the Board of Trustees. Disclosures of portfolio holdings information may only be made pursuant to these Board-approved policies and procedures.
Disclosure of a Fund’s portfolio holdings may only occur if such disclosure is consistent with the anti-fraud provisions of the federal securities laws and the fiduciary duties of the Fund and its adviser. Disclosure is permissible only when a Fund, as determined by the Board of Trustees or Chief Compliance Officer, has legitimate business purposes for such disclosure and the recipients are subject to a written confidentiality agreement, which includes a duty not to trade on non-public information.
Public Disclosures of Portfolio Holdings Information
Disclosure of a Fund’s complete holdings as of the end of each fiscal quarter is required to be made quarterly within 60 days of the end of each fiscal quarter in the Annual Report and Semi-Annual Report to Fund shareholders and in the quarterly holdings report on Form N-Q. These reports are available, free of charge, on the EDGAR database on the SEC’s website at www.sec.gov. The Funds will also make these reports available on their website, www.russell.com. Disclosure of a Fund’s complete portfolio holdings will be available on the Funds’ website following each month end. Such disclosure will be available no later than 60 calendar days following each month end. Disclosure of a Fund’s top ten portfolio holdings as of the last day of each month will be available on the Fund’s website no later than 15 calendar days after each month end.
Upon the occurrence of an unexpected, out of the ordinary event with respect to one or more portfolio holdings or the market as a whole, RIMCo may, consistent with the statement of policy set forth above and with the prior approval of the Chief Compliance Officer, prepare and make available on the Funds’ website a statement relating to such event which may include information regarding the Funds’ portfolio holdings.
Portfolio managers and other senior officers or spokespersons of the Funds may disclose or confirm the ownership of any individual portfolio holdings position to reporters, brokers, shareholders, consultants or other interested persons only if such information has been previously publicly disclosed in accordance with the portfolio holdings disclosure policies.
A Fund may pay for any portion of a redemption amount in excess of $250,000 by a distribution of in-kind securities from the Fund’s portfolio, instead of in cash. Prior to making an in-kind distribution, RIMCo will notify the redeeming Shareholder that all information regarding the Fund’s portfolio holdings is non-public and confidential, may not be disclosed to others and may not be used as the basis for any trading decisions.
Non-Public Disclosures of Portfolio Holdings Information
RIMCo and the money managers may periodically distribute lists of applicable investments held by the Funds for the purpose of facilitating management of the Funds’ portfolios and receipt of relevant research. RIMCo and the money managers may periodically distribute a list of the issuers and securities which are covered by their research department as of a particular date, but in no case will such a list identify an issuer’s securities as either currently held or anticipated to be held by the Funds or identify Fund position sizes. In addition, the Funds’ custodian generates daily portfolio holdings information in connection with its services to the Funds. Confluence Technologies, Inc. (“CTI”), GCOM2 Solutions, Inc. (“GSI”), and Institutional Shareholder Services, Inc. (“ISS”) provide performance reporting services, tax filing services, and proxy voting and class action registration services to RIMCo, respectively. CTI and ISS receive daily portfolio holdings information in connection with their services to RIMCo, while GSI receives such information quarterly. Such service providers must keep the portfolio holdings information confidential and cannot trade based on the non-public information. There is no lag between the date of such portfolio holdings information and the date on which the information is disclosed to the service providers.
From time to time rating and ranking organizations such as Standard & Poor’s, Morningstar, Inc. and Lipper Analytical Services may request complete portfolio holdings information in connection with rating the Funds. In order to facilitate the review of the Funds by these rating agencies, the Funds may distribute (or authorize their service providers to distribute) portfolio holdings information to such ratings agencies before their public disclosure is required or authorized, provided that (a) the recipient does not distribute the information or results of analyses to third parties, other departments or persons who are likely to use the information for purposes of purchasing or selling the Fund shares before the information or results of analyses become public information and (b) the recipient is subject to a confidentiality agreement, which includes a duty not to trade on non-public information.
38
Table of Contents
Administration of the Portfolio Holdings Disclosure Policies
The Chief Compliance Officer will exercise oversight of disclosures of the Funds’ portfolio holdings. It is the duty of the Chief Compliance Officer or her designee to ensure that all disclosures of the portfolio holdings of a Fund are in the best interests of such Fund’s shareholders. It is the responsibility of each business unit with access to portfolio holdings, including Investment Operations and Investment Management and Research, to inform the Chief Compliance Officer of any third parties receiving portfolio holdings information which has not previously been disclosed. The Chief Compliance Officer is also responsible for monitoring for conflicts of interest between the interests of Fund shareholders and the interests of the Funds’ investment adviser, principal underwriter, or any affiliated person of the Funds, their investment adviser or their principal underwriter. Every violation of the portfolio holdings disclosure policies must be reported to the Funds’ Chief Compliance Officer. If the Chief Compliance Officer deems that such violation constitutes a “Material Compliance Matter” within the meaning of Rule 38a-1 under the 1940 Act, the violation will be reported to the Funds’ Board of Trustees, as required by Rule 38a-1. The Chief Compliance Officer also has the discretion to report other compliance matters arising under the portfolio holdings disclosure policies to the Board of Trustees.
Disclosure of the Funds’ portfolio holdings made in accordance with these procedures is authorized by the Funds’ Board of Trustees. The portfolio holdings disclosure policies may not be waived, and exceptions may not be made, without the consent of the Funds’ Board of Trustees; provided, however that waivers or exceptions in connection with operational or administrative functions may be made with the prior consent of the Chief Compliance Officer. All such waivers and exceptions by the Chief Compliance Officer will be disclosed to the Board of Trustees no later than its next regularly scheduled quarterly meeting.
PROXY VOTING POLICIES AND PROCEDURES. The Board has delegated to RIMCo, as RIC’s investment adviser, the primary responsibility for monitoring, evaluating and voting proxies solicited by or with respect to issuers of securities in which assets of the Funds may be invested. RIMCo has established a proxy voting committee (“Committee”) and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting guidelines (“Guidelines”). RIMCo has also hired a third party service provider to serve as proxy administrator (“Administrator”), although RIMCo (whether acting directly or through the Committee) retains final authority with respect to proxy voting.
The P&P are designed to ensure that proxy voting decisions are made in accordance with the best interests of RIMCo’s clients and to enable the Committee to resolve any material conflicts of interest between the Funds on the one hand, and RIMCo or its affiliates, on the other, before voting proxies with respect to a matter in which such a conflict may be present. In order to assure that proxies are voted in accordance with the best interests of clients at all times, the P&P authorize votes to be cast in accordance with the Guidelines and delegate to the Administrator responsibility for performing research and making recommendations in accordance with the Guidelines. Conflicts are addressed in the P&P by requiring the implementation of a process requiring additional diligence and documentation if ballots are not voted in accordance with the Guidelines or pursuant to the recommendation of the Proxy Administrator.
The Guidelines address matters that are commonly submitted to shareholders of a company for voting, such as issues relating to corporate governance, auditors, the board of directors, capital structure, executive and director compensation, and mergers and corporate restructurings. Subject to the supervision and oversight of the Committee, and the authority of the Committee to intervene with respect to a particular proxy matter, the Administrator is obligated to vote all proxies as set forth in the Guidelines.
The following are examples of certain types of issues that are covered in the Guidelines and how the proxies are generally voted.
• | Proxies will generally be voted for routine agenda items such as the opening of the shareholder meeting; the presence of quorum; regulatory filings; the designation of inspector or shareholder representatives of minutes of meeting; the allowance of questions; the publication of minutes; and the closing of the shareholder meeting. |
• | In connection with director and officer indemnification and liability protection, proxies will generally be voted: against proposals to limit or eliminate entirely director and officer liability for monetary damages for violating the duty of care; against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness; and for only those proposals that provide such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company. |
• | In certain corporate governance matters, proxies will generally be voted: for proposals seeking to amend a company’s articles of association, procedures, processes and/or other company documents unless the Administrator recommends a vote against such matter, in which case such vote will be determined on a case-by-case basis; for mergers and acquisitions and corporate restructuring proposals; against proposals to classify the board; for shareholder proposals that ask a company to submit its poison pill for shareholder ratification; and against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments. |
39
Table of Contents
• | In regards to changes to a company’s capital structure, proxies are generally voted against proposals that seek to increase the authorized common or preferred stock by twice the present limit, unless the increase is in connection with a stock split or merger that was voted in favor of. If the company does not have any preferred shares outstanding, proxies will generally be voted against the requested authorization. |
• | Generally, proxies are voted for executive and director stock option plans unless the Administrator recommends a vote against such matter, in which case additional criteria specified in the Guidelines will apply and such vote may be determined on a case-by-case basis. |
• | In connection with social and environmental matters, proxies will generally be voted for management social, political or environmental proposals unless the Administrator recommends a vote against such matter, in which case such vote will be determined on a case-by-case basis. However, in regards to shareholder social, political or environmental proposals, proxies will be registered as abstentions. |
Where a voting matter is not specifically addressed in the Guidelines or there is a question as to the outcome, the Administrator is obligated to request additional direction from the Committee. The Administrator is obligated to maintain records of all votes received, all votes cast and other relevant information.
Information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available at http://www.russell.com and on the SEC’s website at http://www.sec.gov.
BROKERAGE ALLOCATIONS. Subject to the arrangements and provisions described below, the selection of a broker or dealer to execute portfolio transactions is made either by the money manager or by RIMCo. RIC’s arrangements with RIMCo and the money managers provide that in executing portfolio transactions and selecting brokers or dealers, the principal objective is to seek best execution. The factors that may be considered in assessing the best execution available for any transaction include the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, the reasonableness of the commission, if any, and the value of research services (as that term is defined in Section 28(e) of the Securities Exchange Act of 1934). In assessing whether the best overall terms have been obtained, RIMCo and the money managers are not obligated to select the broker offering the lowest commission. Any commission, fee or other remuneration paid to an affiliated broker–dealer is paid in compliance with RIC’s procedures adopted in accordance with Rule 17e–1 of the 1940 Act.
In the case of securities traded in the over-the-counter market and depending on where the money manager or RIMCo believes best execution is available, portfolio transactions may be effected either (1) on an agency basis, which involves the payment of negotiated brokerage commissions to the broker-dealer, including electronic communication networks, or (2) on a principal basis at net prices, which include compensation to the broker-dealer in the form of a mark-up or mark-down without commissions.
RIMCo, pursuant to its Russell Managed Trading program, or a money manager, may effect portfolio transactions for the segment of a Fund’s portfolio assigned to the money manager with a broker–dealer affiliated with RIMCo or the money manager, as well as with brokers affiliated with other money managers. Russell Managed Trading is an arrangement under which RIMCo, as adviser to the Funds, assumes responsibility for placing portfolio transactions that have been determined by certain money managers of selected Funds.
The Funds effect certain transactions through Russell Implementation Services, Inc. (“RIS”) and its global network of unaffiliated correspondent brokers. RIS is a registered broker and investment adviser and an affiliate of RIMCo. Trades placed through RIS and its correspondents are made (i) to manage trading associated with changes in managers, rebalancing across existing managers, cash flows and other portfolio transitions, (ii) to execute portfolio securities transactions selected by money managers or (iii) to execute portfolio securities transactions for the portion of each Fund’s assets that RIMCo determines not to allocate to money managers, including assets allocated to the “select holdings” strategy, and for each Fund’s cash reserves.
The Funds effect certain transactions through 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 RIMCo. Trades placed through LJR and its correspondents are used (i) to obtain research services for RIMCo 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 RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through LJR and its correspondents or other brokers only to the extent that the Funds will receive competitive execution, price and commissions. In addition, RIMCo 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 RIMCo by LJR 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
40
Table of Contents
rates. Research provided to RIMCo may benefit the particular Funds generating the trading activity and may also benefit other Funds within RIC and other funds and clients managed or advised by RIMCo or its affiliates. Similarly, the Funds may benefit from research provided with respect to trading by those other funds and clients.
Decisions concerning the acquisition of research services by RIMCo are approved and monitored by a FRC Soft Dollar Committee, which consists principally of employees in research and investment management roles. The committee acts as an oversight body with respect to purchases of research services acquired by RIMCo using soft dollars generated by funds managed by FRC affiliates, including the Funds. In addition, the committee is charged with setting an annual soft dollar budget with respect to research purchases.
LJR may also rebate to the Funds a portion of commissions earned on certain trading by the Funds through 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 RIMCo’s research needs have been met, as determined annually in the Soft Dollar Committee budgeting process.
LJR retains a portion of all commissions generated, regardless of whether the trades were used to provide research services to RIMCo or commission recapture to the Funds. Trades through RIS for transition services and manager funding (i.e. brokerage arrangements designed to reduce costs and optimize performance during the transition of Fund assets upon the hiring, termination or additional funding of a money manager) and are at ordinary and customary commission rates and do not result in commission rebates or accrued credits for the procurement of research related services.
Additionally, a money manager may independently effect transactions through RIS or a broker affiliated with the money manager or another money manager to obtain research services for its own use. Research services provided to a money manager are required by law to benefit the Fund generating the trading activity but may also benefit other funds and clients managed or advised by the money manager. Similarly, the Funds may benefit from research services provided with respect to trading by those other funds and clients.
41
Table of Contents
BROKERAGE COMMISSIONS. During the fiscal years ended October 31, 2006, 2005 and 2004, the total brokerage commissions paid by the Funds were:
2006 | 2005 | 2004 | |||||||
Equity I | $ | 2,459,543 | $ | 2,061,281 | $ | 2,042,570 | |||
Equity II | 2,101,478 | 3,487,619 | 3,442,885 | ||||||
Equity Q | 1,230,704 | 1,494,594 | 1,580,511 | ||||||
Tax–Managed Large Cap | 377,671 | 294,471 | 226,138 | ||||||
Tax–Managed Mid & Small Cap | 340,854 | 344,246 | 425,404 | ||||||
International | 3,413,630 | 3,404,529 | 3,051,230 | ||||||
Emerging Markets | 2,470,731 | 2,591,323 | 2,079,689 | ||||||
Fixed Income III | 13,920 | 0 | 0 | ||||||
Diversified Equity | 5,303,771 | 4,653,875 | 4,865,262 | ||||||
Special Growth | 3,257,822 | 3,153,276 | 2,559,296 | ||||||
Quantitative Equity | 2,902,158 | 2,532,812 | 2,511,682 | ||||||
International Securities | 5,776,382 | 4,613,979 | 3,740,999 | ||||||
Real Estate Securities | 1,694,302 | 1,936,853 | 1,378,876 | ||||||
Multistrategy Bond | 42,895 | 0 | 0 | ||||||
Select Growth | 507,665 | 490,641 | 445,859 | ||||||
Select Value | 627,610 | 664,717 | 751,568 |
The Global Equity Fund has not yet paid brokerage commissions since it is a new fund.
The principal reasons for changes in several Funds’ brokerage commissions for the three years were (1) changes in Fund asset size, (2) changes in market conditions, and (3) changes in money managers of certain Funds, which required substantial portfolio restructurings, resulting in increased securities transactions and brokerage commissions.
The Fixed Income I, Diversified Bond, Short Duration Bond, Tax Exempt Bond, Money Market, US Government Money Market and Tax Free Money Market Funds normally do not pay a stated brokerage commission on transactions, but may pay brokerage commissions on trading associated with changes in money managers.
During the fiscal year ended October 31, 2006, approximately $6 million of the brokerage commissions of the Funds were directed to brokers who provided research services to RIMCo. The research services included industry and company analysis, portfolio strategy reports, economic analysis, and statistical data pertaining to the capital markets.
Gross brokerage commissions received by affiliated broker/dealers from affiliated money managers for the fiscal years ended October 31, 2006, 2005 and 2004 from portfolio transactions effected for the Funds, were as follows:
2006 | 2005 | 2004 | ||||||||||||||||
Affiliated Broker/Dealer | Commissions | Percent of Total Commissions | Commissions | Percent of Total Commissions | Commissions | Percent of Total Commissions | ||||||||||||
AllianceBernstein L.P. | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 135,953 | 0.5 | % | ||||||
David J. Greene and Company, LLC | 31,162 | 0.2 | 20,272 | 0.1 | 31,468 | 0.1 | ||||||||||||
Russell Implementation Services Inc. | 6,248,534 | 38.1 | 9,067,408 | 28.6 | 7,562,299 | 26.0 | ||||||||||||
Goldman Sachs | 0 | 0 | 11,640 | 0 | 0 | 0 | ||||||||||||
Total* | $ | 6,279,696 | 38.3 | % | $ | 9,099,320 | 28.7 | % | $ | 7,729,720 | 26.6 | % |
The percentage of total affiliated transactions (relating to trading activity) to total transactions during the fiscal year ended October 31, 2006 for the Funds was 38.3%.
42
Table of Contents
During the fiscal year ended October 31, 2006, the Funds purchased securities issued by the following regular brokers or dealers as defined by Rule 10b–1 of the 1940 Act, each of which is one of the Funds’ ten largest brokers or dealers by dollar amounts of securities executed or commissions received on behalf of the Funds. The value of broker–dealer securities held as of October 31, 2006, was as follows:
Fund | Citigroup Markets Inc. | Morgan Stanley Co., Inc. | Goldman Sachs & Co. | Investment Technology Group Inc. | Jefferies & Company Inc. | ||||||||||
Equity I | $ | 21,348,638 | $ | 1,015,646 | $ | 12,265,779 | $ | 0 | $ | 0 | |||||
Equity II | 0 | 0 | 0 | 2,649,140 | 935,584 | ||||||||||
Equity Q | 16,733,241 | 7,404,570 | 5,363,820 | 0 | 0 | ||||||||||
International | 0 | 0 | 0 | 0 | 0 | ||||||||||
Fixed Income I | 0 | 0 | 3,659,582 | 0 | 0 | ||||||||||
Fixed Income III | 0 | 0 | 1,241,695 | 0 | 0 | ||||||||||
Diversified Equity | 47,386,779 | 1,804,332 | 30,520,774 | 0 | 0 | ||||||||||
Special Growth | 0 | 0 | 0 | 3,593,616 | 1,542,814 | ||||||||||
Quantitative Equity | 31,593,030 | 12,210,448 | 10,191,258 | 0 | 0 | ||||||||||
International Securities | 0 | 0 | 0 | 0 | 0 | ||||||||||
Diversified Bond | 0 | 0 | 8,466,495 | 0 | 0 | ||||||||||
Short Duration Bond | 0 | 0 | 7,034,110 | 0 | 0 | ||||||||||
Multistrategy Bond | 0 | 0 | 3,738,443 | 0 | 0 | ||||||||||
Emerging Markets | 0 | 0 | 0 | 0 | 0 | ||||||||||
Tax-Managed Large Cap | 10,137,917 | 3,007,220 | 1,698,543 | 0 | 0 | ||||||||||
Tax–Managed Mid & Small Cap | 0 | 0 | 0 | 289,226 | 768,528 | ||||||||||
Select Growth | 8,120,040 | 0 | 0 | 0 | 0 | ||||||||||
Select Value | 0 | 2,695,150 | 2,545,260 | 0 | 0 | ||||||||||
$ | 135,319,645 | $ | 28,137,366 | $ | 86,725,759 | $ | 6,531,982 | $ | 3,246,926 | ||||||
Fund | Lehman Inc. | Merrill Lynch Fenner & Smith, | Deutsche Inc. | Instinet | Weeden & Co. | ||||||||||
Equity I | $ | 6,156,646 | $ | 4,088,183 | $ | 0 | $ | 0 | $ | 0 | |||||
Equity II | 0 | 0 | 0 | 0 | 0 | ||||||||||
Equity Q | 11,625,019 | 14,406,171 | 0 | 0 | 0 | ||||||||||
International | 0 | 0 | 0 | 0 | 0 | ||||||||||
Fixed Income I | 837,597 | 8,980,059 | 0 | 0 | 0 | ||||||||||
Fixed Income III | 483,994 | 3,780,597 | 0 | 0 | 0 | ||||||||||
Diversified Equity | 15,300,550 | 8,872,630 | 0 | 0 | 0 | ||||||||||
Special Growth | 0 | 0 | 0 | 0 | 0 | ||||||||||
Quantitative Equity | 22,929,613 | 36,045,906 | 0 | 0 | 0 | ||||||||||
International Securities | 0 | 0 | 0 | 0 | 0 | ||||||||||
Diversified Bond | 1,140,515 | 14,059,235 | 0 | 0 | 0 | ||||||||||
Short Duration Bond | 3,630,208 | 3,917,036 | 0 | 0 | 0 | ||||||||||
Multistrategy Bond | 1,536,805 | 11,983,524 | 0 | 0 | 0 | ||||||||||
Emerging Markets | 0 | 0 | 0 | 0 | 0 | ||||||||||
Tax-Managed Large Cap | 0 | 1,097,226 | 0 | 0 | 0 | ||||||||||
Tax–Managed Mid & Small Cap | 0 | 0 | 0 | 0 | 0 | ||||||||||
Select Growth | 0 | 677,977 | 0 | 0 | 0 | ||||||||||
Select Value | 613,934 | 3,887,702 | 0 | 0 | 0 | ||||||||||
$ | 64,254,881 | $ | 111,796,246 | $ | 0 | $ | 0 | $ | 0 | ||||||
43
Table of Contents
YIELD AND TOTAL RETURN QUOTATIONS. The Funds compute their average annual total return by using a standardized method of calculation required by the SEC and report average annual total return for each class of Shares which they offer.
Calculation of Average Annual Total Return.
Average annual total return is computed by finding the average annual compounded rates of return on a hypothetical initial investment of $1,000 over the one, five and ten year periods (or life of the Funds, as appropriate), that would equate the initial amount invested to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where: | P | = | a hypothetical initial payment of $1,000; | |||
T | = | Average annual total return; | ||||
n | = | Number of years; and | ||||
ERV | = | Ending redeemable value of a hypothetical $1,000 payment made at the beginning of the one, five or ten year period at the end of the one, five or ten year period (or fractional portion thereof). |
The calculation assumes that all dividends and distributions of each Fund are reinvested at the net asset value calculated as described in the Prospectuses on the dividend dates during the period, and includes all recurring fees that are charged to all shareholder accounts.
Calculation of Average Annual Total Return After Taxes on Distributions.
Average annual total return after taxes on distributions is computed by finding the average annual compounded rates of return on a hypothetical initial investment of $1,000 over the one, five and ten year periods (or life of a Fund, as appropriate), that would equate the initial amount invested to the ending redeemable value, according to the following formula:
P (1+T)n =ATVD
Where: | P | = | hypothetical initial payment of $1,000. | |||
T | = | average annual total return (after taxes on distributions). | ||||
n | = | number of years. | ||||
ATVD | = | ending value of a hypothetical $1,000 payment made at the beginning of the 1–, 5–, or 10–year periods at the end of the 1–, 5–, or 10–year periods (or fractional portion), after taxes on fund distributions but not after taxes on redemptions. |
The calculation assumes that all dividends and distributions of each Fund, less any taxes due on such dividends and distributions, are reinvested at the net asset value calculated as described in the Prospectuses on the dividend dates during the period, and includes all recurring fees that are charged to all shareholder accounts.
The taxable amount and the tax character of each distribution is as specified by a Fund on the dividend declaration date, but may be adjusted to reflect subsequent recharacterizations of distributions. Distributions are adjusted to reflect the federal tax impact the distribution would have on an individual taxpayer on the reinvestment date. For example, the calculation assumes no taxes are due on the portion of any distribution that would not result in federal income tax on an individual, e.g. tax–exempt interest or non–taxable returns of capital. The effect of applicable tax credits, such as the foreign tax credit, is taken into account in accordance with federal tax law. Taxes are calculated using the highest individual marginal federal income tax rates in effect on the reinvestment date. The rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short–term capital gain rate for short–term capital gain distributions and long–term capital gain rate for long–term capital gain distributions). The required tax rates may vary over the measurement period. All potential tax liabilities other than federal tax liabilities (e.g., state and local taxes) are not taken into account. The effect of phaseouts of certain exemptions, deductions and credits at various income levels and the impact of the federal alternative minimum tax are not taken into account in the calculation. The calculation assumes that no additional taxes or tax credits result from any redemption of shares required to pay such fees. The ending value is determined by assuming a complete redemption at the end of the one, five or ten year period and the deduction of all nonrecurring charges deducted at the end of each period. The calculation assumes that the redemption has no tax consequences.
44
Table of Contents
Calculation of Average Annual Total Return After Taxes on Distributions and Sale of Fund Shares.
Average annual total return after taxes on distributions and sale of fund shares is computed by finding the average annual compounded rates of return on a hypothetical initial investment of $1,000 over the one, five and ten year periods (or life of a Fund, as appropriate), that would equate the initial amount invested to the ending redeemable value, according to the following formula:
P (1+T)n =ATVDR
Where: | P | = | hypothetical initial payment of $1,000. | |||
T | = | average annual total return (after taxes on distributions and redemptions). | ||||
n | = | number of years. | ||||
ATVDR | = | ending value of a hypothetical $1,000 payment made at the beginning of the 1–, 5–, or 10–year periods at the end of the 1–, 5–, or 10–year periods (or fractional portion), after taxes on fund distributions and redemptions. |
The calculation assumes that all dividends and distributions of each Fund, less any taxes due on such dividends and distributions, are reinvested at the price stated in the Prospectuses on the dividend dates during the period, and includes all recurring fees that are charged to all shareholder accounts.
The taxable amount and the tax character of each distribution is as specified by a Fund on the dividend declaration date, but may be adjusted to reflect subsequent recharacterizations of distributions. Distributions are adjusted to reflect the federal tax impact the distribution would have on an individual taxpayer on the reinvestment date. For example, the calculation assumes no taxes are due on the portion of any distribution that would not result in federal income tax on an individual, e.g. tax–exempt interest or non–taxable returns of capital. The effect of applicable tax credits, such as the foreign tax credit, is taken into account in accordance with federal tax law. Taxes are calculated using the highest individual marginal federal income tax rates in effect on the reinvestment date. The rates used correspond to the tax character of each component of the distributions (e.g., ordinary income rate for ordinary income distributions, short–term capital gain rate for short–term capital gain distributions and long–term capital gain rate for long–term capital gain distributions). The required tax rates may vary over the measurement period. All potential tax liabilities other than federal tax liabilities (e.g., state and local taxes) are not taken into account. The effect of phaseouts of certain exemptions, deductions and credits at various income levels and the impact of the federal alternative minimum tax are not taken into account in the calculation. The calculation assumes that no additional taxes or tax credits result from any redemption of shares required to pay such fees. The ending value is determined by assuming a complete redemption at the end of the one, five or ten year period and the deduction of all nonrecurring charges deducted at the end of each period.
The ending value is determined by subtracting capital gains taxes resulting from the redemption and adding the tax benefit from capital losses resulting from the redemption. The capital gain or loss upon redemption is calculated by subtracting the tax basis from the redemption proceeds (after deducting any nonrecurring charges). The basis of shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested dividends is tracked separately. In determining the basis for a reinvested distribution, the distribution net of taxes assumed paid from the distribution is included. Tax basis is adjusted for any distributions representing returns of capital and any other tax basis adjustments that would apply to an individual taxpayer, as permitted by applicable federal law.
The amount and character (e.g., short–term or long–term) of capital gain or loss upon redemption is separately determined for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested dividends. It is not assumed that shares acquired through reinvestment of distributions have the same holding period as the initial $1,000 investment. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character in effect on the redemption date and in accordance with federal tax law applicable on the redemption date. For example, applicable federal tax law is used to determine whether and how gains and losses from the sale of shares with different holding periods should be netted, as well as the tax character (e.g., short–term or long–term) of any resulting gains or losses. It is assumed that a shareholder has sufficient gains of the same character from other investments to offset any capital losses from the redemption so that the taxpayer may deduct the capital losses in full.
Yield Quotation.
Yields are computed by using standardized methods of calculation required by the SEC. Similar to average annual total return calculations, a Fund calculates yields for each class of Shares that it offers. Yields for Funds other than Funds investing primarily
45
Table of Contents
in money market instruments (the “Money Market Funds”) are calculated by dividing the net investment income per share earned during a 30–day (or one month) period by the maximum offering price per share on the last day of the period, according to the following formula:
Where: | a | = | dividends and interest earned during the period | |||
b | = | expenses accrued for the period (net of reimbursements) | ||||
c | = | average daily number of Shares outstanding during the period that were entitled to receive dividends | ||||
d | = | the maximum offering price per share on the last day of the period |
Each Money Market Fund computes its current annualized and compound effective annualized yields using standardized methods required by the SEC. Current yields are calculated by determining the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical pre–existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return by (365/7) with the resulting yield figure carried to at least the nearest hundredth of one percent. Effective yields, carried out to at least the nearest hundredth of one percent, are calculated by determining the net change, exclusive of capital changes, in the value of a hypothetical pre–existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] – 1.
Tax equivalent current yields are calculated by dividing that portion of a Fund’s yield (as calculated above) that is tax exempt by 1 minus a stated income tax rate and adding the quotient to that portion, if any, of the Fund’s yield that is not tax exempt.
Tax equivalent effective yield is calculated by dividing that portion of a Fund’s effective yield (as calculated above) that is tax exempt by 1 minus a stated income tax rate (39.6%) and adding the quotient to that portion, if any, of the Fund’s effective yield that is not tax exempt.
Yield may fluctuate daily and does not provide a basis for determining future yields. Because each Money Market Fund’s yield fluctuates, its yield cannot be compared with yields on savings accounts or other investment alternatives that provide an agreed–to or guaranteed fixed yield for a stated period of time. However, yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the yield of one money market fund to another, consideration should be given to each fund’s investment policies, including the types of investments made, length of maturities of portfolio securities, the methods used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce effective yield.
Each Fund may, from time to time, advertise non–standard performances, including average annual total return for periods other than 1, 5 or 10 years or since inception.
Each Fund may compare its performance with various industry standards of performance, including Lipper Analytical Services, Inc. or other industry publications, business periodicals, rating services and market indexes.
INVESTMENT RESTRICTIONS, POLICIES AND CERTAIN INVESTMENTS
Each Fund’s investment objective, with the exception of Tax Exempt Bond Fund, Equity Q Fund, International Fund, Fixed Income I Fund and Tax Free Money Market Fund, is “non-fundamental.” A non-fundamental investment objective means that it may be changed without the approval of a majority of each Fund’s shareholders. If a Fund’s investment objective is changed by the Board of Trustees, the Prospectus will be amended to reflect the new investment objective. Certain investment policies and restrictions may be, and the investment objectives of Tax Exempt Bond Fund, Equity Q Fund, International Fund, Fixed Income I Fund and Tax Free Money Market Fund are, fundamental which means that they may only be changed with the approval of a majority of each Fund’s shareholders. The vote of a majority of the outstanding voting securities of each Fund means the vote of the lesser of (a) 67% or more of the voting securities of the Fund present at the meeting, if the holders of more than 50% of the
46
Table of Contents
outstanding voting securities of the Fund are present or represented by proxy; or (b) more than 50% of the outstanding voting securities of the Fund. Other policies and restrictions may be changed by a Fund without shareholder approval. The Funds’ investment objectives are set forth in the respective Prospectuses.
INVESTMENT RESTRICTIONS. Each Fund is subject to the following fundamental investment restrictions. Unless otherwise noted, these restrictions apply on a Fund–by–Fund basis at the time an investment is being made.
No Fund may:
1. Purchase securities if, as a result of such purchase, the Fund’s investments would be concentrated, within the meaning of the 1940 Act, in securities of issuers in a particular industry or group of industries. Investments in other investment companies shall not be considered an investment in any particular industry or group of industries for purposes of this investment restriction. This investment restriction shall not apply to securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or securities of other investment companies. This investment restriction shall not apply to the Real Estate Securities Fund. The Real Estate Securities Fund may invest in the securities of companies directly or indirectly engaged in the real estate industry without limitation as to concentration. The Money Market Fund may invest more than 25% of its assets in money market instruments issued by domestic branches of U.S. Banks having net assets in excess of $100,000,000.
2. Purchase or sell real estate; provided that a Fund may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
3. Purchase or sell commodities except that a Fund may purchase or sell currencies, may enter into futures contracts on securities, currencies and other indices or any other financial instruments, and may purchase and sell options on such futures contracts.
4. Borrow money, except that a Fund may borrow money to the extent permitted by the 1940 Act, or to the extent permitted by any exemptions therefrom which may be granted by the SEC.
5. Act as an underwriter except to the extent the Fund may be deemed to be an underwriter when disposing of securities it owns or when selling its own shares.
6. Make loans to other persons except (a) through the lending of its portfolio securities, (b) through the purchase of debt securities, loan participations and/or engaging in direct corporate loans in accordance with its investment objectives and policies, (c) to the extent the entry into a repurchase agreement is deemed to be a loan, or (d) to affiliated investment companies to the extent permitted by the 1940 Act or any exemptions therefrom that may be granted by the SEC.
7. Issue securities senior to the Fund’s presently authorized shares of beneficial interest except that this restriction shall not be deemed to prohibit a Fund from (a) making any permitted borrowings, loans, mortgages or pledges, (b) entering into options, futures contracts, forward contracts, repurchase transactions, or reverse repurchase transactions, or (c) making short sales of securities to the extent permitted by the 1940 Act and any rule or order thereunder.
An additional fundamental policy is that the Tax Exempt Bond Fund will not invest in interests in oil, gas or other mineral exploration or development programs.
For purposes of these investment restrictions, the Tax Exempt Bond and Tax Free Money Market Funds will consider as a separate issuer each: governmental subdivision (i.e., state, territory, possession of the United States or any political subdivision of any of the foregoing, including agencies, authorities, instrumentalities, or similar entities, or of the District of Columbia) if its assets and revenues are separate from those of the government body creating it and the security is backed by its own assets and revenues; the non–governmental user of an industrial development bond, if the security is backed only by the assets and revenues of a non–governmental user. The guarantee of a governmental or some other entity is considered a separate security issued by the guarantor as well as the other issuer for Investment Restrictions, industrial development bonds and governmental issued securities. The issuer of all other municipal obligations will be determined by the money manager on the basis of the characteristics of the obligation, the most significant being the source of the funds for the payment of principal and interest.
With regards to investment restriction 1, above, the staff of the SEC has taken the position that a fund is concentrated if it invests 25% or more of the value of its total assets in any one industry or group of industries. The Real Estate Securities Fund concentrates its investments in real estate securities. With regards to investment restriction 4, above, this restriction applies constantly and not only at the time a borrowing is made.
47
Table of Contents
With regards to investment restriction 6, above, each Fund may lend its portfolio securities in an amount not to exceed 33 1/3% of total fund assets. The Funds may invest without limit in repurchase agreements so long as they abide by their investment objective, investment restrictions, and all 1940 Act requirements, including diversification requirements. Loans to affiliated investment companies are not presently permitted by the 1940 Act in the absence of an exemption from the SEC. The Funds have received exemptive relief from the SEC to loan money to affiliated investment companies.
With regards to investment restriction 7, above, permitted borrowings refer to borrowings by the Fund as permitted by the 1940 Act.
Each Fund is also subject to the following non–fundamental investment restriction (one that can be changed by the Trustees without shareholder approval). Unless otherwise noted, this restriction applies on a Fund–by–Fund basis at the time an investment is being made.
No Fund may borrow money for purposes of leveraging or investment.
Under the 1940 Act, each Fund is presently permitted to borrow up to 5% of its total assets from any person for temporary purposes, and may also borrow from banks, provided that if borrowings exceed 5%, the Fund must have assets totaling at least 300% of the borrowing when the amount of the borrowing is added to the company’s other assets. Put another way, an investment company may borrow, in the aggregate, from banks and others, amounts up to one-third (33 1/3%) of its total assets (including those assets represented by the borrowing). Accordingly, if a Fund were required to pledge assets to secure a borrowing, it would pledge no more than one-third (33 1/3%) of its assets.
The Funds will not purchase additional securities while outstanding cash borrowings exceed 5% of total assets.
A Fund may, from time to time, take temporary defensive positions that are inconsistent with the Fund’s principal investment strategies in attempting to respond to adverse market, economic, political or other conditions. During these times, a Fund may invest up to 100% of its assets in cash or cash equivalents, shares of money market mutual funds, commercial paper, zero coupon bonds, repurchase agreements, and other securities RIMCo believes to be consistent with the Fund’s best interests. During a period in which a Fund takes a temporary defensive position, the Fund may not achieve its investment objective.
48
Table of Contents
The investment objective and principal investment strategies for each of the Funds are provided in their Prospectuses. The following tables illustrate the principal and non-principal investments in which the Funds invest. The Funds may not invest in all of the investments listed below. The Funds use investment techniques commonly used by other mutual funds.
Fund | Principal Investments | Non-Principal Investments | ||
Diversified Equity Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Derivatives to expose cash reserves to markets | ||
Special Growth Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets REITs | ||
Quantitative Equity Fund | Common Stocks and Common Stock Equivalents Short Sales American Depositary Receipts | Cash Reserves Lending Portfolio Securities Derivatives to expose cash reserves to markets | ||
International Securities Fund | Common Stocks and Common Stock Equivalents Depositary Receipts Preferred Stocks Foreign Securities Forward Currency Contracts Emerging Market Securities | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets and to manage country and currency exposure as a substitute for holding physical securities or to facilitate the implementation of its investment strategy | ||
Global Equity Fund | Common Stocks and Common Stock Equivalents Preferred Stocks Foreign Securities Emerging Market Securities | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives (including forward currency contracts for hedging and/or speculative purposes) Depositary Receipts | ||
Diversified Bond Fund | Debt Securities including corporate debt and mortgage-backed securities U.S. Government Securities Foreign Securities Interest rate futures contracts, foreign currency contracts and options on futures When issued and forward commitment securities Swaps Bank Instruments Derivatives | Emerging Markets Debt Municipal Obligations Cash Reserves Repurchase Agreements Lending Portfolio Securities Illiquid Securities Investment Company Securities |
49
Table of Contents
Fund | Principal Investments | Non-Principal Investments | ||
Short Duration Bond Fund | Debt Securities including corporate debt, mortgage-backed securities and below investment grade or junk bonds U.S. Government Securities Foreign Securities Interest rate futures contracts, foreign currency contracts and options on futures When issued and forward commitment securities Swaps Bank Instruments Derivatives | Emerging Markets Debt Cash Reserves Repurchase Agreements Lending Portfolio Securities Illiquid Securities Investment Company Securities Municipal Obligations | ||
Multistrategy Bond Fund | Debt Securities including corporate debt, mortgage-backed securities and below investment grade or junk bonds U.S. Government Securities Foreign Securities Derivatives Interest rate futures contracts, foreign currency contracts and options on futures When issued and forward commitment securities Swaps Bank Instruments | Emerging Markets Debt Municipal Obligations Cash Reserves Repurchase Agreements Lending Portfolio Securities Illiquid Securities Investment Company Securities | ||
Real Estate Securities Fund | Common Stocks and Common Stock Equivalents, including REITs | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets | ||
Select Growth Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets | ||
Select Value Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets REITs |
50
Table of Contents
Fund | Principal Investments | Non-Principal Investments | ||
Emerging Markets Fund | Common Stocks and Common Stock Equivalents Depositary Receipts Preferred Stocks Investment Company Securities (including Pooled Investment Vehicles, Local Access Products and ETFs) Foreign Securities (specifically emerging market securities) | Cash Reserves When issued and forward commitment securities Warrants Options Convertible debt securities Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets and to manage country and currency exposure as a substitute for holding physical securities or to facilitate the implementation of its investment strategy | ||
Tax-Managed Large Cap Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Derivatives to expose cash reserves to markets | ||
Tax-Managed Mid & Small Cap Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets REITs | ||
Tax Exempt Bond Fund | Investment grade Municipal Obligations Municipal Debt Securities that are rated below investment grade or junk bonds. | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets | ||
Money Market Fund | U.S. Government Securities Repurchase Agreements Investment Company Securities Commercial Paper, including asset-backed commercial paper Bank Instruments Variable and Floating Rate Securities Credit and Liquidity Enhancements Funding Agreements Illiquid Securities (other than Funding Agreements) Corporate Debt | Investment Grade Municipal Debt Obligations | ||
US Government Money Market Fund | Repurchase Agreements U.S. Government Securities | Variable and Floating Rate Securities Investment Company Securities | ||
Tax-Free Money Market Fund | Investment Grade Municipal Obligations Credit and Liquidity Enhancements Demand Notes Variable and Floating Rate Securities | Investment Company Securities | ||
Equity I Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Derivatives to expose cash reserves to markets |
51
Table of Contents
Fund | Principal Investments | Non-Principal Investments | ||
Equity II Fund | Common Stocks and Common Stock Equivalents American Depositary Receipts | Cash Reserves Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets REITs | ||
Equity Q Fund | Common Stocks and Common Stock Equivalents Short Sales American Depositary Receipts | Cash Reserves Lending Portfolio Securities Derivatives to expose cash reserves to markets | ||
International Fund | Common Stocks and Common Stock Equivalents Depositary Receipts Preferred Stocks Foreign Securities Forward Currency Contracts Emerging Market Securities | Cash Reserves Reverse Repurchase Agreements Lending Portfolio Securities Illiquid Securities Derivatives to expose cash reserves to markets and to manage country and currency exposure as a substitute for holding physical securities or to facilitate the implementation of its investment strategy | ||
Fixed Income I Fund | Debt Securities including corporate debt and mortgage-backed securities U.S. Government Securities Foreign Securities Interest rate futures contracts, foreign currency contracts and options on futures When issued and forward commitment securities Swaps Bank Instruments Derivatives | Emerging Markets Debt Municipal Obligations Cash Reserves Repurchase Agreements Lending Portfolio Securities Illiquid Securities Investment Company Securities | ||
Fixed Income III Fund | Debt Securities including corporate debt, mortgage-backed securities and below investment grade or junk bonds U.S. Government Securities Foreign Securities Derivatives Interest rate futures contracts, foreign currency contracts and options on futures When issued and forward commitment securities Swaps Bank Instruments | Emerging Markets Debt Municipal Obligations Cash Reserves Repurchase Agreements Lending Portfolio Securities Illiquid Securities Investment Company Securities |
The following discussion describes certain investment strategies which the Funds may pursue and certain types of securities in which the Funds may invest as listed in the foregoing table.
The Diversified Equity, Special Growth, Quantitative Equity, International Securities, Global Equity, Real Estate Securities, Emerging Markets, Select Growth, Select Value, Tax–Managed Large Cap Fund, Tax–Managed Mid & Small Cap, Equity I, Equity II, Equity Q and International Fund are referred to collectively as the “Equity Funds.”
The Diversified Bond, Multistrategy Bond, Short Duration Bond, Tax Exempt Bond, Fixed Income I and Fixed Income III Funds are referred to collectively as the “Fixed Income Funds.”
52
Table of Contents
The Money Market, US Government Money Market and Tax Free Money Market Funds are referred to collectively as the “Money Market Funds.”
General Investment Strategies and Portfolio Instruments
Cash Reserves and Being Fully Invested. A Fund at times has to sell portfolio securities in order to meet redemption requests. The selling of securities may affect a Fund’s performance since securities are sold for other than investment reasons. A Fund can avoid selling its portfolio securities by holding adequate levels of cash to meet anticipated redemption requests (“cash reserves”). The cash reserves may also include cash awaiting investment or to pay expenses. The Funds intend to be fully invested at all times. To do so, RIMCo or a money manager invests the Funds’ (except the Money Market Funds) cash reserves in short term instruments, including certain RIC money market funds. In addition to investing in such short term investments, as described below, A Fund may pursue its strategy to be fully invested by exposing its cash reserves \to the performance of appropriate markets by purchasing equity securities, fixed-income securities and/or derivatives. This is intended to cause a Fund to perform as though its cash reserves were actually invested in those markets.
Each Fund (except the Money Market Funds), that invests its cash reserves in one or more of RIC’s Money Market Funds does so pursuant to exemptive relief from the SEC. The relief requires that any investment of cash reserves in affiliated money market funds will not exceed 25% of the investing Fund’s total assets. Those money market funds seek to maximize current income to the extent consistent with the preservation of capital and liquidity by investing solely in short–term money market instruments. The Funds will invest cash reserves in one or more of RIC’s Money Market Funds only so long as it does not adversely affect the portfolio management and operations of the Money Market Funds and RIC’s other Funds. Those Money Market Funds, and the Funds investing in them, treat such investments as the purchase and redemption of the Money Market Funds’ Shares. Any Fund investing in a money market fund pursuant to this procedure participates equally on a pro rata basis in all income, capital gains, and net assets of the money market fund, and will have all rights and obligations of a shareholder as provided in RIC’s Master Trust Agreement, including voting rights. However, Shares of a money market fund issued to other Funds will be voted by the Trustees in the same proportion as the Shares of the money market fund that are held by shareholders that are not Funds. In addition to the advisory and administrative fees payable by the Funds to RIMCo, each Fund that invests its cash reserves in one or more of RIC’s Money Market Funds pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of that money market fund’s operating expenses, which include the advisory and administrative fees that such money market fund pays to RIMCo. Currently, the cash reserves for all Funds (except the Tax Exempt Bond Fund) are invested in RIC’s Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves invested in the Money Market Fund is 0.10% (net of fee waivers and reimbursements). Currently, the cash reserves for the Tax Exempt Bond Fund are invested in RIC’s Tax Free Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo on the cash reserves invested in the Tax Free Money Market Fund is 0.25%. The SEC exemptive order requires that the Funds’ Board determine that the advisory fees incurred in connection with the investment of cash reserves in affiliated money market funds are not for duplicative services.
Hedging Strategies. Financial futures contracts may be used by the Funds, except the Money Market Funds, during or in anticipation of adverse market events such as, in the case of the Fixed Income Funds, interest rate changes. For example: if interest rates were anticipated to rise, financial futures contracts may be sold (short hedge) which would have an effect similar to selling bonds. Once interest rates increase, fixed–income securities held in a Fund’s portfolio may decline, but the futures contract value may decrease, partly offsetting the loss in value of the fixed–income security by enabling the Fund to repurchase the futures contract at a lower price to close out the position.
The Funds may purchase a put and/or sell a call option on a stock index futures contract instead of selling a futures contract in anticipation of an equity market decline. Purchasing a call and/or selling a put option on a stock index futures contract is used instead of buying a futures contract in anticipation of an equity market advance, or to temporarily create an equity exposure for cash reserves until those balances are invested in equities. Options on financial futures are used in a similar manner in order to hedge portfolio securities against anticipated market changes.
Risk Associated with Hedging Strategies. There are certain investment risks involved with using futures contracts and/or options as a hedging technique. One risk is the imperfect correlation between price movement of the futures contracts or options and the price movement of the portfolio securities, stock index or currency subject of the hedge. The risk increases for the Tax Exempt Bond Fund since financial futures contracts that may be engaged in are on taxable securities rather than tax exempt securities. There is no assurance that the price of taxable securities will move in a similar manner to the price of tax exempt securities. Another risk is that a liquid secondary market may not exist for a futures contract causing a Fund to be unable to close out the futures contract thereby affecting the Fund’s hedging strategy.
In addition, foreign currency options and foreign currency futures involve additional risks. Such transactions may not be regulated as effectively as similar transactions in the United States; may not involve a clearing mechanism and related guarantees; and are
53
Table of Contents
subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions could also be adversely affected by (1) other complex foreign, political, legal and economic factors, (2) lesser availability than in the United States of data on which to make trading decisions, (3) delays in a Fund’s ability to act upon economic events occurring in foreign markets during non– business hours in the United States, (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (5) lesser trading volume.
Lending Portfolio Securities. RIC is a party to a Securities Lending Agency Agreement with State Street Bank and Trust Company, an unaffiliated lending agent, pursuant to which a Fund may lend securities to other parties (typically brokers, dealers, banks or other financial institutions) who may need to borrow securities in order to complete certain transactions such as covering short sales, avoiding failures to deliver securities or completing arbitrage operations. The borrower provides the Fund with collateral in an amount at least equal to the value of the securities loaned. By lending its portfolio securities, a Fund attempts to increase its net investment income through investment earnings from collateral received or the receipt of negotiated fees on the securities lent.
Each Fund retains most rights of beneficial ownership, including dividends, interest or other distributions on the loaned securities. Any gain or loss in the market price of the securities lent that occurs during the term of the loan would be for the account of the Fund. Voting rights may pass with the lending. A Fund may call loans to vote proxies if a material issue affecting the investment is to be voted upon.
If the borrower defaults on its obligations to return the securities lent because of insolvency or other reasons, a Fund could experience delays and costs in recovering the securities lent or in gaining access to the collateral. These delays could be greater for foreign securities. If a Fund is not able to recover the securities lent, a Fund may sell the collateral and purchase a replacement security in the market. The value of the collateral could decrease below the value of the replacement security or the value of the replacement security could increase above the value of the collateral by the time the replacement security is purchased.
The Funds invest cash collateral received in high–quality short–term debt instruments, short–term bank collective investment vehicles and money market mutual funds (including money market funds advised by RIMCo for which RIMCo receives a 0.10% advisory and administrative fee, net of fee waivers and reimbursements), and other investments meeting certain quality and maturity established by the Funds. Income generated from the investment of the cash collateral is first used to pay any negotiated rebate to the borrower of the securities then to pay for lending transaction costs. Any remaining income is divided between the Fund and the lending agent in accordance with the Securities Lending Agency Agreement.
A Fund may incur costs or possible losses in excess of the interest income and fees received in connection with securities lending transactions. To the extent that the value of the cash collateral as invested is insufficient to return the full amount of the collateral plus any negotiated rebate to the borrower upon termination of the loan, a Fund must immediately pay the amount of the shortfall to the borrower.
No Fund may lend portfolio securities in an amount that exceeds 33 1/3% of total fund assets.
Select Holdings. As described in the Prospectuses, RIMCo may employ a “select holdings” strategy for a portion of certain equity Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of a Fund’s money managers in their Fund segments to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for a Fund. The strategy is designed to increase a Fund’s exposure to stocks that are viewed as attractive by multiple money managers. Implementation of this strategy includes periodic rebalancing of the holdings.
Illiquid and Restricted Securities. No more than 15% (10% for the Money Market Funds) of a Fund’s net assets will be invested in securities, including repurchase agreements of more than seven days’ duration, that are illiquid. A security is illiquid if it cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued such security. There may be delays in selling illiquid securities at prices representing their fair value.
The Board of Trustees of the Funds has adopted procedures to permit each Fund to deem as liquid the following types of securities that are otherwise presumed to be illiquid securities: (i) certain restricted securities that are eligible for resale pursuant to Rule 144A (“Rule 144A Securities”) under the Securities Act of 1933, as amended (the “Securities Act”); (ii) certain commercial paper issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act (“Section 4(2) Paper”); (iii) certain interest-only and principal-only fixed mortgage-backed securities issued by the United States government or its agencies and instrumentalities (collectively, “Eligible MBS”); (iv) certain municipal lease obligations and certificates of participation in municipal lease obligations (collectively, “Municipal Lease Obligations”); and (v) certain restricted debt securities that are subject to unconditional puts or demand features exercisable within seven days (“Demand Feature Securities”).
54
Table of Contents
The expenses of registration of restricted securities that are illiquid (excluding securities that may be resold by the Funds pursuant to Rule 144A) may be negotiated at the time such securities are purchased by a Fund. When registration is required, a considerable period may elapse between a decision to sell the securities and the time the sale would be permitted. Thus, a Fund may not be able to obtain as favorable a price as that prevailing at the time of the decision to sell. A Fund also may acquire, through private placements, securities having contractual resale restrictions, which might lower the amount realizable upon the sale of such securities.
Interfund Lending. The Funds have been granted permission from the SEC to participate in a joint lending and borrowing facility (the “Credit Facility”). The Funds may borrow money from the RIC Money Market Fund for temporary purposes. All such borrowing and lending will be subject to a participating fund’s fundamental investment limitations. The RIC Money Market Fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves and the Portfolio Manager determines it is in the best interest of the RIC Money Market Fund. The Funds will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings will be limited to the time required to receive payment for securities sold, but can have a maximum duration of seven days. Loans may be called on one business day’s notice and may be repaid on any day by the borrowing fund. A participating fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the RIC Money Market Fund could result in reduced returns and/or additional borrowing costs.
Investment Company Securities and Pooled Investment Vehicles. The Funds may invest in securities of other open-end or closed-end investment companies. If a Fund invests in other investment companies, shareholders will bear not only their proportionate share of the fund’s expenses (including operating expenses and the fees of the adviser), but also, indirectly, the similar expenses of the underlying investment companies. Shareholders would also be exposed to the risks associated not only to the investments of the fund but also to the portfolio investments of the underlying investment companies.
Some emerging market countries have laws and regulations that currently preclude direct foreign investments in the securities of their companies. However, indirect foreign investments in the securities of companies listed and traded on the stock exchanges in these countries are permitted through pooled investment vehicles or investment funds that have been specifically authorized.
Exchange Traded Funds or “ETF’s”. The Funds, other than the Money Market Funds, may invest in shares of open-end mutual funds or unit investment trusts that are traded on a stock exchange, called exchange-traded funds or ETF’s. Typically, an ETF seeks to track the performance of an index, such as the S&P 500® or the NASDAQ 100, by holding in its portfolio either the same securities that comprise the index, or a representative sample of the index. Investing in an ETF will give a fund exposure to the securities comprising the index on which the ETF is based, and the Funds will gain or lose value depending on the performance of the index. ETF’s have expenses, including advisory and administrative fees paid by ETF shareholders, and, as a result, an investor in the Funds is subject to a duplicate level of fees if a Fund invests in ETF’s.
Unlike shares of typical mutual funds or unit investment trusts, shares of ETF’s are bought and sold based on market values throughout each trading day, and not at net asset value. For this reason, shares could trade at either a premium or discount to net asset value. Currently, the Funds intend to invest only in ETF’s that track equity market indices. The portfolios held by these ETF’s are publicly disclosed on each trading day, and an approximation of actual net asset value is disseminated throughout the trading day. Because of this transparency, the trading prices of these index-based ETF’s tend to closely track the actual net asset value of the underlying portfolios. If available, the Funds may invest in ETF’s that are based on fixed income indices, or that are actively managed. Actively managed ETF’s will likely not have the transparency of index based ETF’s, and therefore, may be more likely to trade at a discount or premium to actual net asset values. If an ETF held by the fund trades at a discount to net asset value, the fund could lose money even if the securities in which the ETF invests go up in value.
Short Sales. The Equity Q and Quantitative Equity Funds may utilize short selling strategies. In a short sale, the seller sells a security that it does not own, typically a security borrowed from a broker or dealer. Because the seller remains liable to return the underlying security that it borrowed from the broker or dealer, the seller must purchase the security prior to the date on which delivery to the broker or dealer is required. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. The making of short sales exposes the Fund to the risk of liability for the market value of the security that is sold (the amount of which liability increases as the market value of the underlying security increases), in addition to the costs associated with establishing, maintaining and closing out the short position.
Although the Fund’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. The proceeds of the short sale will be retained as collateral in a segregated account for the broker’s benefit at the Fund’s custodian, to the extent necessary to meet margin requirements, until the short position is closed out. Until a Fund
55
Table of Contents
replaces a borrowed security in connection with a short sale, the Fund will: (a) maintain daily a segregated account, containing cash, cash equivalents, or liquid marketable securities, at such a level that the amount deposited in the segregated account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; or (b) otherwise cover its short position in accordance with positions taken by the staff of the SEC (e.g., taking an offsetting long position in the security sold short).
Foreign Securities
Investment In Foreign Securities. The Funds may invest in foreign securities traded on U.S. or foreign exchanges or in the over–the–counter market. Investing in securities issued by foreign governments and corporations involves considerations and possible risks not typically associated with investing in obligations issued by the U.S. government and domestic corporations. Less information may be available about foreign companies than about domestic companies, and foreign companies generally are not subject to the same uniform accounting, auditing and financial reporting standards or other regulatory practices and requirements comparable to those applicable to domestic companies. The values of foreign investments are affected by changes in currency rates or exchange control regulations, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the United States or abroad) or changed circumstances in dealings between nations. Costs are incurred in connection with conversions between various currencies. In addition, foreign brokerage commissions are generally higher than in the United States, and foreign securities markets may be less liquid, more volatile and less subject to governmental supervision than in the United States. Investments in foreign countries could be affected by other factors not present in the United States, including nationalization, expropriation, confiscatory taxation, and potential difficulties in enforcing contractual obligations and could be subject to extended settlement periods or restrictions affecting the prompt return of capital to the United States.
Investment In Emerging Markets. The Equity Funds may invest in emerging markets stocks. The Fixed Income Funds many invest in the following types of emerging market debt: bonds; notes and debentures of emerging market governments; debt and other fixed–income securities issued or guaranteed by emerging market government agencies, instrumentalities or central banks; and other fixed–income securities issued or guaranteed by banks or other companies in emerging markets which the money managers believe are suitable investments for the Funds. Emerging markets consist of countries determined by the money managers of a Fund to have developing or emerging economies and markets. These countries generally include every country in the world except the United States, Canada, Japan, Australia, New Zealand, Hong Kong, Singapore and most countries located in Western Europe. Foreign investment may include emerging market stock and emerging market debt.
Risks Associated with Emerging Markets. The considerations outlined above when making investments in foreign securities also apply to investments in emerging markets. The risks associated with investing in foreign securities are often heightened for investments in developing or emerging markets. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability, than those of more developed countries. Moreover, the economies of individual emerging market countries may differ favorably or unfavorably from the U.S. economy in such respects as the rate of growth in gross domestic product, the rate of inflation, capital reinvestment, resource self–sufficiency and balance of payments position. Because the Funds’ foreign securities will generally be denominated in foreign currencies, the value of such securities to the Funds will be affected by changes in currency exchange rates and in exchange control regulations. A change in the value of a foreign currency against the U.S. dollar will result in a corresponding change in the U.S. dollar value of the Funds’ foreign securities. In addition, some emerging market countries may have fixed or managed currencies which are not free–floating against the U.S. dollar. Further, certain emerging market countries’ currencies may not be internationally traded. Certain of these currencies have experienced devaluations relative to the U.S. dollar. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.
Investments in emerging market country government debt securities involve special risks. Certain emerging market countries have historically experienced high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. The issuer or governmental authority that controls the repayment of an emerging market country’s debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. As a result, a government obligor may default on its obligations. If such an event occurs, a Fund may have limited legal recourse against the issuer and/or guarantor.
Foreign Government Securities. Foreign government securities which the Funds may invest in generally consist of obligations issued or backed by the national, state or provincial government or similar political subdivisions or central banks in foreign countries. Foreign government securities also include debt obligations of supranational entities, which include international organizations designated or backed by governmental entities to promote economic reconstruction or development, international banking institutions and related government agencies. These securities also include debt securities of “quasi–government agencies” and debt securities denominated in multinational currency units of an issuer.
56
Table of Contents
Local Access Products. The Emerging Markets Fund may invest in local access products. Local access products, also called participation notes, are a form of derivative security issued by foreign banks that either give holders the right to buy or sell an underlying security or securities for a particular price or give holders the right to receive a cash payment relating to the value of the underlying security or securities. The instruments may or may not be traded on a foreign exchange. Local access products are similar to options in that they are exercisable by the holder for an underlying security or the value of that security, but are generally exercisable over a longer term than typical options. These types of instruments may be exercisable in the American style, which means that they can be exercised at any time on or before the expiration date of the instrument, or exercisable in the European style, which means that they may be exercised only on the expiration date. Local access products have an exercise price, which is fixed when they are issued.
Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In the case of any exercise of the instruments, there may be a time delay between the time a holder gives instructions to exercise and the time the price of the security or the settlement date is determined, during which time the price of the underlying security could change significantly. In addition, the exercise or settlement date of the local access products may be affected by certain market disruption events, such as difficulties relating to the exchange of a local currency into U.S. dollars, the imposition of capital controls by a local jurisdiction or changes in the laws relating to foreign investments. These events could lead to a change in the exercise date or settlement currency of the instruments, or postponement of the settlement date. In some cases, if the market disruption events continue for a certain period of time, the local access products may become worthless resulting in a total loss of the purchase price.
Equity Linked Notes. The International Securities and International Funds may invest in equity linked notes, which are instruments whose return is determined by the performance of a single equity security, a basket of equity securities or an equity index. The principal payable at maturity is based on the current price of the linked security, basket or index. Equity linked notes are generally subject to the risks associated with the securities of foreign issuers and with securities denominated in foreign currencies and, because they are equity-linked, may return a lower amount at maturity because of a decline in value of the linked security or securities. Equity linked notes are also subject to default risk and counterparty risk.
Equity Securities
Common Stocks. The Funds may invest in common stocks, which are shares of a corporation or other entity that entitle the holder to a pro rata share of the profits of the corporation, if any, without preference over any other shareholder or class of shareholders, including holders of the entity’s preferred stock and other senior equity. Common stocks usually carry the right to vote and frequently an exclusive right to do so.
Preferred Stocks. The Funds may invest in preferred stocks, which are shares of a corporation or other entity that pay dividends at a specified rate and have precedence over common stock in the payment of dividends. If the corporation or other entity is liquidated or declares bankruptcy, the claims of owners of preferred stock will have precedence over the claims of owners of common stock, but not over the claims of owners of bonds. Some preferred stock dividends are non-cumulative, but some are “cumulative,” meaning that they require that all or a portion of prior unpaid dividends be paid to preferred stockholders before any dividends are paid to common stockholders. Certain preferred stock dividends are “participating” and include an entitlement to a dividend exceeding the specified dividend rate in certain cases. Investments in preferred stocks carry many of the same risks as investments in common stocks and debt securities.
Convertible Securities. The Funds may invest in convertible securities, which entitle the holder to acquire the issuer’s common stock by exchange or purchase for a predetermined rate. Convertible securities can be bonds, notes, debentures, preferred stock or other securities which are convertible into common stock. Convertible securities are subject both to the credit and interest rate risks associated with fixed income securities and to the stock market risk associated with equity securities. Convertible securities rank senior to common stocks in a corporation’s capital structure. They are consequently of higher quality and entail less risk than the corporation’s common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed income security. The Funds may purchase convertible securities rated Ba or lower by Moody’s Investors Service, Inc. (“Moody’s”), BB or lower by Standard & Poor’s Ratings Group (“S&P”) or BB+ or lower by Fitch Investors Services, Inc. (“Fitch”) and may also purchase non-rated securities considered by the manager to be of comparable quality. Although the fund selects these securities primarily on the basis of their equity characteristics, investors should be aware that debt securities rated in these categories are considered high risk securities; the rating agencies consider them speculative, and payment of interest and principal is not considered well assured. To the extent that such convertible securities are acquired by the fund, there is a greater risk as to the timely payment of the principal of, and timely payment of interest or dividends on, such securities than in the case of higher rated convertible securities.
57
Table of Contents
Warrants. The Funds may invest in warrants. Warrants are instruments which entitle the holder to buy an equity security at a specific price for a specific period of time.
Changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss.
Real Estate Investment Trusts or “REITs”. The Equity Funds may invest in equity REITs. REITs are entities which either own properties or make construction or mortgage loans. Equity REITs own real estate directly and the value of, and income earned by, the trust depends upon the income of the underlying properties and the rental income they earn. Equity REITs can also realize capital gains by selling properties that have appreciated in value.
A Fund’s investments in REITs are subject to the risks associated with particular properties and with the real estate market in general, including the risks of a general downturn in real estate values. The value of securities issued by REITs is affected by tax and regulatory requirements and by perceptions of management skill. A Fund’s investment in REITs is also subject to heavy cash flow dependency, or tenant defaults, self-liquidation, the possibility of failing to qualify for tax-free status under the Internal Revenue Code of 1986, as amended (the “Code”), and failing to maintain exemption from the 1940 Act. By investing in REITs indirectly through the Fund, a shareholder will bear expenses of the REITs in addition to expenses of the Fund.
Depositary Receipts. The Equity Funds may hold securities of foreign issuers in the form of American Depositary Receipts (“ADRs”), American Depositary Shares (“ADSs”) and European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”), or other securities convertible into securities of eligible European or Far Eastern issuers. These securities may not necessarily be denominated in the same currency as the securities for which they may be exchanged. ADRs and ADSs typically are issued by an American bank or trust company and evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts (“CDRs”), are issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. Generally, ADRs and ADSs in registered form are designed for use in United States securities markets and EDRs in bearer form are designed for use in European securities markets. GDRs allow companies in Europe, Asia, the United States and Latin America to offer shares in many markets around the world. GDRs are traded on major stock exchanges, particularly the London SEAQ International trading system. For purposes of a Fund’s investment policies, the Fund’s investments in ADRs, ADSs and EDRs will be deemed to be investments in the equity securities representing securities of foreign issuers into which they may be converted.
ADR facilities may be established as either “unsponsored” or “sponsored.” While ADRs issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of ADR holders and the practices of market participants. A depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depositary requests a letter of non–objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non–cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited securities or to pass through voting rights to ADR holders with respect to the deposited securities. Sponsored ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer, the depositary and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositories agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities. Unsponsored depositary receipts tend to trade over the counter, and are issued without the involvement of the underlying non-US company whose stock underlies the depositary receipts. Shareholder benefits, voting rights and other attached rights may not be extended to the holder of an unsponsored depositary receipt. The Funds may invest in sponsored and unsponsored ADRs.
58
Table of Contents
Debt Instruments and Money Market Instruments
To the extent a Fund invests in the following types of debt securities, its net asset value may change as the general levels of interest rates fluctuate. When interest rates decline, the value of debt securities can be expected to rise. Conversely, when interest rates rise, the value of debt securities can be expected to decline. A Fund’s investments in debt securities with longer terms to maturity are subject to greater volatility than a Fund’s shorter-term obligations. Debt securities may have all types of interest rate payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features.
U.S. Government Obligations. The types of U.S. government obligations the Funds may purchase include: (1) a variety of U.S. Treasury obligations which differ only in their interest rates, maturities and times of issuance: (a) U.S. Treasury bills at time of issuance have maturities of one year or less, (b) U.S. Treasury notes at time of issuance have maturities of one to ten years and (c) U.S. Treasury bonds at time of issuance generally have maturities of greater than ten years; (2) obligations issued or guaranteed by U.S. government agencies and instrumentalities and supported by any of the following: (a) the full faith and credit of the U.S. Treasury (such as Government National Mortgage Association participation certificates), (b) the right of the issuer to borrow an amount limited to a specific line of credit from the U.S. Treasury, (c) discretionary authority of the U.S. government agency or instrumentality or (d) the credit of the instrumentality (examples of agencies and instrumentalities are: Federal Land Banks, Farmers Home Administration, Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks and Federal National Mortgage Association). No assurance can be given that the U.S. government will provide financial support to such U.S. government agencies or instrumentalities described in (2)(b), (2)(c) and (2)(d) in the future, other than as set forth above, since it is not obligated to do so by law. Accordingly, such U.S. government obligations may involve risk of loss of principal and interest. The Funds may invest in fixed–rate and floating or variable rate U.S. government obligations. The Funds may purchase U.S. government obligations on a forward commitment basis.
The Fixed-Income Funds may also purchase Treasury Inflation Protected Securities (“TIPS”). TIPS are U.S. Treasury securities issued at a fixed rate of interest but with principal adjusted every six months based on changes in the Consumer Price Index. As changes occur in the inflation rate, as represented by the designated index, the value of the security’s principal is adjusted by the same proportion. If the inflation rate falls, the principal value of the security will be adjusted downward, and consequently, the interest payable on the securities will be reduced.
STRIPS. The Fixed Income Funds and Money Market Funds may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are created by separating the interest and principal components of an outstanding U.S. Treasury or agency note or bond and selling them as individual securities. STRIPS generally trade like zero coupon securities, which do not pay interest periodically but accrue interest until maturity. STRIPS tend to be subject to the same risks as zero coupon securities. The market prices of STRIPS generally are more volatile than the market prices of securities with similar maturities that pay interest periodically and are likely to respond to changes in interest rates to a greater degree than do non-zero coupon securities having similar maturities and credit quality.
Repurchase Agreements. The Fixed Income Funds and Money Market Funds may enter into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally the next business day). The resale price reflects an agreed upon interest rate effective for the period the security is held by the Fund and is unrelated to the interest rate on the security. The securities acquired by the Fund constitute collateral for the repurchase obligation. In these transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and must be held by the custodian bank until repurchased. In addition, RIMCo will monitor the Fund’s repurchase agreement transactions generally and will evaluate the creditworthiness of any bank, broker or dealer party to a repurchase agreement with the Fund. Subject to the overall limitations described in “Illiquid Securities”, a Fund will not invest more than 15% (10%, in the case of each Money Market Fund) of its net assets (taken at current market value) in repurchase agreements maturing in more than seven days.
Risk Factors. The use of repurchase agreements involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the Fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under bankruptcy or other laws, a court may determine that the underlying securities are collateral for a loan by the Fund not within its control and therefore the realization by the Fund on such collateral may be automatically stayed. It is possible that the Fund may not be able to substantiate its interest in the underlying securities and may be deemed an unsecured creditor of the other party to the agreement.
Reverse Repurchase Agreements. The Fixed Income Funds and Money Market Funds may enter into reverse repurchase agreements to meet redemption requests where the liquidation of portfolio securities is deemed by the Fund’s money manager to
59
Table of Contents
be inconvenient or disadvantageous. A reverse repurchase agreement is a transaction whereby a Fund transfers possession of a portfolio security to a bank or broker–dealer in return for a percentage of the portfolio security’s market value. The Fund retains record ownership of the security involved including the right to receive interest and principal payments. At an agreed upon future date, the Fund repurchases the security by paying an agreed upon purchase price plus interest. Liquid assets of a Fund equal in value to the repurchase price, including any accrued interest, will be segregated on the Fund’s records while a reverse repurchase agreement is in effect.
Corporate Securities. The Fixed Income Funds may invest in debt securities, such as convertible and non-convertible bonds, preferred stock, notes and debentures, issued by corporations, limited partnerships and other similar entities. The Money Market Funds may invest in debt securities issued by corporations. Investments in securities that are convertible into equity securities and preferred stock have characteristics of equity as well as debt securities, and their value may be dependent in part on the value of the issuer’s equity securities. The Funds may also invest in debt securities that are accompanied by warrants which are convertible into the issuer’s equity securities, which have similar characteristics. See “Equity Securities” above for a fuller description of convertible securities.
Zero Coupon Securities. The Fixed Income Funds and Money Market Funds may invest in zero coupon securities. Zero coupon securities are notes, bonds and debentures that (1) do not pay current interest and are issued at a substantial discount from par value, (2) have been stripped of their unmatured interest coupons and receipts or (3) pay no interest until a stated date one or more years into the future. These securities also include certificates representing interests in such stripped coupons and receipts. Zero coupon securities trade at a discount from their par value and are subject to greater fluctuations of market value in response to changing interest rates.
Mortgage–Related And Other Asset–Backed Securities. The forms of mortgage–related and other asset–backed securities the Fixed Income Funds and Money Market Funds may invest in include the securities described below:
Mortgage Pass–Through Securities. Mortgage pass–through securities are securities representing interests in “pools” of mortgages in which payments of both interest and principal on the securities are generally made monthly. The securities are “pass–through” securities because they provide investors with monthly payments of principal and interest which in effect are a “pass–through” of the monthly payments made by the individual borrowers on the underlying mortgages, net of any fees paid to the issuer or guarantor. The principal governmental issuer of such securities is the Government National Mortgage Association (“GNMA”), which is a wholly owned U.S. government corporation within the Department of Housing and Urban Development. Government related issuers include the Federal Home Loan Mortgage Corporation (“FHLMC”), a corporate instrumentality of the United States created pursuant to an Act of Congress, and which is owned entirely by the Federal Home Loan Banks, and the Federal National Mortgage Association (“FNMA”), a government sponsored corporation owned entirely by private stockholders. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass–through pools of conventional residential mortgage loans. Such issuers may be the originators of the underlying mortgage loans as well as the guarantors of the mortgage–related securities.
Collateralized Mortgage Obligations. Collateralized mortgage obligations (“CMOs”) are hybrid instruments with characteristics of both mortgage–backed bonds and mortgage pass–through securities. Similar to a bond, interest and pre–paid principal on a CMO are paid, in most cases, monthly. CMOs may be collateralized by whole mortgage loans but are more typically collateralized by portfolios of mortgage passthrough securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured into multiple classes (or “tranches”), with each class bearing a different stated maturity.
Asset–Backed Securities. Asset–backed securities represent undivided fractional interests in pools of instruments, such as consumer loans, and are similar in structure to mortgage–related pass–through securities. Payments of principal and interest are passed through to holders of the securities and are typically supported by some form of credit enhancement, such as a letter of credit liquidity support, surety bond, limited guarantee by another entity or by priority to certain of the borrower’s other securities. The degree of enhancement varies, generally applying only until exhausted and covering only a fraction of the security’s par value. If the credit enhancement held by a Fund has been exhausted, and if any required payments of principal and interest are not made with respect to the underlying loans, the Fund may experience loss or delay in receiving payment and a decrease in the value of the security.
Risk Factors. Prepayment of principal on mortgage or asset–backed securities may expose a Fund to a lower rate of return upon reinvestment of principal. Also, if a security subject to prepayment has been purchased at a premium, in the event of prepayment the value of the premium would be lost. Like other fixed–income securities, the value of mortgage–related securities is affected by fluctuations in interest rates.
Loans and Other Direct Indebtedness. The Fixed Income Funds may purchase loans or other direct indebtedness, or participations in loans or other direct indebtedness, that entitles the acquiror of such interest to payments of interest, principal
60
Table of Contents
and/or other amounts due under the structure of the loan or other direct indebtedness. In addition to being structured as secured or unsecured, such investments could be structured as novations or assignments or represent trade or other claims owed by a company to a supplier. Loan participations typically represent direct participation in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates.
Risk Factors. Loans and other direct indebtedness involve the risk that a Fund will not receive payment of principal, interest and other amounts due in connection with these investments and will depend primarily on the financial condition of the borrower. Loans that are fully secured offer a Fund more protection than an unsecured loan in the event of non-payment of scheduled interest or principal, although there is no assurance that the liquidation of collateral from a secured loan would satisfy the corporate borrower’s obligation, or that the collateral can be liquidated. Some loans or claims may be in default at the time of purchase. Certain of the loans and the other direct indebtedness acquired by a Fund may involve revolving credit facilities or other standby financing commitments which obligate a Fund to pay additional cash on a certain date or on demand. These commitments may require a Fund to increase its investment in a company at a time when that Fund might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will at all times hold and maintain in a segregated account cash or other high-grade debt obligations in an amount sufficient to meet such commitments.
As a Fund may be required to rely upon another lending institution to collect and pass onto the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. The highly leveraged nature of many such loans and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions. Investments in such loans and other direct indebtedness may involve additional risk to the Fund.
In purchasing loans or loan participations, a Fund assumes the credit risk associated with the corporate buyer and may assume the credit risk associated with the interposed bank or other financial intermediary. The participation may not be rated by a nationally recognized rating service. Further, loan participations may not be readily marketable and may be subject to restrictions on resale. Loan participations are generally illiquid investments and are priced through a nationally recognized pricing service which determines loan prices by surveying available dealer quotations. If the corporate borrower defaults on its obligations, a Fund may end up owning the underlying collateral.
Brady Bonds. The Fixed Income Funds may invest in Brady Bonds, the products of the “Brady Plan,” under which bonds are issued in exchange for cash and certain of a country’s outstanding commercial bank loans. The Brady Plan offers relief to debtor countries that have effected substantial economic reforms. Specifically, debt reduction and structural reform are the main criteria countries must satisfy in order to obtain Brady Plan status. Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (primarily U.S.–dollar) and are actively traded on the over–the–counter market.
Bank Instruments. The Fixed Income Funds and Money Market Funds may invest in bank instruments, which include Eurodollar certificates of deposit (“ECDs”), Eurodollar time deposits (“ETDs”) and Yankee Certificates of Deposit (“Yankee CDs”).
Risk Factors. ECDs, ETDs, and Yankee CDs are subject to somewhat different risks from the obligations of domestic banks. ECDs are U.S. dollar denominated certificates of deposit issued by foreign branches of U.S. and foreign banks; ETDs are U.S. dollar denominated time deposits in a foreign branch of a U.S. bank or a foreign bank; and Yankee CDs are certificates of deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the United States.
Different risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or their domestic or foreign branches, are not necessarily subject to the same regulatory requirements that apply to domestic banks, such as reserve requirements, loan limitations, examinations, accounting, auditing and recordkeeping, and the public availability of information.
Indexed Commercial Paper. The Fixed Income Funds may invest in indexed commercial paper, which is U.S.–dollar denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on indexed commercial paper is established at maturity as a function of spot exchange rates between the U.S. dollar and a designated currency as of or about that time. The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S.–dollar denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.
61
Table of Contents
While such commercial paper entails risk of loss of principal, the potential risk for realizing gains as a result of changes in foreign currency exchange rates enables a Fund to hedge (or cross–hedge) against a decline in the U.S. dollar value of investments denominated in foreign currencies while providing an attractive money market rate of return.
High Risk Bonds. The Fixed Income Funds may invest their assets in securities rated BBB– or higher by S&P, Baa3 or higher by Moody’s or BBB or higher by Fitch, or in unrated securities judged by the money managers to be of higher credit quality than those designations. Securities rated BBB– by S&P, Baa3 by Moody’s or BBB by Fitch are the lowest ratings which are considered “investment grade,” although Moody’s considers securities rated Baa3, S&P considers bonds rated BBB– and Fitch considers bonds rated BBB, to have some speculative characteristics. The Fixed Income Funds may be required by their prospectus or investment guidelines to dispose of, in a prudent and orderly fashion, a security if its ratings drop below these minimum ratings.
Risks Associated with High Risk Bonds
These lower rated debt securities are commonly referred to as “junk bonds.” Lower rated debt securities, or junk bonds, generally offer a higher yield than that available from higher grade issues but involve higher risks because they are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged, to changes in the financial condition of the issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn or rising interest rates, highly leveraged issuers may experience financial stress which could adversely affect their ability to make payments of principal and interest and increase the possibility of default. Conversely, periods of economic expansion or falling interest rates enhance the ability of issuers to make payments of principal and interest and decrease the possibility of default. The market for lower rated debt securities is generally thinner and less active than that for higher quality securities, which would limit a Fund’s ability to sell such securities at fair value in response to changes in the economy or the financial markets. While such debt may have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposure to adverse conditions.
Securities rated BBB– by S&P,Baa3 by Moody’s or BBB by Fitch may involve greater risks than securities in higher rating categories. Securities receiving S&P’s BBB– rating are regarded as having adequate capacity to pay interest and repay principal. Such securities typically exhibit adequate investor protections but adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rating categories. For further description of the various rating categories, see “Ratings of Debt Instruments.”
Securities possessing Moody’s Baa3 rating are considered medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security is judged adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such securities lack outstanding investment characteristics and in fact may have speculative characteristics as well.
Securities possessing Fitch’s BBB rating indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.
Lower rated debt securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. The prices of low rated debt securities have been found to be less sensitive to interest rate changes than investment grade securities, but more sensitive to economic downturns, individual corporate developments, and price fluctuations in response to changing interest rates. A projection of an economic downturn or of a period of rising interest rates, for example, could cause a sharper decline in the prices of low rated debt securities because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. If the issuer of low rated debt securities defaults, a Fund may incur additional expenses to seek financial recovery.
In addition, the markets in which low rated debt securities are traded are generally thinner, more limited and less active than those for higher rated securities. The existence of limited markets for particular securities may diminish a Fund’s ability to sell the securities at fair value either to meet redemption requests or to respond to changes in the economy or in the financial markets and could adversely affect and cause fluctuations in the daily net asset value of the Fund’s Shares.
Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of low rated debt securities, especially in a thinly traded market. Analysis of the creditworthiness of issuers of low rated securities may be more complex than for issuers of other investment grade securities, and the ability of a Fund to achieve its investment objectives may be more dependent on credit analysis than would be the case if the Fund was investing only in investment grade securities.
62
Table of Contents
The money managers of the Funds may use ratings to assist in investment decisions. Ratings of debt securities represent a rating agency’s opinion regarding their quality and are not a guarantee of quality. Rating agencies attempt to evaluate the safety of principal and interest payments and do not evaluate the risks of fluctuations in market value. Also, rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an issuer’s current financial condition may be better or worse than a rating indicates.
Municipal Debt Instruments
Municipal Obligations and Bonds. The Fixed Income Funds and Money Market Funds may invest in “municipal obligations.” Municipal obligations are debt obligations issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, or multi–state agencies or authorities the interest from which may be exempt from federal income tax in the opinion of bond counsel to the issuer. Municipal obligations include debt obligations issued to obtain funds for various public purposes and certain industrial development bonds issued by or on behalf of public authorities. Municipal obligations are classified as general obligation bonds, revenue bonds and notes. Municipal bonds generally have maturities of more than one year when issued and have two principal classifications –– General Obligation Bonds and Revenue Bonds.
General Obligation Bonds – are secured by the issuer’s pledge of its faith, credit and taxing power for the payment of principal and interest.
Revenue Bonds – are payable only from the revenues derived from a particular facility or group of facilities or from the proceeds of special excise or other specific revenue service.
Industrial Development Bonds – are a type of revenue bond and do not generally constitute the pledge of credit of the issuer of such bonds but rather the pledge of credit by the core obligor. The payment of the principal and interest on such bonds is dependent on the facility’s user to meet its financial obligations and the pledge, if any, of real and personal property financed as security for such payment. Industrial development bonds are issued by or on behalf of public authorities to raise money to finance public and private facilities for business, manufacturing, housing, ports, pollution control, airports, mass transit and other similar type projects.
Municipal Notes. The Fixed Income Funds and Money Market Funds may invest in municipal notes. Municipal notes generally have maturities of one year or less when issued and are used to satisfy short–term capital needs. Municipal notes include:
Tax Anticipation Notes – issued to finance working capital needs of municipalities and are generally issued in anticipation of future tax revenues.
Bond Anticipation Notes –issued in expectation of a municipality issuing a long–term bond in the future. Usually the long–term bonds provide the money for the repayment of the notes.
Revenue Anticipation Notes –issued in expectation of receipt of other types of revenues such as certain federal revenues.
Construction Loan Notes –sold to provide construction financing and may be insured by the Federal Housing Administration. After completion of the project, FNMA or GNMA frequently provides permanent financing.
Pre-Refunded Municipal Bonds –bonds no longer secured by the credit of the issuing entity, having been escrowed with U.S. Treasury securities as a result of a refinancing by the issuer. The bonds are escrowed for retirement either at original maturity or at an earlier call date.
Tax Free Commercial Paper – a promissory obligation issued or guaranteed by a municipal issuer and frequently accompanied by a letter of credit of a commercial bank. It is used by agencies of state and local governments to finance seasonal working capital needs, or as short–term financing in anticipation of long–term financing.
Variable Rate Demand Notes – long term, taxable, or tax-exempt bonds issued on a variable rate basis that can be tendered for purchase at par whenever rates reset upon contractual notice by the investor. The bonds tendered are then resold by the remarketing agent in the secondary market to other investors. Variable Rate Demand Notes can be converted to a long term fixed rate security upon appropriate notice by the issuer. The Funds’ money managers will continually monitor the pricing, quality and liquidity of the floating and variable rate demand instruments held by the Funds.
Tax Free Participation Certificates – tax free floating, or variable rate demand notes which are issued by a municipal or governmental entity that sells a participation in the note. They are usually purchased by the Tax Exempt Bond and Tax Free Money Market Funds to maintain liquidity. The Funds’ money managers will continually monitor the pricing, quality and liquidity of the participation certificates.
63
Table of Contents
A participation certificate gives a Fund an undivided interest in the municipal obligation in the proportion that the Fund’s participation interest bears to the total principal amount of the municipal obligation and provides the demand feature described below. Each participation is backed by: an irrevocable letter of credit or guaranty of a bank which may be the bank issuing the participation certificate, a bank issuing a confirming letter of credit to that of the issuing bank, or a bank serving as agent of the issuing bank with respect to the possible repurchase of the certificate of participation; or an insurance policy of an insurance company that the money manager has determined meets the prescribed quality standards for the Fund. The Fund has the right to sell the participation certificate back to the institution and draw on the letter of credit or insurance on demand after thirty days’ notice for all or any part of the full principal amount of the Fund’s participation interest in the security plus accrued interest. The Funds’ money managers intend to exercise the demand feature only (1) upon a default under the terms of the bond documents, (2) as needed to provide liquidity to the Funds in order to make redemptions of Fund Shares, or (3) to maintain the required quality of its investment portfolios.
The institutions issuing the participation certificates will retain a service and letter of credit fee and a fee for providing the demand feature, in an amount equal to the excess of the interest paid on the instruments over the negotiated yield at which the participations were purchased by a Fund. The total fees generally range from 5% to 15% of the applicable prime rate or other interest rate index. The Fund will attempt to have the issuer of the participation certificate bear the cost of the insurance. The Fund retains the option to purchase insurance if necessary, in which case the cost of insurance will be a capitalized expense of the Fund.
Demand Notes. The Fixed Income Funds may purchase obligations with the right to a “put” or “stand– by commitment.” A “put” on a municipal obligation obligates the seller of the put to buy within a specified time and at an agreed upon price a municipal obligation the put is issued with. A stand–by commitment is a commitment by an underwriter to purchase for resale any part of a new issue offered to current shareholders in a rights offering which remains unsubscribed.
The Money Market Funds may also invest in demand notes, which are obligations with the right to a “put.” A “put” obligates the provider of the put to buy the security within a specified time and at an agreed upon price. Variable rate demand notes are floating rate instruments with terms of as much as 40 years which pay interest monthly or quarterly based on a floating rate that is reset daily or weekly based on an index of short-term municipal rates. Liquidity is provided with a put feature, which allows the holder to put the security at par plus accrued interest on any interest rate reset date, usually with one or seven days notice. Variable rate demand notes almost always have credit enhancement in the form of either a letter of credit or bond insurance.
The Funds will enter into put and stand–by commitments with institutions such as banks and broker–dealers that the Funds’ money managers continually believe satisfy the Funds’ credit quality requirements.
Risk Factors. The ability of the Funds to exercise the put or stand–by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand–by commitment is exercised or on certain restrictions in the buy back arrangement. Such restrictions may prohibit the Funds from exercising the put or stand–by commitment except to maintain portfolio flexibility and liquidity. In the event the seller would be unable to honor a put or stand–by commitment for financial reasons, the Funds may, in the opinion of Funds’ management, be a general creditor of the seller. There may be certain restrictions in the buy back arrangement which may not obligate the seller to repurchase the securities. (See, “Certain Investments –– Municipal Notes –– Tax Free Participation Certificates.”)
The Funds may purchase from issuers floating or variable rate municipal obligations some of which are subject to payment of principal by the issuer on demand by the Funds (usually not more than thirty days’ notice). The Funds may also purchase floating or variable rate municipal obligations or participations therein from banks, insurance companies or other financial institutions which are owned by such institutions or affiliated organizations. Each participation is usually backed by an irrevocable letter of credit, or guaranty of a bank or insurance policy of an insurance company.
Variable Amount Master Demand Notes. The Fixed Income Funds and Money Market Funds may invest in variable amount master demand notes. Variable amount master demand notes are unsecured obligations redeemable upon notice that permit investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements with the issuer of the instrument. A variable amount master demand note differs from ordinary commercial paper in that (1) it is issued pursuant to a written agreement between the issuer and the holders, (2) its amount may, from time to time, be increased (may be subject to an agreed maximum) or decreased by the holder of the issue, (3) it is payable on demand, (4) its rate of interest payable varies with an agreed upon formula and (5) it is not typically rated by a rating agency.
64
Table of Contents
Variable And Floating Rate Securities. The Fixed Income Funds and Money Market Funds may invest in variable and floating rate securities. A floating rate security is one whose terms provide for the automatic adjustment of an interest rate whenever the specified interest rate changes. A variable rate security is one whose terms provide for the automatic establishment of a new interest rate on set dates. The interest rate on floating rate securities is ordinarily tied to and is a specified margin above or below the prime rate of a specified bank or some similar objective standard, such as the yield on the 90–day U.S. Treasury Bill rate, and may change as often as daily. Generally, changes in interest rates on variable and floating rate securities will reduce changes in the securities’ market value from the original purchase price resulting in the potential for capital appreciation or capital depreciation being less than for fixed–income obligations with a fixed interest rate.
The Funds may purchase variable rate U.S. government obligations which are instruments issued or guaranteed by the U.S. government, or an agency or instrumentality thereof, which have a rate of interest subject to adjustment at regular intervals but no less frequently than every 762 days. Variable rate U.S. government obligations whose interest rates are readjusted no less frequently than every 762 days will be deemed to have a maturity equal to the period remaining until the next readjustment of the interest rate.
Commercial Paper. The Fixed Income Funds and Money Market Funds may invest in commercial paper, which consists of short-term (usually 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations.
Asset-Backed Commercial Paper. The Money Market Funds may invest in asset-backed commercial paper. This is commercial paper issued by a bankruptcy remote special purpose entity to fund the acquisition of financial assets (such as trade receivables, commercial loans, auto and equipment loans, leases or collateral debt obligations) that is repaid from the cash flows of those receivables on a specific date.
Credit And Liquidity Enhancements. The Fixed Income Funds and Money Market Funds may invest in securities supported by credit and liquidity enhancements from third parties, generally letters of credit from foreign or domestic banks. Liquidity enhancements may be used to shorten the maturity of the debt obligation through a demand feature. Adverse changes in the credit quality of these institutions could cause losses to Fixed Income Funds and Money Market Funds that invest in these securities and may affect their share price.
Funding Agreements. The Fixed Income Funds and Money Market Funds may invest in various types of funding agreements. A funding agreement is an obligation of indebtedness negotiated privately between an investor and an insurance company. A funding agreement has a fixed maturity date and may have either a fixed or variable interest rate that is based on an index and guaranteed for a set time period. Because there is normally no secondary market for these investments, funding agreements purchased by the Fund may be regarded as illiquid and therefore will be subject to the Fund’s limitation on illiquid investments.
Other Financial Instruments Including Derivatives
Options, Futures and Other Financial Instruments. The Funds may use various types of financial instruments, some of which are derivatives, to attempt to manage the risk of the Fund’s investment or, in certain circumstances, for investment (e.g. as a substitute for investing in securities). These financial instruments include options, futures, forward contracts and swaps. Positions in these financial instruments, other than purchased options, expose a Fund to an obligation to another party. The Funds will not enter into any such transaction unless it owns (1) an offsetting (“covered”) position in securities, currencies or other options, futures contracts or forward contracts or (2) cash or liquid assets with a value, marked to market daily, sufficient to cover their obligations to the extent not covered as provided in (1) above. The Funds will comply with SEC guidelines regarding cover for these instruments and will, if the guidelines so require, designate the prescribed amount of cash or liquid assets as segregated.
Assets used as cover or held as segregated cannot be sold while the position in the corresponding financial instrument is open unless they are replaced with other appropriate assets.
Options And Futures. The Funds, other than the Money Market Funds, may purchase and sell (write) both call and put options on securities, securities indexes, and foreign currencies, and enter into interest rate, foreign currency and index futures contracts and purchase and sell options on such futures contracts for hedging purposes or to effect investment transactions consistent with a Fund’s investment objective and strategies. If other types of options, futures contracts, or options on futures contracts are traded in the future, the Funds may also use those instruments, provided that their use is consistent with the Funds’ investment objectives, and provided that their use is consistent with restrictions applicable to options and futures contracts currently eligible for use by the Funds (i.e., that written call or put options will be “covered” or “secured” and that futures and options on futures contracts will be for the purposes of hedging or effecting a Fund’s permitted investment strategies, provided that initial margin and premiums required to establish such non-hedging positions will not exceed 5% of the Fund’s net assets).
65
Table of Contents
Options On Securities And Indexes. Each Fund, other than the Money Market Funds, may purchase and write both call and put options on securities and securities indexes in standardized contracts traded on foreign or national securities exchanges, boards of trade, or similar entities, or quoted on NASDAQ or on a regulated foreign or national over–the–counter market, and agreements, sometimes called cash puts, which may accompany the purchase of a new issue of bonds from a dealer. The Funds intend to treat options in respect of specific securities that are not traded on a national securities exchange and the securities underlying covered call options as not readily marketable and therefore subject to the limitations on the Funds’ ability to hold illiquid securities. The Funds intend to purchase and write call and put options on specific securities.
Exchange listed options are issued by a regulated intermediary, such as the Options Clearing Corporation (“OCC”), which guarantees the performance of the obligations of the parties to such options. This discussion uses the OCC as an example but is also applicable to other financial intermediaries. With certain exceptions, OCC issued and exchange listed options generally settle by physical delivery of the underlying security or currency, although cash settlements may sometimes be available. Index options and Eurodollar instruments are cash settled for the net amount, if any, by which the option is “in the money” (i.e. where the value of the underlying instruments exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option) at the time the option is exercised. Frequently, rather than taking or making delivery of the underlying instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option.
A Fund’s ability to close out its position as a purchaser or seller of an OCC or exchange listed put or call option is dependent, in part, upon the liquidity of the option market. If one or more exchanges decide to discontinue the trading of options (or a particular class or series of options), the relevant market for that option on that exchange would cease to exist, although outstanding options on that exchange would generally continue to be exercisable in accordance with their terms.
Over–the–counter options (“OTC Options”) are purchased from or sold to securities dealers, financial institutions or other parties (“Counterparties”) through a direct bilateral agreement with the Counterparty. In contrast to exchange listed options, which generally have standardized terms and performance mechanics, all the terms of an OTC Option, including such terms as method of settlement, term, exercise price, premium, guarantees and security, are set by negotiation of the parties. The staff of the SEC takes the position that OTC options and the assets used as “cover” for written OTC options are illiquid.
Unless the parties provide for it, there is no central clearing or guaranty function in an OTC Option. As a result, if the Counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC Option it has entered into with a Fund or fails to make a cash settlement payment due in accordance with the terms of that option, the Fund will lose any premium paid for the option and any anticipated benefits of the transaction. Accordingly, RIMCo or the money manager must assess the creditworthiness of each such Counterparty or any guarantor or credit enhancement of the Counterparty’s credit to determine the likelihood that the terms of the OTC Option will be satisfied. A Fund will engage in OTC Option transactions only with U.S. Government securities dealers recognized by the Federal Reserve Bank of New York as “primary dealers” or broker/dealers, domestic or foreign banks or other financial institutions that have received (or the guarantors or the obligations of which have received) a short term credit rating of A–1 from S&P or P–1 from Moody’s or an equivalent rating from any nationally recognized statistical rating organization or, in the case of OTC currency transactions, determined to be of equivalent credit by RIMCo or the money manager for the Fund.
An option on a security (or securities index) is a contract that gives the purchaser of the option, in return for a premium, the right (but not the obligation) to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise price at any time during the option period. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying security. Upon exercise, the writer of an option on an index is obligated to pay the difference between the cash value of the index and the exercise price multiplied by the specified multiplier (established by the exchange upon which the stock index is traded) for the index option. (An index is designed to reflect specified facets of a particular financial or securities market, a specified group of financial instruments or securities, or certain economic indicators.) Options on securities indexes are similar to options on specific securities except that settlement is in cash and gains and losses depend on price movements in the stock market generally (or in a particular industry or segment of the market), rather than price movements in the specific security.
A Fund may purchase a call option on securities to protect against substantial increases in prices of securities the Fund intends to purchase pending its ability or desire to purchase such securities in an orderly manner or employed as a cost-efficient alternative to acquiring the securities for which the option is intended to serve as a proxy. A Fund may purchase a put option on securities to protect holdings in an underlying or related security against a substantial decline in market value. Securities are considered related if their price movements generally correlate to one another.
66
Table of Contents
A Fund will write call options and put options only if they are “covered.” In the case of a call option on a security, the option is “covered” if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, liquid assets in such amount are segregated) upon conversion or exchange of other securities held by the Fund. For a call option on an index, the option is covered if the Fund maintains liquid assets equal to the contract value. A call option is also covered if the Fund holds a call on the same security or index as the call written where the exercise price of the call held is (1) equal to or less than the exercise price of the call written, or (2) greater than the exercise price of the call written, provided the difference is maintained by the Fund in liquid segregated assets. A put option on a security or an index is “covered” if the Fund maintains liquid segregated assets equal to the exercise price. A put option is also covered if the Fund holds a put on the same security or index as the put written where the exercise price of the put held is (1) equal to or greater than the exercise price of the put written, or (2) less than the exercise price of the put written, provided the difference is maintained by the Fund in liquid segregated assets.
If an option written by a Fund expires, the Fund realizes a capital gain equal to the premium received at the time the option was written. If an option purchased by a Fund expires unexercised, the Fund realizes a capital loss (long or short–term depending on whether the Fund’s holding period for the option is greater than one year) equal to the premium paid.
To close out a position when writing covered options, a Fund may make a “closing purchase transaction,” which involves purchasing an option on the same security with the same exercise price and expiration date as the option which it previously wrote on the security. To close out a position as a purchaser of an option, a Fund may make a “closing sale transaction,” which involves liquidating the Fund’s position by selling the option previously purchased. The Fund will realize a profit or loss from a closing purchase or sale transaction depending upon the difference between the amount paid to purchase an option and the amount received from the sale thereof.
Prior to the earlier of exercise or expiration, an option may be closed out by an offsetting purchase or sale of an option of the same series (type, exchange, underlying security or index, exercise price and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be affected when the Fund desires.
A Fund will realize a capital gain from a closing transaction on an option it has written if the cost of the closing option is less than the premium received from writing the option, or, if it is more, the Fund will realize a capital loss. If the premium received from a closing sale transaction is more than the premium paid to purchase the option, the Fund will realize a capital gain or, if it is less, the Fund will realize a capital loss. With respect to closing transactions on purchased options, the capital gain or loss realized will be short or long–term depending on the holding period of the option closed out. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security or index in relation to the exercise price of the option, the volatility of the underlying security or index, and the time remaining until the expiration date.
The premium paid for a put or call option purchased by a Fund is an asset of the Fund. The premium received for an option written by a Fund is recorded as a liability. The value of an option purchased or written is marked–to–market daily and is valued at the closing price on the exchange on which it is traded or, if not traded on an exchange or no closing price is available, at the mean between the last bid and asked prices.
Risks Associated With Options On Securities And Indexes. There are several risks associated with transactions in options on securities and on indexes. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well–conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events.
If a put or call option purchased by a Fund is not sold when it has remaining value, and if the market price of the underlying security, in the case of a put, remains equal to or greater than the exercise price or, in the case of a call, remains less than or equal to the exercise price, the Fund will lose its entire investment (i.e., the premium paid) on the option. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position. If a Fund were unable to close out an option that it had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless. If a Fund were unable to close out a covered call option that it had written on a security, it would not be able to sell the underlying security unless the option expired without exercise.
As the writer of a covered call option, a Fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the underlying security above the exercise price, but, as long as its obligation as a writer continues, has retained a risk of loss should the price of the underlying security decline. Where a Fund writes a put option, it is exposed during the term of the option to a decline in the price of the underlying security.
67
Table of Contents
If trading were suspended in an option purchased by a Fund, the Fund would not be able to close out the option. If restrictions on exercise were imposed, the Fund might be unable to exercise an option it has purchased. Except to the extent that a call option on an index written by the Fund is covered by an option on the same index purchased by the Fund, movements in the index may result in a loss to the Fund; however, such losses may be mitigated by changes in the value of the Fund’s securities during the period the option was outstanding.
Options On Foreign Currency. A Fund may buy and sell put and call options on foreign currencies either on exchanges or in the over–the–counter market for the purpose of hedging against changes in future currency exchange rates or to effect investment transactions consistent with a Fund’s investment objective and strategies. Call options convey the right to buy the underlying currency at a price which is expected to be lower than the spot price of the currency at the time the option expires. Put options convey the right to sell the underlying currency at a price which is anticipated to be higher than the spot price of the currency at the time the option expires. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of a Fund to reduce foreign currency risk using such options. Over–the–counter options differ from traded options in that they are two–party contracts with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange–traded options.
Futures Contracts And Options On Futures Contracts. A Fund may invest in interest rate futures contracts, foreign currency futures contracts, or stock index futures contracts, and options thereon that are traded on a U.S. or foreign exchange or board of trade or over–the–counter. An interest rate, foreign currency or index futures contract provides for the future sale by one party and purchase by another party of a specified quantity of financial instruments (such as GNMA certificates or Treasury bonds) or foreign currency or the cash value of an index at a specified price at a future date. A futures contract on an index (such as the S&P 500®) is an agreement between two parties (buyer and seller) to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. In the case of futures contracts traded on U.S. exchanges, the exchange itself or an affiliated clearing corporation assumes the opposite side of each transaction (i.e., as buyer or seller). A futures contract may be satisfied or closed out by delivery or purchase, as the case may be, of the financial instrument or by payment of the change in the cash value of the index. Although the value of an index may be a function of the value of certain specified securities, no physical delivery of these securities is made. A public market exists in futures contracts covering several indexes as well as a number of financial instruments and foreign currencies. For example: the S&P 500®; the Russell 2000®; Nikkei 225; CAC–40; FT–SE 100; the NYSE composite; U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three–month U.S. Treasury bills; Eurodollar certificates of deposit; the Australian Dollar; the Canadian Dollar; the British Pound; the German Mark; the Japanese Yen; the French Franc; the Swiss Franc; the Mexican Peso; and certain multinational currencies, such as the European Currency Unit (“ECU”). It is expected that other futures contracts will be developed and traded in the future.
Frequently, using futures to affect a particular strategy instead of using the underlying or related security or index will result in lower transaction costs being incurred.
Each Fund may also purchase and write call and put options on futures contracts. Options on futures contracts possess many of the same characteristics as options on securities and indexes (discussed above). A futures option gives the holder the right, in return for the premium paid, to assume a long position (in the case of a call) or short position (in the case of a put) in a futures contract at a specified exercise price at any time during the period of the option. Upon exercise of a call option, the holder acquires a long position in the futures contract and the writer is assigned the opposite short position. In the case of a put option, the opposite is true. An option on a futures contract may be closed out (before exercise or expiration) by an offsetting purchase or sale of an option on a futures contract of the same series.
There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures contract or a futures option position. Most futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single day; once the daily limit has been reached on a particular contract, no trades may be made that day at a price beyond that limit. In addition, certain of these instruments are relatively new and without a significant trading history. As a result, there is no assurance that an active secondary market will develop or continue to exist. Lack of a liquid market for any reason may prevent a Fund from liquidating an unfavorable position and the Fund would remain obligated to meet margin requirements until the position is closed.
A Fund will only enter into futures contracts or options on futures contracts which are standardized and traded on a U.S. or foreign exchange or board of trade, or similar entity, or quoted on an automated quotation system. A Fund will enter into a futures contract only if the contract is “covered” or if the Fund at all times maintains liquid segregated assets equal to or greater than the fluctuating value of the contract (less any margin or deposit). A Fund will write a call or put option on a futures contract only if the option is “covered.” For a discussion of how to cover a written call or put option, see “Options on Securities and Indexes” above.
68
Table of Contents
A Fund may enter into futures contracts and options on futures contracts for “bona fide hedging” purposes, as defined under the rules of the Commodity Futures Trading Commission (the “CFTC”). A Fund may also enter into futures contracts and options on futures contracts for non hedging purposes provided the aggregate initial margin and premiums required to establish such non-hedging positions will not exceed 5% of the Fund’s net assets.
Each Fund will limit its use of futures contracts and options on futures contracts to hedging transactions and, within such 5% limits, to effect investment transactions consistent with a Fund’s investment objective and strategies. For example, a Fund might use futures contracts to hedge against anticipated changes in interest rates that might adversely affect either the value of the Fund’s securities or the price of the securities which the Fund intends to purchase. Additionally, a Fund may use futures contracts to create equity exposure for its cash reserves for liquidity purposes.
When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with the broker a specified amount of cash or U.S. government securities (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract which is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. Each Fund expects to earn interest income on its initial margin deposits.
A futures contract held by a Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. This process is known as “marking to market.” Variation margin does not represent a borrowing or loan by a Fund, but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, each Fund will mark–to– market its open futures positions.
A Fund is also required to deposit and maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option, and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (same exchange, underlying security or index, and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs must also be included in these calculations.
Limitations On Use Of Futures And Options On Futures Contracts. A Fund will not enter into a futures contract or futures option contract for purposes other than hedging if, immediately thereafter, the aggregate initial margin deposits relating to such positions plus premiums paid by it for open futures option positions, less the amount by which any such options are “in–the–money,” would exceed 5% of the Fund’s total assets. A call option is “in–the–money” if the value of the futures contract that is the subject of the option exceeds the exercise price. A put option is “in–the–money” if the exercise price exceeds the value of the futures contract that is the subject of the option.
When purchasing a futures contract, a Fund will maintain (and mark–to–market on a daily basis) liquid assets that, when added to the amounts deposited with a futures commission merchant as margin, are equal to the market value of the futures contract. Alternatively, the Fund may “cover” its position by purchasing a put option on the same futures contract with a strike price equal to or higher than the price of the contract held by the Fund.
When selling a futures contract, a Fund will maintain (and mark–to–market on a daily basis) liquid assets that, when added to the amount deposited with a futures commission merchant as margin, are equal to the market value of the instruments underlying the contract. Alternatively, the Fund may “cover” its position by owning the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or by holding a call option permitting the Fund to purchase the same futures contract at a price no higher than the price of the contract written by the Fund (or at a higher price if the difference is maintained in segregated liquid assets).
When selling a call option on a futures contract, a Fund will maintain (and mark–to–market on a daily basis) liquid assets that, when added to the amounts deposited with a futures commission merchant as margin, equal the total market value of the futures contract underlying the call option. Alternatively, the Fund may “cover” its position by entering into a long position in the same futures contract at a price no higher than the strike price of the call option, by owning the instruments underlying the futures contract, or by holding a separate call option permitting the Fund to purchase the same futures contract at a price not higher than the strike price of the call option sold by the Fund.
69
Table of Contents
When selling a put option on a futures contract, a Fund will maintain (and mark–to–market on a daily basis) liquid assets that equal the purchase price of the futures contract, less any margin on deposit. Alternatively, the Fund may “cover” the position either by entering into a short position in the same futures contract, or by owning a separate put option permitting it to sell the same futures contract so long as the strike price of the purchased put option is the same or higher than the strike price of the put option sold by the Fund.
The Funds are limited in entering into futures contracts and options on futures contracts to positions which constitute “bona fide hedging” positions within the meaning and intent of applicable CFTC rules and, with respect to positions for non-hedging purposes, to positions for which the aggregate initial margins and premiums will not exceed 5% of the net assets of a Fund.
The requirements for qualification as a regulated investment company also may limit the extent to which a Fund may enter into futures, options on futures contracts or forward contracts. See “Taxes.”
Risks Associated With Futures And Options On Futures Contracts. There are several risks associated with the use of futures and options on futures contracts as hedging techniques. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged. In addition, there are significant differences between the securities and futures markets that could result in an imperfect correlation between the markets, causing a given hedge not to achieve its objectives. The degree of imperfection of correlation depends on circumstances such as variations in speculative market demand for futures and options on futures contracts on securities, including technical influences in futures trading and options on futures contracts, and differences between the financial instruments being hedged and the instruments underlying the standard contracts available for trading in such respects as interest rate levels, maturities and creditworthiness of issuers. An incorrect correlation could result in a loss on both the hedged securities in a Fund and the hedging vehicle so that the portfolio return might have been greater had hedging not been attempted. A decision as to whether, when and how to hedge involves the exercise of skill and judgment, and even a well–conceived hedge may be unsuccessful to some degree because of market behavior or unexpected interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures or a futures option position. Most futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single day; once the daily limit has been reached on a particular contract, no trades may be made that day at a price beyond that limit. In addition, certain of these instruments are relatively new and without a significant trading history. As a result, there is no assurance that an active secondary market will develop or continue to exist. Lack of a liquid market for any reason may prevent a Fund from liquidating an unfavorable position and the Fund would remain obligated to meet margin requirements until the position is closed.
Foreign Currency Futures Contracts. The Funds are also permitted to enter into foreign currency futures contracts in accordance with their investment objectives and as limited by the procedures outlined above.
A foreign currency futures contract is a bilateral agreement pursuant to which one party agrees to make, and the other party agrees to accept delivery of a specified type of debt security or currency at a specified price. Although such futures contacts by their terms call for actual delivery or acceptance of debt securities or currency, in most cases the contracts are closed out before the settlement date without the making or taking of delivery.
The Funds may sell a foreign currency futures contract to hedge against possible variations in the exchange rate of the foreign currency in relation to the U.S. dollar or to effect investment transactions consistent with the Funds’ investment objectives and strategies. When a manager anticipates a significant change in a foreign exchange rate while intending to invest in a foreign security, a Fund may purchase a foreign currency futures contract to hedge against a rise in foreign exchange rates pending completion of the anticipated transaction or as a means to gain portfolio exposure to that currency. Such a purchase would serve
70
Table of Contents
as a temporary measure to protect the Fund against any rise in the foreign exchange rate which may add additional costs to acquiring the foreign security position. The Funds may also purchase call or put options on foreign currency futures contracts to obtain a fixed foreign exchange rate. The Funds may purchase a call option or write a put option on a foreign exchange futures contract to hedge against a decline in the foreign exchange rates or the value of its foreign securities. The Funds may write a call option on a foreign currency futures contract as a partial hedge against the effects of declining foreign exchange rates on the value of foreign securities or as a means to gain portfolio exposure to a currency.
Forward Foreign Currency Exchange Transactions (“Forward Currency Contracts”). The Funds may engage in forward currency contracts to hedge against uncertainty in the level of future exchange rates or to effect investment transactions consistent with the Funds’ investment objectives and strategies. The Funds will conduct their forward foreign currency exchange transactions either on a spot (i.e. cash) basis at the rate prevailing in the currency exchange market, or through entering into forward currency exchange contracts (“forward contract”) to purchase or sell currency at a future date. A forward contract involves an obligation to purchase or sell a specific currency. For example, to exchange a certain amount of U.S. dollars for a certain amount of Japanese Yen––at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward currency contracts are (a) traded in an interbank market conducted directly between currency traders (typically, commercial banks or other financial institutions) and their customers, (b) generally have no deposit requirements and (c) are consummated without payment of any commissions. A Fund may, however, enter into forward currency contracts containing either or both deposit requirements and commissions. In order to assure that a Fund’s forward currency contracts are not used to achieve investment leverage, the Fund will segregate liquid assets in an amount at all times equal to or exceeding the Fund’s commitments with respect to these contracts. The Funds may engage in a forward contract that involves transacting in a currency whose changes in value are considered to be linked (a proxy) to a currency or currencies in which some or all of the Funds’ portfolio securities are or are expected to be denominated. A Fund’s dealings in forward contracts may involve hedging involving either specific transactions or portfolio positions or taking a position in a foreign currency. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of the Funds generally accruing in connection with the purchase or sale of their portfolio securities. Position hedging is the sale of foreign currency with respect to portfolio security positions denominated or quoted in the currency. A Fund may not enter into a forward currency contract to sell a particular currency to an extent greater than the aggregate market value (at the time of making such sale) of the securities held in its portfolio denominated or quoted in or currency convertible into that particular currency (or another currency or aggregate of currencies which act as a proxy for that currency). The Funds may enter into a forward currency contract to purchase a currency other than that held in the Funds’ portfolios. If a Fund enters into a forward currency contract, liquid assets will be segregated in an amount equal to the value of the Fund’s total assets committed to the consummation of the forward contract. If the value of the securities that are segregated declines, additional liquid assets will be segregated so that the value of the segregated liquid assets will equal the amount of the Fund’s commitment with respect to the contract. Forward currency transactions may be made from any foreign currency into U.S. dollars or into other appropriate currencies.
At or before the maturity of a forward foreign currency contract, a Fund may either sell a portfolio security and make delivery of the currency, or retain the security and offset its contractual obligation to deliver the currency by purchasing a second contract pursuant to which the Fund will obtain, on the same maturity date, the same amount of the currency which it is obligated to deliver. If a Fund retains the portfolio security and engages in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward currency contract prices. Should forward prices decline during the period between the Fund’s entering into a forward contract for the sale of a currency and the date that it enters into an offsetting contract for the purchase of the currency, the Fund will realize a gain to the extent that the price of the currency that it has agreed to sell exceeds the price of the currency that it has agreed to purchase. Should forward prices increase, the Fund will suffer a loss to the extent that the price of the currency it has agreed to purchase exceeds the price of the currency that it has agreed to sell. There can be no assurance that new forward currency contracts or offsets will be available to a Fund.
Upon maturity of a forward currency contract, the Funds may (a) pay for and receive, or deliver and be paid for, the underlying currency, (b) negotiate with the dealer to roll over the contract into a new forward currency contract with a new future settlement date or (c) negotiate with the dealer to terminate the forward contract by entering into an offset with the currency trader whereby the parties agree to pay for and receive the difference between the exchange rate fixed in the contract and the then current exchange rate. A Fund also may be able to negotiate such an offset prior to maturity of the original forward contract. There can be no assurance that new forward contracts or offsets will always be available to the Funds.
The cost to a Fund of engaging in currency transactions varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. Because transactions in currency exchange are usually conducted on a principal basis, no fees or commissions are involved. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In addition, although forward foreign currency contracts limit the risk of loss due to a decline in the value of a hedged currency, at the same time, they limit any potential gain that might result should the value of the currency increase.
71
Table of Contents
If a devaluation is generally anticipated, a Fund may be able to contract to sell the currency at a price above the devaluation level that it anticipates. A Fund will not enter into a currency transaction if, as a result, it will fail to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”), for a given year.
Forward foreign currency contracts are not regulated by the SEC. They are traded through financial institutions acting as market–makers. In the forward foreign currency market, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Moreover, a trader of forward contracts could lose amounts substantially in excess of its initial investments, due to the collateral requirements associated with such positions.
The market for forward currency contracts may be limited with respect to certain currencies. These factors will restrict a Fund’s ability to hedge against the risk of devaluation of currencies in which the Fund holds a substantial quantity of securities and are unrelated to the qualitative rating that may be assigned to any particular portfolio security. Where available, the successful use of forward currency contracts draws upon a money manager’s special skills and experience with respect to such instruments and usually depends on the money manager’s ability to forecast interest rate and currency exchange rate movements correctly. Should interest or exchange rates move in an unexpected manner, a Fund may not achieve the anticipated benefits of forward currency contracts or may realize losses and thus be in a worse position than if such strategies had not been used. Unlike many exchange–traded futures contracts and options on futures contracts, there are no daily price fluctuation limits with respect to forward currency contracts, and adverse market movements could therefore continue to an unlimited extent over a period of time. In addition, the correlation between movements in the prices of such instruments and movements in the price of the securities and currencies hedged or used for cover will not be perfect. In the case of proxy hedging, there is also a risk that the perceived linkage between various currencies may not be present or may not be present during the particular time a Fund is engaged in that strategy.
A Fund’s ability to dispose of its positions in forward currency contracts will depend on the availability of active markets in such instruments. It is impossible to predict the amount of trading interest that may exist in various types of forward currency contracts. Forward currency contracts may be closed out only by the parties entering into an offsetting contract. Therefore, no assurance can be given that the Fund will be able to utilize these instruments effectively for the purposes set forth above.
Forward foreign currency transactions are subject to the additional risk of governmental actions affecting trading in or the prices of foreign currencies or securities. The value of such positions also could be adversely affected by (1) other complex foreign, political, legal and economic factors, (2) lesser availability than in the United States of data on which to make trading decisions, (3) delays in a Fund’s ability to act upon economic events occurring in foreign markets during non–business hours in the United States, (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, (5) lesser trading volume and (6) that a perceived linkage between various currencies may not persist throughout the duration of the contracts.
Additional Risks Of Options On Securities, Futures Contracts, Options On Futures Contracts, And Forward Currency Exchange Contract And Options Thereon. Options on securities, futures contracts, options on futures contracts, currencies and options on currencies may be traded on foreign exchanges. Such transactions may not be regulated as effectively as similar transactions in the United States; may not involve a clearing mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the prices of, foreign securities. The value of such positions also could be adversely affected by (1) other complex foreign, political, legal and economic factors, (2) lesser availability than in the United States of data on which to make trading decisions, (3) delays in a Fund’s ability to act upon economic events occurring in foreign markets during non–business hours in the United States, (4) the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States, and (5) lesser trading volume.
Swap Agreements. The Funds may enter into swap agreements, on either an asset-based or liability-based basis, depending on whether they are hedging their assets or their liabilities, and will usually enter into swaps on a net basis, i.e., the two payment streams are netted out, with the Funds receiving or paying, as the case may be, only the net amount of the two payments. When a Fund engages in a swap, it exchanges its obligations to pay or rights to receive payments for the obligations or rights to receive payments of another party (i.e., an exchange of floating rate payments for fixed rate payments).
The Funds may enter into several different types of agreements including interest rate, credit and currency swaps. Interest rate swaps are a counterparty agreement, can be customized to meet each party’s needs, and involve the exchange of a fixed payment per period for a payment that is not fixed. Currency swaps are an agreement where two parties exchange specified amounts of different currencies 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 a 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.
72
Table of Contents
The Funds expect to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of their portfolios or to protect against any increase in the price of securities they anticipate purchasing at a later date. The net amount of the excess, if any, of the Funds’ obligations over their entitlements with respect to each swap will be accrued on a daily basis and an amount of cash or liquid high-grade debt securities having an aggregate net asset value at least equal to the accrued excess will be segregated. To the extent that the Funds enter into swaps on other than a net basis, the amount maintained in a segregated account will be the full amount of the Funds’ obligations, if any, with respect to such interest rate swaps, accrued on a daily basis. The Funds will not enter into any swaps unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in the highest rating category of at least one nationally recognized rating organization at the time of entering into such transaction. If there is a default by the other party to such a transaction, the Funds will have contractual remedies pursuant to the agreement related to the transaction. 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.
The use of interest rate swaps is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If a money manager using this technique is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of a Fund would diminish compared to what it would have been if this investment technique were not used.
A Fund may only enter into interest rate swaps to hedge its portfolio. Interest rate swaps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the Funds are contractually obligated to make. If the other party to an interest rate swap defaults, the Funds’ risk of loss consists of the net amount of interest payments that the Funds are contractually entitled to receive. Since interest rate swaps are individually negotiated, the Funds expect to achieve an acceptable degree of correlation between their rights to receive interest on their portfolio securities and their rights and obligations to receive and pay interest pursuant to interest rate swaps.
Index Swap Agreements. The Funds, other than the Money Market 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 Fund’s investment objective 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).
Under most swap agreements entered into by these Funds, the parties’ obligations are determined on a “net basis.” Consequently, a Fund’s obligations or rights under a swap agreement will generally be equal only to a net amount based on the relative values of the positions held by each party. A Fund’s obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating cash or other liquid assets to avoid any potential leveraging of a Fund’s portfolio. No Fund will enter into a swap agreement with any single party if the net amount owned or to be received ender existing contracts with that party would exceed 5% of that Fund’s assets.
The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting as both principals and agents using standardized swap documentation. As a result, the swap market has become relatively liquid.
A Fund may not receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes bankrupt. The market for swap agreements is largely unregulated. The Funds will only enter into swap agreements with counterparties that would be eligible for consideration as repurchase agreement counterparties under the Funds’ repurchase agreement guidelines.
Forward Commitments. A Fund may contract to purchase securities for a fixed price at a future date beyond customary settlement time (a “forward commitment” or “when–issued” transaction) so long as such transactions are consistent with the Fund’s ability to manage its investment portfolio and meet redemption requests. A Fund may dispose of a forward commitment or when–issued transaction prior to settlement if it is appropriate to do so and realize short–term profits or losses upon such sale. When effecting such transactions, liquid assets 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. Forward commitments and when–issued transactions involve 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.
73
Table of Contents
Additionally, under certain circumstances, the International, International Securities and Emerging Markets Funds may occasionally engage in “free trade” transactions in which delivery of securities sold by the Fund is made prior to the Fund’s receipt of cash payment therefore or the Fund’s payment of cash for portfolio securities occurs prior to the Fund’s receipt of those securities. Cash payment in such instances generally occurs on the next business day in the local market. “Free trade” transactions involve the risk of loss to a Fund if the other party to the “free trade” transaction fails to complete the transaction after a Fund has tendered cash payment or securities, as the case may be.
Tax Information for All Funds
The information discussed in this section applies generally to all of the Funds, but is supplemented or modified in additional separate sections that are provided below for Tax-Exempt Bond Fund, Money Market Fund, U.S. Government Money Market Fund and Tax Free Money Market Fund.
Distributions of Net Investment Income. Each Fund receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation of the Fund, constitutes the Fund’s net investment income from which dividends may be paid to you. If you are a taxable investor, any distributions by the Fund from such income (other than certain qualified dividend income, described below) will be taxable to you as ordinary income, whether you receive them in cash or in additional shares.
If you are an individual investor, a portion of the dividends you receive from certain Funds may be treated as “qualified dividend income” which is taxable to individuals at the same rates that are applicable to long-term capital gains. A Fund distribution is treated as qualified dividend income to the extent that the Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that certain holding period and other requirements are met. Fund distributions generally will not qualify as qualified dividend income to the extent attributable to interest, capital gains, REIT distributions and, in many cases, distributions from non-U.S. corporations.
Distributions of Capital Gain. A Fund may realize a capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions from net long-term capital gain will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Fund. Any net capital gain realized by a Fund generally will be distributed once each year, and may be distributed more frequently, if necessary, to reduce or eliminate excise or income taxes on the Fund.
Effect of Foreign Investments on Distributions. Most foreign exchange gain realized by a Fund on the sale of debt securities is treated as ordinary income. Similarly, foreign exchange loss realized on the sale of debt securities generally is treated as ordinary loss. This gain when distributed will be taxable to you as ordinary income, and any loss will reduce a Fund’s ordinary income otherwise available for distribution to you. This treatment could increase or decrease a Fund’s ordinary income distributions to you, and may cause some or all of the Fund’s previously distributed income to be classified as a return of capital. A return of capital generally is not taxable to you, but reduces the tax basis of your shares in the Fund. Any return of capital in excess of your basis is taxable as a capital gain.
Certain Funds may invest in foreign securities and may be subject to foreign withholding taxes on income from these securities. This, in turn, could reduce ordinary income distributions to you. If more than 50% of such a Fund’s total assets at the end of the fiscal year is invested in foreign securities, the Fund may elect to pass through to you your pro rata share of foreign taxes paid by the Fund. If this election is made, the year-end statement you receive from the Fund will show more taxable income than was actually distributed to you. In that case, you will be entitled either to deduct your share of these taxes in computing your taxable income or to claim a foreign tax credit for these taxes against your U.S. federal income tax (subject to limitations for certain shareholders). The Fund will provide you with the information necessary to complete your personal income tax return if it makes this election.
Information on the Amount and Tax Character of Distributions. Each Fund will inform you of the amount of your ordinary income and capital gain dividends at the time they are paid, and will advise you of its tax status for federal income tax purposes shortly after the end of each calendar year. If you have not held Fund shares for a full year, a Fund may designate and distribute to you, as ordinary income or capital gain, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by a Fund in October, November or December to shareholders of record in such a month but paid in January are taxable to you as if they were paid in December.
74
Table of Contents
Election to be Taxed as a Regulated Investment Company. Each Fund intends to elect or has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”). Each Fund that has been in existence for more than one year has qualified as a regulated investment company for its most recent fiscal year, and intends to continue to qualify during the current fiscal year. As a regulated investment company, a Fund generally pays no federal income tax on the income and gain it distributes to you. The Board of Trustees reserves the right not to maintain the qualification of a Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders. In such a case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gain, and distributions to you would be taxed as ordinary dividend income to the extent of the Fund’s earnings and profits.
Excise Tax Distribution Requirements. To avoid federal excise taxes, the Code requires a Fund to distribute to you by December 31 of each year, at a minimum, the following amounts: 98% of its taxable ordinary income earned during the calendar year; 98% of its capital gain net income earned during the twelve-month period ending October 31; and 100% of any undistributed amounts from the prior year. Each Fund intends to declare and pay these distributions in December (or to pay them in January, in which case you must treat them as received in December) but can give no assurances that its distributions will be sufficient to eliminate all taxes.
Redemption of Fund Shares. Redemptions (including redemptions in kind) and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you redeem your Fund shares, or exchange them for shares of a different RIC Fund, the IRS will require that you report any gain or loss on your redemption or exchange. If you held your shares as a capital asset, the gain or loss that you realize will be capital gain or loss and will be long-term or short-term, generally depending on how long you held your shares.
Redemptions at a Loss Within Six Months of Purchase. Any loss incurred on a redemption or exchange of shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain distributed to you by a Fund on those shares.
Wash Sales. All or a portion of any loss that you realize on a redemption of your Fund shares is disallowed to the extent that you buy other shares in the Fund (through reinvestment of dividends or otherwise) within 30 days before or after your share redemption. Any loss disallowed under these rules is added to your tax basis in the new shares.
U.S. Government Securities. The income earned on certain U.S. government securities is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by a Fund. The income on Fund investments in certain securities, such as repurchase agreements, commercial paper and federal agency-backed obligations (e.g., Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA) securities), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations.
Dividends-Received Deduction for Corporations. If you are a corporate shareholder, a percentage of the dividends paid by certain Funds for the most recent fiscal year may have qualified for the dividends-received deduction. You may be allowed to deduct a portion of these qualified dividends, thereby reducing the tax that you would otherwise be required to pay on these dividends, if certain holding period and other requirements are met. The dividends-received deduction will be available only with respect to dividends designated by a Fund as eligible for such treatment. All dividends (including the deducted portion) must be included in your alternative minimum taxable income calculation. If a Fund’s income is derived primarily from either investments in foreign rather than domestic securities or interest rather than dividends, generally none of its distributions are expected to qualify for the corporate dividends-received deduction.
Investment in Complex Securities. A Fund may invest in complex securities that may be subject to numerous special and complex tax rules. These rules could affect whether gain or loss recognized by the Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to the Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions). These rules could defer the Fund’s ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could, therefore, affect the amount, timing, or character of the income distributed to you by the Fund.
Non-U.S. Investors. Non-U.S. investors may be subject to U.S. withholding and estate taxes, and are subject to special U.S. tax certification requirements. For Fund taxable years beginning after December 31, 2004 and before January 1, 2008, a portion of Fund distributions received by a non-U.S. investor may, however, be exempt from U.S. withholding tax to the extent attributable to U.S. source interest income and capital gains. Also, for that same three-year period, U.S. estate taxes may not apply to that portion of Shares held by a non-U.S. investor that is attributable to Fund assets consisting of certain debt obligations or other property treated as not within the United States for U.S. estate tax purposes. Fund distributions, if any, made during such three year period that are attributable to gains from the sale or exchange of “U.S. real property interests,” which the Code defines to
75
Table of Contents
include direct holdings of U.S. real property and interests (other than solely as a creditor) in “U.S. real property holding corporations,” (including certain non-domestically-controlled REITs), will be taxable to non-U.S. investors and will require such investors to file U.S. income tax returns. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Fund.
Backup Withholding. By law, each Fund must withhold a portion of your taxable distributions and redemption proceeds unless you provide your correct social security or taxpayer identification number, certify that this number is correct, certify that you are not subject to backup withholding, and certify that you are a U.S. person (including a U.S. resident alien). A Fund also must withhold if the IRS instructs it to do so. When withholding is required, the rate will be 28% for calendar years through 2010.
Additional Tax Information With Respect to the Tax-Exempt Bond Fund
The tax information described in “Tax Information for All Funds” above applies to the Tax-Exempt Bond Fund, except as noted in this section.
Exempt-Interest Dividends. By meeting certain requirements of the Code, the Fund qualifies to pay exempt-interest dividends to you. These dividends are derived from interest income exempt from regular federal income tax, and are not subject to regular federal income tax when they are paid to you. In addition, to the extent that exempt-interest dividends are derived from interest on obligations of a state or its political subdivisions, or from interest on qualifying U.S. territorial obligations (including qualifying obligations of Puerto Rico, the U.S. Virgin Islands and Guam), they also may be exempt from that state’s personal income taxes. Most states, however, do not grant tax-free treatment to interest on state and municipal securities of other states.
Dividends from Taxable Income. The Fund may earn taxable income from many sources, including income from temporary investments, discount from stripped obligations or their coupons, income from securities loans or other taxable transactions, and ordinary income from the sale of market discount bonds. Any distributions by the Fund from this income will be taxable to you as ordinary income, whether you receive them in cash or in additional shares. Because the Fund’s income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify as qualified dividend income for individual shareholders.
Information on the Amount and Tax Character of Distributions. The Fund will inform you of the amount of your taxable ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year, including the portion of the distributions that on average are comprised of taxable income or interest income that is a tax preference item when determining your alternative minimum tax. If you have not held Fund shares for a full year, the Fund may designate and distribute to you, as taxable, tax-exempt or tax preference income, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by the Fund in October, November or December to shareholders of record in such a month but paid in January are taxed to you as if made in December.
Redemption at a Loss Within Six Months of Purchase. Any loss incurred on the redemption or exchange of shares held for six months or less will be disallowed to the extent of any exempt-interest dividends paid to you with respect to your Fund shares, and any remaining loss will be treated as a long-term capital loss to the extent of any long-term capital gain distributed to you by the Fund on those shares.
Dividends-Received Deduction for Corporations. Because the Fund’s income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify for the corporate dividends-received deduction.
Alternative Minimum Tax. Interest on certain private activity bonds, while exempt from regular federal income tax, is a preference item for you when determining your alternative minimum tax under the Code and under the income tax provisions of several states. Private activity bond interest could subject you to or increase your liability under the federal and state alternative minimum taxes, depending on your personal or corporate tax position. If you are a person defined in the Code as a substantial user (or person related to a user) of a facility financed by private activity bonds, you should consult with your tax adviser before buying shares of the Fund.
Treatment of Interest on Debt Incurred to Hold Fund Shares. Interest on debt you incur to buy or hold Fund shares may not be deductible for federal income tax purposes.
Loss of Status of Securities as Tax-Exempt. Failure of the issuer of a tax-exempt security to comply with certain legal or contractual requirements relating to the security could cause interest on the security, as well as Fund distributions derived from this interest, to become taxable, perhaps retroactively to the date the security was issued.
76
Table of Contents
Additional Tax Information With Respect to the Money Market Fund, the US Government Money Market Fund and the Tax Free Money Market Fund
The tax information described in “Tax Information for All Funds” above applies to the Money Market Fund, US Government Money Market Fund and Tax Free Money Market Fund except as noted in this section.
Distributions of Net Investment Income. Each Fund typically pays dividends from its daily net income each day that its net asset value is calculated. The Fund’s daily net income includes accrued interest and any original issue or acquisition discount, less the estimated expenses of the Fund. Any distributions by the Fund from such income will be taxable to you as ordinary income, whether you receive them in cash or in additional shares. Because the Fund’s income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify as qualified dividend income for individual shareholders.
Exempt-Interest Dividends (Only Applies to Tax Free Money Market Fund). By meeting certain requirements of the Code, the Tax Free Money Market Fund (but not the US Government Money Market Fund nor the Money Market Fund) has qualified and continues to qualify to pay exempt-interest dividends to you. These dividends are derived from interest income exempt from regular federal income tax, and are not subject to regular federal income tax when they are distributed to you. In addition, to the extent that exempt-interest dividends are derived from interest on obligations of a state or its political subdivisions, or from interest on qualifying U.S. territorial obligations (including qualifying obligations of Puerto Rico, the U.S. Virgin Islands or Guam), they also may be exempt from that state’s personal income taxes. Most states generally do not grant tax-free treatment to interest on state and municipal securities of other states.
Dividends from Taxable Income (Only Applies to Tax Free Money Market Fund). The Tax Free Money Fund may earn taxable income from many sources, including on any temporary investments, the discount from stripped obligations or their coupons, income from securities loans or other taxable transactions, or ordinary income derived from the sale of market discount bonds. Any distributions by the Tax Free Money Market Fund from such income will be taxable to you as ordinary income, whether you receive them in cash or in additional shares. Because the Fund’s income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify as qualified dividend income for individual shareholders.
Distributions of Capital Gain. A Fund may derive capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Because each Fund is a money market fund, it does not expect to realize any long-term capital gain.
Maintaining a $1 Share Price. Gain and loss on the sale of portfolio securities and unrealized appreciation or depreciation in the value of these securities may require the money market funds to adjust distributions to maintain its $1 share price. These procedures may result in under- or over-distributions by the Fund of its net investment income.
Information on the Amount and Tax Character of Distributions. The Fund will inform you of the amount of your taxable ordinary income (including qualified dividend income) and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year (including, for the Tax Free Money Market Fund, the portion of the distributions that on average are comprised of taxable income or interest income that is a tax preference item when determining your alternative minimum tax). If you have not held Fund shares for a full year, the Fund may designate and distribute to you, as taxable income (or tax-exempt or tax preference income for shareholders of the Tax Free Money Market Fund), a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by the Fund in December but paid in January are taxed to you as if made in December.
Redemption of Fund Shares. Redemptions (including redemptions in kind) and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. Because each Fund tries to maintain a stable $1 share price, however, you should not expect to realize any capital gain or loss on the sale or exchange of your shares. For tax purposes, an exchange of your Fund shares for shares of a different RIC Fund is the same as a sale.
Dividends-Received Deduction for Corporations. Because the Funds’ income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify for the corporate dividends-received deduction.
Alternative Minimum Tax (Only Applies to Tax Free Money Market Fund). Interest on certain private activity bonds, while exempt from regular federal income tax, is a preference item for you when determining your alternative minimum tax under the Code and under the income tax provisions of several states. Private activity bond interest could subject you to or increase your liability under the federal and state alternative minimum taxes, depending on your personal or corporate tax position. If you are a person defined in the Code as a substantial user (or person related to a user) of a facility financed by private activity bonds, you should consult with your tax adviser before buying shares of the Fund.
77
Table of Contents
At October 31, 2006, the following Funds had net tax basis capital loss carryforwards which may be applied against any realized net taxable gains of each succeeding year until their respective expiration dates, whichever occurs first. Available capital loss carryforwards and expiration dates are as follows:
Fund | 10/31/07 | 10/31/08 | 10/31/09 | 10/31/10 | 10/31/11 | 10/31/12 | 10/31/13 | 10/31/14 | TOTAL | |||||||||
Tax–Managed Large Cap | — | — | 18,201,536 | 59,069,223 | — | — | — | — | 77,270,759 | |||||||||
Fixed Income I | — | — | — | — | — | — | 3,855,225 | 14,386,926 | 18,242,151 | |||||||||
Fixed Income III | — | — | — | — | — | — | — | 5,108,237 | 5,108,237 | |||||||||
Money Market | — | 90,626 | 35,378 | — | 43,223 | — | 3,147 | 11,753 | 184,127 | |||||||||
Diversified Bond | — | — | — | — | — | — | 4,923,732 | 16,820,169 | 21,743,901 | |||||||||
Short Duration Bond | — | — | — | — | — | — | 10,268,501 | 7,439,440 | 17,707,941 | |||||||||
Multistrategy Bond | — | — | — | — | — | — | — | 14,540,672 | 14,540,672 | |||||||||
Tax Exempt Bond | — | 682,095 | — | — | — | 357,343 | — | 634,298 | 1,673,736 | |||||||||
Select Growth | — | — | — | 9,306,293 | 263,497 | — | — | — | 9,569,790 | |||||||||
Select Value* | 3,596,153 | 451,724 | 2,362,680 | 362,611 | — | — | — | — | 6,773,168 |
* | Select Value Fund had a capital loss carryforward of $6,773,168 that it acquired from the Equity Income Fund and Equity III Fund of which $3,596,153, $451,724, $2,362,680 and $362,611 will expire on October 31 of the years 2007, 2008, 2009 and 2010, respectively. This capital loss carryforward can be utilized at a pace of up to $5,101,116 each year with any unused capital loss annual limitation carried over to each succeeding year or until its respective expiration dates, whichever occurs first. |
78
Table of Contents
DIVERSIFIED EQUITY FUND
AllianceBernstein L.P., is a limited partnership the majority ownership interests in which are held by its affiliates. AllianceBernstein Corporation, an indirect wholly-owned subsidiary of AXA Financial, Inc., a publicly traded financial services organization, is the general partner of both AllianceBernstein L.P. and AllianceBernstein Holding L.P. On a combined basis as of June 30, 2002, AXA Financial, Inc. has a 53% economic interest in AllianceBernstein’s business. The remaining economic interest is held by unaffiliated unit holders (32%) and employees (15%).
Columbus Circle Investors is 70% owned by Principal Global Investors, LLC. Principal Global Investors, LLC is 100% owned by Principal Life Insurance Company, which is 100% owned by Principal Financial Services, Inc., which in turn is 100% owned by Principal Financial Group, a publicly traded company.
Institutional Capital LLC is a wholly-owned subsidiary of New York Life Investment Management Holdings LLC, which is a wholly-owned subsidiary of New York Life Insurance Company, which, in turn, is wholly-owned by the policyholders of New York Life Insurance Company.
Marsico Capital Management, LLC is a wholly-owned indirect subsidiary of Bank of America Corporation, a publicly traded corporation.
MFS Institutional Advisors, Inc. is a subsidiary of Massachusetts Financial Services Company and is an indirect wholly owned subsidiary of Sun Life Assurance Company of Canada, which is owned by Sun Life Financial Services of Canada, Inc., a publicly traded company.
Montag & Caldwell, Inc. is an indirect wholly-owned subsidiary of ABN AMRO Holdings N.V., a publicly traded company. Other entities in the corporate chain of control of which Montag & Caldwell, Inc. is a direct or indirect wholly-owned subsidiary include ABN AMRO Bank N.V., ABN AMRO Asset Management Holding NV and ABN AMRO Asset Management Holdings, Inc.
Schneider Capital Management Corporation is controlled by its majority shareholder, Arnold C. Schneider, III.
Suffolk Capital Management, LLC, is a wholly–owned subsidiary of Ohio National Financial Services, Inc. Ohio National Financial Services, Inc. is wholly–owned by Ohio National Mutual Holdings, Inc. which, in turn, is wholly–owned by the policyholders of The Ohio National Life Insurance Company.
Turner Investment Partners, Inc. is a corporation controlled by Robert E. Turner.
QUANTITATIVE EQUITY FUND
Aronson+Johnson+Ortiz, LP is a limited partnership controlled by Theodore R. Aronson.
Franklin Portfolio Associates LLC is a Massachusetts limited liability company owned by Mellon Financial Corporation.
Goldman Sachs Asset Management, L.P. is a wholly-owned direct and indirect subsidiary of the Goldman Sachs Group, Inc., a publicly traded company.
Jacobs Levy Equity Management, Inc. is owned by Bruce Jacobs and Kenneth Levy.
TAX–MANAGED LARGE CAP FUND
Armstrong Shaw Associates Inc., is employee-owned and is controlled by Jeffrey Shaw.
J.P. Morgan Investment Management Inc. is a wholly owned subsidiary of J.P. Morgan Chase & Co., a publicly held bank holding company.
Palisades Investment Partners, LLC is controlled by its majority shareholder, Quinn Stills.
Sands Capital Management, Inc. is controlled 70% by Frank M. Sands, Sr. and Marjorie Sands and 30% by Frank M. Sands, Jr.
Turner Investment Partners Inc. See: Diversified Equity Fund
79
Table of Contents
SPECIAL GROWTH FUND
Berkeley Capital Management LLC is a U.S. limited liability company which is indirectly controlled by Jennings Newcom, Jeffrey D. Lovell and James E. Minnick through their ownership of 25% or more of the voting shares of various limited liability companies and partnerships within the corporate structure of Berkeley.
ClariVest Asset Management, LLC is a U.S. limited liability company which is indirectly controlled by Stacey Nutt, Jeffrey D. Lovell and James E. Minnick through their ownership of 25% or more of the voting shares of various limited liability companies and partnerships within the corporate structure of ClariVest.
David J. Greene and Company, LLC, is a limited liability company controlled by Michael C. Greene and Alan I. Greene.
Delphi Management, Inc. is 100% owned by Scott Black.
Gould Investment Partners LLC is a limited liability company controlled by Richard H. Gould.
Jacobs Levy Equity Management, Inc. See: Quantitative Equity Fund.
PanAgora Asset Management, Inc., is independently operated and owned by Putnam Investments (“Putnam”) and Nippon Life Insurance (“NLI”). Putnam, the majority owner, owns 80% of voting shares and NLI owns the remaining 20% of voting shares.
Tygh Capital Management, Inc. is an employee-owned corporation controlled by its majority shareholders Richard J. Johnson and Jeff B. Curtis.
TAX–MANAGED MID & SMALL CAP FUND
Chartwell Investment Partners is controlled primarily by its employees with no one individual controlling more than 10%.
Netols Asset Management, Inc. is controlled by its majority shareholder, Jeffrey Netols.
Parametric Portfolio Associates LLC is 80% controlled by Eaton Vance Acquisition Business Trust which is an indirect, wholly-owned subsidiary of Eaton Vance Inc., a publicly traded company.
Transamerica Investment Management, LLC is owned by Transamerica Investment Services, Inc. and indirectly owned by Transamerica Corporation, which is wholly-owned by AEGON, N.V. AEGON, N.V. is a publicly traded company.
Turner Investment Partners, Inc. See: Diversified Equity Fund.
SELECT GROWTH FUND
Ark Asset Management Co., Inc. is a wholly-owned subsidiary of Ark Asset Holdings, Inc., which is controlled by Coleman Brandt.
Berkeley Capital Management LLC See: Special Growth Fund.
Delaware Management Company, a series of Delaware Management Business Trust, is an indirect subsidiary of Lincoln National Corporation, a publicly traded company. Other entities in the corporate chain of control of which Delaware Management Company is a direct or indirect subsidiary include: Delaware Management Company, Inc., Delaware Investments U.S., Inc., DMH Corp. Delaware Management Holdings, Inc., Lincoln National Investment Companies, Inc. and Lincoln National Investments, Inc.
Fuller & Thaler Asset Management, Inc. is controlled by Russell J. Fuller.
Sustainable Growth Advisers, LP is a limited partnership with no one individual controlling more than 25%.
Turner Investment Partners, Inc. See: Diversified Equity Fund.
80
Table of Contents
SELECT VALUE FUND
DePrince, Race & Zollo, Inc. is controlled by the following: Gregory M. DePrince, John D. Race and Victor A. Zollo, each owning 30% of the firm.
Iridian Asset Management LLC (“Iridian”) is majority owned by BIAM (US) Inc., an indirect subsidiary of The Governor and Company of the Bank of Ireland, a publicly traded company.
JS Asset Management, LLC is a U.S. Limited Liability Company owned by John Schneider.
Systematic Financial Management, L.P. is owned 55% by Affiliated Managers Group, Inc., which is a publicly traded corporation. The remaining 45% is employee owned.
REAL ESTATE SECURITIES FUND
AEW Management and Advisors, L.P. is a limited partnership that is a wholly–owned subsidiary of AEW Capital Management, L.P., which in turn is a wholly–owned subsidiary of CDC IXIS Asset Management North America, L.P. (“CDCAM NA”). CDCAM NA is a wholly–owned subsidiary of CDC IXIS Asset Management, a French company (“CDCAM”). CDCAM is majority–owned by Eulia and indirectly owned, through Eulia by Caisse Nationale des Caisses D’Epargne and CNP Assurances, in a joint venture with Caisse des Depots et Consignations (“CDC”). CDC is wholly–owned by the French Government.
Heitman Real Estate Securities, LLC is 50% owned by its employees, with no one individual employee beneficially owning 25% or greater, and 50% owned by Old Mutual plc, a publicly traded company.
INVESCO Institutional (N.A.), Inc. which acts as a money manager to the Fund through its INVESCO Real Estate division (“INVESCO”) is an indirect, wholly-owned subsidiary of AMVESCAP, PLC, a publicly traded corporation. Other entities in the corporate chain of control of which INVESCO is a direct or indirect wholly-owned subsidiary include AVZ, Inc., AMVESCAP Group Services, Inc. and INVESCO North American Holdings, Inc.
RREEF America L.L.C. is an indirect wholly-owned subsidiary of Deutsche Bank, A.G., a publicly traded company. Other entities in the corporate chain of control of which RREEF America L.L.C. is a direct or indirect wholly-owned subsidiary include Deutsche Bank Americas Holding Corp. and Taunus Corporation.
GLOBAL EQUITY FUND
Altrinsic Global Advisors, LLC is an employee owned U.S. limited liability company and is controlled by John Hock.
ClariVest Asset Management, LLC. See: Special Growth Fund.
T. Rowe Price International, Inc. (“T. Rowe Price”) is an indirect subsidiary of T. Rowe Price Group, Inc., a publicly traded financial services holding company. Other entities in the corporate chain of control of which T. Rowe Price is a wholly-owned subsidiary include T. Rowe Price Finance, Inc. and T. Rowe Price Associates.
INTERNATIONAL SECURITIES FUND
AllianceBernstein L.P. See: Diversified Equity Fund.
AQR Capital Management, LLC is majority owned and controlled by its principals Clifford S. Asness, Ph.D., John M. Liew, Ph.D., David Kabiller, CFA, Robert Krail, Brian K. Hurst, Jacques A. Friedman and Oktay Kurbanov.
Axiom International Investors LLC (“Axiom”) is 100% employee owned. Axiom’s controlling shareholder is Andrew Jacobson.
The Boston Company Asset Management, LLC is a wholly owned, indirect subsidiary of Mellon Financial Corporation, a publicly held corporation.
Marsico Capital Management, LLC. See: Diversified Equity Fund
81
Table of Contents
MFS Institutional Advisors, Inc. See: Diversified Equity Fund
Mondrian Investment Partners Limited is controlled by senior members of management.
Nicholas-Applegate Capital Management LLC is a limited liability company and is an indirect wholly owned subsidiary of Allianz SE.
Wellington Management Company, LLP is a limited liability partnership with no one individual controlling more than 25%.
EMERGING MARKETS FUND
AllianceBernstein L.P. See: Diversified Equity Fund.
Arrowstreet Capital, Limited Partnership is controlled primarily by its employees with no one individual controlling more than 25%.
Genesis Asset Managers, LLP is 99.9% owned by Genesis Fund Managers, LLP. Genesis Fund Managers, LLP is 60% owned, through subsidiary holding companies, by Affiliated Managers Group, Inc., a publicly traded corporation. A group of Genesis’ managers owns the remaining 40% of Genesis Fund Managers, LLP with no individual manager beneficially owning greater than 10%.
Harding, Loevner Management, L.P., (“Harding Loevner”) is a limited partnership, and its sole general partner is HLM Holdings, Inc. (“Holdings”). Holdings owns substantially all of Harding Loevner. Holdings is 100% employee owned. Harding Loevner is controlled by David Loevner through his ownership stake in Holdings.
T. Rowe Price International, Inc. See: Global Equity Fund.
DIVERSIFIED BOND FUND
Bear Stearns Asset Management Inc. is a publicly traded company.
Lehman Brothers Asset Management LLC is a wholly-owned subsidiary of Lehman Brothers Holdings Inc., a publicly traded company.
Pacific Investment Management Company LLC (“PIMCO”) is a Delaware limited liability company, and is a majority-owned subsidiary of Allianz Global Investors of America L.P., (“AGI LP”). Allianz SE (“Allianz SE”) is the indirect majority owner of AGI LP. Allianz SE is a European-based, multinational insurance and financial services holding company.
Western Asset Management Company is a wholly-owned subsidiary of Legg Mason, Inc., a publicly traded corporation.
Western Asset Management Company Limited is a wholly-owned subsidiary of Legg Mason, Inc., a publicly traded corporation.
MULTISTRATEGY BOND FUND
Bear Stearns Asset Management Inc. See: Diversified Bond Fund.
Delaware Management Company. See: Select Growth Fund.
Goldman Sachs Asset Management, L.P. is a wholly-owned direct and indirect subsidiary of the Goldman Sachs Group, Inc., a publicly traded company.
Morgan Stanley Investment Management Inc. is a wholly-owned, direct subsidiary of Morgan Stanley, a publicly traded company.
Pacific Investment Management Company LLC. See: Diversified Bond Fund.
82
Table of Contents
SHORT DURATION BOND FUND
Merganser Capital Management L.P. (“Merganser”) is controlled by Merganser Capital Management Corporation, its majority shareholder. Merganser Capital Management Corporation is wholly–owned and controlled by Ed Bedrosian and his family.
Pacific Investment Management Company LLC. See: Diversified Bond Fund.
STW Fixed Income Management Ltd., a Bermuda company, is wholly owned by William H. Williams.
TAX EXEMPT BOND FUND
Delaware Management Company. See: Select Growth Fund.
Standish Mellon Asset Management Company LLC is a wholly-owned subsidiary of Mellon Financial Corporation, a publicly traded organization.
EQUITY I FUND
AllianceBernstein L.P. See: Diversified Equity Fund.
Columbus Circle Investors. See: Diversified Equity Fund.
Institutional Capital Corporation. See: Diversified Equity Fund.
Marsico Capital Management Company, LLC. See: Diversified Equity Fund
MFS Institutional Advisors, Inc. See: Diversified Equity Fund.
Montag & Caldwell, Inc. See: Diversified Equity Fund.
Schneider Capital Management Corporation. See: Diversified Equity Fund.
Suffolk Capital Management, LLC. See: Diversified Equity Fund.
Turner Investment Partners Inc. See: Diversified Equity Fund.
EQUITY Q FUND
Aronson+Johnson+Ortiz, LP. See: Quantitative Equity Fund.
Franklin Portfolio Associates LLC. See: Quantitative Equity Fund.
Goldman Sachs Asset Management, L.P. See: Quantitative Equity Fund.
Jacobs Levy Equity Management, Inc. See: Quantitative Equity Fund.
EQUITY II FUND
Berkeley Capital Management LLC. See: Special Growth Fund.
ClariVest Asset Management, LLC. See: Special Growth Fund.
David J. Greene and Company, LLC. See: Special Growth Fund.
Delphi Management, Inc. See: Special Growth Fund.
Gould Investment Partners LLC. See: Special Growth Fund.
Jacobs Levy Equity Management Inc. See: Quantitative Equity Fund.
PanAgora Asset Management, Inc. See: Special Growth Fund.
Tygh Capital Management, Inc. See: Special Growth Fund.
83
Table of Contents
INTERNATIONAL FUND
AllianceBernstein L.P. See: Diversified Equity Fund.
AQR Capital Management, LLC. See: International Securities Fund.
Axiom International Investors LLC. See: International Securities Fund.
The Boston Company Asset Management, LLC. See: International Securities Fund.
Marsico Capital Management, LLC. See: International Securities Fund.
MFS Institutional Advisors, Inc. See: International Securities Fund.
Mondrian Investment Partners Limited. See: International Securities Fund.
Nicholas-Applegate Capital Management. See: International Securities Fund.
Wellington Management Company, LLP. See: International Securities Fund.
FIXED INCOME I FUND
Bear Stearns Asset Management Inc. See: Diversified Bond Fund.
Lehman Brothers Asset Management LLC. See: Diversified Bond Fund.
Pacific Investment Management Company LLC. See: Diversified Bond Fund.
Western Asset Management Company. See: Diversified Bond Fund.
Western Asset Management Company Limited. See: Diversified Bond Fund
FIXED INCOME III FUND
Bear Stearns Asset Management Inc. See: Diversified Bond Fund.
Delaware Management Company, a series of Delaware Management Business Trust. See: Multistrategy Bond Fund.
Goldman Sachs Asset Management, L.P. See: Multistrategy Bond Fund
Morgan Stanley Investment Management Inc. See: Multistrategy Bond Fund.
Pacific Investment Management Company LLC. See: Diversified Bond Fund.
MONEY MARKET FUND
Russell Investment Management Company is wholly–owned by Frank Russell Company, a subsidiary of The Northwestern Mutual Life Insurance Company.
US GOVERNMENT MONEY MARKET FUND
Russell Investment Management Company. See: Money Market Fund.
TAX FREE MONEY MARKET FUND
Neuberger Berman, LLC is a wholly owned, indirect subsidiary of Lehman Brothers Holdings, Inc.
84
Table of Contents
CORPORATE AND MUNICIPAL BOND RATINGS.
MOODY’S INVESTORS SERVICE, INC. (MOODY’S):
Aaa –– Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa — Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long–term risks appear somewhat larger than in Aaa securities.
A –– Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa –– Bonds which are rated Baa are considered as medium–grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great period of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba — Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during other good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B –– Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small.
Caa –– Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal and interest.
Ca — Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C –– Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody’s applies numerical modifiers, 1, 2 and 3 in each generic rating classification in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic category; the modifier 2 indicates a mid–range ranking; and modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
STANDARD & POOR’S RATINGS GROUP (“S&P”):
AAA –– This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay principal and interest.
AA –– Bonds rated AA also qualify as high–quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from AAA issues only in small degree.
A –– Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions.
85
Table of Contents
BBB- –– Bonds rated BBB are regarded as having an adequate capacity to pay interest and repay principal. While bonds with this rating normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than debt in higher rated categories.
BB, B, CCC, CC, C –– Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major risk exposures to adverse conditions.
BB –– Bonds rated BB have less near–term vulnerability to nonpayment than other speculative issues. However, they face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B –– Bonds rated B have a greater vulnerability to nonpayment than obligations rated ‘BB’ but currently have the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal.
CCC –– A bond rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC –– An obligation rated CC is currently highly vulnerable to nonpayment.
C –– The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued.
D –– Bonds rated D are in payment default. The D rating is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized.
Plus (+) or Minus (–): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
The (r) symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Examples include: obligations linked or indexed to equities, currencies, or commodities; obligations exposed to severe prepayment risk – such as interest-only or principal-only mortgage securities; and obligations with unusually risky interest terms, such as inverse floaters.
STATE, MUNICIPAL NOTES AND TAX EXEMPT DEMAND NOTES.
MOODY’S:
Moody’s rating for state, municipal and other short–term obligations will be designated Moody’s Investment Grade (“MIG”). This distinction is in recognition of the differences between short–term credit risk and long–term risk. Factors affecting the liquidity of the borrower are uppermost in importance in short–term borrowing, while various factors of the first importance in bond risk are of lesser importance in the short run.
Symbols used are as follows:
MIG–1/VMIG 1 –– This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad based access to the market for refinancing.
MIG–2/VMIG 2 –– This designation denotes best quality. Margins of protection are ample although not so large as in the preceding group.
86
Table of Contents
MIG–3/VMIG 3 — This designation denotes favorable quality. All security elements are accounted or but there is a lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG — This designation denotes speculative quality. Debt instruments in this category lack margins of protection.
S&P:
A S&P note rating, reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long–term debt rating. The following criteria will be used in making that assessment:
— Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note).
— Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP–1 — Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation.
SP–2 — Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP–3 — Speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS.
Moody’s:
Prime – 1 — Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics:
• | Leading market positions in will-established industries. |
• | High rates of return on funds employed. |
• | Conservative capitalization structure with moderate reliance on debt and ample asset protection. |
• | Broad margins in earnings coverage of fixed financial charges and high internal cash generation. |
• | Well-established access to a range of financial markets and assured sources of alternate liquidity. |
Prime – 2 — Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, wile sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Prime – 3 — Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
WR – Withdrawn
87
Table of Contents
S&P:
A–1 – An obligor rated “A–1” has STRONG capacity to meet its financial commitments. It is rated in the highest category by Standard & Poor’s. Within this category, certain obligors are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitments is EXTREMELY STRONG.
A–2 – An obligor rated “A–2” has SATISFACTORY capacity to meet its financial commitments. However, it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category.
A–3 – An obligor rated “A–3” has ADEQUATE capacity to meet its financial obligations. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.
B – An obligor rated “B” is regarded as VULNERABLE and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitments.
C – An obligor rated “C” is CURRENTLY VULNERABLE to nonpayment and is dependent upon favorable business, financial, and economic conditions for it to meet its financial commitments on the obligation.
D – An obligor rated “D” is in payment default. The “D” rating is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
N.R. – An issuer designated N.R. is not rated.
Fitch Investors Service, Inc.:
Short Term Credit Ratings
F1 – Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2 – Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.
F3 – Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near–term adverse changes could result in a reduction to non–investment grade.
B – Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near–term adverse changes in financial and economic conditions.
C – High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D – Default. Denotes actual or imminent payment default.
Notes to Short–Term Ratings:
“+” or “–” may be appended to a rating to denote relative status within major rating categories. Such suffices are not added to Shot–term ratings other than “F–1.”
Long Term Credit Ratings
Investment Grade
AAA
Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
88
Table of Contents
AA
Very high credit quality. ‘AA’ ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A
High credit quality. ‘A’ ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.
BBB
Good credit quality. ‘BBB’ ratings indicate that there is currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.
Speculative Grade
BB
Speculative. ‘BB’ ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.
B
Highly speculative. For issuers and performing obligations, ‘B’ ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. For individual obligations, may indicate distressed or defaulted obligations with potential for extremely high recoveries. Such obligations would possess a Recovery Rating of ‘R1’ (outstanding).
CCC
For issuers and performing obligations, default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions. For individual obligations, may indicate distressed or defaulted obligations with potential for average to superior levels of recovery. Differences in credit quality may be denoted by plus/minus distinctions. Such obligations typically would possess a Recovery Rating of ‘R2’ (superior), or ‘R3’ (good) or ‘R4’ (average).
CC
For issuers and performing obligations, default of some kind appears probable. For individual obligations, may indicate distressed or defaulted obligations with a Recovery Rating of ‘R4’ (average) or ‘R5’ (below average).
C
For issuers and performing obligations, default is imminent. For individual obligations, may indicate distressed or defaulted obligations with potential for below-average to poor recoveries. Such obligations would possess a Recovery Rating of ‘R6’ (poor).
RD
Indicates an entity that has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations. .
D
Indicates an entity or sovereign that has defaulted on all of its financial obligations. Default generally is defined as one of the following:
- failure of an obligor to make timely payment of principal and/or interest under the contractual terms of any financial obligation; - the bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of business of an obligor; or - the distressed or other coercive exchange of an obligation, where creditors were offered securities with diminished structural or economic terms compared with the existing obligation.
89
Table of Contents
Default ratings are not assigned prospectively; within this context, non-payment on an instrument that contains a deferral feature or grace period will not be considered a default until after the expiration of the deferral or grace period.
Issuers will be rated ‘D’ upon a default. Defaulted and distressed obligations typically are rated along the continuum of ‘C’ to ‘B’ ratings categories, depending upon their recovery prospects and other relevant characteristics. Additionally, in structured finance transactions, where analysis indicates that an instrument is irrevocably impaired such that it is not expected to meet pay interest and/or principal in full in accordance with the terms of the obligation’s documentation during the life of the transaction, but where no payment default in accordance with the terms of the documentation is imminent, the obligation may be rated in the ‘B’ or ‘CCC-C’ categories.
Default is determined by reference to the terms of the obligations’ documentation. Fitch will assign default ratings where it has reasonably determined that payment has not been made on a material obligation in accordance with the requirements of the obligation’s documentation, or where it believes that default ratings consistent with Fitch’s published definition of default are the most appropriate ratings to assign.
Notes to Long-Term ratings:
The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-term rating category, to categories below ‘CCC’. (The +/- modifiers are only used to denote issues within the CCC category, whereas issuers are only rated CCC without the use of modifiers.)
90
Table of Contents
The 2006 annual financial statements of the Global Equity Fund are not yet available because it is a new fund. The 2006 annual financial statements of the other Funds, including notes to the financial statements and financial highlights and the Report of Independent Registered Public Accounting Firm, are included in RIC’s Annual Reports to Shareholders. Copies of these Annual Reports accompany this Statement and are incorporated herein by reference.
91
Table of Contents
Russell Investment Company
Russell Investment Company is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on fourteen of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
Table of Contents
Russell Funds
Annual Report
October 31, 2006
Table of Contents
Page | ||
4 | ||
5 | ||
10 | ||
23 | ||
45 | ||
64 | ||
94 | ||
112 | ||
122 | ||
149 | ||
195 | ||
256 | ||
269 | ||
281 | ||
295 | ||
307 | ||
318 | ||
320 | ||
325 | ||
329 | ||
331 | ||
339 | ||
362 | ||
363 | ||
364 | ||
367 | ||
368 | ||
Manager, Money Managers and Service Providers |
2
Table of Contents
Russell Investment Company - Russell Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Fund Distributors, Inc. member NASD, part of Russell Investment Group.
Effective July 1, 2006 Frank Russell Investment Company changed its name to Russell Investment Company (“RIC”). RIC Funds are distributed by Russell Fund Distributors, Inc., and advised by Russell Investment Management Company (“RIMCo”). Effective July 1, 2006 RIMCo changed its name from Frank Russell Investment Management Company.
Russell Investment Group and Standard & Poor’s Corporation are the owners of the trademarks, service marks, and copyrights related to their respective indexes. Index performance is not indicative of the performance of any specific investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current to the most recent month-end performance data may be obtained by visiting www.russell.com/us/fundperformance.
3
Table of Contents
As you read Russell Investment Company’s 2006 Annual Report, we would like to take this opportunity to review our investment approach, which is designed to help long-term investors build financial security and save for retirement.
Our process is complex, but our goal is simple. We evaluate and select money managers in each asset class and within each investment style. Then we build diversified mutual funds aimed at providing long-term, consistent results.
Russell guides investments for some of the world’s largest investors—and we provide that same manager research to our mutual funds, which are available to individual investors.
Thank you for your continued support and for choosing Russell, GLOBAL LEADERS IN MULTI-MANAGER INVESTING.
Regards, |
(/s/ GREG STARK) |
Greg Stark |
Chief Executive Officer, Chairman and President. |
4
Table of Contents
Market Summary as of October 31, 2006 (Unaudited)
U.S. Equity Markets
For the fiscal year ending October 31, 2006, investors were preoccupied by The Federal Reserve Board’s actions and commentary. In the first half of the year, when both economic growth and inflation were running above the Fed’s comfort levels, the U.S. stock market was led by highly cyclical stocks, especially those tied to the strong performing commodities market. The stock market rewarded companies that were generating strong earnings growth in an economy that was growing at unsustainable levels.
However, the cumulative effects of rising energy prices and interest rates, and a notable slowdown in housing activity eventually resulted in the moderation in economic activity that the Fed had been seeking. By late spring and early summer 2006, investors were now asking whether the Fed had engineered a hard landing for the economy and whether a housing-led recession was unavoidable. This marked change in investor sentiment was reflected in a significant leadership reversal with lower risk, recession resistant stocks gaining favor. Now, the market favored stocks with the highest dividend yields as companies with above-average earnings growth prospects lost favor. Interestingly, however, overall market indexes showed impressive gains during the fiscal year, as the market responded to both sensational corporate earnings and evidence that the Fed’s tightening cycle had ended. For the fiscal year ending October 31, 2006, the Russell 3000(R) Index returned 16.37%.
Despite the backdrop of strong corporate earnings (that have grown at double digit rates for the last three years), overall market leadership in this period was highly defensive. Stocks with high dividend yields substantially outperformed lower yielding stocks. Companies with well above-average growth rates lagged, in favor of slower growing firms. This investor preference for yield over growth was reflected in style leadership for the fiscal year, as the Russell 1000 Value(R) Index (+21.45%) outperformed the Russell 1000 Growth(R) Index (+10.86%). This extended the multi-year outperformance of value stocks and resulted in a further compression of valuations among companies (i.e., the dispersion of P/E multiples within the stock market).
Some of the value leadership is attributable to the market’s preference for yield and interest rate sensitivity as investors digested the Fed’s interest rate pause. Among the best sector performers were utilities (+26.77%) and financial services (+19.77%). Meanwhile, REITs returned an extraordinary 36.37%. In contrast, traditional growth sector returns within the Russell 1000(R) Index such as technology (+11.68%), health care (+10.34%), and consumer discretionary (+13.68%), while delivering positive absolute returns, lagged the Russell 1000(R) Index.
Market leadership continued to favor smaller and medium sized companies, although the spread narrowed as investors grew more defensive. The Russell 1000(R) Index (an index of large and medium capitalization companies) returned 16.02% versus 19.96% for the Russell 2000(R) Index (an index of small capitalization companies).
The fiscal year was extremely challenging for active money managers across the style spectrum. The Lipper Large-Cap Core Funds Average trailed the Russell 1000(R) Index by 1.81%, the Lipper Large Cap Value Funds Average lagged the Russell 1000(R) Value Index by 3.72%, the Lipper Large Cap Growth Funds Average underperformed the Russell 1000(R) Growth Index by 3.44%, and the Lipper Small-Cap Core Funds Average trailed the Russell 2000(R) by 3.56%. Even though the Lipper returns are net of fees, the actively managed mutual funds still trailed the indexes by a large margin.
The main contributors to the difficult active management environment were the significant out-performance of higher yielding stocks that many value investors considered overvalued and the poor returns of the faster growing companies within the growth arena. With the narrow valuation spreads among companies of differing growth rates, active money managers were positioned toward “growthier” companies within their benchmarks. The market did not reward this positioning during this period.
U.S. Real Estate Markets
During the past fiscal year, the public real estate investment trust (REIT) market again exhibited strong performance. REITs, as measured by the FTSE-NAREIT US Equity REIT Index (NAREIT Equity Index), posted a 36.37% total return for the fiscal year ending October 31, 2006. Several factors helped boost REIT performance including robust demand for real estate by private institutional investors, a wave of REIT privatizations and an overall equity market that continued to reward higher yielding stocks.
5
Table of Contents
Apartment, office and industrial were the best performing sectors for the year; all generating total returns in excess of 40%. The specialty sector, which includes several timber companies, and the manufactured home sub-sector were the poorest performers.
Over the first ten months of calendar year 2006, there were ten major REIT mergers/privatizations transactions with a total value over $37 billion. These transactions, in which the acquirers, mainly private buyers, purchase all of the outstanding publicly traded shares of a REIT, have helped increase REIT share prices to higher levels. The level of transaction activity in the first 10 months of 2006 increased significantly over the entire year of 2005, which saw approximately $27 billion in transactions. Putting this transaction volume in perspective, with the market capitalization of the NAREIT Equity Index at approximately $387 billion on October 31, 2006, about 10% of the REIT industry was sold to a combination of public and private buyers. When compared to REIT share prices prior to the announcements, the 2006 transactions averaged an overall 8.60% premium. Privatization activity was driven by well-capitalized buyers, including so called “club deals” involving more than one buyer and motivated sellers willing to sell their companies into a strong real estate market to take advantage of the attractive 15% capital gains tax rate. The majority of activity was focused among office companies, which accounted for approximately 60% of the 2006 transaction value. The office sector’s strong performance was driven by improvement in property fundamentals and deal activity.
At the end of the fiscal year, while REITs were trading near private market valuation levels, they were also trading at the top of historic ranges versus stocks and bonds.
Non-U.S. Equity Markets
Non-U.S. stocks gained 28.04% as measured by the MSCI EAFE Index (gross) for the fiscal year ending October 31, 2006. Non-U.S. stocks were boosted as the US dollar weakened over the course of the fiscal year. In local currency, the MSCI EAFE Index rose 22.41% over the 12-month period.
Non-U.S. stocks benefited from continued global growth and strong corporate earnings. The world became more integrated; however, the U.S. economy and markets continued to drive the prospects for global growth. There was evidence of this as the U.S. interest rate cycle and direction of the Federal Reserve affected global markets. Growth in emerging economies like India and China also had an increasing impact on the strength of developed markets through their demand for goods and infrastructure development.
After strong gains in 2005, MSCI Japan Index lagged other major non-U.S. markets in the fiscal year, returning 16.63%. Investor sentiment waned towards Japanese stocks on fears of a deceleration in the economy. Elsewhere in the region, MSCI Pacific ex Japan Index gained 28.73% due to strong gains in Australian and Singapore companies.
Europe, as represented by the MSCI Europe Index, outperformed the Pacific Basin, as represented by the MSCI Pacific Basin Index, returning 32.32% over the fiscal year. Across Europe, the best performing sectors were utilities and materials, both up over 50%. By country, smaller markets such as Spain and the Netherlands fared best. Helped by strong performance of health care, materials and utilities stocks, Europe’s larger markets of Germany and France delivered returns above the index. Elsewhere, MSCI United Kingdom Index lagged Europe with a gain of 28.55%. The U.K. underperformed the rest of Europe due to weakness in its energy and telecommunication sectors. The Bank of England raised interest rates due to greater inflationary pressures as small signs of economic improvement became evident over the fiscal year.
From the sector perspective, utilities performed best across the non-U.S. developed markets, returning 42.50%, as represented by the MSCI EAFE Index, largely due to a mid-year shift in market sentiment whereby defensive-oriented, high dividend yielding stocks gained favor. The materials sector, led by metals and mining stocks, was also a strong performer, up 38.79% as measured by the materials sector grouping based on the Global Industry Classification Standard (GICS) definitions. The financial sector also performed well returning 34.16% as measured by the financials sector grouping based on the GICS definitions; whereas, technology and energy were the worst performing sectors over the period, with gains of only 14.04% and 13.23%, respectively, as measured by the technology and energy sector groupings based on the GICS definitions. Energy stocks fell from mid-July to late September as the price of oil fell dramatically, from nearly $80 per barrel to less than $60.
With the value segment of MSCI EAFE Index more weighted towards industrial cyclicals (materials) and financials, the market environment was slightly more favorable for value-oriented investors. The MSCI EAFE Value Index rose 31.66%, compared with 24.41% for the MSCI EAFE Growth Index. Investors continued to favor smaller capitalization stocks over larger capitalization stocks with the S&P/Citigroup EMI World ex US Index (an index of smaller capitalization companies) up 32.03% in the period versus the S&P/Citigroup PMI World ex US (in index of larger capitalization companies) up 27.47%.
6
Table of Contents
Markets not represented in the MSCI EAFE Index, but commonly included in non-U.S. stock funds, offered significant opportunities for gains during the period. Emerging markets outperformed their developed counterparts, as the MSCI Emerging Markets Index rose 35.42%. Emerging markets countries benefited from the materials and industrials sectors. Canadian stocks rose 27.50% (MSCI Canada Index) during the period.
Emerging Markets
During the fiscal year, the MSCI Emerging Markets Index (gross) posted strong returns of 35.42%, outperforming developed markets as measured by the MSCI World Index Free which returned 21.91%. The emerging markets asset class performed strongly in the first half of the fiscal year until early May 2006. The strong returns were driven by strong performance of large capitalization emerging markets stocks, significant asset inflows and outperformance of energy and material stocks on the back of strong commodity prices. In early May, there was a strong market reversal, which brought with it an increase in risk aversion. Investors re-focused on global inflation and interest rate concerns and commodity prices slipped from their record highs. The markets that had performed well earlier in the year were subject to the largest sell-offs and emerging markets fell more than 24% from its high point. In mid-June, the markets stabilized and recovered most of the losses from the sell-off. Contained U.S. inflation and expectations that global monetary tightening had peaked outweighed concerns of a U.S. economic slowdown and gave a positive backdrop for improved performance in emerging markets equities.
In terms of regions, both Asia (+38.71% as measured by the MSCI EM Asia Index) and Latin America (+38.47% as measured by the MSCI EM Latin America Index) were strong performers. The MSCI EM (Emerging Markets) Europe, Middle East and Africa Index (EMEA) underperformed the MSCI EM (Emerging Markets) Index, but still posted a respectable return of 27.47%. Some of the smaller markets such as Indonesia, Morocco, Peru and the Philippines, were the best performers, each returning more than 59% as measured by the MSCI Indonesia, MSCI Morocco, MSCI Peru and MSCI Philippines Indexes, respectively. However, some large markets, such as India, which enjoyed strong macroeconomic strength (+66.79% as measured by the MSCI India Index), China (+58.94% as measured by the MSCI China Index), and Russia (+54.76% as measured by the MSCI Russia Index) also posted strong returns. MSCI Barra increased Russia’s weight in the MSCI EM (Emerging Markets) Index twice over the fiscal year, and at the end of the period, Russia was the third largest country weight in that Index. The small market of Jordan was the only country with negative absolute returns, falling 27.45% as measured by the MSCI Jordan Index. Other notable relative underperformers included Turkey (+17.07% as measured by the MSCI Turkey Index), Egypt (+22.48% as measured by the MSCI Egypt Index), South Africa (+25.54% as measured by the MSCI South Africa Index), and Taiwan (+26.06% as measured by the MSCI Taiwan Index). Returns from Turkey and South Africa were dampened by their currencies, which fell more than 7% each. Israel (+4.14% as measured by the MSCI Israel Index) also underperformed following Prime Minister Ariel Sharon’s stroke and Islamist militant group Hamas’ Palestinian parliamentary elections victory.
Currencies were broadly strong against the U.S. dollar with some, such as the Korean won, up more than 10%.
The industrial sectors performed well. Although consumer discretionary and technology stocks underperformed the index, they still returned more than 25% in absolute terms. The small sector of health care was notably weak returning only 3.99% due to stock-specific concerns of the large cap company, Teva Pharmaceuticals.
U.S. Fixed Income Markets
The Federal Reserve Board’s interest rate hikes were one of the biggest factors impacting the fixed income markets. The Fed raised the target fed funds rate (the interest rate at which depository institutions lend money at the Fed to other depository institutions overnight) six times throughout the fiscal year, from 3.75% at the end of October 2005 to 5.25% one year later. The Fed’s interest rate hikes reflected a continued attempt to move toward a neutral monetary policy to counter rising inflationary pressures. Despite inflation measures that remained elevated and above the Fed’s comfort level, the Fed’s highly anticipated pause, after 17 consecutive rate hikes since June 2004, came in August. The Fed cited moderating economic growth and the cumulative effects of previous interest rate hikes as impetuses for the pause. The Treasury yield curve moved markedly from month to month as investors tried to reconcile conflicting economic signals (e.g., a slowing housing market, rising (and falling) commodity prices, wage inflation, and productivity concerns). On a rolling one-year basis, however, shorter-term rates followed Fed policy, while longer-term rates remained virtually unchanged. This resulted in an upward-sloping, normal yield curve becoming inverted (when short term interest rates exceed long rates) by fiscal year end. With nearly static intermediate and long-term rates, investment grade bonds relied upon higher coupon rates in order to provide yield higher than US Treasuries. The Lehman Brothers US Aggregate Bond Index, a broad measure of US investment grade fixed income securities, returned 5.19% for the fiscal year ending October 31, 2006.
7
Table of Contents
Among sectors, the riskier sectors continued to post strong performance. As in the three prior years, high yield and emerging market debt bonds outperformed other bond sectors. High yield bonds continued to benefit from record low corporate default levels, as well as strong technical demand for increased yield. The high yield bond sector, as represented by the Lehman Brothers US Corporate High Yield Index, returned 10.31% over the year compared to 4.43% for the Lehman Brothers US Treasury Index. Emerging market debt performed well due in part to commodity price increases, credit ratings upgrades and relatively non-turbulent election cycles. Emerging market bonds, as represented by the Lehman Brothers Emerging Markets (US Dollar) Index, returned 12.02%.
Investment grade corporate bonds benefited from the same factors that drove the high yield market. For the fiscal year, the Lehman Brothers US Credit Index returned 5.36%. Despite another year of increased regulatory scrutiny of the mortgage market, mortgage securities continued to do well. The Lehman Brothers MBS Fixed Rate Index returned 5.68%. As the fiscal year ended, yield spreads between corporate bonds and mortgages relative to Treasuries continued to be at historical lows. This reflected a search for yield even in the face of a bondholder-unfriendly market environment with loosening underwriting standards, share repurchases and escalating leveraged buyout activity.
Market Summary
8
Table of Contents
(This page intentionally left blank)
9
Table of Contents
Diversified Equity Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Diversified Equity Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.12 | % | |
5 Years | 7.40 | %§ | |
10 Years | 7.41 | %§ |
Diversified Equity Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 13.80 | % | |
5 Years | 7.13 | %§ | |
10 Years | 7.11 | %§ |
Diversified Equity Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 12.98 | % | |
5 Years | 6.34 | %§ | |
10 Years | 6.50 | %§ |
Russell 1000(R) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.02 | % | |
5 Years | 7.92 | %§ | |
10 Years | 8.87 | %§ |
10
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Diversified Equity Fund Class S, Class E and Class C Shares gained 14.12%, 13.80% and 12.98%, respectively. This compared to the Russell 1000(R) Index, which gained 16.02% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Core Funds Average returned 13.60%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The market’s preference during the year for stocks with high dividend yields and its relative disfavor of companies with above-average growth rates and strong earnings trends represented a difficult environment for the Fund, given the Fund’s focus on undervalued companies with above-average growth rates. After many years of value stocks outpacing growth stocks, growth stocks are selling at unusually low valuation premiums. The Fund’s preference for growth stocks was unrewarded in the period as the market favored high dividend yield stocks. The Fund’s performance was competitive to its peers, however, during this difficult environment for active money managers.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
During the past year, the Fund’s money managers maintained their preference for companies with above-average growth rates that were selling at attractive valuations. Additionally, Fund money managers emphasized companies showing strong current earnings trends. With an anticipated slowdown in the economy and corporate earnings growth rates, the Fund’s money managers believed that the market would reward growth companies that could sustain their growth rates. However, with the market’s preference for yield rather than growth and continued strong corporate earnings, the relative advantage of undervalued growth companies was not rewarded.
The main driver of the Fund’s underperformance relative to the benchmark was its underweight in high dividend yield groups such as utilities and REITs and its overweight in growth companies. Industry selection also detracted from relative performance with the Fund being overweight in underperforming industry groups such as communications technology, biotechnology, health services, and oil service. Finally, the market did not reward companies that generated positive earnings surprises or raised their earnings forecasts. The Fund’s money managers focused on such companies, which detracted from relative performance.
At the money manager level, AllianceBernstein L.P., MFS Institutional Advisors, Inc., Schneider Capital Management Corporation, and Suffolk Capital Management LLC outperformed their benchmarks due to favorable stock selection. The market environment was challenging for the Fund’s growth money managers such as Ark Asset Management Co., Inc., Marsico Capital Management, LLC, Turner Investment Partners, Inc., and Montag & Caldwell, Inc. and they underperformed their benchmarks.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers in their Fund segments to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. As the Fund underperformed for the period, the select holdings strategy also underperformed the benchmark. The strategy’s overweight to under-valued growth companies was not rewarded during the period.
At the stock selection level, the Fund benefited from overweight positions in strong performers such as Goldman Sachs, CSX, Kohls, McDonald’s and Google, as well as from underweight positions in underperformers such as Intel and Dell. However, overweights in underperformers such as Genentech, UnitedHealth, Qualcomm, and JDS Uniphase, as well as underweights in strong performers such as AT&T, ExxonMobil, and Microsoft, detracted from performance.
11
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
Ark Asset Management Co., Inc. | Growth | |
Institutional Capital Corporation | Value | |
Marsico Capital Management, LLC | Growth | |
MFS Institutional Advisors, Inc. | Value | |
Montag & Caldwell, Inc. | Growth | |
Schneider Capital Management | Value | |
Suffolk Capital Management, LLC | Market-Oriented | |
Turner Investment Partners, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. |
‡ | The Fund first issued Class E Shares on May 27, 1997. The returns shown for Class E Shares prior to May 27, 1997 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from May 27, 1997 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to May 26, 1997 and the performance of the Fund’s Class E Shares from May 27, 1997 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
12
Table of Contents
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,023.40 | $ | 1,015.27 | ||
Expenses Paid During Period* | $ | 10.05 | $ | 10.01 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.97% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,027.20 | $ | 1,019.11 | ||
Expenses Paid During Period* | $ | 6.18 | $ | 6.16 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.21% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
13
Table of Contents
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,028.60 | $ | 1,020.37 | ||
Expenses Paid During Period* | $ | 4.91 | $ | 4.89 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.96% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
14
Table of Contents
Russell Investment Company
Diversified Equity Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 93.5% | ||||
Auto and Transportation - 3.9% | ||||
American Axle & Manufacturing Holdings, Inc. (Ñ) | 25,700 | 482 | ||
Autoliv, Inc. | 22,300 | 1,268 | ||
BorgWarner, Inc. (Ñ) | 16,100 | 926 | ||
Burlington Northern Santa Fe Corp. | 317,884 | 24,645 | ||
CH Robinson Worldwide, Inc. | 98,840 | 4,126 | ||
CSX Corp. | 978,800 | 34,914 | ||
FedEx Corp. (Ñ) | 197,973 | 22,676 | ||
General Motors Corp. (Ñ) | 33,200 | 1,159 | ||
Lear Corp. | 3,300 | 100 | ||
Magna International, Inc. Class A | 5,600 | 419 | ||
Navistar International Corp. (Æ) | 322,450 | 8,941 | ||
Norfolk Southern Corp. | 98,400 | 5,173 | ||
Southwest Airlines Co. | 88,200 | 1,326 | ||
Toyota Motor Corp. - ADR | 149,231 | 17,609 | ||
Union Pacific Corp. | 130,343 | 11,813 | ||
United Parcel Service, Inc. Class B | 22,600 | 1,703 | ||
US Airways Group, Inc. (Æ)(Ñ) | 74,700 | 3,724 | ||
Visteon Corp. (Æ) | 595,100 | 4,392 | ||
145,396 | ||||
Consumer Discretionary - 13.9% | ||||
Accenture, Ltd. Class A | 155,480 | 5,117 | ||
Activision, Inc. (Æ) | 112,300 | 1,732 | ||
Avis Budget Group, Inc. (Æ) | 1,050 | 21 | ||
Best Buy Co., Inc. | 33,700 | 1,862 | ||
Big Lots, Inc. (Æ) | 39,800 | 839 | ||
Black & Decker Corp. (Ñ) | 14,600 | 1,225 | ||
Carnival Corp. | 57,650 | 2,814 | ||
CBS Corp. Class B | 94,950 | 2,748 | ||
Coach, Inc. (Æ)(Ñ) | 346,840 | 13,749 | ||
Costco Wholesale Corp. | 193,100 | 10,308 | ||
Dollar General Corp. | 32,600 | 457 | ||
eBay, Inc. (Æ) | 87,200 | 2,802 | ||
Electronic Arts, Inc. (Æ) | 341,100 | 18,041 | ||
Estee Lauder Cos., Inc. (The) Class A (Ñ) | 72,300 | 2,920 | ||
Family Dollar Stores, Inc. | 45,400 | 1,337 | ||
Federated Department Stores, Inc. | 167,800 | 7,368 | ||
Focus Media Holding, Ltd. - ADR (Æ)(Ñ) | 57,100 | 3,020 | ||
Four Seasons Hotels, Inc. | 55,788 | 3,578 | ||
GameStop Corp. Class A (Æ)(Ñ) | 76,700 | 3,916 | ||
Gannett Co., Inc. | 38,700 | 2,289 | ||
Gap, Inc. (The) | 235,400 | 4,948 | ||
Google, Inc. Class A (Æ) | 122,400 | 58,310 | ||
Harman International Industries, Inc. | 28,500 | 2,917 | ||
Hewitt Associates, Inc. Class A (Æ)(Ñ) | 274,300 | 6,866 | ||
Hilton Hotels Corp. | 538,050 | 15,560 |
15
Table of Contents
Home Depot, Inc. | 17,000 | 635 | ||
Intercontinental Hotels Group PLC – ADR (Æ)(Ñ) | 486,100 | 9,460 | ||
International Game Technology | 156,560 | 6,655 | ||
Interpublic Group of Cos., Inc. (Æ)(Ñ) | 67,000 | 731 | ||
JC Penney Co., Inc. (Ñ) | 104,900 | 7,892 | ||
Jones Apparel Group, Inc. (Ñ) | 35,100 | 1,172 | ||
Kimberly-Clark Corp. | 17,100 | 1,137 | ||
Kohl’s Corp. (Æ) | 239,100 | 16,880 | ||
Las Vegas Sands Corp. (Æ)(Ñ) | 247,027 | 18,823 | ||
Liberty Global, Inc. Series A (Æ)(Ñ) | 130,663 | 3,429 | ||
Liberty Global, Inc. Series C (Æ) | 146,597 | 3,728 | ||
Liberty Media Holding Corp. Class A (Æ) | 116,340 | 6,248 | ||
Limited Brands, Inc. | 45,400 | 1,338 | ||
Liz Claiborne, Inc. | 71,600 | 3,019 | ||
Lowe’s Cos., Inc. | 363,308 | 10,950 | ||
Mattel, Inc. | 79,600 | 1,801 | ||
McDonald’s Corp. | 1,019,700 | 42,746 | ||
McGraw-Hill Cos., Inc. (The) | 64,900 | 4,165 | ||
MGM Mirage (Æ)(Ñ) | 212,693 | 9,150 | ||
Monster Worldwide, Inc. (Æ) | 72,500 | 2,937 | ||
Newell Rubbermaid, Inc. | 33,000 | 950 | ||
News Corp. Class A (Ñ) | 482,770 | 10,066 | ||
Nike, Inc. Class B | 77,100 | 7,084 | ||
Nutri System, Inc. (Æ)(Ñ) | 71,420 | 4,405 | ||
Office Depot, Inc. (Æ) | 30,900 | 1,297 | ||
Omnicom Group, Inc. | 79,900 | 8,106 | ||
Quiksilver, Inc. (Æ)(Ñ) | 427,000 | 5,957 | ||
RadioShack Corp. (Ñ) | 125,000 | 2,230 | ||
Saks, Inc. (Ñ) | 23,600 | 456 | ||
Scientific Games Corp. (Æ) | 108,260 | 3,035 | ||
Sears Holdings Corp. (Æ) | 29,400 | 5,129 | ||
Staples, Inc. (Ñ) | 515,800 | 13,302 | ||
Starbucks Corp. (Æ) | 641,388 | 24,212 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 97,800 | 5,843 | ||
Station Casinos, Inc. (Ñ) | 123,988 | 7,476 | ||
Target Corp. | 338,280 | 20,019 | ||
Tech Data Corp. (Æ) | 23,500 | 925 | ||
Time Warner, Inc. (Ñ) | 658,450 | 13,176 | ||
TJX Cos., Inc. | 129,540 | 3,750 | ||
Urban Outfitters, Inc. (Æ)(Ñ) | 212,700 | 3,722 | ||
VF Corp. | 22,100 | 1,680 | ||
Viacom, Inc. Class A (Æ) | 301,370 | 11,729 | ||
Wal-Mart Stores, Inc. | 481,500 | 23,728 | ||
Walt Disney Co. | 41,540 | 1,307 | ||
Wyndham Worldwide Corp. (Æ) | 2,100 | 62 | ||
Wynn Resorts, Ltd. (Æ)(Ñ) | 54,973 | 4,043 | ||
XM Satellite Radio Holdings, Inc. Class A (Æ)(Ñ) | 582,550 | 6,793 | ||
Yum! Brands, Inc. | 111,226 | 6,614 | ||
524,736 | ||||
Consumer Staples - 6.9% | ||||
Altria Group, Inc. | 802,380 | 65,258 | ||
Clorox Co. | 27,500 | 1,775 | ||
Coca-Cola Co. (The) | 264,300 | 12,348 | ||
Coca-Cola Enterprises, Inc. | 34,600 | 693 | ||
Colgate-Palmolive Co. | 213,500 | 13,658 | ||
Constellation Brands, Inc. Class A (Æ)(Ñ) | 240,800 | 6,620 | ||
CVS Corp. | 71,500 | 2,244 | ||
Diageo PLC - ADR | 70,550 | 5,254 | ||
Heineken NV - ADR (Æ) | 234,829 | 5,295 | ||
Kellogg Co. (Ñ) | 174,290 | 8,768 |
16
Table of Contents
Kroger Co. (The) | 83,600 | 1,880 | ||
Molson Coors Brewing Co. Class B (Ñ) | 39,000 | 2,776 | ||
NBTY, Inc. (Æ) | 88,580 | 2,464 | ||
PepsiCo, Inc. (Ñ) | 764,240 | 48,483 | ||
Procter & Gamble Co. (Ñ) | 1,063,313 | 67,403 | ||
Safeway, Inc. | 25,500 | 749 | ||
Sara Lee Corp. | 85,300 | 1,459 | ||
Tyson Foods, Inc. Class A (Ñ) | 144,900 | 2,094 | ||
UST, Inc. (Ñ) | 24,700 | 1,323 | ||
Walgreen Co. | 275,500 | 12,034 | ||
262,578 | ||||
Financial Services - 21.4% | ||||
ACE, Ltd. | 13,300 | 761 | ||
Allstate Corp. (The) | 308,560 | 18,933 | ||
American Express Co. | 340,100 | 19,661 | ||
American International Group, Inc. (Ñ) | 852,705 | 57,276 | ||
Annaly Capital Management, Inc. (ö) | 647,850 | 8,500 | ||
AON Corp. (Ñ) | 308,200 | 10,722 | ||
Astoria Financial Corp. | 28,350 | 822 | ||
Bank of America Corp. (Ñ) | 1,317,128 | 70,954 | ||
Bank of New York Co., Inc. (The) | 183,600 | 6,310 | ||
BB&T Corp. (Ñ) | 25,500 | 1,110 | ||
Capital One Financial Corp. (Ñ) | 107,999 | 8,568 | ||
CB Richard Ellis Group, Inc. Class A (Æ) | 180,778 | 5,429 | ||
Charles Schwab Corp. (The) | 300,710 | 5,479 | ||
Chicago Mercantile Exchange Holdings, Inc. Class A | 10,950 | 5,486 | ||
Chubb Corp. | 106,460 | 5,658 | ||
Citigroup, Inc. | 1,023,373 | 51,332 | ||
Comerica, Inc. | 28,000 | 1,629 | ||
Commerce Bancorp, Inc. (Ñ) | 87,600 | 3,059 | ||
Countrywide Financial Corp. | 936,800 | 35,711 | ||
Fannie Mae | 634,850 | 37,621 | ||
Fidelity National Financial, Inc. | 11,350 | 253 | ||
Fidelity National Title Group, Inc. Class A | 25,491 | 561 | ||
First American Corp. | 6,000 | 245 | ||
First Data Corp. | 83,800 | 2,032 | ||
First Horizon National Corp. (Ñ) | 31,500 | 1,239 | ||
Franklin Resources, Inc. (Ñ) | 38,200 | 4,353 | ||
Freddie Mac | 73,250 | 5,054 | ||
Genworth Financial, Inc. Class A (Ñ) | 857,925 | 28,689 | ||
Global Payments, Inc. | 82,050 | 3,586 | ||
Goldman Sachs Group, Inc. (Ñ) | 344,923 | 65,463 | ||
Hartford Financial Services Group, Inc. (Ñ) | 192,180 | 16,752 | ||
Hudson City Bancorp, Inc. (Ñ) | 113,450 | 1,558 | ||
IndyMac Bancorp, Inc. | 20,425 | 928 | ||
iShares Russell 1000 Value Index Fund | 92,600 | 7,356 | ||
JPMorgan Chase & Co. (Ñ) | 1,233,173 | 58,502 | ||
KeyCorp | 56,300 | 2,091 | ||
Lehman Brothers Holdings, Inc. | 236,444 | 18,405 | ||
Lincoln National Corp. | 25,100 | 1,589 | ||
Loews Corp. | 59,250 | 2,306 | ||
MBIA, Inc. | 24,800 | 1,538 | ||
Merrill Lynch & Co., Inc. (Ñ) | 464,200 | 40,580 | ||
Metlife, Inc. | 376,210 | 21,493 | ||
MGIC Investment Corp. (Ñ) | 24,600 | 1,445 | ||
Morgan Stanley | 278,800 | 21,309 | ||
National City Corp. | 75,190 | 2,801 | ||
North Fork Bancorporation, Inc. | 358,450 | 10,245 | ||
Old Republic International Corp. | 62,800 | 1,415 |
17
Table of Contents
PartnerRe, Ltd. (Ñ) | 8,300 | 580 | ||
Paychex, Inc. | 342,700 | 13,530 | ||
PNC Financial Services Group, Inc. | 93,540 | 6,551 | ||
RenaissanceRe Holdings, Ltd. (Ñ) | 77,925 | 4,239 | ||
St. Paul Travelers Cos., Inc. (The) | 326,170 | 16,677 | ||
SunTrust Banks, Inc. | 128,560 | 10,155 | ||
UBS AG (Ñ) | 534,571 | 31,989 | ||
UnumProvident Corp. (Ñ) | 160,100 | 3,167 | ||
US Bancorp | 12,756 | 432 | ||
Wachovia Corp. (Ñ) | 160,700 | 8,919 | ||
Waddell & Reed Financial, Inc. Class A (Ñ) | 33,000 | 841 | ||
Washington Mutual, Inc. (Ñ) | 135,080 | 5,714 | ||
Wells Fargo & Co. | 745,704 | 27,062 | ||
Western Union Co. (The) (Æ) | 83,800 | 1,848 | ||
XL Capital, Ltd. Class A | 8,300 | 586 | ||
809,099 | ||||
Health Care - 11.0% | ||||
Abbott Laboratories | 343,140 | 16,303 | ||
Allergan, Inc. | 85,040 | 9,822 | ||
AmerisourceBergen Corp. | 36,100 | 1,704 | ||
Amgen, Inc. (Æ)(Ñ) | 218,400 | 16,579 | ||
Amylin Pharmaceuticals, Inc. (Æ)(Ñ) | 121,701 | 5,350 | ||
Baxter International, Inc. | 497,300 | 22,861 | ||
Boston Scientific Corp. (Æ) | 100,300 | 1,596 | ||
Bristol-Myers Squibb Co. | 308,700 | 7,640 | ||
Cardinal Health, Inc. | 49,800 | 3,259 | ||
Caremark Rx, Inc. | 289,600 | 14,257 | ||
Celgene Corp. (Æ)(Ñ) | 134,400 | 7,182 | ||
Community Health Systems, Inc. (Æ)(Ñ) | 136,800 | 4,439 | ||
Covance, Inc. (Æ) | 99,320 | 5,810 | ||
DaVita, Inc. (Æ) | 28,500 | 1,585 | ||
Eli Lilly & Co. | 266,300 | 14,916 | ||
Endo Pharmaceuticals Holdings, Inc. (Æ)(Ñ) | 16,000 | 457 | ||
Fisher Scientific International, Inc. (Æ)(Ñ) | 103,600 | 8,870 | ||
Genentech, Inc. (Æ)(Ñ) | 430,410 | 35,853 | ||
Genzyme Corp. (Æ) | 86,180 | 5,818 | ||
Gilead Sciences, Inc. (Æ) | 198,790 | 13,697 | ||
Henry Schein, Inc. (Æ)(Ñ) | 75,200 | 3,737 | ||
Human Genome Sciences, Inc. (Æ)(Ñ) | 577,100 | 7,704 | ||
Intuitive Surgical, Inc. (Æ)(Ñ) | 43,590 | 4,323 | ||
Invitrogen Corp. (Æ)(Ñ) | 100,900 | 5,853 | ||
Johnson & Johnson | 469,430 | 31,640 | ||
Medco Health Solutions, Inc. (Æ) | 131,400 | 7,030 | ||
Medicis Pharmaceutical Corp. Class A (Ñ) | 48,000 | 1,682 | ||
Medtronic, Inc. (Ñ) | 123,300 | 6,002 | ||
Merck & Co., Inc. | 480,600 | 21,829 | ||
Novartis AG - ADR | 232,700 | 14,132 | ||
Omnicare, Inc. (Ñ) | 165,100 | 6,254 | ||
Panacos Pharmaceuticals, Inc. (Æ)(Ñ) | 219,000 | 1,502 | ||
PDL BioPharma, Inc. (Æ)(Ñ) | 217,600 | 4,598 | ||
Pfizer, Inc. (Ñ) | 510,100 | 13,594 | ||
Sanofi-Aventis - ADR (Æ) | 176,300 | 7,526 | ||
Schering-Plough Corp. | 76,100 | 1,685 | ||
St. Jude Medical, Inc. (Æ) | 301,800 | 10,367 | ||
Stryker Corp. | 256,000 | 13,386 | ||
Tenet Healthcare Corp. (Æ)(Ñ) | 153,900 | 1,087 | ||
Triad Hospitals, Inc. (Æ)(Ñ) | 123,500 | 4,573 | ||
UnitedHealth Group, Inc. | 577,540 | 28,172 | ||
WellPoint, Inc. (Æ) | 139,140 | 10,619 | ||
Wyeth | 237,380 | 12,114 | ||
417,407 | ||||
18
Table of Contents
Integrated Oils - 4.1% | ||||
Chevron Corp. (Ñ) | 321,587 | 21,611 | ||
ConocoPhillips | 238,152 | 14,346 | ||
Exxon Mobil Corp. | 743,240 | 53,082 | ||
Hess Corp. (Ñ) | 552,050 | 23,407 | ||
Marathon Oil Corp. | 47,200 | 4,078 | ||
Murphy Oil Corp. (Ñ) | 169,200 | 7,979 | ||
Occidental Petroleum Corp. | 294,260 | 13,813 | ||
Total SA - ADR | 248,850 | 16,957 | ||
155,273 | ||||
Materials and Processing - 3.0% | ||||
Air Products & Chemicals, Inc. | 64,700 | 4,508 | ||
Archer-Daniels-Midland Co. | 243,411 | 9,371 | ||
Ashland, Inc. (Ñ) | 19,400 | 1,147 | ||
Avery Dennison Corp. (Ñ) | 7,800 | 492 | ||
BHP Billiton, Ltd. - ADR (Ñ) | 73,360 | 3,123 | ||
Bunge, Ltd. (Ñ) | 12,800 | 821 | ||
Cameco Corp. | 142,000 | 4,988 | ||
Cytec Industries, Inc. | 42,300 | 2,343 | ||
Dow Chemical Co. (The) | 71,000 | 2,896 | ||
Ecolab, Inc. | 75,300 | 3,415 | ||
EI Du Pont de Nemours & Co. | 39,585 | 1,813 | ||
Hercules, Inc. (Æ) | 53,600 | 975 | ||
Imperial Chemical Industries PLC – ADR (Æ)(Ñ) | 186,569 | 5,817 | ||
International Paper Co. (Ñ) | 392,400 | 13,086 | ||
Lubrizol Corp. | 22,100 | 994 | ||
Masco Corp. | 289,030 | 7,992 | ||
Monsanto Co. | 323,556 | 14,308 | ||
Mosaic Co. (The) (Æ)(Ñ) | 97,800 | 1,831 | ||
Phelps Dodge Corp. | 7,800 | 783 | ||
PPG Industries, Inc. | 103,600 | 7,086 | ||
Praxair, Inc. | 14,876 | 896 | ||
Realogy Corp. (Æ) | 2,625 | 68 | ||
Rio Tinto PLC - ADR (Ñ) | 28,800 | 6,376 | ||
Sherwin-Williams Co. (The) | 76,800 | 4,549 | ||
Smurfit-Stone Container Corp. (Æ) | 87,200 | 930 | ||
Sonoco Products Co. | 9,000 | 319 | ||
St. Joe Co. (The) (Ñ) | 72,641 | 3,907 | ||
Syngenta AG - ADR | 279,850 | 9,020 | ||
United States Steel Corp. | 15,100 | 1,021 | ||
114,875 | ||||
Miscellaneous - 3.4% | ||||
3M Co. (Ñ) | 196,300 | 15,476 | ||
Eaton Corp. | 27,800 | 2,014 | ||
General Electric Co. (Ñ) | 2,412,030 | 84,686 | ||
Hillenbrand Industries, Inc. | 18,000 | 1,056 | ||
Honeywell International, Inc. | 264,200 | 11,128 | ||
SPX Corp. | 23,100 | 1,329 | ||
Textron, Inc. | 35,000 | 3,183 | ||
Tyco International, Ltd. | 310,450 | 9,136 | ||
128,008 | ||||
Other Energy - 3.2% | ||||
Apache Corp. (Ñ) | 127,900 | 8,354 | ||
Baker Hughes, Inc. | 220,000 | 15,191 | ||
Cameron International Corp. (Æ) | 38,600 | 1,934 | ||
Devon Energy Corp. | 126,690 | 8,468 | ||
Halliburton Co. | 800,100 | 25,883 | ||
Massey Energy Co. (Æ)(Ñ) | 390,000 | 9,848 | ||
National-Oilwell Varco, Inc. (Æ) | 68,930 | 4,163 |
19
Table of Contents
Reliant Energy, Inc. (Æ)(Ñ) | 1,466,400 | 18,594 | ||
Rowan Cos., Inc. | 23,500 | 784 | ||
Schlumberger, Ltd. | 391,086 | 24,670 | ||
Smith International, Inc. | 40,700 | 1,607 | ||
Valero Energy Corp. | 58,040 | 3,037 | ||
122,533 | ||||
Producer Durables - 5.4% | ||||
AGCO Corp. (Æ) | 249,950 | 6,686 | ||
Agilent Technologies, Inc. (Æ) | 106,700 | 3,798 | ||
Alcatel SA - ADR (Æ)(Ñ) | 274,300 | 3,484 | ||
American Power Conversion Corp. (Ñ) | 214,100 | 6,472 | ||
Applied Materials, Inc. | 362,710 | 6,308 | ||
Boeing Co. | 223,800 | 17,873 | ||
Bombardier, Inc. (Æ) | 1,236,400 | 4,261 | ||
Caterpillar, Inc. | 176,500 | 10,715 | ||
Centex Corp. (Ñ) | 147,300 | 7,704 | ||
Crown Castle International Corp. (Æ) | 127,610 | 4,294 | ||
Danaher Corp. | 73,980 | 5,310 | ||
Deere & Co. | 141,340 | 12,032 | ||
Emerson Electric Co. | 44,500 | 3,756 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 31,500 | 1,368 | ||
Goodrich Corp. | 131,150 | 5,782 | ||
Ingersoll-Rand Co., Ltd. Class A | 16,000 | 587 | ||
Itron, Inc. (Æ)(Ñ) | 21,800 | 1,187 | ||
KB Home (Ñ) | 74,021 | 3,326 | ||
Lennar Corp. Class A (Ñ) | 83,690 | 3,974 | ||
Lockheed Martin Corp. | 297,963 | 25,902 | ||
Northrop Grumman Corp. | 236,930 | 15,730 | ||
Pulte Homes, Inc. (Ñ) | 169,050 | 5,239 | ||
Roper Industries, Inc. | 79,000 | 3,780 | ||
Teradyne, Inc. (Æ) | 169,900 | 2,382 | ||
Thermo Electron Corp. (Æ)(Ñ) | 151,530 | 6,496 | ||
United Technologies Corp. (Ñ) | 555,073 | 36,479 | ||
204,925 | ||||
Technology - 12.0% | ||||
Adobe Systems, Inc. (Æ)(Ñ) | 154,200 | 5,898 | ||
Agere Systems, Inc. Class A (Æ) | 39,200 | 666 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 190,630 | 8,933 | ||
Apple Computer, Inc. (Æ)(Ñ) | 583,910 | 47,343 | ||
Arrow Electronics, Inc. (Æ) | 44,500 | 1,328 | ||
AU Optronics Corp. - ADR (Æ)(Ñ) | 573,174 | 7,784 | ||
Avnet, Inc. (Æ) | 52,200 | 1,236 | ||
BearingPoint, Inc. (Æ)(Ñ) | 605,350 | 5,043 | ||
Broadcom Corp. Class A (Æ) | 264,300 | 8,000 | ||
Celestica, Inc. (Æ)(Ñ) | 334,800 | 3,291 | ||
Cisco Systems, Inc. (Æ) | 1,529,012 | 36,895 | ||
Citrix Systems, Inc. (Æ) | 96,420 | 2,847 | ||
Cognizant Technology Solutions Corp. Class A (Æ) | 35,860 | 2,700 | ||
Corning, Inc. (Æ) | 463,300 | 9,465 | ||
Dell, Inc. (Æ) | 456,300 | 11,102 | ||
Electronic Data Systems Corp. | 68,300 | 1,730 | ||
EMC Corp. (Æ)(Ñ) | 332,400 | 4,072 | ||
F5 Networks, Inc. (Æ) | 40,100 | 2,654 | ||
Flextronics International, Ltd. (Æ)(Ñ) | 45,600 | 529 | ||
Formfactor, Inc. (Æ)(Ñ) | 141,500 | 5,402 | ||
General Dynamics Corp. | 163,576 | 11,630 | ||
Hewlett-Packard Co. | 1,069,470 | 41,431 | ||
Intel Corp. | 292,920 | 6,251 | ||
International Business Machines Corp. | 179,800 | 16,601 | ||
International Rectifier Corp. (Æ)(Ñ) | 118,000 | 4,244 |
20
Table of Contents
JDS Uniphase Corp. (Æ)(Ñ) | 544,913 | 7,918 | ||
L-3 Communications Holdings, Inc. Class 3 (Ñ) | 94,700 | 7,625 | ||
Lucent Technologies, Inc. (Æ)(Ñ) | 281,400 | 684 | ||
MEMC Electronic Materials, Inc. (Æ) | 90,000 | 3,195 | ||
Microsoft Corp. (Ñ) | 1,145,300 | 32,882 | ||
Motorola, Inc. | 1,451,912 | 33,481 | ||
National Semiconductor Corp. | 253,700 | 6,162 | ||
Nvidia Corp. (Æ) | 144,930 | 5,054 | ||
Oracle Corp. (Æ) | 428,740 | 7,919 | ||
PerkinElmer, Inc. (Ñ) | 293,800 | 6,276 | ||
Qualcomm, Inc. | 943,500 | 34,334 | ||
Research In Motion, Ltd. (Æ) | 154,800 | 18,186 | ||
Salesforce.com, Inc. (Æ)(Ñ) | 115,440 | 4,504 | ||
SanDisk Corp. (Æ) | 226,700 | 10,904 | ||
Sanmina-SCI Corp. (Æ) | 302,700 | 1,196 | ||
Seagate Technology, Inc. (Æ) | 9,200 | — | ||
Silicon Image, Inc. (Æ)(Ñ) | 134,700 | 1,594 | ||
Solectron Corp. (Æ) | 207,700 | 694 | ||
Sun Microsystems, Inc. (Æ) | 733,650 | 3,984 | ||
Texas Instruments, Inc. | 665,550 | 20,086 | ||
453,753 | ||||
Utilities - 5.3% | ||||
America Movil SA de CV – ADR Series L | 139,779 | 5,992 | ||
AT&T, Inc. (Ñ) | 457,547 | 15,671 | ||
BellSouth Corp. | 414,750 | 18,705 | ||
Comcast Corp. Class A (Æ) | 877,937 | 35,706 | ||
Constellation Energy Group, Inc. | 28,300 | 1,766 | ||
Dominion Resources, Inc. (Ñ) | 325,070 | 26,328 | ||
Embarq Corp. (Æ) | 74,621 | 3,608 | ||
Entergy Corp. | 160,100 | 13,741 | ||
FPL Group, Inc. (Ñ) | 111,940 | 5,709 | ||
Level 3 Communications, Inc. (Æ)(Ñ) | 358,500 | 1,897 | ||
NII Holdings, Inc. (Æ)(Ñ) | 85,980 | 5,591 | ||
Progress Energy, Inc. | 22,000 | 1,012 | ||
Progress Energy, Inc. - CVO | 5,500 | 2 | ||
Sprint Nextel Corp. | 2,007,180 | 37,514 | ||
Telephone & Data Systems, Inc. Class L | 13,900 | 646 | ||
TXU Corp. | 120,350 | 7,598 | ||
Verizon Communications, Inc. (Ñ) | 429,520 | 15,892 | ||
Wisconsin Energy Corp. | 20,200 | 929 | ||
198,307 | ||||
Total Common Stocks | ||||
(cost $3,012,207) | 3,536,890 | |||
Preferred Stocks - 0.1% | ||||
Auto and Transportation - 0.1% | ||||
General Motors Corp. | 169,450 | 4,023 | ||
Total Preferred Stocks | ||||
(cost $2,989) | 4,023 | |||
Long-Term Investments - 0.0% | ||||
Corporate Bonds and Notes - 0.0% | ||||
AMR Corp. | ||||
4.250% due 09/23/23 | 142 | 249 | ||
Total Long-Term Investments | ||||
(cost $122) | 249 | |||
Short-Term Investments - 6.4% | ||||
Russell Investment Company Money Market Fund | 230,419,926 | 230,420 | ||
United States Treasury Bills (ç)(ž)(§) | ||||
4.795% due 12/07/06 | 1,000 | 995 | ||
4.891% due 12/07/06 | 10,000 | 9,952 | ||
21
Table of Contents
Total Short-Term Investments | |||||
(cost $241,367) | 241,367 | ||||
Other Securities - 11.7% | |||||
Russell Investment Company Money Market Fund (×) | 113,382,209 | 113,382 | |||
State Street Securities Lending Quality Trust (×) | 328,471,009 | 328,471 | |||
Total Other Securities | |||||
(cost $441,853) | 441,853 | ||||
Total Investments - 111.7% | |||||
(identified cost $3,698,538) | 4,224,382 | ||||
Other Assets and Liabilities, | |||||
Net - (11.7%) | (443,478 | ) | |||
Net Assets - 100.0% | 3,780,904 | ||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Russell 1000 Index expiration date 12/06 (43) | 16,131 | 900 | ||
Russell 1000 Mini Index (CME) expiration date 12/06 (110) | 8,253 | 431 | ||
S&P 500 E-Mini Index (CME) expiration date 12/06 (523) | 36,171 | 1,651 | ||
S&P 500 Index (CME) expiration date 12/06 (338) | 116,880 | 3,347 | ||
S&P Midcap 400 E-Mini Index (CME) expiration date 12/06 (760) | 59,941 | 2,866 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 9,195 | |||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 3.9 | ||
Consumer Discretionary | 13.9 | ||
Consumer Staples | 6.9 | ||
Financial Services | 21.4 | ||
Health Care | 11.0 | ||
Integrated Oils | 4.1 | ||
Materials and Processing | 3.0 | ||
Miscellaneous | 3.4 | ||
Other Energy | 3.2 | ||
Producer Durables | 5.4 | ||
Technology | 12.0 | ||
Utilities | 5.3 | ||
Preferred Stocks | 0.1 | ||
Long-Term Investments | — | * | |
Short-Term Investments | 6.4 | ||
Other Securities | 11.7 | ||
Total Investments | 111.7 | ||
Other Assets and Liabilities, Net | (11.7 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund
22
Table of Contents
Special Growth Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Special Growth Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.42 | % | |
5 Years | 12.83 | %§ | |
10 Years | 10.77 | %§ |
Special Growth Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.12 | % | |
5 Years | 12.55 | %§ | |
10 Years | 10.42 | %§ |
Special Growth Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.26 | % | |
5 Years | 11.71 | %§ | |
10 Years | 9.79 | %§ |
Russell 2500(TM) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.69 | % | |
5 Years | 14.36 | %§ | |
10 Years | 11.53 | %§ |
23
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Special Growth Fund Class S, Class E and Class C Shares gained 17.42%, 17.12% and 16.26%, respectively. This compared to the Russell 2500(TM) Index, which gained 17.69% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Mid-Cap Core Funds Average returned 14.03%, while the Lipper(R) Small-Cap Core Funds Average rose 16.45%. These results serve as peer comparisons and are expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Generally, market conditions presented a difficult environment for active small capitalization managers as evidenced by the underperformance of the Lipper averages for the fiscal year. The significant swings in market leadership over this period, combined with periods of defensiveness, were not favorable for active small capitalization managers. Specifically, the continued leadership of REITs and higher yielding securities served as notable barriers to outperformance for most active managers.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Overall, the Fund’s underperformance compared to its benchmark was largely due to the Fund’s operating expenses, which are reflected in its performance. The benchmark returns do not include any expenses.
Positive stock selection drove performance for the year. In particular, stock selection within traditional growth sectors such as technology and consumer discretionary was significantly positive while stock selection was also positive in the more defensive and interest sensitive financial services sector. Holdings of computer technology, retail, and semiconductor stocks all contributed positively to Fund performance. While stock selection was positive within the financial services sector, the Fund’s underweight to REITs within the financial services sector detracted from the Fund’s performance.
The Fund has eight money managers: three growth, two market-oriented and three value. Five of the eight money managers in the Fund outperformed their respective style indices while five of the eight also outperformed the Russell 2500 Index.
Two of the three growth money managers outperformed their respective benchmarks. Tygh Capital Management, Inc. and Capitalworks Investment Partners, LLC both significantly outperformed the Russell 2500 Growth Index. Gould Investment Partners, LLC, the most growth oriented money manager, underperformed the benchmark. This underperformance is reasonably expected for an aggressive growth money manager during a period where the market favored value stocks and a defensive positioning.
Two of the three value money managers outperformed, with solid outperformance from both David J. Greene & Company, LLC and Jacobs Levy Equity Management, Inc. David J. Greene’s outperformance was notable given its focus on contrarian, higher growth value stocks. Its performance was driven by positive stock selection in technology, energy and health care. Delphi Management, Inc. underperformed the index.
The performance of Goldman Sachs Asset Management, L.P., a market-oriented money manager, was disappointing as it had the largest underperformance of the Fund’s managers. Goldman’s stock selection was weak, with poor stock selection in health care and financials. PanAgora Asset Management, Inc., a recently added market-oriented money manager, outperformed during the period it was in the Fund.
Describe any changes to the Fund’s structure or the money manager line-up.
TimesSquare Capital Management, LLC was removed from the Fund in February 2006. TimesSquare’s assets were re-allocated to other money managers. In May 2006, PanAgora Asset Management, Inc. was hired to replace Nicholas-Applegate.
24
Table of Contents
Money Managers as of October 31, 2006 | Styles | |
CapitalWorks Investment Partners, LLC | Growth | |
David J. Greene and Company, LLC | Value | |
Delphi Management, Inc. | Value | |
Goldman Sachs Asset Management, L.P. | Market-Oriented | |
Gould Investment Partners, LLC | Growth | |
Jacobs Levy Equity Management, Inc. | Value | |
PanAgora Asset Management, Inc. | Market-Oriented | |
Tygh Capital Management, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | Russell 2500(TM) Index is composed of the bottom 500 stocks in the Russell 1000(R) Index and all the stocks in the Russell 2000(R) Index. The Russell 2500(TM) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex- dividend dates. |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1997 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
25
Table of Contents
Russell Investment Company
Special Growth Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 976.80 | $ | 1,013.91 | ||
Expenses Paid During Period* | $ | 11.16 | $ | 11.37 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.24% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
26
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 980.50 | $ | 1,017.69 | ||
Expenses Paid During Period* | $ | 7.44 | $ | 7.58 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.49% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 981.80 | $ | 1,018.95 | ||
Expenses Paid During Period* | $ | 6.19 | $ | 6.31 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.24% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
27
Table of Contents
Russell Investment Company
Special Growth Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 92.5% | ||||
Auto and Transportation - 3.2% | ||||
Aftermarket Technology Corp. (Æ) | 21,211 | 399 | ||
American Commercial Lines, Inc. (Æ)(Ñ) | 20,100 | 1,289 | ||
Arctic Cat, Inc. (Ñ) | 13,000 | 233 | ||
Arkansas Best Corp. | 31,500 | 1,291 | ||
ArvinMeritor, Inc. (Ñ) | 128,214 | 1,926 | ||
Autoliv, Inc. | 44,200 | 2,514 | ||
Bristow Group, Inc. (Æ)(Ñ) | 57,600 | 1,912 | ||
Commercial Vehicle Group, Inc. (Æ) | 14,400 | 297 | ||
Continental Airlines, Inc. Class B (Æ)(Ñ) | 9,249 | 341 | ||
Dana Corp. (Ñ) | 196,600 | 317 | ||
Danaos Corp. (Æ)(Ñ) | 15,300 | 314 | ||
DryShips, Inc. (Ñ) | 66,500 | 921 | ||
EGL, Inc. (Æ) | 3,845 | 131 | ||
ExpressJet Holdings, Inc. Class A (Æ)(Ñ) | 55,816 | 443 | ||
Freightcar America, Inc. (Ñ) | 13,915 | 740 | ||
Grupo TMM SA Series A (Æ) | 66,800 | 163 | ||
Heartland Express, Inc. (Ñ) | 53,700 | 877 | ||
HUB Group, Inc. Class A (Æ) | 32,075 | 871 | ||
Kansas City Southern (Æ)(Ñ) | 28,500 | 809 | ||
Laidlaw International, Inc. | 63,800 | 1,851 | ||
Navistar International Corp. (Æ)(Ñ) | 75,400 | 2,091 | ||
OMI Corp. (Ñ) | 56,500 | 1,261 | ||
Overseas Shipholding Group, Inc. (Ñ) | 8,048 | 503 | ||
PAM Transportation Services (Æ) | 7,200 | 182 | ||
Pinnacle Airlines Corp. (Æ)(Ñ) | 23,375 | 198 | ||
Republic Airways Holdings, Inc. (Æ) | 25,200 | 450 | ||
Saia, Inc. (Æ)(Ñ) | 52,395 | 1,404 | ||
Standard Motor Products, Inc. (Æ) | 17,366 | 192 | ||
Swift Transportation Co., Inc. (Æ)(Ñ) | 6,700 | 169 | ||
Teekay Shipping Corp. (Ñ) | 26,800 | 1,102 | ||
Tenneco, Inc. (Æ)(Ñ) | 29,365 | 667 | ||
Tidewater, Inc. | 4,100 | 204 | ||
TRW Automotive Holdings Corp. (Æ) | 50,200 | 1,288 | ||
US Xpress Enterprises, Inc. Class A (Æ)(Ñ) | 31,980 | 631 | ||
UTI Worldwide, Inc. | 150,635 | 3,894 | ||
Visteon Corp. (Æ) | 72,800 | 537 | ||
Wabtec Corp. | 67,642 | 2,123 | ||
YRC Worldwide, Inc. (Æ)(Ñ) | 89,500 | 3,467 | ||
38,002 | ||||
Consumer Discretionary - 18.9% | ||||
24/7 Real Media, Inc. (Æ)(Ñ) | 124,100 | 1,229 | ||
Abercrombie & Fitch Co. Class A | 46,408 | 3,557 | ||
ABM Industries, Inc. (Ñ) | 7,400 | 147 | ||
Activision, Inc. (Æ)(Ñ) | 351,832 | 5,425 | ||
Adesa, Inc. (Ñ) | 43,200 | 1,086 | ||
Advance Auto Parts, Inc. | 10,200 | 357 | ||
Advisory Board Co. (The) (Æ) | 55,679 | 3,075 | ||
AFC Enterprises (Æ)(Ñ) | 2,500 | 41 |
28
Table of Contents
Alberto-Culver Co. | 16,600 | 843 | ||
Alderwoods Group, Inc. (Æ)(Ñ) | 13,487 | 268 | ||
Alloy, Inc. (Æ) | 9,942 | 137 | ||
American Greetings Corp. Class A (Ñ) | 98,158 | 2,347 | ||
American Woodmark Corp. (Ñ) | 26,052 | 964 | ||
AMN Healthcare Services, Inc. (Æ)(Ñ) | 221,800 | 5,609 | ||
AnnTaylor Stores Corp. (Æ) | 40,600 | 1,787 | ||
aQuantive, Inc. (Æ)(Ñ) | 181,136 | 4,923 | ||
Arbitron, Inc. (Ñ) | 7,660 | 322 | ||
Asbury Automotive Group, Inc. (Ñ) | 46,731 | 1,122 | ||
Autonation, Inc. (Æ)(Ñ) | 36,936 | 741 | ||
Baidu.com - ADR (Æ)(Ñ) | 19,400 | 1,693 | ||
Bally Technologies, Inc. (Æ)(Ñ) | 17,200 | 341 | ||
Barnes & Noble, Inc. | 30,300 | 1,252 | ||
Bebe Stores, Inc. | 82,997 | 2,061 | ||
Belo Corp. Class A (Ñ) | 11,977 | 210 | ||
Big Lots, Inc. (Æ)(Ñ) | 129,377 | 2,727 | ||
Blockbuster, Inc. Class A (Ñ) | 129,410 | 507 | ||
Blyth, Inc. | 13,000 | 311 | ||
Bob Evans Farms, Inc. | 25,696 | 871 | ||
Books-A-Million, Inc. Class A (Ñ) | 8,884 | 178 | ||
Bowne & Co., Inc. (Æ) | 19,100 | 299 | ||
Bright Horizons Family Solutions, Inc. (Æ)(Ñ) | 29,000 | 1,114 | ||
Brightpoint, Inc. (Æ)(Ñ) | 17,070 | 207 | ||
Brown Shoe Co., Inc. | 31,235 | 1,217 | ||
Carmax, Inc. (Æ) | 60,000 | 2,658 | ||
Catalina Marketing Corp. (Æ)(Ñ) | 32,521 | 824 | ||
Cato Corp. (The) Class A | 1,483 | 34 | ||
CBRL Group, Inc. | 29,000 | 1,273 | ||
Central Parking Corp. (Ñ) | 26,527 | 455 | ||
Chemed Corp. | 26,886 | 954 | ||
Children’s Place Retail Stores, Inc. (The) (Æ) | 10,944 | 768 | ||
Choice Hotels International, Inc. (Ñ) | 28,940 | 1,213 | ||
Christopher & Banks Corp. (Ñ) | 108,672 | 2,933 | ||
Churchill Downs, Inc. | 3,962 | 168 | ||
Circuit City Stores, Inc. | 9,700 | 262 | ||
Coach, Inc. (Æ) | 59,733 | 2,368 | ||
Consolidated Graphics, Inc. (Æ) | 15,300 | 951 | ||
Convergys Corp. (Æ) | 90,400 | 1,917 | ||
Corinthian Colleges, Inc. (Æ)(Ñ) | 62,500 | 766 | ||
Corporate Executive Board Co. | 25,534 | 2,293 | ||
Corrections Corp. of America (Æ) | 158,600 | 7,246 | ||
Cox Radio, Inc. Class A (Æ)(Ñ) | 12,240 | 206 | ||
Crocs, Inc. (Æ)(Ñ) | 119,200 | 4,723 | ||
CSS Industries, Inc. | 1,900 | 60 | ||
DeVry, Inc. (Æ)(Ñ) | 70,600 | 1,719 | ||
Dick’s Sporting Goods, Inc. (Æ)(Ñ) | 14,100 | 702 | ||
Dillard’s, Inc. Class A (Ñ) | 42,100 | 1,270 | ||
Dollar Thrifty Automotive Group (Æ)(Ñ) | 15,627 | 628 | ||
Dollar Tree Stores, Inc. (Æ)(Ñ) | 54,000 | 1,679 | ||
Dover Downs Gaming & Entertainment, Inc. | 17,030 | 241 | ||
DreamWorks Animation SKG, Inc. Class A (Æ)(Ñ) | 45,600 | 1,206 | ||
Dress Barn, Inc. (Æ)(Ñ) | 29,170 | 634 | ||
DSW, Inc. Class A (Æ)(Ñ) | 21,866 | 757 | ||
Earthlink, Inc. (Æ)(Ñ) | 126,100 | 885 | ||
Ethan Allen Interiors, Inc. (Ñ) | 42,400 | 1,510 | ||
Expedia, Inc. (Æ) | 29,700 | 483 | ||
Ezcorp, Inc. Class A (Æ)(Ñ) | 40,934 | 1,849 | ||
Family Dollar Stores, Inc. | 54,900 | 1,617 | ||
Federated Department Stores, Inc. | 31,000 | 1,361 |
29
Table of Contents
Foot Locker, Inc. | 79,400 | 1,841 | ||
Forrester Research, Inc. (Æ)(Ñ) | 88,702 | 2,788 | ||
FTD Group, Inc. (Æ) | 24,173 | 386 | ||
Furniture Brands International, Inc. (Ñ) | 36,440 | 678 | ||
Gemstar-TV Guide International, Inc. (Æ) | 447,500 | 1,557 | ||
Great Wolf Resorts, Inc. (Æ) | 32,200 | 424 | ||
Group 1 Automotive, Inc. (Ñ) | 46,379 | 2,658 | ||
Guess?, Inc. (Æ)(Ñ) | 64,600 | 3,679 | ||
Gymboree Corp. (Æ)(Ñ) | 25,973 | 1,207 | ||
Harris Interactive, Inc. (Æ)(Ñ) | 18,030 | 120 | ||
Hasbro, Inc. (Ñ) | 116,000 | 3,007 | ||
Haverty Furniture Cos., Inc. (Ñ) | 48,773 | 771 | ||
Hearst-Argyle Television, Inc. (Ñ) | 58,400 | 1,472 | ||
Helen of Troy, Ltd. (Æ)(Ñ) | 59,530 | 1,465 | ||
Hooker Furniture Corp. (Ñ) | 5,300 | 75 | ||
Iconix Brand Group, Inc. (Æ)(Ñ) | 210,538 | 3,924 | ||
ICT Group, Inc. (Æ)(Ñ) | 11,699 | 371 | ||
IKON Office Solutions, Inc. | 94,522 | 1,409 | ||
Infospace, Inc. (Æ)(Ñ) | 9,970 | 201 | ||
infoUSA, Inc. | 33,071 | 363 | ||
Inter Parfums, Inc. (Ñ) | 4,322 | 85 | ||
Interstate Hotels & Resorts, Inc. (Æ) | 54,486 | 489 | ||
ITT Educational Services, Inc. (Æ)(Ñ) | 42,200 | 2,910 | ||
J Crew Group, Inc. (Æ)(Ñ) | 62,300 | 1,921 | ||
Jack in the Box, Inc. (Æ) | 72,902 | 4,091 | ||
Jackson Hewitt Tax Service, Inc. | 5,600 | 194 | ||
Jo-Ann Stores, Inc. (Æ)(Ñ) | 57,500 | 1,047 | ||
Jones Apparel Group, Inc. (Ñ) | 49,955 | 1,668 | ||
Journal Register Co. (Ñ) | 70,071 | 552 | ||
K-Swiss, Inc. Class A | 13,400 | 473 | ||
K2, Inc. (Æ)(Ñ) | 37,113 | 507 | ||
Kellwood Co. (Ñ) | 76,266 | 2,334 | ||
Kelly Services, Inc. Class A | 4,000 | 115 | ||
Knology, Inc. (Æ)(Ñ) | 9,164 | 94 | ||
Korn/Ferry International (Æ) | 172,256 | 3,809 | ||
Leapfrog Enterprises, Inc. (Æ)(Ñ) | 59,600 | 575 | ||
Lee Enterprises, Inc. (Ñ) | 38,000 | 1,084 | ||
LIFE TIME FITNESS, Inc. (Æ)(Ñ) | 97,200 | 5,009 | ||
Lightbridge, Inc. (Æ)(Ñ) | 55,059 | 636 | ||
Live Nation, Inc. (Æ) | 6,650 | 141 | ||
Liz Claiborne, Inc. (Ñ) | 34,000 | 1,434 | ||
Lodgenet Entertainment Corp. (Æ)(Ñ) | 18,930 | 435 | ||
Maidenform Brands, Inc. (Æ) | 5,096 | 113 | ||
Manpower, Inc. | 40,326 | 2,733 | ||
Marcus Corp. (Ñ) | 24,650 | 616 | ||
Marvel Entertainment, Inc. (Æ)(Ñ) | 71,241 | 1,806 | ||
McClatchy Co. Class A | 29,000 | 1,257 | ||
McCormick & Schmick’s Seafood Restaurants, Inc. (Æ) | 11,446 | 301 | ||
Men’s Wearhouse, Inc. (The) | 65,700 | 2,618 | ||
Meredith Corp. | 30,000 | 1,575 | ||
Mothers Work, Inc. (Æ)(Ñ) | 5,347 | 271 | ||
Movado Group, Inc. (Ñ) | 23,700 | 610 | ||
MPS Group, Inc. (Æ) | 151,479 | 2,310 | ||
O’Charleys, Inc. (Æ) | 12,279 | 244 | ||
O’Reilly Automotive, Inc. (Æ) | 66,533 | 2,148 | ||
Orient-Express Hotels, Ltd. Class A | 131,486 | 5,187 | ||
Pacific Sunwear of California, Inc. (Æ)(Ñ) | 82,500 | 1,454 | ||
Papa John’s International, Inc. (Æ)(Ñ) | 54,019 | 1,982 | ||
Payless Shoesource, Inc. (Æ)(Ñ) | 35,628 | 953 | ||
PC Connection, Inc. (Æ) | 13,600 | 149 |
30
Table of Contents
Penn National Gaming, Inc. (Æ) | 53,678 | 1,963 | ||
Perficient, Inc. (Æ)(Ñ) | 99,100 | 1,662 | ||
Perry Ellis International, Inc. (Æ)(Ñ) | 14,367 | 525 | ||
PHH Corp. (Æ)(Ñ) | 68,031 | 1,878 | ||
Phillips-Van Heusen Corp. | 48,533 | 2,221 | ||
Pier 1 Imports, Inc. (Ñ) | 108,800 | 712 | ||
Pre-Paid Legal Services, Inc. (Ñ) | 14,497 | 615 | ||
Prestige Brands Holdings, Inc. (Æ) | 26,700 | 315 | ||
Priceline.com, Inc. (Æ)(Ñ) | 22,900 | 923 | ||
ProQuest Co. (Æ)(Ñ) | 55,500 | 710 | ||
Quiksilver, Inc. (Æ)(Ñ) | 78,900 | 1,101 | ||
RadioShack Corp. (Ñ) | 48,100 | 858 | ||
Rent-A-Center, Inc. (Æ) | 48,500 | 1,395 | ||
Republic Services, Inc. Class A | 60,720 | 2,490 | ||
Retail Ventures, Inc. (Æ)(Ñ) | 13,664 | 234 | ||
RH Donnelley Corp. | 4,500 | 271 | ||
Ryan’s Restaurant Group, Inc. (Æ)(Ñ) | 54,533 | 884 | ||
SAIC, Inc. (Æ) | 53,500 | 1,070 | ||
Scholastic Corp. (Æ)(Ñ) | 66,355 | 2,085 | ||
Service Corp. International (Ñ) | 15,300 | 140 | ||
Shoe Carnival, Inc. (Æ) | 27,288 | 781 | ||
Sonic Automotive, Inc. Class A (Ñ) | 44,210 | 1,163 | ||
Spherion Corp. (Æ)(Ñ) | 29,540 | 214 | ||
Stage Stores, Inc. (Ñ) | 32,831 | 1,064 | ||
Standard Parking Corp. (Æ)(Ñ) | 5,209 | 181 | ||
Stanley Furniture Co., Inc. (Ñ) | 7,393 | 163 | ||
Stanley Works (The) (Ñ) | 26,169 | 1,247 | ||
Sturm Ruger & Co., Inc. (Æ) | 3,400 | 28 | ||
Tech Data Corp. (Æ) | 46,110 | 1,814 | ||
TeleTech Holdings, Inc. (Æ)(Ñ) | 136,530 | 2,650 | ||
Topps Co., Inc. (The) (Ñ) | 40,300 | 352 | ||
Trans World Entertainment Corp. (Æ) | 1,200 | 8 | ||
Tween Brands, Inc. (Æ) | 64,795 | 2,710 | ||
Under Armour, Inc. Class A (Æ)(Ñ) | 11,500 | 533 | ||
Unifirst Corp. | 4,800 | 173 | ||
United Online, Inc. (Ñ) | 133,838 | 1,809 | ||
United Stationers, Inc. (Æ) | 21,275 | 1,016 | ||
Valassis Communications, Inc. (Æ) | 19,200 | 288 | ||
Viad Corp. | 18,700 | 691 | ||
Volt Information Sciences, Inc. (Æ)(Ñ) | 40,750 | 1,610 | ||
Washington Post Co. (The) Class B (Ñ) | 1,730 | 1,303 | ||
Waste Connections, Inc. (Æ) | 39,667 | 1,614 | ||
Watson Wyatt Worldwide, Inc. Class A | 3,700 | 167 | ||
WESCO International, Inc. (Æ) | 21,900 | 1,429 | ||
224,967 | ||||
Consumer Staples - 1.4% | ||||
Alliance One International, Inc. (Æ) | 16,293 | 79 | ||
Boston Beer Co., Inc. Class A (Æ) | 8,000 | 292 | ||
Chiquita Brands International, Inc. | 19,700 | 270 | ||
Coca-Cola Bottling Co. Consolidated (Ñ) | 17,471 | 1,100 | ||
Dean Foods Co. (Æ) | 38,100 | 1,596 | ||
Delta & Pine Land Co. (Æ) | 6,100 | 247 | ||
Imperial Sugar Co. (Æ)(Ñ) | 6,000 | 159 | ||
J&J Snack Foods Corp. | 10,408 | 348 | ||
Longs Drug Stores Corp. | 29,806 | 1,283 | ||
McCormick & Co., Inc. | 49,000 | 1,833 | ||
Molson Coors Brewing Co. Class B (Ñ) | 40,500 | 2,883 | ||
Nash Finch Co. (Ñ) | 10,386 | 269 | ||
NBTY, Inc. (Æ) | 24,992 | 695 | ||
Pathmark Stores, Inc. (Æ)(Ñ) | 46,200 | 468 |
31
Table of Contents
PepsiAmericas, Inc. | 47,800 | 977 | ||
Performance Food Group Co. (Æ)(Ñ) | 26,833 | 780 | ||
Premium Standard Farms, Inc. (Ñ) | 26,227 | 505 | ||
Seaboard Corp. (Ñ) | 530 | 748 | ||
Sensient Technologies Corp. | 5,360 | 124 | ||
Smithfield Foods, Inc. (Æ)(Ñ) | 22,700 | 610 | ||
Spartan Stores, Inc. (Ñ) | 38,214 | 790 | ||
Weis Markets, Inc. (Ñ) | 3,867 | 157 | ||
Wild Oats Markets, Inc. (Æ)(Ñ) | 23,844 | 429 | ||
16,642 | ||||
Financial Services - 17.3% | ||||
21st Century Holding Co. (Ñ) | 5,638 | 159 | ||
Accredited Home Lenders Holding Co. (Æ)(Ñ) | 14,798 | 453 | ||
Advance America Cash Advance Centers, Inc. (Ñ) | 18,661 | 280 | ||
Advent Software, Inc. (Æ)(Ñ) | 99,400 | 3,680 | ||
Affiliated Managers Group, Inc. (Æ) | 54,315 | 5,439 | ||
Affordable Residential Communities (Æ) | 28,700 | 315 | ||
AG Edwards, Inc. | 32,100 | 1,831 | ||
Alleghany Corp. (Æ)(Ñ) | 882 | 270 | ||
Alliance Data Systems Corp. (Æ)(Ñ) | 114,258 | 6,938 | ||
AMB Property Corp. (ö) | 40,500 | 2,366 | ||
American Home Mortgage Investment Corp. (ö)(Ñ) | 82,010 | 2,802 | ||
AmeriCredit Corp. (Æ)(Ñ) | 63,280 | 1,618 | ||
Anthracite Capital, Inc. (ö) | 43,110 | 617 | ||
Ares Capital Corp. | 69,550 | 1,289 | ||
Argonaut Group, Inc. (Æ) | 7,390 | 251 | ||
Arthur J Gallagher & Co. (Æ)(Ñ) | 29,700 | 827 | ||
Ashford Hospitality Trust, Inc. (ö)(Ñ) | 117,000 | 1,507 | ||
Aspen Insurance Holdings, Ltd. (Ñ) | 47,600 | 1,181 | ||
Assurant, Inc. | 63,569 | 3,348 | ||
Axis Capital Holdings, Ltd. | 45,500 | 1,495 | ||
Bancfirst Corp. | 4,100 | 204 | ||
Bank of Hawaii Corp. | 31,100 | 1,622 | ||
Bankunited Financial Corp. Class A (Ñ) | 112,200 | 3,026 | ||
Banner Corp. | 4,100 | 178 | ||
Bear Stearns Cos., Inc. (The) (Ñ) | 8,600 | 1,302 | ||
BOK Financial Corp. (Ñ) | 6,529 | 336 | ||
Capital Trust, Inc. Class A (ö)(Ñ) | 7,100 | 316 | ||
CapitalSource, Inc. (ö)(Ñ) | 38,000 | 1,054 | ||
Cascade Bancorp (Ñ) | 12,230 | 446 | ||
Cash America International, Inc. (Ñ) | 28,130 | 1,163 | ||
Cathay General Bancorp (Ñ) | 4,899 | 169 | ||
Central Pacific Financial Corp. (Ñ) | 24,571 | 904 | ||
Chittenden Corp. | 16,600 | 490 | ||
CIT Group, Inc. | 20,000 | 1,041 | ||
City Bank | 500 | 27 | ||
City Holding Co. | 4,403 | 173 | ||
City National Corp. (Ñ) | 34,900 | 2,323 | ||
CNA Surety Corp. (Æ) | 59,700 | 1,214 | ||
Colonial BancGroup, Inc. (The) | 154,400 | 3,681 | ||
Colonial Properties Trust (ö) | 3,078 | 155 | ||
Commerce Group, Inc. | 24,600 | 728 | ||
Community Bancorp (Æ) | 7,083 | 205 | ||
Community Trust Bancorp, Inc. | 3,900 | 150 | ||
Conseco, Inc. (Æ)(Ñ) | 24,760 | 504 | ||
Corus Bankshares, Inc. (Ñ) | 102,715 | 2,109 | ||
Crescent Real Estate Equities Co. (ö)(Ñ) | 20,400 | 445 | ||
Cybersource Corp. (Æ)(Ñ) | 133,100 | 1,364 | ||
Deerfield Triarc Capital Corp. (ö)(Ñ) | 35,300 | 525 | ||
Delphi Financial Group Class A | 55,967 | 2,197 |
32
Table of Contents
Deluxe Corp. (Ñ) | 44,200 | 1,002 | ||
DiamondRock Hospitality Co. (ö) | 53,300 | 899 | ||
Downey Financial Corp. (Ñ) | 26,275 | 1,810 | ||
Duke Realty Corp. (ö)(Ñ) | 30,000 | 1,202 | ||
East West Bancorp, Inc. (Ñ) | 10,105 | 369 | ||
Education Realty Trust, Inc. (ö)(Ñ) | 20,200 | 312 | ||
Entertainment Properties Trust (ö)(Ñ) | 11,845 | 651 | ||
Euronet Worldwide, Inc. (Æ) | 65,863 | 1,957 | ||
Fair Isaac Corp. (Ñ) | 3,770 | 138 | ||
Federal Realty Investors Trust (ö)(Ñ) | 24,700 | 1,980 | ||
FelCor Lodging Trust, Inc. (ö) | 104,657 | 2,173 | ||
Fidelity National Financial, Inc. | 35,200 | 785 | ||
Fidelity National Title Group, Inc. Class A (Ñ) | 30,336 | 668 | ||
First American Corp. | 113,200 | 4,622 | ||
First Cash Financial Services, Inc. (Æ)(Ñ) | 42,981 | 929 | ||
First Community Bancorp, Inc. | 1,318 | 70 | ||
First Mutual Bancshares, Inc. (Ñ) | 51,528 | 1,219 | ||
First Place Financial Corp. | 4,863 | 113 | ||
First Regional Bancorp (Æ)(Ñ) | 3,876 | 123 | ||
FirstFed Financial Corp. (Æ)(Ñ) | 19,320 | 1,193 | ||
FPIC Insurance Group, Inc. (Æ) | 7,548 | 270 | ||
Franklin Street Properties Corp. (ö)(Ñ) | 13,230 | 272 | ||
Frontier Financial Corp. (Ñ) | 7,050 | 205 | ||
Fulton Financial Corp. (Ñ) | 39,510 | 633 | ||
GFI Group, Inc. (Æ)(Ñ) | 13,100 | 755 | ||
Global Payments, Inc. | 100,114 | 4,376 | ||
Gramercy Capital Corp. (ö)(Ñ) | 3,078 | 86 | ||
Greater Bay Bancorp | 30,024 | 773 | ||
Hanmi Financial Corp. (Ñ) | 85,548 | 1,828 | ||
HCC Insurance Holdings, Inc. | 53,700 | 1,808 | ||
Health Care Property Investors, Inc. (ö) | 42,440 | 1,333 | ||
Health Care REIT, Inc. (ö)(Ñ) | 38,500 | 1,589 | ||
HealthExtras, Inc. (Æ) | 62,900 | 1,449 | ||
Highland Hospitality Corp. (ö) | 89,300 | 1,234 | ||
Horace Mann Educators Corp. | 19,900 | 401 | ||
Hospitality Properties Trust (ö) | 36,700 | 1,778 | ||
HRPT Properties Trust (ö)(Ñ) | 275,018 | 3,273 | ||
IBERIABANK Corp. (Ñ) | 2,900 | 171 | ||
IMPAC Mortgage Holdings, Inc. (ö)(Ñ) | 111,487 | 1,056 | ||
Innkeepers USA Trust (ö) | 25,600 | 439 | ||
International Securities Exchange Holdings, Inc. Class A (Ñ) | 72,400 | 3,718 | ||
Intersections, Inc. (Æ)(Ñ) | 1,700 | 18 | ||
Intervest Bancshares Corp. Class A (Æ)(Ñ) | 10,676 | 382 | ||
Investors Real Estate Trust (ö)(Ñ) | 2,500 | 25 | ||
IPC Holdings, Ltd. (Ñ) | 46,200 | 1,388 | ||
iStar Financial, Inc. (ö) | 35,500 | 1,645 | ||
ITLA Capital Corp. | 400 | 23 | ||
Jefferies Group, Inc. (Ñ) | 57,200 | 1,643 | ||
John H Harland Co. (Ñ) | 5,154 | 211 | ||
Jones Lang LaSalle, Inc. (Ñ) | 26,356 | 2,425 | ||
Knight Capital Group, Inc. Class A (Æ)(Ñ) | 253,318 | 4,724 | ||
LandAmerica Financial Group, Inc. (Ñ) | 39,725 | 2,506 | ||
LTC Properties, Inc. (ö)(Ñ) | 20,183 | 547 | ||
Luminent Mortgage Capital, Inc. (ö) | 50,800 | 539 | ||
Macatawa Bank Corp. (Ñ) | 6,100 | 134 | ||
Mack-Cali Realty Corp. (ö) | 43,900 | 2,322 | ||
Medical Properties Trust, Inc. (ö)(Ñ) | 27,850 | 378 | ||
Mercantile Bank Corp. | 3,700 | 147 | ||
Mercantile Bankshares Corp. | 15,543 | 701 | ||
Mid-America Apartment Communities, Inc. (ö) | 22,300 | 1,419 |
33
Table of Contents
Municipal Mortgage & Equity LLC (Ñ) | 7,800 | 216 | ||
Nara Bancorp, Inc. (Ñ) | 25,010 | 475 | ||
National Penn Bancshares, Inc. (Ñ) | 6,186 | 127 | ||
National Retail Properties, Inc. (ö)(Ñ) | 47,090 | 1,058 | ||
Nationwide Financial Services, Inc. (Ñ) | 27,300 | 1,390 | ||
Nelnet, Inc. Class A (Æ)(Ñ) | 17,000 | 500 | ||
New Century Financial Corp. (ö)(Ñ) | 36,890 | 1,453 | ||
NorthStar Realty Finance Corp. (ö)(Ñ) | 212,003 | 3,212 | ||
Odyssey Re Holdings Corp. (Ñ) | 4,000 | 142 | ||
Ohio Casualty Corp. | 17,300 | 475 | ||
Old Republic International Corp. | 60,250 | 1,357 | ||
Open Solutions, Inc. (Æ)(Ñ) | 47,900 | 1,790 | ||
Pacific Capital Bancorp | 24,034 | 739 | ||
PFF Bancorp, Inc. | 16,360 | 507 | ||
Philadelphia Consolidated Holding Co. (Æ) | 28,200 | 1,103 | ||
Piper Jaffray Cos., Inc. (Æ)(Ñ) | 32,215 | 2,228 | ||
PMI Group, Inc. (The) (Ñ) | 29,000 | 1,237 | ||
Preferred Bank | 4,170 | 244 | ||
ProAssurance Corp. (Æ) | 81,645 | 3,976 | ||
Protective Life Corp. | 13,400 | 593 | ||
Provident Financial Holdings, Inc. (Ñ) | 6,821 | 206 | ||
Provident Financial Services, Inc. (Ñ) | 30,380 | 557 | ||
PS Business Parks, Inc. (ö) | 9,966 | 656 | ||
R&G Financial Corp. Class B | 31,400 | 242 | ||
Radian Group, Inc. (Ñ) | 24,000 | 1,279 | ||
RAIT Investment Trust (ö)(Ñ) | 6,300 | 189 | ||
Raymond James Financial, Inc. | 64,400 | 2,052 | ||
Realty Income Corp. (ö)(Ñ) | 50,700 | 1,338 | ||
Regency Centers Corp. (ö) | 2,000 | 144 | ||
Reinsurance Group of America, Inc. | 4,524 | 255 | ||
RenaissanceRe Holdings, Ltd. (Ñ) | 29,000 | 1,578 | ||
Resource Capital Corp. (Æ) | 7,000 | 115 | ||
Ryder System, Inc. (Ñ) | 46,300 | 2,438 | ||
S1 Corp. (Æ)(Ñ) | 45,900 | 227 | ||
Safety Insurance Group, Inc. (Ñ) | 41,488 | 2,075 | ||
SeaBright Insurance Holdings, Inc. (Æ) | 15,600 | 256 | ||
SEI Investments Co. (Ñ) | 62,120 | 3,496 | ||
Senior Housing Properties Trust (ö)(Ñ) | 76,549 | 1,755 | ||
Sky Financial Group, Inc. | 27,600 | 691 | ||
SL Green Realty Corp. (ö) | 7,228 | 875 | ||
South Financial Group, Inc. (The) | 42,300 | 1,122 | ||
Southwest Bancorp, Inc. (Ñ) | 47,147 | 1,278 | ||
Sovran Self Storage, Inc. (ö) | 24,400 | 1,439 | ||
Spirit Finance Corp. (ö) | 20,940 | 249 | ||
Stancorp Financial Group, Inc. | 42,600 | 1,946 | ||
Sterling Bancorp | 6,405 | 125 | ||
Sterling Bancshares, Inc. | 28,300 | 518 | ||
Stewart Information Services Corp. | 21,830 | 809 | ||
Sunstone Hotel Investors, Inc. (ö) | 48,500 | 1,429 | ||
Susquehanna Bancshares, Inc. | 25,600 | 640 | ||
SWS Group, Inc. | 11,346 | 315 | ||
Taylor Capital Group, Inc. | 2,088 | 73 | ||
TCF Financial Corp. (Ñ) | 16,800 | 437 | ||
TD Banknorth, Inc. (Ñ) | 40,948 | 1,211 | ||
Thornburg Mortgage, Inc. (ö)(Ñ) | 54,500 | 1,400 | ||
TierOne Corp. (Ñ) | 10,053 | 321 | ||
Tower Group, Inc. (Ñ) | 69,150 | 2,444 | ||
TradeStation Group, Inc. (Æ)(Ñ) | 28,400 | 444 | ||
Triad Guaranty, Inc. (Æ)(Ñ) | 38,994 | 2,009 | ||
UMB Financial Corp. | 6,400 | 229 |
34
Table of Contents
Umpqua Holdings Corp. (Ñ) | 8,100 | 229 | ||
United Bankshares, Inc. | 5,100 | 195 | ||
United Community Banks, Inc. (Ñ) | 9,500 | 299 | ||
Unitrin, Inc. | 25,300 | 1,086 | ||
Valley National Bancorp (Ñ) | 9,030 | 235 | ||
Virginia Commerce Bancorp (Æ)(Ñ) | 7,080 | 144 | ||
Weingarten Realty Investors (ö)(Ñ) | 6,100 | 284 | ||
Whitney Holding Corp. | 32,049 | 1,047 | ||
Williams Scotsman International, Inc. (Æ)(Ñ) | 8,200 | 193 | ||
Winston Hotels, Inc. (ö) | 10,670 | 129 | ||
World Acceptance Corp. (Æ)(Ñ) | 7,648 | 382 | ||
Zenith National Insurance Corp. (Ñ) | 53,372 | 2,483 | ||
Zions Bancorporation | 16,500 | 1,327 | ||
205,273 | ||||
Health Care - 10.6% | ||||
Accelrys, Inc. (Æ) | 88,700 | 559 | ||
Adams Respiratory Therapeutics, Inc. (Æ) | 53,451 | 2,304 | ||
Albany Molecular Research, Inc. (Æ) | 20,738 | 247 | ||
Alkermes, Inc. (Æ)(Ñ) | 78,870 | 1,325 | ||
Alliance Imaging, Inc. (Æ)(Ñ) | 17,900 | 151 | ||
Allscripts Healthcare Solutions, Inc. (Æ) | 110,132 | 2,598 | ||
Alpharma, Inc. Class A | 39,090 | 863 | ||
American Medical Systems Holdings, Inc. (Æ) | 210,683 | 3,752 | ||
AMERIGROUP Corp. (Æ) | 68,964 | 2,066 | ||
Amsurg Corp. Class A (Æ)(Ñ) | 8,188 | 172 | ||
Analogic Corp. (Ñ) | 20,200 | 1,127 | ||
Applera Corp. - Celera Genomics Group (Æ) | 192,100 | 2,981 | ||
Apria Healthcare Group, Inc. (Æ)(Ñ) | 12,860 | 300 | ||
Arqule, Inc. (Æ)(Ñ) | 15,314 | 62 | ||
Arthrocare Corp. (Æ) | 64,678 | 2,614 | ||
Beckman Coulter, Inc. (Ñ) | 8,700 | 501 | ||
Bio-Rad Laboratories, Inc. Class A (Æ) | 19,777 | 1,452 | ||
Bruker BioSciences Corp. (Æ) | 25,832 | 206 | ||
Cerner Corp. (Æ)(Ñ) | 46,300 | 2,237 | ||
Charles River Laboratories International, Inc. (Æ)(Ñ) | 62,400 | 2,678 | ||
Community Health Systems, Inc. (Æ) | 76,614 | 2,486 | ||
Computer Programs & Systems, Inc. (Ñ) | 4,249 | 145 | ||
Conor Medsystems, Inc. (Æ)(Ñ) | 58,000 | 1,424 | ||
Cooper Cos., Inc. (The) (Ñ) | 53,900 | 3,106 | ||
Covance, Inc. (Æ) | 35,800 | 2,094 | ||
Dade Behring Holdings, Inc. | 5,586 | 204 | ||
DaVita, Inc. (Æ)(Ñ) | 146,075 | 8,126 | ||
Dendreon Corp. (Æ)(Ñ) | 29,200 | 147 | ||
Dendrite International, Inc. (Æ) | 7,491 | 78 | ||
Discovery Laboratories, Inc. (Æ)(Ñ) | 58,700 | 153 | ||
Endo Pharmaceuticals Holdings, Inc. (Æ)(Ñ) | 47,250 | 1,349 | ||
Enzon Pharmaceuticals, Inc. (Æ)(Ñ) | 48,636 | 416 | ||
Flamel Technologies SA - ADR (Æ)(Ñ) | 15,500 | 385 | ||
Genesis HealthCare Corp. (Æ) | 11,740 | 569 | ||
Greatbatch, Inc. (Æ)(Ñ) | 23,000 | 517 | ||
Haemonetics Corp. (Æ)(Ñ) | 14,722 | 671 | ||
Hanger Orthopedic Group, Inc. (Æ) | 2,000 | 16 | ||
Healthcare Services Group (Ñ) | 52,300 | 1,422 | ||
Healthspring, Inc. (Æ) | 28,000 | 564 | ||
Healthways, Inc. (Æ) | 65,372 | 2,769 | ||
Henry Schein, Inc. (Æ) | 88,612 | 4,403 | ||
Hologic, Inc. (Æ) | 92,458 | 4,452 | ||
ICU Medical, Inc. (Æ)(Ñ) | 8,077 | 341 | ||
Idexx Laboratories, Inc. (Æ) | 3,200 | 266 | ||
Illumina, Inc. (Æ)(Ñ) | 157,727 | 6,934 |
35
Table of Contents
Intralase Corp. (Æ)(Ñ) | 50,500 | 993 | ||
Inverness Medical Innovations, Inc. (Æ)(Ñ) | 34,600 | 1,304 | ||
Invitrogen Corp. (Æ) | 9,300 | 540 | ||
Kendle International, Inc. (Æ)(Ñ) | 11,730 | 406 | ||
King Pharmaceuticals, Inc. (Æ)(Ñ) | 24,640 | 412 | ||
Kos Pharmaceuticals, Inc. (Æ)(Ñ) | 4,600 | 229 | ||
Landauer, Inc. (Æ) | 4,511 | 247 | ||
LCA-Vision, Inc. | 17,502 | 615 | ||
Lifecell Corp. (Æ)(Ñ) | 54,900 | 1,286 | ||
LifePoint Hospitals, Inc. (Æ) | 26,700 | 948 | ||
Magellan Health Services, Inc. (Æ)(Ñ) | 10,005 | 437 | ||
Medcath Corp. (Æ) | 15,265 | 404 | ||
Medical Action Industries, Inc. (Æ)(Ñ) | 10,467 | 278 | ||
Mentor Corp. | 46,042 | 2,155 | ||
Millennium Pharmaceuticals, Inc. (Æ)(Ñ) | 95,100 | 1,113 | ||
Molecular Devices Corp. (Æ) | 5,430 | 109 | ||
Molina Healthcare, Inc. (Æ)(Ñ) | 47,640 | 1,869 | ||
Myriad Genetics, Inc. (Æ)(Ñ) | 36,500 | 982 | ||
Neurocrine Biosciences, Inc. (Æ)(Ñ) | 24,400 | 282 | ||
Noven Pharmaceuticals, Inc. (Æ)(Ñ) | 34,492 | 766 | ||
Omnicell, Inc. (Æ) | 8,350 | 156 | ||
Pain Therapeutics, Inc. (Æ)(Ñ) | 19,627 | 164 | ||
Palomar Medical Technologies, Inc. (Æ)(Ñ) | 8,330 | 392 | ||
Parexel International Corp. (Æ) | 20,370 | 603 | ||
Patterson Cos., Inc. (Æ) | 53,517 | 1,758 | ||
Perrigo Co. (Ñ) | 64,868 | 1,161 | ||
Pharmaceutical Product Development, Inc. | 66,982 | 2,120 | ||
Pharmacopeia Drug Discovery, Inc. (Æ) | 51,050 | 224 | ||
Pharmacyclics, Inc. (Æ)(Ñ) | 5,300 | 29 | ||
PharmaNet Development Group, Inc. (Æ)(Ñ) | 23,351 | 437 | ||
Phase Forward, Inc. (Æ) | 109,700 | 1,523 | ||
PolyMedica Corp. (Ñ) | 36,400 | 1,512 | ||
PSS World Medical, Inc. (Æ) | 82,579 | 1,662 | ||
Psychiatric Solutions, Inc. (Æ) | 97,030 | 3,221 | ||
Quality Systems, Inc. | 55,864 | 2,371 | ||
Savient Pharmaceuticals, Inc. (Æ) | 54,578 | 415 | ||
Sciclone Pharmaceuticals, Inc. (Æ)(Ñ) | 20,100 | 52 | ||
Sierra Health Services, Inc. (Æ) | 8,150 | 279 | ||
Stericycle, Inc. (Æ)(Ñ) | 33,000 | 2,333 | ||
STERIS Corp. | 42,900 | 1,045 | ||
Sunrise Senior Living, Inc. (Æ)(Ñ) | 32,079 | 1,001 | ||
Techne Corp. (Æ) | 51,327 | 2,868 | ||
Tenet Healthcare Corp. (Æ)(Ñ) | 136,400 | 963 | ||
Universal Health Services, Inc. Class B | 11,900 | 630 | ||
Varian Medical Systems, Inc. (Æ) | 31,450 | 1,725 | ||
Ventana Medical Systems, Inc. (Æ)(Ñ) | 27,600 | 1,115 | ||
Viasys Healthcare, Inc. (Æ) | 7,300 | 209 | ||
Vital Images, Inc. (Æ)(Ñ) | 19,856 | 616 | ||
Watson Pharmaceuticals, Inc. (Æ)(Ñ) | 83,760 | 2,254 | ||
WellCare Health Plans, Inc. (Æ)(Ñ) | 83,512 | 4,906 | ||
West Pharmaceutical Services, Inc. | 15,369 | 646 | ||
Zoll Medical Corp. (Æ) | 22,399 | 867 | ||
125,864 | ||||
Integrated Oils - 0.1% | ||||
Giant Industries, Inc. (Æ)(Ñ) | 10,475 | 848 | ||
Materials and Processing - 8.8% | ||||
Acuity Brands, Inc. | 19,719 | 977 | ||
AEP Industries, Inc. (Æ)(Ñ) | 7,625 | 402 | ||
Airgas, Inc. | 78,751 | 2,978 | ||
Albemarle Corp. (Æ) | 31,500 | 2,048 |
36
Table of Contents
Aleris International, Inc. (Æ) | 53,657 | 2,764 | ||
AM Castle & Co. | 56,303 | 1,883 | ||
Amrep Corp. (Ñ) | 5,140 | 368 | ||
Aptargroup, Inc. | 15,400 | 846 | ||
Arch Chemicals, Inc. | 7,840 | 262 | ||
Ashland, Inc. (Ñ) | 6,440 | 381 | ||
Barnes Group, Inc. (Ñ) | 53,700 | 1,077 | ||
Builders FirstSource, Inc. (Æ)(Ñ) | 30,803 | 487 | ||
Cambrex Corp. (Ñ) | 66,519 | 1,556 | ||
CF Industries Holdings, Inc. | 46,170 | 915 | ||
Chaparral Steel Co. (Æ) | 18,200 | 757 | ||
Chesapeake Corp. (Ñ) | 21,000 | 326 | ||
Chicago Bridge & Iron Co. NV | 75,496 | 1,854 | ||
Comfort Systems USA, Inc. | 74,650 | 867 | ||
Commercial Metals Co. | 65,600 | 1,746 | ||
Constar International, Inc. (Æ)(Ñ) | 48,500 | 339 | ||
Crown Holdings, Inc. (Æ) | 30,200 | 587 | ||
Cytec Industries, Inc. | 61,500 | 3,406 | ||
Eastern Co. (The) (Ñ) | 75,000 | 1,312 | ||
Eastman Chemical Co. | 30,000 | 1,828 | ||
EMCOR Group, Inc. (Æ) | 77,462 | 4,582 | ||
Encore Wire Corp. (Æ)(Ñ) | 29,600 | 796 | ||
Energizer Holdings, Inc. (Æ)(Ñ) | 24,140 | 1,886 | ||
Energy Conversion Devices, Inc. (Æ) | 27,528 | 1,013 | ||
Ennis, Inc. (Ñ) | 60,500 | 1,390 | ||
Ferro Corp. | 40,400 | 797 | ||
FMC Corp. | 30,320 | 2,078 | ||
Georgia Gulf Corp. (Ñ) | 44,500 | 952 | ||
Gerdau Ameristeel Corp. | 142,000 | 1,444 | ||
Granite Construction, Inc. | 17,993 | 937 | ||
Greif, Inc. Class A | 1,753 | 164 | ||
Harsco Corp. | 17,900 | 1,461 | ||
HB Fuller Co. | 80,500 | 1,996 | ||
Hercules, Inc. (Æ) | 60,400 | 1,099 | ||
Huntsman Corp. (Æ) | 41,000 | 708 | ||
Infrasource Services, Inc. (Æ) | 43,769 | 856 | ||
Innospec, Inc. | 3,100 | 104 | ||
Insituform Technologies, Inc. Class A (Æ)(Ñ) | 92,800 | 2,169 | ||
Kaydon Corp. (Ñ) | 15,660 | 655 | ||
Lennox International, Inc. | 24,100 | 650 | ||
LSI Industries, Inc. | 13,500 | 242 | ||
Lubrizol Corp. | 47,100 | 2,119 | ||
Material Sciences Corp. (Æ) | 2,648 | 31 | ||
Metal Management, Inc. | 34,000 | 934 | ||
Mueller Industries, Inc. | 57,759 | 2,118 | ||
Mueller Water Products, Inc. Class A (Æ) | 134,058 | 2,141 | ||
Myers Industries, Inc. (Ñ) | 48,932 | 887 | ||
Neenah Paper, Inc. (Æ) | 14,721 | 542 | ||
Newkirk Realty Trust, Inc. | 10,300 | 174 | ||
NewMarket Corp. | 16,112 | 1,036 | ||
Olin Corp. | 51,400 | 889 | ||
OM Group, Inc. (Æ) | 66,455 | 3,788 | ||
Perini Corp. (Æ) | 10,300 | 255 | ||
Pioneer Cos., Inc. (Æ) | 15,579 | 400 | ||
PolyOne Corp. (Æ)(Ñ) | 101,782 | 835 | ||
PW Eagle, Inc. (Ñ) | 10,908 | 387 | ||
Quanex Corp. (Ñ) | 22,300 | 747 | ||
Reliance Steel & Aluminum Co. | 20,500 | 704 | ||
Rock-Tenn Co. Class A | 34,827 | 719 | ||
Rockwood Holdings, Inc. (Æ) | 41,900 | 977 |
37
Table of Contents
Ryerson, Inc. (Ñ) | 4,710 | 113 | ||
Schnitzer Steel Industries, Inc. Class A (Ñ) | 47,392 | 1,657 | ||
Schulman A, Inc. (Ñ) | 9,620 | 233 | ||
Spartech Corp. | 74,940 | 2,053 | ||
Standard Register Co. (The) (Ñ) | 25,712 | 348 | ||
Steel Dynamics, Inc. (Ñ) | 27,000 | 1,623 | ||
Steel Technologies, Inc. | 15,100 | 290 | ||
Superior Essex, Inc. (Æ) | 34,080 | 1,278 | ||
Temple-Inland, Inc. | 16,500 | 651 | ||
Terra Industries, Inc. (Æ)(Ñ) | 43,900 | 408 | ||
Texas Industries, Inc. (Ñ) | 24,500 | 1,521 | ||
Timken Co. | 45,700 | 1,373 | ||
Trammell Crow Co. (Æ) | 61,290 | 2,988 | ||
Universal Forest Products, Inc. (Ñ) | 2,529 | 115 | ||
URS Corp. (Æ) | 26,700 | 1,079 | ||
USEC, Inc. (Ñ) | 19,500 | 218 | ||
USG Corp. (Æ)(Ñ) | 41,200 | 2,014 | ||
Valmont Industries, Inc. (Ñ) | 37,447 | 2,089 | ||
Washington Group International, Inc. | 109,184 | 6,182 | ||
Westlake Chemical Corp. (Ñ) | 75,783 | 2,391 | ||
Wheeling-Pittsburgh Corp. (Æ)(Ñ) | 6,350 | 125 | ||
Xerium Technologies, Inc. (Ñ) | 9,600 | 119 | ||
104,496 | ||||
Miscellaneous - 1.7% | ||||
Foster Wheeler, Ltd. (Æ)(Ñ) | 42,800 | 1,924 | ||
GP Strategies Corp. (Æ) | 13,003 | 105 | ||
Hillenbrand Industries, Inc. (Ñ) | 34,100 | 2,001 | ||
Johnson Controls, Inc. (Ñ) | 18,000 | 1,468 | ||
Lancaster Colony Corp. | 3,900 | 158 | ||
McDermott International, Inc. (Æ) | 143,239 | 6,403 | ||
SPX Corp. (Ñ) | 42,150 | 2,424 | ||
Walter Industries, Inc. | 80,660 | 3,750 | ||
Wesco Financial Corp. | 4,203 | 2,015 | ||
20,248 | ||||
Other Energy - 4.6% | ||||
Alon USA Energy, Inc. (Ñ) | 9,500 | 267 | ||
Atlas Pipeline Partners, LP (Ñ) | 31,300 | 1,454 | ||
Bronco Drilling Co., Inc. (Æ)(Ñ) | 10,500 | 179 | ||
Cameron International Corp. (Æ) | 36,408 | 1,824 | ||
Cimarex Energy Co. (Ñ) | 49,900 | 1,797 | ||
Comstock Resources, Inc. (Æ) | 43,500 | 1,214 | ||
Core Laboratories NV (Æ) | 65,018 | 4,739 | ||
Dawson Geophysical Co. (Æ)(Ñ) | 43,411 | 1,304 | ||
Denbury Resources, Inc. (Æ) | 30,400 | 874 | ||
Dresser-Rand Group, Inc. (Æ) | 29,000 | 629 | ||
Edge Petroleum Corp. (Æ) | 25,300 | 461 | ||
Enbridge Energy Partners, LP Class A (Ñ) | 29,000 | 1,434 | ||
ENSCO International, Inc. (Ñ) | 31,200 | 1,528 | ||
Equitable Resources, Inc. (Ñ) | 3,040 | 123 | ||
FMC Technologies, Inc. (Æ)(Ñ) | 6,600 | 399 | ||
Foundation Coal Holdings, Inc. (Ñ) | 34,000 | 1,248 | ||
Frontier Oil Corp. | 40,500 | 1,191 | ||
Global Industries, Ltd. (Æ) | 63,900 | 1,061 | ||
Grey Wolf, Inc. (Æ)(Ñ) | 101,205 | 708 | ||
Hercules Offshore, Inc. (Æ)(Ñ) | 43,600 | 1,553 | ||
Holly Corp. (Ñ) | 22,850 | 1,087 | ||
Hornbeck Offshore Services, Inc. (Æ)(Ñ) | 71,079 | 2,565 | ||
Input/Output, Inc. (Æ)(Ñ) | 79,200 | 888 | ||
Meridian Resource Corp. (Æ)(Ñ) | 62,113 | 209 | ||
National-Oilwell Varco, Inc. (Æ) | 39,569 | 2,390 |
38
Table of Contents
Newfield Exploration Co. (Æ)(Ñ) | 17,900 | 730 | ||
Oil States International, Inc. (Æ) | 15,100 | 438 | ||
Ormat Technologies, Inc. (Ñ) | 10,900 | 419 | ||
Penn Virginia Corp. | 17,881 | 1,279 | ||
Pioneer Drilling Co. (Æ)(Ñ) | 67,600 | 888 | ||
Reliant Energy, Inc. (Æ)(Ñ) | 17,401 | 221 | ||
St. Mary Land & Exploration Co. (Ñ) | 27,897 | 1,040 | ||
Swift Energy Co. (Æ) | 44,600 | 2,084 | ||
Talisman Energy, Inc. | 79,965 | 1,320 | ||
TEPPCO Partners, LP (Ñ) | 38,000 | 1,498 | ||
Tetra Technologies, Inc. (Æ) | 139,192 | 3,605 | ||
Trico Marine Services, Inc. (Æ)(Ñ) | 31,400 | 1,071 | ||
Unit Corp. (Æ) | 25,000 | 1,160 | ||
Universal Compression Holdings, Inc. (Æ)(Ñ) | 1,930 | 116 | ||
Veritas DGC, Inc. (Æ)(Ñ) | 59,062 | 4,253 | ||
Western Refining, Inc. (Ñ) | 21,200 | 499 | ||
Whiting Petroleum Corp. (Æ) | 32,100 | 1,432 | ||
XTO Energy, Inc. | 36,609 | 1,708 | ||
54,887 | ||||
Producer Durables - 6.4% | ||||
AGCO Corp. (Æ)(Ñ) | 36,248 | 970 | ||
AO Smith Corp. (Ñ) | 19,660 | 691 | ||
Arris Group, Inc. (Æ) | 42,371 | 568 | ||
ASML Holding NV (Æ) | 149,533 | 3,415 | ||
BE Aerospace, Inc. (Æ) | 116,190 | 2,937 | ||
Belden CDT, Inc. | 12,600 | 456 | ||
Briggs & Stratton Corp. (Ñ) | 32,400 | 826 | ||
C&D Technologies, Inc. (Ñ) | 13,500 | 67 | ||
C-COR, Inc. (Æ) | 58,524 | 585 | ||
Cascade Corp. (Ñ) | 33,700 | 1,725 | ||
Crane Co. | 20,513 | 799 | ||
Credence Systems Corp. (Æ)(Ñ) | 84,596 | 272 | ||
Crown Castle International Corp. (Æ)(Ñ) | 40,300 | 1,356 | ||
CTS Corp. (Ñ) | 22,636 | 320 | ||
Desarrolladora Homex SA de CV - ADR (Æ)(Ñ) | 54,515 | 2,393 | ||
DR Horton, Inc. (Ñ) | 37,566 | 880 | ||
Ducommun, Inc. (Æ)(Ñ) | 64,000 | 1,333 | ||
EnPro Industries, Inc. (Æ)(Ñ) | 16,946 | 542 | ||
Entegris, Inc. (Æ)(Ñ) | 156,127 | 1,750 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 74,309 | 3,227 | ||
Flow International Corp. (Æ)(Ñ) | 2,397 | 28 | ||
Flowserve Corp. (Æ) | 14,300 | 758 | ||
Garmin, Ltd. (Ñ) | 40,200 | 2,147 | ||
Gmarket, Inc. - ADR (Æ) | 28,700 | 476 | ||
Herman Miller, Inc. (Ñ) | 62,500 | 2,143 | ||
Interdigital Communications Corp. (Æ)(Ñ) | 34,200 | 1,223 | ||
Itron, Inc. (Æ)(Ñ) | 12,868 | 701 | ||
Kennametal, Inc. | 28,144 | 1,737 | ||
Kimball International, Inc. Class B (Ñ) | 36,024 | 895 | ||
Kulicke & Soffa Industries, Inc. (Æ)(Ñ) | 17,600 | 158 | ||
L-1 Identity Solutions, Inc. (Æ)(Ñ) | 78,500 | 1,123 | ||
Lam Research Corp. (Æ) | 58,521 | 2,894 | ||
Lennar Corp. Class A (Ñ) | 19,550 | 928 | ||
Mettler Toledo International, Inc. (Æ) | 75,000 | 5,149 | ||
Milacron, Inc. (Æ)(Ñ) | 154,829 | 139 | ||
MKS Instruments, Inc. (Æ) | 34,600 | 749 | ||
NACCO Industries, Inc. Class A | 2,585 | 389 | ||
Novellus Systems, Inc. (Æ)(Ñ) | 35,800 | 990 | ||
Orbital Sciences Corp. (Æ)(Ñ) | 58,513 | 1,063 | ||
Pall Corp. | 50,900 | 1,624 |
39
Table of Contents
Polycom, Inc. (Æ) | 143,243 | 3,925 | ||
Regal-Beloit Corp. (Ñ) | 20,833 | 1,030 | ||
Robbins & Myers, Inc. (Ñ) | 45,986 | 1,770 | ||
SBA Communications Corp. Class A (Æ)(Ñ) | 92,300 | 2,465 | ||
Steelcase, Inc. Class A (Ñ) | 43,800 | 726 | ||
Technitrol, Inc. | 38,700 | 976 | ||
Tecumseh Products Co. Class A (Æ)(Ñ) | 51,700 | 869 | ||
Tektronix, Inc. | 58,000 | 1,761 | ||
Teledyne Technologies, Inc. (Æ) | 21,500 | 897 | ||
Tennant Co. | 34,802 | 962 | ||
Toll Brothers, Inc. (Æ)(Ñ) | 33,100 | 957 | ||
Tollgrade Communications, Inc. (Æ) | 22,950 | 188 | ||
Triumph Group, Inc. (Æ)(Ñ) | 4,500 | 217 | ||
Ultra Clean Holdings (Æ) | 72,200 | 942 | ||
Ultratech, Inc. (Æ)(Ñ) | 43,500 | 622 | ||
United Industrial Corp. (Ñ) | 2,470 | 111 | ||
Varian Semiconductor Equipment Associates, Inc. (Æ)(Ñ) | 194,904 | 7,112 | ||
Waters Corp. (Æ) | 15,079 | 751 | ||
Zygo Corp. (Æ) | 2,500 | 43 | ||
76,750 | ||||
Technology - 16.3% | ||||
Actel Corp. (Æ) | 23,200 | 380 | ||
ActivIdentity Corp. (Æ)(Ñ) | 15,600 | 87 | ||
Acxiom Corp. | 32,099 | 794 | ||
Adaptec, Inc. (Æ) | 289,584 | 1,312 | ||
Agile Software Corp. (Æ)(Ñ) | 206,200 | 1,390 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 83,000 | 3,889 | ||
Alliance Semiconductor Corp. (Æ) | 70,300 | 260 | ||
Altiris, Inc. (Æ) | 5,900 | 133 | ||
Amdocs, Ltd. (Æ) | 39,300 | 1,523 | ||
American Reprographics Co. (Æ) | 31,682 | 1,125 | ||
American Software, Inc. Class A | 9,126 | 66 | ||
Amphenol Corp. Class A | 113,022 | 7,674 | ||
Anaren, Inc. (Æ) | 17,332 | 349 | ||
Ansoft Corp. (Æ)(Ñ) | 50,181 | 1,338 | ||
Ansys, Inc. (Æ) | 90,900 | 4,181 | ||
Applera Corp. - Applied Biosystems Group | 32,400 | 1,208 | ||
Applied Micro Circuits Corp. (Æ) | 57,300 | 175 | ||
Ariba, Inc. (Æ)(Ñ) | 69,000 | 521 | ||
Arrow Electronics, Inc. (Æ) | 56,000 | 1,672 | ||
ASE Test, Ltd. (Æ)(Ñ) | 131,000 | 1,158 | ||
Aspen Technology, Inc. (Æ)(Ñ) | 51,100 | 512 | ||
Atmel Corp. (Æ) | 198,632 | 1,142 | ||
Avanex Corp. (Æ)(Ñ) | 160,500 | 255 | ||
Avnet, Inc. (Æ)(Ñ) | 77,300 | 1,830 | ||
Avocent Corp. (Æ) | 14,400 | 529 | ||
BEA Systems, Inc. (Æ) | 165,200 | 2,688 | ||
BearingPoint, Inc. (Æ)(Ñ) | 60,600 | 505 | ||
Benchmark Electronics, Inc. (Æ) | 260,253 | 6,910 | ||
Blackbaud, Inc. | 43,762 | 1,094 | ||
Broadwing Corp. (Æ)(Ñ) | 37,642 | 564 | ||
Brocade Communications Systems, Inc. (Æ)(Ñ) | 465,104 | 3,772 | ||
Captaris, Inc. (Æ) | 29,951 | 176 | ||
Carrier Access Corp. (Æ)(Ñ) | 19,785 | 124 | ||
Cbeyond, Inc. (Æ)(Ñ) | 57,400 | 1,741 | ||
Ceridian Corp. (Æ) | 8,400 | 198 | ||
Ciena Corp. (Æ)(Ñ) | 170,209 | 4,002 | ||
Cirrus Logic, Inc. (Æ) | 68,363 | 483 | ||
Citrix Systems, Inc. (Æ) | 41,400 | 1,223 | ||
ClearOne Communications, Inc. (Æ) | 358 | 1 |
40
Table of Contents
Cognizant Technology Solutions Corp. Class A (Æ)(Ñ) | 38,600 | 2,906 | ||
Coherent, Inc. (Æ)(Ñ) | 31,232 | 1,007 | ||
Comverse Technology, Inc. (Æ) | 99,541 | 2,167 | ||
Conexant Systems, Inc. (Æ)(Ñ) | 10,400 | 20 | ||
Cray, Inc. (Æ)(Ñ) | 16,808 | 155 | ||
CSG Systems International, Inc. (Æ)(Ñ) | 79,928 | 2,156 | ||
Cubic Corp. (Ñ) | 41,034 | 858 | ||
Daktronics, Inc. (Ñ) | 70,800 | 1,679 | ||
Digital River, Inc. (Æ)(Ñ) | 51,400 | 2,973 | ||
DSP Group, Inc. (Æ) | 4,950 | 107 | ||
Echelon Corp. (Æ)(Ñ) | 7,500 | 63 | ||
Emulex Corp. (Æ) | 4,775 | 90 | ||
Equinix, Inc. (Æ)(Ñ) | 96,299 | 6,587 | ||
Exar Corp. (Æ) | 8,400 | 109 | ||
Extreme Networks (Æ)(Ñ) | 165,178 | 628 | ||
Fairchild Semiconductor International, Inc. (Æ) | 41,100 | 662 | ||
Flir Systems, Inc. (Æ)(Ñ) | 30,900 | 987 | ||
Formfactor, Inc. (Æ)(Ñ) | 29,200 | 1,115 | ||
Foundry Networks, Inc. (Æ) | 76,600 | 970 | ||
Gartner, Inc. (Æ)(Ñ) | 247,500 | 4,603 | ||
Genesis Microchip, Inc. (Æ)(Ñ) | 61,137 | 627 | ||
Gerber Scientific, Inc. (Æ) | 12,400 | 181 | ||
Hittite Microwave Corp. (Æ)(Ñ) | 43,900 | 1,505 | ||
II-VI, Inc. (Æ) | 21,100 | 517 | ||
Ikanos Communications, Inc. (Æ)(Ñ) | 42,600 | 358 | ||
Imation Corp. | 8,300 | 380 | ||
InFocus Corp. (Æ) | 75,300 | 212 | ||
Ingram Micro, Inc. Class A (Æ) | 127,800 | 2,634 | ||
Integrated Device Technology, Inc. (Æ) | 139,600 | 2,213 | ||
Integrated Silicon Solutions, Inc. (Æ)(Ñ) | 114,600 | 606 | ||
Interwoven, Inc. (Æ) | 71,641 | 911 | ||
JDA Software Group, Inc. (Æ)(Ñ) | 19,467 | 286 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 49,575 | 720 | ||
Keane, Inc. (Æ) | 9,300 | 108 | ||
Kemet Corp. (Æ) | 81,100 | 596 | ||
Keynote Systems, Inc. (Æ)(Ñ) | 60,900 | 658 | ||
Lattice Semiconductor Corp. (Æ) | 139,753 | 868 | ||
Lawson Software, Inc. (Æ)(Ñ) | 247,300 | 1,884 | ||
Leadis Technology, Inc. (Æ) | 4,700 | 22 | ||
Logility, Inc. (Æ) | 5,249 | 47 | ||
LSI Logic Corp. (Æ) | 180,200 | 1,811 | ||
McData Corp. Class A (Æ)(Ñ) | 125,047 | 709 | ||
MEMC Electronic Materials, Inc. (Æ) | 39,100 | 1,388 | ||
Mentor Graphics Corp. (Æ)(Ñ) | 373,958 | 6,309 | ||
Mercury Computer Systems, Inc. (Æ) | 14,400 | 177 | ||
Merge Technologies, Inc. (Æ)(Ñ) | 33,078 | 255 | ||
Methode Electronics, Inc. | 21,700 | 240 | ||
Micros Systems, Inc. (Æ) | 54,775 | 2,721 | ||
MicroStrategy, Inc. Class A (Æ)(Ñ) | 10,221 | 1,220 | ||
MIPS Technologies, Inc. Class A (Æ) | 15,000 | 111 | ||
Novell, Inc. (Æ) | 278,200 | 1,669 | ||
Nuance Communications, Inc. (Æ)(Ñ) | 142,800 | 1,648 | ||
Opnet Technologies, Inc. (Æ)(Ñ) | 15,449 | 226 | ||
Opsware, Inc. (Æ)(Ñ) | 158,900 | 1,444 | ||
Orckit Communications, Ltd. (Æ)(Ñ) | 48,600 | 419 | ||
Parametric Technology Corp. (Æ) | 148,967 | 2,911 | ||
Park Electrochemical Corp. (Ñ) | 24,785 | 761 | ||
Pegasystems, Inc. (Ñ) | 9,579 | 92 | ||
Plexus Corp. (Æ) | 18,795 | 412 | ||
PMC - Sierra, Inc. (Æ)(Ñ) | 256,300 | 1,699 |
41
Table of Contents
Portalplayer, Inc. (Æ) | 49,711 | 598 | ||
PowerDsine, Ltd. (Æ)(Ñ) | 53,800 | 584 | ||
Quantum Corp. (Æ)(Ñ) | 305,300 | 666 | ||
Rackable Systems, Inc. (Æ)(Ñ) | 59,100 | 1,833 | ||
Radisys Corp. (Æ)(Ñ) | 30,097 | 552 | ||
RADVision, Ltd. (Æ) | 14,200 | 272 | ||
RADWARE, Ltd. (Æ)(Ñ) | 22,600 | 330 | ||
RealNetworks, Inc. (Æ)(Ñ) | 237,390 | 2,607 | ||
Riverbed Technology, Inc. (Æ) | 14,300 | 343 | ||
Rockwell Automation, Inc. | 59,455 | 3,686 | ||
Sanmina-SCI Corp. (Æ) | 203,500 | 804 | ||
Seachange International, Inc. (Æ)(Ñ) | 85,200 | 715 | ||
Seagate Technology (Ñ) | 109,745 | 2,478 | ||
Semtech Corp. (Æ) | 82,700 | 1,078 | ||
Sigma Designs, Inc. (Æ)(Ñ) | 55,800 | 1,172 | ||
Sigmatel, Inc. (Æ) | 95,700 | 497 | ||
Silicon Image, Inc. (Æ) | 76,230 | 902 | ||
Silicon Motion Technology Corp. - ADR (Æ) | 14,300 | 220 | ||
Silicon Storage Technology, Inc. (Æ)(Ñ) | 189,073 | 792 | ||
Skyworks Solutions, Inc. (Æ)(Ñ) | 284,000 | 1,883 | ||
Smith Micro Software, Inc. (Æ)(Ñ) | 43,200 | 735 | ||
Solectron Corp. (Æ)(Ñ) | 309,300 | 1,033 | ||
SonicWALL, Inc. (Æ) | 149,130 | 1,566 | ||
SPSS, Inc. (Æ) | 5,750 | 159 | ||
Stellent, Inc. | 24,297 | 271 | ||
SupportSoft, Inc. (Æ) | 20,300 | 104 | ||
Sybase, Inc. (Æ) | 14,551 | 354 | ||
Sycamore Networks, Inc. (Æ) | 223,860 | 839 | ||
Sykes Enterprises, Inc. (Æ) | 44,159 | 896 | ||
Syniverse Holdings, Inc. (Æ) | 16,413 | 242 | ||
SYNNEX Corp. (Æ)(Ñ) | 49,738 | 1,117 | ||
Synopsys, Inc. (Æ)(Ñ) | 185,760 | 4,181 | ||
Tekelec (Æ)(Ñ) | 110,600 | 1,631 | ||
Tessera Technologies, Inc. (Æ) | 150,817 | 5,265 | ||
TIBCO Software, Inc. (Æ) | 202,510 | 1,873 | ||
Transaction Systems Architects, Inc. (Æ) | 101,914 | 3,435 | ||
Triquint Semiconductor, Inc. (Æ)(Ñ) | 227,110 | 1,022 | ||
Tyler Technologies, Inc. (Æ)(Ñ) | 28,662 | 407 | ||
Ultimate Software Group, Inc. (Æ)(Ñ) | 99,700 | 2,467 | ||
Unisys Corp. (Æ)(Ñ) | 456,600 | 2,986 | ||
Utstarcom, Inc. (Æ)(Ñ) | 174,900 | 1,884 | ||
Varian, Inc. (Æ) | 49,100 | 2,302 | ||
VeriFone Holdings, Inc. (Æ)(Ñ) | 14,400 | 421 | ||
Vignette Corp. (Æ)(Ñ) | 125,130 | 2,040 | ||
Vocus, Inc. (Æ)(Ñ) | 131,000 | 2,125 | ||
Wavecom Sa - ADR (Æ)(Ñ) | 34,400 | 467 | ||
webMethods, Inc. (Æ) | 145,301 | 1,093 | ||
Westell Technologies, Inc. Class A (Æ) | 68,600 | 165 | ||
Western Digital Corp. (Æ) | 86,400 | 1,579 | ||
Zhone Technologies, Inc. (Æ)(Ñ) | 8,800 | 12 | ||
Zoran Corp. (Æ) | 33,300 | 464 | ||
193,528 | ||||
Utilities - 3.2% | ||||
AGL Resources, Inc. | 6,400 | 240 | ||
Allete, Inc. | 15,800 | 713 | ||
Alliant Energy Corp. (Ñ) | 33,611 | 1,289 | ||
Avista Corp. (Ñ) | 48,240 | 1,242 | ||
Black Hills Corp. (Ñ) | 14,871 | 513 | ||
Centerpoint Energy, Inc. (Ñ) | 80,000 | 1,238 | ||
CenturyTel, Inc. | 20,650 | 831 |
42
Table of Contents
Cincinnati Bell, Inc. (Æ) | 160,296 | 752 | |||
Cleco Corp. (Ñ) | 12,970 | 333 | |||
CMS Energy Corp. (Æ)(Ñ) | 75,500 | 1,124 | |||
CT Communications, Inc. (Ñ) | 49,712 | 1,159 | |||
Laclede Group, Inc. (The) | 4,900 | 175 | |||
Leap Wireless International, Inc. (Æ)(Ñ) | 48,850 | 2,709 | |||
MDU Resources Group, Inc. | 63,300 | 1,626 | |||
NeuStar, Inc. Class A (Æ)(Ñ) | 117,144 | 3,423 | |||
New Jersey Resources Corp. (Ñ) | 15,400 | 799 | |||
NII Holdings, Inc. (Æ) | 40,426 | 2,629 | |||
NorthWestern Corp. (Ñ) | 28,752 | 1,017 | |||
NSTAR (Ñ) | 18,700 | 651 | |||
OGE Energy Corp. (Ñ) | 35,500 | 1,370 | |||
Pepco Holdings, Inc. | 106,550 | 2,708 | |||
Pinnacle West Capital Corp. (Ñ) | 37,200 | 1,778 | |||
Portland General Electric Co. (Ñ) | 21,110 | 544 | |||
RCN Corp. (Æ) | 24,200 | 699 | |||
Southern Union Co. (Ñ) | 47,900 | 1,326 | |||
Southwest Gas Corp. (Ñ) | 7,635 | 274 | |||
TECO Energy, Inc. | 98,700 | 1,628 | |||
Telephone & Data Systems, Inc. | 25,000 | 1,221 | |||
UGI Corp. | 49,900 | 1,322 | |||
Unisource Energy Corp. | 25,500 | 907 | |||
USA Mobility, Inc. (Ñ) | 14,908 | 378 | |||
Westar Energy, Inc. | 42,197 | 1,068 | |||
37,686 | |||||
Total Common Stocks | |||||
(cost $954,695) | 1,099,191 | ||||
Warrants & Rights - 0.0% | |||||
Financial Services - 0.0% | |||||
Washington Mutual, Inc. 2050 Warrants (Æ) | 210,900 | 23 | |||
Total Warrants & Rights | |||||
(cost $45) | 23 | ||||
Short-Term Investments - 7.6% | |||||
Russell Investment Company | |||||
Money Market Fund | 86,722,444 | 86,722 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.815% due 12/07/06 | 100 | 100 | |||
4.891% due 12/07/06 | 3,000 | 2,986 | |||
4.982% due 12/07/06 | 500 | 498 | |||
Total Short-Term Investments | |||||
(cost $90,306) | 90,306 | ||||
Other Securities - 32.5% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 99,126,566 | 99,127 | |||
State Street Securities Lending Quality Trust (×) | 287,172,066 | 287,172 | |||
Total Other Securities | |||||
(cost $386,299) | 386,299 | ||||
Total Investments - 132.6% | |||||
(identified cost $1,431,345) | 1,575,819 | ||||
Other Assets and Liabilities, | |||||
Net - (32.6%) | (387,413 | ) | |||
Net Assets - 100.0% | 1,188,406 | ||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Russell 2000 Mini Index (CME) expiration date 12/06 (1,135) | 87,509 | 5,101 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 5,101 | |||
43
Table of Contents
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 3.2 | ||
Consumer Discretionary | 18.9 | ||
Consumer Staples | 1.4 | ||
Financial Services | 17.3 | ||
Health Care | 10.6 | ||
Integrated Oils | 0.1 | ||
Materials and Processing | 8.8 | ||
Miscellaneous | 1.7 | ||
Other Energy | 4.6 | ||
Producer Durables | 6.4 | ||
Technology | 16.3 | ||
Utilities | 3.2 | ||
Warrants & Rights | — | * | |
Short-Term Investments | 7.6 | ||
Other Securities | 32.5 | ||
Total Investments | 132.6 | ||
Other Assets and Liabilities, Net | (32.6 | ) | |
100.0 | |||
Futures Contracts | 0.4 |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund
44
Table of Contents
Quantitative Equity Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Quantitative Equity Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.49 | % | |
5 Years | 7.06 | %§ | |
10 Years | 8.61 | %§ |
Quantitative Equity Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.18 | % | |
5 Years | 6.79 | %§ | |
10 Years | 8.24 | %§ |
Quantitative Equity Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.34 | % | |
5 Years | 6.00 | %§ | |
10 Years | 7.66 | %§ |
Russell 1000(R) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.02 | % | |
5 Years | 7.92 | %§ | |
10 Years | 8.87 | %§ |
45
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Quantitative Equity Fund Class S, Class E and Class C Shares gained 15.49%, 15.18% and 14.34%, respectively. This compared to the Russell 1000(R) Index, which gained 16.02% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Core Funds Average returned 13.60%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s money managers typically use a variety of quantitative investment models (mathematical formulas based on statistical analyses) and techniques to rank the relative attractiveness of securities based upon expected ability to outperform the total return of the Russell 1000(R) Index. Examples of those quantitative models are dividend discount models, price/cash flow models, price/earnings models, earnings surprise and earnings estimate revisions models and price momentum models. The money managers select stocks that are deemed attractive based upon the quantitative models and factors or characteristics money managers’ research has found to be predictive of positive excess returns over the long term.
Two of the primary long-term factors on which the Fund’s money managers select stocks, positive price momentum and positive earnings surprises and revisions, were not rewarded by the market during the fiscal year. This contributed to the Fund’s relative underperformance. Another detractor from performance was an underweight to stocks with higher dividend yields, which significantly outperformed.
The utilities sector posted the best performance of any sector during the fiscal year. This contributed to the Fund’s relative underperformance as the Fund was underweighted in this sector. An underweight in the best-performing industry, cable TV and radio, was the biggest detractor within the utilities sector. Weak stock selection in the strong integrated oil sector as well as in the weak technology sector contributed negatively.
The primary positive contributors to Fund performance were the Fund’s strategy to be fully invested by exposing cash reserves to appropriate markets and its exposure to companies with factor exposures the Fund’s money managers believed to be predictive of positive long-term excess returns. The key factors that were positively rewarded by the market during the fiscal year were low valuation measures and low forecasted growth. The Fund’s performance benefited from an overweight in lower valuation stocks and an underweight in stocks with high forecasted growth. Good stock selection in the strong materials and processing, the weak health care, and the weak consumer discretionary sectors contributed positively to excess returns.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Detracting from performance were weak stock selection in the strong and overweighted integrated oil sector as well as weak selection in the weak and overweighted health care sector. Contributing positively to the Fund’s relative performance were the Fund’s overweight in the strong materials and processing and producer durables sectors coupled with strong stock selection. While the Fund was underweight in the strong financial services sector, strong stock selection in that sector overcame the underweight and contributed positively to performance.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. Implementation of this strategy includes periodic rebalancing of the holdings. The select holdings strategy contributed positively to relative performance during the fiscal year, particularly during the third quarter.
Franklin Portfolio Associates, LLC outperformed due to its overweight in lower valuation stocks, as well as less of an emphasis on momentum. Franklin also benefited from strong stock selection, particularly in the health care and materials and processing sectors.
Aronson + Johnson + Ortiz, L.P.’s strong tilt toward lower valuation stocks helped it overcome negative contributions to relative performance caused by its price momentum component and outperform its benchmark. Aronson also benefited from favorable sector allocations, especially an underweight in other energy. Strong stock selection, particularly in the materials and processing, technology, and producer durable sectors contributed positively to its outperformance.
46
Table of Contents
Goldman Sachs Asset Management, L.P. outperformed on the strength of its stock selection, which was particularly strong in the materials and processing and consumer discretionary sectors.
Jacobs Levy Equity Management, Inc. (“JLEM”) was the only money manager to underperform over the course of the year due to both weak sector allocation decisions and poor stock selection. During the period, its underweight in the strong utilities and overweight of the weak health care sectors had the most negative effect on its sector allocation contributions. Weak stock selection in producer durables, materials and processing, and integrated oils also negatively impacted the Fund’s relative performance. During the first 10 months of the fiscal year, JLEM had a long-only investment assignment. Weak stock selection and sector allocations contributed to its underperformance during that time period. Stock selection in the materials and processing, producer durables, and other energy sectors were poor. In August, JLEM’s assignment was changed to a limited long-short strategy. The limited long-short strategy outperformed the Index in the remaining two months of the fiscal year due to stronger stock selection, particularly in the consumer discretionary and utility sectors.
Describe any changes to the Fund’s structure or the money manager line-up.
The target allocation to the select holdings strategy was increased from 5% to 10% in February. Additionally, Jacobs Levy’s long-only mandate was changed to a limited long-short assignment in August. There were no changes to the money manager line-up for the fiscal year ended October 31, 2006. In order to increase the Select Holdings portfolio from a 5% allocation to 10% in February, the target weighting for each of the four money managers in the Fund were reduced.
Money Managers as of October 31, 2006 | Style | |
Aronson+Johnson+Ortiz, L.P. | Market-Oriented | |
Franklin Portfolio Associates, LLC | Market-Oriented | |
Goldman Sachs Asset Management, L.P. | Market-Oriented | |
Jacobs Levy Equity Management, Inc. | Market-Oriented |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
47
Table of Contents
Russell Investment Company
Quantitative Equity Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,045.50 | $ | 1,015.12 | ||
Expenses Paid During Period* | $ | 10.31 | $ | 10.16 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.00% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
48
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,049.30 | $ | 1,018.95 | ||
Expenses Paid During Period* | $ | 6.41 | $ | 6.31 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.24% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,050.60 | $ | 1,020.21 | ||
Expenses Paid During Period* | $ | 5.12 | $ | 5.04 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
49
Table of Contents
Russell Investment Company
Quantitative Equity Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 101.0% | ||||
Auto and Transportation - 2.8% | ||||
Alaska Air Group, Inc. (Æ) | 1,100 | 44 | ||
ArvinMeritor, Inc. | 32,300 | 485 | ||
Burlington Northern Santa Fe Corp. (Û) | 107,900 | 8,365 | ||
CH Robinson Worldwide, Inc. | 88,394 | 3,690 | ||
Continental Airlines, Inc. Class A (Æ)(Ñ) | 29,500 | 1,088 | ||
CSX Corp. | 534,510 | 19,066 | ||
EGL, Inc. (Æ) | 34,600 | 1,176 | ||
Expeditors International Washington, Inc. | 63,500 | 3,011 | ||
FedEx Corp. (Û) | 73,000 | 8,361 | ||
Goodyear Tire & Rubber Co. (The) (Æ) | 146,900 | 2,252 | ||
Harley-Davidson, Inc. | 71,300 | 4,893 | ||
Heartland Express, Inc. | 20,500 | 335 | ||
JB Hunt Transport Services, Inc. (Ñ) | 107,700 | 2,331 | ||
Norfolk Southern Corp. | 213,740 | 11,236 | ||
Old Dominion Freight Line, Inc. (Æ) | 24,400 | 675 | ||
Overseas Shipholding Group, Inc. | 78,409 | 4,904 | ||
Paccar, Inc. | 274,321 | 16,243 | ||
Southwest Airlines Co. (Ñ) | 104,800 | 1,575 | ||
Thor Industries, Inc. (Ñ) | 61,400 | 2,691 | ||
TRW Automotive Holdings Corp. (Æ) | 23,900 | 613 | ||
Union Pacific Corp. (Û) | 199,423 | 18,074 | ||
111,108 | ||||
Consumer Discretionary - 14.0% | ||||
Abercrombie & Fitch Co. Class A | 4,600 | 353 | ||
Accenture, Ltd. Class A (Æ) | 231,060 | 7,604 | ||
Aeropostale, Inc. (Æ) | 52,200 | 1,530 | ||
American Eagle Outfitters, Inc. (Ñ) | 232,500 | 10,648 | ||
American Greetings Corp. Class A | 136,160 | 3,256 | ||
AnnTaylor Stores Corp. (Æ) | 114,000 | 5,018 | ||
Aramark Corp. Class B | 42,300 | 1,414 | ||
Autonation, Inc. (Æ) | 367,849 | 7,375 | ||
Avis Budget Group, Inc. (Æ) | 37,500 | 742 | ||
Best Buy Co., Inc. (Û) | 113,300 | 6,260 | ||
Big Lots, Inc. (Æ) | 144,230 | 3,040 | ||
Brinker International, Inc. | 101,000 | 4,689 | ||
CBS Corp. Class B | 564,390 | 16,333 | ||
Chipotle Mexican Grill, Inc. Class B (Æ) | 14,889 | 869 | ||
Circuit City Stores, Inc. | 357,470 | 9,645 | ||
Clear Channel Communications, Inc. | 225,390 | 7,855 | ||
Coach, Inc. (Æ) | 294,100 | 11,658 | ||
Coldwater Creek, Inc. (Æ) | 23,900 | 729 | ||
Corporate Executive Board Co. | 26,300 | 2,362 | ||
Costco Wholesale Corp. | 80,060 | 4,274 | ||
Darden Restaurants, Inc. | 257,970 | 10,809 | ||
Dillard’s, Inc. Class A | 250,470 | 7,557 |
50
Table of Contents
DIRECTV Group, Inc. (The) (Æ) | 386,900 | 8,620 | ||
DreamWorks Animation SKG, Inc. Class A (Æ) | 22,100 | 585 | ||
Dress Barn, Inc. (Æ) | 58,400 | 1,268 | ||
Earthlink, Inc. (Æ) | 27,800 | 195 | ||
Eastman Kodak Co. | 49,300 | 1,203 | ||
eBay, Inc. (Æ)(Û) | 167,600 | 5,385 | ||
EchoStar Communications Corp. Class A (Æ) | 89,500 | 3,179 | ||
Estee Lauder Cos., Inc. (The) Class A | 104,300 | 4,213 | ||
Expedia, Inc. (Æ) | 28,900 | 470 | ||
Family Dollar Stores, Inc. | 147,000 | 4,329 | ||
Federated Department Stores, Inc. (Û) | 177,900 | 7,812 | ||
Gemstar-TV Guide International, Inc. (Æ) | 10,057 | 35 | ||
Google, Inc. Class A (Æ)(Û) | 37,200 | 17,722 | ||
Guess?, Inc. (Æ) | 13,200 | 752 | ||
Hasbro, Inc. | 81,500 | 2,112 | ||
Home Depot, Inc. | 70,171 | 2,619 | ||
JC Penney Co., Inc. (Ñ) | 195,100 | 14,677 | ||
Jones Apparel Group, Inc. | 54,870 | 1,833 | ||
Kimberly-Clark Corp. | 112,600 | 7,490 | ||
Kohl’s Corp. (Æ) | 298,300 | 21,060 | ||
Liberty Media Holding Corp. Series A (Æ) | 34,975 | 3,115 | ||
Limited Brands, Inc. | 94,600 | 2,788 | ||
Lowe’s Cos., Inc. | 542,400 | 16,348 | ||
Manpower, Inc. | 191,009 | 12,945 | ||
Marriott International, Inc. Class A | 197,510 | 8,250 | ||
Mattel, Inc. | 152,800 | 3,458 | ||
McDonald’s Corp. (Û) | 222,431 | 9,324 | ||
McGraw-Hill Cos., Inc. (The) | 625,565 | 40,142 | ||
Men’s Wearhouse, Inc. (The) | 32,300 | 1,287 | ||
NetFlix, Inc. (Æ) | 7,000 | 194 | ||
News Corp. Class A | 1,237,500 | 25,802 | ||
Nike, Inc. Class B | 39,200 | 3,602 | ||
Nordstrom, Inc. (Ñ) | 178,600 | 8,457 | ||
Office Depot, Inc. (Æ) | 528,808 | 22,205 | ||
Omnicom Group, Inc. | 59,500 | 6,036 | ||
Republic Services, Inc. Class A | 32,100 | 1,316 | ||
Robert Half International, Inc. | 44,600 | 1,630 | ||
RR Donnelley & Sons Co. | 82,600 | 2,797 | ||
Sears Holdings Corp. (Æ) | 16,000 | 2,792 | ||
Sirius Satellite Radio, Inc. (Æ) | 164,700 | 631 | ||
Staples, Inc. | 258,550 | 6,668 | ||
Starbucks Corp. (Æ)(Û) | 247,000 | 9,324 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 36,800 | 2,198 | ||
Target Corp. (Û) | 364,600 | 21,577 | ||
Time Warner, Inc. | 2,263,240 | 45,287 | ||
TJX Cos., Inc. | 449,800 | 13,022 | ||
Walt Disney Co. | 747,290 | 23,510 | ||
Warner Music Group Corp. (Æ) | 32,400 | 840 | ||
Waste Management, Inc. | 260,500 | 9,764 | ||
Wendy’s International, Inc. | 34,300 | 1,187 | ||
Williams-Sonoma, Inc. (Ñ) | 70,900 | 2,411 | ||
Yum! Brands, Inc. | 126,300 | 7,510 | ||
545,996 | ||||
Consumer Staples - 5.7% | ||||
Altria Group, Inc. | 106,910 | 8,695 | ||
Anheuser-Busch Cos., Inc. (Û) | 162,800 | 7,720 | ||
Clorox Co. | 1,400 | 90 | ||
Coca-Cola Co. (The) (Û) | 367,600 | 17,174 | ||
Coca-Cola Enterprises, Inc. | 95,400 | 1,911 | ||
ConAgra Foods, Inc. | 170,100 | 4,448 |
51
Table of Contents
CVS Corp. (Û) | 310,580 | 9,746 | ||
Dean Foods Co. (Æ) | 27,230 | 1,141 | ||
General Mills, Inc. | 177,800 | 10,103 | ||
Hormel Foods Corp. (Ñ) | 36,000 | 1,300 | ||
Kraft Foods, Inc. Class A | 57,450 | 1,976 | ||
Kroger Co. (The) | 628,549 | 14,136 | ||
Loews Corp. - Carolina Group | 55,700 | 3,221 | ||
McCormick & Co., Inc. | 122,800 | 4,593 | ||
Molson Coors Brewing Co. Class B | 21,400 | 1,523 | ||
Pepsi Bottling Group, Inc. | 47,300 | 1,496 | ||
PepsiCo, Inc. (Û) | 834,600 | 52,947 | ||
Procter & Gamble Co. (Û) | 470,263 | 29,810 | ||
Reynolds American, Inc. (Ñ) | 241,774 | 15,270 | ||
Safeway, Inc. | 391,200 | 11,486 | ||
Supervalu, Inc. | 169,900 | 5,675 | ||
Tyson Foods, Inc. Class A | 423,630 | 6,121 | ||
UST, Inc. | 123,640 | 6,622 | ||
Whole Foods Market, Inc. | 72,200 | 4,609 | ||
221,813 | ||||
Financial Services - 23.4% | ||||
Aflac, Inc. | 229,100 | 10,291 | ||
Alliance Data Systems Corp. (Æ) | 59,300 | 3,601 | ||
Allstate Corp. (The) | 271,600 | 16,665 | ||
AMBAC Financial Group, Inc. | 111,564 | 9,314 | ||
American Express Co. (Û) | 24,800 | 1,434 | ||
American International Group, Inc. (Û) | 240,860 | 16,179 | ||
AmeriCredit Corp. (Æ)(Ñ) | 198,480 | 5,075 | ||
Ameriprise Financial, Inc. | 185,190 | 9,537 | ||
AON Corp. | 79,800 | 2,776 | ||
Arthur J Gallagher & Co. (Æ) | 5,900 | 164 | ||
Automatic Data Processing, Inc. (Û) | 117,800 | 5,824 | ||
Bank of America Corp. (Û) | 1,655,452 | 89,179 | ||
Bank of Hawaii Corp. | 43,390 | 2,264 | ||
Bank of New York Co., Inc. (The) (Û) | 188,200 | 6,468 | ||
BB&T Corp. | 29,100 | 1,266 | ||
Bear Stearns Cos., Inc. (The) | 9,800 | 1,483 | ||
Boston Properties, Inc. (ö) | 8,260 | 882 | ||
Brown & Brown, Inc. | 29,300 | 857 | ||
CapitalSource, Inc. (ö)(Ñ) | 111,900 | 3,104 | ||
CB Richard Ellis Group, Inc. Class A (Æ) | 172,800 | 5,189 | ||
Charles Schwab Corp. (The) | 92,700 | 1,689 | ||
Chubb Corp. | 76,370 | 4,059 | ||
Cigna Corp. | 7,140 | 835 | ||
Cincinnati Financial Corp. (Ñ) | 91,337 | 4,170 | ||
CIT Group, Inc. | 167,900 | 8,739 | ||
Citigroup, Inc. (Û) | 1,176,100 | 58,993 | ||
Comerica, Inc. | 118,600 | 6,901 | ||
Commerce Group, Inc. | 3,200 | 95 | ||
Corus Bankshares, Inc. | 20,600 | 423 | ||
Countrywide Financial Corp. | 925,208 | 35,269 | ||
Covanta Holding Corp. (Æ) | 138,500 | 2,816 | ||
Crescent Real Estate Equities Co. (ö) | 43,400 | 946 | ||
Duke Realty Corp. (ö) | 33,400 | 1,338 | ||
Equity Office Properties Trust (ö) | 177,100 | 7,527 | ||
FelCor Lodging Trust, Inc. (ö) | 23,800 | 494 | ||
Fifth Third Bancorp | 25,200 | 1,004 | ||
First Data Corp. | 76,450 | 1,854 | ||
First Marblehead Corp. (The) (Ñ) | 82,400 | 5,558 | ||
Fiserv, Inc. (Æ) | 283,600 | 14,010 | ||
Franklin Resources, Inc. (Û) | 71,300 | 8,125 |
52
Table of Contents
Genworth Financial, Inc. Class A | 256,370 | 8,573 | ||
Global Payments, Inc. | 80,500 | 3,519 | ||
Goldman Sachs Group, Inc. (Û) | 315,700 | 59,917 | ||
HCC Insurance Holdings, Inc. | 27,800 | 936 | ||
Health Care Property Investors, Inc. (ö) | 26,000 | 816 | ||
Health Care REIT, Inc. (ö) | 22,200 | 916 | ||
Hospitality Properties Trust (ö)(Ñ) | 52,300 | 2,534 | ||
Host Hotels & Resorts, Inc. (ö) | 349,200 | 8,053 | ||
HRPT Properties Trust (ö) | 31,000 | 369 | ||
Hudson City Bancorp, Inc. | 124,450 | 1,709 | ||
IndyMac Bancorp, Inc. (Ñ) | 117,400 | 5,336 | ||
IntercontinentalExchange, Inc. (Æ) | 17,800 | 1,503 | ||
Investment Technology Group, Inc. (Æ) | 29,900 | 1,396 | ||
Jones Lang LaSalle, Inc. | 35,550 | 3,271 | ||
JPMorgan Chase & Co. (Û) | 1,325,406 | 62,877 | ||
KeyCorp | 283,700 | 10,537 | ||
Kimco Realty Corp. (ö) | 54,390 | 2,417 | ||
Lehman Brothers Holdings, Inc. (Û) | 350,700 | 27,299 | ||
Loews Corp. | 488,310 | 19,005 | ||
MBIA, Inc. | 129,623 | 8,039 | ||
Mellon Financial Corp. | 74,200 | 2,879 | ||
Mercury General Corp. | 3,100 | 161 | ||
Merrill Lynch & Co., Inc. | 284,960 | 24,911 | ||
Metlife, Inc. (Û) | 542,300 | 30,982 | ||
MGIC Investment Corp. (Ñ) | 22,800 | 1,340 | ||
MoneyGram International, Inc. | 55,100 | 1,885 | ||
Moody’s Corp. | 71,000 | 4,707 | ||
Morgan Stanley (Û) | 656,900 | 50,207 | ||
National City Corp. (Ñ) | 620,200 | 23,102 | ||
Nationwide Financial Services, Inc. (Ñ) | 33,820 | 1,722 | ||
New Century Financial Corp. (ö) | 52,990 | 2,087 | ||
New Plan Excel Realty Trust (ö) | 28,800 | 829 | ||
Old Republic International Corp. | 165,480 | 3,728 | ||
PNC Financial Services Group, Inc. | 92,100 | 6,450 | ||
Principal Financial Group, Inc. | 115,970 | 6,551 | ||
Progressive Corp. (The) | 212,200 | 5,129 | ||
ProLogis (ö) | 32,711 | 2,070 | ||
Protective Life Corp. | 9,400 | 416 | ||
Prudential Financial, Inc. (Û) | 100,500 | 7,731 | ||
Radian Group, Inc. | 176,150 | 9,389 | ||
Raymond James Financial, Inc. | 23,400 | 746 | ||
Rayonier, Inc. (ö) | 61,100 | 2,505 | ||
Regions Financial Corp. | 265,333 | 10,069 | ||
Ryder System, Inc. | 42,300 | 2,227 | ||
Safeco Corp. (Ñ) | 180,400 | 10,497 | ||
SL Green Realty Corp. (ö) | 16,770 | 2,030 | ||
Sotheby’s Holdings Class A (Æ) | 71,700 | 2,725 | ||
St. Paul Travelers Cos., Inc. (The) | 176,200 | 9,009 | ||
Stancorp Financial Group, Inc. | 19,000 | 868 | ||
State Street Corp. | 112,100 | 7,200 | ||
Synovus Financial Corp. | 20,800 | 611 | ||
T Rowe Price Group, Inc. | 44,330 | 2,097 | ||
TCF Financial Corp. (Ñ) | 41,400 | 1,078 | ||
UnionBanCal Corp. | 80,260 | 4,621 | ||
United Rentals, Inc. (Æ) | 92,050 | 2,181 | ||
Unitrin, Inc. | 12,900 | 554 | ||
US Bancorp | 471,720 | 15,963 | ||
Ventas, Inc. (ö) | 9,100 | 355 | ||
Wachovia Corp. (Û) | 147,772 | 8,201 | ||
Washington Mutual, Inc. (Ñ)(Û) | 211,000 | 8,925 |
53
Table of Contents
Wells Fargo & Co. (Û) | 1,036,880 | 37,628 | ||
Wilmington Trust Corp. | 14,500 | 603 | ||
WR Berkley Corp. | 250,185 | 9,222 | ||
Zenith National Insurance Corp. | 13,900 | 647 | ||
Zions Bancorporation | 10,384 | 835 | ||
913,092 | ||||
Health Care - 14.6% | ||||
Abbott Laboratories (Û) | 157,200 | 7,469 | ||
Aetna, Inc. | 406,468 | 16,755 | ||
AMERIGROUP Corp. (Æ) | 16,900 | 506 | ||
AmerisourceBergen Corp. | 749,020 | 35,354 | ||
Amgen, Inc. (Æ) | 886,130 | 67,266 | ||
Becton Dickinson & Co. | 201,340 | 14,100 | ||
Bio-Rad Laboratories, Inc. Class A (Æ) | 1,400 | 103 | ||
Biogen Idec, Inc. (Æ) | 163,700 | 7,792 | ||
Biomet, Inc. (Æ) | 7,100 | 269 | ||
Boston Scientific Corp. (Æ) | 256,200 | 4,076 | ||
Bristol-Myers Squibb Co. | 228,600 | 5,635 | ||
Cardinal Health, Inc. (Û) | 287,600 | 18,823 | ||
Caremark Rx, Inc. | 821,149 | 40,425 | ||
Cytyc Corp. (Æ) | 42,300 | 1,118 | ||
Dade Behring Holdings, Inc. | 51,300 | 1,869 | ||
Dentsply International, Inc. (Æ) | 71,400 | 2,233 | ||
Emdeon Corp. (Æ) | 277,300 | 3,231 | ||
Express Scripts, Inc. Class A (Æ) | 123,140 | 7,846 | ||
Forest Laboratories, Inc. (Æ) | 223,600 | 10,943 | ||
Genentech, Inc. (Æ)(Ñ)(Û) | 230,464 | 19,198 | ||
Gilead Sciences, Inc. (Æ) | 90,600 | 6,242 | ||
Health Net, Inc. (Æ) | 119,300 | 4,952 | ||
Humana, Inc. (Æ) | 142,080 | 8,525 | ||
Idexx Laboratories, Inc. (Æ) | 8,200 | 682 | ||
IMS Health, Inc. | 87,600 | 2,440 | ||
Johnson & Johnson (Û) | 1,039,970 | 70,094 | ||
King Pharmaceuticals, Inc. (Æ) | 71,590 | 1,198 | ||
Laboratory Corp. of America Holdings(Æ)(Ñ) | 81,100 | 5,554 | ||
LifePoint Hospitals, Inc. (Æ) | 25,400 | 902 | ||
McKesson Corp. | 642,620 | 32,189 | ||
Medco Health Solutions, Inc. (Æ) | 70,800 | 3,788 | ||
Medtronic, Inc. | 76,200 | 3,709 | ||
Merck & Co., Inc. (Û) | 1,007,670 | 45,768 | ||
MGI Pharma, Inc. (Æ) | 2,100 | 40 | ||
Mylan Laboratories, Inc. | 168,200 | 3,448 | ||
Nektar Therapeutics (Æ) | 35,900 | 518 | ||
PDL BioPharma, Inc. (Æ) | 40,200 | 849 | ||
Pediatrix Medical Group, Inc. (Æ) | 3,500 | 157 | ||
Pfizer, Inc. (Û) | 3,357,560 | 89,479 | ||
Pharmaceutical Product Development, Inc. | 7,500 | 237 | ||
Schering-Plough Corp. (Û) | 366,700 | 8,119 | ||
Sierra Health Services, Inc. (Æ) | 24,900 | 853 | ||
Tenet Healthcare Corp. (Æ) | 162,700 | 1,149 | ||
UnitedHealth Group, Inc. | 50,800 | 2,478 | ||
Varian Medical Systems, Inc. (Æ) | 24,400 | 1,339 | ||
WellPoint, Inc. (Æ)(Û) | 113,900 | 8,693 | ||
568,413 | ||||
Integrated Oils - 5.8% | ||||
Chevron Corp. | 144,100 | 9,683 | ||
ConocoPhillips (Ñ)(Û) | 786,310 | 47,367 | ||
Exxon Mobil Corp. (Û) | 1,969,918 | 140,692 | ||
Hess Corp. (Ñ) | 129,900 | 5,508 | ||
Marathon Oil Corp. (Û) | 269,770 | 23,308 | ||
226,558 | ||||
54
Table of Contents
Materials and Processing - 6.6% | ||||
Acuity Brands, Inc. | 25,800 | 1,278 | ||
Alcoa, Inc. (Ñ)(Û) | 581,600 | 16,814 | ||
Archer-Daniels-Midland Co. (Ñ)(Û) | 991,370 | 38,168 | ||
Ashland, Inc. | 91,310 | 5,396 | ||
Avery Dennison Corp. | 21,300 | 1,345 | ||
Bemis Co. | 52,700 | 1,772 | ||
Celanese Corp. Class A | 32,600 | �� | 672 | |
Chaparral Steel Co. | 31,000 | 1,289 | ||
Corn Products International, Inc. | 25,400 | 919 | ||
Dow Chemical Co. (The) (Û) | 296,100 | 12,078 | ||
Eagle Materials, Inc. | 140,900 | 5,171 | ||
Eastman Chemical Co. | 51,900 | 3,162 | ||
EI Du Pont de Nemours & Co. (Û) | 146,900 | 6,728 | ||
EMCOR Group, Inc. (Æ) | 17,060 | 1,009 | ||
Energizer Holdings, Inc. (Æ) | 95,070 | 7,430 | ||
Fluor Corp. | 56,800 | 4,455 | ||
Freeport-McMoRan Copper & Gold, Inc. Class B (Ñ) | 353,400 | 21,374 | ||
Granite Construction, Inc. | 35,950 | 1,873 | ||
HB Fuller Co. | 60,100 | 1,490 | ||
Hercules, Inc. (Æ) | 35,400 | 644 | ||
Huntsman Corp. (Æ) | 32,700 | 565 | ||
Jacobs Engineering Group, Inc. (Æ) | 37,800 | 2,855 | ||
Lyondell Chemical Co. | 140,100 | 3,596 | ||
Masco Corp. (Ñ) | 229,500 | 6,346 | ||
Monsanto Co. | 216,572 | 9,577 | ||
Mueller Industries, Inc. | 23,200 | 851 | ||
Newmont Mining Corp. | 13,720 | 621 | ||
Nucor Corp. | 634,084 | 37,037 | ||
OM Group, Inc. (Æ) | 42,500 | 2,423 | ||
Packaging Corp. of America | 31,600 | 726 | ||
Pactiv Corp. (Æ) | 272,800 | 8,413 | ||
PPG Industries, Inc. | 70,800 | 4,843 | ||
Praxair, Inc. | 1,600 | 96 | ||
Quanex Corp. | 21,500 | 720 | ||
Reliance Steel & Aluminum Co. | 74,000 | 2,542 | ||
Rohm & Haas Co. | 253,200 | 13,121 | ||
Sherwin-Williams Co. (The) (Ñ) | 164,900 | 9,767 | ||
Steel Dynamics, Inc. (Ñ) | 103,200 | 6,203 | ||
Texas Industries, Inc. | 25,400 | 1,577 | ||
United States Steel Corp. (Ñ) | 36,600 | 2,474 | ||
USG Corp. (Æ) | 105,110 | 5,139 | ||
Vulcan Materials Co. | 44,200 | 3,601 | ||
256,160 | ||||
Miscellaneous - 2.4% | ||||
3M Co. (Û) | 129,200 | 10,186 | ||
Eaton Corp. | 5,700 | 413 | ||
General Electric Co. (Û) | 1,617,230 | 56,781 | ||
Honeywell International, Inc. | 113,000 | 4,760 | ||
ITT Corp. | 18,700 | 1,017 | ||
Johnson Controls, Inc. | 95,000 | 7,746 | ||
SPX Corp. | 73,780 | 4,244 | ||
Textron, Inc. | 41,000 | 3,728 | ||
Trinity Industries, Inc. | 46,100 | 1,662 | ||
Tyco International, Ltd. | 51,100 | 1,504 | ||
92,041 | ||||
Other Energy - 2.6% | ||||
Alon USA Energy, Inc. | 27,800 | 780 | ||
Anadarko Petroleum Corp. | 194,280 | 9,018 |
55
Table of Contents
Apache Corp. | 93,060 | 6,079 | ||
Devon Energy Corp. | 241,900 | 16,169 | ||
EOG Resources, Inc. | 125,890 | 8,375 | ||
Frontier Oil Corp. | 22,100 | 650 | ||
Global Industries, Ltd. (Æ) | 64,900 | 1,077 | ||
Halliburton Co. (Û) | 151,300 | 4,895 | ||
Helix Energy Solutions Group, Inc. (Æ) | 47,100 | 1,521 | ||
Helmerich & Payne, Inc. | 130,200 | 3,118 | ||
Holly Corp. | 99,800 | 4,747 | ||
Newfield Exploration Co. (Æ) | 130,400 | 5,319 | ||
Oceaneering International, Inc. (Æ) | 69,100 | 2,487 | ||
Oil States International, Inc. (Æ) | 48,400 | 1,406 | ||
Patterson-UTI Energy, Inc. | 112,275 | 2,605 | ||
Plains Exploration & Production Co. (Æ) | 10,600 | 448 | ||
Sunoco, Inc. | 86,050 | 5,690 | ||
Superior Energy Services, Inc. (Æ) | 32,900 | 1,030 | ||
Tetra Technologies, Inc. (Æ) | 63,900 | 1,655 | ||
Todco (Æ) | 43,600 | 1,488 | ||
Western Refining, Inc. | 46,600 | 1,098 | ||
XTO Energy, Inc. | 458,330 | 21,386 | ||
101,041 | ||||
Producer Durables - 5.0% | ||||
AGCO Corp. (Æ) | 89,730 | 2,400 | ||
Agilent Technologies, Inc. (Æ) | 156,800 | 5,582 | ||
Applied Industrial Technologies, Inc. | 31,700 | 911 | ||
Boeing Co. | 18,095 | 1,445 | ||
Caterpillar, Inc. | 262,600 | 15,942 | ||
Cummins, Inc. (Ñ) | 35,500 | 4,508 | ||
Danaher Corp. | 8,900 | 639 | ||
Emerson Electric Co. | 81,500 | 6,879 | ||
Gardner Denver, Inc. (Æ) | 45,400 | 1,543 | ||
Genlyte Group, Inc. (Æ) | 9,600 | 742 | ||
Joy Global, Inc. | 61,000 | 2,386 | ||
Lam Research Corp. (Æ) | 243,700 | 12,051 | ||
Lexmark International, Inc. Class A (Æ) | 33,500 | 2,130 | ||
Lockheed Martin Corp. (Û) | 622,400 | 54,105 | ||
Manitowoc Co., Inc. (The) | 60,600 | 3,326 | ||
Mettler Toledo International, Inc. (Æ) | 14,300 | 982 | ||
MKS Instruments, Inc. (Æ) | 18,200 | 394 | ||
Molex, Inc. | 26,200 | 914 | ||
Northrop Grumman Corp. | 658,665 | 43,729 | ||
Novellus Systems, Inc. (Æ) | 75,200 | 2,079 | ||
NVR, Inc. (Æ) | 2,300 | 1,292 | ||
Parker Hannifin Corp. | 41,300 | 3,454 | ||
Steelcase, Inc. Class A | 37,200 | 616 | ||
Technitrol, Inc. | 16,900 | 426 | ||
Terex Corp. (Æ) | 21,800 | 1,128 | ||
United Technologies Corp. | 304,010 | 19,980 | ||
Waters Corp. (Æ) | 38,130 | 1,899 | ||
Xerox Corp. (Æ) | 260,300 | 4,425 | ||
195,907 | ||||
Technology - 12.7% | ||||
Advanced Micro Devices, Inc. (Æ) | 298,600 | 6,351 | ||
Agere Systems, Inc. (Æ) | 90,600 | 1,538 | ||
Altera Corp. (Æ) | 124,300 | 2,292 | ||
Applera Corp. - Applied Biosystems Group | 165,469 | 6,172 | ||
Arrow Electronics, Inc. (Æ) | 29,010 | 866 | ||
Atmel Corp. (Æ) | 601,050 | 3,456 | ||
Avnet, Inc. (Æ) | 1,400 | 33 | ||
AVX Corp. (Ñ) | 79,000 | 1,245 |
56
Table of Contents
BEA Systems, Inc. (Æ) | 438,400 | 7,133 | ||
Benchmark Electronics, Inc. (Æ) | 27,500 | 730 | ||
BMC Software, Inc. (Æ) | 136,300 | 4,131 | ||
Brocade Communications Systems, Inc. (Æ) | 181,100 | 1,469 | ||
Cadence Design Systems, Inc. (Æ) | 284,780 | 5,086 | ||
Ciena Corp. (Æ) | 112,014 | 2,634 | ||
Cisco Systems, Inc. (Æ)(Û) | 3,448,370 | 83,209 | ||
Citrix Systems, Inc. (Æ) | 44,100 | 1,302 | ||
Computer Sciences Corp. (Æ) | 252,229 | 13,330 | ||
Conexant Systems, Inc. (Æ) | 98,507 | 190 | ||
Electronic Data Systems Corp. | 143,700 | 3,640 | ||
F5 Networks, Inc. (Æ) | 35,200 | 2,330 | ||
Fairchild Semiconductor International, Inc. (Æ) | 70,800 | 1,141 | ||
Freescale Semiconductor, Inc. Class B | 24,933 | 981 | ||
General Dynamics Corp. | 38,500 | 2,737 | ||
Harris Corp. | 79,900 | 3,404 | ||
Hewlett-Packard Co. (Û) | 1,565,790 | 60,659 | ||
Ingram Micro, Inc. Class A (Æ) | 82,400 | 1,698 | ||
Integrated Device Technology, Inc. (Æ) | 179,100 | 2,839 | ||
Intel Corp. (Û) | 628,300 | 13,408 | ||
International Business Machines Corp. | 360,100 | 33,248 | ||
Intuit, Inc. (Æ) | 398,279 | 14,059 | ||
Jabil Circuit, Inc. | 170,200 | 4,886 | ||
LSI Logic Corp. (Æ) | 174,900 | 1,758 | ||
MEMC Electronic Materials, Inc. (Æ) | 16,900 | 600 | ||
Micron Technology, Inc. (Æ) | 583,020 | 8,425 | ||
Microsoft Corp. | 1,749,670 | 50,233 | ||
Motorola, Inc. (Û) | 725,110 | 16,721 | ||
National Semiconductor Corp. | 142,600 | 3,464 | ||
NCR Corp. (Æ) | 22,600 | 938 | ||
ON Semiconductor Corp. (Æ) | 93,600 | 582 | ||
Oracle Corp. (Æ)(Û) | 1,118,600 | 20,661 | ||
QLogic Corp. (Æ) | 35,200 | 724 | ||
Qualcomm, Inc. (Û) | 467,000 | 16,994 | ||
Raytheon Co. | 364,290 | 18,196 | ||
Sanmina-SCI Corp. (Æ) | 177,400 | 701 | ||
Seagate Technology, Inc. (Æ) | 67,668 | — | ||
Spansion, Inc. Class A (Æ) | 1,500 | 21 | ||
Sun Microsystems, Inc. (Æ) | 1,697,900 | 9,220 | ||
Sycamore Networks, Inc. (Æ) | 158,300 | 594 | ||
Symantec Corp. (Æ) | 175,200 | 3,476 | ||
Synopsys, Inc. (Æ) | 192,681 | 4,337 | ||
Tellabs, Inc. (Æ) | 15,500 | 163 | ||
Texas Instruments, Inc. | 1,328,000 | 40,079 | ||
Unisys Corp. (Æ) | 116,600 | 763 | ||
Utstarcom, Inc. (Æ) | 153,600 | 1,654 | ||
Western Digital Corp. (Æ) | 483,069 | 8,831 | ||
Xilinx, Inc. | 14,300 | 365 | ||
495,697 | ||||
Utilities - 5.4% | ||||
Alltel Corp. | 47,870 | 2,552 | ||
AT&T, Inc. (Û) | 1,078,792 | 36,949 | ||
BellSouth Corp. | 184,000 | 8,298 | ||
CenturyTel, Inc. | 194,610 | 7,831 | ||
Citizens Communications Co. | 111,700 | 1,638 | ||
Comcast Corp. Class A (Æ) | 470,500 | 19,135 | ||
Constellation Energy Group, Inc. | 56,800 | 3,544 | ||
Duke Energy Corp. | 186,690 | 5,907 | ||
Edison International | 200,541 | 8,912 | ||
Embarq Corp. (Æ) | 129,430 | 6,258 |
57
Table of Contents
FirstEnergy Corp. | 120,930 | 7,117 | ||||
KeySpan Corp. | 89,800 | 3,644 | ||||
Leap Wireless International, Inc. Class W(Æ)(Ñ) | 14,700 | 815 | ||||
Mirant Corp. (Æ) | 49,100 | 1,452 | ||||
PG&E Corp. | 331,160 | 14,286 | ||||
PPL Corp. | 196,500 | 6,783 | ||||
Qwest Communications International, Inc. (Æ)(Ñ) | 691,300 | 5,966 | ||||
Sprint Nextel Corp. | 172,710 | 3,228 | ||||
TXU Corp. | 652,319 | 41,181 | ||||
Verizon Communications, Inc. (Û) | 739,576 | 27,364 | ||||
212,860 | ||||||
Total Common Stocks | ||||||
(cost $3,375,183) | 3,940,686 | |||||
Short-Term Investments - 3.8% | ||||||
Russell Investment Company | ||||||
Money Market Fund | 140,823,000 | 140,823 | ||||
United States Treasury Bills (ç)(ž)(§) | ||||||
4.726% due 12/07/06 | 500 | 498 | ||||
4.831% due 12/07/06 | 500 | 498 | ||||
4.891% due 12/07/06 | 7,500 | 7,464 | ||||
Total Short-Term Investments | ||||||
(cost $149,283) | 149,283 | |||||
Other Securities - 2.4% | ||||||
Russell Investment Company | ||||||
Money Market Fund (×) | 24,481,473 | 24,481 | ||||
State Street Securities Lending Quality Trust (×) | 70,923,421 | 70,923 | ||||
Total Other Securities | ||||||
(cost $95,404) | 95,404 | |||||
Total Investments - 107.2% | ||||||
(identified cost $3,619,870) | 4,185,373 | |||||
Securities Sold Short - (4.3%) | ||||||
Auto and Transportation - (0.2%) | ||||||
Airtran Holdings, Inc. (Æ) | (57,400 | ) | (572 | ) | ||
AMR Corp. (Æ) | (54,500 | ) | (1,545 | ) | ||
Continental Airlines, Inc. (Ñ) | (29,800 | ) | (1,099 | ) | ||
Florida East Coast Industries, Inc. (Æ) | (6,300 | ) | (376 | ) | ||
Oshkosh Truck Corp. | (5,000 | ) | (226 | ) | ||
Overseas Shipholding Group, Inc. | (21,700 | ) | (1,357 | ) | ||
Thor Industries, Inc. | (30,100 | ) | (1,319 | ) | ||
US Airways Group, Inc. (Æ) | (24,800 | ) | (1,237 | ) | ||
Winnebago Industries, Inc. | (17,000 | ) | (566 | ) | ||
(8,297 | ) | |||||
Consumer Discretionary - (0.8%) | ||||||
Advance Auto Parts, Inc. | (36,500 | ) | (1,278 | ) | ||
Allied Waste Industries, Inc. (Æ) | (126,500 | ) | (1,537 | ) | ||
American Greetings Corp. | (45,100 | ) | (1,078 | ) | ||
Borders Group, Inc. | (79,600 | ) | (1,639 | ) | ||
Boyd Gaming Corp. | (8,900 | ) | (351 | ) | ||
Cogent, Inc. (Æ) | (10,100 | ) | (116 | ) | ||
Fastenal Co. | (89,800 | ) | (3,613 | ) | ||
Guitar Center, Inc. (Æ) | (9,400 | ) | (408 | ) | ||
Hearst-Argyle Television, Inc. | (18,000 | ) | (454 | ) | ||
Hewitt Associates, Inc. Class A (Æ) | (94,500 | ) | (2,365 | ) | ||
Interpublic Group of Cos., Inc. (Æ) | (140,600 | ) | (1,534 | ) | ||
Las Vegas Sands Corp. (Æ) | (54,400 | ) | (4,145 | ) | ||
Live Nation, Inc. (Æ) | (7,400 | ) | (157 | ) | ||
Pacific Sunwear of California, Inc. (Æ) | (70,600 | ) | (1,244 | ) | ||
Panera Bread Co. Class A (Æ) | (21,000 | ) | (1,298 | ) | ||
RadioShack Corp. | (71,000 | ) | (1,267 | ) | ||
Reader’s Digest Association, Inc. (The) | (75,300 | ) | (1,083 | ) |
58
Table of Contents
Saks, Inc. | (10,400 | ) | (201 | ) | ||
Service Corp. International | (158,000 | ) | (1,441 | ) | ||
Station Casinos, Inc. | (8,600 | ) | (519 | ) | ||
Under Armour, Inc. Class A (Æ) | (6,700 | ) | (310 | ) | ||
United Natural Foods, Inc. (Æ) | (8,500 | ) | (297 | ) | ||
Waste Connections, Inc. (Æ) | (15,400 | ) | (627 | ) | ||
Yahoo!, Inc. (Æ) | (184,800 | ) | (4,868 | ) | ||
(31,830 | ) | |||||
Consumer Staples - 0.0% | ||||||
Rite Aid Corp. (Æ) | (30,700 | ) | (144 | ) | ||
Tyson Foods, Inc. | (100,100 | ) | (1,446 | ) | ||
(1,590 | ) | |||||
Financial Services - (0.9%) | ||||||
Eaton Vance Corp. | (139,400 | ) | (4,327 | ) | ||
Fannie Mae | (32,000 | ) | (1,896 | ) | ||
First Data Corp. | (103,900 | ) | (2,520 | ) | ||
Fremont General Corp. | (42,000 | ) | (610 | ) | ||
General Growth Properties, Inc. (ö) | (40,700 | ) | (2,112 | ) | ||
Global Signal, Inc. (Æ)(ö) | (23,300 | ) | (1,265 | ) | ||
Greenhill & Co., Inc. | (26,900 | ) | (1,828 | ) | ||
H&R Block, Inc. | (147,600 | ) | (3,227 | ) | ||
Investors Financial Services Corp. | (13,000 | ) | (511 | ) | ||
LandAmerica Financial Group, Inc. | (31,000 | ) | (1,956 | ) | ||
MBIA, Inc. | (62,800 | ) | (3,895 | ) | ||
Piper Jaffray Cos., Inc. (Æ) | (15,700 | ) | (1,086 | ) | ||
Potlatch Corp. (Æ)(ö) | (7,400 | ) | (300 | ) | ||
Redwood Trust, Inc. (Æ)(ö) | (5,900 | ) | (324 | ) | ||
SEI Investments Co. | (44,800 | ) | (2,521 | ) | ||
Sovereign Bancorp, Inc. | (100,900 | ) | (2,407 | ) | ||
UnumProvident Corp. | (77,800 | ) | (1,539 | ) | ||
Vornado Realty Trust (ö) | (18,000 | ) | (2,147 | ) | ||
(34,471 | ) | |||||
Health Care - (0.4%) | ||||||
Abraxis BioScience, Inc. (Æ) | (31,600 | ) | (834 | ) | ||
Adams Respiratory Therapeutics, Inc. (Æ) | (18,300 | ) | (789 | ) | ||
Affymetrix, Inc. (Æ) | (27,000 | ) | (688 | ) | ||
Alexion Pharmaceuticals, Inc. (Æ) | (26,500 | ) | (990 | ) | ||
Genzyme Corp. (Æ) | (32,200 | ) | (2,174 | ) | ||
Gilead Sciences, Inc. | (63,400 | ) | (4,368 | ) | ||
Inverness Medical Innovations, Inc. (Æ) | (9,600 | ) | (362 | ) | ||
Omnicare, Inc. | (71,800 | ) | (2,720 | ) | ||
United Therapeutics Corp. (Æ) | (12,200 | ) | (730 | ) | ||
(13,655 | ) | |||||
Integrated Oils - (0.1%) | ||||||
Delta Petroleum Corp. (Æ) | (21,100 | ) | (542 | ) | ||
Murphy Oil Corp. | (52,400 | ) | (2,471 | ) | ||
(3,013 | ) | |||||
Materials and Processing - (0.2%) | ||||||
Century Aluminum Co. (Æ) | (25,400 | ) | (989 | ) | ||
Energy Conversion Devices, Inc. (Æ) | (9,600 | ) | (353 | ) | ||
Hexcel Corp. (Æ) | (41,200 | ) | (667 | ) | ||
Lone Star Technologies, Inc. (Æ) | (16,200 | ) | (782 | ) | ||
Mosaic Co. (The) (Æ) | (73,500 | ) | (1,376 | ) | ||
Scotts Miracle-Gro Co. (The) Class A | (24,800 | ) | (1,227 | ) | ||
Shaw Group, Inc. (The) (Æ) | (58,600 | ) | (1,556 | ) | ||
(6,950 | ) | |||||
Miscellaneous - 0.0% | ||||||
Walter Industries, Inc. | (35,400 | ) | (1,646 | ) | ||
Other Energy - (0.5%) | ||||||
Arch Coal, Inc. | (68,100 | ) | (2,358 | ) |
59
Table of Contents
ATP Oil & Gas Corp. (Æ) | (11,100 | ) | (477 | ) | ||
Baker Hughes, Inc. | (42,600 | ) | (2,941 | ) | ||
Cabot Oil & Gas Corp. | (17,100 | ) | (905 | ) | ||
CNX Gas Corp. (Æ) | (9,800 | ) | (256 | ) | ||
Consol Energy, Inc. | (54,500 | ) | (1,929 | ) | ||
Crosstex Energy, Inc. (Æ) | (10,800 | ) | (1,037 | ) | ||
El Paso Corp. | (109,900 | ) | (1,506 | ) | ||
Equitable Resources, Inc. | (33,200 | ) | (1,345 | ) | ||
Massey Energy Co. (Æ) | (74,700 | ) | (1,886 | ) | ||
Noble Energy, Inc. | (40,000 | ) | (1,945 | ) | ||
PetroHawk Energy Corp. (Æ) | (17,700 | ) | (201 | ) | ||
Pogo Producing Co. | (49,800 | ) | (2,229 | ) | ||
SEACOR Holdings, Inc. (Æ) | (11,900 | ) | (1,065 | ) | ||
(20,080 | ) | |||||
Producer Durables - (0.5%) | ||||||
ACCO Brands Corp. (Æ) | (27,900 | ) | (678 | ) | ||
American Power Conversion Corp. | (10,500 | ) | (317 | ) | ||
ATMI, Inc. (Æ) | (6,400 | ) | (203 | ) | ||
Beazer Homes USA, Inc. (Æ) | (28,100 | ) | (1,218 | ) | ||
Centex Corp. | (72,700 | ) | (3,802 | ) | ||
Crown Castle International Corp. (Æ) | (95,200 | ) | (3,204 | ) | ||
Dionex Corp. (Æ) | (28,400 | ) | (1,545 | ) | ||
Entegris, Inc. (Æ) | (73,343 | ) | (822 | ) | ||
Lennar Corp. Class A | (21,700 | ) | (1,030 | ) | ||
MDC Holdings, Inc. | (27,800 | ) | (1,386 | ) | ||
Pitney Bowes, Inc. | (88,500 | ) | (4,134 | ) | ||
SBA Communications Corp. Class A (Æ) | (27,800 | ) | (743 | ) | ||
Standard-Pacific Corp. | (68,400 | ) | (1,657 | ) | ||
(20,739 | ) | |||||
Technology - (0.5%) | ||||||
American Reprographics Co. (Æ) | (41,200 | ) | (1,463 | ) | ||
Amphenol Corp. Class A | (24,600 | ) | (1,670 | ) | ||
Dell, Inc. (Æ) | (135,500 | ) | (3,297 | ) | ||
EMC Corp. (Æ) | (100,400 | ) | (1,230 | ) | ||
Juniper Networks, Inc. (Æ) | (123,900 | ) | (2,133 | ) | ||
Maxim Integrated Products, Inc. | (114,100 | ) | (3,424 | ) | ||
Microchip Technology, Inc. | (131,700 | ) | (4,337 | ) | ||
Palm, Inc. (Æ) | (18,400 | ) | (282 | ) | ||
Transaction Systems Architects, Inc. (Æ) | (10,500 | ) | (354 | ) | ||
(18,190 | ) | |||||
Utilities - (0.2%) | ||||||
Atmos Energy Corp. | (39,200 | ) | (1,205 | ) | ||
Black Hills Corp. | (2,000 | ) | (69 | ) | ||
CenturyTel, Inc. | (75,100 | ) | (3,023 | ) | ||
Comcast Corp | (30,600 | ) | (1,245 | ) | ||
National Fuel Gas Co. | (22,600 | ) | (845 | ) | ||
Nicor, Inc. | (10,100 | ) | (464 | ) | ||
Southern Union Co. | (44,300 | ) | (1,226 | ) | ||
(8,077 | ) | |||||
Total Securities Sold Short | ||||||
(proceeds $160,252) | (168,538 | ) | ||||
Other Assets and Liabilities, | ||||||
Net - (2.9%) | (111,917 | ) | ||||
Net Assets - 100.0% | 3,904,918 | |||||
60
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Russell 1000 Index expiration date 12/06 (37) | 13,881 | 774 | ||
Russell 1000 Mini Index (CME) expiration date 12/06 (60) | 4,502 | 235 | ||
S&P 500 E-Mini Index (CME) expiration date 12/06 (383) | 26,488 | 1,239 | ||
S&P 500 Index (CME) expiration date 12/06 (146) | 50,487 | 210 | ||
S&P Midcap 400 E-Mini Index (CME) expiration date 12/06 (548) | 43,221 | 2,250 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 4,708 | |||
61
Table of Contents
Russell Investment Company
Quantitative Equity Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 2.8 | ||
Consumer Discretionary | 14.0 | ||
Consumer Staples | 5.7 | ||
Financial Services | 23.4 | ||
Health Care | 14.6 | ||
Integrated Oils | 5.8 | ||
Materials and Processing | 6.6 | ||
Miscellaneous | 2.4 | ||
Other Energy | 2.6 | ||
Producer Durables | 5.0 | ||
Technology | 12.7 | ||
Utilities | 5.4 | ||
Short-Term Investments | 3.8 | ||
Other Securities | 2.4 | ||
Total Investments | 107.2 | ||
Securities Sold Short | (4.3 | ) | |
Other Assets and Liabilities, Net | (2.9 | ) | |
100.0 | |||
Futures Contracts | 0.1 |
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund
62
Table of Contents
(This page intentionally left blank)
63
Table of Contents
International Securities Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
International Securities Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 26.80 | % | |
5 Years | 13.72 | %§ | |
10 Years | 6.73 | %§ |
International Securities Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 26.50 | % | |
5 Years | 13.44 | %§ | |
10 Years | 6.41 | %§ |
International Securities Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 25.54 | % | |
5 Years | 12.59 | %§ | |
10 Years | 5.79 | %§ |
MSCI EAFE Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 27.52 | % | |
5 Years | 14.56 | %§ | |
10 Years | 7.34 | %§ |
64
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the International Securities Fund Class S, Class E and Class C Shares gained 26.80%, 26.50% and 25.54%, respectively. This compared to the MSCI EAFE(R) Index, which gained 27.52% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) International Funds Average returned 26.25%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
For most of the period, the Fund had a slight tilt towards growth stocks. The Fund had a small valuation premium to the market and slightly above-market forecasted growth rates. This was due to the money managers’ views that growth stocks were undervalued relative to value stocks. This positioning and negative contributions to relative performance caused by factors such as price momentum, above-market growth and yield underweight detracted from Fund performance overall. In addition, the Fund was underweight in high dividend yielding stocks and overweight in stocks with positive price momentum. These factors were well rewarded at the end of 2005 and into 2006, but in May of 2006, market sentiment reversed and began to reward stocks with higher dividend yields, and more defensive, predictable earnings streams. This shift in market strength proved difficult for most active managers. While the Fund had some exposure to this area of the market through money managers such as MFS Institutional Advisors, Inc. and Mondrian Investment Partners Limited, the Fund’s overall orientation favoring positive momentum and away from high yield hurt performance. Two chief detractors in this regard were Axiom International Investors LLC and Marvin & Palmer Associates, Inc. Their focus on high growth stocks led to a level of underperformance in the last five months that negatively impacted the overall Fund.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Sector allocation did not contribute to performance. The Fund’s overweight to the energy sector and underweight in the financial services sector detracted from performance. Within the energy sector, however, the Fund benefited from stock selection with an overweight in the better performing equipment and services companies rather than oil and gas companies.
An overweight to European stocks within the industrials sector proved to be favorable. Vallourec S.A., a French manufacturer of steel tubing, was among the top contributors to Fund performance. Vallourec benefited from many of the favorable trends experienced by energy companies. Telecommunications stocks, especially wireless services, underperformed the broad benchmark, and the Fund benefited from its underweight to this sector. On the negative side, stock selection within the consumer discretionary sector was ineffective. Rakuten Inc., an internet retail store in Japan, in particular, detracted from returns. Stock selection within the health care sector was also a detractor to Fund performance as many of the pharmaceutical companies viewed favorably by the Fund’s money managers failed to keep pace with the broad market.
At the country level, stock selection was best in the U.K. due to an overweight position in staples combined with an underweight to the large oil and gas companies such as BG Group, BP, and Royal Dutch Shell. An underweight to Japanese local industrial companies and good stock selection in the financial services sector contributed positively to performance. Emerging markets exposure was a slight detractor to Fund performance. Despite strength among emerging markets in general, stock selection decisions produced less effective results. Non-U.S. currency exposure had a slightly positive effect on performance during the year due to U.S. dollar weakness.
Value money managers in the Fund tended to have the best returns during the period. AllianceBernstein L.P. benefited from broad value exposure and strong stock selection. Mondrian performed well largely due to its preference for cash generating, high dividend yielding stocks and its underweight to Japan.
MFS, a growth money manager with a focus on earnings quality, outperformed for the period due to its more defensive-growth orientation. Aggressive growth money managers such as Marvin & Palmer and Axiom, with exposure to price momentum, underperformed. These money managers’ portfolios contained a high level of forecasted growth potential that was not rewarded by the market during the latter half of the year.
65
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. The select holdings strategy was implemented in the Fund at a 5% target weight at the end of September 2006.
During the year, RIMCo increased the Fund’s allowable exposure to emerging markets to further expand the investable universe.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
AQR Capital Management, LLC | Market-Oriented | |
Axiom International Investors, LLC | Growth | |
Fidelity Management & Research Company | Market-Oriented | |
Marvin & Palmer Associates, Inc. | Growth | |
MFS Institutional Advisors, Inc. | Growth | |
Mondrian Investment Partners Limited | Value | |
The Boston Company Asset Management, LLC | Value | |
Wellington Management Company, LLP | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index is an index composed of an arithmetic, market value-weighted average of the performance of approximately 1,600 securities listed on the stock exchange of the countries of Europe, Australia, and the Far East. The index is calculated on a total-return basis, which includes reinvestment of gross dividends before deduction of withholding taxes. |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
66
Table of Contents
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,015.50 | $ | 1,014.12 | ||
Expenses Paid During Period* | $ | 11.18 | $ | 11.17 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.20% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,019.40 | $ | 1,017.90 | ||
Expenses Paid During Period* | $ | 7.38 | $ | 7.37 |
67
Table of Contents
* | Expenses are equal to the Fund’s annualized expense ratio of 1.45% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,020.60 | $ | 1,019.16 | ||
Expenses Paid During Period* | $ | 6.11 | $ | 6.11 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.20% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
68
Table of Contents
Russell Investment Company
International Securities Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 92.0% | ||||
Australia - 3.7% | ||||
AGL Energy, Ltd. (Æ)(Ñ) | 17,400 | 207 | ||
Alinta, Ltd. | 10,048 | 83 | ||
Amcor, Ltd. (Ñ) | 1,382,919 | 7,410 | ||
AMP, Ltd. | 243,726 | 1,793 | ||
Aristocrat Leisure, Ltd. (Ñ) | 170,482 | 1,839 | ||
Australia & New Zealand Banking Group, Ltd. | 164,455 | 3,698 | ||
Australian Stock Exchange, Ltd. | 23,000 | 631 | ||
Australian Wealth Management, Ltd. (Ñ) | 311,350 | 627 | ||
AXA Asia Pacific Holdings, Ltd. | 66,093 | 341 | ||
BHP Billiton, Ltd. (Ñ) | 442,973 | 9,358 | ||
Billabong International, Ltd. (Ñ) | 56,300 | 684 | ||
Boral, Ltd. (Ñ) | 62,811 | 354 | ||
Bradken, Ltd. | 53,731 | 254 | ||
Caltex Australia, Ltd. (Ñ) | 18,763 | 322 | ||
Centro Properties Group | 37,200 | 222 | ||
Coca-Cola Amatil, Ltd. (Ñ) | 371,256 | 2,001 | ||
Coles Myer, Ltd. | 508,067 | 5,343 | ||
Commonwealth Bank of Australia | 52,574 | 1,942 | ||
Computershare, Ltd. | 218,000 | 1,300 | ||
CSR, Ltd. (Ñ) | 133,124 | 334 | ||
David Jones, Ltd. (Ñ) | 110,000 | 308 | ||
DB RREEF Trust | 101,321 | 129 | ||
Downer EDI, Ltd. (Ñ) | 119,725 | 597 | ||
Dyno Nobel, Ltd. (Æ) | 75,800 | 137 | ||
Foster’s Group, Ltd. | 2,054,315 | 10,260 | ||
Goodman Fielder, Ltd. | 84,921 | 137 | ||
GPT Group (Ñ) | 74,482 | 272 | ||
Harvey Norman Holdings, Ltd. | 54,300 | 152 | ||
Insurance Australia Group, Ltd. (Ñ) | 292,032 | 1,255 | ||
Investa Property Group | 64,403 | 120 | ||
Leighton Holdings, Ltd. (Ñ) | 16,382 | 270 | ||
Lend Lease Corp., Ltd. | 24,140 | 315 | ||
Macquarie Airports Management, Ltd. | 912,800 | 2,269 | ||
Macquarie Bank, Ltd. (Ñ) | 35,102 | 2,026 | ||
Macquarie Goodman Group (Ñ) | 61,243 | 314 | ||
Macquarie Infrastructure Group | 54,141 | 142 | ||
McGuigan Simeon Wines, Ltd. | 133,647 | 273 | ||
Metcash, Ltd. | 144,256 | 478 | ||
Mirvac Group | 23,409 | 89 | ||
National Australia Bank, Ltd. | 976,629 | 28,874 | ||
Newcrest Mining, Ltd. | 13,831 | 255 | ||
OneSteel, Ltd. (Ñ) | 133,483 | 435 | ||
Pacific Brands, Ltd. | 219,981 | 451 | ||
PaperlinX, Ltd. (Ñ) | 70,361 | 224 | ||
Promina Group, Ltd. | 692,823 | 3,648 |
69
Table of Contents
Publishing & Broadcasting, Ltd. (Ñ) | 36,240 | 544 | ||
Qantas Airways, Ltd. | 123,584 | 406 | ||
QBE Insurance Group, Ltd. (Ñ) | 442,133 | 8,456 | ||
Ramsay Health Care, Ltd. | 52,658 | 439 | ||
Rinker Group, Ltd. | 76,820 | 1,103 | ||
Rio Tinto, Ltd. (Ñ) | 14,400 | 874 | ||
Santos, Ltd. | 37,700 | 309 | ||
Sims Group, Ltd. | 11,208 | 187 | ||
Smorgon Steel Group, Ltd. | 33,268 | 43 | ||
Sons of Gwalia, Ltd. (Æ)(Ñ) | 34,800 | — | ||
Stockland (Ñ) | 59,414 | 349 | ||
Suncorp-Metway, Ltd. (Ñ) | 27,819 | 448 | ||
Symbion Health, Ltd. (Ñ) | 267,436 | 679 | ||
TABCORP Holdings, Ltd. (Ñ) | 244,492 | 3,124 | ||
Telstra Corp., Ltd. (Ñ) | 2,130,673 | 6,534 | ||
Transurban Group (Ñ) | 90,800 | 508 | ||
United Group, Ltd. (Ñ) | 49,200 | 557 | ||
Wesfarmers, Ltd. (Ñ) | 143,403 | 3,835 | ||
Westfield Group (Ñ) | 48,960 | 706 | ||
Westpac Banking Corp. | 77,268 | 1,433 | ||
Woodside Petroleum, Ltd. | 1,941 | 56 | ||
Woolworths, Ltd. | 328,556 | 5,264 | ||
Zinifex, Ltd. (Ñ) | 52,085 | 612 | ||
128,639 | ||||
Austria - 0.5% | ||||
Erste Bank der Oesterreichischen Sparkassen AG | 181,482 | 12,357 | ||
OMV AG | 50,900 | 2,767 | ||
Verbund - Oesterreichische | ||||
Elektrizitaetswirtschafts AG Class A (Ñ) | 19,000 | 949 | ||
Voestalpine AG | 49,200 | 2,320 | ||
18,393 | ||||
Belgium - 1.1% | ||||
Belgacom SA (Ñ) | 59,807 | 2,447 | ||
Delhaize Group | 20,371 | 1,647 | ||
Dexia | 9,452 | 255 | ||
Fortis (Ñ) | 433,075 | 18,169 | ||
Fortis | 187,766 | 7,882 | ||
KBC Groep NV | 46,840 | 5,117 | ||
UCB SA | 26,196 | 1,622 | ||
37,139 | ||||
Bermuda - 0.5% | ||||
CNPC Hong Kong, Ltd. | 610,000 | 306 | ||
Cofco International, Ltd. | 154,000 | 137 | ||
Esprit Holdings, Ltd. | 503,500 | 4,875 | ||
Great Eagle Holdings, Ltd. | 70,000 | 188 | ||
Guoco Group, Ltd. | 8,000 | 97 | ||
Jardine Matheson Holdings, Ltd. | 166,100 | 3,322 | ||
Li & Fung, Ltd. | 1,891,200 | 4,948 | ||
Orient Overseas International, Ltd. | 49,000 | 214 | ||
People’s Food Holdings, Ltd. | 96,000 | 72 | ||
TPV Technology, Ltd. | 252,000 | 210 | ||
Vostok Nafta Investment, Ltd. (Æ)(Ñ) | 20,775 | 1,317 | ||
15,686 | ||||
Brazil - 0.2% | ||||
Cia Vale do Rio Doce - ADR | 54,600 | 1,389 | ||
Gerdau SA - ADR (Ñ) | 97,200 | 1,436 | ||
Petroleo Brasileiro SA - ADR | 27,050 | 2,401 | ||
Unibanco - Uniao de Bancos Brasileiros SA - ADR | 10,800 | 850 | ||
6,076 | ||||
Canada - 1.4% |
70
Table of Contents
Cameco Corp. | 55,400 | 1,946 | ||
Canadian Imperial Bank of Commerce (Ñ) | 25,600 | 1,997 | ||
Canadian National Railway Co. | 78,960 | 3,762 | ||
Canadian Natural Resources, Ltd. | 47,900 | 2,493 | ||
EnCana Corp. (Ñ) | 25,400 | 1,206 | ||
Gerdau Ameristeel Corp. | 211,000 | 2,151 | ||
ING Canada, Inc. | 37,900 | 2,006 | ||
IPSCO, Inc. | 32,300 | 2,968 | ||
Nexen, Inc. | 43,540 | 2,323 | ||
Potash Corp. of Saskatchewan | 16,400 | 2,048 | ||
Research In Motion, Ltd. (Æ) | 88,200 | 10,362 | ||
Rogers Communications, Inc. Class B (Ñ) | 117,700 | 7,042 | ||
SNC-Lavalin Group, Inc. | 125,100 | 3,416 | ||
Teck Cominco, Ltd. Class B (Ñ) | 51,200 | 3,773 | ||
Toronto-Dominion Bank (Ñ) | 15,300 | 887 | ||
48,380 | ||||
Cayman Islands - 0.1% | ||||
Chaoda Modern Agriculture | 176,000 | 106 | ||
Foxconn International Holdings, Ltd. (Æ) | 731,000 | 2,430 | ||
2,536 | ||||
China - 0.3% | ||||
China Life Insurance Co., Ltd. Class H (Ñ) | 3,322,000 | 6,997 | ||
China Merchants Bank Co., Ltd. (Æ)(Ñ) | 130,500 | 204 | ||
China Petroleum & Chemical Corp. Class H | 1,278,000 | 887 | ||
China Telecom Corp., Ltd. Class H | 1,480,000 | 557 | ||
PetroChina Co., Ltd. Class H (Ñ) | 866,000 | 954 | ||
Ping An Insurance (Group) Co. of China, Ltd. Class H | 170,500 | 593 | ||
10,192 | ||||
Denmark - 0.2% | ||||
Carlsberg A/S Class B | 9,550 | 821 | ||
Danske Bank A/S | 22,100 | 927 | ||
East Asiatic Co., Ltd. A/S (Ñ) | 800 | 40 | ||
FLSmidth & Co. A/S (Ñ) | 19,950 | 1,052 | ||
Genmab A/S (Æ) | 8,650 | 387 | ||
Novo-Nordisk A/S Class B | 24,850 | 1,877 | ||
Topdanmark A/S (Æ) | 875 | 124 | ||
5,228 | ||||
Finland - 0.7% | ||||
Cargotec Corp. Class B | 15,669 | 713 | ||
Fortum OYJ | 217,957 | 5,997 | ||
M-real OYJ Class B (Ñ) | 168,690 | 995 | ||
Metso OYJ | 15,200 | 661 | ||
Neste Oil OYJ (Ñ) | 35,588 | 1,120 | ||
Nokia OYJ | 164,826 | 3,271 | ||
Nokia OYJ - ADR | 20,090 | 399 | ||
Orion OYJ Class B (Æ)(Ñ) | 22,600 | 452 | ||
Rautaruukki OYJ | 63,291 | 2,090 | ||
UPM-Kymmene OYJ (Ñ) | 336,669 | 8,547 | ||
24,245 | ||||
France - 12.2% | ||||
Air France-KLM | 73,260 | 2,610 | ||
Air Liquide SA (Ñ) | 62,786 | 13,366 | ||
Alcatel SA | 136,017 | 1,727 | ||
Alstom RGPT (Æ)(Ñ) | 55,700 | 5,140 | ||
Arkema (Æ)(Ñ) | 22,934 | 1,120 | ||
Assurances Generales de France (Ñ) | 16,900 | 2,373 | ||
AXA SA (Ñ) | 605,413 | 23,065 | ||
BNP Paribas (Ñ) | 352,947 | 38,808 | ||
Capgemini SA | 31,142 | 1,769 | ||
Carrefour SA (Ñ) | 106,065 | 6,463 |
71
Table of Contents
Casino Guichard Perrachon SA | 9,000 | 763 | ||
Christian Dior SA (Ñ) | 15,434 | 1,649 | ||
Cie de Saint-Gobain (Ñ) | 136,378 | 10,052 | ||
Cie Generale d’Optique Essilor International SA(Ñ) | 37,371 | 3,921 | ||
CNP Assurances (Ñ) | 18,900 | 1,989 | ||
Compagnie Generale des Etablissements Michelin Class B | 13,800 | 1,125 | ||
Credit Agricole SA (Ñ) | 651,449 | 27,695 | ||
Eiffage SA (Ñ) | 15,169 | 1,393 | ||
Electricite de France (Ñ) | 23,900 | 1,449 | ||
France Telecom SA (Ñ) | 592,686 | 15,394 | ||
Gaz de France SA (Ñ) | 74,270 | 2,986 | ||
Groupe Danone (Ñ) | 113,708 | 16,660 | ||
Iliad SA | 26,373 | 2,252 | ||
L’Oreal SA | 35,250 | 3,428 | ||
Lafarge SA (Ñ) | 18,951 | 2,547 | ||
Lagardere SCA (Ñ) | 26,690 | 1,919 | ||
Legrand SA (Ñ) | 118,160 | 3,348 | ||
LVMH Moet Hennessy Louis Vuitton SA (Ñ) | 89,375 | 9,314 | ||
Natexis Banques Populaires | 4,920 | 1,360 | ||
Nexans SA | 10,560 | 948 | ||
Pernod-Ricard SA (Ñ) | 35,060 | 7,021 | ||
Peugeot SA (Ñ) | 33,350 | 1,916 | ||
PPR SA (Ñ) | 78,267 | 11,677 | ||
Renault SA (Ñ) | 162,406 | 18,997 | ||
Rhodia SA (Æ) | 203,860 | 562 | ||
Sanofi-Aventis (Ñ) | 344,362 | 29,271 | ||
Sanofi-Aventis | 3,305 | 281 | ||
Schneider Electric SA (Ñ) | 127,699 | 13,267 | ||
Societe BIC SA (Ñ) | 6,059 | 390 | ||
Societe Generale (Ñ) | 216,221 | 35,930 | ||
Sodexho Alliance SA (Ñ) | 23,798 | 1,278 | ||
Suez SA (Ñ) | 146,512 | 6,556 | ||
Suez SA (Æ)(Ñ) | 40,348 | 1 | ||
Thomson (Æ)(Ñ) | 141,530 | 2,440 | ||
Total SA (Ñ) | 686,334 | 46,470 | ||
Total SA - ADR | 55,272 | 3,766 | ||
Unibail (Ñ) | 27,704 | 6,032 | ||
Valeo SA (Ñ) | 82,433 | 3,103 | ||
Vallourec SA (Ñ) | 48,519 | 12,075 | ||
Veolia Environnement (Ñ) | 232,251 | 14,219 | ||
Vivendi Universal SA | 121,236 | 4,591 | ||
426,476 | ||||
Germany - 6.6% | ||||
Aareal Bank AG (Æ) | 7,815 | 333 | ||
Allianz SE | 61,023 | 11,326 | ||
BASF AG | 27,002 | 2,380 | ||
Bayer AG | 618,975 | 31,165 | ||
Bayerische Motoren Werke AG | 12,200 | 701 | ||
Bilfinger Berger AG | 30,500 | 1,901 | ||
Celesio AG | 10,436 | 538 | ||
Continental AG | 167,622 | 18,745 | ||
DaimlerChrysler AG | 45,363 | 2,588 | ||
Deutsche Bank AG (Ñ) | 49,733 | 6,259 | ||
Deutsche Boerse AG | 81,385 | 13,123 | ||
Deutsche Lufthansa AG | 255,396 | 5,890 | ||
Deutsche Post AG | 229,191 | 6,348 | ||
Deutsche Telekom AG | 316,224 | 5,473 | ||
E.ON AG | 320,515 | 38,453 | ||
Hannover Rueckversicherung AG (Æ)(Ñ) | 69,200 | 2,937 | ||
Hochtief AG (Ñ) | 26,699 | 1,745 |
72
Table of Contents
Hypo Real Estate Holding AG | 5,141 | 323 | ||
Infineon Technologies AG (Æ) | 392,261 | 4,776 | ||
KarstadtQuelle AG (Æ)(Ñ) | 44,355 | 1,042 | ||
Lanxess AG (Æ)(Ñ) | 39,640 | 1,812 | ||
Linde AG | 17,917 | 1,776 | ||
MAN AG (Ñ) | 122,313 | 10,873 | ||
Medion AG (Ñ) | 29,900 | 318 | ||
Merck KGaA | 35,300 | 3,721 | ||
Metro AG | 60,090 | 3,570 | ||
Muenchener Rueckversicherungs AG | 54,090 | 8,780 | ||
Praktiker Bau- und Heimwerkermaerkte AG | 8,359 | 266 | ||
Rheinmetall AG | 8,827 | 634 | ||
RWE AG | 181,829 | 17,969 | ||
Salzgitter AG | 53,771 | 5,752 | ||
SAP AG | 29,800 | 5,929 | ||
Siemens AG | 82,546 | 7,427 | ||
Suedzucker AG (Ñ) | 42,090 | 1,039 | ||
ThyssenKrupp AG | 3,176 | 118 | ||
TUI AG (Ñ) | 86,600 | 1,894 | ||
Volkswagen AG (Ñ) | 30,152 | 2,975 | ||
Wacker Chemie AG (Æ)(Ñ) | 12,500 | 1,502 | ||
232,401 | ||||
Greece - 0.2% | ||||
Alpha Bank AE | 66,000 | 1,920 | ||
EFG Eurobank Ergasias SA | 99,120 | 3,297 | ||
Public Power Corp. | 105,250 | 2,687 | ||
7,904 | ||||
Hong Kong - 1.6% | ||||
Bank of East Asia, Ltd. | 116,600 | 557 | ||
Beijing Enterprises Holdings, Ltd. (Ñ) | 12,000 | 24 | ||
BOC Hong Kong Holdings, Ltd. (Ñ) | 3,889,500 | 8,702 | ||
Cheung Kong Holdings, Ltd. | 88,800 | 966 | ||
China Mobile, Ltd. (Ñ) | 921,000 | 7,484 | ||
China Netcom Group Corp. Hong Kong, Ltd. (Ñ) | 658,000 | 1,169 | ||
China Resources Power Holdings Co. | 146,000 | 182 | ||
Citic Pacific, Ltd. (Ñ) | 298,200 | 916 | ||
CLP Holdings, Ltd. | 58,000 | 369 | ||
CNOOC, Ltd. (Ñ) | 3,757,000 | 3,159 | ||
Guangdong Investment, Ltd. | 308,000 | 128 | ||
Guangzhou Investment Co., Ltd. | 1,530,000 | 295 | ||
Hang Lung Group, Ltd. | 74,000 | 189 | ||
Hang Seng Bank, Ltd. (Ñ) | 78,300 | 998 | ||
Henderson Land Development Co., Ltd. (Ñ) | 63,000 | 347 | ||
Hong Kong Exchanges and Clearing, Ltd. (Ñ) | 533,500 | 4,226 | ||
HongKong Electric Holdings | 1,153,500 | 5,429 | ||
Hopewell Holdings (Ñ) | 35,000 | 104 | ||
Hutchison China Meditech, Ltd. (Æ) | 5 | — | ||
Hutchison Telecommunications International, Ltd. (Æ)(Ñ) | 1,308,000 | 2,519 | ||
Hutchison Whampoa, Ltd. | 373,700 | 3,316 | ||
Link REIT (The) (Æ)(ö) | 570,500 | 1,174 | ||
Melco International Development | 634,000 | 1,554 | ||
New World Development, Ltd. | 218,000 | 373 | ||
Shenzhen Investment, Ltd. (Ñ) | 352,000 | 139 | ||
Shun TAK Holdings, Ltd. (Ñ) | 2,915,200 | 3,853 | ||
Sino Land Co. (Ñ) | 558,351 | 972 | ||
Sun Hung Kai Properties, Ltd. | 168,000 | 1,837 | ||
Swire Pacific, Ltd. | 50,300 | 531 | ||
Television Broadcasts, Ltd. | 64,000 | 367 | ||
Wharf Holdings, Ltd. | 1,211,862 | 4,114 | ||
55,993 | ||||
73
Table of Contents
Hungary - 0.0% | ||||
MOL Hungarian Oil and Gas PLC | 9,700 | 964 | ||
India - 0.0% | ||||
State Bank of India, Ltd. - GDR | 24,500 | 1,543 | ||
Indonesia - 0.1% | ||||
Bank Central Asia Tbk PT | 4,979,000 | 2,541 | ||
Telekomunikasi Indonesia Tbk PT | 1,599,000 | 1,474 | ||
Telekomunikasi Indonesia Tbk PT - ADR | 6,742 | 246 | ||
4,261 | ||||
Ireland - 0.5% | ||||
Allied Irish Banks PLC (Æ) | 10,623 | 289 | ||
Allied Irish Banks PLC | 54,254 | 1,482 | ||
Bank of Ireland PLC | 235,038 | 4,731 | ||
CRH PLC | 99,640 | 3,514 | ||
Elan Corp. PLC - ADR (Æ)(Ñ) | 247,500 | 3,584 | ||
Irish Life & Permanent PLC (Æ) | 3,403 | 84 | ||
Irish Life & Permanent PLC | 5,397 | 133 | ||
Ryanair Holdings PLC - ADR (Æ)(Ñ) | 74,106 | 4,952 | ||
18,769 | ||||
Israel - 0.0% | ||||
Teva Pharmaceutical Industries, Ltd. - ADR | 27,500 | 907 | ||
Italy - 3.7% | ||||
Amplifon SpA | 30,869 | 232 | ||
Assicurazioni Generali SpA (Ñ) | 165,550 | 6,569 | ||
Banca Intesa SpA (Ñ) | 2,406,174 | 16,448 | ||
Banco Popolare di Verona e Novara SCRL (Ñ) | 131,606 | 3,541 | ||
Benetton Group SpA | 17,400 | 330 | ||
Buzzi Unicem SpA (Ñ) | 150,304 | 3,961 | ||
Capitalia SpA (Ñ) | 198,905 | 1,759 | ||
Enel SpA (Ñ) | 178,280 | 1,711 | ||
ENI SpA (Ñ) | 934,989 | 28,198 | ||
ERG SpA (Ñ) | 33,642 | 705 | ||
Esprinet SpA | 25,281 | 455 | ||
Fastweb | 34,200 | 1,694 | ||
Fiat SpA (Æ)(Ñ) | 151,300 | 2,672 | ||
Fondiaria-Sai SpA (Ñ) | 102,100 | 4,549 | ||
Fondiaria-Sai SpA | 9,900 | 329 | ||
Italcementi SpA (Ñ) | 190,275 | 5,046 | ||
Lottomatica SpA (Ñ) | 50,010 | 1,825 | ||
Mediaset SpA | 325,360 | 3,650 | ||
Milano Assicurazioni SpA | 167,200 | 1,304 | ||
Parmalat Finanziaria (Æ) | 42,200 | — | ||
Saipem SpA (Ñ) | 71,500 | 1,686 | ||
SanPaolo IMI SpA | 56,917 | 1,215 | ||
Saras SpA (Æ)(Ñ) | 375,740 | 1,958 | ||
Snam Rete Gas SpA (Ñ) | 40,953 | 209 | ||
Telecom Italia SpA | 1,101,210 | 2,783 | ||
Toro Assicurazioni SpA | 12,499 | 336 | ||
UniCredito Italiano SpA (Ñ) | 3,942,462 | 32,686 | ||
Unipol SpA | 637,070 | 2,203 | ||
128,054 | ||||
Japan - 19.1% | ||||
77 Bank, Ltd. (The) (Ñ) | 281,400 | 1,850 | ||
Access Co., Ltd. (Æ)(Ñ) | 59 | 393 | ||
Aderans Co., Ltd. (Ñ) | 5,200 | 120 | ||
Aeon Co., Ltd. (Ñ) | 223,400 | 5,262 | ||
Aeon Credit Service Co., Ltd. (Ñ) | 107,600 | 2,406 | ||
Aida Engineering, Ltd. | 66,000 | 398 | ||
Aiful Corp. | 49,107 | 1,696 | ||
Aioi Insurance Co., Ltd. | 55,000 | 379 |
74
Table of Contents
Ajinomoto Co., Inc. | 174,800 | 2,022 | ||
Alpen Co., Ltd. | 21,900 | 659 | ||
Alps Electric Co., Ltd. | 95,500 | 956 | ||
Amada Co., Ltd. | 58,000 | 576 | ||
Asahi Breweries, Ltd. | 36,900 | 526 | ||
Asahi Glass Co., Ltd. (Ñ) | 495,000 | 5,701 | ||
Asahi Kasei Corp. | 115,000 | 735 | ||
Astellas Pharma, Inc. | 74,300 | 3,348 | ||
Bandai Visual Co., Ltd. | 134 | 420 | ||
Bank of Nagoya, Ltd. (The) | 31,000 | 212 | ||
Bank of Yokohama, Ltd. (The) | 28,000 | 216 | ||
Bridgestone Corp. (Ñ) | 263,500 | 5,497 | ||
Brother Industries, Ltd. | 68,000 | 857 | ||
Calsonic Kansei Corp. (Ñ) | 68,000 | 442 | ||
Canon Marketing Japan, Inc. (Ñ) | 10,000 | 237 | ||
Canon, Inc. | 799,668 | 42,870 | ||
Central Japan Railway Co. | 228 | 2,456 | ||
Chiba Bank, Ltd. (The) | 29,000 | 260 | ||
Chubu Electric Power Co., Inc. | 46,500 | 1,288 | ||
Chugai Pharmaceutical Co., Ltd. (Ñ) | 159,900 | 3,281 | ||
Credit Saison Co., Ltd. | 20,700 | 749 | ||
Cyber Communications, Inc. (Ñ) | 105 | 159 | ||
Dai Nippon Printing Co., Ltd. | 21,000 | 313 | ||
Daiei, Inc. (The) (Æ)(Ñ) | 29,300 | 550 | ||
Daiichi Sankyo Co., Ltd. | 215,700 | 6,418 | ||
Daikin Industries, Ltd. (Ñ) | 30,300 | 855 | ||
Dainippon Ink and Chemicals, Inc. | 503,000 | 1,901 | ||
Daiwa House Industry Co., Ltd. | 22,000 | 397 | ||
Daiwa Securities Group, Inc. | 222,000 | 2,519 | ||
Denki Kagaku Kogyo Kabushiki Kaisha | 79,000 | 301 | ||
Denso Corp. | 20,600 | 786 | ||
Dentsu, Inc. (Ñ) | 1,558 | 4,289 | ||
East Japan Railway Co. | 705 | 4,931 | ||
EDION Corp. (Ñ) | 113,300 | 1,632 | ||
Eighteenth Bank, Ltd. (The) | 10,000 | 48 | ||
Eisai Co., Ltd. | 169,400 | 8,676 | ||
Electric Power Development Co., Ltd. | 12,000 | 500 | ||
Elpida Memory, Inc. (Æ) | 97,200 | 4,538 | ||
Exedy Corp. (Ñ) | 22,500 | 660 | ||
Fancl Corp. (Ñ)(Þ) | 55,000 | 718 | ||
Fanuc, Ltd. | 64,300 | 5,580 | ||
Frontier Real Estate Investment Corp. (ö) | 37 | 296 | ||
Fuji Electric Holdings Co., Ltd. (Ñ) | 57,000 | 310 | ||
Fuji Fire & Marine Insurance Co., Ltd. (The) | 73,000 | 293 | ||
Fuji Heavy Industries, Ltd. (Ñ) | 210,000 | 1,212 | ||
FUJIFILM Holdings Corp. | 142,600 | 5,292 | ||
Fujikura, Ltd. (Ñ) | 38,000 | 406 | ||
Fujitsu, Ltd. (Ñ) | 309,000 | 2,521 | ||
Funai Electric Co., Ltd. (Ñ) | 25,600 | 2,244 | ||
Hachijuni Bank, Ltd. (The) | 36,000 | 255 | ||
Higo Bank, Ltd. (The) | 10,000 | 69 | ||
Hino Motors, Ltd. (Ñ) | 581,500 | 2,874 | ||
Hiroshima Bank, Ltd. (The) | 74,000 | 442 | ||
Hitachi Koki Co., Ltd. | 50,000 | 713 | ||
Hitachi, Ltd. (Ñ) | 686,000 | 3,959 | ||
Hokkoku Bank, Ltd. (The) | 13,000 | 57 | ||
Honda Motor Co., Ltd. | 162,000 | 5,735 | ||
Hoya Corp. | 36,000 | 1,391 | ||
Hyakugo Bank, Ltd. (The) | 13,000 | 83 | ||
Hyakujushi Bank, Ltd. (The) | 10,000 | 63 |
75
Table of Contents
Ibiden Co., Ltd. | 46,500 | 2,437 | ||
Inpex Holdings, Inc. (Æ) | 159 | 1,300 | ||
Isuzu Motors, Ltd. (Ñ) | 426,000 | 1,475 | ||
Itochu Corp. | 166,000 | 1,323 | ||
Itochu-Shokuhin Co., Ltd. | 12,600 | 420 | ||
Izumi Co., Ltd. (Ñ) | 13,300 | 495 | ||
Japan Asia Investment Co., Ltd. | 92,000 | 515 | ||
Japan Logistics Fund, Inc. Class A (ö) | 98 | 729 | ||
Japan Petroleum Exploration Co. | 3,500 | 204 | ||
Japan Tobacco, Inc. | 6,653 | 29,011 | ||
JFE Holdings, Inc. (Ñ) | 241,200 | 9,693 | ||
JS Group Corp. | 137,300 | 2,817 | ||
JSR Corp. (Ñ) | 55,900 | 1,405 | ||
Kadokawa Holdings, Inc. (Ñ) | 22,000 | 783 | ||
Kagoshima Bank, Ltd. (The) | 12,000 | 87 | ||
Kandenko Co., Ltd. | 37,000 | 224 | ||
Kansai Electric Power Co., Inc. (The) | 80,500 | 1,900 | ||
Kansai Paint Co., Ltd. (Ñ) | 101,000 | 845 | ||
Kao Corp. (Ñ) | 835,000 | 21,918 | ||
Kawasaki Kisen Kaisha, Ltd. (Ñ) | 33,000 | 235 | ||
KDDI Corp. | 1,455 | 9,069 | ||
Keio Corp. (Ñ) | 45,000 | 300 | ||
Keiyo Bank, Ltd. (The) | 29,000 | 166 | ||
Kenedix, Inc. | 314 | 1,764 | ||
Kobayashi Pharmaceutical Co., Ltd. | 16,800 | 645 | ||
Kobe Steel, Ltd. | 864,000 | 2,645 | ||
Koei Co., Ltd. (Ñ) | 38,830 | 620 | ||
Koito Manufacturing Co., Ltd. (Ñ) | 50,000 | 707 | ||
Komatsu, Ltd. | 96,900 | 1,748 | ||
Konica Minolta Holdings, Inc. (Æ) | 48,000 | 639 | ||
Kose Corp. (Ñ) | 12,760 | 384 | ||
Kubota Corp. | 129,000 | 1,128 | ||
Kuraray Co., Ltd. | 128,300 | 1,452 | ||
Kurita Water Industries, Ltd. (Ñ) | 27,600 | 564 | ||
Lawson, Inc. (Ñ) | 54,300 | 1,843 | ||
Leopalace21 Corp. | 98,300 | 3,698 | ||
Lintec Corp. | 4,900 | 112 | ||
Mabuchi Motor Co., Ltd. (Ñ) | 18,100 | 1,055 | ||
Makita Corp. (Ñ) | 37,400 | 1,113 | ||
Marui Co., Ltd. | 30,200 | 406 | ||
Matsumotokiyoshi Co., Ltd. (Ñ) | 75,044 | 1,813 | ||
Matsushita Electric Industrial Co., Ltd. | 201,000 | 4,202 | ||
Matsushita Electric Works, Ltd. | 49,000 | 550 | ||
Mazda Motor Corp. | 172,000 | 1,163 | ||
Millea Holdings, Inc. | 151,400 | 5,722 | ||
Minebea Co., Ltd. | 94,100 | 574 | ||
Mitsubishi Chemical Holdings Corp. | 32,000 | 205 | ||
Mitsubishi Corp. | 270,500 | 5,227 | ||
Mitsubishi Electric Corp. (Ñ) | 164,000 | 1,430 | ||
Mitsubishi Estate Co., Ltd. | 50,000 | 1,197 | ||
Mitsubishi Gas Chemical Co., Inc. | 28,000 | 267 | ||
Mitsubishi Heavy Industries, Ltd. | 108,000 | 482 | ||
Mitsubishi Rayon Co., Ltd. | 132,000 | 833 | ||
Mitsubishi UFJ Financial Group, Inc. | 947 | 11,903 | ||
Mitsui & Co., Ltd. (Ñ) | 198,000 | 2,704 | ||
Mitsui Chemicals, Inc. (Ñ) | 463,000 | 3,179 | ||
Mitsui Fudosan Co., Ltd. | 411,000 | 10,121 | ||
Mitsui OSK Lines, Ltd. (Ñ) | 608,000 | 5,069 | ||
Mitsui Sumitomo Insurance Co., Ltd. | 15,000 | 187 | ||
Mitsui Trust Holdings, Inc. | 178,700 | 2,104 |
76
Table of Contents
Mizuho Financial Group, Inc. | 1,230 | 9,581 | ||
Mochida Pharmaceutical Co., Ltd. | 10,000 | 83 | ||
Mori Seiki Co., Ltd. (Ñ) | 34,900 | 730 | ||
Murata Manufacturing Co., Ltd. | 38,600 | 2,700 | ||
Nabtesco Corp. (Ñ) | 21,000 | 252 | ||
Nafco Co., Ltd. | 14,700 | 407 | ||
Netprice, Ltd. (Æ)(Ñ) | 69 | 94 | ||
Nichirei Corp. | 104,000 | 556 | ||
Nidec Corp. (Ñ) | 11,300 | 865 | ||
Nidec Sankyo Corp. | 48,000 | 536 | ||
Nihon Unisys, Ltd. (Æ) | 11,900 | 223 | ||
Nikon Corp. (Ñ) | 50,000 | 1,028 | ||
Nintendo Co., Ltd. | 82,100 | 16,791 | ||
Nippon Electric Glass Co., Ltd. (Ñ) | 48,000 | 1,034 | ||
Nippon Express Co., Ltd. (Ñ) | 1,021,000 | 5,526 | ||
Nippon Mining Holdings, Inc. | 245,500 | 1,835 | ||
Nippon Oil Corp. | 154,000 | 1,146 | ||
Nippon Paint Co., Ltd. | 22,000 | 118 | ||
Nippon Paper Group, Inc. (Ñ) | 555 | 1,988 | ||
Nippon Steel Corp. (Ñ) | 345,000 | 1,404 | ||
Nippon Telegraph & Telephone Corp. | 1,260 | 6,346 | ||
Nippon Yusen KK (Ñ) | 175,000 | 1,136 | ||
Nissan Motor Co., Ltd. (Ñ) | 652,400 | 7,815 | ||
Nissha Printing Co., Ltd. | 10,200 | 477 | ||
Nisshin Seifun Group, Inc. | 50,000 | 525 | ||
Nitto Denko Corp. (Ñ) | 90,700 | 5,173 | ||
Nomura Holdings, Inc. | 54,400 | 960 | ||
Noritsu Koki Co., Ltd. (Ñ) | 2,800 | 52 | ||
NTN Corp. (Ñ) | 36,000 | 296 | ||
NTT DoCoMo, Inc. | 1,511 | 2,313 | ||
NTT Urban Development Corp. (Ñ) | 170 | 1,468 | ||
Obic Co., Ltd. | 3,970 | 842 | ||
OJI Paper Co., Ltd. | 90,000 | 477 | ||
Okasan Holdings, Inc. (Ñ) | 39,000 | 303 | ||
Oki Electric Industry Co., Ltd. (Ñ) | 422,000 | 996 | ||
Omron Corp. | 149,500 | 3,860 | ||
ORIX Corp. (Ñ) | 71,510 | 20,147 | ||
Pacific Metals Co., Ltd. | 98,000 | 842 | ||
Parco Co., Ltd. (Ñ) | 12,200 | 146 | ||
Rakuten, Inc. (Ñ) | 6,399 | 2,845 | ||
Rengo Co., Ltd. (Ñ) | 129,000 | 824 | ||
Resona Holdings, Inc. (Ñ) | 234 | 712 | ||
Ricoh Co., Ltd. | 958,200 | 18,926 | ||
Rinnai Corp. (Ñ) | 39,800 | 1,130 | ||
Rohm Co., Ltd. | 62,400 | 5,741 | ||
Sankyo Co., Ltd. (Ñ) | 35,000 | 1,787 | ||
Sapporo Hokuyo Holdings, Inc. | 63 | 630 | ||
Secom Co., Ltd. | 6,400 | 320 | ||
Seino Holdings Corp. (Ñ) | 26,000 | 283 | ||
Sekisui Chemical Co., Ltd. | 347,500 | 3,072 | ||
Sekisui House, Ltd. | 253,800 | 4,012 | ||
SFCG Co., Ltd. (Ñ) | 6,782 | 1,254 | ||
Sharp Corp. | 308,000 | 5,491 | ||
Shiga Bank, Ltd. (The) | 17,000 | 111 | ||
Shimano, Inc. | 5,500 | 153 | ||
Shin-Etsu Chemical Co., Ltd. | 89,200 | 5,850 | ||
Shinko Electric Industries Co., Ltd. | 6,500 | 173 | ||
Shinsei Bank, Ltd. | 1,523,600 | 8,793 | ||
Shionogi & Co., Ltd. | 94,000 | 1,885 | ||
Shizuoka Bank, Ltd. (The) (Ñ) | 25,000 | 267 |
77
Table of Contents
Sohgo Security Services Co., Ltd. | 22,900 | 407 | ||
Sompo Japan Insurance, Inc. | 181,000 | 2,408 | ||
Sony Corp. | 72,200 | 2,994 | ||
Stanley Electric Co., Ltd. (Ñ) | 48,300 | 958 | ||
Sumco Corp. (Ñ) | 59,400 | 4,226 | ||
Sumitomo Chemical Co., Ltd. | 74,000 | 528 | ||
Sumitomo Corp. | 58,300 | 767 | ||
Sumitomo Electric Industries, Ltd. (Ñ) | 102,300 | 1,448 | ||
Sumitomo Heavy Industries, Ltd. | 485,000 | 4,155 | ||
Sumitomo Metal Industries, Ltd. | 701,000 | 2,637 | ||
Sumitomo Mitsui Financial Group, Inc. (Ñ) | 2,902 | 31,761 | ||
Sumitomo Realty & Development Co., Ltd. (Ñ) | 288,000 | 9,554 | ||
Sumitomo Trust & Banking Co., Ltd. (The) | 193,000 | 2,076 | ||
Sumitomo Warehouse Co., Ltd. (The) (Ñ) | 57,000 | 403 | ||
Suzuken Co., Ltd. (Ñ) | 6,900 | 242 | ||
Suzuki Motor Corp. (Ñ) | 317,900 | 9,024 | ||
T&D Holdings, Inc. | 12,500 | 914 | ||
Take And Give Needs Co., Ltd. (Ñ) | 867 | 853 | ||
Takeda Pharmaceutical Co., Ltd. | 264,400 | 16,978 | ||
Takefuji Corp. | 76,020 | 2,756 | ||
TDK Corp. | 29,400 | 2,300 | ||
Telewave, Inc. (Ñ) | 257 | 512 | ||
Terumo Corp. | 53,000 | 2,143 | ||
Tobu Railway Co., Ltd. | 79,000 | 389 | ||
Tokai Carbon Co., Ltd. (Ñ) | 78,000 | 527 | ||
Tokai Rubber Industries, Inc. | 5,000 | 78 | ||
Tokai Tokyo Securities Co., Ltd. (Ñ) | 29,000 | 143 | ||
Tokyo Electric Power Co., Inc. (The) (Ñ) | 147,900 | 4,300 | ||
Tokyo Electron, Ltd. (Ñ) | 15,400 | 1,151 | ||
Tokyo Gas Co., Ltd. (Ñ) | 999,000 | 5,099 | ||
Tokyo Style Co., Ltd. | 6,000 | 66 | ||
Tokyu Corp. (Ñ) | 164,000 | 1,111 | ||
Toppan Printing Co., Ltd. (Ñ) | 12,000 | 132 | ||
Toshiba Corp. (Ñ) | 106,000 | 671 | ||
Toyo Seikan Kaisha, Ltd. (Ñ) | 16,900 | 328 | ||
Toyobo Co., Ltd. | 55,000 | 145 | ||
Toyoda Gosei Co., Ltd. | 51,000 | 1,184 | ||
Toyota Motor Corp. | 971,100 | 57,541 | ||
Trend Micro, Inc. (Ñ) | 21,500 | 689 | ||
Ube Industries, Ltd. | 225,000 | 664 | ||
UNY Co., Ltd. | 49,000 | 615 | ||
Valor Co., Ltd. (Ñ) | 28,700 | 422 | ||
West Japan Railway Co. | 725 | 3,099 | ||
Xebio Co., Ltd. (Ñ) | 10,500 | 323 | ||
Yahoo! Japan Corp. | 480 | 187 | ||
Yokogawa Electric Corp. | 39,400 | 541 | ||
671,383 | ||||
Luxembourg - 0.1% | ||||
Acergy SA (Æ)(Ñ) | 46,700 | 845 | ||
Millicom International Cellular SA (Æ)(Ñ) | 33,700 | 1,681 | ||
SES Global SA (Ñ) | 68,900 | 1,056 | ||
3,582 | ||||
Mexico - 0.6% | ||||
America Movil SA de CV Series L | 260,700 | 11,176 | ||
Coca-Cola Femsa SA de CV - ADR (Ñ) | 51,100 | 1,775 | ||
Fomento Economico Mexicano SA de CV - ADR | 45,000 | 4,351 | ||
Grupo Televisa SA - ADR | 105,880 | 2,613 | ||
Telefonos de Mexico SA de CV Series L | 69,330 | 1,830 | ||
21,745 | ||||
Netherlands - 4.0% |
78
Table of Contents
ABN AMRO Holding NV | 274,924 | 8,018 | ||
Aegon NV (Ñ) | 151,219 | 2,781 | ||
ASML Holding NV (Æ) | 168,691 | 3,858 | ||
Buhrmann NV | 118,800 | 1,847 | ||
Euronext NV (Æ)(Ñ) | 47,460 | 4,755 | ||
Euronext NV | 2,100 | 211 | ||
European Aeronautic Defense and Space Co. NV(Ñ) | 134,510 | 3,648 | ||
Heineken Holding NV | 14,394 | 563 | ||
Heineken NV (Ñ) | 250,191 | 11,339 | ||
Hunter Douglas NV | 5,042 | 388 | ||
ING Groep NV | 1,110,744 | 49,206 | ||
Koninklijke Ahold NV (Æ) | 34,872 | 367 | ||
Koninklijke BAM Groep NV | 101,800 | 2,122 | ||
Koninklijke Philips Electronics NV | 355,560 | 12,419 | ||
Mittal Steel Co. NV | 112,575 | 4,832 | ||
Reed Elsevier NV | 464,619 | 7,988 | ||
Rodamco Europe NV (Ñ) | 21,014 | 2,431 | ||
Royal KPN NV | 197,349 | 2,637 | ||
Royal Numico NV | 168,500 | 7,534 | ||
SBM Offshore NV | 96,700 | 2,862 | ||
STMicroelectronics NV (Ñ) | 93,400 | 1,615 | ||
Stork NV (Æ)(Ñ) | 7,179 | 355 | ||
Unilever NV (Ñ) | 288,400 | 7,111 | ||
Wolters Kluwer NV (Ñ) | 98,600 | 2,711 | ||
141,598 | ||||
Netherlands Antilles - 0.0% | ||||
Schlumberger, Ltd. (Ñ) | 10,700 | 675 | ||
New Zealand - 0.1% | ||||
Telecom Corp. of New Zealand, Ltd. (Ñ) | 1,342,580 | 4,200 | ||
Norway - 0.4% | ||||
Aker Kvaerner ASA (Ñ) | 20,880 | 2,172 | ||
DNB Nor Bank ASA | 229,463 | 3,005 | ||
Pan Fish ASA (Æ)(Ñ) | 297,700 | 233 | ||
Petroleum Geo-Services ASA (Æ)(Ñ) | 15,700 | 914 | ||
Statoil ASA | 104,100 | 2,632 | ||
Telenor ASA | 327,500 | 5,173 | ||
Yara International ASA (Ñ) | 55,800 | 977 | ||
15,106 | ||||
Panama - 0.0% | ||||
Carnival Corp. (Ñ) | 7,900 | 386 | ||
Papua New Guinea - 0.0% | ||||
Oil Search, Ltd. | 206,900 | 548 | ||
Singapore - 1.0% | ||||
CapitaLand, Ltd. (Ñ) | 582,000 | 2,038 | ||
City Developments, Ltd. | 89,000 | 629 | ||
CSE Global, Ltd. | 191,000 | 141 | ||
DBS Group Holdings, Ltd. | 713,040 | 9,344 | ||
Flextronics International, Ltd. (Æ)(Ñ) | 130,600 | 1,515 | ||
Fraser and Neave, Ltd. | 160,000 | 456 | ||
Jardine Cycle & Carriage, Ltd. | 39,000 | 311 | ||
Keppel Corp., Ltd. | 517,000 | 5,247 | ||
NatSteel, Ltd. | 50,000 | 42 | ||
Oversea-Chinese Banking Corp. (Ñ) | 992,800 | 4,464 | ||
Pacific Century Regional Developments, Ltd. (Æ) | 320,000 | 89 | ||
Parkway Holdings, Ltd. | 299,000 | 532 | ||
SembCorp Industries, Ltd. | 99,120 | 233 | ||
Singapore Airlines, Ltd. | 43,000 | 420 | ||
Singapore Exchange, Ltd. | 164,000 | 474 | ||
Singapore Petroleum Co., Ltd. (Ñ) | 69,000 | 201 | ||
Singapore Telecommunications, Ltd. (Æ)(Ñ) | 3,102,300 | 5,281 |
79
Table of Contents
United Overseas Bank, Ltd. | 396,000 | 4,502 | ||
Want Want Holdings, Ltd. | 46,000 | 82 | ||
36,001 | ||||
South Africa - 0.1% | ||||
Nedbank Group, Ltd. | 114,280 | 1,891 | ||
Sanlam, Ltd. | 335,000 | 796 | ||
Standard Bank Group, Ltd. | 66,200 | 777 | ||
Tiger Brands, Ltd. | 31,800 | 661 | ||
4,125 | ||||
South Korea - 1.0% | ||||
Honam Petrochemical Corp. | 9,400 | 589 | ||
Hynix Semiconductor, Inc. (Æ) | 40,450 | 1,468 | ||
Hyundai Mobis | 6,000 | 586 | ||
Industrial Bank of Korea (Ñ) | 58,000 | 1,016 | ||
Kookmin Bank | 18,724 | 1,489 | ||
Korea Electric Power Corp. - ADR (Ñ) | 85,710 | 1,695 | ||
KT Corp. - ADR | 72,700 | 1,627 | ||
LG.Philips LCD Co., Ltd. (Æ) | 13,700 | 436 | ||
POSCO | 3,900 | 1,082 | ||
Samsung Electronics Co., Ltd. | 32,885 | 21,324 | ||
Shinhan Financial Group Co., Ltd. | 15,000 | 692 | ||
SK Telecom Co., Ltd. - ADR (Ñ) | 82,440 | 1,985 | ||
33,989 | ||||
Spain - 2.9% | ||||
Abengoa SA (Ñ) | 23,073 | 704 | ||
Actividades de Construccion y Servicios SA | 85,190 | 4,276 | ||
Altadis SA | 158,804 | 7,601 | ||
Antena 3 de Television SA (Ñ) | 79,888 | 1,731 | ||
Banco Bilbao Vizcaya Argentaria SA (Ñ) | 561,269 | 13,553 | ||
Banco Popular Espanol SA (Ñ) | 91,721 | 1,590 | ||
Banco Santander Central Hispano SA (Ñ) | 789,414 | 13,662 | ||
Cia de Distribucion Integral Logista SA | 19,500 | 1,103 | ||
Corporacion Mapfre SA | 1,006,700 | 4,458 | ||
Endesa SA | 39,126 | 1,735 | ||
Fomento de Construcciones y Contratas SA (Ñ) | 5,300 | 462 | ||
Gestevision Telecinco SA (Ñ) | 95,585 | 2,512 | ||
Iberdrola SA (Ñ) | 196,725 | 9,026 | ||
Inditex SA | 129,300 | 6,182 | ||
Obrascon Huarte Lain SA | 12,641 | 321 | ||
Repsol YPF SA (Ñ) | 239,763 | 7,956 | ||
Repsol YPF SA - ADR (Ñ) | 47,116 | 1,576 | ||
Telefonica SA (Ñ) | 1,131,510 | 21,807 | ||
Union Fenosa SA | 35,411 | 1,799 | ||
102,054 | ||||
Sweden - 1.5% | ||||
Alfa Laval AB | 37,900 | 1,404 | ||
D Carnegie & Co. AB | 15,100 | 288 | ||
Electrolux AB (Ñ) | 102,600 | 1,879 | ||
Hennes & Mauritz AB Class B (Ñ) | 178,355 | 7,692 | ||
Investor AB Class B | 67,600 | 1,516 | ||
JM AB | 28,400 | 559 | ||
Lindex AB (Ñ) | 26,800 | 357 | ||
Nordea Bank AB | 189,000 | 2,604 | ||
Sandvik AB (Ñ) | 144,800 | 1,769 | ||
Securitas AB Class B (Ñ) | 141,093 | 1,856 | ||
Securitas Direct AB Class B (Æ)(Ñ) | 132,093 | 402 | ||
Securitas Systems AB Class B (Æ)(Ñ) | 132,093 | 441 | ||
Skandinaviska Enskilda Banken AB Class A (Ñ) | 32,200 | 901 | ||
Skanska AB Class B | 27,700 | 494 | ||
SKF AB Class B | 126,200 | 2,031 |
80
Table of Contents
Ssab Svenskt Staal AB (Ñ) Class A | 95,600 | 2,032 | ||
Ssab Svenskt Staal AB (Ñ) Class B | 38,700 | 772 | ||
Svenska Cellulosa AB Class B (Ñ) | 95,530 | 4,385 | ||
Svenska Handelsbanken Class A (Ñ) | 28,900 | 748 | ||
Swedish Match AB (Ñ) | 354,000 | 5,661 | ||
Telefonaktiebolaget LM Ericsson Class B | 3,584,580 | 13,599 | ||
TeliaSonera AB (Ñ) | 87,000 | 632 | ||
Volvo AB (Ñ) | 4,600 | 288 | ||
52,310 | ||||
Switzerland - 6.8% | ||||
ABB, Ltd. | 1,092,562 | 16,247 | ||
Actelion, Ltd. (Æ) | 12,860 | 2,166 | ||
Alcon, Inc. | 10,600 | 1,124 | ||
Ciba Specialty Chemicals AG (Ñ) | 73,781 | 4,516 | ||
Clariant AG (Æ) | 120,960 | 1,672 | ||
Compagnie Financiere Richemont AG Class A (Ñ) | 129,166 | 6,391 | ||
Credit Suisse Group | 284,690 | 17,163 | ||
Geberit AG | 508 | 662 | ||
Julius Baer Holding AG | 93,340 | 9,859 | ||
Logitech International SA (Æ) | 323,964 | 8,515 | ||
Nestle SA | 116,768 | 39,891 | ||
Nobel Biocare Holding AG | 10,840 | 2,967 | ||
Novartis AG | 277,313 | 16,830 | ||
Pargesa Holding SA | 11,420 | 1,095 | ||
Roche Holding AG | 269,278 | 47,122 | ||
Sulzer AG | 1,687 | 1,485 | ||
Swatch Group AG | 100,723 | 4,024 | ||
Swiss Reinsurance | 154,890 | 12,699 | ||
Swisscom AG | 5,179 | 1,809 | ||
Syngenta AG (Æ) | 38,100 | 6,153 | ||
UBS AG | 580,753 | 34,685 | ||
Zurich Financial Services AG | 8,262 | 2,042 | ||
239,117 | ||||
Taiwan - 0.4% | ||||
AU Optronics Corp. | 1,024,000 | 1,379 | ||
Compal Electronics, Inc. | 1,061,000 | 888 | ||
High Tech Computer Corp. | �� | 58,000 | 1,438 | |
Hon Hai Precision Industry Co., Ltd. | 1,011,400 | 6,553 | ||
Siliconware Precision Industries Co. | 918,000 | 1,165 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. | 585,000 | 1,073 | ||
United Microelectronics Corp. - ADR (Ñ) | 710,473 | 2,153 | ||
14,649 | ||||
Thailand - 0.1% | ||||
Bangkok Bank PCL (Ñ) | 751,980 | 2,460 | ||
Turkey - 0.0% | ||||
Turkcell Iletisim Hizmet AS | 1 | — | ||
United Kingdom - 20.2% | ||||
3i Group PLC | 242,311 | 4,437 | ||
Admiral Group PLC | 59,704 | 1,059 | ||
Alliance Boots PLC | 937,272 | 14,482 | ||
Amvescap PLC | 273,300 | 3,125 | ||
Anglo American PLC | 126,199 | 5,691 | ||
ARM Holdings PLC | 2,184,406 | 4,906 | ||
AstraZeneca PLC | 229,593 | 13,572 | ||
Aviva PLC | 789,326 | 11,669 | ||
BAE Systems PLC | 1,265,000 | 10,123 | ||
Barclays PLC | 1,952,016 | 26,344 | ||
Barratt Developments PLC | 12,911 | 267 | ||
Berkeley Group Holdings PLC (Æ) | 40,157 | 1,103 | ||
BG Group PLC | 2,366,060 | 31,391 |
81
Table of Contents
BHP Billiton PLC | 411,537 | 7,937 | ||
BP PLC | 2,976,985 | 33,107 | ||
Brambles Industries PLC (Ñ) | 176,300 | 1,660 | ||
British Airways PLC (Æ) | 609,537 | 5,343 | ||
British American Tobacco PLC | 865,000 | 23,579 | ||
British Energy Group PLC (Æ) | 123,255 | 989 | ||
British Land Co. PLC | 428,786 | 12,228 | ||
Brixton PLC | 4,641 | 48 | ||
BT Group PLC | 583,593 | 3,098 | ||
Cadbury Schweppes PLC | 226,859 | 2,283 | ||
Capita Group PLC | 277,300 | 2,851 | ||
Carnival PLC | 28,200 | 1,377 | ||
Carphone Warehouse Group PLC | 1,548,160 | 8,372 | ||
Centrica PLC | 943,279 | 5,960 | ||
Charter PLC (Æ) | 67,801 | 1,192 | ||
Compass Group PLC | 238,983 | 1,279 | ||
Corus Group PLC | 179,555 | 1,601 | ||
Davis Service Group PLC | 23,600 | 221 | ||
De La Rue PLC | 23,073 | 273 | ||
Debenhams PLC | 1,563,754 | 5,608 | ||
Diageo PLC | 681,378 | 12,608 | ||
Drax Group PLC | 10,599 | 165 | ||
DSG International PLC | 340,918 | 1,414 | ||
easyJet PLC (Æ) | 269,785 | 2,712 | ||
EMI Group PLC | 1,236,773 | 6,358 | ||
Firstgroup PLC | 159,437 | 1,634 | ||
Friends Provident PLC | 1,162,890 | 4,592 | ||
George Wimpey PLC | 178,800 | 1,794 | ||
GKN PLC | 684,480 | 3,989 | ||
GlaxoSmithKline PLC | 1,638,969 | 43,770 | ||
Great Portland Estates PLC | 23,177 | 266 | ||
HBOS PLC | 1,336,058 | 27,703 | ||
HMV Group PLC | 314,600 | 951 | ||
HSBC Holdings PLC (Ñ) | 15,200 | 287 | ||
HSBC Holdings PLC | 1,085,019 | 20,573 | ||
Inchcape PLC | 149,025 | 1,472 | ||
Invensys PLC (Æ) | 196,834 | 858 | ||
Investec PLC | 114,480 | 1,157 | ||
ITV PLC | 35,600 | 72 | ||
J Sainsbury PLC | 830,425 | 6,206 | ||
Kelda Group PLC | 79,900 | 1,320 | ||
Kesa Electricals PLC | 962,018 | 6,437 | ||
Ladbrokes PLC | 840,115 | 6,546 | ||
Land Securities Group PLC | 22,998 | 920 | ||
Legal & General Group PLC | 403,264 | 1,112 | ||
Lloyds TSB Group PLC | 1,161,759 | 12,399 | ||
Man Group PLC | 1,328,114 | 12,363 | ||
Marks & Spencer Group PLC | 611,500 | 7,658 | ||
Mitchells & Butlers PLC | 91,800 | 1,044 | ||
Next PLC | 311,361 | 11,166 | ||
Northern Rock PLC | 73,500 | 1,678 | ||
Old Mutual PLC | 754,697 | 2,440 | ||
Pearson PLC | 132,735 | 1,959 | ||
Premier Farnell PLC | 224,119 | 797 | ||
Prudential PLC | 286,022 | 3,505 | ||
Reckitt Benckiser PLC | 569,106 | 24,762 | ||
Reed Elsevier PLC | 898,848 | 10,236 | ||
Rentokil Initial PLC | 1,287,380 | 3,720 | ||
Resolution PLC | 4,299 | 51 | ||
Reuters Group PLC | 469,200 | 4,003 |
82
Table of Contents
RHM PLC | 103,915 | 539 | ||
Rio Tinto PLC | 77,532 | 4,277 | ||
Rolls-Royce Group PLC | 276,700 | 2,479 | ||
Rolls-Royce Group PLC (Æ) | 9,505,300 | 19 | ||
Royal & Sun Alliance Insurance Group PLC | 1,122,479 | 3,158 | ||
Royal Bank of Scotland Group PLC | 815,556 | 29,061 | ||
Royal Dutch Shell PLC Class A (Ñ) | 612,005 | 21,207 | ||
Royal Dutch Shell PLC Class A | 355,161 | 12,317 | ||
Royal Dutch Shell PLC Class B | 292,670 | 10,485 | ||
SABMiller PLC | 201,880 | 3,905 | ||
Scottish & Southern Energy PLC | 197,009 | 4,938 | ||
Severn Trent PLC | 94,266 | 2,510 | ||
Smiths Group PLC | 546,420 | 9,860 | ||
Standard Chartered PLC | 290,704 | 8,179 | ||
Standard Life PLC (Æ) | 24,256 | 132 | ||
Taylor Woodrow PLC | 269,223 | 1,868 | ||
Tesco PLC | 3,613,316 | 27,122 | ||
Trinity Mirror PLC | 368,360 | 3,447 | ||
Unilever PLC | 636,432 | 15,794 | ||
United Business Media PLC | 29,484 | 390 | ||
Vedanta Resources PLC | 36,584 | 1,020 | ||
Vodafone Group PLC (Æ) | 7,754,100 | 19,968 | ||
William Hill PLC | 765,254 | 9,503 | ||
Wilson Bowden PLC | 5,861 | 195 | ||
Wolverhampton & Dudley Brew PLC | 73,800 | 2,051 | ||
WPP Group PLC | 588,860 | 7,543 | ||
Xstrata PLC | 159,013 | 6,794 | ||
708,633 | ||||
United States - 0.1% | ||||
Synthes, Inc. | 19,669 | 2,231 | ||
Total Common Stocks | ||||
(cost $2,541,226) | 3,228,578 | |||
Preferred Stocks - 0.3% | ||||
Brazil - 0.1% | ||||
Banco Itau Holding Financeira SA | 74,200 | 2,443 | ||
Petroleo Brasileiro SA | 44,300 | 889 | ||
Usinas Siderurgicas de Minas Gerais SA | 41,200 | 1,401 | ||
4,733 | ||||
Germany - 0.1% | ||||
Fresenius AG (Ñ) | 25,164 | 4,721 | ||
Porsche AG | 655 | 764 | ||
5,485 | ||||
South Korea - 0.1% | ||||
Hyundai Motor Co. | 21,000 | 991 | ||
Samsung Electronics Co., Ltd. | 1,600 | 776 | ||
1,767 | ||||
Total Preferred Stocks | ||||
(cost $8,719) | 11,985 | |||
Notional Amount $ | ||||
Options Purchased - 0.1% | ||||
(Number of Contracts) | ||||
Belgium - 0.1% | ||||
Bel 20 Index | ||||
Dec 2006 4,163.07 (EUR) Call (143) | 7,598 | 913 | ||
Hong Kong - 0.0% | ||||
Hang Seng Index | ||||
Dec 2006 18,342.30 (HKD) Call (141) | 16,627 | 453 | ||
83
Table of Contents
Switzerland - 0.0% | ||||
Swiss Market Index | ||||
Dec 2006 8,613.85 (CHF) Call (132) | 9,140 | 531 | ||
Total Options Purchased | ||||
(cost $1,887) | 1,897 | |||
Amounts in thousands | Principal or Shares | Market $ | |||
Warrants & Rights - 0.1% | |||||
United States - 0.1% | |||||
Reliance Communication, Ltd. (Æ) | |||||
2010 Warrants | 262 | 2,194 | |||
Satyam Computer Services, Ltd. (Þ) (Æ) | |||||
2009 Warrants | 213 | 2,068 | |||
Total Warrants & Rights | |||||
(cost $3,621) | 4,262 | ||||
Short-Term Investments - 7.1% | |||||
United States - 7.1% | |||||
Russell Investment Company | |||||
Money Market Fund | 228,569,000 | 228,569 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.891% due 12/07/06 | 14,000 | 13,933 | |||
4.934% due 12/14/06 | 7,000 | 6,960 | |||
Total Short-Term Investments | |||||
(cost $249,462) | 249,462 | ||||
Other Securities - 19.4% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 174,725,820 | 174,726 | |||
State Street Securities Lending Quality Trust (×) | 506,184,938 | 506,185 | |||
Total Other Securities | |||||
(cost $680,911) | 680,911 | ||||
Total Investments - 119.0% | |||||
(identified cost $3,485,826) | 4,177,095 | ||||
Other Assets and Liabilities, | |||||
Net - (19.0%) | (665,629 | ) | |||
Net Assets - 100.0% | 3,511,466 | ||||
A Portion of the portfolio has been fair valued as of period end.
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
AEX Index (Netherlands) | |||||
expiration date 11/06 (279) | 34,656 | (187 | ) | ||
CAC-40 Index (France) | |||||
expiration date 11/06 (259) | 17,712 | 12 | |||
expiration date 12/06 (200) | 13,681 | 525 | |||
DAX Index (Germany) | |||||
expiration date 12/06 (217) | 43,577 | 1,149 | |||
EUR STOXX 50 Index (EMU) | |||||
expiration date 12/06 (1000) | 51,207 | 2,206 | |||
FTSE-100 Index (UK) | |||||
expiration date 12/06 (470) | 55,044 | 1,635 | |||
Hang Seng Index (Hong Kong) | |||||
expiration date 11/06 (141) | 16,619 | 155 | |||
MSCI Singapore Index | |||||
expiration date 11/06 (8) | 336 | — | |||
SPI 200 Index (Australia) |
84
Table of Contents
expiration date 12/06 (125) | 12,964 | 598 | |||
TOPIX Index (Japan) | |||||
expiration date 12/06 (395) | 54,401 | (635 | ) | ||
Short Positions | |||||
FTSE-100 Index (UK) | |||||
expiration date 12/06 (250) | 29,279 | (601 | ) | ||
IBEX Plus Index (Spain) | |||||
expiration date 11/06 (2) | 350 | (39 | ) | ||
MIB-30 (Italy) | |||||
expiration date 12/06 (67) | 16,931 | (570 | ) | ||
OMX Stockholm 30 Index (Sweden) | |||||
expiration date 11/06 (865) | 13,026 | 163 | |||
SPI 200 Index (Australia) | |||||
expiration date 12/06 (201) | 20,847 | (1,045 | ) | ||
TOPIX Index (Japan) | |||||
expiration date 12/06 (44) | 6,060 | 579 | |||
Total Unrealized Appreciation (Depreciation) on | |||||
Open Futures Contracts (å) | 3,945 | ||||
Options Written (Number of Contracts) | Notional $ | Market $ | |||
Belgium | |||||
Bel 20 Index Futures | |||||
Dec 2006 4,163.07 (EUR) Put (143) | 7,598 | (932 | ) | ||
Hong Kong | |||||
Hang Seng Index | |||||
Dec 2006 18,342.30 (HKD) Put (141) | 16,627 | (453 | ) | ||
Switzerland | |||||
Swiss Market Index | |||||
Dec 2006 8,613.85 (CHF) Put (132) | 9,140 | (531 | ) | ||
Total Liability for Options Written | |||||
(premiums received $1,886) | (1,916 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | |||
USD 55 | AUD 71 | 11/03/06 | — | |||
USD 420 | AUD 550 | 12/15/06 | 5 | |||
USD 423 | AUD 550 | 12/15/06 | 3 | |||
USD 282 | AUD 375 | 12/20/06 | 8 | |||
USD 325 | AUD 437 | 12/20/06 | 13 | |||
USD 379 | AUD 500 | 12/20/06 | 8 | |||
USD 382 | AUD 500 | 12/20/06 | 5 | |||
USD 676 | AUD 895 | 12/20/06 | 16 | |||
USD 748 | AUD 1,000 | 12/20/06 | 26 | |||
USD 749 | AUD 1,000 | 12/20/06 | 24 | |||
USD 753 | AUD 1,000 | 12/20/06 | 21 | |||
USD 753 | AUD 1,000 | 12/20/06 | 21 | |||
USD 759 | AUD 1,000 | 12/20/06 | 15 | |||
USD 764 | AUD 1,000 | 12/20/06 | 10 | |||
USD 764 | AUD 1,000 | 12/20/06 | 9 | |||
USD 1,001 | AUD 1,320 | 12/20/06 | 20 | |||
USD 1,089 | AUD 1,466 | 12/20/06 | 45 | |||
USD 1,954 | AUD 2,599 | 12/20/06 | 57 | |||
USD 3,082 | AUD 4,099 | 12/20/06 | 89 | |||
USD 3,750 | AUD 4,986 | 12/20/06 | 106 |
85
Table of Contents
USD 11,460 | AUD 15,000 | 12/20/06 | 141 | ||||
USD 52 | CHF 65 | 11/01/06 | — | ||||
USD 568 | CHF 709 | 11/01/06 | 2 | ||||
USD 1,178 | CHF 1,471 | 11/01/06 | 5 | ||||
USD 127 | CHF 159 | 11/02/06 | 1 | ||||
USD 361 | CHF 451 | 11/02/06 | 1 | ||||
USD 2,076 | CHF 2,600 | 12/15/06 | 23 | ||||
USD 2,173 | CHF 2,700 | 12/15/06 | 7 | ||||
USD 1,489 | CHF 1,876 | 12/20/06 | 27 | ||||
USD 4,091 | CHF 5,079 | 12/20/06 | 12 | ||||
USD 6,568 | CHF 8,152 | 12/20/06 | 18 | ||||
USD 15,428 | CHF 19,171 | 12/20/06 | 60 | ||||
USD 25,328 | CHF 31,475 | 12/20/06 | 101 | ||||
USD 27,423 | CHF 34,061 | 12/20/06 | 95 | ||||
USD 158 | DKK 937 | 12/20/06 | 3 | ||||
USD 576 | EUR 454 | 11/01/06 | 3 | ||||
USD 716 | EUR 563 | 11/01/06 | 3 | ||||
USD 1,047 | EUR 821 | 11/01/06 | 2 | ||||
USD 1,973 | EUR 1,549 | 11/01/06 | 5 | ||||
USD 62 | EUR 49 | 11/02/06 | — | ||||
USD 317 | EUR 249 | 11/02/06 | 1 | ||||
USD 805 | EUR 633 | 11/02/06 | 2 | ||||
USD 5,448 | EUR 4,290 | 12/15/06 | 40 | ||||
USD 6,430 | EUR 5,040 | 12/15/06 | 18 | ||||
USD 1,071 | EUR 840 | 12/20/06 | 4 | ||||
USD 1,497 | EUR 1,176 | 12/20/06 | 7 | ||||
USD 2,472 | EUR 1,943 | 12/20/06 | 14 | ||||
USD 2,511 | EUR 2,000 | 12/20/06 | 48 | ||||
USD 2,548 | EUR 2,000 | 12/20/06 | 12 | ||||
USD 2,548 | EUR 2,000 | 12/20/06 | 11 | ||||
USD 2,552 | EUR 2,000 | 12/20/06 | 7 | ||||
USD 2,561 | EUR 2,000 | 12/20/06 | (1 | ) | |||
USD 2,563 | EUR 2,000 | 12/20/06 | (4 | ) | |||
USD 2,570 | EUR 2,000 | 12/20/06 | (11 | ) | |||
USD 2,583 | EUR 2,000 | 12/20/06 | (24 | ) | |||
USD 3,820 | EUR 3,000 | 12/20/06 | 19 | ||||
USD 3,822 | EUR 3,000 | 12/20/06 | 17 | ||||
USD 3,824 | EUR 3,000 | 12/20/06 | 15 | ||||
USD 3,998 | EUR 3,136 | 12/20/06 | 15 | ||||
USD 5,055 | EUR 4,000 | 12/20/06 | 64 | ||||
USD 5,057 | EUR 4,000 | 12/20/06 | 61 | ||||
USD 5,106 | EUR 4,000 | 12/20/06 | 13 | ||||
USD 6,166 | EUR 4,800 | 12/20/06 | (24 | ) | |||
USD 6,361 | EUR 5,000 | 12/20/06 | 37 | ||||
USD 6,787 | EUR 5,332 | 12/20/06 | 36 | ||||
USD 6,987 | EUR 5,551 | 12/20/06 | 117 | ||||
USD 7,346 | EUR 5,767 | 12/20/06 | 34 | ||||
USD 7,724 | EUR 6,100 | 12/20/06 | 82 | ||||
USD 20,810 | EUR 16,200 | 12/20/06 | (79 | ) | |||
USD 27,126 | EUR 21,312 | 12/20/06 | 147 | ||||
USD 33,730 | EUR 26,462 | 12/20/06 | 132 | ||||
USD 92,731 | EUR 72,200 | 12/20/06 | (340 | ) | |||
USD 788 | GBP 416 | 11/01/06 | 5 | ||||
USD 846 | GBP 445 | 11/01/06 | 2 | ||||
USD 1,174 | GBP 619 | 11/01/06 | 7 | ||||
USD 507 | GBP 267 | 11/02/06 | 2 | ||||
USD 437 | GBP 229 | 11/03/06 | — | ||||
USD 859 | GBP 450 | 11/03/06 | — | ||||
USD 3,438 | GBP 1,820 | 12/15/06 | 35 | ||||
USD 3,657 | GBP 1,920 | 12/15/06 | 6 |
86
Table of Contents
USD 565 | GBP 300 | 12/20/06 | 8 | ||||
USD 1,868 | GBP 1,000 | 12/20/06 | 41 | ||||
USD 1,868 | GBP 1,000 | 12/20/06 | 40 | ||||
USD 1,876 | GBP 1,000 | 12/20/06 | 33 | ||||
USD 1,877 | GBP 1,000 | 12/20/06 | 31 | ||||
USD 1,878 | GBP 1,000 | 12/20/06 | 30 | ||||
USD 1,890 | GBP 1,000 | 12/20/06 | 18 | ||||
USD 1,909 | GBP 1,000 | 12/20/06 | (1 | ) | |||
USD 2,800 | GBP 1,500 | 12/20/06 | 62 | ||||
USD 2,816 | GBP 1,500 | 12/20/06 | 47 | ||||
USD 2,818 | GBP 1,500 | 12/20/06 | 45 | ||||
USD 2,818 | GBP 1,500 | 12/20/06 | 45 | ||||
USD 3,746 | GBP 2,000 | 12/20/06 | 70 | ||||
USD 3,767 | GBP 2,000 | 12/20/06 | 50 | ||||
USD 3,781 | GBP 2,000 | 12/20/06 | 36 | ||||
USD 5,012 | GBP 2,699 | 12/20/06 | 138 | ||||
USD 6,486 | GBP 3,451 | 12/20/06 | 100 | ||||
USD 10,880 | GBP 5,790 | 12/20/06 | 170 | ||||
USD 11,634 | GBP 6,191 | 12/20/06 | 180 | ||||
USD 13,798 | GBP 7,339 | 12/20/06 | 208 | ||||
USD 19,562 | GBP 10,409 | 12/20/06 | 302 | ||||
USD 41,138 | GBP 21,894 | 12/20/06 | 642 | ||||
USD 62,542 | GBP 33,200 | 12/20/06 | 814 | ||||
USD 120 | HKD 930 | 11/01/06 | — | ||||
USD 144 | HKD 1,117 | 11/01/06 | — | ||||
USD 59 | HKD 460 | 12/20/06 | — | ||||
USD 71 | HKD 549 | 12/20/06 | — | ||||
USD 88 | HKD 685 | 12/20/06 | — | ||||
USD 119 | HKD 923 | 12/20/06 | — | ||||
USD 356 | HKD 2,766 | 12/20/06 | 1 | ||||
USD 1,000 | HKD 7,763 | 12/20/06 | — | ||||
USD 51 | JPY 6,035 | 11/01/06 | — | ||||
USD 77 | JPY 9,108 | 11/01/06 | — | ||||
USD 1,772 | JPY 208,423 | 11/01/06 | 10 | ||||
USD 237 | JPY 27,941 | 11/02/06 | 2 | ||||
USD 815 | JPY 96,043 | 11/02/06 | 6 | ||||
USD 6,689 | JPY 779,740 | 12/15/06 | 21 | ||||
USD 223 | JPY 26,023 | 12/20/06 | 1 | ||||
USD 433 | JPY 50,000 | 12/20/06 | (3 | ) | |||
USD 861 | JPY 100,000 | 12/20/06 | — | ||||
USD 867 | JPY 100,000 | 12/20/06 | (6 | ) | |||
USD 868 | JPY 100,000 | 12/20/06 | (6 | ) | |||
USD 870 | JPY 100,000 | 12/20/06 | (9 | ) | |||
USD 1,301 | JPY 150,000 | 12/20/06 | (9 | ) | |||
USD 1,690 | JPY 200,000 | 12/20/06 | 33 | ||||
USD 1,694 | JPY 200,000 | 12/20/06 | 28 | ||||
USD 1,706 | JPY 200,000 | 12/20/06 | 16 | ||||
USD 1,712 | JPY 200,000 | 12/20/06 | 10 | ||||
USD 1,716 | JPY 200,000 | 12/20/06 | 7 | ||||
USD 1,721 | JPY 200,000 | 12/20/06 | 1 | ||||
USD 1,722 | JPY 200,000 | 12/20/06 | — | ||||
USD 1,725 | JPY 200,000 | 12/20/06 | (3 | ) | |||
USD 1,737 | JPY 200,000 | 12/20/06 | (15 | ) | |||
USD 1,739 | JPY 200,000 | 12/20/06 | (17 | ) | |||
USD 2,010 | JPY 234,202 | 12/20/06 | 7 | ||||
USD 2,546 | JPY 300,000 | 12/20/06 | 37 | ||||
USD 2,585 | JPY 300,000 | 12/20/06 | (1 | ) | |||
USD 2,609 | JPY 300,000 | 12/20/06 | (26 | ) | |||
USD 2,772 | JPY 325,000 | 12/20/06 | 27 | ||||
USD 3,429 | JPY 400,000 | 12/20/06 | 16 |
87
Table of Contents
USD 3,444 | JPY 400,000 | 12/20/06 | — | ||||
USD 4,014 | JPY 467,874 | 12/20/06 | 15 | ||||
USD 5,007 | JPY 593,257 | 12/20/06 | 102 | ||||
USD 52,014 | JPY 6,000,000 | 12/20/06 | (346 | ) | |||
USD 289 | NOK 1,892 | 11/01/06 | — | ||||
USD 369 | NOK 2,408 | 11/03/06 | — | ||||
USD 2,042 | NOK 13,341 | 11/03/06 | (1 | ) | |||
USD 228 | NOK 1,490 | 12/15/06 | 1 | ||||
USD 242 | NOK 1,580 | 12/15/06 | 1 | ||||
USD 167 | NOK 1,112 | 12/20/06 | 3 | ||||
USD 597 | NOK 3,900 | 12/20/06 | 1 | ||||
USD 2,554 | NOK 16,656 | 12/20/06 | 1 | ||||
USD 2,793 | NOK 18,228 | 12/20/06 | 3 | ||||
USD 17,617 | NOK 114,868 | 12/20/06 | 3 | ||||
USD 19,242 | NOK 125,527 | 12/20/06 | 12 | ||||
USD 18 | NZD 27 | 12/20/06 | — | ||||
USD 31 | NZD 47 | 12/20/06 | 1 | ||||
USD 135 | SEK 977 | 11/01/06 | — | ||||
USD 29 | SEK 210 | 11/02/06 | — | ||||
USD 519 | SEK 3,814 | 12/20/06 | 11 | ||||
USD 3,758 | SEK 27,062 | 12/20/06 | 2 | ||||
USD 4,064 | SEK 29,532 | 12/20/06 | 39 | ||||
USD 4,065 | SEK 29,532 | 12/20/06 | 38 | ||||
USD 20,259 | SEK 146,001 | 12/20/06 | 26 | ||||
USD 21,298 | SEK 154,809 | 12/20/06 | 211 | ||||
USD 204 | SGD 319 | 11/01/06 | 1 | ||||
USD 180 | SGD 285 | 12/20/06 | 4 | ||||
USD 923 | SGD 1,459 | 12/20/06 | 16 | ||||
USD 1,037 | SGD 1,636 | 12/20/06 | 17 | ||||
USD 1,037 | SGD 1,636 | 12/20/06 | 17 | ||||
USD 1,119 | SGD 1,766 | 12/20/06 | 18 | ||||
USD 4,379 | SGD 6,921 | 12/20/06 | 78 | ||||
USD 5,231 | SGD 8,268 | 12/20/06 | 93 | ||||
USD 6,642 | SGD 10,498 | 12/20/06 | 118 | ||||
USD 23,728 | SGD 37,501 | 12/20/06 | 421 | ||||
AUD 34 | USD 27 | 11/03/06 | — | ||||
AUD 47 | USD 36 | 11/03/06 | — | ||||
AUD 1,100 | USD 828 | 12/15/06 | (23 | ) | |||
AUD 300 | USD 231 | 12/20/06 | (1 | ) | |||
AUD 1,200 | USD 890 | 12/20/06 | (38 | ) | |||
AUD 1,200 | USD 890 | 12/20/06 | (38 | ) | |||
AUD 1,200 | USD 916 | 12/20/06 | (12 | ) | |||
AUD 1,400 | USD 1,070 | 12/20/06 | (12 | ) | |||
AUD 1,807 | USD 1,353 | 12/20/06 | (44 | ) | |||
AUD 3,000 | USD 2,229 | 12/20/06 | (92 | ) | |||
AUD 5,202 | USD 3,907 | 12/20/06 | (116 | ) | |||
AUD 5,885 | USD 4,428 | 12/20/06 | (124 | ) | |||
AUD 5,970 | USD 4,485 | 12/20/06 | (132 | ) | |||
AUD 20,730 | USD 15,575 | 12/20/06 | (457 | ) | |||
CAD 60 | USD 53 | 11/01/06 | — | ||||
CAD 11 | USD 10 | 11/02/06 | — | ||||
CHF 2,767 | USD 2,223 | 11/03/06 | (1 | ) | |||
CHF 5,300 | USD 4,187 | 12/15/06 | (93 | ) | |||
CHF 974 | USD 785 | 12/20/06 | (2 | ) | |||
CHF 1,935 | USD 1,530 | 12/20/06 | (34 | ) | |||
CHF 3,406 | USD 2,735 | 12/20/06 | (16 | ) | |||
CHF 11,759 | USD 9,442 | 12/20/06 | (58 | ) | |||
CHF 51,345 | USD 41,328 | 12/20/06 | (153 | ) | |||
DKK 51 | USD 9 | 12/20/06 | — | ||||
DKK 126 | USD 22 | 12/20/06 | — |
88
Table of Contents
DKK 139 | USD 24 | 12/20/06 | — | ||||
DKK 295 | USD 50 | 12/20/06 | — | ||||
DKK 352 | USD 60 | 12/20/06 | — | ||||
DKK 3,702 | USD 624 | 12/20/06 | (12 | ) | |||
EUR 13 | USD 16 | 11/01/06 | — | ||||
EUR 747 | USD 950 | 11/01/06 | (3 | ) | |||
EUR 935 | USD 1,191 | 11/01/06 | (3 | ) | |||
EUR 47 | USD 60 | 11/02/06 | — | ||||
EUR 198 | USD 252 | 11/02/06 | (1 | ) | |||
EUR 230 | USD 293 | 11/02/06 | (1 | ) | |||
EUR 78 | USD 99 | 11/03/06 | — | ||||
EUR 394 | USD 503 | 11/03/06 | — | ||||
EUR 9,330 | USD 11,711 | 12/15/06 | (226 | ) | |||
EUR 1,000 | USD 1,274 | 12/20/06 | (5 | ) | |||
EUR 1,000 | USD 1,288 | 12/20/06 | 8 | ||||
EUR 1,231 | USD 1,569 | 12/20/06 | (6 | ) | |||
EUR 2,000 | USD 2,530 | 12/20/06 | (29 | ) | |||
EUR 3,000 | USD 3,768 | 12/20/06 | (71 | ) | |||
EUR 4,000 | USD 5,176 | 12/20/06 | 57 | ||||
EUR 4,000 | USD 5,099 | 12/20/06 | (19 | ) | |||
EUR 4,400 | USD 5,650 | 12/20/06 | 19 | ||||
EUR 4,458 | USD 5,598 | 12/20/06 | (107 | ) | |||
EUR 7,000 | USD 8,789 | 12/20/06 | (168 | ) | |||
EUR 7,500 | USD 9,437 | 12/20/06 | (160 | ) | |||
EUR 8,507 | USD 10,842 | 12/20/06 | (44 | ) | |||
EUR 9,628 | USD 12,265 | 12/20/06 | (55 | ) | |||
EUR 16,500 | USD 21,191 | 12/20/06 | 77 | ||||
EUR 17,500 | USD 22,020 | 12/20/06 | (375 | ) | |||
EUR 36,569 | USD 46,615 | 12/20/06 | (180 | ) | |||
GBP 8 | USD 14 | 11/01/06 | — | ||||
GBP 8 | USD 15 | 11/01/06 | — | ||||
GBP 11 | USD 21 | 11/01/06 | — | ||||
GBP 11 | USD 21 | 11/01/06 | — | ||||
GBP 63 | USD 119 | 11/01/06 | (1 | ) | |||
GBP 66 | USD 125 | 11/01/06 | (1 | ) | |||
GBP 104 | USD 198 | 11/01/06 | (1 | ) | |||
GBP 1,088 | USD 2,065 | 11/01/06 | (11 | ) | |||
GBP 1,389 | USD 2,635 | 11/01/06 | (15 | ) | |||
GBP 99 | USD 188 | 11/02/06 | (1 | ) | |||
GBP 1,057 | USD 2,007 | 11/02/06 | (9 | ) | |||
GBP 555 | USD 1,058 | 11/03/06 | — | ||||
GBP 3,740 | USD 6,990 | 12/15/06 | (147 | ) | |||
GBP 1,000 | USD 1,897 | 12/20/06 | (11 | ) | |||
GBP 1,000 | USD 1,862 | 12/20/06 | (47 | ) | |||
GBP 1,000 | USD 1,869 | 12/20/06 | (39 | ) | |||
GBP 1,800 | USD 3,432 | 12/20/06 | (3 | ) | |||
GBP 2,000 | USD 3,806 | 12/20/06 | (10 | ) | |||
GBP 2,000 | USD 3,767 | 12/20/06 | (50 | ) | |||
GBP 2,700 | USD 5,013 | 12/20/06 | (140 | ) | |||
GBP 2,700 | USD 5,085 | 12/20/06 | (68 | ) | |||
GBP 2,800 | USD 5,190 | 12/20/06 | (153 | ) | |||
GBP 3,000 | USD 5,651 | 12/20/06 | (74 | ) | |||
GBP 3,559 | USD 6,601 | 12/20/06 | (191 | ) | |||
GBP 4,904 | USD 9,201 | 12/20/06 | (157 | ) | |||
GBP 6,129 | USD 11,521 | 12/20/06 | (174 | ) | |||
GBP 6,200 | USD 11,512 | 12/20/06 | (319 | ) | |||
GBP 30,563 | USD 57,442 | 12/20/06 | (883 | ) | |||
GBP 8,994 | USD 17,062 | 01/31/07 | (105 | ) | |||
HKD 2,013 | USD 259 | 11/01/06 | — | ||||
HKD 206 | USD 27 | 11/02/06 | — |
89
Table of Contents
HKD 8,941 | USD 1,152 | 12/20/06 | — | ||||
JPY 373 | USD 3 | 11/01/06 | — | ||||
JPY 578 | USD 5 | 11/01/06 | — | ||||
JPY 2,338 | USD 20 | 11/01/06 | — | ||||
JPY 24,973 | USD 212 | 11/01/06 | (1 | ) | |||
JPY 60,615 | USD 515 | 11/01/06 | (3 | ) | |||
JPY 370 | USD 3 | 11/02/06 | — | ||||
JPY 569 | USD 5 | 11/02/06 | — | ||||
JPY 2,126 | USD 18 | 11/02/06 | — | ||||
JPY 53,793 | USD 458 | 11/02/06 | (2 | ) | |||
JPY 204,864 | USD 1,744 | 11/02/06 | (8 | ) | |||
JPY 139 | USD 1 | 11/06/06 | — | ||||
JPY 366 | USD 3 | 11/06/06 | — | ||||
JPY 1,125 | USD 10 | 11/06/06 | — | ||||
JPY 24,587 | USD 209 | 11/06/06 | (1 | ) | |||
JPY 71,413 | USD 611 | 11/06/06 | — | ||||
JPY 282,698 | USD 2,414 | 11/06/06 | (3 | ) | |||
JPY 779,740 | USD 6,596 | 12/15/06 | (114 | ) | |||
JPY 43,341 | USD 371 | 12/20/06 | (2 | ) | |||
JPY 100,000 | USD 846 | 12/20/06 | (15 | ) | |||
JPY 100,000 | USD 856 | 12/20/06 | (5 | ) | |||
JPY 100,000 | USD 861 | 12/20/06 | — | ||||
JPY 130,531 | USD 1,120 | 12/20/06 | (4 | ) | |||
JPY 250,000 | USD 2,166 | 12/20/06 | 13 | ||||
JPY 300,000 | USD 2,543 | 12/20/06 | (41 | ) | |||
JPY 350,000 | USD 3,042 | 12/20/06 | 28 | ||||
JPY 400,000 | USD 3,428 | 12/20/06 | (17 | ) | |||
JPY 450,000 | USD 3,937 | 12/20/06 | 62 | ||||
JPY 539,879 | USD 4,633 | 12/20/06 | (16 | ) | |||
JPY 555,000 | USD 4,678 | 12/20/06 | (101 | ) | |||
JPY 600,000 | USD 5,063 | 12/20/06 | (103 | ) | |||
JPY 661,081 | USD 5,675 | 12/20/06 | (18 | ) | |||
JPY 764,173 | USD 6,450 | 12/20/06 | (131 | ) | |||
JPY 1,500,000 | USD 12,648 | 12/20/06 | (271 | ) | |||
JPY 1,685,531 | USD 14,469 | 12/20/06 | (46 | ) | |||
JPY 1,708,997 | USD 14,670 | 12/20/06 | (47 | ) | |||
JPY 3,016,276 | USD 25,881 | 12/20/06 | (94 | ) | |||
NOK 3,070 | USD 454 | 12/15/06 | (17 | ) | |||
NOK 9,354 | USD 1,434 | 12/20/06 | (1 | ) | |||
NOK 23,211 | USD 3,558 | 12/20/06 | (2 | ) | |||
NOK 29,167 | USD 4,469 | 12/20/06 | (5 | ) | |||
NOK 72,917 | USD 11,173 | 12/20/06 | (12 | ) | |||
NOK 144,530 | USD 22,148 | 12/20/06 | (21 | ) | |||
NZD 27 | USD 18 | 12/20/06 | — | ||||
SEK 6,853 | USD 951 | 12/20/06 | (1 | ) | |||
SEK 8,266 | USD 1,125 | 12/20/06 | (23 | ) | |||
SEK 11,705 | USD 1,623 | 12/20/06 | (3 | ) | |||
SEK 71,556 | USD 9,928 | 12/20/06 | (14 | ) | |||
SEK 78,957 | USD 10,958 | 12/20/06 | (12 | ) | |||
SEK 79,766 | USD 11,079 | 12/20/06 | (3 | ) | |||
SGD 530 | USD 340 | 11/01/06 | (1 | ) | |||
SGD 115 | USD 73 | 12/20/06 | (1 | ) | |||
SGD 826 | USD 523 | 12/20/06 | (9 | ) | |||
SGD 1,604 | USD 1,023 | 12/20/06 | (10 | ) | |||
SGD 3,239 | USD 2,049 | 12/20/06 | (36 | ) | |||
SGD 3,637 | USD 2,301 | 12/20/06 | (41 | ) | |||
SGD 3,813 | USD 2,430 | 12/20/06 | (25 | ) | |||
SGD 3,813 | USD 2,430 | 12/20/06 | (25 | ) | |||
SGD 3,813 | USD 2,430 | 12/20/06 | (26 | ) | |||
SGD 3,813 | USD 2,430 | 12/20/06 | (26 | ) |
90
Table of Contents
SGD 7,626 | USD 4,862 | 12/20/06 | (49 | ) | |||
SGD 8,464 | USD 5,354 | 12/20/06 | (97 | ) | |||
SGD 11,438 | USD 7,290 | 12/20/06 | (76 | ) | |||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (1,156 | ) | |||||
Index Swap Contracts |
Fund Receives Underlying Security | Counter Party | Notional Amount | Fund Pays Floating Rate | Termination Date | Unrealized Appreciation (Depreciation) $ | ||||||
MSCI Belgium | |||||||||||
Local Net Total Return | 1 Month EUR Libor | ||||||||||
Index | Merrill Lynch | EUR 5,414 | plus 0.15% | 06/20/07 | (55 | ) | |||||
MSCI Belgium | |||||||||||
Local Net Total Return | 1 Month EUR Libor | ||||||||||
Index | Merrill Lynch | EUR 834 | plus 0.15% | 06/20/07 | (9 | ) | |||||
MSCI Belgium | |||||||||||
Local Net Total Return | 1 Month EUR Libor | ||||||||||
Index | Merrill Lynch | EUR 535 | plus 0.15% | 09/19/07 | (5 | ) | |||||
Total Unrealized Appreciation (Depreciation) on Open Index Swaps | (69 | ) | |||||||||
Industry Diversification (Unaudited) | % of Net Assets | Market $ | ||||
Auto and Transportation | 6.1 | 215,094 | ||||
Consumer Discretionary | 8.6 | 303,375 | ||||
Consumer Staples | 9.0 | 314,615 | ||||
Financial Services | 26.0 | 913,179 | ||||
Health Care | 6.4 | 226,413 | ||||
Integrated Oils | 6.0 | 208,961 | ||||
Materials and Processing | 10.2 | 356,613 | ||||
Miscellaneous | 0.8 | 28,761 | ||||
Other Energy | 0.7 | 24,215 | ||||
Producer Durables | 6.0 | 209,569 | ||||
Technology | 3.9 | 137,974 | ||||
Utilities | 8.6 | 301,794 | ||||
Options Purchased | 0.1 | 1,897 | ||||
Warrants & Rights | 0.1 | 4,262 | ||||
Short-Term Investments | 7.1 | 249,462 | ||||
Other Securities | 19.4 | 680,911 | ||||
Total Investments | 119.0 | 4,177,095 | ||||
Other Assets and Liabilities, Net | (19.0 | ) | (665,629 | ) | ||
Net Assets | 100.0 | 3,511,466 | ||||
Geographic Diversification (Unaudited) | % of Assets | Market $ | ||||
Africa | 0.1 | 4,125 | ||||
Asia | 8.4 | 294,695 | ||||
Europe | 41.6 | 1,460,944 | ||||
Japan | 19.1 | 671,383 | ||||
Latin America | 1.5 | 51,162 | ||||
Middle East | — | 907 | ||||
Other Regions | 8.7 | 304,335 | ||||
United Kingdom | 20.2 | 708,633 | ||||
Other Securities | 19.4 | 680,911 | ||||
Total Investments | 119.0 | 4,177,095 | ||||
Other Assets and Liabilities, Net | (19.0 | ) | (665,629 | ) | ||
Net Assets | 100.0 | 3,511,466 | ||||
91
Table of Contents
Russell Investment Company
International Securities Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Russell Investment Company
Categories | % of Net Assets | ||
Australia | 3.7 | ||
Austria | 0.5 | ||
Belgium | 1.1 | ||
Bermuda | 0.5 | ||
Brazil | 0.2 | ||
Canada | 1.4 | ||
Cayman Islands | 0.1 | ||
China | 0.3 | ||
Denmark | 0.2 | ||
Finland | 0.7 | ||
France | 12.2 | ||
Germany | 6.6 | ||
Greece | 0.2 | ||
Hong Kong | 1.6 | ||
Hungary | — | * | |
India | — | * | |
Indonesia | 0.1 | ||
Ireland | 0.5 | ||
Israel | — | * | |
Italy | 3.7 | ||
Japan | 19.1 | ||
Luxembourg | 0.1 | ||
Mexico | 0.6 | ||
Netherlands | 4.0 | ||
Netherlands Antilles | — | * | |
New Zealand | 0.1 | ||
Norway | 0.4 | ||
Panama | — | * | |
Papua New Guinea | — | * | |
Singapore | 1.0 | ||
South Africa | 0.1 | ||
South Korea | 1.0 | ||
Spain | 2.9 | ||
Sweden | 1.5 | ||
Switzerland | 6.8 | ||
Taiwan | 0.4 | ||
Thailand | 0.1 | ||
Turkey | — | * | |
United Kingdom | 20.2 | ||
United States | 0.1 | ||
Preferred Stocks | 0.3 | ||
Options Purchased | 0.1 | ||
Warrants & Rights | 0.1 | ||
Short-Term Investments | 7.1 | ||
Other Securities | 19.4 | ||
Total Investments | 119.0 | ||
Other Assets and Liabilities, Net | (19.0 | ) | |
100.0 | |||
Futures Contracts | 0.1 | ||
Foreign Currency Exchange Contracts | (— | )* | |
Options Written | (0.1 | ) | |
Index Swaps | — | * |
* | Less than .05% of net assets |
See accompanying notes which are an integral part of the financial statements.
International Securities Fund
92
Table of Contents
(This page intentionally left blank)
93
Table of Contents
Emerging Markets Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Emerging Markets Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 33.04 | % | |
5 Years | 27.92 | %§ | |
10 Years | 7.48 | %§ |
Emerging Markets Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 32.64 | % | |
5 Years | 27.68 | %§ | |
10 Years | 7.30 | %§ |
Emerging Markets Fund - Class C ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 31.63 | % | |
5 Years | 26.80 | %§ | |
10 Years | 6.70 | %§ |
MSCI Emerging Markets Free Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 35.00 | % | |
5 Years | 28.11 | %§ | |
10 Years | N/A |
94
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Emerging Markets Fund Class S, Class E and Class C Shares gained 33.04%, 32.64% and 31.63%, respectively. This compared to the MSCI Emerging Markets Free Index(SM), which gained 35.00% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Emerging Markets Funds Average returned 34.38%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s underperformance during this period was primarily driven by a weak second quarter of 2006 when three of the largest countries to which the Fund was overweight (Turkey, South Africa and Brazil) had large negative returns. More generally, over the fiscal year, the Fund’s underweight to India and China and weak stock selection in Korea and India detracted from performance.
During the year, the Fund had a relatively neutral position to the top two performing emerging market sectors, industrials and financial services. Stock selection within the financial services sector was a significant positive. Energy was the third best performing sector, which was boosted by strong oil prices throughout the year. On average the Fund had a significant overweight to energy stocks and this was a large contributor to the Fund’s performance. The Fund’s underweight to health care was also a positive contributor to performance, as this small sector, which is dominated by Teva Pharmaceuticals, significantly underperformed.
Overall sector allocation was positive. However stock selection detracted from performance, especially in consumer discretionary and telecommunications sectors. In terms of countries, the underweight to Israel, which is dominated by the health care stock, Teva Pharmaceuticals, an overweight to Indonesia, as well as good stock selection in Brazil, were the main positive contributors to Fund performance.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The market environment during the fiscal period was generally a difficult one for the investment strategies employed in the Fund. Of the four money managers that were in the Fund for the full 12 month period, only Arrowstreet Capital, L.P. produced a positive return. T. Rowe Price International, Inc. and AllianceBernstein L.P. both significantly underperformed the benchmark with Genesis Asset Managers Limited marginally underperforming. The aggregate performance of Wells Capital Management Inc., who was terminated in the second quarter of 2006, and Harding Loevner Management, L.P., the latest addition to the Fund, contributed most positively to Fund performance.
Wells Capital Management Inc. made the largest positive contribution to Fund performance, primarily driven by a strong first quarter in 2006, when its large overweight position in energy and technology stocks added to returns.
T. Rowe Price had an extremely difficult second quarter of 2006 as it was overweight in many of the countries that did well in 2005, such as Egypt, Turkey and South Africa. These were some of the markets that underperformed the most over the second quarter, with Turkey and South Africa in particular suffering from sharp depreciation in their currencies. T. Rowe Price’s performance improved after the second quarter of 2006.
Genesis Asset Managers, LLP struggled in this period because of weak stock selection in India largely due to its overweight to health care.
In the global sell-off in the second quarter, the emerging markets asset class was hit hard. Arrowstreet, a quantitative manager, held up well in this environment, but it underperformed significantly in the third quarter when there was a sell-off in the materials sector. Arrowstreet’s performance was fairly volatile over the fiscal year, but it finished ahead of its benchmark.
95
Table of Contents
AllianceBernstein was behind its benchmark during this period. Its portfolio suffered following a very strong period of performance during the last five year period in which it had been the strongest performing money manager in the Fund.
Harding, Loevner Management, L.P. performed well since it was added to the Fund at the end of June. Its focus on companies that it believes exhibit quality fundamentals led to strong stock selection in the financial services sector.
Describe any changes to the Fund’s structure or the money manager line-up.
In June 2006, Wells Capital Management was replaced with Harding Loevner. Harding Loevner is a market-oriented money manager with a bottom-up focus that emphasizes companies it believes have high quality characteristics across a broad universe of emerging markets.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
Arrowstreet Capital, L.P. | Market-Oriented | |
Genesis Asset Managers, LLP | Market-Oriented | |
Harding Loevner Management, L.P. | Market-Oriented | |
T. Rowe Price International, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | The Morgan Stanley Capital International Emerging Markets Free Index (net) is a market capitalization-weighted Index of over 850 stocks traded in 22 world markets. |
*** | The Morgan Stanley Capital International Emerging Markets Free Index (net) was linked to the Morgan Stanley Capital International Emerging Markets Free Index (gross) as of December 31, 1998. |
‡‡ | The Fund first issued Class E Shares on September 22, 1998. The returns shown for Class E Shares prior to September 22, 1998 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, returns for that period would have been lower. |
‡‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to September 21, 1998, and the performance of the Fund’s Class E Shares from September 22, 1998 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
96
Table of Contents
Russell Investment Company
Emerging Markets Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 961.00 | $ | 1,011.64 | ||
Expenses Paid During Period* | $ | 13.30 | $ | 13.64 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.69% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
97
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 964.30 | $ | 1,015.48 | ||
Expenses Paid During Period* | $ | 9.56 | $ | 9.80 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.93% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 966.10 | $ | 1,016.69 | ||
Expenses Paid During Period* | $ | 8.38 | $ | 8.59 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.69% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
98
Table of Contents
Russell Investment Company
Emerging Markets Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal or Shares | Market $ | |||
Common Stocks - 89.1% | ||||
Austria - 0.1% | ||||
Raiffeisen International Bank Holding AG | 8,900 | 1,018 | ||
Bermuda - 0.4% | ||||
Brilliance China Automotive Holdings, Ltd. (Æ) | 338,000 | 52 | ||
Credicorp, Ltd. (Ñ) | 73,409 | 3,098 | ||
Shangri-La Asia, Ltd. | 492,000 | 1,068 | ||
4,218 | ||||
Brazil - 7.8% | ||||
All America Latina Logistica SA | 230,000 | 2,008 | ||
Banco do Brasil SA | 253,000 | 6,136 | ||
Banco Itau Holding Financeira SA - ADR | 82,700 | 2,746 | ||
Brasil Telecom Participacoes SA - ADR | 65,400 | 2,189 | ||
Centrais Eletricas Brasileiras SA | 151,505,400 | 3,191 | ||
Cia Brasileira de Distribuicao Grupo Pao de Acucar - ADR (Ñ) | 78,400 | 2,342 | ||
Cia de Bebidas das Americas - ADR | 31,400 | 1,371 | ||
Cia de Saneamento Basico do Estado de Sao Paulo | 45,960,000 | 5,526 | ||
Cia Siderurgica Nacional SA | 95,533 | 2,967 | ||
Cia Vale do Rio Doce - ADR | 402,200 | 8,736 | ||
Cia Vale do Rio Doce - ADR (Ñ) | 173,800 | 4,421 | ||
Companhia de Saneamento de Minas Gerais (Æ) | 72,000 | 671 | ||
Cyrela Brazil Realty SA | 66,500 | 1,354 | ||
EDP - Energias do Brasil SA | 104,500 | 1,439 | ||
Empresa Brasileira de Aeronautica SA - ADR (Ñ) | 20,400 | 849 | ||
Gerdau SA | 7,300 | 91 | ||
Gerdau SA - ADR (Ñ) | 498,800 | 7,367 | ||
Gol Linhas Aereas Inteligentes SA - ADR (Ñ) | 69,000 | 2,149 | ||
Lojas Renner SA | 7,500 | 94 | ||
Natura Cosmeticos SA | 306,500 | 4,222 | ||
Perdigao SA | 100,309 | 1,169 | ||
Petroleo Brasileiro SA | 134,656 | 2,980 | ||
Petroleo Brasileiro SA - ADR (Æ) | 75,100 | 6,080 | ||
Petroleo Brasileiro SA - ADR (Æ)(Ñ) | 67,125 | 5,958 | ||
Souza Cruz SA | 2,400 | 37 | ||
Tele Norte Leste Participacoes SA | 42,906 | 1,278 | ||
Tele Norte Leste Participacoes SA - ADR (Ñ) | 263,000 | 3,806 | ||
Unibanco - Uniao de Bancos Brasileiros SA (Æ) | 350,300 | 2,773 | ||
Unibanco - Uniao de Bancos Brasileiros SA - ADR | 83,700 | 6,591 | ||
90,541 | ||||
Canada - 0.2% | ||||
First Quantum Minerals, Ltd. | 30,800 | 1,760 | ||
Cayman Islands - 0.8% | ||||
Agile Property Holdings, Ltd. | 998,000 | 883 | ||
ASM Pacific Technology | 268,000 | 1,391 | ||
China Resources Land, Ltd. | 396,000 | 316 | ||
Himax Technologies, Inc. - ADR (Æ) | 109,600 | 698 | ||
Hutchison Telecommunications International, Ltd. (Æ) | 727,000 | 1,400 |
99
Table of Contents
Kingboard Chemical Holdings, Ltd. | 261,500 | 930 | ||
Luen Thai Holdings, Ltd. | 1,407,000 | 244 | ||
Semiconductor Manufacturing International Corp. (Æ) | 5,583,000 | 653 | ||
Shui On Land, Ltd. (Æ) | 818,000 | 631 | ||
Sina Corp./China (Æ)(Ñ) | 34,100 | 877 | ||
Solomon Systech International, Ltd. | 3,594,900 | 629 | ||
Tencent Holdings, Ltd. | 430,000 | 1,027 | ||
9,679 | ||||
Chile - 0.5% | ||||
Banco de Credito e Inversiones | 46,400 | 1,298 | ||
Banco Santander Chile SA - ADR | 31,500 | 1,519 | ||
Coca-Cola Embonor SA - ADR | 97,500 | 938 | ||
Embotelladora Andina SA - ADR | 62,100 | 966 | ||
Lan Airlines SA - ADR (Ñ) | 16,800 | 725 | ||
5,446 | ||||
China - 5.8% | ||||
Aluminum Corp. of China, Ltd. Class H | 1,132,000 | 790 | ||
Angang Steel Co., Ltd. Class H | 290,000 | 296 | ||
Anhui Conch Cement Co., Ltd. Class H | 820,000 | 1,824 | ||
Bank of Communications Co., Ltd. Class H | 970,000 | 728 | ||
Beijing Capital International Airport Co., Ltd. Class H | 302,000 | 194 | ||
China COSCO Holdings Co., Ltd. Class H | 2,011,000 | 936 | ||
China International Marine Containers Co., Ltd. Class B | 350,330 | 493 | ||
China Life Insurance Co., Ltd. Class H | 1,720,000 | 3,623 | ||
China Merchants Bank Co., Ltd. (Æ) | 138,000 | 215 | ||
China Petroleum & Chemical Corp. - ADR (Ñ) | 53,160 | 3,688 | ||
China Petroleum & Chemical Corp. Class H | 13,559,254 | 9,415 | ||
China Shenhua Energy Co., Ltd. | 3,186,700 | 5,605 | ||
China Shipping Container Lines Co., Ltd. Class H | 1,309,000 | 318 | ||
China Shipping Development Co., Ltd. Class H | 928,000 | 1,010 | ||
China Telecom Corp., Ltd. Class H | 9,281,000 | 3,497 | ||
Datang International Power Generation Co., Ltd. Class H | 1,782,000 | 1,510 | ||
Guangzhou R&F Properties Co., Ltd. | 662,400 | 1,082 | ||
Industrial & Commercial Bank of China (Æ) | 4,665,000 | 2,087 | ||
Jiangsu Express Class H | 2,586,400 | 1,523 | ||
Jiangxi Copper Co., Ltd. Class H | 527,000 | 573 | ||
Maanshan Iron & Steel Class H | 3,203,600 | 1,273 | ||
PetroChina Co., Ltd. - ADR | 21,663 | 2,391 | ||
PetroChina Co., Ltd. Class H | 14,067,176 | 15,501 | ||
PICC Property & Casualty Co., Ltd. Class H | 574,000 | 205 | ||
Ping An Insurance Group Co. of China, Ltd. Class H | 1,051,100 | 3,656 | ||
Shanghai Forte Land Co., Ltd. Class H | 1,970,000 | 869 | ||
Shenzhen Expressway Co., Ltd. Class H | 270,000 | 152 | ||
Sinopec Shanghai Petrochemical Co., Ltd. Class H | 2,519,000 | 1,069 | ||
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H | 628,000 | 120 | ||
Weiqiao Textile Co. Class H | 279,500 | 384 | ||
Yanzhou Coal Mining Co., Ltd. Class H | 3,008,000 | 1,973 | ||
ZTE Corp. Class H | 216,700 | 803 | ||
67,803 | ||||
Colombia - 0.6% | ||||
BanColombia SA | 309,722 | 2,306 | ||
BanColombia SA - ADR (Ñ) | 136,953 | 4,186 | ||
6,492 | ||||
Czech Republic - 0.0% | ||||
Philip Morris CR | 276 | 146 | ||
Egypt - 1.9% | ||||
Commercial International Bank | 93,384 | 848 | ||
Egyptian Co. for Mobile Services | 129,940 | 3,603 | ||
Orascom Construction Industries | 202,836 | 8,773 | ||
Orascom Construction Industries - GDR (Æ) | 37,000 | 3,230 |
100
Table of Contents
Orascom Telecom Holding SAE | 57,340 | 3,242 | ||
Orascom Telecom Holding SAE - GDR | 46,600 | 2,623 | ||
22,319 | ||||
Hong Kong - 1.4% | ||||
Beijing Enterprises Holdings, Ltd. | 810,000 | 1,625 | ||
China Insurance International Holdings Co., Ltd. | 1,822,000 | 1,570 | ||
China Merchants Holdings International Co., Ltd. | 469,000 | 1,372 | ||
China Mobile, Ltd. | 7,500 | 61 | ||
China Mobile, Ltd. - ADR (Ñ) | 79,300 | 3,234 | ||
China Netcom Group Corp. Hong Kong, Ltd. | 1,762,000 | 3,131 | ||
China Overseas Land & Investment, Ltd. | 196,000 | 179 | ||
China Resources Enterprise | 634,000 | 1,469 | ||
Citic Pacific, Ltd. | 39,000 | 120 | ||
Guangzhou Investment Co., Ltd. | 1,616,000 | 312 | ||
Shenzhen Investment, Ltd. | 278,000 | 109 | ||
Techtronic Industries Co. | 1,340,400 | 1,899 | ||
Travelsky Technology, Ltd. Class H | 200,000 | 262 | ||
Wumart Stores, Inc. (Æ) | 635,200 | 592 | ||
15,935 | ||||
Hungary - 1.3% | ||||
Magyar Telekom Telecommunications PLC | 639,491 | 2,975 | ||
MOL Hungarian Oil and Gas PLC | 77,900 | 7,745 | ||
MOL Hungarian Oil and Gas PLC - ADR | 30,100 | 3,003 | ||
Richter Gedeon Nyrt. (Ñ) | 6,400 | 1,342 | ||
15,065 | ||||
India - 5.6% | ||||
Allahabad Bank | 243,535 | 504 | ||
Andhra Bank | 429,000 | 887 | ||
Arvind Mills, Ltd. | 292,400 | 403 | ||
Bajaj Auto, Ltd. | 41,500 | 2,533 | ||
Bank of Baroda | 220,000 | 1,363 | ||
Bank of India | 30,000 | 116 | ||
Bharat Heavy Electricals | 29,200 | 1,569 | ||
Bharti Tele Ventures, Ltd. (Æ) | 477,200 | 5,619 | ||
Chennai Petroleum Corp., Ltd. | 194,660 | 874 | ||
Financial Technologies India, Ltd. | 33,600 | 1,202 | ||
GAIL India, Ltd. - GDR | 63,000 | 2,120 | ||
Gateway Distriparks, Ltd. | 124,867 | 467 | ||
Genesis Indian Investment Co., Ltd. (Æ) | 635,119 | 21,664 | ||
HDFC Bank, Ltd. - ADR (Ñ) | 24,600 | 1,704 | ||
Housing Development Finance Corp. | 78,100 | 2,539 | ||
I-Flex Solutions, Ltd. | 38,900 | 1,310 | ||
ICICI Bank, Ltd. | 135,800 | 2,344 | ||
Indian Overseas Bank | 250,000 | 656 | ||
Industrial Development Bank of India, Ltd. | 471,000 | 858 | ||
Mahanagar Telephone Nigam | 12,053 | 38 | ||
Oil & Natural Gas Corp., Ltd. | 29,920 | 542 | ||
Oriental Bank of Commerce | 111,000 | 634 | ||
Petronet LNG, Ltd. (Æ) | 846,900 | 1,037 | ||
Reliance Industries, Ltd. | 50,163 | 1,366 | ||
State Bank of India, Ltd. - GDR | 79,010 | 4,978 | ||
Sun TV, Ltd. | 59,191 | 1,591 | ||
Suzlon Energy, Ltd. | 107,505 | 3,123 | ||
Union Bank of India | 118,000 | 340 | ||
Videocon Industries, Ltd. | 137,300 | 1,323 | ||
Zee Telefilms, Ltd. | 278,963 | 1,869 | ||
65,573 | ||||
Indonesia - 3.0% | ||||
Aneka Tambang Tbk PT | 3,141,646 | 2,396 | ||
Astra Agro Lestari Tbk PT | 244,789 | 262 |
101
Table of Contents
Astra International Tbk PT | 1,005,277 | 1,478 | ||
Bank Central Asia Tbk PT | 207,500 | 106 | ||
Bank Danamon Indonesia Tbk PT | 1,441,200 | 941 | ||
Bank Mandiri Persero Tbk PT | 13,169,003 | 3,938 | ||
Bank Rakyat Indonesia | 19,357,772 | 10,409 | ||
Perusahaan Gas Negara PT | 1,364,000 | 1,707 | ||
Ramayana Lestari Sentosa Tbk PT | 5,957,500 | 549 | ||
Telekomunikasi Indonesia Tbk PT | 12,340,700 | 11,376 | ||
Telekomunikasi Indonesia Tbk PT - ADR | 55,800 | 2,040 | ||
35,202 | ||||
Israel - 1.7% | ||||
Bank Hapoalim BM | 974,800 | 4,857 | ||
Bank Leumi Le-Israel BM | 1,186,500 | 4,907 | ||
Check Point Software Technologies (Æ)(Ñ) | 233,200 | 4,832 | ||
Discount Investment Corp. | 2,511 | 65 | ||
IDB Development Corp., Ltd. | 6,641 | 206 | ||
Israel Chemicals, Ltd. | 426,600 | 2,436 | ||
Tadiran Communications, Ltd. | 13,949 | 531 | ||
Teva Pharmaceutical Industries, Ltd. - ADR | 60,000 | 1,978 | ||
19,812 | ||||
Lebanon - 0.0% | ||||
Solidere - GDR | 8,200 | 150 | ||
Luxembourg - 2.1% | ||||
Genesis Smaller Companies | 368,184 | 21,778 | ||
Tenaris SA | 1 | — | ||
Tenaris SA - ADR | 80,565 | 3,109 | ||
24,887 | ||||
Malaysia - 1.0% | ||||
AirAsia BHD (Æ) | 2,220,300 | 912 | ||
Bumiputra-Commerce Holdings BHD | 2,714,742 | 5,128 | ||
IOI Corp. BHD | 755,900 | 3,560 | ||
Magnum Corp. BHD | 1,948,400 | 1,211 | ||
MK Land Holdings BHD | 714,600 | 100 | ||
TAN Chong Motor Holdings BHD | 908,000 | 328 | ||
11,239 | ||||
Mexico - 5.3% | ||||
Alfa SA de CV Class A (Ñ) | 586,900 | 3,268 | ||
America Movil SA de CV Series L | 269,800 | 11,566 | ||
Cemex SAB de CV (Ñ) | 4,163,420 | 12,833 | ||
Cemex SAB de CV - ADR | 50,000 | 1,537 | ||
Corporacion Moctezuma SA de CV | 365,800 | 850 | ||
Fomento Economico Mexicano SA de CV - ADR | 31,724 | 3,068 | ||
Grupo Aeroportuario del Pacifico SA de CV - ADR | 21,100 | 796 | ||
Grupo Aeroportuario del Sureste SAB de CV - ADR | 15,700 | 596 | ||
Grupo Financiero Banorte SA de CV Class O (Ñ) | 1,433,900 | 5,165 | ||
Grupo Mexico SAB de CV (Ñ) | 631,100 | 2,206 | ||
Grupo Modelo SA | 823,700 | 3,963 | ||
Grupo Televisa SA - ADR | 92,392 | 2,280 | ||
Organizacion Soriana SAB de CV Class B (Ñ) | 144,000 | 827 | ||
Telefonos de Mexico SA de CV Series L | 80,000 | 2,111 | ||
Urbi Desarrollos Urbanos SA de CV (Æ)(Ñ) | 1,500,600 | 4,599 | ||
Wal-Mart de Mexico SA de CV | 1,226,700 | 4,274 | ||
Wal-Mart de Mexico SA de CV - ADR (Ñ) | 64,900 | 2,246 | ||
62,185 | ||||
Netherlands - 0.5% | ||||
Pyaterochka Holding NV - GDR (Æ) | 221,463 | 4,910 | ||
Zentiva NV | 24,300 | 1,387 | ||
6,297 | ||||
Oman - 0.1% | ||||
Bank Muscat SAOG - GDR (Æ) | 147,900 | 1,693 | ||
102
Table of Contents
Pakistan - 1.4% | ||||
Engro Chemical Pakistan, Ltd. | 1,187,300 | 3,551 | ||
Fauji Fertilizer Co., Ltd. | 1,895,322 | 3,654 | ||
ICI Pakistan, Ltd. | 265,200 | 525 | ||
Oil & Gas Development Co., Ltd. | 1,189,700 | 2,917 | ||
Pakistan Petroleum, Ltd. | 26,000 | 110 | ||
Pakistan State Oil Co., Ltd. | 605,500 | 2,995 | ||
Pakistan Telecommunication Co., Ltd. | 3,025,423 | 2,225 | ||
15,977 | ||||
Peru - 0.0% | ||||
Cia de Minas Buenaventura SA - ADR | 13,448 | 348 | ||
Philippines - 0.5% | ||||
Globe Telecom, Inc. | 92,090 | 2,070 | ||
Philippine Long Distance Telephone Co. | 46,000 | 2,178 | ||
Philippine Long Distance Telephone Co. - ADR(Ñ) | 41,300 | 1,966 | ||
6,214 | ||||
Poland - 0.4% | ||||
Bank Pekao SA | 22,600 | 1,525 | ||
KGHM Polska Miedz SA | 43,073 | 1,556 | ||
Polski Koncern Naftowy Orlen | 104,483 | 1,655 | ||
4,736 | ||||
Russia - 7.1% | ||||
Kalina | 5,400 | 232 | ||
LUKOIL - ADR | 338,617 | 27,360 | ||
Magnit OAO (Æ) | 52,100 | 1,699 | ||
Mechel OAO - ADR (Ñ) | 86,600 | 1,923 | ||
MMC Norilsk Nickel - ADR | 35,818 | 5,292 | ||
Mobile Telesystems - ADR | 240,200 | 10,588 | ||
NovaTek OAO - GDR (Å) | 54,900 | 3,184 | ||
Novolipetsk Steel - GDR | 2,270 | 48 | ||
OAO Gazprom | 250,000 | 2,625 | ||
OAO Gazprom - ADR (Ñ) | 140,881 | 5,968 | ||
OAO Gazprom - ADR (Æ) | 242,400 | 10,268 | ||
Pipe Metallurgical Co. (Æ) | 90,400 | 539 | ||
Promstroibank St. Petersburg | 696,000 | 1,037 | ||
RBC Information Systems (Æ) | 119,459 | 1,278 | ||
Sberbank RF | 3,185 | 7,166 | ||
Seventh Continent | 69,600 | 1,827 | ||
Tatneft - ADR (Ñ) | 12,532 | 1,138 | ||
TMK OAO - GDR (Æ) | 12,800 | 323 | ||
Unified Energy System - GDR | 801 | 60 | ||
82,555 | ||||
South Africa - 8.5% | ||||
ABSA Group, Ltd. | 306,775 | 4,747 | ||
African Bank Investments, Ltd. | 428,323 | 1,598 | ||
Alexander Forbes, Ltd. (Æ) | 376,300 | 771 | ||
Anglo Platinum, Ltd. | 7,511 | 806 | ||
AngloGold Ashanti, Ltd. | 22,600 | 959 | ||
AngloGold Ashanti, Ltd. - ADR | 28,134 | 1,198 | ||
Aspen Pharmacare Holdings, Ltd. (Æ) | 497,200 | 2,262 | ||
Aveng, Ltd. | 736,400 | 3,119 | ||
Barloworld, Ltd. | 144,334 | 2,794 | ||
Bidvest Group, Ltd. | 101,500 | 1,681 | ||
Consol, Ltd. | 668,500 | 1,434 | ||
DataTec, Ltd. | 270,000 | 1,092 | ||
Edgars Consolidated Stores, Ltd. | 542,200 | 2,702 | ||
FirstRand, Ltd. | 625,851 | 1,637 | ||
Foschini, Ltd. | 230,486 | 1,658 | ||
Impala Platinum Holdings, Ltd. | 43,239 | 7,602 | ||
Investec, Ltd. | 207,730 | 2,087 |
103
Table of Contents
JD Group, Ltd. | 175,701 | 1,830 | ||
Lewis Group, Ltd. | 20,097 | 153 | ||
Massmart Holdings, Ltd. | 96,500 | 777 | ||
Medi-Clinic Corp., Ltd. | 66,563 | 194 | ||
Metropolitan Holdings, Ltd. | 414,744 | 724 | ||
Mittal Steel South Africa, Ltd. | 35,835 | 428 | ||
MTN Group, Ltd. | 345,300 | 3,141 | ||
Murray & Roberts Holdings, Ltd. | 135,600 | 700 | ||
Nampak, Ltd. | 79,926 | 209 | ||
Naspers, Ltd. Class N | 216,208 | 3,913 | ||
Network Healthcare Holdings, Ltd. (Æ) | 1,165,000 | 1,977 | ||
Pick’n Pay Stores, Ltd. | 173,454 | 711 | ||
Pretoria Portland Cement Co., Ltd. | 31,600 | 1,630 | ||
Reunert, Ltd. | 117,668 | 1,262 | ||
Sanlam, Ltd. | 2,852,943 | 6,778 | ||
Sasol, Ltd. | 439,936 | 15,098 | ||
Sasol, Ltd. - ADR (Ñ) | 12,123 | 415 | ||
Standard Bank Group, Ltd. | 1,102,072 | 12,941 | ||
Steinhoff International Holdings, Ltd. | 788,400 | 2,569 | ||
Tiger Brands, Ltd. | 154,518 | 3,209 | ||
Tongaat-Hulett Group, Ltd. (The) | 3,004 | 39 | ||
Truworths International, Ltd. | 504,128 | 1,766 | ||
98,611 | ||||
South Korea - 14.5% | ||||
Amorepacific Corp. (Æ) | 4,724 | 2,447 | ||
CJ Home Shopping | 15,703 | 1,370 | ||
Daegu Bank | 15,810 | 262 | ||
Daelim Industrial Co. | 7,688 | 588 | ||
Daewoo Engineering & Construction Co., Ltd. | 11,820 | 256 | ||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 51,600 | 1,659 | ||
Daum Communications Corp. (Æ) | 13,918 | 824 | ||
Dongbu Insurance Co., Ltd. | 21,870 | 521 | ||
GS Engineering & Construction Corp. | 32,324 | 2,515 | ||
Hanjin Heavy Industries & Construction Co., Ltd. (Ñ) | 1,760 | 52 | ||
Hanjin Shipping Co., Ltd. (Ñ) | 104,020 | 2,815 | ||
Hankook Tire Co., Ltd. (Ñ) | 315,997 | 4,561 | ||
Hanwha Chem Corp. (Ñ) | 157,670 | 1,774 | ||
Honam Petrochemical Corp. (Ñ) | 41,100 | 2,573 | ||
Hynix Semiconductor, Inc. (Æ) | 48,900 | 1,775 | ||
Hyosung Corp. (Æ)(Ñ) | 56,900 | 1,205 | ||
Hyundai Development Co. | 31,420 | 1,584 | ||
Hyundai Heavy Industries | 13,731 | 2,018 | ||
Hyundai Mipo Dockyard | 9,434 | 1,251 | ||
Hyundai Mobis | 83,250 | 8,128 | ||
Hyundai Motor Co. (Ñ) | 49,770 | 4,046 | ||
Hyundai Steel Co. (Ñ) | 58,620 | 2,081 | ||
Industrial Bank of Korea (Ñ) | 237,400 | 4,157 | ||
KCC Corp. | 11,624 | 3,405 | ||
Kookmin Bank (Ñ) | 178,206 | 14,166 | ||
Kookmin Bank - ADR | 28,700 | 2,278 | ||
Korea Electric Power Corp. | 245,510 | 9,484 | ||
Korea Electric Power Corp. - ADR (Ñ) | 35,100 | 694 | ||
Korea Investment Holdings Co., Ltd. | 39,850 | 1,903 | ||
Korean Air Lines Co., Ltd. | 31,980 | 1,137 | ||
KT Corp. | 80,670 | 3,660 | ||
KT Corp. - ADR | 17,100 | 383 | ||
KT&G Corp. | 41,537 | 2,566 | ||
LG Household & Health Care, Ltd. | 20,740 | 1,915 | ||
LG International Corp. | 3,160 | 72 | ||
LG.Philips LCD Co., Ltd. (Æ) | 27,000 | 860 |
104
Table of Contents
LIG Non-Life Insurance Co., Ltd. (Ñ) | 35,500 | 529 | ||
Lotte Shopping Co., Ltd. | 4,832 | 1,831 | ||
LS Cable, Ltd. | 6,300 | 265 | ||
Orion Corp. | 5,325 | 1,441 | ||
Pacific Corp. | 1,863 | 259 | ||
Poongsan Corp. | 56,600 | 1,246 | ||
POSCO (Ñ) | 33,581 | 9,320 | ||
Samsung Corp. | 123,110 | 4,109 | ||
Samsung Electronics Co., Ltd. (Ñ) | 23,827 | 15,451 | ||
Samsung Electronics Co., Ltd. - GDR (Þ) | 19,231 | 6,236 | ||
Samsung Electronics Co., Ltd. - GDR | 14,759 | 3,534 | ||
Samsung Fire & Marine Insurance Co., Ltd. | 27,550 | 4,269 | ||
Samsung SDI Co., Ltd. | 2,957 | 213 | ||
Samsung Securities Co., Ltd. (Ñ) | 87,200 | 4,710 | ||
Shinhan Financial Group Co., Ltd. | 158,370 | 7,303 | ||
Shinsegae Co., Ltd. | 8,530 | 4,916 | ||
SK Corp. | 57,206 | 4,195 | ||
SK Telecom Co., Ltd. | 13,620 | 2,956 | ||
SK Telecom Co., Ltd. - ADR | 14,700 | 354 | ||
STX Shipbuilding Co., Ltd. | 68,300 | 1,047 | ||
Tae Young Corp. (Ñ) | 11,339 | 674 | ||
Woori Finance Holdings Co., Ltd. (Ñ) | 130,090 | 2,782 | ||
168,625 | ||||
Taiwan - 9.3% | ||||
Acer, Inc. | 1,112,514 | 2,017 | ||
Advantech Co., Ltd. | 1,072,948 | 2,987 | ||
Asia Cement Corp. | 1,385,640 | 1,131 | ||
AU Optronics Corp. | 1,845,280 | 2,485 | ||
AU Optronics Corp. - ADR | 127,617 | 1,733 | ||
Basso Industry Corp. | 19,751 | 22 | ||
Benq Corp. (Æ) | 2,016,000 | 1,000 | ||
Cathay Financial Holding Co., Ltd. | 575,245 | 1,115 | ||
Chang Hwa Commercial Bank | 468,000 | 291 | ||
China Steel Corp. | 4,324,920 | 3,823 | ||
China Steel Corp. - GDR | 39,574 | 699 | ||
Chunghwa Picture Tubes, Ltd. | 480,000 | 92 | ||
Chunghwa Telecom Co., Ltd. | 37,120 | 64 | ||
Chunghwa Telecom Co., Ltd. - ADR | 9,304 | 170 | ||
CMC Magnetics Corp. | 6,621,000 | 1,971 | ||
Compal Electronics, Inc. | 2,170,892 | 1,818 | ||
Compal Electronics, Inc. - GDR | 189,071 | 824 | ||
D-Link Corp. | 401,600 | 446 | ||
Delta Electronics, Inc. | 1,107,850 | 3,131 | ||
Elitegroup Computer Systems | 313,140 | 161 | ||
Evergreen Marine Corp. | 810,870 | 466 | ||
Far Eastern Textile Co., Ltd. | 1,348,995 | 1,022 | ||
Far EasTone Telecommunications Co., Ltd. | 924,000 | 1,056 | ||
Faraday Technology Corp. | 317,987 | 453 | ||
First Financial Holding Co., Ltd. | 3,291,300 | 2,256 | ||
Foxconn Technology Co., Ltd. | 213,900 | 2,087 | ||
Gigabyte Technology Co., Ltd. | 1,150,718 | 834 | ||
HannStar Display Corp. (Æ) | 907,000 | 136 | ||
High Tech Computer Corp. | 281,800 | 6,989 | ||
HON HAI Precision Industry Co., Ltd. | 1,596,372 | 10,343 | ||
Macronix International (Æ) | 3,242,086 | 1,092 | ||
MediaTek, Inc. | 565,200 | 5,514 | ||
Mega Financial Holding Co., Ltd. | 5,595,000 | 3,944 | ||
Micro-Star International Co., Ltd. | 85,470 | 46 | ||
Mitac International | 1,435,935 | 1,502 | ||
Nan Ya Plastics Corp. | 770,710 | 1,112 |
105
Table of Contents
Phoenixtec Power Co., Ltd. | 565,629 | 596 | ||
POU Chen Corp. | 648,000 | 555 | ||
Powerchip Semiconductor Corp. | 1 | — | ||
Powertech Technology, Inc. | 261,000 | 751 | ||
Quanta Computer, Inc. | 741,710 | 1,099 | ||
Realtek Semiconductor Corp. | 560,000 | 744 | ||
Ritek Corp. | 2,653,161 | 634 | ||
Siliconware Precision Industries Co. | 3,310,625 | 4,200 | ||
Systex Corp. | 194,000 | 54 | ||
Taiwan Cement Corp. | 673,357 | 531 | ||
Taiwan Fertilizer Co., Ltd. | 63,000 | 102 | ||
Taiwan Mobile Co., Ltd. | 2,509,520 | 2,505 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. | 10,875,984 | 19,945 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. - | ||||
ADR (Ñ) | 120,222 | 1,166 | ||
Teco Electric and Machinery Co., Ltd. | 1,415,000 | 553 | ||
U-Ming Marine Transport Corp. | 715,000 | 837 | ||
Uni-President Enterprises Corp. | 2,601,000 | 2,315 | ||
United Microelectronics Corp. | 5,398,935 | 3,011 | ||
Vanguard International Semiconductor Corp. | 1,965,947 | 1,318 | ||
Wintek Corp. | 797,630 | 679 | ||
Yieh Phui Enterprise | 807,430 | 325 | ||
Yuanta Core Pacific Securities Co. | 1,508,000 | 1,056 | ||
Zyxel Communications Corp. | 856,118 | 973 | ||
108,781 | ||||
Thailand - 2.0% | ||||
Airports of Thailand PCL (Ñ) | 1,742,300 | 3,087 | ||
Bank of Ayudhya PCL | 6,588,900 | 3,430 | ||
Charoen Pokphand Foods PCL | 4,318,500 | 584 | ||
CP 7-Eleven PCL | 5,297,700 | 931 | ||
Glow Energy PCL | 942,500 | 790 | ||
Kasikornbank PCL | 898,200 | 1,689 | ||
Precious Shipping PCL | 117,300 | 139 | ||
PTT Chemical PCL | 943,579 | 1,993 | ||
PTT Exploration & Production PCL | 563,400 | 1,674 | ||
PTT PCL | 509,000 | 3,080 | ||
Rayong Refinery PCL (Æ) | 960,000 | 505 | ||
Regional Container Lines PCL | 962,600 | 601 | ||
Siam City Bank PCL | 178,400 | 104 | ||
Siam City Cement PCL | 25,000 | 168 | ||
Siam Commercial Bank PCL | 975,500 | 1,728 | ||
Thai Beverage PCL | 13,966,900 | 2,602 | ||
23,105 | ||||
Turkey - 3.1% | ||||
Akcansa Cimento AS | 75,895 | 411 | ||
Anadolu Efes Biracilik Ve Malt Sanayii AS | 186,030 | 5,106 | ||
Arcelik | 168,400 | 1,080 | ||
BIM Birlesik Magazalar AS | 9,500 | 420 | ||
Cimsa Cimento Sanayi VE Tica | 263,875 | 1,621 | ||
Eregli Demir ve Celik Fabrikalari TAS | 504,954 | 2,911 | ||
Ford Otomotiv Sanayi AS | 143,300 | 1,013 | ||
Hurriyet Gazetecilik AS | 461,300 | 1,323 | ||
Ihlas Holding AS | 816,246 | 325 | ||
Migros Turk TAS | 230,523 | 2,658 | ||
Trakya Cam Sanayi AS | 311,452 | 872 | ||
Tupras Turkiye Petrol Rafine | 294,407 | 4,889 | ||
Turk Hava Yollari (Æ) | 111,952 | 503 | ||
Turkcell Iletisim Hizmet AS | 78,249 | 422 | ||
Turkiye Garanti Bankasi AS | 726,000 | 2,665 | ||
Turkiye Is Bankasi Class C | 777,280 | 5,041 |
106
Table of Contents
Turkiye Vakiflar Bankasi Tao Class D | 240,900 | 1,265 | ||
Vestel Elektronik Sanayi ve Ticaret AS (Æ) | 114,575 | 303 | ||
Yapi ve Kredi Bankasi (Æ) | 1,458,077 | 2,802 | ||
35,630 | ||||
United Kingdom - 1.5% | ||||
Anglo American PLC | 244,845 | 11,135 | ||
Astro All Asia Networks PLC | 870,300 | 1,187 | ||
Hikma Pharmaceuticals PLC | 176,600 | 1,359 | ||
Kazakhmys PLC | 55,800 | 1,278 | ||
Old Mutual PLC | 2,300 | 7 | ||
SABMiller PLC | 111,500 | 2,169 | ||
17,135 | ||||
United States - 0.7% | ||||
CTC Media, Inc. (Æ)(Ñ) | 55,700 | 1,352 | ||
Southern Copper Corp. (Ñ) | 137,710 | 7,076 | ||
WNS Holdings, Ltd. - ADR (Æ) | 10,800 | 321 | ||
8,749 | ||||
Venezuela - 0.0% | ||||
Cia Anonima Nacional Telefonos de Venezuela - CANTV - ADR (Ñ) | 24,542 | 477 | ||
Siderurgica Venezolana Sivensa SACA (Æ) | 1,306,495 | 44 | ||
521 | ||||
Zimbabwe - 0.0% | ||||
Delta Corp., Ltd. | 1,322,627 | 294 | ||
Total Common Stocks | ||||
(cost $727,324) | 1,038,741 | |||
Preferred Stocks - 5.3% | ||||
Brazil - 4.2% | ||||
Banco Bradesco SA | 137,900 | 4,900 | ||
Banco Itau Holding Financeira SA | 167,910 | 5,528 | ||
Braskem SA | 419,235 | 2,966 | ||
Centrais Eletricas Brasileiras SA | 212,816,500 | 4,263 | ||
Cia Brasileira de Distribuicao Grupo Pao de | ||||
Acucar | 39,980,000 | 1,195 | ||
Cia de Bebidas das Americas | 950,000 | 417 | ||
Cia de Tecidos do Norte de Minas - Coteminas | 7,256,440 | 684 | ||
Cia Energetica de Sao Paulo Class Preferenc(Æ) | 97,300,000 | 950 | ||
Cia Vale do Rio Doce | 42,444 | 914 | ||
Duratex SA | 19,200 | 231 | ||
Gerdau SA | 19,400 | 284 | ||
Petroleo Brasileiro SA | 668,272 | 13,419 | ||
Tam SA | 46,000 | 1,398 | ||
Usinas Siderurgicas de Minas Gerais SA | 305,600 | 10,389 | ||
Weg SA | 180,400 | 876 | ||
48,414 | ||||
Chile - 0.0% | ||||
Embotelladora Andina SA | 205,300 | 539 | ||
Colombia - 0.0% | ||||
BanColombia SA | 7,200 | 54 | ||
Russia - 0.1% | ||||
Transneft | 770 | 1,624 | ||
South Korea - 1.0% | ||||
Hyundai Motor Co. | 36,070 | 1,704 | ||
Samsung Electronics Co., Ltd. (Ñ) | 19,629 | 9,520 | ||
11,224 | ||||
Total Preferred Stocks | ||||
(cost $39,149) | 61,855 | |||
Warrants & Rights - 0.0% | ||||
Brazil - 0.0% | ||||
Banco Bradesco SA Right (Æ) | 2,982 | 29 | ||
South Korea - 0.0% |
107
Table of Contents
STX Shipbuilding Co., Ltd. Right (Æ) | 6,437 | 31 | ||
Total Warrants & Rights | ||||
(cost $0) | 60 | |||
Notional Amount $ | ||||
Options Purchased - 0.3% | ||||
(Number of Contracts) | ||||
Brazil - 0.0% | ||||
Bovespa Index Futures | ||||
Dec 2006 39,540.00 (BRL) | ||||
Call (328) | 6,056 | 64 | ||
Dec 2006 39,545.00 (BRL) | ||||
Call (152) | 2,807 | 30 | ||
94 | ||||
South Korea - 0.3% | ||||
Kospi 200 Index Futures | ||||
Dec 2006 148.41 (KRW) | ||||
Call (146) | 11,498 | 3,079 | ||
Total Options Purchased | ||||
(cost $2,822) | 3,173 | |||
Principal Amount ($) or Shares | |||||
Short-Term Investments - 5.1% | |||||
Russell Investment Company | |||||
Money Market Fund | 54,402,000 | 54,402 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.898% due 12/07/06 | 4,800 | 4,777 | |||
Total Short-Term Investments | |||||
(cost $59,179) | 59,179 | ||||
Other Securities - 5.2% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 15,523,804 | 15,524 | |||
State Street Securities Lending Quality Trust (×) | 44,972,837 | 44,973 | |||
Total Other Securities | |||||
(cost $60,497) | 60,497 | ||||
Total Investments - 105.0% | |||||
(identified cost $888,971) | 1,223,505 | ||||
Other Assets and Liabilities, | |||||
Net - (5.0%) | (58,583 | ) | |||
Net Assets - 100.0% | 1,164,922 | ||||
Amounts in thousands
Futures Contracts (Number of Contracts) | Notional $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Hang Seng Index (Hong Kong) | |||||
expiration date 11/06 (161) | 13,759 | 117 | |||
JSE-40 Index (South Africa) | |||||
expiration date 12/06 (330) | 9,653 | 791 | |||
MSCI Taiwan Index | |||||
expiration date 11/06 (400) | 11,652 | (130 | ) | ||
Total Unrealized Appreciation (Depreciation) on | |||||
Open Futures Contracts | 778 | ||||
108
Table of Contents
Options Written (Number of Contracts) | Notional $ | Market $ | |||
Brazil | |||||
Bovespa Index Futures | |||||
Dec 2006 39,540.00 (BRL) Put (328) | 6,056 | (46 | ) | ||
Dec 2006 39,545.00 (BRL) Put (152) | 2,807 | (21 | ) | ||
South Korea | |||||
Kospi 200 Index Futures | |||||
Dec 2006 148.41 (KRW) Put (146) | 11,498 | (775 | ) | ||
Total Liability for Options Written | |||||
(premiums received $828) | (842 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||
USD 171 | BRL 365 | 11/01/06 | (1 | ) | |||
USD 40 | BRL 85 | 12/07/06 | — | ||||
USD 458 | BRL 1,000 | 12/20/06 | 4 | ||||
USD 1,097 | BRL 2,400 | 12/20/06 | 12 | ||||
USD 2,283 | BRL 5,000 | 12/20/06 | 29 | ||||
USD 5,244 | BRL 11,500 | 12/20/06 | 73 | ||||
USD 42 | HKD 330 | 11/01/06 | — | ||||
USD 828 | HKD 6,439 | 11/01/06 | — | ||||
USD 528 | KRW 500,000 | 12/20/06 | 3 | ||||
USD 530 | KRW 500,000 | 12/20/06 | 1 | ||||
USD 944 | KRW 900,000 | 12/20/06 | 13 | ||||
USD 1,045 | KRW 1,000,000 | 12/20/06 | 18 | ||||
USD 2,931 | KRW 2,800,000 | 12/20/06 | 44 | ||||
USD 8,801 | KRW 8,400,000 | 12/20/06 | 125 | ||||
USD 73 | MXN 780 | 11/01/06 | — | ||||
USD 32 | ZAR 244 | 11/01/06 | 1 | ||||
USD 37 | ZAR 276 | 11/02/06 | — | ||||
USD 72 | ZAR 535 | 11/02/06 | — | ||||
USD 78 | ZAR 581 | 11/03/06 | — | ||||
USD 78 | ZAR 576 | 11/06/06 | — | ||||
USD 61 | ZAR 452 | 11/07/06 | — | ||||
USD 231 | ZAR 1,700 | 12/20/06 | (1 | ) | |||
USD 719 | ZAR 5,300 | 12/20/06 | (3 | ) | |||
USD 894 | ZAR 7,000 | 12/20/06 | 52 | ||||
USD 957 | ZAR 7,200 | 12/20/06 | 16 | ||||
USD 976 | ZAR 7,000 | 12/20/06 | (30 | ) | |||
USD 7,149 | ZAR 52,742 | 12/20/06 | (23 | ) | |||
BRL 153 | USD 72 | 11/01/06 | — | ||||
BRL 90 | USD 42 | 11/03/06 | — | ||||
BRL 2,000 | USD 911 | 12/20/06 | (13 | ) | |||
BRL 2,900 | USD 1,323 | 12/20/06 | (18 | ) | |||
HKD 51 | USD 7 | 11/02/06 | — | ||||
IDR 271,610 | USD 30 | 11/02/06 | — | ||||
IDR 246,278 | USD 27 | 11/03/06 | — | ||||
KRW��500,000 | USD 523 | 12/20/06 | (8 | ) | |||
KRW 3,100,000 | USD 3,246 | 12/20/06 | (48 | ) | |||
THB 392 | USD 11 | 11/03/06 | — | ||||
TRY 77 | USD 53 | 11/02/06 | — | ||||
ZAR 4,797 | USD 630 | 11/01/06 | (22 | ) | |||
ZAR 3,000 | USD 414 | 12/20/06 | 9 | ||||
ZAR 6,742 | USD 915 | 12/20/06 | 4 |
109
Table of Contents
ZAR 7,000 | USD 947 | 12/20/06 | 1 | |||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 238 | |||||
Industry Diversification (Unaudited) | % of Net Assets | Market $ | ||||
Auto and Transportation | 4.5 | 49,434 | ||||
Consumer Discretionary | 4.6 | 55,503 | ||||
Consumer Staples | 4.8 | 58,953 | ||||
Financial Services | 22.6 | 269,244 | ||||
Health Care | 0.9 | 10,499 | ||||
Integrated Oils | 9.4 | 109,636 | ||||
Materials and Processing | 16.4 | 189,689 | ||||
Miscellaneous | 1.0 | 12,974 | ||||
Other Energy | 4.6 | 51,493 | ||||
Producer Durables | 1.7 | 18,093 | ||||
Technology | 11.4 | 130,484 | ||||
Utilities | 12.5 | 144,594 | ||||
Warrants & Rights | — | 60 | ||||
Options Purchased | 0.3 | 3,173 | ||||
Short-Term Investments | 5.1 | 59,179 | ||||
Other Securities | 5.2 | 60,497 | ||||
Total Investments | 105.0 | 1,223,505 | ||||
Other Assets and Liabilities, Net | (5.0 | ) | (58,583 | ) | ||
Net Assets | 100.0 | 1,164,922 | ||||
Geographic Diversification (Unaudited) | % of Net Assets | Market $ | ||||
Africa | 8.5 | 98,905 | ||||
Asia | 45.9 | 534,188 | ||||
Europe | 14.7 | 171,958 | ||||
Latin America | 19.5 | 227,160 | ||||
Middle East | 3.7 | 43,974 | ||||
Other Regions | 6.0 | 69,688 | ||||
United Kingdom | 1.5 | 17,135 | ||||
Other Securities | 5.2 | 60,497 | ||||
Total Investments | 105.0 | 1,223,505 | ||||
Other Assets and Liabilities, Net | (5.0 | ) | (58,583 | ) | ||
Net Assets | 100.0 | 1,164,922 | ||||
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund
110
Table of Contents
Russell Investment Company
Emerging Markets Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Austria | 0.1 | ||
Bermuda | 0.4 | ||
Brazil | 7.8 | ||
Canada | 0.2 | ||
Cayman Islands | 0.8 | ||
Chile | 0.5 | ||
China | 5.8 | ||
Columbia | 0.6 | ||
Czech Republic | — | * | |
Egypt | 1.9 | ||
Hong Kong | 1.4 | ||
Hungary | 1.3 | ||
India | 5.6 | ||
Indonesia | 3.0 | ||
Israel | 1.7 | ||
Lebanon | — | * | |
Luxembourg | 2.1 | ||
Malaysia | 1.0 | ||
Mexico | 5.3 | ||
Netherlands | 0.5 | ||
Oman | 0.1 | ||
Pakistan | 1.4 | ||
Peru | — | * | |
Philippines | 0.5 | ||
Poland | 0.4 | ||
Russia | 7.1 | ||
South Africa | 8.5 | ||
South Korea | 14.5 | ||
Taiwan | 9.3 | ||
Thailand | 2.0 | ||
Turkey | 3.1 | ||
United Kingdom | 1.5 | ||
United States | 0.7 | ||
Venezuela | — | * | |
Zimbabwe | — | * | |
Preferred Stock | 5.3 | ||
Warrants & Rights | — | * | |
Options Purchased | 0.3 | ||
Short-Term Investments | 5.1 | ||
Other Securities | 5.2 | ||
Total Investments | 105.0 | ||
Other Assets and Liabilities Net | (5.0 | ) | |
100.0 | |||
Futures Contracts | 0.1 | ||
Foreign Currency Exchange Contracts | — | * | |
Options Written | (0.1 | ) |
* | Less than .05% of net assets. |
Emergin Markets Fund
111
Table of Contents
Real Estate Securities Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Real Estate Securities Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 38.04 | % | |
5 Years | 24.91 | %§ | |
10 Years | 16.55 | %§ |
Real Estate Securities Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 37.65 | % | |
5 Years | 24.60 | %§ | |
10 Years | 16.18 | %§ |
Real Estate Securities Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 36.63 | % | |
5 Years | 23.68 | %§ | |
10 Years | 15.52 | %§ |
FTSE NAREIT Equity REIT Index **
Periods Ended 10/31/06 | Total Return | ||
1 Year | 36.37 | % | |
5 Years | 24.38 | %§ | |
10 Years | 15.79 | %§ |
112
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide current income and long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Real Estate Securities Fund Class S, Class E and Class C Shares gained 38.04%, 37.65% and 36.63%, respectively. This compared to the FTSE NAREIT Equity REITs Index, which gained 36.37% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Real Estate Funds Average returned 35.69%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The money managers positioned the Fund to capitalize on improving real estate market fundamentals. The largest overweight positions were in sectors with strong earnings growth: lodging/resorts, regional malls, apartments, office and industrial. As more fully described below, sector positioning was a positive contributor to the Fund’s performance during the fiscal year.
The Fund maintained a primary focus on the larger and more liquid REITs during the fiscal year. As this segment of the market outperformed the broader REIT market, the Fund benefited from this positioning.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
AEW Management and Advisors, L.P. pursues a value-oriented style that focuses on identifying companies that it believes are mispriced relative to underlying real estate net asset value. AEW’s portfolio tends to track relatively closely to the benchmark sector weights. AEW outperformed the benchmark during the fiscal year due to strong stock selection and sector selection. Stock selection was strongest in the regional malls and office sectors. This was partially offset by weak stock selection in the specialty sector. Sector selection was also positive as overweight positions in the apartments sector and underweight positions in the specialty, health care and freestanding retail sectors boosted performance. This was partially offset by an overweight position in the underperforming mixed industrial/office sector.
INVESCO Institutional (N.A.), Inc. maintains a broadly diversified portfolio with exposure to all major property sectors. Their investment style incorporates fundamental property market research and bottom-up quantitative securities analysis. INVESCO outperformed the benchmark during the fiscal year due to contributions from stock selection and, to a lesser extent, sector selection. Stock selection was strongest in the office, specialty, diversified and regional malls sectors. Positive sector selection was driven by overweight positions in the office and industrial sectors and underweight positions in the specialty and freestanding retail sectors. An overweight position in the regional malls sector partially offset these positive effects.
RREEF America LLC’s style emphasizes a top-down approach to property sector weights based on an assessment of property market fundamentals. RREEF outperformed the benchmark during the fiscal year due to contributions from both stock selection and sector selection. Stock selection was strongest in the office, diversified and apartments sectors. This was partially offset by weak stock selection in the shopping centers sector. Sector selection was positive, driven by overweight positions in the lodging/resorts and apartments sectors and an underweight position in the specialty sector.
Heitman Real Estate Securities, LLC manages a concentrated portfolio with a bottom-up approach to stock selection focusing on companies that it believes have attractive valuations relative to growth prospects. Heitman underperformed the benchmark during the fiscal year. Overall, Heitman’s stock selection was a negative contributor to performance, particularly in the office, apartments and self storage sectors. Favorable stock selection in the specialty and regional malls sectors partially offset these adverse effects.
Describe any changes to the Fund’s structure or the money manager line-up.
Heitman’s target weight was increased from 10% to 15%. Heitman is expected to be complementary to the other money managers in the Fund due to its growth-oriented style and more concentrated portfolio.
113
Table of Contents
Money Managers as of October 31, 2006 | Styles | |
AEW Management and Advisors, L.P. | Value | |
Heitman Real Estate Securities, LLC | Growth | |
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund through its INVESCO Real Estate division | Market-Oriented | |
RREEF America, LLC | Market-Oriented |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | FTSE National Association of Real Estate Investment Trusts (NAREIT) Equity REIT Index is an index composed of all the data based on the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market value-weighted. The total-return calculation is based upon whether it is 1-month, 3-months or 12-months. Only those REITs listed for the entire period are used in the total return calculation. |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares is the performance of the Fund’s Class S Shares from November 1, 1996 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
114
Table of Contents
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,179.20 | $ | 1,014.77 | ||
Expenses Paid During Period* | $ | 11.37 | $ | 10.51 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.07% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,183.40 | $ | 1,018.55 | ||
Expenses Paid During Period* | $ | 7.26 | $ | 6.72 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.32% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
115
Table of Contents
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,185.20 | $ | 1,019.86 | ||
Expenses Paid During Period* | $ | 5.84 | $ | 5.40 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.06% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
116
Table of Contents
Russell Investment Company
Real Estate Securities Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market $ | |||
Common Stocks - 97.0% | ||||
Apartments - 19.9% | ||||
American Campus Communities, Inc. (Æ)(ö) | 93,700 | 2,495 | ||
Apartment Investment & Management Co. Class A(ö)(Ñ) | 403,475 | 23,127 | ||
Archstone-Smith Trust (ö)(Ñ) | 1,653,979 | 99,586 | ||
AvalonBay Communities, Inc. (ö) | 707,800 | 92,764 | ||
BRE Properties, Inc. Class A (ö)(Ñ) | 58,200 | 3,859 | ||
Camden Property Trust (ö)(Ñ) | 444,700 | 35,896 | ||
Equity Residential (ö)(Ñ) | 1,520,250 | 83,021 | ||
Essex Property Trust, Inc. (ö)(Ñ) | 245,250 | 32,687 | ||
GMH Communities Trust (ö)(Ñ) | 769,300 | 10,747 | ||
Home Properties, Inc. (ö) | 69,600 | 4,397 | ||
Mid-America Apartment Communities, Inc. (ö) | 122,600 | 7,804 | ||
United Dominion Realty Trust, Inc. (ö)(Ñ) | 486,000 | 15,732 | ||
412,115 | ||||
Diversified - 6.3% | ||||
Colonial Properties Trust (ö) | 153,500 | 7,735 | ||
iStar Financial, Inc. (ö) | 125,700 | 5,824 | ||
Spirit Finance Corp. (ö)(Ñ) | 814,400 | 9,699 | ||
Vornado Realty Trust (ö)(Ñ) | 897,972 | 107,083 | ||
130,341 | ||||
Free Standing Retail - 0.1% | ||||
Realty Income Corp. (ö)(Ñ) | 130,000 | 3,432 | ||
Health Care - 3.8% | ||||
Health Care Property Investors, Inc. (ö) | 380,000 | 11,932 | ||
Health Care REIT, Inc. (ö)(Ñ) | 98,200 | 4,054 | ||
Healthcare Realty Trust, Inc. (ö)(Ñ) | 185,800 | 7,525 | ||
LTC Properties, Inc. (ö)(Ñ) | 110,850 | 3,004 | ||
Nationwide Health Properties, Inc. (ö)(Ñ) | 655,550 | 18,840 | ||
Omega Healthcare Investors, Inc. (ö)(Ñ) | 309,700 | 5,228 | ||
Ventas, Inc. (ö)(Ñ) | 743,850 | 28,995 | ||
79,578 | ||||
Industrial - 7.3% | ||||
AMB Property Corp. (ö) | 553,350 | 32,321 | ||
EastGroup Properties, Inc. (ö)(Ñ) | 123,400 | 6,569 | ||
First Potomac Realty Trust (ö)(Ñ) | 132,500 | 4,099 | ||
ProLogis (ö) | 1,702,750 | 107,733 | ||
150,722 | ||||
Lodging/Resorts - 7.6% | ||||
Ashford Hospitality Trust, Inc. (ö) | 156,600 | 2,017 | ||
DiamondRock Hospitality Co. (ö)(Ñ) | 258,800 | 4,366 | ||
FelCor Lodging Trust, Inc. (ö) | 228,300 | 4,739 | ||
Hilton Hotels Corp. | 762,400 | 22,049 | ||
Hospitality Properties Trust (ö) | 67,000 | 3,247 | ||
Host Hotels & Resorts, Inc. (ö)(Ñ) | 3,472,064 | 80,066 | ||
LaSalle Hotel Properties (ö)(Ñ) | 152,520 | 6,444 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 427,975 | 25,567 |
117
Table of Contents
Strategic Hotels & Resorts, Inc. (ö)(Ñ) | 51,700 | 1,100 | ||
Sunstone Hotel Investors, Inc. (ö)(Ñ) | 247,566 | 7,293 | ||
156,888 | ||||
Manufactured Homes - 0.4% | ||||
Equity Lifestyle Properties, Inc. (ö)(Ñ) | 185,750 | 9,152 | ||
Mixed Industrial/Office - 1.7% | ||||
Duke Realty Corp. (ö)(Ñ) | 162,600 | 6,514 | ||
Liberty Property Trust (ö) | 486,900 | 23,468 | ||
PS Business Parks, Inc. (ö) | 100,000 | 6,585 | ||
36,567 | ||||
Office - 18.7% | ||||
Alexandria Real Estate Equities, Inc. (ö)(Ñ) | 211,500 | 21,087 | ||
American Financial Realty Trust (ö)(Ñ) | 350,100 | 4,086 | ||
BioMed Realty Trust, Inc. (ö)(Ñ) | 299,800 | 9,663 | ||
Boston Properties, Inc. (ö)(Ñ) | 939,550 | 100,372 | ||
Brandywine Realty Trust (ö)(Ñ) | 665,321 | 22,195 | ||
Brookfield Properties Corp. (Ñ) | 785,450 | 29,761 | ||
Corporate Office Properties Trust (ö)(Ñ) | 389,300 | 18,605 | ||
Douglas Emmett, Inc. (Æ)(ö) | 138,500 | 3,303 | ||
Equity Office Properties Trust (ö)(Ñ) | 1,897,000 | 80,622 | ||
Highwoods Properties, Inc. (ö) | 262,000 | 10,008 | ||
Kilroy Realty Corp. (ö)(Ñ) | 136,000 | 10,245 | ||
Mack-Cali Realty Corp. (ö)(Ñ) | 311,200 | 16,462 | ||
Maguire Properties, Inc. (ö) | 75,600 | 3,233 | ||
Reckson Associates Realty Corp. (ö)(Ñ) | 293,800 | 12,962 | ||
SL Green Realty Corp. (ö) | 370,100 | 44,801 | ||
387,405 | ||||
Regional Malls - 14.2% | ||||
CBL & Associates Properties, Inc. (ö)(Ñ) | 173,300 | 7,578 | ||
General Growth Properties, Inc. (ö) | 730,200 | 37,897 | ||
Macerich Co. (The) (ö) | 714,000 | 57,370 | ||
Simon Property Group, Inc. (ö)(Ñ) | 1,674,250 | 162,570 | ||
Taubman Centers, Inc. (ö)(Ñ) | 634,156 | 29,742 | ||
295,157 | ||||
Self Storage - 4.6% | ||||
Extra Space Storage, Inc. (ö)(Ñ) | 675,100 | 12,449 | ||
Public Storage, Inc. (ö)(Ñ) | 774,864 | 69,513 | ||
Sovran Self Storage, Inc. (ö) | 33,650 | 1,985 | ||
U-Store-It Trust (ö)(Ñ) | 489,500 | 10,749 | ||
94,696 | ||||
Shopping Centers - 10.6% | ||||
Acadia Realty Trust (ö)(Ñ) | 464,200 | 11,860 | ||
Developers Diversified Realty Corp. (ö) | 775,700 | 47,240 | ||
Federal Realty Investors Trust (ö)(Ñ) | 531,300 | 42,584 | ||
Kimco Realty Corp. (ö)(Ñ) | 707,438 | 31,432 | ||
Kite Realty Group Trust (ö) | 181,200 | �� | 3,323 | |
Regency Centers Corp. (ö) | 969,150 | 69,933 | ||
Tanger Factory Outlet Centers (ö)(Ñ) | 173,400 | 6,468 | ||
Weingarten Realty Investors (ö) | 136,900 | 6,366 | ||
219,206 | ||||
Specialty - 1.8% | ||||
Digital Realty Trust, Inc. (ö)(Ñ) | 897,980 | 29,984 | ||
Plum Creek Timber Co., Inc. (ö) | 200,000 | 7,188 | ||
37,172 | ||||
Total Common Stocks | ||||
(cost $1,193,634) | 2,012,431 | |||
Short-Term Investments - 3.2% | ||||
Russell Investment Company | ||||
Money Market Fund | 65,334,000 | 65,334 | ||
Total Short-Term Investments |
118
Table of Contents
(cost $65,334) | 65,334 | ||||
Other Securities - 11.0% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 58,696,829 | 58,697 | |||
State Street Securities Lending Quality Trust(×) | 170,046,138 | 170,046 | |||
Total Other Securities | |||||
(cost $228,743) | 228,743 | ||||
Total Investments - 111.2% | |||||
(identified cost $1,487,711) | 2,306,508 | ||||
Other Assets and Liabilities, | |||||
Net - (11.2%) | (233,088 | ) | |||
Net Assets - 100.0% | 2,073,420 | ||||
119
Table of Contents
Russell Investment Company
Real Estate Securities Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Apartments | 19.9 | ||
Diversified | 6.3 | ||
Free Standing Retail | 0.1 | ||
Health Care | 3.8 | ||
Industrial | 7.3 | ||
Lodging/Resorts | 7.6 | ||
Manufactured Homes | 0.4 | ||
Mixed Industrial/Office | 1.7 | ||
Office | 18.7 | ||
Regional Malls | 14.2 | ||
Self Storage | 4.6 | ||
Shopping Center | 10.6 | ||
Specialty | 1.8 | ||
Short-Term Investments | 3.2 | ||
Other Securities | 11.0 | ||
Total Investments | 111.2 | ||
Other Assets and Liabilities, Net | (11.2 | ) | |
100.0 | |||
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund
120
Table of Contents
(This page intentionally left blank)
121
Table of Contents
Short Duration Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Short Duration Bond Fund—Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.95 | % | |
5 Years | 2.83 | %§ | |
10 Years | 4.62 | %§ |
Short Duration Bond Fund—Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.69 | % | |
5 Years | 2.57 | %§ | |
10 Years | 4.42 | %§ |
Short Duration Bond Fund—Class C ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 2.89 | % | |
5 Years | 1.80 | %§ | |
10 Years | 3.82 | %§ |
Merrill Lynch U.S. Treasuries 1-3 Year Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.15 | % | |
5 Years | 2.68 | %§ | |
10 Years | 4.71 | %§ |
122
Table of Contents
Russell Investment Company
Short Duration Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
What is the Fund’s investment objective?
The Fund seeks to provide current income and preservation of capital with a focus on short duration securities.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Short Duration Bond Fund Class S, Class E and Class C Shares gained 3.95%, 3.69% and 2.89%, respectively. This compared to the Merrill Lynch U.S. Treasuries 1-3 Year Index, which gained 4.15% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Short Investment Grade Debt Funds Average returned 4.11%. This return serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Short-term interest rates increased over the 12 months ended October 31, 2006. Therefore, the Fund’s money managers who favored shorter-than-index duration positions should have performed better. However, given spikes in interest rate volatility throughout the year, money managers that responded more tactically by changing their duration stance relatively quickly performed better. Duration is a measure of a bond price’s sensitivity to a change in interest rates. Fund performance was helped by tactical duration decisions and yield curve positioning.
Despite the increase in short-term interest rates, shorter maturity non-Treasury sectors achieved strong benchmark relative performance. The Fund benefited from having an overweight position in non-Treasury sectors, such as corporate and mortgage-backed securities, as well as small positions in high yield corporate bonds and emerging market debt securities.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund entered the fiscal year positioned conservatively compared to other time periods. For example, the Fund held few emerging market debt and non-investment grade corporate bonds relative to other time periods. The Fund was also positioned to generate a yield advantage from non-Treasury sectors such as investment grade corporate bonds and to reflect a more conservative view on the direction of interest rates by maintaining a close to benchmark duration position. As the fiscal year progressed, shorter duration non-Treasury sectors continued to perform well, leading to less attractive valuations in those sectors. In response, the Fund’s money managers maintained their conservative investment stance by focusing on higher quality securities. While the Fund’s money managers took profits in the non-Treasury sectors, the Fund maintained a near benchmark duration stance throughout most of the fiscal year although duration positioning did vary as the Fund’s money managers made tactical investment decisions.
The key investment strategies of sector rotation, issue selection, and duration and yield curve management all contributed positively to performance. Sector rotation strategies caused the Fund’s money managers to overweight non- benchmark sectors which tended to outperform the all-Treasury security benchmark. The money managers also added value through security selection. Finally, in order to take advantage of interest rates changes, some money managers took either longer or shorter duration positions at various times resulting in positive Fund performance.
The Fund derived much of its performance by maintaining overweighted positions in the riskier sectors of the fixed income markets relative to the all-Treasury benchmark. These sectors included investment grade corporate bonds and mortgage and asset-backed securities. The allocation to these non-Treasury sectors benefited the Fund by providing a larger-than-benchmark yield and higher-than-benchmark total return. In addition, the Fund’s money managers added value through positive security selection and sector allocation decisions. In contrast, investments in government securities, such as Treasury Inflation Protected Securities (TIPS) and non-dollar denominated bonds, detracted from performance during the fiscal year.
123
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Style | |
Merganser Capital Management, L.P. | Sector Rotation | |
Pacific Investment Management Company, LLC | Sector Rotation | |
STW Fixed Income Management | Sector Rotation |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Merrill Lynch 1-2.99 Years Treasury Index is an index composed of approximately 160 issues in the form of publicly placed, coupon-bearing US Treasury debt. Issues must carry a term to maturity of at least one year, and par amounts outstanding must be no less than $10 million at the start and at the close of the performance measurement periods. | |
‡‡ | The Fund first issued Class E Shares on February 18, 1999. The returns shown for Class E Shares prior to February 18, 1999 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class C Shares on March 3, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to February 17, 1999 and the performance of the Class E Shares from February 18, 1999 to March 2, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
124
Table of Contents
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,021.30 | $ | 1,016.94 | ||
Expenses Paid During Period* | $ | 8.36 | $ | 8.34 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,025.10 | $ | 1,020.72 | ||
Expenses Paid During Period* | $ | 4.54 | $ | 4.53 |
125
Table of Contents
* | Expenses are equal to the Fund’s annualized expense ratio of 0.89% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,026.40 | $ | 1,021.98 | ||
Expenses Paid During Period* | $ | 3.27 | $ | 3.26 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
126
Table of Contents
Russell Investment Company
Short Duration Bond Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments—68.4% | ||||
Asset-Backed Securities—18.3% | ||||
ACE Securities Corp. (Ê) | ||||
Series 2006-HE4 Class A2A | ||||
5.384% due 10/25/36 | 1,177 | 1,177 | ||
AmeriCredit Automobile Receivables Trust | ||||
Series 2005-AX Class A3 | ||||
3.630% due 01/06/10 | 1,362 | 1,353 | ||
Series 2006-RM Class A1 | ||||
5.370% due 10/06/09 | 2,000 | 2,001 | ||
Argent Securities, Inc. (Ê) | ||||
Series 2006-M2 Class A2A | ||||
5.380% due 09/25/36 | 452 | 452 | ||
Series 2006-W4 Class A2A | ||||
5.380% due 05/25/36 | 2,670 | 2,670 | ||
Asset Backed Securities Corp. Home Equity (Ê) | ||||
Series 2002-HE1 Class M1 | ||||
6.970% due 03/15/32 | 1,108 | 1,109 | ||
Asset Backed Securities Corp. Home Equity Loan | ||||
Trust (Ê) | ||||
Series 2004-HE6 Class A1 | ||||
5.595% due 09/25/34 | 731 | 730 | ||
Banc of America Securities Auto Trust | ||||
Series 2005-WF1 Class A4 | ||||
4.080% due 04/18/10 | 3,000 | 2,951 | ||
Bank One Issuance Trust | ||||
Series 2004-B2 Class B2 | ||||
4.370% due 04/15/12 | 2,000 | 1,963 | ||
Bear Stearns Asset Backed Securities, Inc. (Ê) | ||||
Series 2004-BO1 Class 1A1 | ||||
5.520% due 09/25/34 | 211 | 212 | ||
BMW Vehicle Owner Trust | ||||
Series 2004-A Class A4 | ||||
3.320% due 02/25/09 | 4,950 | 4,887 | ||
Brazos Higher Education Authority, Inc. | ||||
Series 2005-A Class A5 | ||||
4.910% due 12/01/40 | 3,250 | 3,235 | ||
California Infrastructure PG&E-1 Series 1997-1 | ||||
Class A8 | ||||
6.480% due 12/26/09 | 2,746 | 2,768 | ||
California Infrastructure SCE-1 Series 1997-1 | ||||
Class A7 | ||||
6.420% due 12/26/09 | 4,540 | 4,570 | ||
Capital Auto Receivables Asset Trust | ||||
Series 2004-1 Class A3 | ||||
2.000% due 11/15/07 | 118 | 118 | ||
Series 2004-2 Class A2 |
127
Table of Contents
3.350% due 02/15/08 | 2,185 | 2,175 | ||
Series 2006-1 Class A3 | ||||
5.030% due 10/15/09 | 2,225 | 2,219 | ||
Capital One Auto Finance Trust | ||||
Series 2005-BSS Class A3 | ||||
4.080% due 11/15/09 | 2,000 | 1,986 | ||
Capital One Master Trust | ||||
Series 2002-4A Class A | ||||
4.900% due 03/15/10 | 1,000 | 998 | ||
Capital One Prime Auto Receivables Trust | ||||
Series 2004-3 Class A4 | ||||
3.690% due 06/15/10 | 1,000 | 979 | ||
Series 2004-3 Class B | ||||
3.860% due 08/15/11 | 1,500 | 1,473 | ||
Carmax Auto Owner Trust | ||||
Series 2004-2 Class A4 | ||||
3.460% due 09/15/11 | 2,500 | 2,443 | ||
Series 2005-2 Class A4 | ||||
4.340% due 08/15/10 | 2,000 | 1,970 | ||
Caterpillar Financial Asset Trust | ||||
Series 2006-A Class A3 | ||||
5.570% due 05/25/10 | 2,000 | 2,016 | ||
Centex Home Equity | ||||
Series 2003-C Class AF4 | ||||
4.960% due 04/25/32 | 136 | 135 | ||
Chase Credit Card Master Trust (Ê) | ||||
Series 2002-1 Class A | ||||
5.420% due 06/15/09 | 2,900 | 2,901 | ||
Chase Manhattan Auto Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.830% due 09/15/10 | 1,800 | 1,761 | ||
Series 2005-A Class A4 | ||||
3.980% due 04/15/11 | 1,000 | 978 | ||
Series 2005-A Class CTFS | ||||
4.040% due 04/15/11 | 1,000 | 986 | ||
Series 2006-A Class A3 | ||||
5.340% due 07/15/10 | 3,770 | 3,784 | ||
CIT Equipment Collateral | ||||
Series 2004-VT1 Class A3 | ||||
2.200% due 03/20/08 | 240 | 238 | ||
Series 2005-VT1 Class A3 | ||||
4.120% due 08/20/08 | 1,063 | 1,056 | ||
CIT Marine Trust | ||||
Series 1999-A Class A4 | ||||
6.250% due 11/15/19 | 590 | 590 | ||
CIT Rv Trust | ||||
Series 1998-A Class A5 | ||||
6.120% due 11/15/13 | 295 | 295 | ||
Citibank Credit Card Issuance Trust | ||||
Series 2003-A3 Class A3 | ||||
3.100% due 03/10/10 | 1,000 | 973 | ||
Citigroup Mortgage Loan Trust, Inc. (Ê) | ||||
Series 2006-WFH Class A1 | ||||
5.360% due 08/25/36 | 868 | 868 | ||
Community Program Loan Trust | ||||
Series 1987-A Class A4 | ||||
4.500% due 10/01/18 | 1,955 | 1,922 | ||
Countrywide Asset-Backed Certificates (Ê) | ||||
Series 2001-BC3 Class A | ||||
5.800% due 12/25/31 | 173 | 173 |
128
Table of Contents
Series 2005-9 Class 2A1 | ||||
5.420% due 01/25/36 | 163 | 163 | ||
Series 2006-15 Class A1 | ||||
5.434% due 10/25/46 | 1,092 | 1,092 | ||
Series 2006-16 Class 2A1 | ||||
5.375% due 12/25/46 | 500 | 500 | ||
Series 2006-17 Class 2A1 | ||||
5.380% due 03/25/47 | 1,100 | 1,100 | ||
Daimler Chrysler Auto Trust | ||||
Series 2005-A Class A3 | ||||
3.490% due 12/08/08 | 1,674 | 1,662 | ||
Series 2005-A Class A4 | ||||
3.740% due 02/08/10 | 9,100 | 8,941 | ||
Discover Card Master Trust I | ||||
Series 2002-2 Class B | ||||
5.450% due 10/15/09 | 1,000 | 999 | ||
E-Trade RV and Marine Trust | ||||
Series 2004-1 Class A3 | ||||
3.620% due 10/08/18 | 1,300 | 1,253 | ||
Equity One ABS, Inc. | ||||
Series 2003-4 Class M1 | ||||
5.369% due 10/25/34 | 1,500 | 1,486 | ||
Fannie Mae Grantor Trust (Ê) | ||||
Series 2002-T10 Class A1 | ||||
5.560% due 06/25/32 | 4,433 | 4,433 | ||
Fifth Third Auto Trust | ||||
Series 2004-A Class A3 | ||||
3.190% due 02/20/08 | 310 | 310 | ||
First Franklin Mortgage Loan Asset Backed | ||||
Certificates (Ê) | ||||
Series 2006-FF1 Class A3 | ||||
5.370% due 11/25/36 | 1,300 | 1,300 | ||
First NLC Trust (Ê) | ||||
Series 2005-2 Class AV1 | ||||
5.430% due 09/25/35 | 5 | 5 | ||
Ford Credit Auto Owner Trust | ||||
Series 2005-A Class A3 | ||||
3.480% due 11/15/08 | 5,527 | 5,486 | ||
Series 2005-B Class A4 | ||||
4.380% due 01/15/10 | 1,500 | 1,483 | ||
Series 2005-B Class B | ||||
4.640% due 04/15/10 | 1,250 | 1,238 | ||
Series 2005-C Class B | ||||
4.520% due 09/15/10 | 1,000 | 985 | ||
Series 2006-A Class A3 | ||||
5.050% due 03/15/10 | 535 | 534 | ||
Series 2006-B Class A3 | ||||
5.260% due 10/15/10 | 545 | 546 | ||
Franklin Auto Trust | ||||
Series 2003-1 Class A4 | ||||
2.270% due 05/20/11 | 506 | 499 | ||
GE Capital Credit Card Master Note Trust | ||||
Series 2006-1 Class A | ||||
5.080% due 09/15/12 | 1,480 | 1,484 | ||
GE Commercial Equipment Financing LLC (Ê) | ||||
Series 2004-1 Class B | ||||
5.520% due 12/20/15 | 468 | 469 | ||
GE Corporate Aircraft Financing LLC (Ê)(Þ) | ||||
Series 2004-1A Class B | ||||
6.170% due 01/25/18 | 364 | 367 |
129
Table of Contents
GE Dealer Floorplan Master Note Trust (Ê) | ||||
Series 2004-2 Class B | ||||
5.610% due 07/20/09 | 1,000 | 1,001 | ||
GE-WMC Mortgage Securities LLC (Ê) | ||||
Series 2006-1 Class A2A | ||||
5.370% due 08/25/36 | 480 | 480 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-GH1 Class A2 | ||||
4.390% due 12/25/25 | 1,500 | 1,484 | ||
GS Auto Loan Trust | ||||
Series 2004-1 Class A3 | ||||
2.130% due 11/15/07 | 48 | 48 | ||
Series 2006-1 Class A3 | ||||
5.370% due 12/15/10 | 1,300 | 1,305 | ||
GSAMP Trust (Ê) | ||||
Series 2004-SEA Class A2A | ||||
5.610% due 03/25/34 | 551 | 551 | ||
Harley-Davidson Motorcycle Trust | ||||
Series 2006-3 Class A3 | ||||
5.240% due 01/15/12 | 4,850 | 4,866 | ||
Honda Auto Receivables Owner Trust | ||||
Series 2003-2 Class A4 | ||||
2.160% due 10/21/08 | 1,752 | 1,748 | ||
Series 2003-3 Class A4 | ||||
2.770% due 11/21/08 | 1,216 | 1,208 | ||
Series 2003-4 Class A4 | ||||
2.790% due 03/16/09 | 699 | 691 | ||
Series 2003-5 Class A4 | ||||
2.960% due 04/20/09 | 2,119 | 2,092 | ||
Series 2004-3 Class A4 | ||||
3.280% due 02/18/10 | 2,300 | 2,244 | ||
Series 2005-2 Class A4 | ||||
4.150% due 10/15/10 | 1,850 | 1,822 | ||
Series 2006-3 Class A3 | ||||
5.120% due 10/15/10 | 1,250 | 1,253 | ||
Household Automotive Trust | ||||
Series 2005-3 Class A2 | ||||
4.700% due 01/20/09 | 1,231 | 1,229 | ||
Hyundai Auto Receivables Trust | ||||
Series 2004-A Class A3 | ||||
2.970% due 05/15/09 | 555 | 548 | ||
Series 2005-A Class A3 | ||||
3.980% due 11/16/09 | 1,500 | 1,481 | ||
Illinois Power Special Purpose Trust | ||||
Series 1998-1 Class A6 | ||||
5.540% due 06/25/09 | 1,496 | 1,496 | ||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||
Series 2006-WMC Class A2 | ||||
5.380% due 08/25/36 | 565 | 565 | ||
Long Beach Auto Receivables Trust | ||||
Series 2005-B Class A3 | ||||
4.406% due 05/15/10 | 1,500 | 1,487 | ||
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.600% due 10/25/34 | 303 | 303 | ||
Marlin Leasing Receivables LLC (Þ) | ||||
Series 2005-1A Class A3 | ||||
4.630% due 11/17/08 | 1,650 | 1,637 | ||
MBNA Master Credit Card Trust (Ê) | ||||
Series 2000-D Class A |
130
Table of Contents
5.520% due 09/15/09 | 3,460 | 3,463 | ||
Merrill Auto Trust Securitization | ||||
Series 2005-1 Class A3 | ||||
4.100% due 08/25/09 | 3,000 | 2,972 | ||
Merrill Lynch Mortgage Investors, Inc. (Ê) | ||||
Series 2006-RM5 Class A2A | ||||
5.380% due 10/25/37 | 1,900 | 1,900 | ||
Morgan Stanley Dean Witter Capital I (Ê) | ||||
Series 2002-HE1 Class A2 | ||||
5.660% due 07/25/32 | 2 | 2 | ||
National City Auto Receivables Trust | ||||
Series 2004-A Class A3 | ||||
2.110% due 07/15/08 | 204 | 204 | ||
Nelnet Education Loan Funding, Inc. | ||||
Series 2001-A Class A1 | ||||
5.760% due 07/01/12 | 1,567 | 1,575 | ||
Nissan Auto Lease Trust | ||||
Series 2005-A Class A3 | ||||
4.700% due 10/15/08 | 3,000 | 2,987 | ||
Nissan Auto Receivables Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.760% due 07/15/09 | 4,000 | 3,922 | ||
Series 2005-A Class A3 | ||||
3.540% due 10/15/08 | 1,281 | 1,271 | ||
Series 2005-B Class A3 | ||||
3.990% due 07/15/09 | 1,980 | 1,962 | ||
Onyx Acceptance Grantor Trust | ||||
Series 2005-A Class A4 | ||||
3.910% due 09/15/11 | 2,000 | 1,964 | ||
Park Place Securities, Inc. (Ê) | ||||
Series 2004-MCW Class A1 | ||||
5.642% due 10/25/34 | 3,394 | 3,387 | ||
PBG Equipment Trust (Þ) | ||||
Series 1998-1A Class A | ||||
6.270% due 01/20/12 | 448 | 448 | ||
Peco Energy Transition Trust | ||||
Series 1999-A Class A6 | ||||
6.050% due 03/01/09 | 801 | 802 | ||
Series 2001-A Class A1 | ||||
6.520% due 12/31/10 | 1,248 | 1,307 | ||
PG&E Energy Recovery Funding LLC | ||||
Series 2005-1 Class A2 | ||||
3.870% due 06/25/11 | 2,742 | 2,697 | ||
Series 2005-2 Class A1 | ||||
4.850% due 06/25/11 | 1,098 | 1,094 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2004-5 Class AF2 | ||||
3.735% due 12/25/34 | 383 | 381 | ||
Series 2005-3 Class AF3 | ||||
4.437% due 07/25/35 | 2,000 | 1,972 | ||
Providian Gateway Master Trust (Þ) G | ||||
Series 2004-FA Class A | ||||
3.650% due 11/15/11 | 1,200 | 1,180 | ||
Public Service New Hampshire Funding LLC | ||||
Series 2001-1 Class A2 | ||||
5.730% due 11/01/10 | 901 | 906 | ||
Railcar Leasing LLC (Þ) | ||||
Series 1997-1 Class A2 | ||||
7.125% due 01/15/13 | 950 | 993 | ||
Residential Asset Mortgage Products, Inc. (Ê) |
131
Table of Contents
Series 2004-RS2 Class AIIB | ||||
5.580% due 02/25/34 | 143 | 143 | ||
Series 2006-RZ4 Class A1A | ||||
5.410% due 10/25/36 | 1,200 | 1,200 | ||
Residential Asset Securities Corp. (Ê) | ||||
Series 2006-KS6 Class A1 | ||||
5.364% due 08/25/36 | 673 | 673 | ||
Series 2006-KS9 Class A11 | ||||
5.390% due 11/25/36 | 1,100 | 1,100 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2006-3 Class A1 | ||||
5.380% due 11/25/36 | 600 | 600 | ||
SBI Heloc Trust (Ê)(Å) | ||||
Series 2006-1A Class 1A2A | ||||
5.494% due 08/25/36 | 700 | 700 | ||
SLM Student Loan Trust (Þ) | ||||
Series 2003-4 Class A5B | ||||
3.390% due 03/15/33 | 3,000 | 2,906 | ||
Soundview Home Equity Loan Trust (Ê) | ||||
Series 2006-EQ1 Class A1 | ||||
5.380% due 10/25/36 | 1,000 | 1,000 | ||
Structured Asset Securities Corp. (Ê) | ||||
Series 2005-WF3 Class A1 | ||||
5.420% due 07/25/35 | 390 | 390 | ||
Series 2006-BC3 Class A2 | ||||
5.370% due 10/25/36 | 1,200 | 1,200 | ||
Susquehanna Auto Lease Trust (Þ) | ||||
Series 2005-1 Class A3 | ||||
4.430% due 06/16/08 | 4,000 | 3,969 | ||
Series 2005-1 Class B | ||||
4.710% due 07/14/08 | 1,700 | 1,685 | ||
Series 2006-1 Class A3 | ||||
5.210% due 03/16/09 | 1,000 | 1,000 | ||
Toyota Auto Receivables Owner Trust | ||||
Series 2003-B Class A4 | ||||
2.790% due 01/15/10 | 3,912 | 3,907 | ||
Triad Auto Receivables Owner Trust | ||||
Series 2006-A Class A3 | ||||
4.770% due 01/12/11 | 2,000 | 1,989 | ||
USAA Auto Owner Trust | ||||
Series 2004-2 Class A3 | ||||
3.030% due 06/16/08 | 1,238 | 1,232 | ||
Series 2004-2 Class A4 | ||||
3.580% due 02/15/11 | 1,700 | 1,676 | ||
Series 2005-2 Class A4 | ||||
4.170% due 02/15/11 | 4,000 | 3,936 | ||
Wachovia Auto Owner Trust | ||||
Series 2004-A Class A3 | ||||
3.190% due 06/20/08 | 603 | 600 | ||
Series 2004-A Class A4 | ||||
3.660% due 07/20/10 | 7,500 | 7,401 | ||
Series 2004-B Class A3 | ||||
2.910% due 04/20/09 | 2,438 | 2,409 | ||
Wells Fargo Financial Auto Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.670% due 08/16/10 | 1,917 | 1,887 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 1,258 | 1,258 | ||
Whole Auto Loan Trust |
132
Table of Contents
Series 2003-1 Class B | ||||
2.240% due 03/15/10 | 127 | 127 | ||
World Omni Auto Receivables Trust | ||||
Series 2006-A Class A2 | ||||
5.050% due 10/15/08 | 2,611 | 2,608 | ||
211,974 | ||||
Corporate Bonds and Notes—20.0% | ||||
Abbott Laboratories | ||||
3.500% due 02/17/09 (Ñ) | 2,000 | 1,932 | ||
5.375% due 05/15/09 | 1,500 | 1,513 | ||
Allstate Financial Global Funding (Þ) | ||||
2.500% due 06/20/08 | 4,080 | 3,911 | ||
Altria Group, Inc. (Ñ) | ||||
7.650% due 07/01/08 | 1,500 | 1,552 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.380% due 10/20/09 | 800 | 800 | ||
American Express Centurion Bank | ||||
Series BKNT | ||||
4.375% due 07/30/09 | 3,440 | 3,383 | ||
American Honda Finance Corp. (Ê)(Þ) | ||||
5.450% due 03/09/09 | 1,300 | 1,301 | ||
American International Group, Inc. | ||||
4.700% due 10/01/10 | 2,695 | 2,657 | ||
Ameritech Capital Funding Corp. | ||||
6.250% due 05/18/09 | 2,000 | 2,030 | ||
Anadarko Petroleum Corp. (Ê) | ||||
5.790% due 09/15/09 | 1,200 | 1,202 | ||
ASIF Global Financing (Å) | ||||
3.850% due 11/26/07 | 2,984 | 2,938 | ||
Associates Corp. of North America | ||||
6.250% due 11/01/08 | 3,274 | 3,338 | ||
8.550% due 07/15/09 | 750 | 813 | ||
AT&T, Inc. (Ê) | ||||
5.495% due 05/15/08 | 2,600 | 2,602 | ||
Bank of America Corp. | ||||
6.375% due 02/15/08 (Ñ) | 3,000 | 3,037 | ||
7.125% due 03/01/09 (Ñ) | 1,500 | 1,564 | ||
5.400% due 06/19/09 (Ê) | 3,800 | 3,801 | ||
Bank One Corp. | ||||
2.625% due 06/30/08 | 5,675 | 5,443 | ||
Bank One NA | ||||
Series BKNT | ||||
3.700% due 01/15/08 | 1,470 | 1,441 | ||
Bear Stearns Cos., Inc. (The) | ||||
5.489% due 08/21/09 (Ê) | 2,300 | 2,301 | ||
Series MTNB (Ê) | ||||
5.457% due 03/30/09 | 900 | 901 | ||
BellSouth Corp. (Ê) | ||||
5.530% due 11/15/07 | 1,200 | 1,201 | ||
5.580% due 08/15/08 | 1,300 | 1,300 | ||
Capital One Financial Corp. | ||||
5.700% due 09/15/11 | 4,200 | 4,258 | ||
Caterpillar, Inc. | ||||
7.250% due 09/15/09 | 3,150 | 3,329 | ||
CIT Group, Inc. | ||||
5.000% due 11/24/08 | 7,050 | 7,027 | ||
4.250% due 02/01/10 (Ñ) | 2,325 | 2,257 | ||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||
Series MTNM |
133
Table of Contents
5.430% due 03/07/08 | 1,600 | 1,601 | ||
Citigroup, Inc. | ||||
5.416% due 01/30/09 (Ê) | 2,200 | 2,201 | ||
6.200% due 03/15/09 | 5,700 | 5,839 | ||
Consolidated Edison Co. of New York | ||||
Series B | ||||
7.150% due 12/01/09 | 1,000 | 1,054 | ||
Credit Suisse First Boston USA, Inc. (Ê) | ||||
5.520% due 12/09/08 | 3,500 | 3,506 | ||
DaimlerChrysler North America Holding Corp. (Ê) | ||||
5.918% due 08/03/09 | 800 | 800 | ||
Deutsche Bank Financial, Inc. | ||||
7.500% due 04/25/09 | 2,000 | 2,102 | ||
Entergy Mississippi, Inc. | ||||
4.350% due 04/01/08 | 500 | 492 | ||
Exelon Generation Co. LLC | ||||
6.950% due 06/15/11 | 3,250 | 3,444 | ||
FleetBoston Financial Corp. | ||||
6.375% due 05/15/08 | 4,185 | 4,254 | ||
Ford Motor Credit Co. (Ê)(Ñ) | ||||
8.466% due 11/02/07 | 200 | 203 | ||
General Electric Capital Corp. | ||||
4.000% due 06/15/09 (Ñ) | 1,650 | 1,609 | ||
5.444% due 01/20/10 (Ê) | 900 | 901 | ||
4.875% due 10/21/10 (Ñ) | 10,050 | 9,974 | ||
5.474% due 10/21/10 (Ê) | 2,000 | 2,002 | ||
Series mtn (Ê) | ||||
5.410% due 10/26/09 | 1,400 | 1,399 | ||
General Electric Co. (Ê) | ||||
5.430% due 12/09/08 | 1,000 | 1,000 | ||
Goldman Sachs Group, Inc. | ||||
7.350% due 10/01/09 | 1,000 | 1,059 | ||
5.770% due 10/07/11 (Ê)(Ñ) | 3,000 | 3,026 | ||
Series MTNB (Ê) | ||||
5.704% due 07/23/09 | 2,000 | 2,013 | ||
Hertz Vehicle Financing LLC (Þ) | ||||
Series 2005-2A Class A2 | ||||
4.930% due 02/25/10 | 2,500 | 2,489 | ||
HSBC Bank USA NA (Ê) | ||||
Series BKNT | ||||
5.530% due 06/10/09 | 300 | 301 | ||
HSBC Finance Corp. | ||||
6.500% due 11/15/08 | 10,130 | 10,377 | ||
5.531% due 12/05/08 (Ê) | 300 | 301 | ||
International Lease Finance Corp. | ||||
6.375% due 03/15/09 | 1,500 | 1,538 | ||
4.750% due 07/01/09 | 2,680 | 2,655 | ||
John Deere Capital Corp. (Ê) | ||||
5.424% due 04/15/08 | 700 | 700 | ||
5.424% due 07/15/08 | 800 | 800 | ||
Lehman Brothers Holdings, Inc. | ||||
5.370% due 11/24/08 (Ê) | 2,400 | 2,400 | ||
5.493% due 08/21/09 (Ê) | 1,000 | 1,000 | ||
7.875% due 08/15/10 | 1,000 | 1,087 | ||
Series MTNG | ||||
3.950% due 11/10/09 | 2,800 | 2,706 | ||
5.696% due 11/10/09 (Ê) | 400 | 402 | ||
Lehman Brothers, Inc. | ||||
6.625% due 02/15/08 | 1,500 | 1,522 | ||
Merrill Lynch & Co., Inc. |
134
Table of Contents
4.831% due 10/27/08 | 3,925 | 3,899 | ||
5.685% due 07/25/11 (Ê) | 1,100 | 1,101 | ||
Series MTn (Ê) | ||||
5.492% due 08/14/09 | 800 | 800 | ||
Series MTNB (Ê) | ||||
5.466% due 01/30/09 | 1,100 | 1,101 | ||
Series MTNC | ||||
5.430% due 06/16/08 (Ê) | 200 | 200 | ||
5.489% due 08/22/08 (Ê) | 600 | 601 | ||
4.125% due 01/15/09 | 1,000 | 979 | ||
Metropolitan Life Global Funding I (Þ) | ||||
5.750% due 07/25/11 | 4,000 | 4,091 | ||
Morgan Stanley | ||||
3.625% due 04/01/08 | 3,000 | 2,931 | ||
3.875% due 01/15/09 | 2,000 | 1,949 | ||
Series GMTN (Ê) | ||||
5.550% due 02/09/09 | 700 | 701 | ||
National City Bank | ||||
Series BKNT | ||||
4.250% due 01/29/10 | 3,375 | 3,277 | ||
Northern States Power Co. | ||||
6.875% due 08/01/09 | 3,000 | 3,121 | ||
Ohio Edison Co. | ||||
4.000% due 05/01/08 | 2,035 | 1,996 | ||
Pricoa Global Funding I (Ê)(Þ) | ||||
5.457% due 01/25/08 | 1,400 | 1,402 | ||
Principal Life Global Funding I (Å) | ||||
3.625% due 04/30/08 | 1,250 | 1,219 | ||
Principal Life Global Funding I (Þ) | ||||
2.800% due 06/26/08 | 5,600 | 5,388 | ||
Prudential Financial, Inc. | ||||
3.750% due 05/01/08 | 1,475 | 1,443 | ||
SBC Communications, Inc. | ||||
4.125% due 09/15/09 | 5,330 | 5,173 | ||
SLM Corp. (Ñ) | ||||
3.625% due 03/17/08 | 7,200 | 7,032 | ||
Sprint Capital Corp. | ||||
7.625% due 01/30/11 | 3,775 | 4,069 | ||
US Bank NA | ||||
Series BKNT | ||||
4.125% due 03/17/08 | 1,600 | 1,575 | ||
Wachovia Bank NA | ||||
Series BKNT | ||||
4.375% due 08/15/08 | 2,250 | 2,220 | ||
Series DPNT (Ê) | ||||
5.429% due 03/23/09 | 500 | 500 | ||
Wachovia Corp. | ||||
5.625% due 12/15/08 (Ñ) | 8,200 | 8,268 | ||
5.506% due 10/15/11 (Ê) | 3,400 | 3,399 | ||
Wells Fargo & Co. | ||||
4.125% due 03/10/08 (Ñ) | 820 | 807 | ||
6.250% due 04/15/08 | 8,337 | 8,437 | ||
5.490% due 09/15/09 (Ê) | 2,900 | 2,905 | ||
4.200% due 01/15/10 | 1,600 | 1,556 | ||
5.449% due 03/23/10 (Ê) | 3,000 | 3,002 | ||
Xcel Energy, Inc. | ||||
3.400% due 07/01/08 | 925 | 897 | ||
230,628 | ||||
International Debt—4.7% | ||||
ANZ National International, Ltd. (Ê)(Þ) |
135
Table of Contents
5.539% due 08/07/09 | 2,600 | 2,597 | ||
Diageo Capital PLC (Ê)(Ñ) | ||||
5.546% due 11/10/08 | 1,400 | 1,401 | ||
Eksportfinans A/S (Ñ) | ||||
4.750% due 12/15/08 | 7,800 | 7,771 | ||
Eli Lilly Services, Inc. (Ê)(Þ) | ||||
5.440% due 09/12/08 | 1,333 | 1,335 | ||
HBOS Treasury Services PLC (Þ) | ||||
3.500% due 11/30/07 | 2,000 | 1,964 | ||
3.750% due 09/30/08 | 1,000 | 974 | ||
Inter-American Development Bank | ||||
Series GMTN | ||||
5.250% due 06/16/08 | 2,500 | 2,512 | ||
Interstar Millennium Trust (Ê) | ||||
Series 2004-2G Class A | ||||
5.590% due 03/14/36 | 1,430 | 1,433 | ||
Kreditanstalt fuer Wiederaufbau | ||||
5.250% due 05/19/09 | 6,080 | 6,130 | ||
4.875% due 10/19/09 | 2,765 | 2,764 | ||
National Australia Bank, Ltd. (Ê)(Þ) | ||||
5.430% due 09/11/09 | 800 | 800 | ||
Ontario Electricity Financial Corp. | ||||
6.100% due 01/30/08 | 4,000 | 4,042 | ||
Royal Bank of Scotland PLC (Ê)(Þ) | ||||
5.424% due 07/21/08 | 1,500 | 1,501 | ||
Siemens Financieringsmaatschappij NV (Ê)(Þ) | ||||
5.466% due 08/14/09 | 3,700 | 3,698 | ||
Svensk Exportkredit AB (Ñ) | ||||
4.625% due 02/17/09 | 10,305 | 10,218 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 800 | 800 | ||
Unicredit Luxembourg Finance SA (Ê)(Å) | ||||
5.426% due 10/24/08 | 3,900 | 3,899 | ||
VTB Capital SA (Ê)(Å) | ||||
5.970% due 08/01/08 | 700 | 700 | ||
Mortgage-Backed Securities—20.1% | ||||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-3 Class 5A | ||||
4.290% due 10/25/34 | 1,898 | 1,862 | ||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 634 | 617 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-2 Class A1 | ||||
2.764% due 11/10/38 | 1,565 | 1,518 | ||
Banc of America Funding Corp. | ||||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 8,880 | 8,669 | ||
Series 2006-2 Class 2A18 | ||||
5.750% due 03/25/36 | 3,366 | 3,383 | ||
Banc of America Mortgage Securities | ||||
Series 2002-K Class 2A1 (Ê) | ||||
5.397% due 10/20/32 | — | — | ||
Series 2004-2 Class 2A1 | ||||
5.250% due 03/25/34 | 1,033 | 1,026 | ||
Series 2004-2 Class 5A1 | ||||
6.500% due 10/25/31 | 300 | 305 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
Series 2003-1 Class 5A1 | ||||
5.456% due 04/25/33 | 484 | 481 | ||
Series 2003-8 Class 2A1 (Ê) |
136
Table of Contents
4.797% due 01/25/34 | 434 | 429 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 1,208 | 1,211 | ||
Bear Stearns Asset Backed Securities, Inc. | ||||
Series 2003-AC3 Class A1 | ||||
4.000% due 07/25/33 | 445 | 435 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 1998-C1 Class A1 | ||||
6.340% due 06/16/30 | 255 | 256 | ||
Series 1999-C1 Class A2 | ||||
6.020% due 02/14/31 | 2,000 | 2,031 | ||
Series 2001-TOP Class A1 | ||||
5.060% due 11/15/16 | 461 | 460 | ||
Series 2003-PWR Class A1 | ||||
3.432% due 05/11/39 | 629 | 609 | ||
Series 2003-T10 Class A1 | ||||
4.000% due 03/13/40 | 1,358 | 1,318 | ||
Series 2003-T12 Class A1 | ||||
2.960% due 08/13/39 | 776 | 755 | ||
Citigroup Commercial Mortgage Trust | ||||
5.390% due 07/15/18 | 1,600 | 1,600 | ||
Commercial Mortgage Pass Through Certificates | ||||
Series 1999-1 Class A2 | ||||
6.455% due 05/15/32 | 881 | 895 | ||
Series 2004-LB2 Class A2 | ||||
3.600% due 03/10/39 | 1,000 | 969 | ||
Countrywide Alternative Loan Trust | ||||
Series 2003-6T2 Class A1 | ||||
6.500% due 06/25/33 | 143 | 143 | ||
Series 2003-J2 Class A1 | ||||
6.000% due 10/25/33 | 462 | 457 | ||
Series 2004-12C Class 1A1 | ||||
5.000% due 07/25/19 | 2,658 | 2,606 | ||
Series 2005-34C Class 1A6 | ||||
5.500% due 09/25/35 | 3,421 | 3,420 | ||
Series 2005-73C Class 1A8 | ||||
5.500% due 01/25/36 | 3,407 | 3,399 | ||
Countrywide Home Loan Mortgage Pass Through Trust (Ê) | ||||
Series 2005-HYB Class 5A1 | ||||
5.250% due 02/20/36 | 1,193 | 1,192 | ||
Countrywide Securities Corp. | ||||
5.500% due 12/25/46 | 800 | 800 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2002-P3A Class A1 (Ê)(Þ) | ||||
5.870% due 08/25/33 | 133 | 134 | ||
Series 2003-C4 Class A2 | ||||
3.908% due 08/15/36 | 1,000 | 978 | ||
Series 2003-CK2 Class A1 | ||||
3.006% due 03/15/36 | 702 | 686 | ||
Series 2004-C1 Class A1 | ||||
2.254% due 01/15/37 | 877 | 862 | ||
Series 2005-C5 Class A1 | ||||
5.046% due 08/15/38 | 3,350 | 3,341 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2002-AR2 Class 2A2 | ||||
5.756% due 10/25/32 | 14 | 14 | ||
Fannie Mae | ||||
6.000% due 2008 | 57 | 57 | ||
5.500% due 2009 | 1,413 | 1,414 |
137
Table of Contents
6.000% due 2010 | 128 | 128 | ||
6.500% due 2010 | 116 | 118 | ||
6.000% due 2011 | 152 | 154 | ||
6.500% due 2011 | 90 | 91 | ||
4.500% due 2013 | 2,347 | 2,299 | ||
5.000% due 2013 | 2,366 | 2,350 | ||
5.500% due 2013 | 301 | 302 | ||
6.000% due 2013 | 356 | 362 | ||
6.000% due 2014 | 1,780 | 1,809 | ||
5.500% due 2016 | 1,089 | 1,092 | ||
5.000% due 2017 | 91 | 90 | ||
5.500% due 2017 | 1,739 | 1,745 | ||
6.000% due 2017 | 180 | 182 | ||
5.000% due 2018 | 3,867 | 3,818 | ||
5.000% due 2019 | 481 | 475 | ||
5.000% due 2020 | 328 | 324 | ||
5.000% due 2021 | 989 | 974 | ||
5.500% due 2022 | 1,219 | 1,217 | ||
5.500% due 2033 | 77 | 76 | ||
6.000% due 2033 | 28 | 28 | ||
5.500% due 2034 | 13,645 | 13,515 | ||
4.664% due 2035 (Ê) | 3,810 | 3,756 | ||
4.672% due 2035 (Ê) | 529 | 525 | ||
4.900% due 2035 (Ê) | 32,284 | 31,934 | ||
5.500% due 2035 | 19,884 | 19,663 | ||
5.813% due 2041 (Ê) | 961 | 968 | ||
5.763% due 2042 (Ê) | 716 | 720 | ||
Fannie Mae REMICS | ||||
Series 2003-129 Class PQ | ||||
4.500% due 07/25/33 | 230 | 229 | ||
Series 2003-24 Class PU | ||||
3.500% due 11/25/15 | 247 | 238 | ||
Series 2003-46 Class PQ | ||||
3.000% due 06/25/19 | 1,686 | 1,673 | ||
Series 2003-62 Class OD | ||||
3.500% due 04/25/26 | 1,250 | 1,203 | ||
Series 2003-63 Class GU | ||||
4.000% due 07/25/33 | 1,660 | 1,629 | ||
Series 2003-67 Class TA | ||||
3.000% due 08/25/17 | 3,279 | 3,070 | ||
Series 2003-75 Class NB | ||||
3.250% due 08/25/18 | 561 | 537 | ||
Series 2004-17 Class HA | ||||
3.000% due 01/25/19 | 1,940 | 1,791 | ||
Series 2004-21 Class QA | ||||
4.000% due 11/25/17 | 1,189 | 1,179 | ||
Federal Home Loan Bank System | ||||
Series 2004- Class 1 | ||||
3.920% due 09/25/09 | 1,455 | 1,415 | ||
Series 2005-058 Class H | ||||
4.750% due 10/25/10 | 3,416 | 3,357 | ||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities (Ê) | ||||
Series 2005-63 Class 1A1 | ||||
5.763% due 02/25/45 | 1,312 | 1,310 | ||
Freddie Mac | ||||
6.000% due 2009 | 50 | 50 | ||
6.000% due 2010 | 92 | 92 | ||
8.000% due 2010 | 16 | 16 | ||
6.000% due 2011 | 163 | 166 | ||
6.000% due 2032 | 403 | 408 |
138
Table of Contents
6.000% due 2033 | 693 | 700 | ||
4.916% due 2035 (Ê) | 871 | 861 | ||
Series 2003-263 Class YH | ||||
3.500% due 08/15/22 | 171 | 170 | ||
Freddie Mac Gold | ||||
4.000% due 2007 | 804 | 795 | ||
4.000% due 2008 | 663 | 649 | ||
4.500% due 2008 | 708 | 702 | ||
5.500% due 2008 | 68 | 68 | ||
6.500% due 2008 | 62 | 63 | ||
5.500% due 2009 | 164 | 164 | ||
6.000% due 2009 | 51 | 51 | ||
6.500% due 2009 | 236 | 238 | ||
6.000% due 2011 | 242 | 245 | ||
6.000% due 2013 | 113 | 115 | ||
5.500% due 2014 | 487 | 488 | ||
6.000% due 2014 | 118 | 120 | ||
6.000% due 2016 | 510 | 517 | ||
5.500% due 2017 | 843 | 845 | ||
5.000% due 2018 | 528 | 521 | ||
6.000% due 2028 | 114 | 116 | ||
5.500% due 2029 | 819 | 814 | ||
6.000% due 2029 | 244 | 247 | ||
6.000% due 2031 | 325 | 329 | ||
Freddie Mac REMICS | ||||
Series 1993-164 Class PD | ||||
4.500% due 09/15/08 | 40 | 39 | ||
Series 2003-255 Class PB | ||||
5.500% due 08/15/30 | 30 | 30 | ||
Series 2003-258 Class NS | ||||
3.250% due 09/15/15 | 1,216 | 1,173 | ||
Series 2003-261 Class JA | ||||
3.760% due 03/15/29 | 1,216 | 1,165 | ||
Series 2003-262 Class KP | ||||
2.870% due 12/15/16 | 2,722 | 2,564 | ||
Series 2003-263 Class CD | ||||
4.000% due 10/15/26 | 1,500 | 1,455 | ||
Series 2003-268 Class MX | ||||
4.000% due 07/15/16 | 2,041 | 1,978 | ||
Series 2003-271 Class OJ | ||||
3.500% due 03/15/11 | 84 | 84 | ||
Series 2004-276 Class EA | ||||
4.500% due 04/15/13 | 1,085 | 1,075 | ||
Series 2004-276 Class NL | ||||
3.250% due 03/15/14 | 3,411 | 3,277 | ||
Series 2004-282 Class EA | ||||
4.500% due 11/15/15 | 2,820 | 2,778 | ||
Series 2004-285 Class BA | ||||
4.500% due 02/15/20 | 1,342 | 1,317 | ||
Series 2005-305 Class AP | ||||
5.500% due 01/15/27 | 2,462 | 2,469 | ||
Series 2006-314 Class LF (Ê) | ||||
5.620% due 05/15/36 | 600 | 599 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2001-3 Class A1 | ||||
5.560% due 06/10/38 | 828 | 836 | ||
Series 2004-C3 Class A1 | ||||
3.752% due 07/10/39 | 1,927 | 1,887 | ||
Series 2005-C1 Class A1 | ||||
4.012% due 06/10/48 | 1,428 | 1,400 |
139
Table of Contents
Ginnie Mae I | ||||
7.000% due 11/15/07 | 2 | 2 | ||
6.000% due 12/15/08 | 54 | 54 | ||
9.500% due 12/15/17 | 1 | 1 | ||
Ginnie Mae II (Ê) | ||||
4.750% due 07/20/27 | 114 | 115 | ||
5.000% due 02/20/32 | 201 | 201 | ||
Government National Mortgage Association | ||||
Series 2004-78 Class A | ||||
3.590% due 11/16/17 | 2,569 | 2,502 | ||
GSR Mortgage Loan Trust | ||||
Series 2004-7 Class 1A1 | ||||
3.393% due 06/25/34 | 1,582 | 1,574 | ||
Harborview Mortgage Loan Trust (Ê) | ||||
Series 2006-12 Class 2A11 | ||||
5.410% due 12/19/37 | 1,900 | 1,900 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.820% due 04/25/34 | 226 | 226 | ||
Indymac Index Mortgage Loan Trust (Ê) | ||||
Series 2006-AR1 Class 1A1A | ||||
5.410% due 10/25/36 | 800 | 800 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2002-C2 Class A1 | ||||
4.326% due 12/12/34 | 726 | 712 | ||
Series 2005-LDP Class A1 | ||||
4.655% due 08/15/42 | 1,560 | 1,546 | ||
4.613% due 10/15/42 | 1,848 | 1,830 | ||
Series 2005-LDP Class A2 | ||||
4.790% due 10/15/42 | 2,150 | 2,123 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2003-C1 Class A1 | ||||
2.720% due 03/15/27 | 1,038 | 1,013 | ||
Series 2003-C3 Class A1 | ||||
2.599% due 05/15/27 | 1,568 | 1,522 | ||
Lehman Brothers Floating Rate Commercial | ||||
Mortgage Trust (Ê)(Þ) | ||||
Series 2006-LLF Class A1 | ||||
5.400% due 09/15/21 | 870 | 870 | ||
Mellon Residential Funding Corp. (Ê) | ||||
Series 2000-TBC Class A1 | ||||
5.560% due 06/15/30 | 1,182 | 1,172 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2006-C1 Class A1 | ||||
5.528% due 05/12/39 | 2,582 | 2,604 | ||
Morgan Stanley Capital I | ||||
Series 2003-T11 Class A1 | ||||
3.260% due 06/13/41 | 1,265 | 1,234 | ||
Series 2004-T13 Class A1 | ||||
2.850% due 09/13/45 | 564 | 547 | ||
Series 2005-HQ6 Class A1 | ||||
4.646% due 08/13/42 | 1,763 | 1,744 | ||
Morgan Stanley Dean Witter Capital I | ||||
Series 2002-HQ Class A2 | ||||
6.090% due 04/15/34 | 131 | 132 | ||
Prime Mortgage Trust (Ê) | ||||
Series 2004-CL1 Class 1A2 | ||||
5.730% due 02/25/34 | 212 | 213 | ||
Series 2004-CL1 Class 2A2 | ||||
5.730% due 02/25/19 | 51 | 51 |
140
Table of Contents
Residential Accredit Loans, Inc. | ||||
Series 2003-QS1 Class A1 | ||||
5.000% due 09/25/18 | 3,463 | 3,394 | ||
Salomon Brothers Mortgage Securities VII | ||||
Series 2003-UP2 Class A1 | ||||
4.000% due 12/25/18 | 931 | 879 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2002-AR3 Class A1 | ||||
5.650% due 09/19/32 | 58 | 58 | ||
Structured Asset Securities Corp. (Ê) | ||||
Series 2001-21A Class 1A1 | ||||
6.792% due 01/25/32 | 75 | 75 | ||
Vendee Mortgage Trust | ||||
Series 2001-3 Class J | ||||
6.500% due 05/15/08 | 272 | 273 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2002-C2 Class A2 | ||||
4.043% due 11/15/34 | 1,803 | 1,759 | ||
Series 2003-C4 Class A1 | ||||
3.003% due 04/15/35 | 1,175 | 1,147 | ||
Series 2006-WL7 Class A1 (Ê)(Þ) | ||||
5.410% due 08/11/18 | 3,000 | 3,000 | ||
Washington Mutual, Inc. | ||||
Series 2002-AR1 Class A6 | ||||
4.816% due 10/25/32 | 515 | 512 | ||
Series 2002-AR6 Class A (Ê) | ||||
5.963% due 06/25/42 | 401 | 402 | ||
Series 2002-AR9 Class 1A (Ê) | ||||
5.963% due 08/25/42 | 810 | 811 | ||
Series 2004-AR1 Class A2A (Ê) | ||||
5.745% due 11/25/34 | 1,650 | 1,660 | ||
Series 2005-AR1 Class A1A1 (Ê) | ||||
5.620% due 10/25/45 | 368 | 370 | ||
Series 2006-AR1 Class 2A (Ê) | ||||
5.777% due 09/25/46 | 797 | 797 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2005-9 Class 1A1 | ||||
4.750% due 10/25/35 | 2,689 | 2,645 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 1,202 | 1,192 | ||
232,016 | ||||
Non-US Bonds—0.0% | ||||
Landwirtschaftliche Rentenbank 0.650% due 09/30/08 | JPY 60,000 | 513 | ||
United States Government Agencies—0.3% | ||||
Federal Home Loan Bank System | ||||
Series DE08 | ||||
5.925% due 04/09/08 | 1,600 | 1,621 | ||
Series HK10 | ||||
Zero coupon due 04/27/10 | 531 | 496 | ||
Freddie Mac | ||||
5.810% due 04/04/08 | 1,000 | 1,012 | ||
3,129 | ||||
United States Government Treasuries—5.0% | ||||
United States Treasury Notes | ||||
3.875% due 05/15/09 | 9,500 | 9,330 | ||
4.000% due 11/15/12 | 49,803 | 48,322 | ||
57,652 | ||||
Total Long-Term Investments | ||||
(cost $796,447) | 790,451 | |||
Preferred Stocks—0.2% |
141
Table of Contents
Financial Services - 0.2% | ||||
DG Funding Trust (Ê)(Å) | 219 | 2,331 | ||
Total Preferred Stocks | ||||
(cost $2,307) | 2,331 | |||
Notional Amount $ | ||||
Options Purchased—0.1% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 92.25 Put (250) | 57,656 | 2 | ||
Dec 2006 92.50 Put (100) | 23,125 | 1 | ||
Dec 2006 92.75 Put (72) | 16,695 | — | ||
Dec 2006 94.00 Put (149) | 35,015 | 1 | ||
Mar 2007 92.00 Put (292) | 67,160 | 2 | ||
Jun 2007 91.00 Put (201) | 45,728 | 1 | ||
Jun 2007 91.25 Put (316) | 72,088 | 2 | ||
Sep 2007 91.75 Put (60) | 13,763 | — | ||
Dec 2007 91.25 Put (777) | 177,253 | 5 | ||
Swaptions | ||||
(Fund PaysFund Receives) | ||||
EUR Three Month LIBOR / | ||||
EUR 3.96% | ||||
Jul 2007 0.00 Call (1) | 3,829 | 16 | ||
GBP Six Month LIBOR / | ||||
GBP 5.08% | ||||
Jun 2007 0.00 Call (1) | 1,908 | 4 | ||
GBP Six Month LIBOR / | ||||
GBP 5.08% | ||||
Jun 2007 0.00 Call (1) | 3,052 | — | ||
USD Three Month LIBOR / | ||||
USD 4.80% | ||||
Dec 2006 0.00 Call (1) | 12,000 | 5 | ||
USD Three Month LIBOR / | ||||
USD 5.17% | ||||
Feb 2007 0.00 Call (1) | 9,500 | 41 | ||
USD Three Month LIBOR / | ||||
USD 5.00% | ||||
Mar 2007 0.00 Call (2) | 17,000 | 54 | ||
USD Three Month LIBOR / | ||||
USD 5.08% | ||||
Apr 2007 0.00 Call (1) | 6,900 | 33 | ||
USD Three Month LIBOR / | ||||
USD 5.20% | ||||
May 2007 0.00 Call (1) | 20,800 | 145 | ||
USD Three Month LIBOR / | ||||
USD 5.25% | ||||
Jun 2007 0.00 Call (1) | 18,000 | 147 | ||
USD Three Month LIBOR / | ||||
USD 4.85% | ||||
Jul 2007 0.00 Call (1) | 20,000 | 33 | ||
USD Three Month LIBOR / | ||||
USD 5.25% | ||||
Jul 2007 0.00 Call (1) | 18,000 | 282 | ||
Total Options Purchased (cost $551) | 774 | |||
142
Table of Contents
Principal Amount ($) or Shares | ||||
Short-Term Investments—31.5% | ||||
Alcoa, Inc. | ||||
4.250% due 08/15/07 | 1,175 | 1,161 | ||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 200 | 200 | ||
Bank of America Corp. (ç)(ž) | ||||
5.370% due 11/01/06 | 7,600 | 7,600 | ||
Bank of Montreal | ||||
7.800% due 04/01/07 | 2,500 | 2,523 | ||
Barclays Bank PLC (ž) | ||||
5.271% due 01/29/07 | 2,700 | 2,707 | ||
Barclays US Funding Corp. (ž) | ||||
5.250% due 01/17/07 | 300 | 297 | ||
BNP Paribas Financial, Inc. (ç)(ž) | ||||
5.300% due 11/01/06 | 5,000 | 5,000 | ||
Boeing Co. | ||||
8.100% due 11/15/06 | 2,375 | 2,377 | ||
British Aerospace Finance, Inc. (Þ) | ||||
7.000% due 07/01/07 | 900 | 907 | ||
British Telecommunications PLC | ||||
7.000% due 05/23/07 | 1,700 | 1,712 | ||
CIT Group, Inc. (Ê)(Ñ) | ||||
5.620% due 09/20/07 | 3,800 | 3,808 | ||
Citigroup, Inc. (Ê)(Ñ) | ||||
5.451% due 06/04/07 | 1,000 | 1,001 | ||
Dexia Delaware LLC (ž) | ||||
5.240% due 01/18/07 | 10,600 | 10,480 | ||
Dominion Resources, Inc. | ||||
Series G | ||||
3.660% due 11/15/06 | 1,800 | 1,799 | ||
Fannie Mae Discount Notes (ç)(ž) | ||||
5.255% due 11/01/06 (ç) | 9,700 | 9,700 | ||
5.080% due 11/15/06 (ç) | 2,800 | 2,794 | ||
Zero coupon due 01/17/07 | 900 | 890 | ||
Federal Farm Credit Bank | ||||
12.250% due 02/01/07 | 864 | 866 | ||
FedEx Corp. (Ê) | ||||
5.579% due 08/08/07 | 800 | 801 | ||
Ford Motor Credit Co. | ||||
7.750% due 02/15/07 (Ñ) | 200 | 200 | ||
6.340% due 03/21/07 (Ê) | 2,800 | 2,799 | ||
Fortis Bank | ||||
5.265% due 04/28/08 | 1,700 | 1,699 | ||
France Treasury Bill BTF | ||||
Zero coupon due 12/21/06 | EUR 1,300 | 1,651 | ||
Freddie Mac Discount Notes (ç)(ž) | ||||
Series RB | ||||
5.133% due 11/14/06 | 3,200 | 3,194 | ||
GMAC LLC (Ê) | ||||
6.274% due 01/16/07 | 200 | 200 | ||
Goldman Sachs Group, Inc. (Ê) | ||||
5.495% due 10/05/07 | 2,000 | 2,003 | ||
HBOS Treasury Services PLC | ||||
5.365% due 11/01/06 (ç)(ž) | 3,000 | 3,000 | ||
5.265% due 11/22/06 (ç)(ž) | 8,500 | 8,474 |
143
Table of Contents
5.451% due 01/12/07 (Ê)(Þ) | 900 | 900 | ||
HSBC Finance Corp. (Ê) | ||||
5.440% due 02/28/07 | 3,200 | 3,201 | ||
Inter-American Development Bank | ||||
6.375% due 10/22/07 | 5,305 | 5,373 | ||
International Lease Finance Corp. | ||||
5.625% due 06/01/07 | 1,600 | 1,602 | ||
Series MTNP | ||||
3.125% due 05/03/07 | 2,200 | 2,175 | ||
John Hancock Global Funding II | ||||
6.000% due 12/28/06 | 2,450 | 2,450 | ||
MBNA Corp. | ||||
6.250% due 01/17/07 | 2,000 | 2,003 | ||
MGM Mirage | ||||
9.750% due 06/01/07 | 1,200 | 1,224 | ||
National Rural Utilities Cooperative Finance Corp. | ||||
Series MTNC | ||||
6.500% due 03/01/07 | 2,200 | 2,208 | ||
New York Life Global Funding (Ê)(Þ) | ||||
5.460% due 02/26/07 | 2,500 | 2,501 | ||
Nisource Finance Corp. (ç) | ||||
3.200% due 11/01/06 | 2,795 | 2,795 | ||
NiSource, Inc. (ç) | ||||
3.628% due 11/01/06 | 1,300 | 1,300 | ||
Pepco Holdings, Inc. (Ñ) | ||||
5.500% due 08/15/07 | 400 | 400 | ||
Principal Life Global Funding I (Þ) | ||||
5.125% due 06/28/07 | 2,000 | 1,996 | ||
Province of New Brunswick Canada (ç) | ||||
3.500% due 10/23/07 | 3,671 | 3,614 | ||
Prudential Financial, Inc. | ||||
4.104% due 11/15/06 | 500 | 500 | ||
Rabobank USA Financial Corp. (ç)(ž) | ||||
5.300% due 11/01/06 | 10,600 | 10,600 | ||
Royal Bank of Scotland (ç)(ž) | ||||
4.750% due 11/27/06 | 3,000 | 3,000 | ||
Russell Investment Company Money Market Fund | 96,765,334 | 96,765 | ||
San Paolo IMI US Financial Co. (ç)(ž) | ||||
5.265% due 11/22/06 | 500 | 498 | ||
Skandinaviska Enskilda Banken (ç)(ž) | ||||
5.271% due 10/03/07 | 2,400 | 2,399 | ||
Societe Generale NA (ž) | ||||
5.266% due 12/21/06 (ç) | 7,800 | 7,743 | ||
5.245% due 01/08/07 | 3,800 | 3,762 | ||
Texas Eastern Transmission, LP | ||||
5.250% due 07/15/07 | 2,900 | 2,889 | ||
TIAA Global Markets, Inc. (Þ) | ||||
5.000% due 03/01/07 | 3,625 | 3,621 | ||
UBS Financial Del LLC (ç)(ž) | ||||
5.280% due 11/01/06 | 10,500 | 10,477 | ||
5.290% due 11/01/06 | 100 | 100 | ||
5.265% due 11/16/06 | 1,100 | 1,098 | ||
United States Treasury Bills (ç)(ž)(§) | ||||
4.179% due 12/07/06 | 50 | 50 | ||
4.894% due 12/07/06 | 50 | 50 | ||
4.915% due 12/14/06 | 250 | 249 | ||
4.921% due 12/14/06 | 25 | 25 | ||
4.937% due 12/14/06 | 2,095 | 2,083 | ||
United States Treasury Notes |
144
Table of Contents
3.125% due 05/15/07 | 17,990 | 17,806 | |||
3.625% due 06/30/07 | 82,618 | 81,853 | |||
US Bancorp | |||||
Series MTNN | |||||
5.100% due 07/15/07 | 1,650 | 1,646 | |||
Wachovia Corp. (Ê) | |||||
Series * | |||||
5.410% due 07/20/07 | 3,500 | 3,503 | |||
Total Short-Term Investments | |||||
(cost $364,698) | 364,302 | ||||
Other Securities—1.9% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 5,623,714 | 5,624 | |||
State Street Securities Lending Quality Trust (×) | 16,292,035 | 16,292 | |||
Total Other Securities | |||||
(cost $21,916) | 21,916 | ||||
Total Investments—102.1% | |||||
(identified cost $1,185,919) | 11,179,774 | ||||
Other Assets and Liabilities, Net—(2.1%) | (24,188 | ) | |||
Net Assets—100.0% | 11,155,586 | ||||
Amount in thousand
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Euribor Futures | |||||
expiration date 06/07 (34) | 10,428 | (10 | ) | ||
Eurodollar Futures (CME) | |||||
expiration date 12/06 (78) | 18,454 | (40 | ) | ||
expiration date 03/07 (524) | 124,162 | (532 | ) | ||
expiration date 06/07 (675) | 160,228 | (322 | ) | ||
expiration date 09/07 (813) | 193,342 | (32 | ) | ||
expiration date 12/07 (876) | 208,587 | 305 | |||
expiration date 03/08 (7) | 1,667 | — | |||
LIBOR Futures expiration date 06/07 (14) | 3,159 | (4 | ) | ||
expiration date 09/07 (26) | 5,868 | (6 | ) | ||
expiration date 12/07 (16) | 3,612 | (3 | ) | ||
United States Treasury | |||||
2 Year Notes | |||||
expiration date 12/06 (186) | 38,020 | 82 | |||
Short Positions | |||||
United States Treasury Bonds | |||||
expiration date 12/06 (256) | 28,840 | (440 | ) | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | (1,002 | ) | |||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (12) | 2,850 | (11 | ) | ||
Dec 2006 95.25 Put (338) | 80,486 | (520 | ) | ||
Dec 2006 95.50 Put (40) | 9,550 | (87 | ) | ||
Mar 2007 94.75 Put (13) | 3,079 | (3 | ) | ||
Swaptions | |||||
(Fund Receives Fund Pays) | |||||
EUR Six Month LIBOR/ | |||||
EUR 4.100% | |||||
Jul 2007 0.00 Call (1) | 1,276 | (16 | ) | ||
GBP Six Month LIBOR/ |
145
Table of Contents
GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 572 | (6 | ) | ||
GBP Six Month LIBOR/ | |||||
GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 954 | (9 | ) | ||
GBP 4.500% | |||||
GBP Six Month LIBOR/ | |||||
Dec 2006 0.00 Put (1) | 3,243 | (27 | ) | ||
USD Three Month LIBOR/ | |||||
USD 4.850% | |||||
Dec 2006 0.00 Call (1) | 5,000 | (7 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.240% | |||||
Feb 2007 0.00 Call (1) | 4,100 | (50 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.040% | |||||
Mar 2007 0.00 Call (2) | 7,000 | (50 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.220% | |||||
Apr 2007 0.00 Call (1) | 3,000 | (40 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.315% | |||||
May 2007 0.00 Call (1) | 9,100 | (151 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.370% | |||||
Jul 2007 0.00 Call (1) | 8,000 | (161 | ) | ||
USD Three Month LIBOR/ | |||||
USD 4.950% | |||||
Jul 2007 0.00 Call (1) | 4,200 | (47 | ) | ||
Total Liability for Options Written (premiums received $773) | (1,185 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||
EUR 1,522 | USD 1,937 | 12/08/06 | (9 | ) | |||
GBP 107 | USD 200 | 11/30/06 | (4 | ) | |||
JPY 15,662 | USD 138 | 11/15/06 | 4 | ||||
JPY 15,663 | USD 138 | 11/15/06 | 3 | ||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (6 | ) | |||||
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||
Barclays Bank PLC | GBP 2,800 | 5.000 | % | Six Month LIBOR | 06/15/07 | (14 | ) | |||||
BNP Paribas | EUR 1,200 | 2.090 | % | Consumer Price Index (France) | 10/15/10 | 16 | ||||||
Lehman Brothers | GBP 1,500 | 4.500 | % | Six Month LIBOR | 09/20/09 | (39 | ) | |||||
Merrill Lynch | GBP 1,600 | 4.500 | % | Six Month LIBOR | 09/20/09 | (41 | ) | |||||
UBS | USD 42,500 | 5.000 | % | Three Month LIBOR | 12/20/08 | (29 | ) | |||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($390) | (107 | ) | ||||||||||
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Softbank Corp. | Deutsche Bank | 30,000 | 2.300 | % | 09/20/07 | 1 | |||||
Total Market Value of Open Credit Default Contracts Premiums Paid (Received)—$0 | 1 | ||||||||||
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund
146
Table of Contents
Russell Investment Company
Short Duration Bond Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Asset-Backed Securities | 18.3 | ||
Corporate Bonds and Notes | 20.0 | ||
International Debt | 4.7 | ||
Mortgage-Backed Securities | 20.1 | ||
Non-US Bonds | — | * | |
United States Government Agencies | 0.3 | ||
United States Government Treasuries | 5.0 | ||
Preferred Stocks | 0.2 | ||
Options Purchased | 0.1 | ||
Short Term Investments | 31.5 | ||
Other Securities | 1.9 | ||
Total Investments | 102.1 | ||
Other Assets and Liabilities, Net | (2.1 | ) | |
100.0 | |||
Futures Contracts | (0.1 | ) | |
Options Written | (0.1 | ) | |
Foreign Currency Exchange Contracts | — | * | |
Interest Rate Swap Contracts | — | * | |
Credit Default Swap Contracts | — | * |
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund
147
Table of Contents
(This page intentionally left blank)
148
Table of Contents
Diversified Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Diversified Bond Fund—Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.77 | % | |
5 Years | 4.05 | %§ | |
10 Years | 5.78 | %§ |
Diversified Bond Fund—Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.52 | % | |
5 Years | 3.80 | %§ | |
10 Years | 5.46 | %§ |
Diversified Bond Fund—Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.72 | % | |
5 Years | 3.02 | %§ | |
10 Years | 4.84 | %§ |
Lehman Brothers Aggregate Bond Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.19 | % | |
5 Years | 4.51 | %§ | |
10 Years | 6.26 | %§ |
149
Table of Contents
Russell Investment Company
Diversified Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
What is the Fund’s investment objective?
The Fund seeks to provide current income and the preservation of capital.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Diversified Bond Fund Class S, Class E and Class C Shares gained 4.77%, 4.52% and 3.72%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 5.19% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 4.61%. This return serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Corporate bonds have performed well over the last four years, leaving the yield spread between corporates and Treasuries for bearing credit risk very thin. As a result, the Fund’s money managers were modestly underweight in this sector, which detracted from Fund performance as the corporate sector continued to post strong earnings and had very few defaults. Given low yields across the globe, strong demand also drove the corporate market as investors searched for any possible incremental yield. This led to continued strong market demand for corporate bonds.
As illustrated by the average actively managed mutual fund underperforming the benchmark, volatile markets over the fiscal year made it difficult for active money managers to correctly gauge the direction and magnitude of interest rate changes. While 10 year Treasuries started and ended the fiscal year with nearly the same yield, over the year, yields ranged from 4.33% to 5.24%. Further, the Federal Reserve’s aggressive rate hikes surprised the market as evidenced by futures markets that trade based on the probability of Fed rate hikes. Despite this volatility, over the fiscal year, the Fund was able to effectively offset losses from an underweight to the corporate market through modest interest rate timing and security selection.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund’s money managers successfully moved their duration (a measure of a bond price’s sensitivity to a change in interest rates) exposure longer as interest rates rose and shorter when interest rates fell. A longer duration increases returns in a falling interest rate environment as longer duration bonds outperform more when interest rates fall. This duration management added modestly to the Fund’s incremental return in a volatile market.
At the money manager level, Bear Stearns Asset Management Inc. was the best performer due to its overweight to corporate bonds and strong security selection within this sector. Lehman Brothers Asset Management, LLC also did well in security selection and through an overweight to both the asset-backed and mortgage sectors. Believing the Fed would be finished raising interest rates by end of 2005, Pacific Investment Management Company, LLC (PIMCO) struggled early in the year by taking positions in short maturity bonds which fell in price as short-term interest rates rose. Near the end of the fiscal period, PIMCO’s positioning was rewarded and its performance rebounded to end modestly positive for the year. Lastly, Western Asset Management Company also struggled with a long duration view in the spring when interest rates rose. Western’s corporate overweight helped it have a very modest excess return for the year as well.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
150
Table of Contents
Russell Investment Company
Diversified Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Money Managers as of October 31, 2006 | Style | |
Bear Stearns Asset Management, Inc. | Sector Rotation | |
Lehman Brothers Asset Management, LLC | Enhanced Core | |
Pacific Investment Management Company, LLC | Fully Discretionary | |
Western Asset Management Company, Ltd. | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. | |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. | |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class E Shares from November 1, 1996 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
151
Table of Contents
Russell Investment Company
Diversified Bond Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,038.30 | $ | 1,016.99 | ||
Expenses Paid During Period* | $ | 8.37 | $ | 8.29 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.63% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
152
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,042.40 | $ | 1,020.82 | ||
Expenses Paid During Period* | $ | 4.48 | $ | 4.43 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.87% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,043.50 | $ | 1,022.08 | ||
Expenses Paid During Period* | $ | 3.19 | $ | 3.16 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.62% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
153
Table of Contents
Russell Investment Company
Diversified Bond Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments—99.9% | ||||
Asset-Backed Securities—8.1% | ||||
ABSC NIMs Trust (Þ) | ||||
Series 2005-HE6 Class A1 | ||||
5.050% due 08/27/35 | 163 | 162 | ||
Accredited Mortgage Loan Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.620% due 07/25/34 | 155 | 155 | ||
ACE Securities Corp. (Ê) | ||||
Series 2005-SD3 Class A | ||||
5.720% due 08/25/45 | 935 | 936 | ||
Series 2006-ASP Class A2A | ||||
5.404% due 10/25/36 | 786 | 786 | ||
Series 2006-FM1 Class A2A | ||||
5.370% due 07/25/36 | 1,844 | 1,844 | ||
Series 2006-FM1 Class A2B | ||||
5.420% due 07/25/36 | 2,580 | 2,580 | ||
Aegis Asset Backed Securities Trust (Ê) | ||||
Series 2003-3 Class M2 | ||||
6.970% due 01/25/34 | 450 | 454 | ||
American Express Credit Account Master Trust | ||||
Series 2006-A Class A | ||||
5.310% due 01/15/09 | 2,420 | 2,419 | ||
Ameriquest Mortgage Securities, Inc. (Ê) | ||||
Series 2002-D Class M1 | ||||
7.820% due 02/25/33 | 205 | 205 | ||
Series 2004-R10 Class A5 | ||||
5.710% due 11/25/34 | 150 | 150 | ||
Series 2004-R4 Class A1A (Þ) | ||||
5.660% due 06/25/34 | 773 | 773 | ||
Series 2004-R8 Class A5 | ||||
5.700% due 09/25/34 | 437 | 437 | ||
Argent Securities, Inc. (Ê) | ||||
Series 2005-W5 Class A2A | ||||
5.410% due 01/25/36 | 1,585 | 1,585 | ||
Series 2006-M2 Class A2A | ||||
5.378% due 09/25/36 | 578 | 578 | ||
Asset Backed Funding Corp. NIMs Trust (Þ) | ||||
Series 2005-WF1 Class N1 | ||||
4.750% due 03/26/35 | 101 | 100 | ||
Bayview Financial Acquisition Trust | ||||
Series 2004-C Class A1 (Ê) | ||||
5.744% due 05/28/44 | 854 | 856 | ||
Series 2006-A Class 1A3 | ||||
5.865% due 02/28/41 | 450 | 451 | ||
Burlington Northern Santa Fe Corp. Pass-Through Certificate | ||||
4.967% due 04/01/23 | 302 | 296 | ||
Chase Credit Card Master Trust (Ê) |
154
Table of Contents
Series 2002-1 Class A | ||||
5.430% due 06/15/09 | 3,100 | 3,101 | ||
Series 2004-2 Class A | ||||
5.360% due 09/15/09 | 2,190 | 2,191 | ||
Chase Issuance Trust | ||||
Series 2005-A1 Class A1 | ||||
5.330% due 12/15/10 | 10,375 | 10,376 | ||
Series 2005-A3 Class A (Ê) | ||||
5.340% due 10/17/11 | 4,450 | 4,452 | ||
Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2004-RES Class A1 (Ê) | ||||
5.620% due 11/25/34 | 628 | 629 | ||
Series 2006-WFH Class A1 (Ê) | ||||
5.370% due 08/25/36 | 965 | 965 | ||
Series 2006-WFH Class A1B | ||||
5.440% due 01/25/36 | 2,490 | 2,491 | ||
Countrywide Asset-Backed Certificates | ||||
Series 2001-BC3 Class A (Ê) | ||||
5.810% due 12/25/31 | 92 | 92 | ||
Series 2004-13 Class AF3 | ||||
3.989% due 02/25/31 | 283 | 280 | ||
Series 2004-BC1 Class M1 (Ê) | ||||
5.820% due 02/25/34 | 235 | 236 | ||
Series 2005-11 Class AF1 (Ê) | ||||
5.510% due 02/25/36 | 1,281 | 1,282 | ||
Series 2005-17 Class 1AF1 (Ê) | ||||
5.510% due 12/25/36 | 1,455 | 1,456 | ||
Series 2005-17 Class 4AV1 (Ê) | ||||
5.430% due 05/25/36 | 1,205 | 1,205 | ||
Series 2005-5N Class N (Þ) | ||||
5.000% due 07/25/36 | 101 | 98 | ||
Series 2006-11 Class 1AF4 | ||||
6.300% due 09/25/46 | 685 | 701 | ||
Series 2006-13 Class 3AV1 (Ê) | ||||
5.380% due 07/25/46 | 1,830 | 1,830 | ||
Series 2006-15 Class A1 (Ê) | ||||
5.434% due 10/25/46 | 1,100 | 1,100 | ||
Series 2006-16 Class 2A1 (Ê) | ||||
5.374% due 12/25/46 | 500 | 500 | ||
Series 2006-19 Class 2A1 (Ê) | ||||
5.409% due 07/25/36 | 1,300 | 1,300 | ||
Countrywide Home Equity Loan Trust | ||||
Series 2005-A Class 2A | ||||
5.570% due 04/15/35 | 260 | 260 | ||
Series 2005-G Class 2A (Ê) | ||||
5.560% due 12/15/35 | 1,283 | 1,284 | ||
Credit-Based Asset Servicing and Securitization | ||||
Series 2005-CB5 Class AV2 | ||||
5.580% due 08/25/35 | 520 | 522 | ||
Credit-Based Asset Servicing and Securitization LLC | ||||
Series 2004-CB7 Class AF5 | ||||
4.585% due 10/25/34 | 770 | 740 | ||
Series 2005-CB1 Class AF2 | ||||
4.090% due 12/25/35 | 419 | 417 | ||
Series 2006-CB3 Class AV1 | ||||
5.380% due 03/25/36 | 1,221 | 1,221 | ||
Series 2006-CB6 Class A21 (Ê) | ||||
5.370% due 07/25/36 | 3,613 | 3,613 | ||
Daimler Chrysler Auto Trust | ||||
Series 2006-C Class A2 |
155
Table of Contents
5.330% due 05/08/09 | 1,200 | 1,200 | ||
Daimler Chrysler Master Owner Trust (Ê) | ||||
Series 2005-A Class A | ||||
5.370% due 04/15/10 | 8,255 | 8,256 | ||
Discover Card Master Trust I (Ê) | ||||
Series 2005-1 Class A | ||||
5.330% due 09/16/10 | 3,870 | 3,871 | ||
Equifirst Mortgage Loan Trust | ||||
Series 2004-3 Class A2 | ||||
5.650% due 12/25/34 | 2,036 | 2,039 | ||
Equifirst Mortgage Loan Trust NIMs Notes (Þ) | ||||
Series 2005-1 Class N1 | ||||
4.458% due 04/25/35 | 222 | 222 | ||
Fannie Mae Grantor Trust (Ê) | ||||
Series 2002-T5 Class A1 | ||||
5.560% due 05/25/32 | 273 | 273 | ||
Series 2003-T4 Class 1A | ||||
5.440% due 09/26/33 | 303 | 303 | ||
Fannie Mae Whole Loan (Ê) | ||||
Series 2003-W5 Class A | ||||
5.440% due 04/25/33 | 328 | 328 | ||
Series 2003-W9 Class A | ||||
5.450% due 06/25/33 | 512 | 510 | ||
First Franklin Mortgage Loan Asset Backed Certificates | ||||
Series 2004-FF1 Class A2 (Ê) | ||||
5.720% due 12/25/32 | 947 | 949 | ||
Series 2004-FFH Class 2A1 (Ê) | ||||
5.700% due 10/25/34 | 451 | 453 | ||
Series 2005-FF1 Class A2A (Ê) | ||||
5.420% due 11/25/36 | 267 | 267 | ||
Series 2006-FF1 Class 2A2 (Ê) | ||||
5.430% due 08/25/36 | 4,005 | 4,005 | ||
Series 2006-FF1 Class A3 (Ê) | ||||
5.370% due 11/25/36 | 1,400 | 1,400 | ||
Series 2006-FF3 Class A2A | ||||
5.400% due 02/25/36 | 1,273 | 1,273 | ||
Series 2006-FF5 Class 2A1 | ||||
5.380% due 04/25/36 | 1,504 | 1,504 | ||
First Franklin NIMs Trust (Þ) | ||||
Series 2005-FF1 Class N1 | ||||
4.213% due 01/25/35 | 42 | 42 | ||
Ford Credit Floorplan Master Owner Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.360% due 07/15/09 | 2,275 | 2,274 | ||
Fremont Home Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.700% due 03/25/35 | 7,752 | 7,772 | ||
Series 2006-3 Class 2A1 | ||||
5.390% due 02/27/37 | 900 | 899 | ||
Fremont NIMs Trust (Þ) | ||||
Series 2005-A | ||||
3.750% due 01/25/35 | 97 | 97 | ||
Series 2005-C Class NOTE | ||||
5.584% due 07/25/35 | 81 | 80 | ||
GE Dealer Floorplan Master Note Trust (Ê) | ||||
Series 2004-2 Class A | ||||
5.400% due 07/20/09 | 1,240 | 1,241 | ||
Series 2005-1 Class A | ||||
5.360% due 04/20/10 | 1,800 | 1,801 | ||
Series 2006-3 Class A |
156
Table of Contents
5.330% due 07/20/11 | 3,045 | 3,045 | ||
GE-WMC Mortgage Securities LLC (Ê) | ||||
Series 2006-1 Class A2A | ||||
5.365% due 08/25/36 | 480 | 480 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-HE5 Class A3 | ||||
3.970% due 09/25/34 | 676 | 669 | ||
Government National Mortgage Association | ||||
Series 1998-23 Class ZA | ||||
6.500% due 09/20/28 | 2,651 | 2,732 | ||
GSAA Home Equity Trust | ||||
Series 2006-4 Class 1A2 | ||||
5.977% due 03/25/36 | 686 | 689 | ||
GSAA Trust | ||||
Series 2006-2 Class 2A3 | ||||
5.590% due 12/25/35 | 785 | 787 | ||
GSAMP Trust | ||||
Series 2003-HE2 Class M1 | ||||
5.970% due 08/25/33 | 420 | 421 | ||
Series 2006-FM2 Class A2A (Ê) | ||||
5.394% due 09/25/36 | 1,068 | 1,068 | ||
HFC Home Equity Loan Asset Backed Certificates (Ê) | ||||
Series 2006-2 Class A1 | ||||
5.520% due 03/20/36 | 3,413 | 3,414 | ||
Home Equity Asset Trust | ||||
Series 2003-5 Class M1 (Ê) | ||||
6.020% due 12/25/33 | 620 | 623 | ||
Series 2005-2 Class 2A2 | ||||
5.520% due 07/25/35 | 398 | 398 | ||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||
Series 2005-FLD Class A1 | ||||
5.450% due 07/25/35 | 593 | 594 | ||
Series 2006-WMC Class A2 | ||||
5.380% due 08/25/36 | 548 | 548 | ||
Lehman XS Trust | ||||
Series 2005-1 Class 2A1 | ||||
4.660% due 07/25/35 | 1,221 | 1,206 | ||
Series 2005-1 Class 2A2 (Ê) | ||||
4.660% due 07/25/35 | 394 | 394 | ||
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.610% due 10/25/34 | 263 | 263 | ||
Series 2006-1 Class 2A1 | ||||
5.410% due 02/25/36 | 439 | 439 | ||
Mastr Asset Backed Securities Trust | ||||
Series 2003-WMC Class M2 | ||||
6.970% due 08/25/33 | 133 | 133 | ||
Series 2005-NC1 Class A1 (Ê) | ||||
5.610% due 12/25/34 | 4,778 | 4,780 | ||
MBNA Credit Card Master Note Trust | ||||
Series 2002-A4 Class A4 | ||||
5.440% due 08/17/09 | 3,155 | 3,157 | ||
Merrill Auto Trust Securitization (Ê) | ||||
Series 2005-1 Class A2B | ||||
5.334% due 04/25/08 | 359 | 359 | ||
Morgan Stanley ABS Capital I | ||||
Series 2003-NC8 Class M3 | ||||
7.420% due 09/25/33 | 192 | 193 | ||
Series 2004-NC5 Class A2 (Ê) | ||||
5.620% due 05/25/34 | 961 | 962 |
157
Table of Contents
Series 2006-NC5 Class A2A (Ê) | ||||
5.360% due 10/25/36 | 1,000 | 1,000 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-12X Class A6A | ||||
5.726% due 10/25/36 | 580 | 581 | ||
MSDWCC Heloc Trust (Ê) | ||||
Series 2005-1 Class A | ||||
5.520% due 07/25/17 | 134 | 134 | ||
Navistar Financial Corp. Owner Trust (Ê) | ||||
Series 2003-B Class A3 | ||||
5.520% due 04/15/08 | 169 | 169 | ||
New Century Home Equity Loan Trust | ||||
Series 2004-4 Class M2 | ||||
5.850% due 02/25/35 | 515 | 518 | ||
Newcastle Mortgage Securities Trust (Ê) | ||||
Series 2006-1 Class A1 | ||||
5.400% due 03/25/36 | 1,271 | 1,271 | ||
Nissan Master Owner Trust Receivables (Ê) | ||||
Series 2005-A Class A | ||||
5.350% due 07/15/10 | 2,065 | 2,065 | ||
Option One Mortgage Loan Trust (Ê) | ||||
Series 2002-2 Class A | ||||
5.870% due 06/25/32 | 137 | 137 | ||
Series 2003-2 Class M2 | ||||
7.020% due 04/25/33 | 154 | 155 | ||
Series 2003-3 Class M3 | ||||
7.320% due 06/25/33 | 114 | 116 | ||
Series 2003-4 Class M2 | ||||
6.970% due 07/25/33 | 286 | 288 | ||
Option One Mortgage Securities Corp. NIMs Trust | ||||
Series 2006-1A | ||||
5.430% due 12/25/10 | 1,999 | 1,999 | ||
Origen Manufactured Housing | ||||
Series 2005-B Class A4 | ||||
5.910% due 01/15/37 | 400 | 399 | ||
Ownit Mortgage Loan Asset Backed Certificates (Ê) | ||||
Series 2006-6 Class A2C | ||||
5.484% due 09/25/37 | 3,380 | 3,380 | ||
Park Place Securities, Inc. | ||||
Series 2004-MCW Class A1 (Ê) | ||||
5.642% due 10/25/34 | 3,606 | 3,599 | ||
Series 2004-WWF Class A1D | ||||
5.780% due 02/25/35 | 1,009 | 1,012 | ||
Series 2005-WCW Class M1 | ||||
5.770% due 09/25/35 | 510 | 513 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2005-1 Class AF2 | ||||
3.914% due 05/25/35 | 145 | 145 | ||
Series 2005-6 Class A3 | ||||
5.680% due 01/25/36 | 565 | 565 | ||
Ramp NIMs Trust (Þ) | ||||
Series 2005-NM2 | ||||
5.193% due 04/25/35 | 106 | 105 | ||
Renaissance Home Equity Loan Trust | ||||
Series 2005-1 Class M1 | ||||
5.357% due 05/25/35 | 315 | 310 | ||
Series 2005-2 Class AF4 | ||||
4.934% due 08/25/35 | 340 | 334 | ||
Series 2005-3 Class AF1 (Ê) | ||||
5.480% due 11/25/35 | 515 | 515 |
158
Table of Contents
Series 2005-4 Class N | ||||
7.142% due 02/25/36 | 336 | 334 | ||
Series 2006-1 Class AF6 | ||||
5.746% due 05/25/36 | 425 | 430 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2003-RS1 Class AI6A | ||||
5.980% due 12/25/33 | 480 | 486 | ||
Series 2003-RS2 Class AII (Ê) | ||||
5.670% due 03/25/33 | 113 | 113 | ||
Series 2003-RS3 Class AII (Ê) | ||||
5.690% due 04/25/33 | 79 | 79 | ||
Residential Asset Securities Corp. | ||||
Series 2001-KS1 Class AII (Ê) | ||||
5.800% due 03/25/32 | 76 | 76 | ||
Series 2001-KS3 Class AII (Ê) | ||||
5.780% due 09/25/31 | 97 | 97 | ||
Series 2002-KS3 Class A1B (Ê) | ||||
5.830% due 05/25/32 | 118 | 118 | ||
Series 2003-KS1 Class M2 (Ê) | ||||
7.070% due 01/25/33 | 125 | 125 | ||
Series 2003-KS2 Class MI1 | ||||
4.800% due 04/25/33 | 1,055 | 1,034 | ||
Series 2006-KS6 Class A1 (Ê) | ||||
5.364% due 08/25/36 | 656 | 656 | ||
Series 2006-KS9 Class A11 (Ê) | ||||
5.390% due 11/25/36 | 1,200 | 1,200 | ||
Residential Funding Mortgage Securities II, Inc. (Ê) | ||||
Series 2005-HS1 Class AI1 | ||||
5.450% due 09/25/35 | 1,234 | 1,231 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.600% due 03/25/35 | 128 | 128 | ||
Series 2006-3 Class A1 | ||||
5.382% due 11/25/36 | 590 | 590 | ||
SBI Heloc Trust (Ê)(Å) | ||||
Series 2006-1A Class 1A2A | ||||
5.494% due 08/25/36 | 700 | 700 | ||
Securitized Asset Backed Receivables LLC Trust (Ê) | ||||
Series 2005-FR4 Class A3 | ||||
5.530% due 01/25/36 | 527 | 527 | ||
SLM Student Loan Trust (Ê) | ||||
Series 2006-3 Class A2 | ||||
5.485% due 01/25/16 | 1,079 | 1,079 | ||
Series 2006-5 Class A2 | ||||
5.367% due 07/25/17 | 2,700 | 2,700 | ||
Small Business Administration | ||||
Series 2000-P10 Class 1 | ||||
7.449% due 08/01/10 | 36 | 38 | ||
Soundview Home Equity Loan Trust | ||||
Series 2006-EQ1 Class A1 (Ê) | ||||
5.380% due 10/25/36 | 781 | 781 | ||
Series 2006-WF1 Class A2 | ||||
5.645% due 10/25/36 | 1,215 | 1,215 | ||
Soundview NIMs Trust | ||||
Series 2005-DO1 Class N1 | ||||
4.703% due 06/25/35 | 16 | 16 | ||
Specialty Underwriting & Residential Finance | ||||
Series 2003-BC1 Class A (Ê) | ||||
5.670% due 01/25/34 | 11 | 11 | ||
Series 2006-AB1 Class A2 |
159
Table of Contents
5.470% due 12/25/36 | 1,225 | 1,226 | ||
Structured Asset Investment Loan Trust | ||||
Series 2004-7 Class A1 (Ê) | ||||
5.585% due 08/25/34 | 425 | 427 | ||
Series 2005-3 Class M2 | ||||
5.760% due 04/25/35 | 290 | 291 | ||
Structured Asset Securities Corp. | ||||
Series 2002-AL1 Class A3 | ||||
3.450% due 02/25/32 | 319 | 299 | ||
Series 2002-HF1 Class A (Ê) | ||||
5.620% due 01/25/33 | 13 | 13 | ||
Series 2004-19X Class A2 | ||||
4.370% due 10/25/34 | 900 | 890 | ||
Series 2005-WF1 Class A2 (Ê) | ||||
5.530% due 02/25/35 | 3,150 | 3,153 | ||
Series 2005-WF3 Class A1 (Ê) | ||||
5.420% due 07/25/35 | 390 | 390 | ||
Series 2006-BC3 Class A2 (Ê) | ||||
5.370% due 10/25/36 | 1,300 | 1,300 | ||
Tenaska Alabama II Partners, LP (Þ) | ||||
Series 2003 | ||||
6.125% due 03/30/23 | 252 | 256 | ||
Textron Financial Floorplan Master Note Trust (Ê)(Þ) | ||||
Series 2005-1A Class A | ||||
5.440% due 05/13/10 | 2,405 | 2,409 | ||
Volkswagen Credit Auto Master Trust (Ê) | ||||
Series 2005-1 Class A | ||||
5.350% due 07/20/10 | 1,870 | 1,870 | ||
Wachovia Asset Securitization, Inc. (Ê) | ||||
Series 2003-HE3 Class A | ||||
5.580% due 11/25/33 | 209 | 210 | ||
Wachovia Mortgage Loan Trust LLC (Ê) | ||||
Series 2005-WMC Class A1 | ||||
5.440% due 10/25/35 | 231 | 231 | ||
Waverly Community School | ||||
Series 2006-1 Class A1 | ||||
5.420% due 05/25/36 | 1,559 | 1,559 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 1,328 | 1,328 | ||
174,448 | ||||
Corporate Bonds and Notes—15.5% | ||||
Abbott Laboratories | ||||
5.600% due 05/15/11 | 545 | 555 | ||
5.875% due 05/15/16 | 6,275 | 6,523 | ||
Alamosa Delaware, Inc. | ||||
8.500% due 01/31/12 | 245 | 261 | ||
Allstate Life Global Funding Trusts | ||||
3.850% due 01/25/08 | 1,865 | 1,832 | ||
Altria Group, Inc. | ||||
7.000% due 11/04/13 | 1,220 | 1,337 | ||
American Electric Power Co., Inc. | ||||
Series C | ||||
5.375% due 03/15/10 | 85 | 85 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.330% due 10/16/08 | 1,200 | 1,200 | ||
American General Finance Corp. (Ê) | ||||
Series MTNI | ||||
5.498% due 06/27/08 | 1,600 | 1,603 |
160
Table of Contents
American International Group, Inc. | ||||
5.370% due 06/16/09 (Ê)(Þ) | 700 | 700 | ||
4.700% due 10/01/10 | 635 | 626 | ||
5.375% due 10/18/11 | 670 | 676 | ||
5.050% due 10/01/15 (Ñ) | 645 | 630 | ||
American RE Corp. | ||||
Series B | ||||
7.450% due 12/15/26 | 595 | 675 | ||
Ameriprise Financial, Inc. | ||||
5.650% due 11/15/15 | 1,135 | 1,149 | ||
Anadarko Petroleum Corp. | ||||
5.790% due 09/15/09 (Ê) | 680 | 681 | ||
5.950% due 09/15/16 | 1,535 | 1,559 | ||
6.450% due 09/15/36 | 720 | 746 | ||
Anheuser-Busch Cos., Inc. | ||||
4.950% due 01/15/14 | 545 | 532 | ||
ASIF Global Financing (Þ) | ||||
4.900% due 01/17/13 | 70 | 69 | ||
AT&T, Inc. | ||||
5.612% due 11/14/08 (Ê) | 500 | 501 | ||
5.100% due 09/15/14 | 465 | 453 | ||
BAE Systems Holdings, Inc. (Þ) | ||||
6.400% due 12/15/11 | 1,670 | 1,733 | ||
Bank of America Corp. | ||||
5.875% due 02/15/09 | 120 | 122 | ||
5.400% due 06/19/09 (Ê) | 3,600 | 3,601 | ||
7.800% due 02/15/10 | 120 | 129 | ||
4.375% due 12/01/10 | 2,035 | 1,981 | ||
5.375% due 08/15/11 | 980 | 990 | ||
5.750% due 08/15/16 | 3,385 | 3,450 | ||
Bank of America NA | ||||
6.000% due 10/15/36 | 3,550 | 3,661 | ||
Bank of New York Co., Inc. | ||||
5.125% due 11/01/11 | 795 | 795 | ||
Banque Paribas | ||||
6.875% due 03/01/09 | 440 | 457 | ||
Bear Stearns Cos., Inc. (The) | ||||
5.489% due 08/21/09 (Ê) | 1,200 | 1,201 | ||
Series MTNB (Ê) | ||||
5.457% due 03/30/09 | 900 | 901 | ||
BellSouth Corp. | ||||
5.580% due 08/15/08 (Ê) | 1,300 | 1,300 | ||
4.750% due 11/15/12 (Ñ) | 30 | 29 | ||
6.550% due 06/15/34 | 1,530 | 1,582 | ||
Boeing Capital Corp. (Ñ) | ||||
6.100% due 03/01/11 | 165 | 171 | ||
Boston Scientific Corp. | ||||
6.400% due 06/15/16 | 905 | 919 | ||
Burlington Northern Santa Fe Corp. | ||||
6.875% due 12/01/27 | 55 | 61 | ||
Campbell Soup Co. | ||||
5.875% due 10/01/08 | 160 | 162 | ||
Carolina Power & Light Co. | ||||
6.500% due 07/15/12 | 15 | 16 | ||
5.150% due 04/01/15 | 1,115 | 1,096 | ||
Caterpillar, Inc. | ||||
6.050% due 08/15/36 | 2,035 | 2,133 | ||
CenterPoint Energy Houston Electric LLC | ||||
Series J2 | ||||
5.700% due 03/15/13 | 210 | 212 |
161
Table of Contents
CenterPoint Energy Resources Corp. | ||||
Series B | ||||
7.875% due 04/01/13 | 675 | 754 | ||
Cingular Wireless Services, Inc. | ||||
7.875% due 03/01/11 | 1,480 | 1,623 | ||
8.750% due 03/01/31 | 2,740 | 3,590 | ||
Cisco Systems, Inc. | ||||
5.500% due 02/22/16 | 4,380 | 4,430 | ||
CIT Group Holdings, Inc. (Ê) | ||||
5.635% due 01/30/09 | 800 | 802 | ||
CIT Group, Inc. | ||||
5.540% due 12/19/08 (Ê) | 900 | 902 | ||
5.500% due 06/08/09 (Ê) | 100 | 100 | ||
5.546% due 08/17/09 (Ê) | 1,400 | 1,401 | ||
6.875% due 11/01/09 | 100 | 104 | ||
4.125% due 11/03/09 | 50 | 49 | ||
5.780% due 07/28/11 (Ê) | 900 | 901 | ||
Citicorp | ||||
7.250% due 10/15/11 | 370 | 401 | ||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||
Series MTNM | ||||
5.430% due 03/07/08 | 1,300 | 1,301 | ||
Citigroup, Inc. | ||||
3.500% due 02/01/08 | 1,900 | 1,860 | ||
5.525% due 01/30/09 (Ê) | 500 | 500 | ||
4.125% due 02/22/10 | 1,070 | 1,040 | ||
6.500% due 01/18/11 | 695 | 730 | ||
5.100% due 09/29/11 | 970 | 968 | ||
5.000% due 09/15/14 | 7,810 | 7,628 | ||
6.125% due 08/25/36 | 400 | 415 | ||
Clear Channel Communications, Inc. | ||||
4.250% due 05/15/09 | 150 | 145 | ||
6.250% due 03/15/11 | 30 | 29 | ||
5.500% due 09/15/14 | 400 | 339 | ||
Clorox Co. | ||||
4.200% due 01/15/10 | 250 | 243 | ||
Columbus Southern Power Co. | ||||
Series C | ||||
5.500% due 03/01/13 | 100 | 100 | ||
Comcast Cable Communications, Inc. | ||||
6.875% due 06/15/09 | 665 | 691 | ||
Comcast Corp. | ||||
5.800% due 07/14/09 (Ê) | 1,000 | 1,002 | ||
6.500% due 01/15/15 (Ñ) | 1,185 | 1,240 | ||
5.900% due 03/15/16 | 120 | 121 | ||
6.500% due 01/15/17 | 600 | 629 | ||
6.500% due 11/15/35 | 1,330 | 1,358 | ||
6.450% due 03/15/37 | 255 | 258 | ||
ConocoPhillips Holding Co. | ||||
6.950% due 04/15/29 | 1,780 | 2,055 | ||
Consolidated Edison Co. of New York (Ñ) | ||||
5.375% due 12/15/15 | 960 | 958 | ||
Consolidated Natural Gas Co. | ||||
6.850% due 04/15/11 | 510 | 537 | ||
Constellation Energy Group, Inc. | ||||
6.125% due 09/01/09 | 785 | 802 | ||
COX Communications, Inc. | ||||
3.875% due 10/01/08 | 300 | 291 | ||
6.750% due 03/15/11 | 3,945 | 4,126 | ||
Credit Suisse First Boston USA, Inc. |
162
Table of Contents
3.875% due 01/15/09 | 820 | 799 | ||
4.875% due 08/15/10 | 155 | 153 | ||
6.500% due 01/15/12 | 55 | 58 | ||
5.500% due 08/15/13 (Ñ) | 115 | 117 | ||
Credit Suisse USA, Inc. | ||||
5.250% due 03/02/11 | 405 | 406 | ||
CRH America, Inc. | ||||
6.000% due 09/30/16 | 1,915 | 1,929 | ||
CVS Corp. | ||||
5.750% due 08/15/11 | 350 | 355 | ||
6.125% due 08/15/16 | 940 | 969 | ||
DaimlerChrysler NA Holding Corp. | ||||
4.750% due 01/15/08 | 300 | 297 | ||
4.050% due 06/04/08 | 285 | 279 | ||
5.875% due 03/15/11 | 300 | 302 | ||
8.500% due 01/18/31 (Ñ) | 1,335 | 1,604 | ||
DaimlerChrysler North America Holding Corp. (Ê) | ||||
5.918% due 08/03/09 | 800 | 800 | ||
Detroit Edison Co. | ||||
6.125% due 10/01/10 | 325 | 335 | ||
6.350% due 10/15/32 | 95 | 100 | ||
Devon Energy Corp. | ||||
7.950% due 04/15/32 | 1,210 | 1,508 | ||
Dominion Resources, Inc. | ||||
4.750% due 12/15/10 | 110 | 107 | ||
5.700% due 09/17/12 | 695 | 704 | ||
Series B | ||||
6.250% due 06/30/12 | 80 | 83 | ||
Series C | ||||
5.150% due 07/15/15 | 1,245 | 1,208 | ||
DPL, Inc. | ||||
6.875% due 09/01/11 | 600 | 633 | ||
DR Horton, Inc. | ||||
6.500% due 04/15/16 | 900 | 897 | ||
Dresdner Funding Trust I (Þ) | ||||
8.151% due 06/30/31 | 565 | 683 | ||
DTE Energy Co. | ||||
7.050% due 06/01/11 | 1,835 | 1,948 | ||
Duke Energy Corp. | ||||
6.250% due 01/15/12 | 170 | 177 | ||
5.625% due 11/30/12 | 290 | 295 | ||
Duke Energy Field Services LLC | ||||
6.875% due 02/01/11 | 40 | 42 | ||
Duke Realty, LP | ||||
5.950% due 02/15/17 | 1,045 | 1,061 | ||
Eastman Kodak Co. (Ñ) | ||||
7.250% due 11/15/13 | 40 | 40 | ||
Electronic Data Systems Corp. | ||||
7.125% due 10/15/09 | 600 | 627 | ||
Eli Lilly & Co. (Ñ) | ||||
6.770% due 01/01/36 | 715 | 834 | ||
Embarq Corp. | ||||
7.082% due 06/01/16 | 1,435 | 1,468 | ||
Erac USA Finance Co. | ||||
5.900% due 11/15/15 | 1,570 | 1,588 | ||
Exelon Corp. | ||||
4.900% due 06/15/15 | 1,395 | 1,319 | ||
5.625% due 06/15/35 | 720 | 684 | ||
FedEx Corp. | ||||
5.500% due 08/15/09 | 1,870 | 1,882 |
163
Table of Contents
7.600% due 07/01/97 | 180 | 213 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 10P | ||||
Zero coupon due 11/30/17 | 1,165 | 673 | ||
Series 15P | ||||
Zero coupon due 03/07/19 | 165 | 89 | ||
Series 2P | ||||
Zero coupon due 11/30/17 | 140 | 81 | ||
Series 6P | ||||
Zero coupon due 08/03/18 | 715 | 397 | ||
FirstEnergy Corp. | ||||
Series B | ||||
6.450% due 11/15/11 | 4,015 | 4,201 | ||
Series C (Ñ) | ||||
7.375% due 11/15/31 | 2,480 | 2,901 | ||
Ford Motor Co. (Ñ) | ||||
7.450% due 07/16/31 | 360 | 282 | ||
Ford Motor Credit Co. | ||||
4.950% due 01/15/08 | 410 | 400 | ||
7.375% due 10/28/09 | 3,210 | 3,125 | ||
Freddie Mac (Ñ) | ||||
5.250% due 05/21/09 | 2,735 | 2,761 | ||
General Electric Capital Corp. | ||||
5.410% due 01/05/09 (Ê) | 800 | 800 | ||
3.250% due 06/15/09 | 1,400 | 1,339 | ||
5.570% due 01/20/10 (Ê) | 800 | 801 | ||
5.500% due 04/28/11 | 550 | 559 | ||
4.250% due 06/15/12 | 1,125 | 1,076 | ||
4.875% due 03/04/15 | 950 | 927 | ||
Series MTNA (Ê) | ||||
5.410% due 10/26/09 | 2,200 | 2,199 | ||
Series MTNA | ||||
4.250% due 01/15/08 | 280 | 277 | ||
4.125% due 09/01/09 | 400 | 390 | ||
6.000% due 06/15/12 | 915 | 952 | ||
5.450% due 01/15/13 (Ñ) | 3,295 | 3,344 | ||
General Electric Co. | ||||
5.000% due 02/01/13 | 375 | 372 | ||
General Motors Corp. | ||||
8.375% due 07/15/33 (Ñ) | 120 | 107 | ||
Glencore Funding LLC (Þ) | ||||
6.000% due 04/15/14 | 540 | 525 | ||
GMAC LLC | ||||
5.625% due 05/15/09 | 1,765 | 1,731 | ||
7.750% due 01/19/10 | 300 | 311 | ||
Goldman Sachs Group, Inc. | ||||
5.478% due 06/23/09 (Ê) | 1,700 | 1,701 | ||
5.000% due 01/15/11 | 200 | 198 | ||
6.875% due 01/15/11 | 1,620 | 1,718 | ||
4.750% due 07/15/13 | 1,380 | 1,332 | ||
5.350% due 01/15/16 | 1,567 | 1,548 | ||
Goldman Sachs Group, LP | ||||
4.500% due 06/15/10 | 1,360 | 1,331 | ||
Hartford Financial Services Group, Inc. | ||||
5.550% due 08/16/08 | 1,070 | 1,076 | ||
5.250% due 10/15/11 | 915 | 916 | ||
Hess Corp. | ||||
7.300% due 08/15/31 | 1,115 | 1,264 | ||
Historic TW, Inc. |
164
Table of Contents
8.050% due 01/15/16 | 485 | 547 | ||
6.625% due 05/15/29 | 95 | 97 | ||
HJ Heinz Co. | ||||
6.428% due 12/01/08 | 100 | 102 | ||
HJ Heinz Finance Co. | ||||
6.000% due 03/15/12 | 40 | 41 | ||
Home Depot, Inc. | ||||
5.400% due 03/01/16 | 1,435 | 1,433 | ||
HSBC Bank USA NA (Ê) | ||||
Series BKNT | ||||
5.530% due 06/10/09 | 500 | 502 | ||
HSBC Finance Corp. | ||||
4.625% due 01/15/08 | 1,060 | 1,053 | ||
5.520% due 09/15/08 (Ê) | 900 | 902 | ||
4.750% due 05/15/09 | 6,155 | 6,110 | ||
4.125% due 11/16/09 | 3,510 | 3,405 | ||
6.750% due 05/15/11 | 2,100 | 2,230 | ||
7.000% due 05/15/12 | 2,435 | 2,636 | ||
6.375% due 11/27/12 | 710 | 749 | ||
5.000% due 06/30/15 | 400 | 388 | ||
HSBC Financial Capital Trust IX | ||||
5.911% due 11/30/35 | 700 | 704 | ||
ILFC E-Capital Trust II (Å) | ||||
6.250% due 12/21/65 | 50 | 51 | ||
International Business Machines Corp. | ||||
7.125% due 12/01/96 | 620 | 727 | ||
International Lease Finance Corp. | ||||
3.500% due 04/01/09 | 745 | 716 | ||
4.750% due 07/01/09 | 1,820 | 1,803 | ||
5.750% due 06/15/11 | 130 | 133 | ||
5.625% due 09/20/13 | 2,730 | 2,751 | ||
International Paper Co. | ||||
6.750% due 09/01/11 | 310 | 330 | ||
5.500% due 01/15/14 | 390 | 386 | ||
International Steel Group, Inc. | ||||
6.500% due 04/15/14 | 435 | 435 | ||
ITT Corp. | ||||
7.400% due 11/15/25 | 240 | 283 | ||
John Deere Capital Corp. | ||||
5.424% due 07/15/08 (Ê) | 800 | 800 | ||
4.875% due 03/16/09 | 1,895 | 1,884 | ||
JP Morgan Chase Capital XV | ||||
5.875% due 03/15/35 | 3,095 | 3,014 | ||
JP Morgan Chase Capital XX | ||||
Series T | ||||
6.550% due 09/29/36 | 100 | 104 | ||
JPMorgan Chase & Co. | ||||
5.600% due 06/01/11 | 255 | 260 | ||
5.125% due 09/15/14 | 735 | 722 | ||
5.150% due 10/01/15 (Ñ) | 1,145 | 1,120 | ||
Kellogg Co. | ||||
Series B | ||||
6.600% due 04/01/11 | 1,430 | 1,508 | ||
Kinder Morgan Energy Partners, LP | ||||
7.125% due 03/15/12 | 255 | 271 | ||
5.000% due 12/15/13 (Ñ) | 175 | 167 | ||
Kinder Morgan Finance | ||||
Series WI | ||||
5.350% due 01/05/11 | 1,405 | 1,372 | ||
Kraft Foods, Inc. |
165
Table of Contents
4.000% due 10/01/08 | 1,575 | 1,539 | ||
5.625% due 11/01/11 | 2,035 | 2,062 | ||
Kroger Co. (The) | ||||
6.750% due 04/15/12 | 50 | 53 | ||
7.500% due 04/01/31 (Ñ) | 70 | 78 | ||
Lehman Brothers Holdings, Inc. | ||||
4.000% due 01/22/08 | 870 | 858 | ||
5.374% due 11/24/08 (Ê) | 1,400 | 1,400 | ||
5.460% due 04/03/09 (Ê) | 700 | 701 | ||
5.493% due 08/21/09 (Ê) | 900 | 900 | ||
5.000% due 01/14/11 | 660 | 655 | ||
5.594% due 07/18/11 (Ê)(Ñ) | 600 | 601 | ||
5.500% due 04/04/16 | 415 | 415 | ||
Manufacturers & Traders Trust Co. | ||||
5.585% due 12/28/20 | 163 | 163 | ||
Marshall & Ilsley Corp. | ||||
5.350% due 04/01/11 | 1,795 | 1,805 | ||
Merrill Lynch & Co., Inc. | ||||
5.685% due 07/25/11 (Ê) | 1,100 | 1,101 | ||
6.220% due 09/15/26 | 3,965 | 4,094 | ||
Series MTn (Ê) | ||||
5.492% due 08/14/09 | 700 | 700 | ||
Series MTNB | ||||
3.125% due 07/15/08 | 1,490 | 1,439 | ||
Series MTNC | ||||
4.250% due 02/08/10 | 1,860 | 1,809 | ||
Metlife, Inc. | ||||
5.700% due 06/15/35 | 1,080 | 1,066 | ||
Midamerican Energy Holdings Co. | ||||
Series WI | ||||
6.125% due 04/01/36 | 5,690 | 5,851 | ||
Miller Brewing Co. (Þ) | ||||
5.500% due 08/15/13 | 385 | 381 | ||
Monumental Global Funding II (Þ) | ||||
4.625% due 03/15/10 | 190 | 187 | ||
Morgan Stanley | ||||
3.625% due 04/01/08 | 195 | 190 | ||
3.875% due 01/15/09 | 1,050 | 1,023 | ||
5.751% due 01/22/09 (Ê) | 400 | 400 | ||
5.625% due 01/09/12 | 690 | 701 | ||
4.750% due 04/01/14 | 280 | 268 | ||
5.375% due 10/15/15 | 360 | 357 | ||
Series MTNF (Ê) | ||||
5.499% due 01/18/08 | 1,400 | 1,402 | ||
Motorola, Inc. | ||||
5.220% due 10/01/97 | 1,100 | 895 | ||
Natexis Ambs Co. LLC (f)(Þ) | ||||
8.440% due 12/29/49 | 270 | 283 | ||
National Rural Utilities Cooperative Finance Corp. | ||||
5.750% due 08/28/09 | 2,555 | 2,595 | ||
News America Holdings, Inc. | ||||
7.750% due 12/01/45 | 130 | 146 | ||
7.900% due 12/01/95 | 230 | 255 | ||
8.250% due 10/17/96 | 75 | 86 | ||
News America, Inc. | ||||
6.200% due 12/15/34 | 265 | 259 | ||
Series WI | ||||
6.400% due 12/15/35 | 3,150 | 3,159 | ||
Nisource Finance Corp. | ||||
7.875% due 11/15/10 | 410 | 443 |
166
Table of Contents
Norfolk Southern Corp. | ||||
6.200% due 04/15/09 | 845 | 863 | ||
7.050% due 05/01/37 | 310 | 364 | ||
7.900% due 05/15/97 | 1,090 | 1,366 | ||
6.000% due 03/15/2105 | 565 | 545 | ||
Northern States Power Co. | ||||
Series B | ||||
8.000% due 08/28/12 | 1,615 | 1,831 | ||
Northern Trust Corp. | ||||
5.300% due 08/29/11 | 1,170 | 1,180 | ||
Occidental Petroleum Corp. | ||||
9.250% due 08/01/19 | 185 | 246 | ||
Ohio Power Co. | ||||
Series F | ||||
5.500% due 02/15/13 | 35 | 35 | ||
ONEOK Partners, LP | ||||
6.650% due 10/01/36 | 1,750 | 1,801 | ||
Owens Corning, Inc. (Å) | ||||
6.500% due 12/01/16 | 1,080 | 1,098 | ||
Pacific Gas & Electric Co. | ||||
3.600% due 03/01/09 | 195 | 188 | ||
4.200% due 03/01/11 | 1,005 | 965 | ||
6.050% due 03/01/34 | 650 | 664 | ||
Pemex Project Funding Master Trust | ||||
7.375% due 12/15/14 (Ñ) | 1,600 | 1,756 | ||
Series 144a | ||||
5.750% due 12/15/15 | 300 | 296 | ||
6.625% due 06/15/35 (Å) | 390 | 393 | ||
Progress Energy, Inc. | ||||
5.850% due 10/30/08 | 850 | 865 | ||
7.100% due 03/01/11 | 485 | 519 | ||
7.750% due 03/01/31 | 170 | 207 | ||
7.000% due 10/30/31 | 110 | 124 | ||
ProLogis | ||||
5.625% due 11/15/15 | 2,010 | 2,012 | ||
Rabobank Capital Funding II (f)(Å) | ||||
5.260% due 12/31/49 | 30 | 29 | ||
Rabobank Capital Funding Trust (f)(Å) | ||||
5.254% due 12/29/49 | 60 | 58 | ||
RBS Capital Trust III (f) | ||||
5.512% due 09/29/49 | 765 | 753 | ||
Regions Financial Corp. | ||||
4.500% due 08/08/08 | 1,625 | 1,606 | ||
Residential Capital Corp. | ||||
6.125% due 11/21/08 | 350 | 352 | ||
6.000% due 02/22/11 | 1,345 | 1,349 | ||
Safeway, Inc. (Ñ) | ||||
7.250% due 02/01/31 | 60 | 66 | ||
SBC Communications, Inc. | ||||
4.125% due 09/15/09 | 2,325 | 2,257 | ||
5.300% due 11/15/10 | 3,670 | 3,675 | ||
6.150% due 09/15/34 | 300 | 300 | ||
Sigma Finance, Inc. (Ê)(Å) | ||||
8.500% due 08/11/16 | 970 | 970 | ||
Simon Property Group, LP | ||||
4.600% due 06/15/10 | 1,350 | 1,322 | ||
4.875% due 08/15/10 | 1,450 | 1,428 | ||
5.750% due 12/01/15 | 3,685 | 3,751 | ||
6.100% due 05/01/16 | 1,415 | 1,474 | ||
SLM Corp. |
167
Table of Contents
5.400% due 10/25/11 | 1,545 | 1,552 | ||
Series MTNA | ||||
4.000% due 01/15/09 | 1,675 | 1,633 | ||
5.625% due 07/27/09 (Ê) | 600 | 601 | ||
Southern California Edison Co. | ||||
5.566% due 02/02/09 | 600 | 601 | ||
Southern Copper Corp. | ||||
7.500% due 07/27/35 | 755 | 807 | ||
Sovereign Bank | ||||
5.125% due 03/15/13 | 445 | 437 | ||
Sprint Capital Corp. | ||||
7.625% due 01/30/11 | 3,545 | 3,821 | ||
8.375% due 03/15/12 | 120 | 135 | ||
6.875% due 11/15/28 | 425 | 435 | ||
8.750% due 03/15/32 | 1,910 | 2,360 | ||
State Street Bank & Trust Co. | ||||
Series BKNT | ||||
5.300% due 01/15/16 | 250 | 249 | ||
Suntrust Bank (Ñ) | ||||
5.000% due 09/01/15 | 2,595 | 2,521 | ||
Tele-Communications-TCI Group | ||||
9.800% due 02/01/12 | 330 | 390 | ||
7.875% due 08/01/13 | 1,305 | 1,460 | ||
Time Warner Entertainment Co., LP | ||||
Series * | ||||
8.375% due 07/15/33 | 1,780 | 2,169 | ||
Time Warner, Inc. | ||||
6.875% due 05/01/12 | 610 | 648 | ||
7.700% due 05/01/32 | 535 | 609 | ||
TXU Corp. | ||||
Series P | ||||
5.550% due 11/15/14 | 150 | 143 | ||
Series R (Ñ) | ||||
6.550% due 11/15/34 | 610 | 582 | ||
TXU Electric Delivery Co. | ||||
6.375% due 05/01/12 | 25 | 26 | ||
6.375% due 01/15/15 | 30 | 31 | ||
TXU Energy Co. LLC | ||||
7.000% due 03/15/13 | 545 | 574 | ||
Tyson Foods, Inc. | ||||
6.600% due 04/01/16 | 155 | 159 | ||
Unilever Capital Corp. | ||||
5.900% due 11/15/32 | 325 | 331 | ||
Union Pacific Corp. | ||||
3.625% due 06/01/10 | 625 | 592 | ||
United Technologies Corp. | ||||
5.400% due 05/01/35 | 80 | 79 | ||
UnitedHealth Group, Inc. | ||||
5.250% due 03/15/11 | 305 | 304 | ||
US Bancorp | ||||
5.300% due 04/28/09 | 1,980 | 1,989 | ||
US Bank NA | ||||
5.700% due 12/15/08 | 70 | 71 | ||
USB Capital IX | ||||
6.189% due 04/15/42 | 100 | 102 | ||
Verizon Communications, Inc. | ||||
5.350% due 02/15/11 | 1,120 | 1,126 | ||
5.550% due 02/15/16 | 320 | 319 | ||
Verizon Global Funding Corp. | ||||
7.375% due 09/01/12 | 130 | 143 |
168
Table of Contents
5.850% due 09/15/35 | 530 | 509 | ||
Verizon Maryland, Inc. | ||||
Series A | ||||
6.125% due 03/01/12 | 795 | 817 | ||
Verizon Virginia, Inc. | ||||
Series A | ||||
4.625% due 03/15/13 | 1,165 | 1,092 | ||
Viacom, Inc. | ||||
5.750% due 04/30/11 | 440 | 441 | ||
Wachovia Bank NA | ||||
Series BKNT | ||||
5.358% due 06/27/08 (Ê) | 800 | 800 | ||
5.800% due 12/01/08 | 340 | 345 | ||
Series DPNT (Ê) | ||||
5.440% due 03/23/09 | 1,500 | 1,500 | ||
Wachovia Capital Trust III | ||||
5.800% due 03/15/42 | 350 | 353 | ||
Wachovia Corp. | ||||
5.506% due 10/15/11 (Ê) | 1,800 | 1,799 | ||
5.700% due 08/01/13 | 3,195 | 3,273 | ||
5.250% due 08/01/14 | 1,155 | 1,145 | ||
Waste Management, Inc. | ||||
6.375% due 11/15/12 | 835 | 873 | ||
WellPoint, Inc. | ||||
5.850% due 01/15/36 | 160 | 157 | ||
Wells Fargo & Co. | ||||
5.490% due 09/15/09 (Ê) | 2,900 | 2,905 | ||
5.300% due 08/26/11 | 1,680 | 1,692 | ||
4.950% due 10/16/13 | 240 | 235 | ||
Wells Fargo Bank NA | ||||
5.750% due 05/16/16 | 425 | 437 | ||
Weyerhaeuser Co. | ||||
6.750% due 03/15/12 | 2,435 | 2,550 | ||
Wyeth | ||||
6.950% due 03/15/11 | 2,850 | 3,037 | ||
5.500% due 03/15/13 | 130 | 131 | ||
5.500% due 02/01/14 | 85 | 85 | ||
XTO Energy, Inc. | ||||
7.500% due 04/15/12 | 210 | 230 | ||
Zurich Capital Trust I (Þ) | ||||
8.376% due 06/01/37 | 1,250 | 1,313 | ||
331,208 | ||||
International Debt—3.5% | ||||
Abbey National PLC (Ê)(f) | ||||
6.700% due 06/29/49 | 550 | 561 | ||
Aiful Corp. (Å) | ||||
5.000% due 08/10/10 | 300 | 292 | ||
Anadarko Finance Co. | ||||
Series B | ||||
7.500% due 05/01/31 | 770 | 892 | ||
ANZ National International, Ltd. (Ê)(Þ) | ||||
5.539% due 08/07/09 | 2,800 | 2,797 | ||
Apache Finance Canada Corp. | ||||
4.375% due 05/15/15 | 545 | 506 | ||
Arch Capital Group, Ltd. | ||||
7.350% due 05/01/34 | 240 | 267 | ||
AXA SA | ||||
8.600% due 12/15/30 | 1,655 | 2,174 | ||
British Telecommunications PLC (Ê)(f) | ||||
8.875% due 12/15/30 | 215 | 291 |
169
Table of Contents
China Development Bank | ||||
5.000% due 10/15/15 | 100 | 98 | ||
CIT Group Funding Co. of Canada | ||||
5.600% due 11/02/11 | 310 | 313 | ||
Conoco Funding Co. | ||||
6.350% due 10/15/11 | 1,330 | 1,400 | ||
Crest, Ltd. (Þ) | ||||
Series 2003-2A Class C2 | ||||
5.709% due 12/28/38 | 2,130 | 2,104 | ||
Deutsche Telekom International Finance BV | ||||
8.000% due 06/15/10 | 710 | 775 | ||
5.750% due 03/23/16 | 300 | 296 | ||
8.250% due 06/15/30 | 255 | 317 | ||
Egypt Government AID Bonds | ||||
4.450% due 09/15/15 | 915 | 886 | ||
Eksportfinans ASA | ||||
5.500% due 05/25/16 | 610 | 630 | ||
Export-Import Bank of China (Þ) | ||||
4.875% due 07/21/15 | 640 | 620 | ||
Export-Import Bank of Korea | ||||
4.125% due 02/10/09 (Þ) | 290 | 283 | ||
5.125% due 02/14/11 | 235 | 234 | ||
Falconbridge, Ltd. | ||||
6.000% due 10/15/15 | 565 | 568 | ||
Glitnir Banki HF (Å) | ||||
6.693% due 06/15/16 | 570 | 588 | ||
HBOS PLC (f)(Þ) | ||||
5.920% due 09/29/49 | 100 | 98 | ||
HBOS Treasury Services PLC (Ê)(Þ) | ||||
Series Mtn | ||||
5.414% due 07/17/09 | 1,300 | 1,300 | ||
HSBC Holdings PLC | ||||
6.500% due 05/02/36 | 200 | 217 | ||
Ispat Inland ULC | ||||
9.750% due 04/01/14 | 835 | 935 | ||
Kaupthing Bank Hf (ß) | ||||
6.062% due 04/12/11 | 1,020 | 1,020 | ||
Kaupthing Bank Hf (Å) | ||||
5.750% due 10/04/11 | 110 | 110 | ||
7.125% due 05/19/16 | 1,730 | 1,843 | ||
Klio Funding, Ltd. | ||||
Series 2004-1A Class A1 | ||||
6.030% due 04/23/39 | 2,180 | 2,196 | ||
Korea Development Bank (Ñ) | ||||
4.250% due 11/13/07 | 725 | 717 | ||
Korea Electric Power Corp. (Þ) | ||||
5.125% due 04/23/34 | 145 | 143 | ||
Mexico Government International Bond | ||||
5.625% due 01/15/17 | 26 | 26 | ||
8.300% due 08/15/31 | 855 | 1,087 | ||
Series MTNA | ||||
7.500% due 04/08/33 | 1,641 | 1,925 | ||
Mizuho Financial Group Cayman, Ltd. (Þ) | ||||
5.790% due 04/15/14 | 445 | 451 | ||
MUFG Capital Finance 1, Ltd. (f) | ||||
6.346% due 07/25/49 | 270 | 273 | ||
Newcastle CDO, Ltd. (Þ) | ||||
Series 2004-4A Class 3FX | ||||
5.110% due 03/24/39 | 1,090 | 1,036 | ||
Petrobras International Finance Co. |
170
Table of Contents
6.125% due 10/06/16 | 550 | 550 | ||
Petroleum Export, Ltd. (Þ) | ||||
Series 2005 | ||||
5.265% due 06/15/11 | 93 | 91 | ||
Province of Quebec Canada | ||||
5.000% due 07/17/09 (Ñ) | 40 | 40 | ||
Series PJ | ||||
6.125% due 01/22/11 | 1,430 | 1,487 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. II (Þ) | ||||
Series 2005 | ||||
5.298% due 09/30/20 | 600 | 579 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. III (Þ) | ||||
5.838% due 09/30/27 | 300 | 291 | ||
Resona Bank, Ltd. (f)(Þ) | ||||
5.850% due 09/29/49 | 575 | 563 | ||
Resona Preferred Global Securities Cayman, Ltd. (f)(Å) | ||||
7.191% due 12/29/49 | 375 | 393 | ||
Royal Bank of Scotland PLC | ||||
5.570% due 07/21/08 | 800 | 800 | ||
5.770% due 07/06/12 (Ê) | 3,300 | 3,305 | ||
Royal KPN NV | ||||
8.000% due 10/01/10 | 730 | 792 | ||
Russia Government International Bond | ||||
5.000% due 03/31/30 (Þ) | 775 | 868 | ||
Series REGS | ||||
5.000% due 03/31/30 | 1,690 | 1,893 | ||
Santander Financial Issuances | ||||
6.375% due 02/15/11 | 120 | 125 | ||
Sanwa Finance Aruba AEC | ||||
8.350% due 07/15/09 | 510 | 548 | ||
Shinsei Finance Cayman, Ltd. (Å) | ||||
6.418% due 01/29/49 | 660 | 664 | ||
Siemens Financieringsmaatschappij NV (Þ) | ||||
5.466% due 08/14/09 (Ê) | 1,500 | 1,499 | ||
5.750% due 10/17/16 | 1,445 | 1,475 | ||
6.125% due 08/17/26 | 5,265 | 5,477 | ||
Sumitomo Mitsui Banking Corp. | ||||
5.625% due 07/29/49 | 200 | 196 | ||
Systems 2001 AT LLC (Þ) | ||||
7.156% due 12/15/11 | 181 | 187 | ||
Telecom Italia Capital SA | ||||
6.108% due 07/18/11 (Ê) | 1,100 | 1,097 | ||
5.250% due 10/01/15 | 3,500 | 3,273 | ||
Telefonica Emisiones SAU (Ê) | ||||
5.629% due 06/19/09 | 1,000 | 1,001 | ||
Telefonica Europe BV | ||||
7.750% due 09/15/10 | 2,615 | 2,830 | ||
Telefonos de Mexico SA de CV | ||||
4.500% due 11/19/08 | 495 | 486 | ||
TELUS Corp. | ||||
8.000% due 06/01/11 | 1,180 | 1,301 | ||
TNK-BP Finance SA (Å) | ||||
Series 144a | ||||
7.500% due 07/18/16 | 430 | 450 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 800 | 800 | ||
Tyco International Group SA | ||||
6.750% due 02/15/11 | 885 | 936 | ||
6.375% due 10/15/11 | 445 | 467 | ||
6.000% due 11/15/13 | 905 | 940 |
171
Table of Contents
7.000% due 06/15/28 | 40 | 45 | ||
6.875% due 01/15/29 | 120 | 135 | ||
UFJ Finance Aruba AEC | ||||
6.750% due 07/15/13 | 60 | 64 | ||
Unicredit Luxembourg Finance SA (Ê)(Å) | ||||
5.426% due 10/24/08 | 4,100 | 4,099 | ||
Vale Overseas, Ltd. | ||||
6.250% due 01/11/16 | 265 | 267 | ||
Vodafone Group PLC | ||||
7.750% due 02/15/10 | 525 | 563 | ||
VTB Capital SA (Ê)(Å) | ||||
5.970% due 08/01/08 | 800 | 800 | ||
WEA Finance LLC/WCI Finance LLC (Å) | ||||
5.700% due 10/01/16 | 2,575 | 2,579 | ||
74,225 | ||||
Loan Agreements - 0.3% | ||||
Starbound Reinsurance, Ltd., Term Loan B | ||||
6.738% due 03/31/08 | 6,000 | 6,000 | ||
Mortgage-Backed Securities - 51.2% | ||||
Adjustable Rate Mortgage Trust (Ê) | ||||
Series 2005-3 Class 8A2 | ||||
5.560% due 07/25/35 | 793 | 794 | ||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 518 | 505 | ||
Series 2005-2 Class 5A2 | ||||
5.470% due 09/25/35 | 955 | 955 | ||
Series 2005-3 Class 3A2 | ||||
5.500% due 09/25/35 | 940 | 940 | ||
Series 2005-4 Class 1A1 | ||||
5.610% due 11/25/45 | 1,921 | 1,929 | ||
Arcap Reit, Inc. (Þ) | ||||
Series 2004-RR3 Class B | ||||
5.040% due 09/21/45 | 460 | 446 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-3 Class A3 | ||||
4.875% due 06/10/39 | 1,050 | 1,044 | ||
Series 2004-4 Class A3 | ||||
4.128% due 07/10/42 | 685 | 668 | ||
Series 2005-2 Class A4 | ||||
4.783% due 07/10/43 | 1,205 | 1,182 | ||
Series 2005-3 Class A2 | ||||
4.501% due 07/10/43 | 610 | 598 | ||
Series 2005-3 Class A4 | ||||
4.668% due 07/10/43 | 1,700 | 1,630 | ||
Series 2005-5 Class A4 | ||||
5.115% due 10/10/45 | 2,225 | 2,198 | ||
Series 2005-6 Class A1 | ||||
5.001% due 09/10/47 | 2,658 | 2,652 | ||
Series 2005-6 Class A2 | ||||
5.165% due 09/10/47 | 1,760 | 1,762 | ||
Series 2006-1 Class A4 | ||||
5.372% due 09/10/45 | 420 | 423 | ||
Series 2006-3 Class A4 | ||||
5.889% due 07/10/44 | 1,420 | 1,481 | ||
Banc of America Funding Corp. | ||||
Series 2005-5 Class 1A11 | ||||
5.500% due 09/25/35 | 1,293 | 1,266 | ||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 565 | 552 |
172
Table of Contents
Series 2006-3 Class 5A8 | ||||
5.500% due 03/25/36 | 1,130 | 1,125 | ||
Series 2006-A Class 3A2 | ||||
5.919% due 02/20/36 | 5,818 | 5,876 | ||
Series 2006-A Class 4A1 (Ê) | ||||
5.567% due 02/20/36 | 1,603 | 1,603 | ||
Series 2006-B Class 7A1 | ||||
5.899% due 03/20/36 | 1,792 | 1,797 | ||
Series 2006-G Class 2A1 (Ê) | ||||
5.550% due 07/20/36 | 1,710 | 1,707 | ||
Series 2006-G Class 2A2 (Ê) | ||||
5.410% due 07/20/36 | 1,625 | 1,623 | ||
Banc of America Mortgage Securities | ||||
Series 2003-9 Class 1A12 (Ê) | ||||
5.770% due 12/25/33 | 1,690 | 1,697 | ||
Series 2004-1 Class 5A1 | ||||
6.500% due 09/25/33 | 40 | 40 | ||
Series 2004-11 Class 2A1 | ||||
5.750% due 01/25/35 | 1,104 | 1,090 | ||
Series 2005-L Class 3A1 (Ê) | ||||
5.453% due 01/25/36 | 611 | 609 | ||
Series 2006-2 Class A15 | ||||
6.000% due 07/25/36 | 1,344 | 1,353 | ||
Bank of America Alternative Loan Trust | ||||
Series 2003-10 Class 2A2 (Ê) | ||||
5.770% due 12/25/33 | 631 | 635 | ||
Series 2003-2 Class CB2 (Ê) | ||||
5.820% due 04/25/33 | 288 | 289 | ||
Series 2006-5 Class CB17 | ||||
6.000% due 06/25/36 | 1,002 | 1,004 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
Series 2002-11 Class 1A1 | ||||
5.623% due 02/25/33 | 39 | 39 | ||
Series 2002-11 Class 1A2 | ||||
5.328% due 02/25/33 | 57 | 57 | ||
Series 2003-1 Class 6A1 | ||||
5.059% due 04/25/33 | 145 | 145 | ||
Series 2004-4 Class A4 | ||||
3.516% due 06/25/34 | 580 | 567 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 890 | 892 | ||
Series 2006-4 Class 32A1 | ||||
6.486% due 07/25/36 | 8,029 | 8,193 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 2005-PWR Class A1 | ||||
4.386% due 02/11/41 | 560 | 554 | ||
Chase Mortgage Finance Corp. (Ê) | ||||
Series 2005-A1 Class 2A2 | ||||
5.250% due 12/25/35 | 2,518 | 2,496 | ||
Series 2006-A1 Class 1A1 | ||||
6.075% due 09/25/36 | 2,452 | 2,461 | ||
Series 2006-A1 Class 4A1 | ||||
6.072% due 09/25/36 | 1,577 | 1,581 | ||
Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2005-11 Class A2A (Ê) | ||||
4.700% due 12/25/35 | 274 | 269 | ||
Series 2006-WF1 Class A2F | ||||
5.657% due 03/01/36 | 780 | 780 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust |
173
Table of Contents
Series 2006-CD3 Class A5 | ||||
5.617% due 10/15/48 | 750 | 754 | ||
Citimortgage Alternative Loan Trust | ||||
Series 2006-A3 Class 1A5 | ||||
6.000% due 07/25/36 | 733 | 736 | ||
Commercial Mortgage Acceptance Corp. | ||||
Series 1998-C2 Class A3 | ||||
6.040% due 09/15/30 | 4,770 | 4,816 | ||
Countrywide Alternative Loan Trust | ||||
5.500% due 05/31/35 | 800 | 800 | ||
Series 2004-2CB Class 1A4 (Ê) | ||||
5.720% due 03/25/34 | 1,120 | 1,123 | ||
Series 2005-56 Class 3A1 (Ê) | ||||
5.620% due 11/25/35 | 1,119 | 1,123 | ||
Series 2005-56 Class 4A1 (Ê) | ||||
5.640% due 11/25/35 | 2,029 | 2,035 | ||
Series 2005-59 Class 1A1 (Ê) | ||||
5.656% due 11/20/35 | 2,397 | 2,404 | ||
Series 2005-J12 Class 2A1 (Ê) | ||||
5.600% due 11/25/35 | 1,894 | 1,898 | ||
Series 2005-J13 Class 2A3 | ||||
5.500% due 11/25/35 | 393 | 392 | ||
Series 2005-J8 Class 1A3 | ||||
5.500% due 07/25/35 | 964 | 963 | ||
Series 2006-9T1 Class A7 | ||||
6.000% due 05/25/36 | 531 | 537 | ||
Series 2006-J2 Class A3 | ||||
6.000% due 04/25/36 | 803 | 810 | ||
Countrywide Asset-Backed Certificates | ||||
Series 2005-IM2 Class A3 | ||||
5.590% due 01/25/36 | 3,475 | 3,481 | ||
Countrywide Home Loan Mortgage Pass Through Trust | ||||
Series 2004-16 Class 1A1 (Ê) | ||||
5.720% due 09/25/34 | 976 | 980 | ||
Series 2005-3 Class 1A2 (Ê) | ||||
5.620% due 04/25/35 | 158 | 159 | ||
Series 2005-3 Class 1A3 (Ê) | ||||
5.570% due 04/25/35 | 533 | 533 | ||
Series 2005-R3 Class AF (Þ)(Ê) | ||||
5.730% due 09/25/35 | 1,868 | 1,878 | ||
Series 2006-HYB Class 2A1A | ||||
5.702% due 05/20/36 | 1,188 | 1,199 | ||
Countrywide Securities Corp. | ||||
5.500% due 12/25/46 | 900 | 900 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2003-C5 Class A1 | ||||
3.093% due 12/15/36 | 1,760 | 1,713 | ||
Series 2004-C1 Class A3 | ||||
4.321% due 01/15/37 | 1,096 | 1,062 | ||
Series 2005-C4 Class A3 | ||||
5.120% due 08/15/38 | 6,620 | 6,587 | ||
Series 2005-C6 Class A1 | ||||
4.938% due 12/15/40 | 1,693 | 1,685 | ||
Series 2005-C6 Class A4 | ||||
5.230% due 12/15/40 | 1,825 | 1,817 | ||
Credit Suisse Morgan Stanley Commercial Mortgage Trust | ||||
Series 2006-HC1 Class A1 | ||||
5.510% due 05/15/23 | 1,970 | 1,971 | ||
Credit Suisse Mortgage Capital Certificates | ||||
Series 2006-C1 Class A1 |
174
Table of Contents
4.367% due 07/15/10 | 550 | 542 | ||
Series 2006-C1 Class AAB | ||||
5.681% due 02/15/39 | 1,305 | 1,326 | ||
Series 2006-C2 Class A1 | ||||
5.250% due 03/15/39 | 1,176 | 1,181 | ||
Series 2006-C2 Class A2 | ||||
5.659% due 03/15/39 | 1,185 | 1,216 | ||
Series 2006-C4 Class A1 | ||||
4.771% due 09/15/39 | 3,384 | 3,354 | ||
Series 2006-C4 Class A3 | ||||
5.467% due 09/15/39 | 1,710 | 1,728 | ||
Series 2006-TFL Class A1 | ||||
5.440% due 04/15/21 | 2,512 | 2,513 | ||
CS First Boston Mortgage Securities Corp. | ||||
Series 1998-C2 Class A2 | ||||
6.300% due 11/15/30 | 417 | 424 | ||
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||
Series 2005-AR1 Class 2A3 | ||||
5.025% due 08/25/35 | 1,145 | 1,166 | ||
DLJ Commercial Mortgage Corp. | ||||
Series 1998-CF1 Class A1B | ||||
6.410% due 02/18/31 | 708 | 714 | ||
Downey Savings & Loan Association Mortgage Loan Trust (Ê) | ||||
Series 2004-AR3 Class 1A1B | ||||
6.910% due 07/19/44 | 351 | 354 | ||
Fannie Mae | ||||
7.000% due 2008 | 7 | 7 | ||
7.000% due 2009 | 20 | 20 | ||
8.000% due 2010 | 1 | 1 | ||
7.000% due 2011 | 10 | 10 | ||
8.000% due 2011 | 2 | 2 | ||
5.363% due 2012 (Ê) | 835 | 837 | ||
7.000% due 2012 | 4 | 4 | ||
6.500% due 2013 | 27 | 28 | ||
5.500% due 2014 | 31 | 31 | ||
6.500% due 2015 | 20 | 20 | ||
7.000% due 2015 | 12 | 12 | ||
5.500% due 2016 | 6 | 6 | ||
6.000% due 2016 | 82 | 83 | ||
6.500% due 2016 | 116 | 119 | ||
9.000% due 2016 | 3 | 3 | ||
5.000% due 2017 | 1,698 | 1,677 | ||
5.500% due 2017 | 907 | 911 | ||
6.000% due 2017 | 171 | 173 | ||
6.500% due 2017 | 460 | 470 | ||
8.000% due 2017 | 38 | 40 | ||
8.500% due 2017 | 6 | 6 | ||
4.500% due 2018 | 4,912 | 4,764 | ||
5.000% due 2018 | 1,980 | 1,956 | ||
5.500% due 2018 | 614 | 617 | ||
6.500% due 2018 | 332 | 344 | ||
4.500% due 2019 | 4,842 | 4,689 | ||
5.000% due 2019 | 10,257 | 10,116 | ||
6.500% due 2019 | 148 | 151 | ||
4.000% due 2020 | 6,148 | 5,822 | ||
4.500% due 2020 | 9,627 | 9,320 | ||
5.000% due 2020 | 5,204 | 5,135 | ||
6.500% due 2020 | 57 | 59 | ||
8.000% due 2020 | 6 | 6 | ||
4.000% due 2021 | 182 | 172 |
175
Table of Contents
4.500% due 2021 | 599 | 579 | ||
5.000% due 2021 | 3,349 | 3,299 | ||
6.500% due 2022 | 84 | 87 | ||
8.000% due 2024 | 98 | 103 | ||
7.000% due 2025 | 8 | 8 | ||
8.500% due 2025 | 4 | 4 | ||
7.000% due 2026 | 5 | 5 | ||
6.500% due 2028 | 405 | 419 | ||
7.000% due 2028 | 369 | 382 | ||
6.500% due 2029 | 1,386 | 1,425 | ||
6.500% due 2030 | 195 | 201 | ||
8.000% due 2030 | 178 | 187 | ||
6.500% due 2031 | 805 | 825 | ||
6.000% due 2032 | 1,444 | 1,458 | ||
6.500% due 2032 | 2,578 | 2,642 | ||
7.000% due 2032 | 916 | 945 | ||
3.950% due 2033 | 839 | 820 | ||
4.500% due 2033 | 1,596 | 1,502 | ||
4.644% due 2033 (Ê) | 518 | 517 | ||
5.000% due 2033 | 11,697 | 11,322 | ||
5.500% due 2033 | 37,061 | 36,723 | ||
6.000% due 2033 | 2,330 | 2,351 | ||
6.500% due 2033 | 1,423 | 1,455 | ||
7.000% due 2033 | 379 | 391 | ||
4.500% due 2034 | 754 | 709 | ||
5.000% due 2034 | 17,949 | 17,367 | ||
5.500% due 2034 | 34,422 | 34,086 | ||
6.000% due 2034 | 11,058 | 11,143 | ||
6.500% due 2034 | 2,352 | 2,401 | ||
4.500% due 2035 | 6,857 | 6,437 | ||
5.000% due 2035 | 13,681 | 13,219 | ||
5.500% due 2035 | 82,424 | 81,549 | ||
6.000% due 2035 | 6,986 | 7,029 | ||
6.500% due 2035 | 139 | 143 | ||
6.663% due 2035 (Ê) | 372 | 382 | ||
6.665% due 2035 (Ê) | 451 | 464 | ||
6.665% due 2035 | 460 | 473 | ||
6.666% due 2035 (Ê) | 357 | 367 | ||
6.671% due 2035 (Ê) | 443 | 456 | ||
4.500% due 2036 | 54 | 51 | ||
5.500% due 2036 | 2,970 | 2,936 | ||
6.000% due 2036 | 13,238 | 13,319 | ||
6.500% due 2036 | 493 | 503 | ||
Series 1992-10 Class ZD | ||||
8.000% due 11/25/21 | 484 | 490 | ||
Series 1993-134 Class H | ||||
6.500% due 08/25/08 | 744 | 747 | ||
Series 1999-56 Class Z | ||||
7.000% due 12/18/29 | 516 | 536 | ||
Series 2003-32 Class FH | ||||
5.720% due 11/25/22 | 952 | 959 | ||
Series 2003-337 Class 1 | ||||
Principal Only STRIP due 07/01/33 | 1,247 | 918 | ||
Interest Only STRIP | ||||
Series 2003-343 Class 6 | ||||
5.000% due 10/01/33 | 1,241 | 275 | ||
Series 2003-78 Class FI | ||||
5.720% due 01/25/33 | 901 | 903 | ||
Series 2004-21 Class FL | ||||
5.670% due 11/25/32 | 469 | 469 |
176
Table of Contents
Series 2005-65 Class FP | ||||
5.570% due 08/25/35 | 696 | 695 | ||
15 Year TBA (Ï) | ||||
4.000% | 135 | 128 | ||
4.500% | 4,570 | 4,420 | ||
5.000% | 19,010 | 18,719 | ||
5.500% | 6,030 | 6,036 | ||
6.000% | 2,435 | 2,472 | ||
30 Year TBA (Ï) | ||||
4.500% | 2,045 | 1,918 | ||
5.000% | 51,855 | 50,049 | ||
5.500% | 92,125 | 91,026 | ||
6.000% | 51,685 | 51,990 | ||
6.500% | 32,345 | 32,954 | ||
Fannie Mae Grantor Trust | ||||
Series 2001-T6 Class B | ||||
6.088% due 05/25/11 | 1,150 | 1,200 | ||
Fannie Mae REMICS | ||||
Series 2006-5 Class 3A2 | ||||
4.677% due 05/25/35 | 200 | 197 | ||
Fannie Mae Whole Loan | ||||
Series 2003-W1 Class 1A1 | ||||
6.500% due 12/25/42 | 79 | 81 | ||
First Horizon Alternative Mortgage Securities | ||||
Series 2006-AA5 Class A2 (Ê) | ||||
6.626% due 09/25/36 | 805 | 825 | ||
Series 2006-FA3 Class A6 | ||||
6.000% due 07/25/36 | 655 | 662 | ||
First Horizon Asset Securities, Inc. | ||||
Series 2005-AR5 Class 3A1 | ||||
5.525% due 10/25/35 | 295 | 295 | ||
Freddie Mac | ||||
4.500% due 01/15/13 (Ñ) | 2,550 | 2,493 | ||
9.000% due 04/01/16 | 45 | 47 | ||
4.500% due 05/01/18 | 96 | 93 | ||
5.000% due 05/01/18 | 572 | 564 | ||
5.000% due 01/01/19 | 695 | 685 | ||
4.500% due 02/01/20 | 540 | 521 | ||
4.500% due 01/01/21 | 769 | 743 | ||
5.500% due 08/01/33 | 631 | 626 | ||
4.688% due 04/01/34 | 577 | 579 | ||
5.000% due 10/01/35 | 7,977 | 7,711 | ||
5.000% due 01/01/36 | 4,600 | 4,446 | ||
8.500% due 01/01/36 | 1 | 1 | ||
Series 1991-105 Class G | ||||
7.000% due 03/15/21 | 47 | 47 | ||
Series 2001-229 Class KF (Ê) | ||||
5.570% due 07/25/22 | 623 | 627 | ||
Series 2003-262 Class AB | ||||
2.900% due 11/15/14 | 902 | 872 | ||
Series 2004-277 Class UF | ||||
5.630% due 06/15/33 | 1,203 | 1,205 | ||
Series 2004-281 Class DF | ||||
5.780% due 06/15/23 | 350 | 352 | ||
Series 2005-292 Class IG | ||||
5.000% due 04/15/23 | 469 | 71 | ||
Series 2005-294 Class FA | ||||
5.500% due 03/15/20 | 680 | 680 | ||
Series 2005-305 Class JF | ||||
5.620% due 10/15/35 | 771 | 771 |
177
Table of Contents
15 Year TBA (Ï) | ||||
5.000% | 5,100 | 5,019 | ||
30 Year TBA (Ï) | ||||
5.000% | 21,155 | 20,434 | ||
5.500% | 27,245 | 26,934 | ||
6.000% | 21,520 | 21,661 | ||
Freddie Mac Gold | ||||
7.000% due 2008 | 14 | 14 | ||
8.000% due 2009 | 7 | 7 | ||
7.000% due 2010 | 8 | 8 | ||
8.000% due 2010 | 1 | 1 | ||
6.000% due 2011 | 277 | 279 | ||
7.000% due 2011 | 4 | 4 | ||
8.000% due 2011 | 15 | 16 | ||
6.000% due 2012 | 6 | 6 | ||
8.000% due 2012 | 7 | 7 | ||
7.000% due 2014 | 62 | 64 | ||
12.000% due 2014 | 11 | 12 | ||
6.000% due 2016 | 10 | 10 | ||
6.000% due 2017 | 350 | 355 | ||
8.000% due 2017 | 21 | 22 | ||
4.500% due 2018 | 1,743 | 1,687 | ||
5.000% due 2018 | 478 | 472 | ||
4.500% due 2019 | 666 | 645 | ||
5.000% due 2019 | 437 | 430 | ||
5.500% due 2019 | 951 | 953 | ||
4.500% due 2020 | 797 | 770 | ||
5.000% due 2020 | 694 | 683 | ||
5.500% due 2020 | 2,998 | 3,003 | ||
9.000% due 2024 | 5 | 6 | ||
6.500% due 2025 | 5 | 5 | ||
8.500% due 2025 | 24 | 26 | ||
9.000% due 2025 | 8 | 9 | ||
9.000% due 2026 | 1 | 1 | ||
8.500% due 2027 | 101 | 109 | ||
6.500% due 2029 | 175 | 179 | ||
7.222% due 2030 (Ê) | 5 | 5 | ||
6.500% due 2031 | 1,632 | 1,674 | ||
5.500% due 2032 | 4,914 | 4,875 | ||
6.000% due 2032 | 216 | 219 | ||
7.000% due 2032 | 266 | 273 | ||
5.000% due 2033 | 609 | 590 | ||
5.500% due 2033 | 7,400 | 7,340 | ||
6.000% due 2033 | 320 | 323 | ||
6.500% due 2033 | 605 | 618 | ||
4.500% due 2034 | 205 | 193 | ||
5.000% due 2034 | 3,349 | 3,245 | ||
5.500% due 2034 | 5,129 | 5,083 | ||
6.000% due 2034 | 1,192 | 1,202 | ||
6.500% due 2034 | 224 | 228 | ||
5.000% due 2035 | 911 | 881 | ||
5.500% due 2035 | 1,052 | 1,042 | ||
5.000% due 2036 | 3,856 | 3,727 | ||
Freddie Mac Reference REMIC | ||||
Series 2006-R00 Class AK | ||||
5.750% due 12/15/18 | 875 | 879 | ||
Freddie Mac REMIC | ||||
Series 2004-277 Class KE | ||||
3.500% due 12/15/17 | 636 | 630 | ||
Freddie Mac REMICS |
178
Table of Contents
Series 2003-269 Class FE | ||||
5.930% due 12/15/28 | 952 | 956 | ||
Series 2006-314 Class LF (Ê) | ||||
5.620% due 05/15/36 | 600 | 599 | ||
Series 2006-323 Class PA | ||||
6.000% due 03/15/26 | 1,215 | 1,233 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2005-C1 Class A1 | ||||
4.012% due 06/10/48 | 707 | 693 | ||
Series 2005-C1 Class A5 | ||||
4.772% due 06/10/48 | 620 | 600 | ||
Series 2006-C1 Class A4 | ||||
5.339% due 03/10/44 | 1,250 | 1,260 | ||
Ginnie Mae I | ||||
6.500% due 2008 | 5 | 5 | ||
6.500% due 2009 | 118 | 118 | ||
7.000% due 2011 | 1 | 1 | ||
9.500% due 2016 | 1 | 1 | ||
10.500% due 2020 | 12 | 13 | ||
8.000% due 2022 | 26 | 27 | ||
8.500% due 2022 | 9 | 10 | ||
8.000% due 2025 | 38 | 41 | ||
9.000% due 2025 | 230 | 246 | ||
7.000% due 2029 | 6 | 6 | ||
8.000% due 2030 | 468 | 499 | ||
8.500% due 2030 | 6 | 6 | ||
7.000% due 2031 | 405 | 419 | ||
8.000% due 2031 | 2 | 2 | ||
7.000% due 2032 | 11 | 11 | ||
8.000% due 2032 | 16 | 17 | ||
5.000% due 2033 | 3,942 | 3,850 | ||
5.000% due 2035 | 697 | 680 | ||
6.000% due 2035 | 6,128 | 6,214 | ||
30 Year TBA (Ï) | ||||
5.500% | 8,615 | 8,577 | ||
6.000% | 1,100 | 1,115 | ||
6.500% | 4,000 | 4,106 | ||
Ginnie Mae II | ||||
5.125% due 02/20/23 (Ê) | 295 | 297 | ||
5.375% due 02/20/23 (Ê) | 219 | 221 | ||
5.375% due 05/20/24 (Ê) | 49 | 49 | ||
4.500% due 04/20/35 | 1,001 | 941 | ||
GMAC Commercial Mortgage Securities, Inc. | ||||
Series 2001-C1 Class A2 | ||||
6.465% due 04/15/34 | 760 | 795 | ||
Series 2005-C1 Class A2 | ||||
4.471% due 05/10/43 | 605 | 594 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2005-AR6 Class 3A1 | ||||
5.297% due 11/19/35 | 1,033 | 1,027 | ||
Series 2006-AR1 Class 1A1 | ||||
5.633% due 03/19/36 | 2,545 | 2,556 | ||
Government National Mortgage Association (Ê) | ||||
Series 1999-40 Class FE | ||||
5.870% due 11/16/29 | 652 | 658 | ||
Greenpoint Mortgage Funding Trust (Ê) | ||||
Series 2006-AR5 Class A1A | ||||
5.400% due 10/25/46 | 2,900 | 2,899 | ||
Greenwich Capital Commercial Funding Corp. | ||||
Series 2004-GG1 Class A7 |
179
Table of Contents
5.317% due 06/10/36 | 1,885 | 1,890 | ||
Series 2005-GG3 Class A1 | ||||
3.919% due 08/10/42 | 888 | 873 | ||
Series 2005-GG5 Class A41 | ||||
5.243% due 04/10/37 | 525 | 526 | ||
GS Mortgage Securities Corp. II | ||||
Series 1998-C1 Class A2 | ||||
6.620% due 10/18/30 | 1,306 | 1,327 | ||
Series 2005-GG4 Class AABA | ||||
4.680% due 07/10/39 | 800 | 779 | ||
Series 2006-FL8 Class A1 (Å)(Ê) | ||||
5.430% due 01/06/08 | 3,780 | 3,780 | ||
Series 2006-GG6 Class A4 | ||||
5.553% due 04/10/38 | 420 | 428 | ||
Series 2006-GG8 Class AAB | ||||
5.535% due 11/10/39 | 805 | 819 | ||
GSMPS Mortgage Loan Trust (Ê)(Þ) | ||||
Series 2004-4 Class 1AF | ||||
5.720% due 06/25/34 | 1,579 | 1,586 | ||
Harborview Mortgage Loan Trust | ||||
Series 2004-4 Class 3A (Ê) | ||||
2.975% due 06/19/34 | 2,535 | 2,515 | ||
Series 2005-14 Class 3A1A | ||||
5.319% due 12/19/35 | 308 | 307 | ||
Series 2005-2 Class 2A1A (Ê) | ||||
5.550% due 05/19/35 | 281 | 281 | ||
Series 2006-2 Class 1A | ||||
5.454% due 02/25/36 | 779 | 795 | ||
Series 2006-3 Class 1A1A | ||||
6.474% due 06/19/36 | 8,593 | 8,799 | ||
HSI Asset Securitization Corp. Trust | ||||
Series 2005-I1 Class 2A1 | ||||
5.440% due 11/25/35 | 1,542 | 1,543 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-3 Class 1A | ||||
5.570% due 06/25/34 | 155 | 155 | ||
Impac Secured Assets CMN Owner Trust | ||||
Series 2005-2 Class A1 | ||||
5.650% due 03/25/36 | 2,085 | 2,089 | ||
Indymac Index Mortgage Loan Trust | ||||
Series 2005-AR1 Class A2 | ||||
5.099% due 09/25/35 | 493 | 480 | ||
Series 2005-AR2 Class 4A1 | ||||
5.437% due 11/25/35 | 35 | 34 | ||
Series 2006-AR1 Class 1A1A (Ê) | ||||
5.410% due 11/25/46 | 800 | 800 | ||
Series 2006-AR3 Class 2A1A | ||||
6.410% due 03/25/36 | 11,345 | 11,589 | ||
Indymac Loan Trust (Ê) | ||||
Series 2004-L1 Class A1 (Þ) | ||||
5.610% due 07/25/09 | 301 | 301 | ||
Series 2005-L1 Class A | ||||
5.520% due 06/25/10 | 1,229 | 1,231 | ||
Series 2005-L2 Class A1 | ||||
5.540% due 01/25/11 | 3,048 | 3,054 | ||
JP Morgan Alternative Loan Trust | ||||
Series 2006-A2 Class 3A1 | ||||
5.925% due 05/25/36 | 4,206 | 4,256 | ||
Series 2006-A2 Class 5A1 | ||||
6.360% due 05/25/36 | 2,383 | 2,394 |
180
Table of Contents
Series 2006-A3 Class 1A2 (Ê) | ||||
5.400% due 07/25/36 | 2,021 | 2,018 | ||
Series 2006-A4 Class A4 (Ê) | ||||
5.400% due 08/25/36 | 1,545 | 1,545 | ||
Series 2006-A6 Class 1A2 (Ê) | ||||
5.390% due 11/25/36 | 2,335 | 2,335 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2003-CB7 Class A3 | ||||
4.449% due 01/12/38 | 1,250 | 1,219 | ||
Series 2004-LN2 Class A1 | ||||
4.475% due 07/15/41 | 849 | 829 | ||
Series 2005-CB1 Class A1 | ||||
4.520% due 08/12/37 | 1,336 | 1,321 | ||
Series 2005-CB1 Class A2 | ||||
5.247% due 01/12/43 | 3,515 | 3,526 | ||
Series 2005-CB1 Class A4 | ||||
4.895% due 09/12/37 | 80 | 78 | ||
Series 2005-FL1 Class A1 (Þ)(Ê) | ||||
5.430% due 02/15/19 | 1,225 | 1,225 | ||
Series 2005-LDP Class A1 | ||||
5.035% due 12/15/44 | 4,443 | 4,431 | ||
4.116% due 03/15/46 | 639 | 628 | ||
Series 2005-LDP Class A3 | ||||
4.959% due 08/15/42 | 915 | 902 | ||
5.208% due 12/15/44 | 3,925 | 3,931 | ||
Series 2005-LDP Class A3A1 | ||||
4.871% due 10/15/42 | 860 | 847 | ||
Series 2005-LDP Class A4 | ||||
4.918% due 10/15/42 | 900 | 877 | ||
5.179% due 12/15/44 | 1,940 | 1,939 | ||
Series 2006-CB1 Class A3A | ||||
5.491% due 12/12/44 | 1,875 | 1,900 | ||
Series 2006-CB1 Class A4 | ||||
5.814% due 06/12/43 | 985 | 1,023 | ||
5.481% due 12/12/44 | 630 | 638 | ||
5.817% due 05/12/45 | 2,370 | 2,413 | ||
Series 2006-CB1 Class ASB | ||||
5.506% due 12/12/44 | 500 | 506 | ||
Series 2006-FL1 Class A1A | ||||
5.410% due 02/15/20 | 3,545 | 3,546 | ||
Series 2006-LDP Class A2 | ||||
5.862% due 04/15/45 | 2,685 | 2,769 | ||
Series 2006-LDP Class A4 | ||||
5.876% due 04/15/45 | 3,800 | 3,984 | ||
5.561% due 05/15/45 | 1,160 | 1,167 | ||
JP Morgan Mortgage Trust | ||||
Series 2005-A2 Class 3A1 | ||||
4.909% due 04/25/35 | 1,520 | 1,502 | ||
Series 2005-A3 Class 6A1 | ||||
4.913% due 06/25/35 | 2,226 | 2,195 | ||
Series 2005-A6 Class 2A2 | ||||
4.977% due 08/25/35 | 1,554 | 1,537 | ||
Series 2006-A2 Class 1A1 | ||||
5.473% due 04/25/36 | 2,442 | 2,433 | ||
Series 2006-A6 Class 3A1 | ||||
6.165% due 10/25/36 | 4,058 | 4,085 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2001-C3 Class A1 | ||||
6.058% due 06/15/20 | 178 | 181 | ||
Series 2003-C3 Class A1 |
181
Table of Contents
2.599% due 05/15/27 | 680 | 660 | ||
Series 2004-C2 Class A1 | ||||
2.946% due 03/15/29 | 1,765 | 1,697 | ||
Series 2004-C4 Class A3 | ||||
5.154% due 06/15/29 | 1,455 | 1,460 | ||
Series 2005-C3 Class A5 | ||||
4.739% due 07/15/30 | 480 | 463 | ||
Series 2005-C3 Class AAB | ||||
4.664% due 07/15/30 | 600 | 584 | ||
Series 2006-C4 Class A4 | ||||
5.900% due 06/15/38 | 430 | 452 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust (Ê)(Þ) | ||||
Series 2006-LLF Class A1 | ||||
5.400% due 09/15/21 | 870 | 870 | ||
Lehman Mortgage Trust | ||||
Series 2005-3 Class 1A3 | ||||
5.500% due 01/25/36 | 1,605 | 1,609 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-5N Class 1A1 | ||||
5.630% due 11/25/35 | 1,569 | 1,574 | ||
Mach One Trust Commercial Mortgage-Backed (Þ) | ||||
Series 2004-1A Class A3 | ||||
5.220% due 05/28/40 | 1,480 | 1,445 | ||
Mastr Adjustable Rate Mortgages Trust | ||||
Series 2006-2 Class 3A1 | ||||
4.848% due 01/25/36 | 1,242 | 1,230 | ||
Mastr Alternative Loans Trust | ||||
Series 2003-4 Class B1 | ||||
5.660% due 06/25/33 | 481 | 485 | ||
Series 2004-10 Class 5A6 | ||||
5.750% due 09/25/34 | 690 | 690 | ||
Mastr Asset Securitization Trust | ||||
Series 2003-11 Class 6A8 | ||||
5.820% due 12/25/33 | 1,063 | 1,068 | ||
Series 2003-7 Class 4A35 (Ê) | ||||
5.720% due 09/25/33 | 1,128 | 1,129 | ||
Series 2004-4 Class 2A2 (Ê) | ||||
5.770% due 04/25/34 | 452 | 452 | ||
Series 2005-2 Class 1A1 | ||||
5.250% due 11/25/35 | 1,798 | 1,772 | ||
Mastr Reperforming Loan Trust (Å) | ||||
Series 2005-1 Class 1A1 | ||||
6.000% due 08/25/34 | 823 | 825 | ||
Merrill Lynch Mortgage Investors, Inc. | ||||
5.619% due 07/12/34 | 4,300 | 4,300 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2004-MKB Class A2 | ||||
4.353% due 02/12/42 | 925 | 907 | ||
Series 2005-LC1 Class A1 | ||||
5.017% due 01/12/44 | 1,621 | 1,617 | ||
Series 2005-LC1 Class A2 | ||||
5.202% due 01/12/44 | 1,795 | 1,798 | ||
Series 2005-MKB Class A1 | ||||
4.446% due 09/12/42 | 1,193 | 1,177 | ||
Series 2005-MKB Class A4 | ||||
5.204% due 09/12/42 | 825 | 820 | ||
Series 2006-C1 Class A4 | ||||
5.844% due 05/12/39 | 900 | 929 | ||
Merrill Lynch/Countrywide Commercial Mortgage Trust | ||||
Series 2006-3 Class A2 |
182
Table of Contents
5.291% due 07/12/46 | 1,975 | 1,984 | ||
MLCC Mortgage Investors, Inc. | ||||
Series 2004-HB1 Class A2 | ||||
5.930% due 04/25/29 | 216 | 216 | ||
Morgan Stanley Capital I | ||||
Series 2004-HQ3 Class A1 | ||||
3.100% due 01/13/41 | 1,209 | 1,175 | ||
Series 2004-RR2 Class A2 (Þ) | ||||
5.450% due 10/28/33 | 1,575 | 1,555 | ||
Series 2005-HQ5 Class A4 | ||||
5.168% due 01/14/42 | 1,150 | 1,140 | ||
Series 2005-HQ6 Class A4A | ||||
4.989% due 08/13/42 | 720 | 705 | ||
Series 2005-IQ1 Class AAB | ||||
5.178% due 09/15/42 | 985 | 982 | ||
Series 2005-IQ9 Class A1 | ||||
3.990% due 07/15/56 | 717 | 703 | ||
Series 2005-T17 Class A5 | ||||
4.780% due 12/13/41 | 285 | 276 | ||
Series 2006-HQ8 Class A4 | ||||
5.388% due 03/12/44 | 1,120 | 1,136 | ||
Series 2006-HQ9 Class A4 | ||||
5.731% due 07/20/44 | 820 | 845 | ||
Morgan Stanley Dean Witter Capital I | ||||
Series 2001-TOP Class A3 | ||||
6.200% due 07/15/33 | 297 | 298 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-11 Class 1A6 | ||||
6.231% due 08/25/36 | 905 | 928 | ||
Series 2006-3AR Class 2A3 | ||||
5.901% due 03/25/36 | 812 | 820 | ||
Mortgage Capital Funding, Inc. | ||||
Series 1998-MC2 Class A2 | ||||
6.423% due 06/18/30 | 1,293 | 1,307 | ||
Nomura Asset Securities Corp. | ||||
Series 1998-D6 Class A1B | ||||
6.590% due 03/15/30 | 978 | 993 | ||
Novastar NIMs Trust (Þ) | ||||
Series 2005-N1 | ||||
4.777% due 10/26/35 | 68 | 68 | ||
Prime Mortgage Trust | ||||
Series 2004-CL1 Class 1A2 (Ê) | ||||
5.720% due 02/25/34 | 104 | 104 | ||
Series 2004-CL1 Class 2A2 (Ê) | ||||
5.730% due 02/25/19 | 25 | 25 | ||
Series 2006-DR1 Class 2A2 | ||||
6.000% due 11/25/36 | 2,900 | 2,880 | ||
Residential Accredit Loans, Inc. | ||||
Series 2004-QS5 Class A6 | ||||
5.920% due 04/25/34 | 185 | 186 | ||
Series 2004-QS8 Class A4 | ||||
5.720% due 06/25/34 | 916 | 920 | ||
Series 2005-QA1 Class A41 | ||||
5.725% due 09/25/35 | 1,163 | 1,169 | ||
Series 2005-QA8 Class NB3 | ||||
5.504% due 07/25/35 | 634 | 637 | ||
Series 2005-QO3 Class A1 (Ê) | ||||
5.730% due 10/25/45 | 1,909 | 1,915 | ||
Series 2006-QA1 Class A21 | ||||
6.001% due 01/25/36 | 3,743 | 3,788 |
183
Table of Contents
Series 2006-QO7 Class 3A2 (Ê) | ||||
5.535% due 09/25/46 | 1,940 | 1,939 | ||
Series 2006-QS6 Class 1A13 | ||||
6.000% due 06/25/36 | 1,810 | 1,823 | ||
Residential Asset Securities Corp. | ||||
Series 2003-KS4 Class AIIB | ||||
5.610% due 06/25/33 | 243 | 243 | ||
Residential Asset Securitization Trust (Ê) | ||||
Series 2003-A15 Class 1A2 | ||||
5.770% due 02/25/34 | 1,063 | 1,067 | ||
Residential Funding Mortgage Securities II | ||||
Series 2003-S14 Class A5 | ||||
5.720% due 07/25/18 | 568 | 570 | ||
Series 2003-S20 Class 1A7 (Ê) | ||||
5.820% due 12/25/33 | 161 | 161 | ||
Series 2003-S5 Class 1A2 (Ê) | ||||
5.770% due 11/25/18 | 539 | 542 | ||
Sequoia Mortgage Trust | ||||
Series 2004-3 Class A | ||||
5.670% due 04/20/34 | 1,341 | 1,341 | ||
Small Business Administration | ||||
Series 1999-P10 Class 1 | ||||
7.540% due 08/10/09 | 433 | 453 | ||
Series 2000-10B Class 1 | ||||
7.452% due 09/01/10 | 1,200 | 1,263 | ||
Small Business Administration Participation Certificates | ||||
Series 2005-20G Class 1 | ||||
4.750% due 07/01/25 | 2,847 | 2,768 | ||
Structured Adjustable Rate Mortgage Loan Trust (Ê) | ||||
Series 2005-19X Class 1A1 | ||||
5.650% due 10/25/35 | 1,476 | 1,482 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2006-AR6 Class 1A3 | ||||
5.514% due 07/25/36 | 2,644 | 2,650 | ||
Structured Asset Securities Corp. | ||||
Series 2004-21X Class 1A3 | ||||
4.440% due 12/25/34 | 1,515 | 1,494 | ||
Thornburg Mortgage Securities Trust | ||||
Series 2005-3 Class A3 (Ê) | ||||
5.590% due 10/25/35 | 2,174 | 2,176 | ||
Series 2006-1 Class A2 (Ê) | ||||
5.480% due 01/25/36 | 2,700 | 2,695 | ||
Series 2006-2 Class A1B | ||||
5.380% due 04/25/36 | 1,619 | 1,616 | ||
Series 2006-5 Class A1 (Ê) | ||||
5.450% due 08/25/36 | 1,968 | 1,964 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2003-C9 Class A1 | ||||
3.291% due 12/15/35 | 1,295 | 1,261 | ||
Series 2005-C16 Class A2 | ||||
4.380% due 10/15/41 | 1,510 | 1,480 | ||
Series 2005-C17 Class A1 | ||||
4.430% due 03/15/42 | 3,089 | 3,049 | ||
Series 2005-C22 Class A3 | ||||
5.461% due 12/15/44 | 2,685 | 2,701 | ||
Series 2006-WL7 Class A1 (Þ)(Ê) | ||||
5.490% due 08/11/18 | 3,100 | 3,100 | ||
Washington Mutual Alternative Mortgage | ||||
Pass-Through Certificates | ||||
Series 2005-4 Class CB11 |
184
Table of Contents
5.500% due 06/25/35 | 375 | 368 | ||
Washington Mutual, Inc. | ||||
Series 2003-S9 Class A2 | ||||
5.870% due 10/25/33 | 960 | 964 | ||
Series 2004-AR1 Class A1B1 (Ê) | ||||
5.665% due 11/25/34 | 234 | 235 | ||
Series 2005-AR1 Class 1A1 | ||||
4.839% due 10/25/35 | 991 | 978 | ||
Series 2005-AR1 Class A1A1 (Ê) | ||||
5.614% due 10/25/45 | 1,975 | 1,986 | ||
Series 2005-AR1 Class A1A2 | ||||
5.620% due 11/25/45 | 2,023 | 2,031 | ||
5.610% due 12/25/45 (Ê) | 1,204 | 1,209 | ||
5.620% due 12/25/45 | 2,254 | 2,260 | ||
Series 2005-AR1 Class A1C1 | ||||
5.510% due 12/26/45 | 382 | 382 | ||
Series 2005-AR6 Class B3 (Ê) | ||||
5.980% due 04/25/45 | 588 | 587 | ||
Series 2006-AR1 Class 2A (Ê) | ||||
5.777% due 09/25/46 | 797 | 797 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2006-2 Class 2A3 | ||||
5.500% due 03/25/36 | 1,247 | 1,246 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 1,020 | 1,012 | ||
Zuni Mortgage Loan Trust (Ê) | ||||
Series 2006-OA1 Class A1 | ||||
5.615% due 08/25/36 | 2,401 | 2,398 | ||
1,096,194 | ||||
Municipal Bonds - 0.2% | ||||
Badger TOB Asset Securitization Corp. Revenue | ||||
Bonds, weekly demand | ||||
6.375% due 06/01/32 | 700 | 760 | ||
Golden State Tobacco Securitization Corp. | ||||
Revenue Bonds, weekly demand | ||||
5.000% due 06/01/21 | 505 | 507 | ||
New York City Municipal Water Finance Authority | ||||
Revenue Bonds, weekly demand | ||||
4.750% due 06/15/38 | 1,700 | 1,741 | ||
Tobacco Settlement Financing Corp. Revenue | ||||
Bonds, weekly demand | ||||
5.500% due 06/01/26 | 1,500 | 1,599 | ||
4,607 | ||||
Non-US Bonds - 0.2% | ||||
Bundesrepublik Deutschland | ||||
Series 04 | ||||
3.750% due 01/04/15 | EUR 1,110 | 1,420 | ||
Canadian Government Bond | ||||
4.000% due 12/01/31 | CAD 721 | 944 | ||
General Motors Corp. | ||||
8.375% due 07/05/33 | EUR 90 | 106 | ||
Poland Government Bond | ||||
Series 0509 | ||||
6.000% due 05/24/09 | PLN 2,840 | 963 | ||
Quebec Residual | ||||
Zero coupon STRIP | ||||
0.000% due 12/01/36 | CAD 1,200 | 263 | ||
3,696 | ||||
United States Government Agencies - 4.5% | ||||
Fannie Mae |
185
Table of Contents
3.500% due 03/28/08 | 1,925 | 1,887 | ||
2.500% due 06/15/08 (Ñ) | 4,270 | 4,110 | ||
4.875% due 04/15/09 | 7,555 | 7,557 | ||
7.250% due 01/15/10 (Ñ) | 3,965 | 4,242 | ||
3.875% due 02/15/10 (Ñ) | 1,630 | 1,581 | ||
4.750% due 04/19/10 | 3,845 | 3,806 | ||
4.125% due 05/15/10 (Ñ) | 625 | 610 | ||
7.125% due 06/15/10 (Ñ) | 1,000 | 1,074 | ||
4.250% due 08/15/10 | 11,230 | 10,989 | ||
5.125% due 04/15/11 | 5,960 | 6,018 | ||
Zero coupon due 07/05/14 | 2,570 | 1,771 | ||
5.250% due 03/24/15 | 730 | 721 | ||
5.000% due 04/26/17 | 1,755 | 1,697 | ||
Zero coupon due 06/01/17 (Ñ) | 2,180 | 1,282 | ||
6.625% due 11/15/30 (Ñ) | 750 | 905 | ||
6.210% due 08/06/38 | 240 | 279 | ||
Federal Farm Credit Bank (Ñ) | ||||
5.125% due 08/25/16 | 1,010 | 1,025 | ||
Federal Home Loan Bank System | ||||
5.000% due 09/18/09 (Ñ) | 9,505 | 9,554 | ||
5.375% due 08/19/11 (Ñ) | 330 | 337 | ||
5.375% due 05/15/19 (Ñ) | 500 | 510 | ||
5.125% due 08/15/19 | 420 | 422 | ||
5.500% due 07/15/36 | 840 | 887 | ||
Series 567 | ||||
4.375% due 09/17/10 | 400 | 393 | ||
Series VB15 | ||||
5.000% due 12/21/15 | 1,920 | 1,920 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Zero coupon due 05/11/16 | 185 | 116 | ||
Zero coupon due 06/06/16 | 545 | 340 | ||
Zero coupon due 12/27/16 | 645 | 391 | ||
Zero coupon due 10/06/17 | 710 | 413 | ||
Zero coupon due 10/06/17 | 345 | 201 | ||
Zero coupon due 11/30/17 | 395 | 228 | ||
Zero coupon due 11/30/17 | 1,170 | 675 | ||
Zero coupon due 04/06/18 | 785 | 444 | ||
Zero coupon due 11/02/18 | 1,105 | 606 | ||
Zero coupon due 02/08/18 | 155 | 88 | ||
Zero coupon due 05/11/18 | 90 | 51 | ||
Zero coupon due 08/03/18 | 1,455 | 809 | ||
Zero coupon due 12/06/18 | 765 | 417 | ||
Zero coupon due 12/27/18 | 1,620 | 880 | ||
Zero coupon due 04/05/19 | 875 | 468 | ||
Zero coupon due 09/26/19 | 1,340 | 699 | ||
Freddie Mac | ||||
4.000% due 12/15/09 (Ñ) | 4,515 | 4,404 | ||
6.875% due 09/15/10 (Ñ) | 950 | 1,016 | ||
5.625% due 03/15/11 (Ñ) | 910 | 937 | ||
4.500% due 11/15/11 | 1,095 | 1,076 | ||
5.750% due 01/15/12 (Ñ) | 3,195 | 3,320 | ||
5.125% due 07/15/12 (Ñ) | 4,210 | 4,256 | ||
4.875% due 11/15/13 (Ñ) | 3,250 | 3,236 | ||
5.050% due 01/26/15 (Ñ) | 1,485 | 1,478 | ||
5.250% due 04/18/16 | 265 | 271 | ||
5.500% due 07/18/16 (Ñ) | 1,880 | 1,956 | ||
6.750% due 03/15/31 | 130 | 160 | ||
5.625% due 11/23/35 | 720 | 703 | ||
Tennessee Valley Authority |
186
Table of Contents
6.150% due 01/15/38 | 2,145 | 2,491 | ||
95,707 | ||||
United States Government Treasuries - 16.4% | ||||
United States Treasury Inflation Indexed Bonds | ||||
2.375% due 04/15/11 (Ñ) | 3,663 | 3,643 | ||
3.375% due 01/15/12 | 2,647 | 2,767 | ||
2.000% due 07/15/14 (Ñ) | 8,064 | 7,855 | ||
1.625% due 01/15/15 (Ñ) | 160 | 151 | ||
1.875% due 07/15/15 (Ñ) | 3,795 | 3,654 | ||
2.500% due 07/15/16 | 2,948 | 2,990 | ||
2.375% due 01/15/25 (Ñ) | 6,111 | 6,186 | ||
2.000% due 01/15/26 | 3,575 | 3,417 | ||
3.625% due 04/15/28 (Ñ) | 630 | 778 | ||
United States Treasury Notes | ||||
4.375% due 12/31/07 | 22,425 | 22,298 | ||
3.000% due 02/15/08 (Ñ) | 130 | 127 | ||
3.375% due 02/15/08 (Ñ) | 1,335 | 1,311 | ||
3.750% due 05/15/08 (Ñ) | 770 | 759 | ||
3.125% due 09/15/08 (Ñ) | 8,925 | 8,676 | ||
4.375% due 11/15/08 | 17,080 | 16,975 | ||
3.250% due 01/15/09 (Ñ) | 17,630 | 17,116 | ||
3.875% due 05/15/09 (Ñ) | 580 | 570 | ||
4.000% due 06/15/09 (Ñ) | 6,630 | 6,529 | ||
3.375% due 10/15/09 | 3,000 | 2,900 | ||
3.625% due 01/15/10 (Ñ) | 12,010 | 11,664 | ||
4.000% due 03/15/10 (Ñ) | 18,665 | 18,324 | ||
4.000% due 04/15/10 (Ñ) | 230 | 226 | ||
4.125% due 08/15/10 | 1,560 | 1,536 | ||
3.875% due 09/15/10 (Ñ) | 6,680 | 6,515 | ||
4.375% due 12/15/10 | 6,630 | 6,581 | ||
4.500% due 02/28/11 | 880 | 878 | ||
4.875% due 04/30/11 (Ñ) | 21,565 | 21,822 | ||
4.625% due 08/31/11 (Ñ) | 3,400 | 3,407 | ||
4.375% due 08/15/12 | 8,875 | 8,794 | ||
4.000% due 11/15/12 (Ñ) | 9,925 | 9,630 | ||
4.250% due 08/15/13 (Ñ) | 8,095 | 7,938 | ||
12.000% due 08/15/13 (Ñ) | 315 | 354 | ||
4.250% due 11/15/13 (Ñ) | 6,320 | 6,194 | ||
4.750% due 05/15/14 (Ñ) | 7,655 | 7,732 | ||
13.250% due 05/15/14 (Ñ) | 510 | 614 | ||
12.500% due 08/15/14 (Ñ) | 760 | 915 | ||
4.250% due 11/15/14 (Ñ) | 3,985 | 3,893 | ||
4.125% due 05/15/15 (Ñ) | 13,280 | 12,841 | ||
4.250% due 08/15/15 (Ñ) | 6,475 | 6,312 | ||
5.125% due 05/15/16 (Ñ) | 11,445 | 11,897 | ||
8.750% due 05/15/17 (Ñ) | 1,765 | 2,360 | ||
8.875% due 08/15/17 (Ñ) | 1,050 | 1,421 | ||
8.125% due 08/15/19 (Ñ) | 7,130 | 9,419 | ||
8.125% due 08/15/21 (Ñ) | 13,475 | 18,185 | ||
Principal Only STRIP | ||||
Zero Coupon due 11/15/21 (Ñ) | 3,640 | 1,760 | ||
7.125% due 02/15/23 (Ñ) | 13,690 | 17,232 | ||
6.000% due 02/15/26 (Ñ) | 14,310 | 16,423 | ||
6.125% due 08/15/29 (Ñ) | 2,370 | 2,806 | ||
5.375% due 02/15/31 (Ñ) | 6,980 | 7,579 | ||
4.500% due 02/15/36 | 18,985 | 18,325 | ||
352,279 | ||||
Total Long-Term Investments | ||||
(cost $2,132,020) | 2,138,364 | |||
Preferred Stocks - 0.2% |
187
Table of Contents
Auto and Transportation - 0.0% | ||||
General Motors Corp. | 18,625 | 385 | ||
Financial Services—0.2% | ||||
DG Funding Trust (Ê)(Å) | 240 | 2,553 | ||
Total Preferred Stocks | ||||
(cost $2,878) | 2,938 | |||
Notional Amount $ | ||||
Options Purchased - 0.0% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 91.75 Put (92) | 21,103 | 1 | ||
Dec 2006 92.00 Put (191) | 43,930 | 1 | ||
Dec 2006 92.25 Put (192) | 44,280 | 1 | ||
Dec 2006 92.50 Put (384) | 88,800 | 3 | ||
Dec 2006 93.38 Put (42) | 9,400 | — | ||
Dec 2006 94.13 Put (150) | 35,297 | 1 | ||
Dec 2007 91.25 Put (515) | 117,484 | 3 | ||
Jun 2007 91.25 Put (185) | 42,203 | 1 | ||
Sep 2007 90.50 Put (200) | 45,250 | 1 | ||
Sep 2007 90.75 Put (166) | 37,661 | 1 | ||
Sep 2007 91.00 Put (60) | 13,650 | — | ||
Sep 2007 91.25 Put (198) | 45,169 | 1 | ||
US Treasury Notes | ||||
10 Year Futures | ||||
Nov 2006 102.03 (USD) Call (100) | 10,203 | — | ||
Nov 2006 107.00 (USD) Put (8) | 856 | 1 | ||
Total Options Purchased | ||||
(cost $26) | 15 | |||
Principal Amount ($) or Shares | ||||
Short-Term Investments - 15.4% | ||||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 100 | 100 | ||
AT&T Wireless Services, Inc. | ||||
7.500% due 05/01/07 | 3,650 | 3,687 | ||
AT&T, Inc. (Þ) | ||||
4.214% due 06/05/07 | 1,100 | 1,092 | ||
Bank of America Corp. (ž) | ||||
5.275% due 12/01/06 | 400 | 396 | ||
Bank of Ireland Governor & Co. (ç)(ž) | ||||
5.260% due 12/05/06 | 10,800 | 10,746 | ||
Barclays US Funding Corp (ç)(ž) | ||||
5.300% due 11/15/06 | 10,600 | 10,578 | ||
Barclays US Funding Corp. (ç)(ž) | ||||
5.275% due 11/21/06 | 1,200 | 1,196 | ||
ChevronTexaco Capital Co. | ||||
3.500% due 09/17/07 | 590 | 581 | ||
CIT Group, Inc. | ||||
5.605% due 02/15/07 (Ê) | 2,000 | 2,001 | ||
5.750% due 09/25/07 | 155 | 155 | ||
Countrywide Home Loans, Inc. | ||||
Series MTNK | ||||
5.500% due 02/01/07 | 110 | 110 |
188
Table of Contents
Danske Corp. (ç)(ž) | ||||
5.270% due 12/27/06 | 1,300 | 1,289 | ||
Danske Corp. (ž) | ||||
5.240% due 01/30/07 | 11,500 | 11,349 | ||
Duke Energy Field Services LLC | ||||
5.750% due 11/15/06 | 60 | 60 | ||
Fannie Mae (ž) | ||||
5.130% due 06/25/07 (§) | 500 | 484 | ||
Ford Motor Credit Co. (Ê) | ||||
6.340% due 03/21/07 | 1,800 | 1,799 | ||
Fortis Bank (ž) | ||||
5.265% due 04/28/07 | 1,900 | 1,899 | ||
France Treasury Bill BTF | ||||
Zero coupon due 11/02/06 | EUR 1,130 | 1,442 | ||
Zero coupon due 12/21/06 | EUR 2,400 | 3,049 | ||
General Electric Capital Corp. | ||||
5.250% due 01/16/07 (ž) | 7,900 | 7,813 | ||
5.480% due 03/09/07 (Ê) | 2,200 | 2,201 | ||
GMAC LLC | ||||
6.125% due 08/28/07 | 970 | 967 | ||
Golden West Financial Corp. | ||||
4.125% due 08/15/07 | 220 | 218 | ||
Goldman Sachs Group, Inc. (Ê) | ||||
Series MTNB | ||||
5.467% due 03/30/07 | 2,000 | 2,001 | ||
Government of Canada (ç)(ž) | ||||
Zero Coupon due 12/15/06 | 340 | 338 | ||
Harrah’s Operating Co., Inc. | ||||
7.125% due 06/01/07 | 1,040 | 1,045 | ||
HBOS Treasury Services PLC (§)(ž) | ||||
5.365% due 11/01/06 | 7,500 | 7,500 | ||
HSBC Finance Corp. (Ê) | ||||
5.590% due 02/09/07 | 2,000 | 2,001 | ||
IXIS Corp. (ç)(ž) | ||||
5.270% due 11/08/06 | 10,600 | 10,589 | ||
Metropolitan Life Global | ||||
Funding I (Ê)(Þ) | ||||
5.460% due 03/16/07 | 2,000 | 2,001 | ||
Morgan Stanley (Ê) | ||||
5.512% due 01/12/07 | 2,000 | 2,001 | ||
Rabobank USA Financial Corp. (ç)(ž) | ||||
5.300% due 11/01/06 | 10,000 | 10,000 | ||
Russell Investment Company | ||||
Money Market Fund | 160,036,031 | 160,036 | ||
Skandinaviska Enskilda Banken (ç)(ž) | ||||
5.255% due 12/08/06 | 1,400 | 1,392 | ||
Societe Generale NA (ž) | ||||
5.290% due 12/18/06 | 8,000 | 7,945 | ||
5.245% due 01/08/07 | 3,200 | 3,168 | ||
Sprint Capital Corp. | ||||
6.000% due 01/15/07 | 1,225 | 1,226 | ||
TELUS Corp. | ||||
7.500% due 06/01/07 | 1,070 | 1,082 | ||
Total SA (ç)(ž) | ||||
5.290% due 11/01/06 | 11,700 | 11,700 | ||
UBS Financial Del LLC (ž) | ||||
5.265% due 11/16/06 (ç) | 1,300 | 1,297 | ||
5.280% due 11/16/06 (ç) | 8,800 | 8,781 | ||
5.245% due 01/08/07 | 1,100 | 1,089 | ||
United States Treasury Bills (ž)(§) |
189
Table of Contents
5.093% due 11/30/06 (ç) | 1,485 | 1,479 | |||
4.898% due 12/07/06 (ç) | 500 | 498 | |||
4.937% due 12/14/06 (ç) | 1,425 | 1,417 | |||
4.961% due 02/15/07 | 75 | 74 | |||
5.035% due 02/15/07 | 220 | 217 | |||
5.131% due 02/15/07 | 150 | 148 | |||
United States Treasury Notes (Ñ) | |||||
2.875% due 11/30/06 | 13,210 | 13,185 | |||
3.000% due 12/31/06 | 4,510 | 4,493 | |||
3.125% due 05/15/07 | 1,805 | 1,787 | |||
4.375% due 05/15/07 | 4,185 | 4,170 | |||
6.625% due 05/15/07 | 1,920 | 1,936 | |||
Westpac Banking Corp. (ç)(ž) | |||||
5.265% due 11/17/06 | 1,800 | 1,795 | |||
Total Short-Term Investments (cost $329,722) | 329,603 | ||||
Other Securities - 20.8% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 114,398,091 | 114,398 | |||
State Street Securities Lending Quality Trust (×) | 331,414,043 | 331,414 | |||
Total Other Securities (cost $445,812) | 445,812 | ||||
Total Investments - 136.3% (identified cost $2,910,458) | 2,916,732 | ||||
Other Assets and Liabilities, Net - (36.3%) | (776,901 | ) | |||
Net Assets - 100.0% | 2,139,831 | ||||
Amount in thousands Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Euribor Futures expiration date 0607 (33) | 10,121 | (9 | ) | ||
Eurodollar Futures (CME) expiration date 1206 (180) | 42,586 | (277 | ) | ||
expiration date 0307 (625) | 148,094 | (351 | ) | ||
expiration date 0607 (549) | 130,319 | (103 | ) | ||
expiration date 0907 (1,238) | 294,412 | 261 | |||
expiration date 1207 (939) | 223,588 | 478 | |||
expiration date 0308 (15) | 3,572 | 1 | |||
LIBOR Futures expiration date 0607 (14) | 3,159 | (4 | ) | ||
expiration date 0907 (26) | 5,868 | (6 | ) | ||
expiration date 1207 (40) | 9,030 | (7 | ) | ||
expiration date 0308 (10) | 2,259 | (2 | ) | ||
expiration date 0608 (8) | 1,808 | (1 | ) | ||
expiration date 0908 (11) | 2,486 | (2 | ) | ||
United States Treasury Bonds expiration date 1206 (90) | 10,139 | 163 | |||
United States Treasury | |||||
2 Year Notes expiration date 1206 (221) | 45,174 | 59 | |||
United States Treasury | |||||
5 Year Notes expiration date 1206 (638) | 67,349 | 403 | |||
United States Treasury | |||||
10 Year Notes expiration date 1206 (394) | 42,638 | 420 | |||
Short Positions |
190
Table of Contents
Eurodollar Futures (CME) | |||||
expiration date 03/08 (19) | 4,526 | (27 | ) | ||
United States Treasury Bonds | |||||
expiration date 12/06 (141) | 15,885 | (258 | ) | ||
United States Treasury | |||||
10 Year Notes | |||||
expiration date 12/06 (194) | 20,994 | (265 | ) | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 473 | ||||
Options Written (Number of Contracts)/ | Notional Amount $ | Market Value $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (38) | 9,025 | (35 | ) | ||
Mar 2007 94.75 Put (12) | 2,843 | (3 | ) | ||
Mar 2007 95.25 Put (14) | 3,334 | (17 | ) | ||
United States Treasury Bonds | |||||
Nov 2006 111.00 Call (23) | 2,553 | (40 | ) | ||
Nov 2006 104.00 Put (23) | 2,392 | (1 | ) | ||
Nov 2006 105.00 Put (1) | 105 | — | |||
Feb 2007 109.00 Put (27) | 2,943 | (10 | ) | ||
Federal National Mortgage Association | |||||
Nov 2006 100.40 Call (1) | 30,120 | — | |||
United States Treasury Notes | |||||
2 Year Futures | |||||
Nov 2006 101.75 Put (483) | 98,290 | (15 | ) | ||
10 Year Futures | |||||
Nov 2006 105.00 Call (28) | 2,940 | (90 | ) | ||
Nov 2006 106.00 Call (21) | 2,226 | (47 | ) | ||
Nov 2006 109.00 Call (15) | 1,635 | (2 | ) | ||
Feb 2007 110.00 Call (16) | 1,760 | (6 | ) | ||
Nov 2006 106.00 Put (15) | 1,590 | — | |||
Total Liability for Options Written (premiums received $208) | (266 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||
USD 1,066 | AUD 1,401 | 11/07/06 | 18 | ||||
USD 945 | CAD 1,068 | 11/07/06 | 6 | ||||
USD 2,932 | CAD 3,260 | 11/07/06 | (28 | ) | |||
USD 517 | CAD 589 | 11/30/06 | 8 | ||||
USD 363 | CNY 2,809 | 03/19/07 | (2 | ) | |||
USD 1,396 | EUR 1,112 | 11/07/06 | 24 | ||||
USD 1,445 | EUR 1,130 | 11/20/06 | (1 | ) | |||
USD 702 | EUR 550 | 03/23/07 | 4 | ||||
USD 491 | GBP 264 | 11/30/06 | 12 | ||||
USD 4,103 | JPY 467,350 | 11/15/06 | (99 | ) | |||
USD 4,114 | JPY 467,350 | 11/15/06 | (109 | ) | |||
USD 838 | JPY 97,000 | 12/20/06 | (3 | ) | |||
USD 3,499 | JPY 406,750 | 12/20/06 | 3 | ||||
USD 2,870 | JPY 338,388 | 02/07/07 | 63 | ||||
USD 978 | PLN 3,025 | 11/07/06 | 20 | ||||
USD 131 | SGD 208 | 11/27/06 | 2 | ||||
USD 128 | TWD 4,140 | 11/22/06 | (3 | ) | |||
AUD 1,401 | USD 1,057 | 11/07/06 | (28 | ) | |||
CAD 3,260 | JPY 338,388 | 11/07/06 | 26 | ||||
CAD 3,260 | JPY 338,388 | 11/07/06 | (33 | ) | |||
CAD 1,068 | USD 955 | 11/07/06 | 3 | ||||
CAD 1,068 | USD 948 | 02/07/07 | (6 | ) | |||
EUR 1,130 | USD 1,443 | 11/02/06 | 1 | ||||
EUR 192 | USD 246 | 11/07/06 | 1 | ||||
EUR 920 | USD 1,170 | 11/07/06 | (5 | ) | |||
EUR 2,108 | USD 2,683 | 12/08/06 | (13 | ) | |||
EUR 1,112 | USD 1,402 | 02/07/07 | (25 | ) | |||
JPY 338,388 | USD 2,834 | 11/07/06 | (62 | ) | |||
JPY 89,800 | USD 778 | 12/20/06 | 7 | ||||
PLN 3,025 | USD 981 | 11/07/06 | (17 | ) | |||
PLN 3,025 | USD 981 | 02/07/07 | (20 | ) | |||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (256 | ) | |||||
191
Table of Contents
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | ||||||
Bank of America | USD 1,100 | 5.000% | Three Month LIBOR | 12/20/36 | (42 | ) | |||||
Barclays Bank PLC | GBP 7,700 | 5.000% | Six Month LIBOR | 06/15/07 | (13 | ) | |||||
Barclays Bank PLC | USD 8,300 | 5.000% | Three Month LIBOR | 12/20/08 | (6 | ) | |||||
BNP Paribas | EUR 1,300 | 2.090% | Consumer Price Index (France) | 10/15/10 | 18 | ||||||
Deutsche Bank AG | USD 1,000 | 5.000% | Three Month LIBOR | 12/20/36 | (38 | ) | |||||
Goldman Sachs | USD 500 | 5.000% | Three Month LIBOR | 12/20/36 | (19 | ) | |||||
Lehman Brothers | GBP 4,200 | 4.500% | Six Month LIBOR | 09/20/09 | (109 | ) | |||||
Lehman Brothers | EUR 2,100 | 4.000% | Six Month LIBOR | 12/15/11 | 15 | ||||||
Lehman Brothers | USD 500 | 5.000% | Three Month LIBOR | 12/15/35 | (15 | ) | |||||
Merrill Lynch | GBP 10,500 | 4.500% | Six Month LIBOR | 09/20/09 | (273 | ) | |||||
Merrill Lynch | GBP 200 | Six Month LIBOR | 4.000% | 12/15/35 | (6 | ) | |||||
Morgan Stanley | EUR 1,900 | 6.000% | Six Month LIBOR | 06/18/34 | 439 | ||||||
Royal Bank of Scotland | USD 7,900 | 5.000% | Three Month LIBOR | 12/20/36 | (397 | ) | |||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($292) | (446 | ) | |||||||||
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed | Termination Date | Market Value $ | ||||||
Russian Federation | JP Morgan | 200 | 0.460 | % | 06/20/07 | — | |||||
American International Group | JP Morgan | 3,200 | 0.050 | % | 12/20/07 | 1 | |||||
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($0) | 1 | ||||||||||
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund
192
Table of Contents
Presentation of Portfolio Holdings—October 31, 2006 (Unaudited)
Categories | of% Net Assets | ||
Asset-Backed Securities | 8.1 | ||
Corporate Bonds and Notes | 15.5 | ||
International Debt | 3.5 | ||
Loan Agreements | 0.3 | ||
Mortgage-Backed Securities | 51.2 | ||
Municipal Bonds | 0.2 | ||
Non-US Bonds | 0.2 | ||
United States Government Agencies | 4.5 | ||
United States Government Treasuries | 16.4 | ||
Preferred Stocks | 0.2 | ||
Options Purchased | — | * | |
Short-Term Investments | 15.4 | ||
Other Securities | 20.8 | ||
Total Investments Other Assets and Liabilities, Net | 136.3 (36.3 | ) | |
100.0 | |||
Futures Contracts Options Written Foreign Currency Exchange Contracts Interest Rate Swap Contracts Credit Default Swap Contracts | — — — — — | * * * * * |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund
193
Table of Contents
(This page intentionally left blank)
194
Table of Contents
Multistrategy Bond Fund
Portfolio Management Discussion—October 31, 2006 (Unaudited)
Multistrategy Bond Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.82 | % | |
5 Years | 4.79 | %§ | |
10 Years | 5.93 | %§ |
Multistrategy Bond Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.57 | % | |
5 Years | 4.51 | %§ | |
10 Years | 5.71 | %§ |
Multistrategy Bond Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.80 | % | |
5 Years | 3.75 | %§ | |
10 Years | 5.11 | %§ |
Lehman Brothers Aggregate Bond Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.19 | % | |
5 Years | 4.51 | %§ | |
10 Years | 6.26 | %§ |
195
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide current income, and as a secondary objective, capital appreciation.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Multistrategy Bond Fund Class S, Class E and Class C Shares gained 4.82%, 4.57% and 3.80%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 5.19% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) BBB Rated Fixed Income Funds Average returned 5.33%. For the same period, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 4.61%. These returns serve as peer comparisons and are expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Corporate bonds have done well over the last four years, leaving the yield spread between corporates and Treasuries for bearing credit risk very thin. As a result, the Fund’s money managers were modestly underweight in this sector, which detracted from Fund performance as the corporate sector continued to post strong earnings and had very few defaults. Given low yields across the globe, strong demand also drove the corporate market as investors searched for any possible incremental yield. This led to continued strong market demand for corporate bonds.
As illustrated by the average actively managed mutual fund underperforming the benchmark, volatile markets over the fiscal year made it difficult for active money managers to correctly gauge the direction and magnitude of interest rate changes. While 10 year Treasuries looked to have started and ended the fiscal year with nearly the same yield, over the year, yields ranged from 4.33% to 5.24%. Further, the Federal Reserve’s aggressive rate hikes surprised the market as evidenced by futures markets that trade based on the probability of Fed rate hikes. Despite this volatility, over the fiscal year, the Fund was able to effectively offset losses from an underweight to the corporate market through modest interest rate timing and security selection.
With greater exposure to high yield and emerging market debt relative to the Index, there was value added to Fund performance from these sectors as they continued to perform strongly. Over the year the Fund’s allocation to high yield bonds ranged from 3.5% to 4.5% and the allocation to emerging market debt ranged from 1/2% to 1%. Additionally, a very small exposure to non-dollar securities in the most recent quarter detracted from performance as the U.S. dollar strengthened versus many other currencies, which was contrary to the Fund’s money managers’ views.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Overall, the Fund’s underperformance compared to its benchmark was largely due to the Fund’s operating expenses which are reflected in its performance. The benchmark returns do not include any expenses.
With a tilt to be short in duration over the year expecting interest rates to generally rise, the Fund’s money managers successfully moved their duration (a measure of a bond price’s sensitivity to a change in interest rates) exposure longer as interest rates rose and shorter when interest rates fell. A longer duration increases returns in a falling interest rate environment as longer duration bonds outperform more when interest rates fall. This duration management added modestly to the Fund’s incremental return in a volatile market.
At the money manager level, Delaware Management Company was the best performer because of its significant overweight to high yield and emerging market debt. Believing that high valuations that included a market in search of yield would lead to a continued premium for these bonds, Delaware overweighted high yield and emerging markets debt. Bear Stearns Asset Management Inc. also did well due to its overweight to corporate bonds and strong security selection within this sector.
Believing the Fed would be finished raising interest rates by year end of 2005, Pacific Investment Management Company, LLC (PIMCO) struggled early in the year by taking positions in short maturity bonds, which fell in price as short-term interest rates rose. Near the end of the fiscal period, PIMCO’s positioning was rewarded and its performance rebounded to end modestly positive for the year. Lastly, Morgan Stanley Investment Management Inc. lagged the benchmark due to its view that rates across the curve would rise. Morgan Stanley also struggled with security selection within the mortgage sector, believing prepayments would slow and paying a premium for high coupon securities, which subsequently prepaid at par.
196
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
In June, Goldman Sachs Asset Management, L.P. was added as a money manager for the Fund. The goal of this addition was to further diversify the Fund as well as add a bond money manager with diversified skills in modest duration management, sector rotation, security selection within traditional and riskier sectors, and capabilities in non-dollar bond markets.
Money Managers as of October 31, 2006 | Styles | |
Bear Stearns Asset Management, Inc. | Sector Rotation | |
Delaware Management Company, a series of Delaware Management Business Trust | Sector Rotation | |
Goldman Sachs Asset Management, L.P. | Fully Discretionary | |
Morgan Stanley Investment Management, Inc. | Fully Discretionary | |
Pacific Investment Management Company, LLC | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. | |
‡ | The Fund first issued Class E Shares on September 11, 1998. The returns shown for Class E Shares prior to September 11, 1998 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to September 11, 1998 and the performance of the Class E Shares from September 11, 1998 to January 26, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
197
Table of Contents
Shareholder Expense Example—October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,036.20 | $ | 1,016.03 | ||
Expenses Paid During Period* | $ | 9.34 | $ | 9.25 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.82% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,040.00 | $ | 1,019.81 | ||
Expenses Paid During Period* | $ | 5.50 | $ | 5.45 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.07% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
198
Table of Contents
Class S | Actual Performance | Hypothetical Performance (5% return | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,041.20 | $ | 1,021.07 | ||
Expenses Paid During Period* | $ | 4.22 | $ | 4.18 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.82% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
199
Table of Contents
Russell Investment Company
Multistrategy Bond Fund
Schedule of Investments—October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments - 85.1% | ||||
Asset-Backed Securities - 6.8% | ||||
Accredited Mortgage Loan Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.620% due 07/25/34 | 366 | 367 | ||
ACE Securities Corp. (Ê) | ||||
Series 2004-IN1 Class A1 | ||||
5.650% due 05/25/34 | 814 | 817 | ||
Series 2005-SD3 Class A | ||||
5.720% due 08/25/45 | 2,291 | 2,293 | ||
Series 2006-HE2 Class A2A | ||||
5.390% due 05/25/36 | 2,073 | 2,074 | ||
Aegis Asset Backed Securities Trust (Ê) | ||||
Series 2003-3 Class M2 | ||||
6.970% due 01/25/34 | 805 | 813 | ||
Series 2005-4 Class 1A1 | ||||
5.440% due 10/25/35 | 842 | 842 | ||
Alliance Capital Funding LLC (Þ) | ||||
Series 1998-1 Class A3 | ||||
5.840% due 02/15/10 | 8 | 7 | ||
American Airlines, Inc. | ||||
6.817% due 11/23/12 | 530 | 531 | ||
7.377% due 05/23/19 | 539 | 518 | ||
6.977% due 05/23/21 | 211 | 204 | ||
American Express Credit Account Master Trust (Ê) | ||||
Series 2002-1 Class A | ||||
5.440% due 09/15/09 | 1,600 | 1,601 | ||
Series 2002-2 Class A | ||||
5.440% due 11/16/09 | 2,175 | 2,177 | ||
Series 2002-3 Class A | ||||
5.430% due 12/15/09 | 5,500 | 5,504 | ||
Ameriquest Mortgage Securities, Inc. (Ê) | ||||
Series 2002-D Class M1 | ||||
7.820% due 02/25/33 | 450 | 451 | ||
Series 2004-R10 Class A5 | ||||
5.710% due 11/25/34 | 412 | 412 | ||
Series 2004-R8 Class A5 | ||||
5.700% due 09/25/34 | 1,519 | 1,521 | ||
Series 2006-R1 Class A2C | ||||
5.520% due 08/01/16 | 820 | 821 | ||
Bank One Issuance Trust (Ê) | ||||
Series 2003-A3 Class A3 | ||||
5.440% due 12/15/10 | 3,800 | 3,806 | ||
Bayview Financial Acquisition Trust | ||||
Series 2006-A Class 1A3 | ||||
5.865% due 02/28/41 | 1,090 | 1,093 |
200
Table of Contents
Bear Stearns Asset Backed Securities, Inc. (Ê) | ||||
Series 2004-BO1 Class 1A1 | ||||
5.530% due 09/25/34 | 505 | 506 | ||
Series 2005-AQ1 Class 2A1 | ||||
5.550% due 03/25/35 | 1,074 | 1,074 | ||
Series 2005-HE8 Class A1 | ||||
5.450% due 08/25/35 | 474 | 474 | ||
Capital Auto Receivables Asset Trust | ||||
Series 2003-3 Class A3B (Ê) | ||||
5.410% due 01/15/08 | 489 | 489 | ||
Series 2004-2 Class A2 | ||||
3.350% due 02/15/08 | 656 | 652 | ||
Carrington Mortgage Loan Trust (Ê) | ||||
Series 2005-NC4 Class A1 | ||||
5.474% due 09/25/35 | 597 | 598 | ||
Cendant Timeshare Receivables Funding LLC (Þ) | ||||
Series 2004-1A Class A1 | ||||
3.670% due 05/20/16 | 160 | 156 | ||
Citibank Credit Card Issuance Trust | ||||
Series 2000-A3 Class A3 | ||||
6.875% due 11/16/09 | 900 | 915 | ||
Citifinancial Mortgage Securities, Inc. | ||||
Series 2003-4 Class AF3 | ||||
3.221% due 10/25/33 | 44 | 43 | ||
Citigroup Mortgage Loan Trust, Inc. (Ê) | ||||
Series 2006-NC1 Class A2A | ||||
5.394% due 08/25/36 | 2,259 | 2,260 | ||
Countrywide Asset-Backed Certificates | ||||
Series 2004-13 Class AF3 | ||||
3.989% due 02/25/31 | 505 | 500 | ||
Series 2004-BC1 Class M1 (Ê) | ||||
5.820% due 02/25/34 | 545 | 548 | ||
Series 2005-16 Class 2AF1 (Ê) | ||||
5.480% due 05/25/36 | 1,922 | 1,923 | ||
Series 2005-AB3 Class 2A1 (Ê) | ||||
5.450% due 02/25/36 | 922 | 922 | ||
Series 2006-11 Class 1AF3 | ||||
6.050% due 09/25/46 | 870 | 882 | ||
Series 2006-11 Class 1AF4 | ||||
6.300% due 09/25/46 | 1,250 | 1,279 | ||
Series 2006-13 Class 1AF3 | ||||
5.944% due 05/25/33 | 905 | 914 | ||
Series 2006-15 Class A3 | ||||
5.689% due 10/25/46 | 690 | 694 | ||
Series 2006-3 Class 2A2 (Ê) | ||||
5.510% due 02/25/36 | 1,790 | 1,793 | ||
Series 2006-S3 Class A2 | ||||
6.085% due 06/25/21 | 1,380 | 1,397 | ||
Series 2006-S6 Class A2 | ||||
5.519% due 03/25/34 | 1,365 | 1,366 | ||
Countrywide Home Equity Loan Trust (Ê) | ||||
Series 2006-H Class 2A1B | ||||
5.476% due 11/15/36 | 6,000 | 6,002 | ||
Credit-Based Asset Servicing and Securitization LLC | ||||
Series 2005-CB1 Class AF2 | ||||
4.090% due 12/25/35 | 894 | 888 | ||
Series 2005-CB4 Class AV1 (Ê) | ||||
5.430% due 08/25/35 | 601 | 600 | ||
Series 2005-CB5 Class AV1 (Ê) | ||||
5.440% due 08/25/35 | 521 | 521 |
201
Table of Contents
Series 2005-CB8 Class AF1B | ||||
5.451% due 12/25/35 | 622 | 619 | ||
Series 2006-CB5 Class A1 (Ê) | ||||
5.384% due 06/25/36 | 2,039 | 2,039 | ||
Series 2006-SL1 Class A2 (Þ) | ||||
5.556% due 09/25/36 | 1,240 | 1,241 | ||
Dunkin Securitization (Þ) | ||||
Series 2006-1 Class A2 | ||||
5.779% due 06/20/31 | 1,045 | 1,063 | ||
Entergy Gulf States, Inc. (Ê) | ||||
5.800% due 12/01/09 | 335 | 334 | ||
Fannie Mae Grantor Trust | ||||
Series 2003-T4 Class 2A5 | ||||
4.907% due 09/26/33 | 1,502 | 1,491 | ||
First Franklin Mortgage Loan Asset Backed Certificates (Ê) | ||||
Series 2005-FF7 Class A2 | ||||
5.485% due 07/25/35 | 667 | 668 | ||
Series 2006-FF1 Class A2 | ||||
5.374% due 07/25/36 | 2,106 | 2,106 | ||
Series 2006-FF2 Class A2 | ||||
5.455% due 02/25/36 | 1,822 | 1,822 | ||
Fremont Home Loan Trust (Ê) | ||||
Series 2005-E Class 2A1 | ||||
5.420% due 01/25/36 | 390 | 390 | ||
Series 2006-3 Class 2A1 | ||||
5.390% due 02/27/37 | 1,200 | 1,199 | ||
Series 2006-A Class 2A1 | ||||
5.380% due 05/25/36 | 1,372 | 1,372 | ||
GE Capital Credit Card Master Note Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.380% due 06/15/10 | 1,500 | 1,501 | ||
Series 2004-2 Class A | ||||
5.370% due 09/15/10 | 1,950 | 1,951 | ||
GE Dealer Floorplan Master Note Trust (Ê) | ||||
Series 2004-2 Class A | ||||
5.400% due 07/20/09 | 1,900 | 1,901 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-HE5 Class A3 | ||||
3.970% due 09/25/34 | 1,463 | 1,448 | ||
GSAA Home Equity Trust | ||||
Series 2006-4 Class 1A2 | ||||
5.977% due 03/25/36 | 1,667 | 1,674 | ||
GSAA Trust (Ê) | ||||
Series 2006-2 Class 2A3 | ||||
5.590% due 12/25/35 | 1,890 | 1,894 | ||
GSAMP Trust | ||||
Series 2003-HE2 Class M1 (Ê) | ||||
5.970% due 08/25/33 | 975 | 978 | ||
Series 2005-HE4 Class A2A (Ê) | ||||
5.444% due 08/25/35 | 442 | 442 | ||
Series 2006-HE4 Class A2A (Ê) | ||||
5.394% due 06/25/36 | 2,391 | 2,392 | ||
Series 2006-S3 Class A1 | ||||
6.085% due 05/25/36 | 499 | 498 | ||
Harley-Davidson Motorcycle Trust | ||||
Series 2004-2 Class A1 | ||||
2.180% due 01/15/09 | 92 | 91 | ||
Heritage Property Investment Trust | ||||
5.125% due 04/15/14 | 1,000 | 977 | ||
Home Equity Asset Trust (Ê) |
202
Table of Contents
Series 2003-5 Class M1 | ||||
6.020% due 12/25/33 | 1,425 | 1,432 | ||
Series 2005-2 Class 2A2 | ||||
5.520% due 07/25/35 | 929 | 930 | ||
Indymac Residential Asset Backed Trust (Ê) | ||||
Series 2006-H2 Class A | ||||
5.478% due 06/28/36 | 2,758 | 2,758 | ||
Irwin Home Equity Loan Trust (Ê) | ||||
Series 2005-1 Class 2A1 | ||||
5.464% due 06/25/35 | 760 | 760 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-1 Class 2A2 | ||||
4.660% due 07/25/35 | 921 | 922 | ||
Series 2006-11 Class 1A1 | ||||
5.404% due 06/25/46 | 5,086 | 5,089 | ||
Series 2006-16N Class A1A | ||||
5.410% due 11/25/46 | 2,200 | 2,200 | ||
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.610% due 10/25/34 | 384 | 384 | ||
Series 2006-9 Class 2A1 | ||||
5.390% due 10/25/36 | 6,300 | 6,299 | ||
Master Asset Backed Securities Trust (Ê) | ||||
Series 2003-WMC Class M2 | ||||
6.970% due 08/25/33 | 306 | 307 | ||
MBNA Master Credit Card Trust (Ê) | ||||
Series 2002-A10 Class A10 | ||||
5.470% due 02/16/10 | 2,175 | 2,178 | ||
MBNA Master Credit Card Trust (Ê) | ||||
Series 2000-D Class A | ||||
5.530% due 09/15/09 | 2,925 | 2,928 | ||
MBNA Master Credit Card Trust | ||||
Series 2000-E Class A | ||||
7.800% due 10/15/12 | 600 | 655 | ||
Merrill Auto Trust Securitization (Ê) | ||||
Series 2005-1 Class A2B | ||||
5.334% due 04/25/08 | 623 | 623 | ||
Merrill Lynch Mortgage Investors, Inc. | ||||
Series 2005-NCB Class A1A | ||||
5.451% due 07/25/36 | 208 | 207 | ||
Series 2006-AR1 Class A2C (Ê) | ||||
5.484% due 03/25/37 | 1,580 | 1,581 | ||
Mid-State Trust | ||||
Series 2003-11 Class A1 | ||||
4.864% due 07/15/38 | 151 | 146 | ||
Series 2004-1 Class A | ||||
6.005% due 08/15/37 | 201 | 204 | ||
Series 2005-1 Class A | ||||
5.745% due 01/15/40 | 198 | 198 | ||
Series 2006-1 Class A (Å) | ||||
5.787% due 10/15/40 | 1,670 | 1,670 | ||
Morgan Stanley ABS Capital I (Ê) | ||||
Series 2003-NC8 Class M3 | ||||
7.420% due 09/25/33 | 746 | 752 | ||
Series 2006-HE7 Class A2A | ||||
5.424% due 09/25/36 | 6,200 | 6,200 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-12X Class A6A | ||||
5.726% due 10/25/36 | 1,035 | 1,036 | ||
Nationstar Home Equity Loan Trust (Ê) |
203
Table of Contents
Series 2006-B Class AV1 | ||||
5.400% due 09/25/36 | 2,500 | 2,500 | ||
New Century Home Equity Loan Trust (Ê) | ||||
Series 2004-4 Class M2 | ||||
5.850% due 02/25/35 | 1,205 | 1,211 | ||
Northwest Airlines, Inc. (ø) | ||||
7.041% due 04/01/22 | 446 | 444 | ||
NWA Trust (ø) | ||||
Series 1995-2 Class A | ||||
9.250% due 06/21/14 | 842 | 869 | ||
Option One Mortgage Loan Trust (Ê) | ||||
Series 2003-2 Class M2 | ||||
7.020% due 04/25/33 | 411 | 414 | ||
Series 2003-3 Class M3 | ||||
7.320% due 06/25/33 | 264 | 267 | ||
Series 2003-4 Class M2 | ||||
6.970% due 07/25/33 | 730 | 735 | ||
Series 2005-4 Class A3 | ||||
5.584% due 11/25/35 | 1,605 | 1,609 | ||
Ownit Mortgage Loan Asset Backed Certificates | ||||
Series 2006-2 Class A2B | ||||
5.633% due 01/25/37 | 470 | 470 | ||
Park Place Securities, Inc. (Ê) | ||||
Series 2005-WCW Class M1 | ||||
5.770% due 09/25/35 | 1,195 | 1,201 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2005-1 Class AF2 | ||||
3.914% due 05/25/35 | 404 | 401 | ||
Series 2005-6 Class A3 | ||||
5.680% due 01/25/36 | 1,290 | 1,289 | ||
Power Contract Financing LLC (Þ) | ||||
6.256% due 02/01/10 | 520 | 523 | ||
Quest Trust (Ê)(Þ) | ||||
Series 2005-X2 Class A1 | ||||
5.410% due 12/25/35 | 152 | 152 | ||
RAAC Series (Ê) | ||||
Series 2006-SP1 Class A1 | ||||
5.424% due 09/25/45 | 1,197 | 1,197 | ||
Renaissance Home Equity Loan Trust | ||||
Series 2004-4 Class AF2 | ||||
3.856% due 02/25/35 | 159 | 158 | ||
Series 2005-1 Class M1 | ||||
5.357% due 05/25/35 | 565 | 557 | ||
Series 2005-2 Class AF2 | ||||
4.361% due 08/25/35 | 1,385 | 1,372 | ||
Series 2005-2 Class AF4 | ||||
4.934% due 08/25/35 | 610 | 600 | ||
Series 2005-4 Class A2 | ||||
5.399% due 02/25/36 | 575 | 573 | ||
Series 2005-4 Class A3 | ||||
5.565% due 02/25/36 | 360 | 361 | ||
Series 2006-1 Class AF6 | ||||
5.746% due 05/25/36 | 1,020 | 1,032 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2003-RS1 Class AI6A | ||||
5.980% due 12/25/33 | 1,160 | 1,175 | ||
Series 2004-RZ2 Class AI3 | ||||
4.300% due 01/25/31 | 366 | 362 | ||
Series 2006-RZ3 Class A1 (Ê) | ||||
5.394% due 08/25/36 | 2,407 | 2,407 |
204
Table of Contents
Residential Asset Securities Corp. | ||||
Series 2001-KS3 Class AII (Ê) | ||||
5.780% due 09/25/31 | 241 | 241 | ||
Series 2003-KS1 Class M2 (Ê) | ||||
7.070% due 01/25/33 | 352 | 353 | ||
Series 2003-KS2 Class MI1 | ||||
4.800% due 04/25/33 | 2,540 | 2,490 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2005-2 Class A2A | ||||
5.414% due 10/25/35 | 50 | 50 | ||
Series 2006-3 Class A1 | ||||
5.382% due 11/25/36 | 885 | 885 | ||
Securitized Asset Backed Receivables LLC Trust (Ê) | ||||
Series 2006-WM1 Class A2A | ||||
5.394% due 12/25/35 | 977 | 977 | ||
Sharps SP I, LLC | ||||
7.000% due 01/25/34 | 61 | 43 | ||
SLM Student Loan Trust (Ê) | ||||
Series 2006-9 Class A1 | ||||
5.338% due 10/25/12 | 4,400 | 4,399 | ||
Small Business Administration | ||||
Series 2000-P10 Class 1 | ||||
7.449% due 08/01/10 | 72 | 76 | ||
Small Business Administration Participation | ||||
Certificates | ||||
7.500% due 04/01/17 | 1,504 | 1,574 | ||
Soundview Home Equity Loan Trust | ||||
Series 2006-WF1 Class A2 | ||||
5.645% due 10/25/36 | 2,125 | 2,125 | ||
Specialty Underwriting & Residential Finance (Ê) | ||||
Series 2005-BC2 Class A2A | ||||
5.429% due 12/25/35 | 163 | 163 | ||
Structured Asset Investment Loan Trust (Ê) | ||||
Series 2005-3 Class M2 | ||||
5.760% due 04/25/35 | 675 | 678 | ||
Series 2005-HE1 Class A1 | ||||
5.424% due 07/25/35 | 475 | 475 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2006-AR7 Class A2A | ||||
5.560% due 08/25/36 | 2,272 | 2,275 | ||
Structured Asset Securities Corp. | ||||
Series 2001-SB1 Class A2 | ||||
3.375% due 08/25/31 | 492 | 441 | ||
Series 2004-16X Class A2 | ||||
4.910% due 08/25/34 | 581 | 578 | ||
Series 2004-19X Class A2 | ||||
4.370% due 10/25/34 | 2,125 | 2,102 | ||
Series 2005-GEL Class A (Ê) | ||||
5.674% due 12/25/34 | 980 | 981 | ||
Series 2005-S2 Class A2 (Ê) | ||||
5.524% due 06/25/35 | 1,981 | 1,982 | ||
Series 2006-BC3 Class A2 (Ê) | ||||
5.370% due 10/25/36 | 2,000 | 2,000 | ||
Tenaska Alabama II Partners, LP (Þ) | ||||
6.125% due 03/30/23 | 467 | 475 | ||
Tenaska Alabama Partners, LP (Þ) | ||||
7.000% due 06/30/21 | — | — | ||
Terwin Mortgage Trust (Ê) | ||||
Series 2005-12A Class AF1 | ||||
5.504% due 07/25/36 | 1,019 | 1,019 |
205
Table of Contents
Series 2005-8HE Class A1 (Þ) | ||||
5.449% due 07/25/35 | 210 | 210 | ||
TXU Electric Delivery Transition Bond Co. | ||||
Series 2004-1 Class A2 | ||||
4.810% due 11/17/14 | 300 | 296 | ||
Washington Mutual | ||||
5.504% due 11/25/46 | 2,000 | 2,000 | ||
Washington Mutual Mortgage Pass-Through | ||||
Certificates (Ê) | ||||
Series 2006-AR6 Class 1A | ||||
5.588% due 07/25/46 | 1,680 | 1,682 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 1,887 | 1,887 | ||
World Financial Properties (Þ) | ||||
6.910% due 09/01/13 | 609 | 640 | ||
6.950% due 09/01/13 | 180 | 189 | ||
177,963 | ||||
Corporate Bonds and Notes - 15.7% | ||||
Abbott Laboratories | ||||
5.600% due 05/15/11 | 1,140 | 1,162 | ||
5.875% due 05/15/16 | 575 | 598 | ||
Abitibi-Consolidated Finance, LP (Ñ) | ||||
7.875% due 08/01/09 | 960 | 941 | ||
Ace Capital Trust II | ||||
9.700% due 04/01/30 | 1,050 | 1,434 | ||
AIG SunAmerica Global Financing VI (Þ) | ||||
6.300% due 05/10/11 | 1,490 | 1,558 | ||
Alamosa Delaware, Inc. | ||||
8.500% due 01/31/12 | 600 | 638 | ||
Allied Waste North America, Inc. | ||||
Series B | ||||
7.125% due 05/15/16 | 500 | 495 | ||
Altria Group, Inc. (Ñ) | ||||
7.750% due 01/15/27 | 450 | 552 | ||
American Casino & Entertainment Properties LLC | ||||
7.850% due 02/01/12 | 1,250 | 1,272 | ||
American Electric Power Co., Inc. | ||||
Series C | ||||
5.375% due 03/15/10 | 100 | 100 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.330% due 10/16/08 | 1,800 | 1,799 | ||
American Express Co. | ||||
6.800% due 09/01/66 | 600 | 638 | ||
American Express Credit Corp. (Ê) | ||||
5.380% due 03/02/09 | 1,800 | 1,801 | ||
American General Finance Corp. | ||||
4.875% due 05/15/10 (Ñ) | 1,300 | 1,282 | ||
Series MTNH | ||||
4.625% due 09/01/10 | 45 | 44 | ||
Series MTNI | ||||
4.625% due 05/15/09 | 220 | 216 | ||
American International Group, Inc. | ||||
4.700% due 10/01/10 | 1,220 | 1,203 | ||
5.375% due 10/18/11 | 1,240 | 1,251 | ||
5.050% due 10/01/15 (Ñ) | 1,335 | 1,304 | ||
American RE Corp. | ||||
Series B |
206
Table of Contents
7.450% due 12/15/26 | 1,445 | 1,638 | ||
Americo Life, Inc. (Þ) | ||||
7.875% due 05/01/13 | 225 | 227 | ||
Ameriprise Financial, Inc. | ||||
7.518% due 06/01/66 | 1,120 | 1,218 | ||
AmerisourceBergen Corp. | ||||
Series WI | ||||
5.625% due 09/15/12 | 1,060 | 1,041 | ||
AmerUs Group Co. | ||||
5.950% due 08/15/15 | 850 | 872 | ||
Anadarko Petroleum Corp. | ||||
5.950% due 09/15/16 | 505 | 513 | ||
ANZ Capital Trust (f)(Þ) | ||||
4.484% due 12/31/49 | 1,400 | 1,361 | ||
Arizona Public Service Co. | ||||
5.800% due 06/30/14 | 550 | 551 | ||
AT&T Corp. | ||||
7.300% due 11/15/11 | 885 | 963 | ||
8.000% due 11/15/31 | 1,425 | 1,785 | ||
AT&T, Inc. | ||||
5.495% due 05/15/08 (Ê) | 3,300 | 3,302 | ||
5.612% due 11/14/08 (Ê) | 3,400 | 3,409 | ||
5.100% due 09/15/14 | 325 | 317 | ||
Avista Capital Trust III | ||||
6.500% due 04/01/34 | 851 | 849 | ||
Avista Corp. | ||||
9.750% due 06/01/08 | 610 | 644 | ||
AXA Financial, Inc. | ||||
6.500% due 04/01/08 | 325 | 330 | ||
BAC Capital Trust XI | ||||
6.625% due 05/23/36 | 355 | 382 | ||
BAE Systems Holdings, Inc. (Þ) | ||||
6.400% due 12/15/11 | 2,915 | 3,024 | ||
Ball Corp. | ||||
6.625% due 03/15/18 | 1,135 | 1,114 | ||
Bank of America Corp. | ||||
5.400% due 06/19/09 (Ê) | 5,600 | 5,602 | ||
7.800% due 02/15/10 | 460 | 496 | ||
Bank of America NA | ||||
6.000% due 10/15/36 | 500 | 516 | ||
Bank of New York Co., Inc. | ||||
5.125% due 11/01/11 | 1,445 | 1,445 | ||
BellSouth Corp. | ||||
4.200% due 09/15/09 | 465 | 452 | ||
6.550% due 06/15/34 | 260 | 269 | ||
BNP Paribas Capital Trust (f)(Å) | ||||
9.003% due 12/29/49 | 2,600 | 2,930 | ||
Boeing Capital Corp. (Ñ) | ||||
6.100% due 03/01/11 | 365 | 379 | ||
Boston Scientific Corp. | ||||
6.400% due 06/15/16 | 2,650 | 2,692 | ||
Bowater, Inc. (Ñ) | ||||
9.000% due 08/01/09 | 860 | 894 | ||
Burlington Northern Santa Fe Corp. | ||||
6.750% due 07/15/11 | 110 | 117 | ||
6.875% due 12/01/27 | 55 | 61 | ||
6.750% due 03/15/29 | 110 | 122 | ||
California Steel Industries, Inc. | ||||
6.125% due 03/15/14 | 1,620 | 1,498 | ||
Carolina Power & Light Co. |
207
Table of Contents
6.500% due 07/15/12 | 50 | 53 | ||
Caterpillar Financial Services Corp. | ||||
5.470% due 05/18/09 (Ê) | 1,600 | 1,601 | ||
Series MTNF | ||||
3.625% due 11/15/07 | 160 | 157 | ||
Caterpillar, Inc. | ||||
6.050% due 08/15/36 | 685 | 718 | ||
CenterPoint Energy Houston Electric LLC | ||||
Series J2 | ||||
5.700% due 03/15/13 | 470 | 475 | ||
CenterPoint Energy Resources Corp. | ||||
Series B | ||||
7.875% due 04/01/13 | 1,210 | 1,351 | ||
Centex Corp. | ||||
6.500% due 05/01/16 | 950 | 974 | ||
Cingular Wireless Services, Inc. | ||||
7.875% due 03/01/11 | 825 | 905 | ||
8.750% due 03/01/31 | 325 | 426 | ||
CIT Group, Inc. | ||||
3.650% due 11/23/07 | 260 | 256 | ||
5.540% due 12/19/08 (Ê) | 900 | 902 | ||
5.546% due 08/17/09 (Ê) | 4,900 | 4,903 | ||
6.875% due 11/01/09 | 140 | 146 | ||
4.125% due 11/03/09 | 225 | 218 | ||
Citicorp | ||||
Series MTNF | ||||
6.375% due 11/15/08 | 265 | 271 | ||
Citigroup Funding, Inc. | ||||
Zero coupon due 07/17/08 | 550 | 560 | ||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||
Series MTNA | ||||
5.490% due 03/17/09 | 300 | 300 | ||
Series MTNM | ||||
5.430% due 03/07/08 | 1,800 | 1,801 | ||
Citigroup, Inc. | ||||
4.200% due 12/20/07 (Ñ) | 3,600 | 3,558 | ||
3.500% due 02/01/08 | 3,110 | 3,045 | ||
6.500% due 01/18/11 | 1,745 | 1,834 | ||
4.700% due 05/29/15 | 180 | 173 | ||
6.125% due 08/25/36 | 1,320 | 1,371 | ||
Citizens Communications Co. | ||||
9.250% due 05/15/11 | 635 | 704 | ||
Clorox Co. | ||||
5.444% due 12/14/07 (Ê) | 705 | 706 | ||
4.200% due 01/15/10 | 525 | 510 | ||
CNA Financial Corp. | ||||
6.500% due 08/15/16 | 850 | 889 | ||
Columbus Southern Power Co. | ||||
Series C | ||||
5.500% due 03/01/13 | 260 | 261 | ||
Comcast Cable Communications Holdings, Inc. | ||||
9.455% due 11/15/22 | 750 | 979 | ||
Comcast Cable Communications, Inc. | ||||
6.750% due 01/30/11 | 425 | 447 | ||
Comcast Corp. | ||||
5.800% due 07/14/09 (Ê) | 655 | 656 | ||
5.900% due 03/15/16 | 145 | 146 | ||
6.500% due 11/15/35 | 580 | 592 | ||
6.450% due 03/15/37 | 435 | 441 | ||
Commonwealth Edison Co. |
208
Table of Contents
6.950% due 07/15/18 | 150 | 154 | ||
ConAgra Foods, Inc. | ||||
7.000% due 10/01/28 (Ñ) | 215 | 234 | ||
8.250% due 09/15/30 | 275 | 338 | ||
Consolidated Natural Gas Co. | ||||
Series A | ||||
5.000% due 12/01/14 | 395 | 377 | ||
Series C | ||||
6.250% due 11/01/11 | 155 | 160 | ||
Constellation Brands, Inc. | ||||
Series B | ||||
8.125% due 01/15/12 | 360 | 373 | ||
Consumers Energy Co. | ||||
Series F | ||||
4.000% due 05/15/10 | 175 | 167 | ||
Series H | ||||
4.800% due 02/17/09 | 325 | 321 | ||
Continental Airlines, Inc. (Ñ) | ||||
Series 01-1 | ||||
6.503% due 06/15/11 | 550 | 560 | ||
Cooper Industries, Inc. | ||||
Series WI | ||||
5.250% due 11/15/12 | 500 | 498 | ||
Corrections Corp. of America | ||||
7.500% due 05/01/11 | 480 | 491 | ||
Countrywide Home Loans, Inc. (Ñ) | ||||
3.250% due 05/21/08 | 680 | 660 | ||
COX Communications, Inc. | ||||
4.625% due 01/15/10 | 2,545 | 2,487 | ||
Credit Suisse First Boston Mortgage Securities Corp. (Ê)(Þ) | ||||
Series 2005-CN2 Class A1S | ||||
5.550% due 11/15/19 | 1,532 | 1,533 | ||
Credit Suisse First Boston USA, Inc. | ||||
4.875% due 08/15/10 | 335 | 332 | ||
6.500% due 01/15/12 | 215 | 227 | ||
5.500% due 08/15/13 | 230 | 233 | ||
Credit Suisse USA, Inc. (Ñ) | ||||
5.250% due 03/02/11 | 625 | 627 | ||
CVS Corp. | ||||
5.750% due 08/15/11 | 625 | 635 | ||
DaimlerChrysler NA Holding Corp. | ||||
5.820% due 03/13/09 (Ê) | 1,100 | 1,101 | ||
8.500% due 01/18/31 (Ñ) | 320 | 385 | ||
DaimlerChrysler North America Holding Corp. (Ê) | ||||
5.918% due 08/03/09 | 1,425 | 1,426 | ||
Delhaize America, Inc. | ||||
9.000% due 04/15/31 | 435 | 510 | ||
Detroit Edison Co. | ||||
6.125% due 10/01/10 | 595 | 613 | ||
6.350% due 10/15/32 | 275 | 290 | ||
Developers Diversified Realty Corp. | ||||
5.000% due 05/03/10 | 400 | 395 | ||
4.625% due 08/01/10 | 776 | 756 | ||
5.250% due 04/15/11 | 50 | 50 | ||
5.375% due 10/15/12 | 370 | 368 | ||
Dex Media East Finance Co. | ||||
12.125% due 11/15/12 | 220 | 245 | ||
Dominion Resources, Inc. a 6.300% due 09/30/66 | 1,005 | 1,006 | ||
Series A |
209
Table of Contents
5.687% due 05/15/08 | 755 | 758 | ||
Series B | ||||
6.250% due 06/30/12 | 120 | 125 | ||
DPL, Inc. | ||||
6.875% due 09/01/11 | 1,070 | 1,129 | ||
Dresdner Funding Trust I (Þ) | ||||
8.151% due 06/30/31 | 1,065 | 1,287 | ||
Drummond Co., Inc. (Þ) | ||||
7.375% due 02/15/16 | 1,160 | 1,108 | ||
Duke Energy Field Services LLC | ||||
6.875% due 02/01/11 | 60 | 63 | ||
E*Trade Financial Corp. | ||||
8.000% due 06/15/11 | 1,370 | 1,421 | ||
Echostar DBS Corp. | ||||
6.375% due 10/01/11 | 595 | 589 | ||
6.625% due 10/01/14 | 280 | 270 | ||
El Paso Corp. | ||||
6.950% due 12/15/07 (Ñ) | 2,600 | 2,623 | ||
Series * | ||||
6.700% due 02/15/27 | 705 | 706 | ||
El Paso Natural Gas Co. | ||||
Series A | ||||
7.625% due 08/01/10 | 750 | 774 | ||
Eli Lilly & Co. (Ñ) | ||||
6.770% due 01/01/36 | 1,235 | 1,441 | ||
Embarq Corp. | ||||
7.995% due 06/01/36 | 200 | 213 | ||
Energy Transfer Partners, LP | ||||
5.950% due 02/01/15 | 1,125 | 1,135 | ||
Entergy Gulf States, Inc. | ||||
3.600% due 06/01/08 | 235 | 228 | ||
6.140% due 12/08/08 (Ê)(Þ) | 570 | 571 | ||
Enterprise Products Operating, LP | ||||
4.950% due 06/01/10 | 825 | 811 | ||
8.375% due 08/01/66 | 1,980 | 2,128 | ||
Series B | ||||
4.625% due 10/15/09 | 880 | 862 | ||
Erac USA Finance Co. (Þ) | ||||
7.350% due 06/15/08 | 780 | 803 | ||
5.300% due 11/15/08 | 350 | 349 | ||
Farmers Exchange Capital (Þ) | ||||
7.050% due 07/15/28 | 2,290 | 2,401 | ||
Farmers Insurance Exchange (Þ) | ||||
6.000% due 08/01/14 | 570 | 566 | ||
8.625% due 05/01/24 | 1,140 | 1,368 | ||
FedEx Corp. | ||||
5.500% due 08/15/09 | 170 | 171 | ||
7.600% due 07/01/97 | 440 | 521 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 10P | ||||
Zero coupon due 11/30/17 | 2,700 | 1,559 | ||
Series 15P | ||||
Zero coupon due 03/07/19 | 390 | 210 | ||
Series 2P | ||||
Zero coupon due 11/30/17 | 330 | 191 | ||
Series 6P | ||||
Zero coupon due 08/03/18 | 1,640 | 912 | ||
First Union Institutional Capital II | ||||
7.850% due 01/01/27 | 1,680 | 1,750 |
210
Table of Contents
FirstEnergy Corp. | ||||
Series B | ||||
6.450% due 11/15/11 | 3,440 | 3,599 | ||
Series C | ||||
7.375% due 11/15/31 | 885 | 1,035 | ||
Ford Motor Co. (Ñ) | ||||
7.450% due 07/16/31 | 1,240 | 972 | ||
7.700% due 05/15/97 | 585 | 426 | ||
Ford Motor Credit Co. | ||||
9.750% due 09/15/10 (Þ) | 1,110 | 1,145 | ||
9.875% due 08/10/11 | 3,660 | 3,782 | ||
FPL Group Capital, Inc. | ||||
5.625% due 09/01/11 | 820 | 831 | ||
FTI Consulting, Inc. (Þ) | ||||
7.750% due 10/01/16 | 1,160 | 1,186 | ||
Galaxy Entertainment Finance Co., Ltd. (Ê)(Þ) | ||||
10.420% due 12/15/10 | 370 | 390 | ||
General Electric Capital Corp. | ||||
5.570% due 01/20/10 (Ê) | 2,100 | 2,103 | ||
5.500% due 04/28/11 | 1,060 | 1,076 | ||
5.568% due 01/08/16 (Ê) | 1,100 | 1,102 | ||
Series mtn (Ê) | ||||
5.410% due 10/26/09 | 200 | 200 | ||
Series MTNA | ||||
5.466% due 01/15/08 (Ê)(Ñ) | 700 | 701 | ||
5.600% due 07/28/08 (Ê) | 2,000 | 2,004 | ||
4.250% due 12/01/10 (Ñ) | 180 | 175 | ||
5.875% due 02/15/12 | 320 | 330 | ||
5.450% due 01/15/13 (Ñ) | 2,200 | 2,233 | ||
4.750% due 09/15/14 (Ñ) | 80 | 78 | ||
General Motors Corp. (Ñ) | ||||
8.375% due 07/15/33 | 2,200 | 1,958 | ||
Georgia-Pacific Corp. | ||||
8.125% due 05/15/11 | 1,000 | 1,035 | ||
9.500% due 12/01/11 | 690 | 750 | ||
8.875% due 05/15/31 | 927 | 980 | ||
Glencore Funding LLC (Þ) | ||||
6.000% due 04/15/14 | 980 | 952 | ||
Glencore Nickel, Ltd. | ||||
9.000% due 12/01/14 | 305 | — | ||
GMAC LLC | ||||
6.875% due 09/15/11 | 4,816 | 4,849 | ||
8.000% due 11/01/31 (Ñ) | 4,245 | 4,548 | ||
Goldman Sachs Group, Inc. | ||||
5.478% due 06/23/09 (Ê) | 2,300 | 2,301 | ||
6.875% due 01/15/11 | 2,970 | 3,150 | ||
5.350% due 01/15/16 | 2,435 | 2,405 | ||
6.345% due 02/15/34 | 810 | 827 | ||
Series MTNB (Ê) | ||||
5.527% due 12/22/08 | 1,800 | 1,802 | ||
5.841% due 07/23/09 | 1,500 | 1,510 | ||
Great West Life & Annuity Insurance Co. (Å) | ||||
7.153% due 05/16/46 | 660 | 695 | ||
Greater Bay Bancorp | ||||
Series B | ||||
5.250% due 03/31/08 | 900 | 896 | ||
Harrah’s Operating Co., Inc. | ||||
5.500% due 07/01/10 | 525 | 504 | ||
6.500% due 06/01/16 | 2,295 | 2,020 | ||
Hartford Financial Services Group, Inc. |
211
Table of Contents
5.663% due 11/16/08 | 845 | 850 | ||
7.900% due 06/15/10 | 80 | 86 | ||
HCA, Inc. | ||||
5.500% due 12/01/09 | 1,200 | 1,208 | ||
Health Care Property Investors, Inc. | ||||
5.950% due 09/15/11 | 1,750 | 1,770 | ||
Healthsouth Corp. (Ñ)(Þ) | ||||
10.750% due 06/15/16 | 825 | 846 | ||
Hertz Corp. (Þ) | ||||
8.875% due 01/01/14 | 835 | 873 | ||
Hess Corp. | ||||
6.650% due 08/15/11 | 350 | 367 | ||
7.300% due 08/15/31 | 585 | 663 | ||
Hewlett-Packard Co. (Ê) | ||||
5.524% due 05/22/09 | 580 | 581 | ||
Historic TW, Inc. | ||||
a 8.050% due 01/15/16 | 1,035 | 1,168 | ||
HJ Heinz Co. (Þ) | ||||
6.428% due 12/01/08 | 200 | 204 | ||
HJ Heinz Finance Co. | ||||
6.000% due 03/15/12 | 210 | 213 | ||
Host Hotels & Resorts, LP (Å) | ||||
6.875% due 11/01/14 | 465 | 467 | ||
Host Marriott, LP | ||||
Series Q | ||||
6.750% due 06/01/16 | 1,590 | 1,548 | ||
HRPT Properties Trust | ||||
5.750% due 02/15/14 | 670 | 670 | ||
HSBC Finance Corp. | ||||
5.520% due 09/15/08 (Ê) | 3,600 | 3,609 | ||
4.125% due 12/15/08 | 175 | 172 | ||
5.875% due 02/01/09 (Ñ) | 660 | 671 | ||
4.125% due 11/16/09 | 270 | 262 | ||
8.000% due 07/15/10 | 165 | 180 | ||
4.625% due 09/15/10 | 600 | 589 | ||
6.375% due 10/15/11 | 365 | 383 | ||
6.375% due 11/27/12 | 1,195 | 1,261 | ||
5.000% due 06/30/15 | 730 | 709 | ||
HSBC Financial Capital Trust IX | ||||
5.911% due 11/30/35 | 900 | 905 | ||
Huntsman International LLC | ||||
Series * | ||||
10.125% due 07/01/09 | 825 | 837 | ||
ICI Wilmington, Inc. | ||||
4.375% due 12/01/08 | 210 | 205 | ||
Innophos Investments Holdings, Inc. (Ê) | ||||
13.405% due 02/15/15 | 1,551 | 1,619 | ||
Innophos, Inc. | ||||
8.875% due 08/15/14 | 880 | 878 | ||
Insight Midwest, LP | ||||
10.500% due 11/01/10 | 351 | 363 | ||
International Business Machines Corp. (Ñ) | ||||
7.125% due 12/01/96 | 1,170 | 1,372 | ||
International Lease Finance Corp. | ||||
5.750% due 06/15/11 | 180 | 184 | ||
5.625% due 09/20/13 | 555 | 559 | ||
International Paper Co. | ||||
6.750% due 09/01/11 | 650 | 692 | ||
5.500% due 01/15/14 | 630 | 623 | ||
International Steel Group, Inc. |
212
Table of Contents
6.500% due 04/15/14 | 745 | 745 | ||
Interpublic Group of Cos., Inc. | ||||
5.400% due 11/15/09 | 450 | 427 | ||
7.250% due 08/15/11 | 100 | 97 | ||
iStar Financial, Inc. (Ñ) | ||||
Series B | ||||
5.125% due 04/01/11 | 1,100 | 1,081 | ||
ITT Corp. | ||||
7.400% due 11/15/25 | 455 | 536 | ||
JC Penney Co., Inc. | ||||
7.375% due 08/15/08 | 510 | 526 | ||
JC Penney Corp., Inc. | ||||
7.625% due 03/01/97 | 220 | 230 | ||
John Hancock Financial Services, Inc. | ||||
5.625% due 12/01/08 | 120 | 121 | ||
John Hancock Global Funding II (Þ) | �� | |||
7.900% due 07/02/10 | 440 | 480 | ||
JP Morgan Chase Bank NA | ||||
6.000% due 08/16/10 | 608 | 562 | ||
6.000% due 08/16/10 | 707 | 654 | ||
Series EMTn | ||||
4.590% due 05/22/45 BRL | 10,586 | 6,372 | ||
JP Morgan Chase Capital XVIII | ||||
Series R | ||||
6.950% due 08/17/36 | 930 | 1,007 | ||
JP Morgan Chase Capital XX | ||||
Series T | ||||
6.550% due 09/29/36 | 790 | 818 | ||
JPMorgan Chase & Co. | ||||
6.000% due 02/15/09 | 170 | 173 | ||
7.000% due 11/15/09 | 65 | 68 | ||
6.750% due 02/01/11 | 175 | 185 | ||
5.600% due 06/01/11 | 470 | 478 | ||
5.150% due 10/01/15 | 1,165 | 1,140 | ||
Kellogg Co. | ||||
Series B | ||||
6.600% due 04/01/11 | 2,450 | 2,584 | ||
Kerr-McGee Corp. | ||||
6.950% due 07/01/24 | 725 | 786 | ||
KeySpan Corp. (Ñ) | ||||
7.625% due 11/15/10 | 525 | 567 | ||
Kinder Morgan Energy Partners, LP | ||||
5.125% due 11/15/14 | 175 | 167 | ||
Kinder Morgan Finance (Ñ) | ||||
Series WI | ||||
5.350% due 01/05/11 | 425 | 415 | ||
Kinder Morgan Finance Co. ULC | ||||
Series WI | ||||
5.700% due 01/05/16 | 625 | 579 | ||
Kraft Foods, Inc. | ||||
4.125% due 11/12/09 | 452 | 439 | ||
5.625% due 11/01/11 | 2,940 | 2,979 | ||
6.500% due 11/01/31 | 170 | 185 | ||
Kroger Co. (The) | ||||
7.250% due 06/01/09 | 270 | 282 | ||
8.000% due 09/15/29 | 165 | 189 | ||
LaBranche & Co., Inc. | ||||
9.500% due 05/15/09 | 1,000 | 1,052 | ||
Lehman Brothers Holdings, Inc. | ||||
5.601% due 10/22/08 (Ê) | 1,800 | 1,802 |
213
Table of Contents
5.460% due 04/03/09 (Ê) | 2,400 | 2,402 | ||
5.000% due 01/14/11 | 1,305 | 1,295 | ||
5.500% due 04/04/16 | 625 | 626 | ||
Lenfest Communications, Inc. | ||||
7.625% due 02/15/08 | 100 | 103 | ||
Level 3 Financing, Inc. (Ñ) | ||||
12.250% due 03/15/13 | 595 | 671 | ||
Liberty Mutual Group, Inc. (Ñ)(Þ) | ||||
6.700% due 08/15/16 | 720 | 766 | ||
Lodgenet Entertainment Corp. | ||||
9.500% due 06/15/13 | 720 | 770 | ||
Lubrizol Corp. | ||||
4.625% due 10/01/09 | 631 | 619 | ||
M&I Marshall & Ilsley Bank | ||||
Series BKNT | ||||
3.800% due 02/08/08 | 755 | 740 | ||
Mandalay Resort Group (Ñ) | ||||
6.500% due 07/31/09 | 500 | 501 | ||
Manufacturers & Traders Trust Co. | ||||
5.585% due 12/28/20 | 248 | 248 | ||
Marsh & McLennan Cos., Inc. | ||||
5.150% due 09/15/10 | 825 | 791 | ||
May Department Stores Co. (The) (Ñ) | ||||
6.700% due 07/15/34 | 570 | 574 | ||
MBNA Corp. (Ê) | ||||
Series MTNF | ||||
5.910% due 05/05/08 | 780 | 785 | ||
Medco Health Solutions, Inc. | ||||
7.250% due 08/15/13 | 1,297 | 1,409 | ||
Merrill Lynch & Co., Inc. | ||||
5.490% due 06/16/08 (Ê) | 6,800 | 6,811 | ||
6.050% due 05/16/16 | 815 | 846 | ||
6.220% due 09/15/26 | 455 | 470 | ||
Series MTNC | ||||
4.250% due 02/08/10 | 3,195 | 3,108 | ||
Metlife, Inc. | ||||
5.000% due 06/15/15 | 520 | 504 | ||
Midamerican Energy Holdings Co. | ||||
Series WI | ||||
6.125% due 04/01/36 | 1,900 | 1,954 | ||
Midamerican Funding LLC | ||||
6.750% due 03/01/11 | 590 | 623 | ||
Miller Brewing Co. (Þ) | ||||
4.250% due 08/15/08 | 585 | 574 | ||
5.500% due 08/15/13 | 810 | 802 | ||
Mohawk Industries, Inc. | ||||
Series D | ||||
7.200% due 04/15/12 | 340 | 356 | ||
Monumental Global Funding II (Þ) | ||||
4.625% due 03/15/10 | 320 | 314 | ||
Morgan Stanley | ||||
5.375% due 10/15/15 | 730 | 725 | ||
6.250% due 08/09/26 | 1,155 | 1,210 | ||
Series GMTN (Ê) | ||||
5.550% due 02/09/09 | 3,100 | 3,104 | ||
Motorola, Inc. | ||||
4.608% due 11/16/07 | 393 | 390 | ||
Natexis Ambs Co. LLC (f)(Þ) | ||||
8.440% due 12/29/49 | 430 | 451 | ||
National Rural Utilities Cooperative Finance Corp. |
214
Table of Contents
5.750% due 08/28/09 | 200 | 203 | ||
Nationwide Financial Services | ||||
6.250% due 11/15/11 | 395 | 411 | ||
Nationwide Mutual Insurance Co. (Þ) | ||||
7.875% due 04/01/33 | 867 | 1,033 | ||
Neiman-Marcus Group, Inc. (Ñ) | ||||
Series WI | ||||
10.375% due 10/15/15 | 1,200 | 1,312 | ||
Nelnet, Inc. | ||||
7.400% due 09/29/36 | 1,170 | 1,184 | ||
News America Holdings, Inc. | ||||
7.750% due 12/01/45 | 275 | 310 | ||
7.900% due 12/01/95 | 410 | 455 | ||
8.250% due 10/17/96 | 135 | 155 | ||
News America, Inc. | ||||
7.125% due 04/08/28 | 75 | 80 | ||
Nextel Communications, Inc. | ||||
Series E | ||||
6.875% due 10/31/13 | 955 | 976 | ||
Nisource Finance Corp. | ||||
5.968% due 11/23/09 (Ê) | 370 | 370 | ||
7.875% due 11/15/10 | 750 | 811 | ||
Norfolk Southern Corp. | ||||
7.050% due 05/01/37 | 280 | 329 | ||
7.900% due 05/15/97 | 2,300 | 2,882 | ||
6.000% due 03/15/2105 | 950 | 916 | ||
North Front Pass-Through Trust (Þ) | ||||
5.810% due 12/15/24 | 1,700 | 1,689 | ||
Occidental Petroleum Corp. | ||||
9.250% due 08/01/19 | 285 | 379 | ||
Ohio Power Co. | ||||
Series F | ||||
5.500% due 02/15/13 | 55 | 55 | ||
Series K | ||||
6.000% due 06/01/16 | 560 | 578 | ||
Oneok, Inc. | ||||
5.510% due 02/16/08 | 775 | 776 | ||
Pacific Gas & Electric Co. | ||||
4.200% due 03/01/11 | 1,015 | 975 | ||
6.050% due 03/01/34 | 335 | 342 | ||
Peabody Energy Corp. (Ñ) | ||||
7.875% due 11/01/26 | 500 | 519 | ||
Pemex Project Funding Master Trust | ||||
Series 144a (Þ) | ||||
5.750% due 12/15/15 | 500 | 494 | ||
6.625% due 06/15/35 | 940 | 948 | ||
Series WI | ||||
6.625% due 06/15/35 | 205 | 207 | ||
Pepco Holdings, Inc. (Ê) | ||||
5.856% due 06/01/10 | 975 | 978 | ||
Phoenix Life Insurance Co. (Þ) | ||||
7.150% due 12/15/34 | 850 | 919 | ||
Pilgrim’s Pride Corp. | ||||
9.625% due 09/15/11 | 140 | 147 | ||
Pinnacle Entertainment, Inc. | ||||
8.250% due 03/15/12 | 140 | 142 | ||
Plains All American Pipeline, LP | ||||
6.700% due 05/15/36 (Þ) | 580 | 601 | ||
6.650% due 01/15/37 (Å) | 380 | 389 | ||
Plantinum Underwriters Financial, Inc. |
215
Table of Contents
Series B | ||||
6.371% due 11/16/07 | 405 | 402 | ||
Platinum Underwriters Finance, Inc. (Ñ) | ||||
Series B | ||||
7.500% due 06/01/17 | 520 | 544 | ||
Popular North America Capital Trust I | ||||
6.564% due 09/15/34 | 1,137 | 1,112 | ||
Popular North America, Inc. | ||||
5.886% due 04/06/09 (Ê) | 705 | 707 | ||
Series MTNE | ||||
3.875% due 10/01/08 | 1,600 | 1,557 | ||
Progress Energy, Inc. | ||||
7.100% due 03/01/11 | 605 | 648 | ||
6.850% due 04/15/12 | 90 | 96 | ||
7.000% due 10/30/31 | 590 | 664 | ||
PSEG Energy Holdings LLC | ||||
8.625% due 02/15/08 | 94 | 98 | ||
Qwest Corp. | ||||
7.875% due 09/01/11 | 1,320 | 1,398 | ||
7.625% due 06/15/15 | 1,000 | 1,052 | ||
Rabobank Capital Funding II (f)(Þ) | ||||
5.260% due 12/31/49 | 995 | 977 | ||
Radiologix, Inc. | ||||
Series B | ||||
10.500% due 12/15/08 | 1,180 | 1,209 | ||
RBS Capital Trust III (f) | ||||
5.512% due 09/29/49 | 1,395 | 1,372 | ||
Reinsurance Group of America, Inc. | ||||
6.750% due 12/15/65 | 325 | 322 | ||
6.125% due 11/21/08 | 835 | 840 | ||
7.337% due 04/17/09 (Ê)(Þ) | 1,365 | 1,368 | ||
6.375% due 06/30/10 | 1,752 | 1,778 | ||
6.000% due 02/22/11 | 1,260 | 1,264 | ||
5.125% due 05/17/12 EUR | 670 | 867 | ||
6.500% due 04/17/13 | 1,945 | 1,979 | ||
Series WI (Ñ) | ||||
6.875% due 06/30/15 | 1,710 | 1,790 | ||
RH Donnelley, Inc. | ||||
10.875% due 12/15/12 | 980 | 1,072 | ||
Rural Cellular Corp. | ||||
8.250% due 03/15/12 | 305 | 314 | ||
Safeco Capital Trust I | ||||
8.072% due 07/15/37 | 900 | 946 | ||
Safeway, Inc. | ||||
5.830% due 03/27/09 (Ê) | 1,085 | 1,086 | ||
5.800% due 08/15/12 (Ñ) | 60 | 60 | ||
7.250% due 02/01/31 (Ñ) | 105 | 115 | ||
SB Treasury Co. LLC (f)(Å) | ||||
(Step Up, 10.925%, 06/30/08) | ||||
9.400% due 12/29/49 | 2,028 | 2,150 | ||
SBC Communications, Inc. | ||||
6.150% due 09/15/34 | 945 | 945 | ||
Sempra Energy (Ê) | ||||
5.863% due 05/21/08 | 891 | 892 | ||
Simon Property Group, LP (Ñ) | ||||
5.600% due 09/01/11 | 1,000 | 1,011 | ||
SLM Corp. | ||||
4.000% due 01/15/10 | 540 | 522 | ||
Series MTNA (Ê) |
216
Table of Contents
5.695% due 07/25/08 | 6,200 | 6,221 | ||
Southern California Edison Co. | ||||
7.625% due 01/15/10 | 260 | 277 | ||
Southern Copper Corp. | ||||
7.500% due 07/27/35 | 1,915 | 2,047 | ||
Sovereign Capital Trust VI | ||||
7.908% due 06/13/36 | 1,170 | 1,315 | ||
Sprint Capital Corp. | ||||
7.625% due 01/30/11 | 3,055 | 3,293 | ||
6.875% due 11/15/28 | 85 | 87 | ||
8.750% due 03/15/32 | 3,360 | 4,151 | ||
Structured Asset Mortgage | ||||
Investments II (Ê) | ||||
Series 2006-AR5 Class 1A2 | ||||
5.584% due 05/25/36 | 1,602 | 1,605 | ||
Suncom Wireless, Inc. (Ñ) | ||||
8.500% due 06/01/13 | 1,335 | 1,268 | ||
Sungard Data Systems, Inc. | ||||
10.250% due 08/15/15 | 956 | 1,001 | ||
Swiss Re Capital I, LP (f)(Þ) | ||||
6.854% due 05/29/49 | 815 | 851 | ||
Symetra Financial Corp. (Þ) | ||||
6.125% due 04/01/16 | 900 | 912 | ||
TCI Communications, Inc. | ||||
7.875% due 02/15/26 | 145 | 166 | ||
TDS Investor Corp. (Ñ)(Þ) | ||||
11.875% due 09/01/16 | 2,055 | 2,024 | ||
TECO Energy, Inc. | ||||
7.200% due 05/01/11 | 715 | 744 | ||
Tele-Communications-TCI Group | ||||
9.800% due 02/01/12 | 990 | 1,171 | ||
7.875% due 08/01/13 | 2,240 | 2,505 | ||
Texas Eastern Transmission, LP | ||||
7.000% due 07/15/32 | 280 | 316 | ||
Time Warner Entertainment Co., LP | ||||
Series * | ||||
8.375% due 03/15/23 | 426 | 503 | ||
Twin Reefs Pass-Through Trust | ||||
(Ê)(f)(Þ) | ||||
6.370% due 12/10/49 | 900 | 901 | ||
Tyson Foods, Inc. | ||||
6.600% due 04/01/16 | 285 | 293 | ||
Union Pacific Corp. | ||||
6.625% due 02/01/08 | 265 | 269 | ||
3.625% due 06/01/10 | 85 | 80 | ||
6.125% due 01/15/12 | 800 | 829 | ||
Series MTNE | ||||
6.790% due 11/09/07 | 110 | 111 | ||
Union Planters Corp. | ||||
7.750% due 03/01/11 | 265 | 290 | ||
United Technologies Corp. | ||||
6.050% due 06/01/36 | 535 | 573 | ||
UnitedHealth Group, Inc. | ||||
5.250% due 03/15/11 | 565 | 564 | ||
UnumProvident Finance Co. PLC (Þ) | ||||
6.850% due 11/15/15 | 625 | 655 | ||
US Oncology, Inc. | ||||
9.000% due 08/15/12 | 465 | 482 | ||
USB Capital IX (f) | ||||
6.189% due 04/15/42 | 1,145 | 1,169 |
217
Table of Contents
Valero Logistics Operations, LP | ||||
6.050% due 03/15/13 | 1,117 | 1,133 | ||
Verizon Communications, Inc. | ||||
5.550% due 02/15/16 | 735 | 732 | ||
Verizon Global Funding Corp. | ||||
7.250% due 12/01/10 | 800 | 859 | ||
5.850% due 09/15/35 | 810 | 777 | ||
Verizon, Inc. | ||||
6.500% due 09/15/11 | 70 | 72 | ||
Viacom, Inc. | ||||
5.741% due 06/16/09 (Ê) | 1,275 | 1,275 | ||
5.750% due 04/30/11 | 935 | 936 | ||
6.875% due 04/30/36 | 580 | 584 | ||
Visteon Corp. (Ñ) | ||||
8.250% due 08/01/10 | 1,060 | 1,012 | ||
Wachovia Bank NA (Ê) | ||||
Series BKNT | ||||
5.460% due 05/25/10 | 3,800 | 3,800 | ||
Wachovia Capital Trust III (f) | ||||
5.800% due 03/15/42 | 5,010 | 5,054 | ||
Wachovia Corp. (Ê) | ||||
5.535% due 10/28/08 | 3,000 | 3,003 | ||
Washington Mutual, Inc. | ||||
8.250% due 04/01/10 | 755 | 819 | ||
WellPoint, Inc. | ||||
3.750% due 12/14/07 | 270 | 265 | ||
4.250% due 12/15/09 | 532 | 517 | ||
5.850% due 01/15/36 | 1,335 | 1,313 | ||
Wells Fargo & Co. | ||||
4.950% due 10/16/13 | 390 | 382 | ||
Wells Fargo Bank NA | ||||
5.750% due 05/16/16 | 655 | 673 | ||
West Corp. (Å) | ||||
9.500% due 10/15/14 | 1,375 | 1,372 | ||
Weyerhaeuser Co. | ||||
7.125% due 07/15/23 | 970 | 975 | ||
Willis North America, Inc. | ||||
5.125% due 07/15/10 | 680 | 661 | ||
5.625% due 07/15/15 | 785 | 750 | ||
Windstream Corp. (Þ) | ||||
8.125% due 08/01/13 | 615 | 657 | ||
8.625% due 08/01/16 | 945 | 1,019 | ||
Wisconsin Electric Power | ||||
3.500% due 12/01/07 | 145 | 142 | ||
Wyeth | ||||
6.950% due 03/15/11 | 2,675 | 2,850 | ||
5.500% due 02/01/14 | 1,110 | 1,117 | ||
Xcel Energy, Inc. | ||||
6.500% due 07/01/36 | 380 | 406 | ||
Xlliac Global Funding (Þ) | ||||
4.800% due 08/10/10 | 730 | 717 | ||
Yum! Brands, Inc. | ||||
8.875% due 04/15/11 | 350 | 396 | ||
ZFS Finance USA Trust I (Þ) | ||||
6.450% due 12/15/65 | 1,205 | 1,203 | ||
Zurich Capital Trust I (Þ) | ||||
8.376% due 06/01/37 | 1,345 | 1,413 | ||
408,909 | ||||
International Debt - 4.8% | ||||
Abbey National PLC (f)(Ñ) |
218
Table of Contents
(Step Up, 7.570%, 06/15/08) | ||||
6.700% due 06/29/49 | 775 | 790 | ||
Abitibi-Consolidated, Inc. (Ñ) | ||||
8.850% due 08/01/30 | 345 | 286 | ||
Abu Dhabi National Energy Co. (Þ) | ||||
5.875% due 10/27/16 | 845 | 861 | ||
6.500% due 10/27/36 | 1,700 | 1,776 | ||
America Movil SA de CV | ||||
5.500% due 03/01/14 | 500 | 490 | ||
Amvescap PLC | ||||
4.500% due 12/15/09 | 1,337 | 1,305 | ||
Arch Capital Group, Ltd. | ||||
7.350% due 05/01/34 | 430 | 478 | ||
Argentina Government International Bond | ||||
Series $GDP | ||||
Zero coupon due 12/15/35 | 1,550 | 173 | ||
Arlington Street CDO, Ltd. (Þ) | ||||
Series 2000-1A Class A2 | ||||
7.660% due 06/10/12 | 1,710 | 1,705 | ||
Aspen Insurance Holdings, Ltd. | ||||
6.000% due 08/15/14 | 200 | 196 | ||
AXA SA | ||||
8.600% due 12/15/30 | 255 | 335 | ||
Barclays Bank PLC (f)(Þ) | ||||
7.375% due 06/29/49 | 910 | 989 | ||
Biovail Corp. | ||||
7.875% due 04/01/10 | 1,363 | 1,366 | ||
Bowater Canada Finance (Ñ) | ||||
7.950% due 11/15/11 | 1,095 | 1,046 | ||
Brascan Corp. | ||||
7.125% due 06/15/12 | 565 | 606 | ||
Brazilian Government International Bond | ||||
10.500% due 07/14/14 (Ñ) | 35 | 44 | ||
8.875% due 04/15/24 | 2,125 | 2,595 | ||
British Telecommunications PLC | ||||
8.375% due 12/15/10 | 180 | 202 | ||
8.875% due 12/15/30 | 1,280 | 1,734 | ||
Canadian Natural Resources, Ltd. | ||||
6.500% due 02/15/37 | 475 | 488 | ||
Canadian Oil Sands, Ltd. (Þ) | ||||
4.800% due 08/10/09 | 481 | 472 | ||
Catalyst Paper Corp. | ||||
Series D | ||||
8.625% due 06/15/11 | 1,550 | 1,550 | ||
China Development Bank | ||||
5.000% due 10/15/15 | 200 | 195 | ||
CIT Group Funding Co. of Canada | ||||
5.600% due 11/02/11 | 570 | 576 | ||
Conoco Funding Co. | ||||
6.350% due 10/15/11 | 2,330 | 2,452 | ||
Corp. Nacional del Cobre de Chile (Å) | ||||
6.150% due 10/24/36 | 100 | 102 | ||
Deutsche Telekom International Finance BV | ||||
5.569% due 03/23/09 (Ê) | 2,200 | 2,201 | ||
5.375% due 03/23/11 | 475 | 474 | ||
8.250% due 06/15/30 | 895 | 1,112 | ||
DNB Nor Bank ASA (Ê)(Å) | ||||
5.443% due 10/13/09 | 6,300 | 6,297 | ||
Egypt Government AID Bonds | ||||
4.450% due 09/15/15 | 2,210 | 2,139 |
219
Table of Contents
Embraer Overseas, Ltd. (Ñ)(Å) | ||||
6.375% due 01/24/17 | 495 | 495 | ||
Endurance Specialty Holdings, Ltd. (Ñ) | ||||
6.150% due 10/15/15 | 500 | 498 | ||
Export-Import Bank of China (Þ) | ||||
4.875% due 07/21/15 | 1,290 | 1,250 | ||
Export-Import Bank of Korea | ||||
4.125% due 02/10/09 (Þ) | 170 | 166 | ||
5.125% due 02/14/11 | 735 | 732 | ||
Falconbridge, Ltd. | ||||
6.000% due 10/15/15 | 1,005 | 1,011 | ||
FBG Finance, Ltd. (Þ) | ||||
5.125% due 06/15/15 | 585 | 557 | ||
France Telecom SA | ||||
8.500% due 03/01/31 | 625 | 830 | ||
Galaxy Entertainment Finance Co., Ltd. (Ñ)(Þ) | ||||
9.875% due 12/15/12 | 925 | 978 | ||
Gaz Capital for Gazprom (Þ) | ||||
8.625% due 04/28/34 | 450 | 573 | ||
Glitnir Banki HF (Å) | ||||
6.693% due 06/15/16 | 965 | 996 | ||
HBOS PLC (f)(Þ) | ||||
5.920% due 09/29/49 | 700 | 685 | ||
HBOS Treasury Services PLC (Ê)(Å) | ||||
Series Mtn | ||||
5.414% due 07/17/09 | 1,600 | 1,601 | ||
HSBC Holdings PLC | ||||
6.500% due 05/02/36 | 350 | 379 | ||
Intelsat Subsidiary Holding Co., Ltd. (Ê) | ||||
10.484% due 01/15/12 | 1,030 | 1,044 | ||
Ispat Inland ULC | ||||
9.750% due 04/01/14 | 1,779 | 1,992 | ||
Korea Electric Power Corp. (Þ) | ||||
5.125% due 04/23/34 | 285 | 282 | ||
LG Electronics, Inc. (Þ) | ||||
5.000% due 06/17/10 | 390 | 381 | ||
Majapahit Holding BV (Å) | ||||
7.250% due 10/17/11 | 480 | 486 | ||
Mantis Reef, Ltd. (Þ) | ||||
4.692% due 11/14/08 | 585 | 575 | ||
Mexico Government International Bond | ||||
8.300% due 08/15/31 | 1,570 | 1,996 | ||
Mizuho Financial Group Cayman, Ltd. | ||||
5.790% due 04/15/14 (Þ) | 790 | 800 | ||
Series REGS | ||||
5.790% due 04/15/14 | 185 | 187 | ||
Montpelier Re Holdings, Ltd. | ||||
6.125% due 08/15/13 | 570 | 553 | ||
MUFG Capital Finance 1, Ltd. (f) | ||||
6.346% due 07/25/49 | 560 | 566 | ||
Nationwide Building Society (Þ) | ||||
4.250% due 02/01/10 | 770 | 748 | ||
Nexen, Inc. | ||||
5.875% due 03/10/35 | 296 | 283 | ||
Nippon Life Insurance (Þ) | ||||
4.875% due 08/09/10 | 1,235 | 1,212 | ||
Norske Skogindustrier ASA (Þ) | ||||
7.125% due 10/15/33 | 1,565 | 1,430 | ||
OAO Siberian Oil Co. | ||||
Series REGS |
220
Table of Contents
10.750% due 01/15/09 | 2,150 | 2,365 | ||
Panama Government International Bond | ||||
8.875% due 09/30/27 | 300 | 373 | ||
Petroleum Export, Ltd. (Þ) | ||||
5.265% due 06/15/11 | 186 | 181 | ||
Poland Government International Bond | ||||
Series RSTA | ||||
4.750% due 10/27/24 | 750 | 724 | ||
Province of Quebec Canada (Ñ) | ||||
Series PJ | ||||
6.125% due 01/22/11 | 2,755 | 2,864 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. II (Þ) | ||||
5.298% due 09/30/20 | 1,515 | 1,462 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. III (Þ) | ||||
5.832% due 09/30/16 | 1,080 | 1,090 | ||
5.838% due 09/30/27 | 1,680 | 1,630 | ||
Resona Bank, Ltd. (f)(Þ) | ||||
5.850% due 09/29/49 | 2,705 | 2,650 | ||
Resona Preferred Global Securities Cayman, Ltd. (f)(Þ) | ||||
7.191% due 12/29/49 | 2,590 | 2,716 | ||
Royal Bank of Scotland Group PLC (f) | ||||
Series 1 | ||||
9.118% due 03/31/49 | 4,025 | 4,482 | ||
Royal Bank of Scotland PLC (Ê) | ||||
5.770% due 07/06/12 | 4,300 | 4,306 | ||
Russia Government International Bond (Þ) | ||||
5.000% due 03/31/30 | 2,350 | 2,632 | ||
Santander Financial Issuances | ||||
6.375% due 02/15/11 | 240 | 250 | ||
Sanwa Finance Aruba AEC (Ñ) | ||||
8.350% due 07/15/09 | 1,000 | 1,075 | ||
Sappi Papier Holding AG (Þ) | ||||
6.750% due 06/15/12 | 1,055 | 1,015 | ||
7.500% due 06/15/32 | 895 | 776 | ||
Secunda International, Ltd. (Ê) | ||||
13.507% due 09/01/12 | 660 | 683 | ||
Shinsei Finance Cayman, Ltd. (f)(Þ) | ||||
6.418% due 01/29/49 | 860 | 865 | ||
Siemens Financieringsmaatschappij NV (Þ) | ||||
6.125% due 08/17/26 | 870 | 905 | ||
South Street CBO, Ltd. | ||||
Series 1999-1A Class A1 | ||||
7.160% due 07/01/11 | 71 | 72 | ||
Stora Enso Oyj (Þ) | ||||
7.250% due 04/15/36 | 795 | 833 | ||
Sumitomo Mitsui Banking Corp. (f)(Þ) | ||||
5.625% due 07/29/49 | 495 | 484 | ||
Systems 2001 AT LLC (Þ) | ||||
7.156% due 12/15/11 | 264 | 274 | ||
6.664% due 09/15/13 | 391 | 412 | ||
Telecom Italia Capital SA | ||||
4.000% due 01/15/10 | 1,666 | 1,587 | ||
4.875% due 10/01/10 | 950 | 926 | ||
6.108% due 07/18/11 (Ê) | 1,295 | 1,292 | ||
5.250% due 10/01/15 | 1,960 | 1,833 | ||
7.200% due 07/18/36 | 1,520 | 1,597 | ||
Telefonica Emisiones SAU | ||||
5.629% due 06/19/09 (Ê) | 835 | 836 | ||
5.984% due 06/20/11 | 550 | 562 | ||
6.421% due 06/20/16 | 380 | 394 |
221
Table of Contents
7.045% due 06/20/36 | 315 | 339 | ||
Telefonica Europe BV | ||||
7.750% due 09/15/10 | 2,765 | 2,992 | ||
8.250% due 09/15/30 | 655 | 794 | ||
Telefonos de Mexico SA de CV | ||||
4.500% due 11/19/08 | 1,288 | 1,264 | ||
TELUS Corp. | ||||
8.000% due 06/01/11 | 1,955 | 2,156 | ||
TNK-BP Finance SA (Þ) | ||||
Series 144a | ||||
7.500% due 07/18/16 | 725 | 759 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 1,200 | 1,200 | ||
Tyco International Group SA | ||||
6.750% due 02/15/11 | 2,545 | 2,692 | ||
Tyumen Oil Co. | ||||
Series REGS | ||||
11.000% due 11/06/07 | 1,230 | 1,291 | ||
UFJ Finance Aruba AEC | ||||
6.750% due 07/15/13 | 220 | 236 | ||
Unicredit Luxembourg Finance SA (Ê)(Å) | ||||
5.426% due 10/24/08 | 1,245 | 1,245 | ||
Vale Overseas, Ltd. | ||||
6.250% due 01/11/16 | 460 | 463 | ||
Vedanta Resources PLC (Þ) | ||||
6.625% due 02/22/10 | 820 | 809 | ||
Venezuela Government International Bond | ||||
6.000% due 12/09/20 | 1,115 | 1,012 | ||
VTB Capital SA (Ê)(Å) | ||||
5.970% due 08/01/08 | 4,685 | 4,685 | ||
124,404 | ||||
Loan Agreements - 0.8% | ||||
Avis Budget Holdings, Term Loan | ||||
6.630% due 04/19/12 | 509 | 506 | ||
AWAS, Second Lien Term Loan | ||||
11.438% due 03/21/13 | 685 | 692 | ||
Georgia-Pacific Corp., First Lien Term Loan B | ||||
7.367% due 12/20/12 | 201 | 202 | ||
7.376% due 12/20/12 | 52 | 53 | ||
7.390% due 12/20/12 | 838 | 843 | ||
Georgia-Pacific Corp., Second Lien Term Loan | ||||
8.390% due 12/23/13 | 800 | 811 | ||
Healthsouth Corp., Term Loan B | ||||
8.620% due 03/10/13 | 1,895 | 1,902 | ||
La Petite Academy, Inc., Second Lien Term Loan | ||||
12.610% due 02/17/13 | 500 | 505 | ||
Lyondell Chemical Co., Term Loan | ||||
7.110% due 08/16/13 | 900 | 903 | ||
NRG Energy, Inc. | ||||
7.367% due 02/01/13 | 996 | 1,001 | ||
Starbound Reinsurance, Ltd., Term B II Loan | ||||
7.230% due 03/31/08 | 9,000 | 9,000 | ||
Starbound Reinsurance, Ltd., Term B III Loan | ||||
6.730% due 03/31/08 | 2,000 | 2,000 | ||
United Airlines, Inc., Term Loan | ||||
9.125% due 02/01/12 | 162 | 163 | ||
United Airlines, Inc., Term Loan B | ||||
9.250% due 02/01/12 | 1,132 | 1,143 | ||
Visteon Corp., Term Loan | ||||
8.610% due 06/13/13 | 900 | 900 |
222
Table of Contents
Windstream Communications, Term Loan B | ||||
7.120% due 07/17/13 | 1,035 | 1,042 | ||
21,666 | ||||
Mortgage-Backed Securities - 42.9% | ||||
Adjustable Rate Mortgage Trust (Ê) | ||||
Series 2005-3 Class 8A2 | ||||
5.560% due 07/25/35 | 1,863 | 1,867 | ||
American Home Mortgage Assets (Ê) | ||||
Series 2006-2 Class 2A2 | ||||
5.615% due 09/25/46 | 2,639 | 2,645 | ||
Series 2006-4 Class 1A11 | ||||
5.520% due 08/30/36 | 3,257 | 3,257 | ||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-1 Class 1A | ||||
5.735% due 04/25/44 | 519 | 519 | ||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 864 | 842 | ||
Series 2005-2 Class 5A2 | ||||
5.470% due 09/25/35 | 607 | 607 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-3 Class A3 | ||||
4.875% due 06/10/39 | 2,290 | 2,276 | ||
Series 2004-4 Class A3 | ||||
4.128% due 07/10/42 | 1,475 | 1,438 | ||
Series 2005-2 Class A4 | ||||
4.783% due 07/10/43 | 2,155 | 2,114 | ||
Series 2005-3 Class A2 | ||||
4.501% due 07/10/43 | 1,110 | 1,087 | ||
Series 2005-5 Class A4 | ||||
5.115% due 10/10/45 | 4,500 | 4,445 | ||
Series 2005-6 Class A4 | ||||
5.182% due 09/10/47 | 3,000 | 2,990 | ||
Series 2006-3 Class A4 | ||||
5.889% due 07/10/44 | 2,755 | 2,873 | ||
Series 2006-4 Class A4 | ||||
5.634% due 07/10/46 | 2,865 | 2,936 | ||
Banc of America Funding Corp. | ||||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 969 | 946 | ||
Series 2005-F Class 1A2 (Ê) | ||||
5.676% due 09/20/35 | 626 | 628 | ||
Series 2005-F Class 2A1 | ||||
5.256% due 09/20/35 | 1,205 | 1,212 | ||
Series 2006-3 Class 5A8 | ||||
5.500% due 03/25/36 | 2,800 | 2,787 | ||
Series 2006-A Class 3A2 | ||||
5.919% due 02/20/36 | 1,334 | 1,347 | ||
Series 2006-A Class 4A1 (Ê) | ||||
5.567% due 02/20/36 | 2,943 | 2,944 | ||
Banc of America Mortgage Securities | ||||
Series 2003-9 Class 1A12 (Ê) | ||||
5.770% due 12/25/33 | 3,909 | 3,924 | ||
Series 2003-D Class 1A2 (Ê) | ||||
6.104% due 05/25/33 | 8 | 8 | ||
Series 2004-1 Class 5A1 | ||||
6.500% due 09/25/33 | 100 | 101 | ||
Series 2004-11 Class 2A1 | ||||
5.750% due 01/25/35 | 2,583 | 2,549 | ||
Series 2004-D Class 1A1 (Ê) | ||||
3.524% due 05/25/34 | 874 | 867 |
223
Table of Contents
Series 2005-9 Class 2A1 | ||||
4.750% due 10/25/20 | 1,344 | 1,318 | ||
Series 2005-L Class 3A1 (Ê) | ||||
5.453% due 01/25/36 | 1,434 | 1,430 | ||
Series 2006-2 Class A15 | ||||
6.000% due 07/25/36 | 2,486 | 2,502 | ||
Bank of America Alternative Loan Trust | ||||
Series 2003-10 Class 2A1 | ||||
6.000% due 12/25/33 | 624 | 625 | ||
Series 2003-10 Class 2A2 (Ê) | ||||
5.770% due 12/25/33 | 1,433 | 1,441 | ||
Series 2003-2 Class CB2 (Ê) | ||||
5.820% due 04/25/33 | 661 | 665 | ||
Series 2004-10 Class 1CB1 | ||||
6.000% due 11/25/34 | 407 | 410 | ||
Series 2004-11 Class 1CB1 | ||||
6.000% due 12/25/34 | 478 | 481 | ||
Series 2004-2 Class 1A1 | ||||
6.000% due 03/25/34 | 423 | 424 | ||
Series 2005-3 Class 2A1 | ||||
5.500% due 04/25/35 | 615 | 613 | ||
Series 2005-5 Class 2CB1 | ||||
6.000% due 06/25/35 | 748 | 748 | ||
Series 2005-6 Class 7A1 | ||||
5.500% due 07/25/20 | 817 | 814 | ||
Series 2005-9 Class 5A1 | ||||
5.500% due 10/25/20 | 962 | 958 | ||
Series 2006-5 Class CB17 | ||||
6.000% due 06/25/36 | 1,821 | 1,825 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
Series 2003-8 Class 4A1 | ||||
4.644% due 01/25/34 | 584 | 581 | ||
Series 2005-10 Class A1 (Ê) | ||||
4.750% due 10/25/35 | 4,269 | 4,210 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 1,526 | 1,529 | ||
Series 2006-3 Class 33A1 (Ê) | ||||
6.205% due 05/25/36 | 1,700 | 1,721 | ||
Series 2006-3 Class 34A1 | ||||
6.192% due 05/25/36 | 1,514 | 1,532 | ||
Series 2006-4 Class 23A5 | ||||
6.246% due 08/25/36 | 1,395 | 1,416 | ||
Bear Stearns Asset Backed Securities, Inc. | ||||
Series 2005-AC8 Class A5 | ||||
5.500% due 11/25/35 | 1,264 | 1,260 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 2004-ESA Class E (Þ) | ||||
5.064% due 05/14/16 | 825 | 825 | ||
Series 2005-PW1 Class A4 | ||||
5.405% due 12/11/40 | 3,500 | 3,528 | ||
Bear Stearns Mortgage Funding Trust | ||||
5.320% due 12/25/36 | 2,800 | 2,800 | ||
Series 2006-AR1 Class 1A2 (Ê) | ||||
5.574% due 07/25/36 | 2,087 | 2,088 | ||
Series 2006-AR2 Class 1A1 (Ê) | ||||
5.524% due 09/25/36 | 5,297 | 5,287 | ||
Series 2006-AR2 Class 2A1 (Ê) | ||||
5.554% due 10/25/36 | 2,497 | 2,497 | ||
Series 2006-AR3 Class IA1 (Ê) |
224
Table of Contents
5.500% due 03/25/36 | 2,250 | 2,250 | ||
Chase Mortgage Finance Corp. | ||||
Series 2003-S8 Class A2 | ||||
5.000% due 09/25/18 | 1,973 | 1,948 | ||
Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2005-11 Class A2A (Ê) | ||||
4.700% due 12/25/35 | 365 | 359 | ||
Series 2006-WF1 Class A2F | ||||
5.657% due 03/01/36 | 1,925 | 1,924 | ||
Series 2006-WFH Class A2 (Ê) | ||||
5.470% due 11/25/36 | 6,300 | 6,309 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||
Series 2005-CD1 Class A4 | ||||
5.226% due 07/15/44 | 4,000 | 4,003 | ||
Series 2006-CD3 Class A5 | ||||
5.617% due 10/15/48 | 1,390 | 1,397 | ||
Citimortgage Alternative Loan Trust | ||||
Series 2006-A3 Class 1A5 | ||||
6.000% due 07/25/36 | 1,480 | 1,487 | ||
Commercial Mortgage Pass Through Certificates | ||||
Series 2001-J1A Class A2 (Þ) | ||||
6.457% due 02/16/34 | 693 | 720 | ||
Series 2006-C7 Class A2 | ||||
5.690% due 06/10/46 | 825 | 842 | ||
Countrywide Alternative Loan Trust | ||||
5.250% due 12/25/46 | 8,500 | 8,500 | ||
Series 2004-28C Class 6A1 | ||||
6.000% due 01/25/35 | 648 | 648 | ||
Series 2004-J7 Class 1A2 | ||||
4.673% due 08/25/34 | 353 | 350 | ||
Series 2004-J8 Class 1A1 | ||||
7.000% due 09/25/34 | 696 | 711 | ||
Series 2005-51 Class 1A1 (Ê) | ||||
5.650% due 11/20/35 | 780 | 784 | ||
Series 2005-56 Class 2A2 (Ê) | ||||
6.472% due 11/25/35 | 2,312 | 2,360 | ||
Series 2005-58 Class A2 (Ê) | ||||
5.720% due 12/20/35 | 1,796 | 1,802 | ||
Series 2005-59 Class 1A1 (Ê) | ||||
5.656% due 11/20/35 | 2,219 | 2,226 | ||
Series 2005-59 Class 1A2B (Ê) | ||||
5.586% due 11/20/35 | 1,363 | 1,367 | ||
Series 2005-62 Class 1A1 (Ê) | ||||
5.630% due 12/25/35 | 2,762 | 2,774 | ||
Series 2005-63 Class 3A1 | ||||
5.892% due 11/25/35 | 1,387 | 1,389 | ||
Series 2005-76 Class 2A2 (Ê) | ||||
6.132% due 02/25/36 | 2,597 | 2,624 | ||
Series 2005-81 Class X1 | ||||
Interest Only STRIP | ||||
1.651% due 02/25/37 | 7,378 | 405 | ||
Series 2005-J13 Class 2A3 | ||||
5.500% due 11/25/35 | 971 | 970 | ||
Series 2005-J8 Class 1A3 | ||||
5.500% due 07/25/35 | 1,719 | 1,718 | ||
Series 2006-2CB Class A3 | ||||
5.500% due 03/25/36 | 1,052 | 1,055 | ||
Series 2006-33C Class M | ||||
6.000% due 11/25/36 | 510 | 505 | ||
Series 2006-9T1 Class A7 |
225
Table of Contents
6.000% due 05/25/36 | 966 | 978 | ||
Series 2006-J2 Class A3 | ||||
6.000% due 04/25/36 | 1,431 | 1,444 | ||
Series 2006-OA1 Class 1XP | ||||
Interest Only STRIP | ||||
0.088% due 10/25/36 | 21,900 | 1,158 | ||
Series 2006-OA1 Class 2X | ||||
Interest Only STRIP | ||||
1.790% due 03/20/46 | 10,835 | 540 | ||
Series 2006-OA1 Class 4A1 (Ê) | ||||
5.514% due 08/25/46 | 3,932 | 3,932 | ||
Series 2006-OA1 Class A1A (Ê) | ||||
5.380% due 09/25/46 | 2,389 | 2,388 | ||
Series 2006-OA1 Class XBJ | ||||
Interest Only STRIP | ||||
0.399% due 08/25/46 | 6,923 | 324 | ||
Series 2006-OA6 Class 1A3 (Ê) | ||||
5.600% due 04/25/36 | 1,575 | 1,580 | ||
Countrywide Home Loan Mortgage Pass Through Trust | ||||
Series 2004-16 Class 1A1 (Ê) | ||||
5.720% due 09/25/34 | 2,317 | 2,327 | ||
Series 2005-HYB Class 3A2A (Ê) | ||||
5.250% due 02/20/36 | 435 | 431 | ||
Series 2006-1 Class A2 | ||||
6.000% due 03/25/36 | 1,109 | 1,111 | ||
Series 2006-HYB Class 3A1A | ||||
6.124% due 05/20/36 | 1,579 | 1,620 | ||
Series 2006-OA5 Class 2A1 (Ê) | ||||
5.530% due 04/25/46 | 4,799 | 4,794 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 1998-C2 Class A2 | ||||
6.300% due 11/15/30 | 729 | 742 | ||
Series 2001-SPG Class A2 (Þ) | ||||
6.515% due 08/13/18 | 400 | 423 | ||
Series 2003-29 Class 5A1 | ||||
7.000% due 12/25/33 | 169 | 171 | ||
Series 2004-1 Class 3A1 | ||||
7.000% due 02/25/34 | 71 | 72 | ||
Series 2004-C1 Class A3 | ||||
4.321% due 01/15/37 | 1,895 | 1,836 | ||
Credit Suisse Mortgage Capital Certificates | ||||
Series 2006-C1 Class AAB | ||||
5.681% due 02/15/39 | 450 | 457 | ||
Series 2006-C4 Class A3 | ||||
5.467% due 09/15/39 | 2,000 | 2,021 | ||
Crown Castle Towers LLC (Þ) | ||||
Series 2005-1A Class C | ||||
5.074% due 06/15/35 | 460 | 453 | ||
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||
Series 2003-3 Class 2A3 | ||||
4.500% due 10/25/33 | 2 | 2 | ||
Series 2005-AR1 Class 2A3 | ||||
5.025% due 08/25/35 | 2,810 | 2,862 | ||
DLJ Commercial Mortgage Corp. | ||||
Series 1998-CF1 Class A1B | ||||
6.410% due 02/18/31 | 1,593 | 1,607 | ||
Series 1999-CG1 Class S | ||||
Interest Only STRIP | ||||
0.082% due 03/10/32 | 19,311 | 380 | ||
Downey Savings & Loan Association Mortgage Loan Trust |
226
Table of Contents
Series 2004-AR3 Class 1A1B (Ê) | ||||
6.910% due 07/19/44 | 761 | 769 | ||
Series 2006-AR1 Class 2A1A (Ê) | ||||
5.372% due 04/19/47 | 2,545 | 2,546 | ||
Series 2006-AR2 Class 2A1A (Ê) | ||||
5.580% due 09/19/36 | 2,626 | 2,631 | ||
Fannie Mae | ||||
7.000% due 2009 | 64 | 64 | ||
5.363% due 2012 | 1,499 | 1,502 | ||
5.500% due 2016 | 98 | 98 | ||
6.000% due 2016 | 1,118 | 1,138 | ||
11.000% due 2016 | 106 | 117 | ||
5.000% due 2017 | 787 | 778 | ||
5.500% due 2017 | 511 | 514 | ||
6.000% due 2017 | 643 | 654 | ||
6.500% due 2017 | 378 | 384 | ||
4.000% due 2018 | 5,708 | 5,422 | ||
4.500% due 2018 | 8,045 | 7,800 | ||
5.000% due 2018 | 18,105 | 17,872 | ||
4.500% due 2019 | 2,365 | 2,289 | ||
5.000% due 2019 | 3,202 | 3,160 | ||
4.500% due 2020 | 1,392 | 1,349 | ||
5.000% due 2020 | 5,812 | 5,727 | ||
5.500% due 2020 | 552 | 553 | ||
4.500% due 2021 | 5 | 5 | ||
5.000% due 2021 | 3,501 | 3,446 | ||
6.500% due 2024 | 1,891 | 1,936 | ||
7.500% due 2024 | 11 | 11 | ||
5.500% due 2025 | 1,124 | 1,120 | ||
6.500% due 2025 | 1,179 | 1,208 | ||
6.664% due 2026 (Ê) | 290 | 295 | ||
7.000% due 2026 | 280 | 290 | ||
9.000% due 2026 | 48 | 52 | ||
7.000% due 2027 | 9 | 9 | ||
7.500% due 2027 | 8 | 9 | ||
6.500% due 2028 | 3 | 3 | ||
7.000% due 2028 | 204 | 211 | ||
5.500% due 2029 | 1,860 | 1,848 | ||
7.000% due 2029 | 2,506 | 2,595 | ||
7.500% due 2029 | 56 | 60 | ||
7.000% due 2030 | 928 | 958 | ||
7.500% due 2030 | 415 | 430 | ||
8.000% due 2030 | 426 | 448 | ||
8.500% due 2030 | 807 | 870 | ||
9.500% due 2030 | 106 | 116 | ||
7.000% due 2031 | 2,028 | 2,093 | ||
7.500% due 2031 | 583 | 609 | ||
8.000% due 2031 | 726 | 766 | ||
8.500% due 2031 | 479 | 516 | ||
6.000% due 2032 | 3,239 | 3,270 | ||
6.500% due 2032 | 395 | 404 | ||
7.000% due 2032 | 6,638 | 6,850 | ||
7.500% due 2032 | 351 | 366 | ||
8.000% due 2032 | 4 | 4 | ||
8.500% due 2032 | 66 | 71 | ||
3.950% due 2033 (Ê) | 2,013 | 1,967 | ||
4.644% due 2033 (Ê) | 1,283 | 1,278 | ||
5.000% due 2033 | 4,359 | 4,225 | ||
5.500% due 2033 | 4,595 | 4,552 | ||
6.000% due 2033 | 1,071 | 1,080 |
227
Table of Contents
7.000% due 2033 | 595 | 614 | ||
5.000% due 2034 | 4,907 | 4,754 | ||
5.500% due 2034 | 44,530 | 44,107 | ||
6.000% due 2034 | 1,809 | 1,823 | ||
7.000% due 2034 | 422 | 435 | ||
7.500% due 2034 | 268 | 277 | ||
4.174% due 2035 (Ê) | 4,425 | 4,377 | ||
4.582% due 2035 (Ê) | 3,011 | 2,995 | ||
4.836% due 2035 (Ê) | 4,584 | 4,538 | ||
5.000% due 2035 | 997 | 966 | ||
5.500% due 2035 | 70,957 | 70,186 | ||
6.000% due 2035 | 2,166 | 2,181 | ||
7.000% due 2035 | 6,482 | 6,686 | ||
7.500% due 2035 | 1,426 | 1,485 | ||
5.000% due 2036 | 33,534 | 32,404 | ||
6.000% due 2036 | 16,000 | 16,100 | ||
6.500% due 2036 | 4,664 | 4,753 | ||
7.000% due 2036 | 6,318 | 6,503 | ||
7.500% due 2036 | 5,221 | 5,418 | ||
6.064% due 2040 (Ê) | 743 | 750 | ||
Series 1992-10 Class ZD | ||||
8.000% due 11/25/21 | 473 | 478 | ||
Series 1997-281 Class 2 | ||||
Interest Only STRIP | ||||
9.000% due 11/01/26 | 50 | 13 | ||
Series 1996-46 Class ZA | ||||
7.500% due 11/25/26 | 276 | 285 | ||
Series 1997-68 Class SC (Ê) | ||||
Interest Only STRIP | ||||
3.125% due 05/18/27 | 125 | 11 | ||
Series 1999-56 Class Z | ||||
7.000% due 12/18/29 | 942 | 979 | ||
Series 2000-306 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 05/01/30 | 54 | 13 | ||
Series 2001-317 Class 2 | ||||
Interest Only STRIP | ||||
8.000% due 08/01/31 | 111 | 27 | ||
Series 2001-4 Class SA (Ê) | ||||
Interest Only STRIP | ||||
2.181% due 02/17/31 | 239 | 15 | ||
Series 2002-320 Class 2 | ||||
Interest Only STRIP | ||||
7.000% due 03/01/32 | 35 | 8 | ||
Series 2002-50 Class SC (Ê) | ||||
Interest Only STRIP | ||||
2.715% due 12/25/29 | 22 | — | ||
Series 2003-122 Class AJ | ||||
Interest Only STRIP | ||||
4.500% due 02/25/28 | 450 | 439 | ||
Series 2003-16 Class NI | ||||
Interest Only STRIP | ||||
5.000% due 02/25/15 | 552 | 20 | ||
Series 2003-25 Class IK | ||||
Interest Only STRIP | ||||
7.000% due 04/25/33 | 400 | 89 | ||
Series 2003-32 Class FH (Ê) | ||||
5.720% due 11/25/22 | 2,256 | 2,272 | ||
Series 2003-32 Class UI | ||||
Interest Only STRIP |
228
Table of Contents
6.000% due 05/25/33 | 475 | 109 | ||
Series 2003-33 Class IA | ||||
Interest Only STRIP | ||||
6.500% due 05/25/33 | 2,185 | 486 | ||
Series 2003-337 Class 1 | ||||
Principal Only STRIP | ||||
Zero coupon due 07/01/33 | 2,227 | 1,640 | ||
Series 2003-343 Class 6 | ||||
Interest Only STRIP | ||||
5.000% due 10/01/33 | 2,195 | 487 | ||
Series 2003-35 Class IU | ||||
Interest Only STRIP | ||||
6.000% due 05/25/33 | 526 | 121 | ||
Series 2003-35 Class UI | ||||
Interest Only STRIP | ||||
6.500% due 05/25/33 | 527 | 116 | ||
Series 2003-64 Class JI | ||||
Interest Only STRIP | ||||
6.000% due 07/25/33 | 517 | 118 | ||
Series 2003-78 Class FI (Ê) | ||||
5.720% due 01/25/33 | 2,167 | 2,172 | ||
Series 2003-82 Class IA | ||||
Interest Only STRIP | ||||
6.000% due 08/25/32 | 497 | 69 | ||
Series 2003-82 Class WI | ||||
Interest Only STRIP | ||||
6.000% due 08/25/32 | 80 | 11 | ||
Series 2004-21 Class FL (Ê) | ||||
5.670% due 11/25/32 | 1,102 | 1,102 | ||
Series 2005-110 Class MB | ||||
5.500% due 09/25/35 | 1,875 | 1,890 | ||
Series 2005-69 Class IO (Ê) | ||||
Zero coupon due 08/25/35 | 56 | 13 | ||
15 Year TBA (Ï) | ||||
4.500% | 3,080 | 2,979 | ||
5.000% | 7,475 | 7,361 | ||
5.500% | 4,430 | 4,434 | ||
6.000% | 4,805 | 4,877 | ||
30 Year TBA (Ï) | ||||
4.500% | 3,815 | 3,579 | ||
5.000% | 35,035 | 33,820 | ||
5.500% | 69,115 | 68,294 | ||
6.000% | 7,575 | 7,620 | ||
6.500% | 15,235 | 15,524 | ||
7.000% | 15,910 | 16,365 | ||
7.500% | 2,000 | 2,073 | ||
Fannie Mae Grantor Trust | ||||
Series 1999-T2 Class A1 | ||||
7.500% due 01/19/39 | 44 | 46 | ||
Series 2001-T8 Class A2 | ||||
9.500% due 07/25/41 | 241 | 260 | ||
Fannie Mae REMIC (Ê) | ||||
Series 1993-41 Class ZQ | ||||
7.000% due 12/25/23 | 2,448 | 2,563 | ||
Series 1993-42 Class ZQ | ||||
6.750% due 04/25/23 | 1,674 | 1,732 | ||
Series 2006-5 Class 3A2 | ||||
4.677% due 05/25/35 | 300 | 296 | ||
Series 2006-90 Class Z | ||||
6.000% due 09/25/36 | 1,732 | 1,732 |
229
Table of Contents
Fannie Mae Whole Loan | ||||
Series 2003-W17 Class 1A6 | ||||
5.310% due 08/25/33 | 5,400 | 5,358 | ||
Series 2004-W11 Class 1A2 | ||||
6.500% due 05/25/44 | 653 | 669 | ||
Series 2004-W9 Class 2A1 | ||||
6.500% due 02/25/44 | 359 | 368 | ||
FBR Securitization Trust (Ê) | ||||
Series 2005-4 Class AV21 | ||||
5.450% due 10/25/35 | 825 | 825 | ||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities | ||||
Series 2003-58 Class 2A | ||||
6.500% due 09/25/43 | 336 | 344 | ||
Series 2005-63 Class 1A1 (Ê) | ||||
5.632% due 02/25/45 | 262 | 262 | ||
First Horizon Alternative Mortgage Securities | ||||
Series 2005-AA2 Class 1A1 (Ê) | ||||
5.097% due 03/25/35 | 481 | 479 | ||
Series 2005-AA5 Class 1A1 (Ê) | ||||
5.324% due 07/25/35 | 559 | 558 | ||
Series 2006-AA5 Class A2 (Ê) | ||||
6.626% due 09/25/36 | 1,473 | 1,510 | ||
Series 2006-FA3 Class A6 | ||||
6.000% due 07/25/36 | 1,605 | 1,623 | ||
First Horizon Asset Securities, Inc. | ||||
Series 2003-5 Class 1A17 | ||||
8.000% due 07/25/33 | 139 | 148 | ||
Series 2004-AR5 Class 4A1 (Ê) | ||||
5.679% due 10/25/34 | 439 | 437 | ||
Series 2005-AR5 Class 3A1 (Ê) | ||||
5.525% due 10/25/35 | 727 | 728 | ||
First Union-Lehman Brothers-Bank of America | ||||
Series 1998-C2 Class A2 | ||||
6.560% due 11/18/35 | 16 | 17 | ||
Freddie Mac | ||||
12.000% due 2013 | 12 | 13 | ||
12.000% due 2014 | 17 | 19 | ||
11.000% due 2015 | 14 | 15 | ||
10.000% due 2016 | 55 | 60 | ||
12.000% due 2016 | 3 | 3 | ||
4.500% due 2018 | 2,625 | 2,541 | ||
5.000% due 2018 | 4,383 | 4,325 | ||
4.000% due 2019 | 13,387 | 12,684 | ||
4.500% due 2019 | 356 | 344 | ||
5.000% due 2019 | 6,400 | 6,311 | ||
4.500% due 2020 | 2,677 | 2,590 | ||
11.000% due 2020 | 59 | 66 | ||
5.000% due 2021 | 1,839 | 1,814 | ||
5.500% due 2021 | 843 | 844 | ||
7.430% due 2024 | 64 | 64 | ||
4.235% due 2034 (Ê) | 302 | 304 | ||
4.688% due 2034 (Ê) | 1,429 | 1,432 | ||
4.924% due 2034 (Ê) | 3,124 | 3,079 | ||
4.821% due 2035 (Ê) | 2,925 | 2,915 | ||
4.866% due 2035 (Ê) | 4,932 | 4,887 | ||
Series 1991-103 Class Z | ||||
9.000% due 02/15/21 | 62 | 62 | ||
Series 1994-173 Class Z | ||||
7.000% due 05/15/24 | 359 | 378 | ||
Series 1999-212 Class SG (Ê) |
230
Table of Contents
Interest Only STRIP | ||||
1.625% due 06/17/27 | 1,963 | 72 | ||
Series 2000-224 Class SC (Ê) | ||||
Interest Only STRIP | ||||
2.170% due 08/15/30 | 85 | 3 | ||
Series 2000-226 Class F (Ê) | ||||
5.780% due 11/15/30 | 102 | 102 | ||
Series 2001-229 Class KF (Ê) | ||||
5.570% due 07/25/22 | 777 | 783 | ||
Series 2001-232 Class ZQ | ||||
6.500% due 06/15/31 | 1,683 | 1,759 | ||
Series 2002-246 Class SJ (Ê) | ||||
Interest Only STRIP | ||||
2.680% due 03/15/32 | 279 | 21 | ||
Series 2003-256 Class IM | ||||
Interest Only STRIP | ||||
5.000% due 09/15/14 | 679 | 27 | ||
Series 2003-259 Class IQ | ||||
Interest Only STRIP | ||||
5.000% due 06/15/17 | 1,538 | 181 | ||
Series 2003-262 Class AB | ||||
2.900% due 11/15/14 | 2,230 | 2,156 | ||
Series 2003-264 Class IM | ||||
Interest Only STRIP | ||||
7.000% due 07/15/33 | 479 | 110 | ||
Series 2003-266 Class MA | ||||
4.500% due 10/15/31 | 863 | 847 | ||
Series 2004-276 Class IP | ||||
Interest Only STRIP | ||||
5.500% due 07/15/23 | 1,993 | 100 | ||
Series 2004-277 Class UF (Ê) | ||||
5.630% due 06/15/33 | 2,732 | 2,736 | ||
Series 2004-281 Class DF (Ê) | ||||
5.780% due 06/15/23 | 805 | 810 | ||
Series 2004-287 Class GC | ||||
5.000% due 11/15/29 | 520 | 511 | ||
Series 2004-289 Class PC | ||||
5.000% due 07/15/30 | 1,060 | 1,042 | ||
Series 2005-291 Class KP | ||||
5.000% due 11/15/29 | 1,155 | 1,137 | ||
Series 2005-292 Class IG | ||||
Interest Only STRIP | ||||
5.000% due 04/15/23 | 1,085 | 165 | ||
Series 2005-292 Class NA | ||||
5.000% due 12/15/20 | 1,517 | 1,509 | ||
Series 2005-294 Class FA (Ê) | ||||
5.500% due 03/15/20 | 1,564 | 1,563 | ||
Series 2005-302 Class MB | ||||
5.000% due 12/15/28 | 640 | 634 | ||
Series 2005-303 Class AQ | ||||
4.500% due 10/15/22 | 4,044 | 4,006 | ||
Series 2005-306 Class PC | ||||
5.000% due 02/15/29 | 1,795 | 1,776 | ||
Series 2006-313 Class FP (Ê) | ||||
Zero coupon due 04/15/36 | 1,186 | 1,207 | ||
15 Year TBA (Ï) | ||||
5.500% | 10,300 | 10,300 | ||
30 Year TBA (Ï) | ||||
5.000% | 17,205 | 16,619 | ||
5.500% | 12,085 | 11,949 |
231
Table of Contents
6.000% | 5,905 | 5,944 | ||
Freddie Mac Gold | ||||
6.000% due 2016 | 137 | 137 | ||
5.000% due 2018 | 270 | 267 | ||
5.500% due 2020 | 6,030 | 6,043 | ||
8.000% due 2020 | 132 | 139 | ||
10.500% due 2021 | 34 | 37 | ||
5.500% due 2024 | 833 | 831 | ||
8.500% due 2025 | 41 | 44 | ||
7.000% due 2027 | 254 | 263 | ||
8.500% due 2027 | 208 | 223 | ||
7.500% due 2028 | 60 | 63 | ||
7.500% due 2029 | 100 | 104 | ||
6.500% due 2030 | 8 | 8 | ||
7.222% due 2030 (Ê) | 10 | 10 | ||
7.500% due 2030 | 335 | 349 | ||
8.000% due 2030 | 86 | 91 | ||
8.500% due 2030 | 211 | 226 | ||
7.000% due 2031 | 533 | 550 | ||
7.500% due 2031 | 192 | 200 | ||
8.000% due 2031 | 296 | 311 | ||
7.000% due 2032 | 295 | 304 | ||
7.500% due 2032 | 181 | 189 | ||
5.000% due 2033 | 1,996 | 1,941 | ||
6.500% due 2033 | 139 | 143 | ||
7.000% due 2033 | 80 | 82 | ||
7.500% due 2033 | 126 | 132 | ||
Series 1998-191 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 01/01/28 | 42 | 10 | ||
Series 1998-194 Class IO | ||||
Interest Only STRIP | ||||
6.500% due 04/01/28 | 258 | 58 | ||
Series 2001-212 Class IO | ||||
Interest Only STRIP | ||||
6.000% due 05/01/31 | 402 | 85 | ||
Series 2001-215 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 06/01/31 | 189 | 45 | ||
Freddie Mac Reference REMIC | ||||
Series 2006-R00 Class AK | ||||
5.750% due 12/15/18 | 2,150 | 2,160 | ||
Freddie Mac REMICS | ||||
Series 2003-269 Class FE (Ê) | ||||
5.930% due 12/15/28 | 2,186 | 2,197 | ||
Series 2004-277 Class KE | ||||
3.500% due 12/15/17 | 295 | 292 | ||
Series 2006-323 Class PA | ||||
6.000% due 03/15/26 | 2,125 | 2,156 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2002-1A Class A3 | ||||
6.269% due 12/10/35 | 745 | 782 | ||
Series 2002-3A Class A1 | ||||
4.229% due 12/10/37 | 4,366 | 4,284 | ||
Ginnie Mae I | ||||
11.000% due 2010 | 19 | 21 | ||
11.000% due 2013 | 12 | 13 | ||
10.500% due 2015 | 45 | 50 | ||
11.000% due 2015 | 3 | 3 | ||
10.500% due 2016 | 74 | 82 |
232
Table of Contents
10.500% due 2021 | 65 | 74 | ||
10.000% due 2022 | 72 | 79 | ||
9.500% due 2023 | 295 | 321 | ||
10.000% due 2025 | 89 | 99 | ||
7.500% due 2031 | 91 | 95 | ||
30 Year TBA (Ï) | ||||
5.500% | 7,070 | 7,039 | ||
Ginnie Mae II | ||||
4.750% due 2023 (Ê) | 23 | 23 | ||
5.125% due 2023 (Ê) | 38 | 39 | ||
5.375% due 2023 (Ê) | 116 | 117 | ||
4.750% due 2024 (Ê) | 163 | 164 | ||
5.125% due 2024 (Ê) | 172 | 173 | ||
4.750% due 2025 (Ê) | 10 | 10 | ||
5.125% due 2025 (Ê) | 14 | 14 | ||
5.375% due 2025 (Ê) | 335 | 338 | ||
5.125% due 2026 (Ê) | 76 | 76 | ||
8.500% due 2026 | 49 | 52 | ||
4.750% due 2027 (Ê) | 193 | 195 | ||
5.375% due 2027 (Ê) | 126 | 127 | ||
5.125% due 2029 (Ê) | 496 | 501 | ||
Global Signal Trust (Þ) | ||||
Series 2004-2A Class A | ||||
4.232% due 12/15/14 | 655 | 640 | ||
Series 2006-1 Class B | ||||
5.588% due 02/15/36 | 415 | 416 | ||
Series 2006-1 Class C | ||||
5.707% due 02/15/36 | 635 | 637 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2005-AR2 Class 4A (Ê) | ||||
5.185% due 05/25/35 | 1,227 | 1,206 | ||
Series 2005-AR6 Class 3A1 | ||||
5.297% due 11/19/35 | 2,408 | 2,394 | ||
Series 2006-HE3 Class A2 | ||||
5.799% due 10/25/36 | 495 | 496 | ||
Government National Mortgage Association | ||||
Series 1999-27 Class SE (Ê) | ||||
Interest Only STRIP | ||||
3.270% due 08/16/29 | 122 | 11 | ||
Series 1999-40 Class FE (Ê) | ||||
5.870% due 11/16/29 | 1,140 | 1,151 | ||
Series 1999-44 Class SA (Ê) | ||||
Interest Only STRIP | ||||
3.220% due 12/16/29 | 223 | 22 | ||
Series 2001-46 Class SA (Ê) | ||||
Interest Only STRIP | ||||
2.250% due 09/16/31 | 47 | 3 | ||
Series 2003-5 Class B | ||||
4.486% due 10/16/25 | 795 | 781 | ||
Greenpoint Mortgage Funding Trust | ||||
Series 2005-AR3 Class X1 | ||||
Interest Only STRIP | ||||
1.273% due 08/25/45 | 7,327 | 231 | ||
Series 2005-AR4 Class X4 | ||||
Interest Only STRIP | ||||
0.097% due 10/25/45 | 9,654 | 303 | ||
Series 2006-AR2 Class 3A2 (Ê) | ||||
5.644% due 03/25/36 | 2,320 | 2,321 | ||
Greenwich Capital Commercial Funding Corp. | ||||
Series 2004-GG1 Class A7 |
233
Table of Contents
5.317% due 06/10/36 | 3,430 | 3,440 | ||
Series 2005-GG5 Class A41 | ||||
5.243% due 04/10/37 | 2,155 | 2,157 | ||
GS Mortgage Securities Corp. (Å) | ||||
Series 2006-OA1 Class A | ||||
Interest Only STRIP | ||||
1.990% due 08/25/35 | 6,192 | 250 | ||
GS Mortgage Securities Corp. II | ||||
Series 2006-FL8 Class A1 (Ê)(Þ) | ||||
5.430% due 01/06/08 | 1,164 | 1,164 | ||
Series 2006-GG6 Class A4 | ||||
5.553% due 04/10/38 | 840 | 856 | ||
Series 2006-GG8 Class A4 | ||||
5.560% due 11/10/39 | 2,765 | 2,821 | ||
Series 2006-GG8 Class AAB | ||||
5.535% due 11/10/39 | 1,445 | 1,470 | ||
Series 2006-RR2 Class A1 (Þ) | ||||
5.816% due 01/07/36 | 925 | 938 | ||
GSMPS Mortgage Loan Trust (Þ) | ||||
Series 1998-3 Class A | ||||
7.750% due 09/19/27 | 164 | 172 | ||
Series 1999-3 Class A | ||||
8.000% due 08/19/29 | 298 | 315 | ||
Series 2005-RP1 Class 1A3 | ||||
8.000% due 01/25/35 | 895 | 950 | ||
Series 2005-RP1 Class 1A4 | ||||
8.500% due 01/25/35 | 467 | 496 | ||
Series 2006-RP1 Class 1A3 | ||||
8.000% due 01/25/36 | 539 | 550 | ||
GSR Mortgage Loan Trust | ||||
Series 2004-7 Class 1A1 | ||||
3.402% due 06/25/34 | 1,582 | 1,574 | ||
Series 2005-AR6 Class 2A1 (Ê) | ||||
4.540% due 09/25/35 | 4,541 | 4,489 | ||
Series 2006-OA1 Class 2A1 (Ê) | ||||
5.516% due 08/25/46 | 2,534 | 2,535 | ||
Harborview Mortgage Loan Trust | ||||
Series 2005-10 Class 2A1A (Ê) | ||||
5.630% due 11/19/35 | 3,482 | 3,493 | ||
Series 2005-10 Class 2A1B (Ê) | ||||
5.705% due 11/19/35 | 1,161 | 1,168 | ||
Series 2005-14 Class 3A1A | ||||
5.319% due 12/19/35 | 741 | 739 | ||
Series 2005-15 Class 2A11 (Ê) | ||||
5.595% due 10/20/45 | 3,107 | 3,116 | ||
Series 2005-16 Class 3A1A (Ê) | ||||
5.570% due 01/19/36 | 4,128 | 4,140 | ||
Series 2005-16 Class 3A1B (Ê) | ||||
5.665% due 01/19/36 | 1,743 | 1,747 | ||
Series 2005-16 Class X1 | ||||
Interest Only STRIP | ||||
2.080% due 01/19/36 | 6,373 | 185 | ||
Series 2005-16 Class X3 | ||||
Interest Only STRIP | ||||
1.820% due 01/19/36 | 17,941 | 482 | ||
Series 2005-2 Class X | ||||
Interest Only STRIP | ||||
1.412% due 05/19/35 | 10,795 | 261 | ||
Series 2005-3 Class X2 | ||||
Interest Only STRIP |
234
Table of Contents
1.112% due 06/19/35 | 10,149 | 230 | ||
Series 2005-5 Class 2A1B (Ê) | ||||
5.615% due 07/19/45 | 714 | 717 | ||
Series 2006-1 Class 2A1A (Ê) | ||||
5.565% due 03/19/37 | 1,769 | 1,771 | ||
Series 2006-1 Class PO1 | ||||
Principal Only STRIP | ||||
Zero coupon due 03/19/37 | 4 | 3 | ||
Series 2006-1 Class X1 | ||||
Interest Only STRIP | ||||
2.290% due 03/19/37 | 10,397 | 491 | ||
Series 2006-5 Class PO2 | ||||
Principal Only STRIP | ||||
Zero coupon due 07/19/47 | — | — | ||
Series 2006-5 Class X2 | ||||
Interest Only STRIP | ||||
2.193% due 07/19/47 | 12,898 | 488 | ||
Series 2006-7 Class 2A1B (Ê) | ||||
5.580% due 08/19/46 | 2,126 | 2,130 | ||
Series 2006-9 Class 2A1A (Ê) | ||||
5.540% due 08/19/46 | 2,872 | 2,873 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-3 Class 1A | ||||
5.570% due 06/25/34 | 377 | 377 | ||
Indymac Index Mortgage Loan Trust | ||||
Series 2005-AR1 Class AX2 | ||||
Interest Only STRIP | ||||
0.640% due 07/25/35 | 8,052 | 262 | ||
Series 2005-AR2 Class 1A21 | ||||
5.882% due 12/25/35 | 1,015 | 1,017 | ||
Series 2005-AR3 Class 1A1 | ||||
5.189% due 01/25/36 | 2,340 | 2,359 | ||
Series 2006-AR6 Class 2A1B (Ê) | ||||
5.635% due 06/25/47 | 2,512 | 2,519 | ||
Series 2006-AR7 Class 5A1 | ||||
6.159% due 03/25/36 | 1,085 | 1,099 | ||
Series 2006-FLX Class A1 (Ê) | ||||
5.536% due 11/25/36 | 1,675 | 1,675 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2002-C1 Class A3 | ||||
5.376% due 07/12/37 | 1,180 | 1,191 | ||
Series 2003-C1 Class A2 | ||||
4.985% due 01/12/37 | 1,618 | 1,598 | ||
Series 2004-LN2 Class A1 | ||||
4.475% due 07/15/41 | 1,794 | 1,752 | ||
Series 2005-LDP Class A3A1 | ||||
4.871% due 10/15/42 | 1,560 | 1,536 | ||
Series 2005-LDP Class A4 | ||||
4.918% due 10/15/42 | 735 | 716 | ||
Series 2006-CB1 Class A4 | ||||
5.814% due 06/12/43 | 3,000 | 3,114 | ||
5.817% due 05/12/45 | 1,550 | 1,578 | ||
Series 2006-LDP Class A4 | ||||
5.876% due 04/15/45 | 1,355 | 1,421 | ||
5.561% due 05/15/45 | 2,070 | 2,083 | ||
Series 2006-LDP Class AJ | ||||
6.066% due 04/15/45 | 1,110 | 1,156 | ||
Series 2006-RR1 Class A1 (Þ) | ||||
5.457% due 10/18/52 | 930 | 935 | ||
JP Morgan Mortgage Trust |
235
Table of Contents
Series 2005-A4 Class 1A1 | ||||
5.409% due 07/25/35 | 879 | 869 | ||
Series 2005-A6 Class 1A2 | ||||
5.151% due 09/25/35 | 1,470 | 1,476 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2002-C1 Class A4 | ||||
6.462% due 03/15/31 | 65 | 69 | ||
Series 2004-C4 Class A3 | ||||
5.154% due 06/15/29 | 3,135 | 3,146 | ||
Series 2006-C1 Class A4 | ||||
5.156% due 02/15/31 | 4,000 | 3,964 | ||
Series 2006-C4 Class A4 | ||||
5.900% due 06/15/38 | 780 | 819 | ||
Lehman Mortgage Trust | ||||
Series 2005-2 Class 2A3 | ||||
5.500% due 12/25/35 | 1,074 | 1,072 | ||
Series 2005-3 Class 1A3 | ||||
5.500% due 01/25/36 | 3,880 | 3,889 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-5N Class 3A1A | ||||
5.624% due 11/25/35 | 3,216 | 3,219 | ||
Series 2005-9N Class 1A1 | ||||
5.594% due 01/25/36 | 914 | 915 | ||
Series 2006-16N Class A4A | ||||
5.520% due 11/25/46 | 4,233 | 4,238 | ||
Luminent Mortgage Trust | ||||
Series 2006-1 Class A1 (Ê) | ||||
5.564% due 04/25/36 | 1,757 | 1,761 | ||
Series 2006-3 Class 11A2 (Ê) | ||||
5.574% due 09/25/35 | 1,579 | 1,584 | ||
Series 2006-6 Class A1 (Ê) | ||||
5.530% due 10/25/46 | 1,950 | 1,950 | ||
Mastr Adjustable Rate Mortgages Trust | ||||
Series 2005-6 Class 7A1 | ||||
5.370% due 06/25/35 | 544 | 538 | ||
Mastr Alternative Loans Trust | ||||
Series 2003-4 Class B1 | ||||
5.660% due 06/25/33 | 1,167 | 1,176 | ||
Series 2003-6 Class 3A1 | ||||
8.000% due 09/25/33 | 123 | 126 | ||
Series 2003-9 Class 1A1 | ||||
5.500% due 12/25/18 | 442 | 441 | ||
Series 2004-10 Class 5A6 | ||||
5.750% due 09/25/34 | 1,255 | 1,255 | ||
Series 2005-3 Class 7A1 | ||||
6.000% due 04/25/35 | 798 | 801 | ||
Mastr Asset Securitization Trust (Ê) | ||||
Series 2003-11 Class 6A8 | ||||
5.820% due 12/25/33 | 2,568 | 2,580 | ||
Series 2003-7 Class 4A35 | ||||
5.720% due 09/25/33 | 2,027 | 2,029 | ||
Series 2004-4 Class 2A2 | ||||
5.770% due 04/25/34 | 814 | 815 | ||
Mastr Reperforming Loan Trust (Þ) | ||||
Series 2005-1 Class 1A5 | ||||
8.000% due 08/25/34 | 717 | 758 | ||
Series 2005-2 Class 1A4 | ||||
8.000% due 05/25/35 | 1,057 | 1,078 | ||
Mastr Specialized Loan Trust (Þ) | ||||
Series 2005-2 Class A2 |
236
Table of Contents
5.150% due 07/25/35 | 541 | 530 | ||
Mellon Residential Funding Corp. (Ê) | ||||
Series 2000-TBC Class A1 | ||||
5.570% due 06/15/30 | 1,087 | 1,078 | ||
Merrill Lynch Mortgage Investors, Inc. (Ê) | ||||
Series 2005-A6 Class 2A1 | ||||
5.444% due 08/25/35 | 857 | 857 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2002-MW1 Class J (Þ) | ||||
5.695% due 07/12/34 | 365 | 353 | ||
Series 2004-MKB Class A2 | ||||
4.353% due 02/12/42 | 1,940 | 1,903 | ||
Series 2005-CIP Class A2 | ||||
4.960% due 07/12/38 | 225 | 224 | ||
Series 2005-GGP Class E (Þ) | ||||
4.330% due 11/15/10 | 185 | 183 | ||
Series 2005-GGP Class F (Þ) | ||||
4.351% due 11/15/10 | 180 | 178 | ||
MLCC Mortgage Investors, Inc. (Ê) | ||||
Series 2004-HB1 Class A2 | ||||
5.930% due 04/25/29 | 545 | 546 | ||
Morgan Stanley Capital I | ||||
Series 1999-FNV Class G (Þ) | ||||
6.120% due 03/15/31 | 400 | 404 | ||
Series 2005-IQ1 Class AAB | ||||
5.178% due 09/15/42 | 2,510 | 2,504 | ||
Series 2006-HQ8 Class A4 | ||||
5.388% due 03/12/44 | 1,130 | 1,146 | ||
Series 2006-HQ9 Class A4 | ||||
5.731% due 07/20/44 | 1,464 | 1,509 | ||
Morgan Stanley Dean Witter | ||||
Capital I (Þ) | ||||
Series 2001-TOP Class E | ||||
7.552% due 02/15/33 | 180 | 192 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-11 Class 1A6 | ||||
6.231% due 08/25/36 | 1,605 | 1,646 | ||
Series 2006-2 Class 6A | ||||
6.500% due 02/25/36 | 702 | 713 | ||
Nomura Asset Acceptance Corp. | ||||
Series 2005-WF1 Class 2A2 | ||||
4.786% due 03/25/35 | 1,285 | 1,266 | ||
Series 2006-AF1 Class 1A2 | ||||
6.159% due 05/25/36 | 1,525 | 1,539 | ||
Prime Mortgage Trust | ||||
Series 2004-CL1 Class 1A1 | ||||
6.000% due 02/25/34 | 253 | 254 | ||
Series 2004-CL1 Class 1A2 (Ê) | ||||
5.720% due 02/25/34 | 182 | 183 | ||
Series 2004-CL1 Class 2A2 (Ê) | ||||
5.730% due 02/25/19 | 50 | 50 | ||
Residential Accredit Loans, Inc. | ||||
Series 2004-QS5 Class A6 (Ê) | ||||
5.920% due 04/25/34 | 457 | 459 | ||
Series 2004-QS8 Class A4 (Ê) | ||||
5.720% due 06/25/34 | 2,149 | 2,158 | ||
Series 2005-QA1 Class A41 | ||||
5.725% due 09/25/35 | 757 | 761 | ||
Series 2005-QA8 Class NB3 | ||||
5.504% due 07/25/35 | 1,430 | 1,436 |
237
Table of Contents
Series 2005-QO4 Class 2A1 (Ê) | ||||
5.604% due 12/25/45 | 3,982 | 3,997 | ||
Series 2005-QS9 Class A6 | ||||
5.500% due 06/25/35 | 420 | 411 | ||
Series 2006-QO1 Class 1A1 (Ê) | ||||
5.584% due 02/25/46 | 817 | 817 | ||
Series 2006-QO1 Class 2A1 (Ê) | ||||
5.594% due 02/25/46 | 936 | 936 | ||
Series 2006-QO6 Class A2 (Ê) | ||||
5.554% due 06/25/46 | 2,606 | 2,602 | ||
Series 2006-QS6 Class 1A13 | ||||
6.000% due 06/25/36 | 3,300 | 3,323 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2004-SL1 Class A3 | ||||
7.000% due 11/25/31 | 229 | 232 | ||
Series 2004-SL4 Class A3 | ||||
6.500% due 07/25/32 | 458 | 466 | ||
Series 2005-SL1 Class A2 | ||||
6.000% due 05/25/32 | 676 | 693 | ||
Residential Asset Securities Corp. (Ê) | ||||
Series 2003-KS4 Class AIIB | ||||
5.610% due 06/25/33 | 604 | 604 | ||
Residential Asset Securitization Trust (Ê) | ||||
Series 2003-A15 Class 1A2 | ||||
5.770% due 02/25/34 | 2,431 | 2,438 | ||
Residential Funding Mortgage Securities II | ||||
Series 2003-S14 Class A5 (Ê) | ||||
5.720% due 07/25/18 | 1,859 | 1,866 | ||
Series 2003-S20 Class 1A7 (Ê) | ||||
5.820% due 12/25/33 | 294 | 294 | ||
Series 2003-S5 Class 1A2 (Ê) | ||||
5.770% due 11/25/18 | 1,221 | 1,228 | ||
Series 2006-SA3 Class 3A1 | ||||
6.093% due 09/25/36 | 1,572 | 1,587 | ||
Series 2006-SA4 Class 2A1 | ||||
6.164% due 10/25/36 | 870 | 877 | ||
Sequoia Mortgage Trust (Ê) | ||||
Series 2004-3 Class A | ||||
5.670% due 04/20/34 | 3,198 | 3,198 | ||
Small Business Administration Participation Certificates | ||||
Series 2004-20F Class 1 | ||||
5.520% due 06/01/24 | 354 | 359 | ||
Structured Adjustable Rate Mortgage Loan Trust | ||||
Series 2004-18 Class 5A | ||||
5.500% due 12/25/34 | 491 | 486 | ||
Series 2005-22 Class 4A2 | ||||
5.382% due 12/25/35 | 137 | 135 | ||
Series 2006-5 Class 5A4 | ||||
6.413% due 06/25/36 | 330 | 325 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2006-AR1 Class 3A1 | ||||
5.554% due 02/25/36 | 949 | 950 | ||
Series 2006-AR3 Class 11A2 | ||||
5.594% due 04/25/36 | 2,894 | 2,894 | ||
Series 2006-AR3 Class 3A1 | ||||
5.514% due 02/25/36 | 1,261 | 1,263 | ||
Series 2006-AR8 Class A1A | ||||
5.520% due 03/25/36 | 5,450 | 5,450 | ||
Structured Asset Securities Corp. | ||||
Series 2002-22H Class 1A |
238
Table of Contents
6.973% due 11/25/32 | 103 | 105 | ||
Series 2004-12H Class 1A | ||||
6.000% due 05/25/34 | 446 | 447 | ||
Series 2004-21X Class 1A3 | ||||
4.440% due 12/25/34 | 3,410 | 3,362 | ||
Series 2005-6 Class B2 | ||||
5.344% due 05/25/35 | 284 | 271 | ||
Thornburg Mortgage Securities Trust (Ê) | ||||
Series 2006-5 Class A1 | ||||
5.450% due 08/25/36 | 3,975 | 3,967 | ||
Tobacco Settlement Authority of Iowa | ||||
6.500% due 06/01/23 | 395 | 396 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2005-C16 Class A2 | ||||
4.380% due 10/15/41 | 3,330 | 3,264 | ||
Series 2005-C21 Class A4 | ||||
5.370% due 10/15/44 | 4,000 | 3,993 | ||
Series 2006-WL7 Class A1 (Ê)(Þ) | ||||
5.490% due 08/11/18 | 4,500 | 4,500 | ||
Washington Mutual Alternative Mortgage | ||||
Pass-Through Certificates | ||||
Series 2005-4 Class CB11 | ||||
5.500% due 06/25/35 | 680 | 667 | ||
Series 2005-9 Class 3CB | ||||
5.500% due 10/25/20 | 702 | 701 | ||
Series 2006-2 Class 2CB | ||||
6.500% due 03/25/36 | 1,001 | 1,014 | ||
Series 2006-5 Class 2CB3 | ||||
6.000% due 07/25/36 | 1,490 | 1,505 | ||
Series 2006-5 Class LB1 | ||||
6.000% due 07/25/36 | 688 | 688 | ||
Series 2006-AR2 Class A1A (Ê) | ||||
5.222% due 04/25/46 | 2,011 | 2,009 | ||
Series 2006-AR5 Class 3A (Ê) | ||||
5.503% due 07/25/46 | 1,101 | 1,104 | ||
Series 2006-AR7 Class A1A (Ê) | ||||
5.483% due 09/25/46 | 1,953 | 1,955 | ||
Series 2006-AR8 Class 2A (Ê) | ||||
5.413% due 09/25/46 | 3,990 | 3,978 | ||
Series 2006-AR9 Class 2A (Ê) | ||||
5.504% due 11/25/46 | 4,000 | 4,000 | ||
Washington Mutual Mortgage Pass-Through Certificates (Ê) | ||||
Series 2005-AR1 Class A1B3 | ||||
5.674% due 12/25/45 | 2,164 | 2,171 | ||
Washington Mutual, Inc. | ||||
Series 2002-AR9 Class 1A (Ê) | ||||
5.963% due 08/25/42 | 707 | 708 | ||
Series 2003-AR4 Class A7 (Ê) | ||||
3.950% due 05/25/33 | 123 | 121 | ||
Series 2003-S9 Class A2 (Ê) | ||||
5.870% due 10/25/33 | 2,340 | 2,350 | ||
Series 2004-AR1 Class A2C (Ê) | ||||
5.698% due 07/25/44 | 80 | 80 | ||
Series 2004-AR1 Class A3 (Ê) | ||||
5.698% due 10/25/44 | 178 | 179 | ||
Series 2004-AR1 Class X | ||||
Interest Only STRIP | ||||
0.547% due 07/25/44 | 9,352 | 170 | ||
0.376% due 10/25/44 | 13,812 | 246 | ||
Series 2004-AR8 Class X |
239
Table of Contents
Interest Only STRIP | ||||
0.548% due 06/25/44 | 5,320 | 86 | ||
Series 2004-CB3 Class 1A | ||||
6.000% due 10/25/34 | 350 | 350 | ||
Series 2004-CB3 Class 4A | ||||
6.000% due 10/25/19 | 802 | 811 | ||
Series 2005-AR1 Class 1A1 | ||||
4.839% due 10/25/35 | 1,856 | 1,832 | ||
Series 2005-AR1 Class A1A1 (Ê) | ||||
5.614% due 10/25/45 | 1,415 | 1,423 | ||
5.584% due 11/25/45 | 2,670 | 2,679 | ||
Series 2005-AR1 Class A1B1 (Ê) | ||||
5.614% due 08/25/45 | 637 | 638 | ||
5.584% due 10/25/45 | 1,199 | 1,202 | ||
5.574% due 11/25/45 | 1,223 | 1,230 | ||
5.574% due 12/25/45 | 2,108 | 2,111 | ||
Series 2005-AR6 Class B3 (Ê) | ||||
5.980% due 04/25/45 | 1,364 | 1,363 | ||
Series 2005-AR8 Class 2A1A (Ê) | ||||
5.610% due 07/25/45 | 1,539 | 1,545 | ||
Series 2005-AR8 Class 2AB3 (Ê) | ||||
5.684% due 07/25/45 | 1,168 | 1,173 | ||
Series 2006-AR1 Class 1A (Ê) | ||||
5.443% due 10/25/46 | 3,000 | 2,999 | ||
Series 2006-AR1 Class 1A1 | ||||
5.980% due 09/25/36 | 1,671 | 1,688 | ||
Series 2006-AR1 Class 1A4 | ||||
5.668% due 11/25/36 | 3,130 | 3,119 | ||
Series 2006-AR1 Class 3A1A (Ê) | ||||
5.352% due 09/25/46 | 996 | 996 | ||
Series 2006-AR4 Class 1A1B (Ê) | ||||
5.372% due 05/25/46 | 2,013 | 2,014 | ||
Series 2006-AR7 Class 1A (Ê) | ||||
5.543% due 07/25/46 | 933 | 933 | ||
Series 2006-AR8 Class 1A5 | ||||
5.941% due 08/25/46 | 327 | 330 | ||
Series 2006-AR8 Class 2A3 (Ê) | ||||
6.166% due 08/25/46 | 226 | 229 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2004-I Class 1A1 | ||||
3.379% due 07/25/34 | 645 | 647 | ||
Series 2004-T Class A1 (Ê) | ||||
3.458% due 09/25/34 | 676 | 676 | ||
Series 2005-12 Class 1A7 | ||||
5.500% due 11/25/35 | 1,600 | 1,552 | ||
Series 2005-14 Class 2A1 | ||||
5.500% due 12/25/35 | 2,431 | 2,376 | ||
Series 2005-17 Class 1A1 | ||||
5.500% due 01/25/36 | 2,158 | 2,110 | ||
Series 2005-17 Class 1A2 | ||||
5.500% due 01/25/36 | 1,255 | 1,235 | ||
Series 2006-1 Class A3 | ||||
5.000% due 03/25/21 | 1,527 | 1,496 | ||
Series 2006-2 Class 2A3 | ||||
5.500% due 03/25/36 | 3,040 | 3,037 | ||
Series 2006-2 Class 3A1 | ||||
5.750% due 03/25/36 | 1,705 | 1,687 | ||
Series 2006-4 Class 1A8 | ||||
5.750% due 04/25/36 | 958 | 970 | ||
Series 2006-AR1 Class 1A2 (Ê) |
240
Table of Contents
6.050% due 09/25/36 | 992 | 999 | ||
Series 2006-AR1 Class 5A1 (Ê) | ||||
5.606% due 07/25/36 | 1,460 | 1,464 | ||
Series 2006-AR1 Class A7 | ||||
5.539% due 08/25/36 | 1,798 | 1,794 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 1,947 | 1,931 | ||
Series 2006-AR4 Class 1A1 (Ê) | ||||
5.868% due 04/25/36 | 2,072 | 2,073 | ||
Series 2006-AR4 Class 2A1 (Ê) | ||||
5.791% due 04/25/36 | 3,232 | 3,225 | ||
Series 2006-AR5 Class 2A1 (Ê) | ||||
5.549% due 04/25/36 | 523 | 525 | ||
Zuni Mortgage Loan Trust (Ê) | ||||
Series 2006-OA1 Class A1 | ||||
5.615% due 08/25/36 | 1,972 | 1,969 | ||
1,121,401 | ||||
Municipal Bonds - 0.3% | ||||
California State University Revenue Bonds (µ) weekly demand | ||||
5.000% due 11/01/30 | 435 | 462 | ||
New Jersey Economic Development Authority Revenue Bonds weekly demand | ||||
5.750% due 06/15/34 | 745 | 799 | ||
New York State Urban Development Corp. Revenue Bonds (µ) weekly demand | ||||
5.250% due 03/15/34 | 540 | 585 | ||
State of California General Obligation Unlimited, weekly demand | ||||
5.000% due 02/01/33 | 370 | 385 | ||
State of Illinois General Obligation Unlimited | ||||
5.100% due 06/01/33 | 480 | 464 | ||
State of Oregon General Obligation Unlimited | ||||
5.892% due 06/01/27 | 555 | 586 | ||
State of Texas General Obligation Unlimited weekly demand | ||||
4.750% due 04/01/35 | 450 | 462 | ||
Tobacco Settlement Financing Corp. Revenue Bonds weekly demand | ||||
5.750% due 06/01/32 | 4,060 | 4,342 | ||
West Virginia Economic Development Authority Revenue Bonds (µ) | ||||
5.370% due 07/01/20 | 200 | 201 | ||
8,286 | ||||
Non-US Bonds - 0.9% | ||||
Argentina Government International Bond | ||||
5.830% due 12/31/33 | ARS 1,510 | 625 | ||
Brazilian Government International Bond | ||||
12.500% due 01/05/16 | BRL 2,193 | 1,040 | ||
Colombia Government International Bond | ||||
12.000% due 10/22/15 | COP 3,246,000 | 1,659 | ||
Deutsche Bundesrepublik | ||||
Series 01 | ||||
5.000% due 07/04/11 | EUR 690 | 930 | ||
Federative Republic of Brazil | ||||
12.500% due 01/05/22 | BRL 2,756 | 1,297 | ||
Mexican Bonos | ||||
Series M 20 |
241
Table of Contents
10.000% due 12/05/24 | MXN 17,865 | 1,951 | ||
Poland Government Bond | ||||
Series 1015 | ||||
6.250% due 10/24/15 | PLN 1,190 | 420 | ||
Province of Ontario | ||||
4.500% due 03/08/15 | CAD 890 | 807 | ||
Province of Quebec Canada | ||||
5.000% due 12/01/15 | CAD 1,529 | 1,426 | ||
Quebec Residual | ||||
Zero coupon due 12/01/36 | CAD 2,790 | 611 | ||
Queensland Treasury Corp. | ||||
Series 15G | ||||
6.000% due 10/14/15 | AUD 2,854 | 2,223 | ||
South Africa Government Bond | ||||
Series R157 | ||||
13.500% due 09/15/15 | ZAR 3,400 | 619 | ||
Sweden Government Bond | ||||
Series 1047 | ||||
5.000% due 12/01/20 | SEK 2,005 | 316 | ||
Series 1048 | ||||
4.000% due 12/01/09 | SEK 6,855 | 961 | ||
Series 1049 | ||||
4.500% due 08/12/15 | SEK 3,480 | 512 | ||
United Kingdom Gilt | ||||
5.750% due 12/07/09 | GBP 2,800 | 5,470 | ||
8.000% due 09/27/13 | GBP 1,050 | 2,397 | ||
23,264 | ||||
United States Government Agencies - 4.7% | ||||
Fannie Mae | ||||
4.200% due 03/24/08 (Ñ) | 11,000 | 10,871 | ||
4.150% due 09/10/09 (Ñ) | 12,000 | 11,772 | ||
3.875% due 02/15/10 (Ñ) | 3,405 | 3,303 | ||
4.750% due 04/20/10 (Ñ) | 7,620 | 7,591 | ||
4.375% due 06/21/10 | 8,000 | 7,848 | ||
5.050% due 02/07/11 | 6,600 | 6,642 | ||
Zero coupon due 10/09/19 | 2,155 | 1,069 | ||
Federal Home Loan Bank | ||||
4.800% due 05/02/08 | 18,000 | 17,967 | ||
Series 577 (Ñ) | ||||
4.500% due 09/26/08 | 16,900 | 16,779 | ||
Federal Home Loan Bank System | ||||
5.375% due 08/19/11 (Ñ) | 975 | 995 | ||
5.310% due 12/28/12 | 5,500 | 5,613 | ||
Series IY08 | ||||
3.400% due 03/18/08 | 6,000 | 5,874 | ||
Series VX10 | ||||
4.200% due 05/07/10 | 9,000 | 8,771 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 1 | ||||
Zero coupon due 05/11/16 | 400 | 250 | ||
Series 12P | ||||
Zero coupon due 12/06/18 | 1,770 | 965 | ||
Series 13 | ||||
Zero coupon due 12/27/16 | 1,410 | 854 | ||
Series 13P | ||||
Zero coupon due 12/27/18 | 3,800 | 2,065 | ||
Series 16P | ||||
Zero coupon due 04/05/19 | 1,445 | 774 | ||
Series 19 |
242
Table of Contents
Zero coupon due 06/06/16 | 1,185 | 739 | ||
Series 3P | ||||
Zero coupon due 11/30/17 | 885 | 511 | ||
Series 5P | ||||
Zero coupon due 02/08/18 | 365 | 209 | ||
Series 8P | ||||
Zero coupon due 08/03/18 | 3,205 | 1,781 | ||
Series 9P | ||||
Zero coupon due 10/06/17 | 1,605 | 935 | ||
Series C-P | ||||
Zero coupon due 11/30/17 | 1,820 | 1,051 | ||
Series E-P | ||||
Zero coupon due 11/02/18 | 855 | 469 | ||
Freddie Mac | ||||
3.450% due 03/12/08 | 6,000 | 5,878 | ||
4.750% due 01/19/16 (Ñ) | 155 | 153 | ||
Series *(Ñ) | ||||
2.750% due 03/15/08 | 1,060 | 1,029 | ||
122,758 | ||||
United States Government Treasuries - 8.2% | ||||
United States Treasury Principal (Ñ) | ||||
Zero coupon due 11/15/26 | 100 | 38 | ||
Zero coupon due 11/15/27 | 500 | 183 | ||
United States Treasury Inflation Indexed Bonds (Ñ) | ||||
2.375% due 04/15/11 | 2,053 | 2,042 | ||
3.375% due 01/15/12 | 6,511 | 6,806 | ||
3.000% due 07/15/12 | 4,179 | 4,307 | ||
1.875% due 07/15/13 | 999 | 967 | ||
2.000% due 01/15/14 | 883 | 860 | ||
2.000% due 07/15/14 | 13,899 | 13,539 | ||
1.875% due 07/15/15 | 7,230 | 6,962 | ||
2.000% due 01/15/16 | 2,260 | 2,196 | ||
2.500% due 07/15/16 | 11,994 | 12,166 | ||
2.375% due 01/15/25 | 4,327 | 4,380 | ||
2.000% due 01/15/26 | 6,205 | 5,930 | ||
3.625% due 04/15/28 | 630 | 778 | ||
United States Treasury Notes (Ñ) | ||||
4.375% due 12/31/07 | 24,100 | 23,964 | ||
4.625% due 02/29/08 | 6,000 | 5,985 | ||
4.750% due 09/30/08 | 5,380 | 5,371 | ||
4.500% due 09/30/11 | 2,555 | 2,546 | ||
3.875% due 02/15/13 | 7,100 | 6,830 | ||
Principal Only STRIP | ||||
Zero coupon due 11/15/13 | 1,855 | 1,348 | ||
4.250% due 08/15/15 | 7,070 | 6,892 | ||
4.875% due 08/15/16 | 6,710 | 6,849 | ||
8.750% due 05/15/17 | 445 | 595 | ||
8.125% due 08/15/19 | 13,425 | 17,736 | ||
8.125% due 08/15/21 | 1,275 | 1,721 | ||
Principal Only STRIP | ||||
Zero coupon due 11/15/21 | 21,630 | 10,460 | ||
7.625% due 02/15/25 | 2,500 | 3,346 | ||
6.000% due 02/15/26 | 20,895 | 23,980 | ||
6.375% due 08/15/27 | 7,675 | 9,247 | ||
6.125% due 08/15/29 | 13,500 | 15,986 | ||
4.500% due 02/15/36 | 10,055 | 9,705 | ||
213,715 | ||||
Total Long-Term Investments | ||||
(cost $2,206,391) | 2,222,366 | |||
Common Stocks - 0.1% |
243
Table of Contents
Financial Services - 0.1% | ||||
Emerging Market Local Currency Fund (Æ) | 288,299 | 3,304 | ||
Pacific Investment Management Co. | ||||
Series High Yield Portfolio Institutional | 21,427 | 180 | ||
Total Common Stocks | ||||
(cost $3,388) | 3,484 | |||
Preferred Stocks - 0.3% | ||||
Financial Services - 0.2% | ||||
Bank of America Corp. (Æ)(Ê) | 45,000 | 1,125 | ||
DG Funding Trust (Ê)(Å) | 361 | 3,841 | ||
4,966 | ||||
Producer Durables - 0.0% | ||||
Nexen, Inc. | 12,590 | 322 | ||
Utilities - 0.1% | ||||
Rural Cellular Corp. (Æ) | 1,160 | 1,409 | ||
Total Preferred Stocks | ||||
(cost $6,612) | 6,697 | |||
Warrants & Rights - 0.0% | ||||
Consumer Discretionary - 0.0% | ||||
Travelcenters of America, Inc. | ||||
2009 Warrants (Æ) | 30 | — | ||
Materials and Processing - 0.0% Solutia, Inc. | ||||
2009 Warrants (Æ)(Þ) | 850 | — | ||
Miscellaneous - 0.0% | ||||
Mexico Government International Bond Value | ||||
Recovery Rights (Æ) | ||||
Series E | 3,950,000 | 73 | ||
Total Warrants & Rights (cost $84) | 73 | |||
Notional Amount $ | Market Value $ | |||
Options Purchased - 0.1% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 91.75 Put (186) | 42,664 | 1 | ||
Dec 2006 92.00 Put (504) | 115,920 | 3 | ||
Dec 2006 92.25 Put (209) | 48,201 | 1 | ||
Dec 2006 92.50 Put (226) | 52,263 | 1 | ||
Dec 2006 92.75 Put (150) | 34,781 | 1 | ||
Dec 2006 94.13 Put (267) | 62,828 | 2 | ||
Mar 2007 92.25 Put (310) | 71,494 | 2 | ||
Jun 2007 91.25 Put (959) | 218,772 | 6 | ||
Jun 2007 94.25 Put (978) | 230,441 | 43 | ||
Jun 2007 94.50 Put (130) | 30,713 | 16 | ||
Sep 2007 90.50 Put (160) | 36,200 | 1 | ||
Sep 2007 90.75 Put (311) | 70,558 | 2 | ||
Sep 2007 91.00 Put (85) | 19,338 | 1 | ||
Sep 2007 91.25 Put (284) | 64,788 | 1 | ||
Dec 2007 91.25 Put (608) | 138,700 | 4 | ||
Forward Volatility Agreements | ||||
(Fund Pays/Fund Receives) | ||||
USD/JPY 1 Year | ||||
Jan 2007 8.44 Call(1) | 2,000 | — | ||
Swaptions | ||||
(Fund Pays/Fund Receives) | ||||
EUR Three Month LIBOR/ EUR 3.960% | ||||
Jul 2007 0.00 Call(2) | 19,144 | 88 |
244
Table of Contents
Notional Amount $ | Market Value $ | |||
EUR Six Month LIBOR/ EUR 3.960% | ||||
Jul 2007 0.00 Call(1) | 19,144 | 74 | ||
EUR Six Month LIBOR/ EUR 4.100% | ||||
Jul 2007 0.00 Call(1) | 14,039 | 54 | ||
GBP Six Month LIBOR/ GBP 5.080% | ||||
Jun 2007 0.00 Call(1) | 2,861 | 6 | ||
GBP Six Month LIBOR/ GBP 5.080% | ||||
Jun 2007 0.00 Call(1) | 4,387 | — | ||
USD Six Month LIBOR/ USD 4.800% | ||||
Dec 2006 0.00 Call(1) | 17,000 | 7 | ||
USD Three Month LIBOR/ USD 5.170% | ||||
Feb 2007 0.00 Call(1) | 14,100 | 61 | ||
USD Three Month LIBOR/ USD 5.000% | ||||
Mar 2007 0.00 Call(2) | 30,000 | 95 | ||
USD Three Month LIBOR/ USD 5.080% | ||||
Apr 2007 0.00 Call(1) | 9,200 | 44 | ||
USD Three Month LIBOR/ USD 5.200% | ||||
May 2007 0.00 Call(2) | 63,100 | 436 | ||
USD Three Month LIBOR/ USD 5.250% | ||||
Jun 2007 0.00 Call(2) | 33,000 | 269 | ||
USD Three Month LIBOR/ USD 5.500% | ||||
Jun 2007 0.00 Call(1) | 26,000 | 391 | ||
USD Three Month LIBOR/ USD 4.850% | ||||
Jul 2007 0.00 Call(1) | 30,000 | 49 | ||
USD Three Month LIBOR/ USD 5.250% | ||||
Jul 2007 0.00 Call(1) | 72,000 | 1,127 | ||
USD Three Month LIBOR/ USD 5.370% | ||||
Jul 2007 0.00 Call(1) | 20,200 | 208 | ||
USD Six Month LIBOR/ USD 4.900% | ||||
Oct 2007 0.00 Call(1) | 21,000 | 109 | ||
Total Options Purchased | ||||
(cost $2,075) | 3,103 | |||
Principal Amount ($) or | ||||
Short-Term Investments - 23.2% | ||||
Abitibi-Consolidated, Inc. (Ñ) | ||||
6.950% due 12/15/06 | 438 | 438 | ||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 300 | 300 | ||
Arizona Public Service Co. | ||||
6.750% due 11/15/06 | 180 | 180 | ||
AT&T Wireless Services, Inc. | ||||
7.500% due 05/01/07 | 3,480 | 3,515 | ||
Avista Corp. | ||||
7.750% due 01/01/07 | 55 | 55 | ||
Bank of America Corp. (ç)(ž) | ||||
5.370% due 11/01/06 | 11,500 | 11,500 | ||
5.275% due 12/01/06 | 300 | 299 | ||
Bank of Ireland Governor & Co. (ç)(ž) | ||||
5.260% due 12/05/06 | 15,900 | 15,821 | ||
Barclays Bank PLC (ž) | ||||
5.343% due 01/29/07 | 6,200 | 6,215 | ||
Barclays US Funding Corp. (ç)(ž) | ||||
5.275% due 11/21/06 | 11,000 | 10,968 |
245
Table of Contents
Caesars Entertainment, Inc. / 9.375% due 02/15/07 | 980 | 987 | ||
Caterpillar Financial Services Corp. (Ê) | ||||
Series MTNF | ||||
5.463% due 08/20/07 | 470 | 470 | ||
CC Funding Trust I | ||||
6.900% due 02/16/07 | 685 | 688 | ||
Centex Corp. (Ê) | ||||
Series MTNE | ||||
5.739% due 08/01/07 | 736 | 737 | ||
Comcast Cable Communications, Inc. | ||||
8.375% due 05/01/07 | 110 | 112 | ||
DaimlerChrysler NA Holding Corp. (Ê) | ||||
Series MTND | ||||
5.740% due 11/17/06 | 2,800 | 2,800 | ||
Danske Corp. (ž) | ||||
5.265% due 12/27/06 (ç) | 300 | 298 | ||
5.240% due 01/30/07 | 17,100 | 16,876 | ||
Donohue Forest Products | ||||
7.625% due 05/15/07 | 665 | 665 | ||
Duke Energy Field Services LLC | ||||
5.750% due 11/15/06 | 80 | 80 | ||
Enterprise Products Operating, LP | ||||
Series B | ||||
4.000% due 10/15/07 | 700 | 690 | ||
FedEx Corp. | ||||
2.650% due 04/01/07 | 220 | 217 | ||
Ford Motor Credit Co. (Ê) | ||||
5.590% due 03/13/07 | 2,250 | 2,233 | ||
6.194% due 09/28/07 (Ñ) | 1,400 | 1,391 | ||
France Treasury Bill BTF | ||||
Zero coupon due 12/21/06 | EUR 2,900 | 3,684 | ||
GMAC LLC (Ê) | ||||
6.407% due 01/16/07 | 1,500 | 1,500 | ||
Harrah’s Operating Co., Inc. | ||||
7.125% due 06/01/07 | 1,055 | 1,060 | ||
Hilton Hotels Corp. | ||||
7.950% due 04/15/07 | 330 | 332 | ||
Historic TW, Inc. | ||||
8.180% due 08/15/07 | 323 | 330 | ||
HSBC Finance Corp. (Ê) | ||||
5.410% due 10/04/07 | 2,200 | 2,202 | ||
Hyatt Equities LLC (Þ) | ||||
6.875% due 06/15/07 | 435 | 437 | ||
International Bank for Reconstruction & Development | ||||
Zero coupon due 08/20/07 | NZD 950 | 600 | ||
International Lease Finance Corp. | ||||
3.750% due 08/01/07 | 115 | 114 | ||
JPMorgan Chase & Co. | ||||
5.350% due 03/01/07 | 160 | 160 | ||
Mandalay Resort Group | ||||
Series B | ||||
10.250% due 08/01/07 | 2,830 | 2,911 | ||
Marsh & McLennan Cos., Inc. | ||||
5.375% due 03/15/07 | 1,480 | 1,479 | ||
5.640% due 07/13/07 (Ê) | 630 | 630 | ||
Mastr Adjustable Rate Mortgages Trust | ||||
5.503% due 10/13/07 | 2,879 | 2,878 | ||
MGM Mirage | ||||
9.750% due 06/01/07 | 2,020 | 2,060 | ||
Mirage Resorts, Inc. |
246
Table of Contents
6.750% due 08/01/07 | 600 | 603 | ||
Netherlands Government Bond | ||||
Series 1 | ||||
5.750% due 02/15/07 | EUR 490 | 629 | ||
Norfolk Southern Corp. | ||||
7.350% due 05/15/07 | 320 | 323 | ||
Northrop Grumman Corp. | ||||
4.079% due 11/16/06 | 155 | 155 | ||
Panhandle Eastern Pipe Line | ||||
Series B | ||||
2.750% due 03/15/07 | 125 | 124 | ||
Pepco Holdings, Inc. | ||||
5.500% due 08/15/07 | 1,070 | 1,070 | ||
Reynolds American, Inc. (Ñ)(Þ) | ||||
6.500% due 06/01/07 | 450 | 452 | ||
Russell Investment Company | ||||
Money Market Fund | 415,303,000 | 415,303 | ||
Sempra Energy | ||||
4.621% due 05/17/07 | 777 | 774 | ||
Skandinaviska Enskilda Banken (ç)(ž) | ||||
5.255% due 12/08/06 | 9,800 | 9,747 | ||
Societe Generale NA (ç)(ž) | ||||
5.290% due 12/18/06 | 1,100 | 1,092 | ||
5.265% due 12/21/06 | 7,800 | 7,743 | ||
St. Paul Travelers Cos., Inc. (The) | ||||
5.010% due 08/16/07 | 1,340 | 1,333 | ||
Starwood Hotels & Resorts Worldwide, Inc. | ||||
7.375% due 05/01/07 | 65 | 65 | ||
TELUS Corp. | ||||
7.500% due 06/01/07 | 1,925 | 1,947 | ||
Total SA (ç)(ž) | ||||
5.290% due 11/01/06 | 13,800 | 13,800 | ||
UBS Financial Del LLC (ç)(ž) | ||||
5.260% due 12/01/06 | 1,300 | 1,294 | ||
United States Treasury Bills (ž)(§) | ||||
5.093% due 11/30/06 (ç) | 2,375 | 2,366 | ||
4.841% due 12/07/06 (ç) | 500 | 498 | ||
4.898% due 12/07/06 (ç) | 500 | 498 | ||
4.802% due 12/14/06 (ç) | 300 | 298 | ||
4.914% due 12/14/06 (ç) | 30 | 30 | ||
4.932% due 12/14/06 (ç) | 500 | 497 | ||
4.937% due 12/14/06 (ç) | 2,470 | 2,456 | ||
5.161% due 01/11/07 | 650 | 644 | ||
4.948% due 02/15/07 | 60 | 59 | ||
4.960% due 02/15/07 | 100 | 99 | ||
5.007% due 02/15/07 | 200 | 197 | ||
5.018% due 02/15/07 | 110 | 108 | ||
5.131% due 02/15/07 | 250 | 246 | ||
United States Treasury Notes (Ñ) | ||||
3.500% due 11/15/06 | 14,400 | 14,390 | ||
3.125% due 05/15/07 | 21,250 | 21,033 | ||
Westpac Banking Corp. (ç)(ž) | ||||
5.265% due 11/17/06 | 7,300 | 7,283 | ||
Total Short-Term Investments (cost $605,235) | 605,068 | |||
Other Securities - 11.8% | ||||
Russell Investment Company | ||||
Money Market Fund (×) | 79,200,049 | 79,200 | ||
State Street Securities Lending Quality Trust (×) | 229,444,462 | 229,444 | ||
Total Other Securities (cost $308,644) | 308,644 | |||
Total Investments - 120.6% (identified cost $3,132,429) | 3,149,435 |
247
Table of Contents
Other Assets and Liabilities, | |||
Net - (20.6%) | (537,670 | ) | |
Net Assets - 100.0% | 2,611,765 | ||
Amount in thousands Futures Contracts (Number of Contracts) | Notional $ | Unrealized (Depreciation) | |||
Long Positions | |||||
Australian 3 Year Bond (Australia) | |||||
expiration date 12/06 (101) | 20,095 | (312 | ) | ||
Australian 10 Year Bond (Australia) | |||||
expiration date 12/06 (54) | 30,604 | (29 | ) | ||
Euro-Bund Futures (Germany) | |||||
expiration date 12/06 (48) | 7,218 | 18 | |||
Euro-Schatz Bond Futures | |||||
expiration date 12/06 (106) | 14,057 | (24 | ) | ||
Eurodollar Futures (CME) | |||||
expiration date 12/06 (550) | 130,123 | (726 | ) | ||
expiration date 03/07 (741) | 175,580 | (709 | ) | ||
expiration date 06/07 (888) | 210,789 | (253 | ) | ||
expiration date 09/07 (1,867) | 443,996 | 163 | |||
expiration date 12/07 (1,640) | 390,505 | 633 | |||
expiration date 03/08 (40) | 9,525 | 4 | |||
Libor Futures | |||||
expiration date 06/07 (22) | 4,964 | (7 | ) | ||
expiration date 09/07 (37) | 8,350 | (9 | ) | ||
expiration date 12/07 (59) | 13,320 | (10 | ) | ||
expiration date 03/08 (15) | 3,388 | (3 | ) | ||
expiration date 06/08 (12) | 2,711 | (2 | ) | ||
expiration date 09/08 (17) | 3,842 | (2 | ) | ||
Three Month Short Sterling Interest Rate Futures (UK) | |||||
expiration date 03/07 (110) | 24,814 | (18 | ) | ||
United States Treasury Bonds | |||||
expiration date 12/06 (372) | 41,908 | 589 | |||
United States Treasury 2 Year Notes | |||||
expiration date 12/06 (404) | 82,580 | 130 | |||
United States Treasury 5 Year Notes | |||||
expiration date 12/06 (1,017) | 107,357 | 501 | |||
United States Treasury 10 Year Notes | |||||
expiration date 12/06 (1,619) | 175,206 | 2,001 | |||
expiration date 03/07 (2) | 217 | 2 | |||
Short Positions | |||||
Bankers Acceptance Futures (Canada) | |||||
expiration date 03/07 (112) | 23,935 | 11 | |||
Euro-Bobl Futures (Germany) | |||||
expiration date 12/06 (364) | 50,970 | 10 | |||
Japanese 10 Year Bond (Japan) | |||||
expiration date 12/06 (32) | 36,732 | (89 | ) | ||
Long Gilt Bond (UK) | |||||
expiration date 12/06 (8) | 1,679 | (3 | ) | ||
United States Treasury 2 Year Notes | |||||
expiration date 12/06 (106) | 21,667 | (4 | ) | ||
United States Treasury 5 Year Notes | |||||
expiration date 12/06 (580) | 60,972 | (254 | ) | ||
United States Treasury 10 Year Notes | |||||
expiration date 12/06 (485) | 52,037 | (449 | ) | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 1,159 | ||||
248
Table of Contents
Options Written (Number of Contracts) | Notional Amount $ | Market $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (17) | 4,038 | (16 | ) | ||
Mar 2007 94.75 Put (22) | 5,211 | (6 | ) | ||
Mar 2007 95.25 Put (24) | 5,715 | (29 | ) | ||
Forward Volatility Agreements | |||||
(Fund Pays/Fund Receives) | |||||
USD/JPY 1 Year | |||||
Jan 2007 8.44 Put (1) | 2,000 | — | |||
Swaptions | |||||
(Fund Receives/Fund Pays) | |||||
EUR Six Month LIBOR/ EUR 4.100% | |||||
Jul 2007 0.00 Call (2) | 7,658 | (85 | ) | ||
EUR Six Month LIBOR/ EUR 4.100% | |||||
Jul 2007 0.00 Call (1) | 7,658 | (97 | ) | ||
EUR Six Month LIBOR/ EUR 4.230% | |||||
Jul 2007 0.00 Call (1) | 6,381 | (81 | ) | ||
GBP Three Month LIBOR/ GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 763 | (7 | ) | ||
GBP Six Month LIBOR/ GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 1,335 | (13 | ) | ||
GBP Six Month LIBOR/ GBP 4.500% | |||||
Dec 2006 0.00 Put (1) | 20,602 | (174 | ) | ||
USD Three Month LIBOR/ USD 4.850% | |||||
Dec 2006 0.00 Call (1) | 7,000 | (10 | ) | ||
USD Three Month LIBOR/ USD 5.240% | |||||
Feb 2007 0.00 Call (1) | 6,100 | (74 | ) | ||
USD Three Month LIBOR/ USD 5.040% | |||||
Mar 2007 0.00 Call (2) | 13,000 | (94 | ) | ||
USD Three Month LIBOR/ USD 5.220% | |||||
Apr 2007 0.00 Call (1) | 4,000 | (53 | ) | ||
USD Three Month LIBOR/ USD 5.300% | |||||
May 2007 0.00 Call (1) | 14,000 | (230 | ) | ||
USD Three Month LIBOR/ USD 5.320% | |||||
May 2007 0.00 Call (1) | 13,600 | (226 | ) | ||
USD Three Month LIBOR/ USD 5.330% | |||||
Jun 2007 0.00 Call (1) | 2,000 | (37 | ) | ||
USD Three Month LIBOR/ USD 5.340% | |||||
Jun 2007 0.00 Call (1) | 12,000 | (231 | ) | ||
USD Three Month LIBOR/ USD 5.600% | |||||
Jun 2007 0.00 Call (1) | 11,000 | — | |||
USD Three Month LIBOR/ USD 5.370% | |||||
Jul 2007 0.00 Call (1) | 32,000 | (643 | ) | ||
USD Three Month LIBOR/ USD 5.500% | |||||
Jul 2007 0.00 Call (1) | 6,600 | (198 | ) | ||
USD Six Month LIBOR/ USD 4.950% | |||||
Jul 2007 0.00 Call (1) | 6,700 | (75 | ) | ||
USD Six Month LIBOR/ USD 5.010% | |||||
Oct 2007 0.00 Call (1) | 9,000 | (120 | ) | ||
United States Treasury Bonds | |||||
Nov 2006 111.00 Call (87) | 9,657 | (150 | ) | ||
Nov 2006 104.00 Put (76) | 7,904 | (1 | ) | ||
Nov 2006 105.00 Put (11) | 1,155 | — | |||
United States Treasury Notes | |||||
2 Year Futures | |||||
Nov 2006 101.75 Put (880) | 179,080 | (28 | ) | ||
United States Treasury Notes | |||||
10 Year Futures |
249
Table of Contents
Nov 2006 109.00 Call (15) | 1,635 | (2 | ) | ||
Nov 2006 106.00 Put (15) | 1,590 | — | |||
Total Liability for Options Written (premiums received $1,995) | (2,680 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized (Depreciation) | ||||
USD 2,298 | AUD 2,984 | 11/02/06 | 13 | ||||
USD 2,454 | AUD 3,264 | 12/20/06 | 70 | ||||
USD 5,464 | AUD 7,156 | 12/20/06 | 69 | ||||
USD 7,428 | AUD 9,715 | 12/20/06 | 85 | ||||
USD 1,697 | CAD 1,911 | 11/02/06 | 5 | ||||
USD 865 | CAD 985 | 11/30/06 | 13 | ||||
USD 2,519 | CAD 2,803 | 12/20/06 | (19 | ) | |||
USD 469 | CNY 3,629 | 03/19/07 | (3 | ) | |||
USD 200 | CNY 1,544 | 03/20/07 | (2 | ) | |||
USD 206 | EUR 161 | 11/02/06 | — | ||||
USD 250 | EUR 195 | 11/02/06 | (1 | ) | |||
USD 309 | EUR 240 | 11/02/06 | (2 | ) | |||
USD 418 | EUR 325 | 11/02/06 | (3 | ) | |||
USD 422 | EUR 330 | 11/02/06 | (1 | ) | |||
USD 423 | EUR 330 | 11/02/06 | (2 | ) | |||
USD 520 | EUR 404 | 11/02/06 | (4 | ) | |||
USD 574 | EUR 445 | 11/02/06 | (6 | ) | |||
USD 601 | EUR 465 | 11/02/06 | (7 | ) | |||
USD 602 | EUR 465 | 11/02/06 | (8 | ) | |||
USD 717 | EUR 564 | 11/02/06 | 3 | ||||
USD 796 | EUR 623 | 12/06/06 | — | ||||
USD 5,042 | EUR 3,958 | 12/20/06 | 27 | ||||
USD 5,460 | EUR 4,335 | 12/20/06 | 91 | ||||
USD 556 | EUR 435 | 02/02/07 | 2 | ||||
USD 1,277 | EUR 1,000 | 03/23/07 | 8 | ||||
USD 2,419 | GBP 1,272 | 11/02/06 | 7 | ||||
USD 2,711 | GBP 1,443 | 12/20/06 | 44 | ||||
USD 8,541 | GBP 4,550 | 12/20/06 | 146 | ||||
USD 8,609 | GBP 4,550 | 12/20/06 | 77 | ||||
USD 10 | JPY 1,171 | 11/02/06 | — | ||||
USD 65 | JPY 7,415 | 11/02/06 | (2 | ) | |||
USD 196 | JPY 22,775 | 11/02/06 | (1 | ) | |||
USD 469 | JPY 54,970 | 11/02/06 | 1 | ||||
USD 508 | JPY 57,623 | 11/02/06 | (15 | ) | |||
USD 583 | JPY 66,920 | 11/02/06 | (11 | ) | |||
USD 584 | JPY 66,505 | 11/02/06 | (15 | ) | |||
USD 716 | JPY 84,315 | 11/02/06 | 6 | ||||
USD 726 | JPY 82,060 | 11/02/06 | (24 | ) | |||
USD 1,786 | JPY 202,053 | 11/02/06 | (58 | ) | |||
USD 3,202 | JPY 362,561 | 11/02/06 | (101 | ) | |||
USD 6,797 | JPY 774,119 | 11/15/06 | (163 | ) | |||
USD 6,814 | JPY 774,118 | 11/15/06 | (181 | ) | |||
USD 6,745 | JPY 781,000 | 12/06/06 | (32 | ) | |||
USD 1,469 | JPY 170,000 | 12/20/06 | (5 | ) | |||
USD 6,284 | JPY 730,500 | 12/20/06 | 6 | ||||
USD 732 | JPY 84,315 | 02/02/07 | (1 | ) | |||
USD 2,159 | JPY 249,448 | 02/02/07 | 1 | ||||
USD 2,982 | JPY 343,716 | 02/02/07 | (5 | ) | |||
USD 1,896 | NOK 12,296 | 12/20/06 | (9 | ) | |||
USD 2,730 | NOK 18,251 | 12/20/06 | 71 | ||||
USD 578 | NZD 862 | 11/02/06 | (1 | ) | |||
USD 2,521 | NZD 3,870 | 12/20/06 | 66 |
250
Table of Contents
USD 2,730 | NZD 4,148 | 12/20/06 | 43 | ||||
USD 531 | PLN 1,608 | 11/02/06 | — | ||||
USD 1,355 | SEK 9,783 | 11/02/06 | — | ||||
USD 2,519 | SEK 18,305 | 12/20/06 | 26 | ||||
USD 4,915 | SEK 35,582 | 12/20/06 | 32 | ||||
USD 469 | SEK 3,372 | 12/21/06 | — | ||||
USD 249 | SGD 395 | 11/27/06 | 5 | ||||
USD 243 | TWD 7,871 | 11/22/06 | (6 | ) | |||
AUD 2,984 | USD 2,281 | 11/02/06 | (30 | ) | |||
CAD 1,911 | USD 1,694 | 11/02/06 | (7 | ) | |||
EUR 325 | USD 419 | 11/02/06 | 4 | ||||
EUR 330 | USD 424 | 11/02/06 | 3 | ||||
EUR 330 | USD 423 | 11/02/06 | 2 | ||||
EUR 435 | USD 554 | 11/02/06 | (2 | ) | |||
EUR 435 | USD 554 | 11/02/06 | (2 | ) | |||
EUR 445 | USD 577 | 11/02/06 | 9 | ||||
EUR 465 | USD 600 | 11/02/06 | 7 | ||||
EUR 465 | USD 599 | 11/02/06 | 6 | ||||
EUR 564 | USD 726 | 11/02/06 | 6 | ||||
EUR 565 | USD 711 | 11/02/06 | (10 | ) | |||
GBP 1,272 | USD 2,393 | 11/02/06 | (33 | ) | |||
JPY 55,490 | USD 477 | 11/02/06 | 3 | ||||
JPY 57,623 | USD 510 | 11/02/06 | 17 | ||||
JPY 66,505 | USD 586 | 11/02/06 | 17 | ||||
JPY 83,231 | USD 717 | 11/02/06 | 5 | ||||
JPY 84,315 | USD 722 | 11/02/06 | 1 | ||||
JPY 249,448 | USD 2,133 | 11/02/06 | (1 | ) | |||
JPY 411,756 | USD 3,528 | 11/02/06 | 6 | ||||
NZD 862 | USD 532 | 11/02/06 | (46 | ) | |||
PLN 1,608 | USD 526 | 11/02/06 | (4 | ) | |||
SEK 3,635 | USD 502 | 11/02/06 | (1 | ) | |||
SEK 6,148 | USD 858 | 11/02/06 | 7 | ||||
EUR 5,559 | USD 7,162 | 12/06/06 | 53 | ||||
JPY 88,000 | USD 757 | 12/06/06 | — | ||||
EUR 2,785 | USD 3,552 | 12/08/06 | (10 | ) | |||
AUD 3,339 | USD 2,507 | 12/20/06 | (75 | ) | |||
AUD 3,393 | USD 2,521 | 12/20/06 | (103 | ) | |||
AUD 3,639 | USD 2,711 | 12/20/06 | (103 | ) | |||
CAD 2,740 | USD 2,454 | 12/20/06 | 10 | ||||
CAD 3,007 | USD 2,722 | 12/20/06 | 39 | ||||
CHF 3,443 | USD 2,730 | 12/20/06 | (55 | ) | |||
CHF 9,348 | USD 7,583 | 12/20/06 | 22 | ||||
EUR 1,976 | USD 2,519 | 12/20/06 | (11 | ) | |||
EUR 3,929 | USD 5,021 | 12/20/06 | (11 | ) | |||
EUR 4,301 | USD 5,464 | 12/20/06 | (44 | ) | |||
EUR 4,343 | USD 5,462 | 12/20/06 | (100 | ) | |||
GBP 1,469 | USD 2,730 | 12/20/06 | (75 | ) | |||
JPY 160,650 | USD 1,392 | 12/20/06 | 9 | ||||
JPY 651,335 | USD 5,604 | 12/20/06 | (5 | ) | |||
JPY 661,204 | USD 5,693 | 12/20/06 | (1 | ) | |||
JPY 661,204 | USD 5,696 | 12/20/06 | 2 | ||||
NOK 32,990 | USD 5,042 | 12/20/06 | (20 | ) | |||
NZD 3,844 | USD 2,454 | 12/20/06 | (116 | ) | |||
NZD 12,011 | USD 7,723 | 12/20/06 | (305 | ) | |||
SEK 18,211 | USD 2,521 | 12/20/06 | (11 | ) | |||
SEK 19,992 | USD 2,730 | 12/20/06 | (50 | ) | |||
AUD 2,984 | USD 2,292 | 02/02/07 | (13 | ) | |||
BRL 12,259 | USD 5,568 | 02/02/07 | (55 | ) | |||
CAD 1,911 | USD 1,702 | 02/02/07 | (5 | ) | |||
EUR 161 | USD 207 | 02/02/07 | — |
251
Table of Contents
GBP 1,272 | USD 2,420 | 02/02/07 | (8 | ) | |||
NZD 862 | USD 574 | 02/02/07 | 1 | ||||
PLN 1,608 | USD 532 | 02/02/07 | — | ||||
SEK 9,783 | USD 1,363 | 02/02/07 | — | ||||
Total Unrealized Appreciation (Depreciation)on Open Foreign CurrencyExchange Contracts | (854 | ) | |||||
Index Swap Contracts
Fund Receives Underlying Security | Counter Party | Notional Amount $ | Fund Pays Floating Rate | Termination Date | Unrealized Appreciation (Depreciation) $ | ||||||
CMBS AAA | 1 Month LIBOR | ||||||||||
10 Yr. Index | Citibank | 3,500 | plus 0.235% | 03/31/07 | (146 | ) | |||||
CMBS AAA | 1 Month LIBOR | ||||||||||
10 Yr. Index | Goldman Sachs | 4,000 | plus 0.030% | 09/28/07 | (166 | ) | |||||
Turkish Overnight | |||||||||||
Index Tuibon | |||||||||||
GS Total Return | Citibank | 14,958 | plus 0.750% | 07/17/08 | (42 | ) | |||||
Lehman Brothers | 1 Month LIBOR | ||||||||||
CMBS Index - AAA | Goldman Sachs | 6,830 | plus 0.050% | 02/01/07 | 101 | ||||||
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts | (253 | ) | |||||||||
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | ||||||
Bank of America | USD 35,900 | 5.600% | Three Month LIBOR | 12/21/09 | 536 | ||||||
Bank of America | USD 37,500 | 5.470% | Three Month LIBOR | 06/14/11 | 1,183 | ||||||
Bank of America | USD 31,000 | 5.650% | Three Month LIBOR | 12/20/13 | 1,035 | ||||||
Bank of America | USD 13,200 | 5.550% | Three Month LIBOR | 06/14/16 | 603 | ||||||
Bank of America | USD 7,000 | 5.630% | Three Month LIBOR | 06/16/36 | 489 | ||||||
Barclays Bank PLC | GBP 15,400 | 5.000% | Six Month LIBOR | 06/15/07 | (26 | ) | |||||
Barclays Bank PLC | USD 18,100 | 5.000% | Three Month LIBOR | 12/20/08 | (12 | ) | |||||
Barclays Bank PLC | EUR 2,800 | 2.103% | Consumer Price Index (France) | 10/15/10 | 35 | ||||||
Barclays Bank PLC | JPY 2,400,000 | Six Month LIBOR | 1.550% | 12/20/11 | 159 | ||||||
Barclays Bank PLC | EUR 22,000 | 4.250% | Six Month LIBOR | 07/20/16 | 750 | ||||||
Barclays Bank PLC | SEK 204,000 | Three Month LIBOR | 4.323% | 07/20/16 | (1,331 | ) | |||||
Barclays Bank PLC | EUR 1,500 | 4.300% | Six Month LIBOR | 12/20/16 | 51 | ||||||
Barclays Bank PLC | EUR 2,450 | Six Month LIBOR | 4.300% | 12/20/16 | (84 | ) | |||||
Barclays Bank PLC | GBP 4,050 | 5.000% | Six Month LIBOR | 12/20/16 | 61 | ||||||
Barclays Bank PLC | JPY 1,333,000 | 2.100% | Six Month LIBOR | 12/20/16 | 164 | ||||||
Barclays Bank PLC | SEK 13,700 | Three Month LIBOR | 4.350% | 12/20/16 | (18 | ) | |||||
Barclays Bank PLC | EUR 3,500 | 4.550% | Six Month LIBOR | 12/22/36 | 368 | ||||||
Barclays Bank PLC | EUR 1,320 | Six Month LIBOR | 4.550% | 12/22/36 | (139 | ) | |||||
Barclays Bank PLC | GBP 940 | 4.550% | Six Month LIBOR | 12/22/36 | 71 | ||||||
Barclays Bank PLC | GBP 2,400 | Six Month LIBOR | 4.550% | 12/22/36 | (146 | ) | |||||
Credit Suisse First Boston | EUR 77,890 | Six Month LIBOR | 3.959% | 11/24/08 | (129 | ) | |||||
Credit Suisse First Boston | EUR 86,470 | 4.079% | Six Month LIBOR | 11/22/11 | 1,014 | ||||||
Credit Suisse First Boston | GBP 1,310 | Six Month LIBOR | 5.100% | 12/20/11 | 7 | ||||||
Credit Suisse First Boston | EUR 2,050 | 4.300% | Six Month LIBOR | 12/20/16 | 70 | ||||||
Credit Suisse First Boston | GBP 4,921 | Six Month LIBOR | 5.000% | 12/20/16 | (72 | ) | |||||
Credit Suisse First Boston | SEK 22,000 | Three Month LIBOR | 4.350% | 12/20/16 | (58 | ) | |||||
Credit Suisse First Boston | SEK 19,000 | Three Month LIBOR | 4.350% | 12/20/16 | 58 | ||||||
Credit Suisse First Boston | EUR 26,850 | Six Month LIBOR | 4.412% | 11/22/21 | (1,412 | ) | |||||
Credit Suisse First Boston | USD 3,700 | 5.820% | Three Month LIBOR | 09/22/36 | 310 | ||||||
Credit Suisse First Boston | EUR 1,780 | Six Month LIBOR | 4.550% | 12/22/36 | (187 | ) | |||||
Credit Suisse First Boston | GBP 1,260 | 4.550% | Six Month LIBOR | 12/22/36 | 95 | ||||||
Deutsche Bank | USD 35,000 | 5.600% | Three Month LIBOR | 12/20/11 | 689 | ||||||
Deutsche Bank | USD 25,900 | 5.650% | Three Month LIBOR | 12/20/13 | 687 | ||||||
Goldman Sachs | USD 600 | 5.000% | Three Month LIBOR | 12/20/36 | (23 | ) |
252
Table of Contents
JP Morgan | GBP 2,250 | Six Month LIBOR | 4.550% | 12/22/36 | (170 | ) | |||||
JP Morgan | GBP 5,100 | 4.950% | Six Month LIBOR | 12/22/08 | (70 | ) | |||||
Lehman Brothers | GBP 5,100 | Six Month LIBOR | 4.950% | 12/22/08 | (70 | ) | |||||
Lehman Brothers | GBP 8,400 | 4.500% | Six Month LIBOR | 09/20/09 | (219 | ) | |||||
Lehman Brothers | EUR 3,100 | 4.000% | Six Month LIBOR | 12/15/11 | 22 | ||||||
Lehman Brothers | USD 4,000 | 5.000% | Three Month LIBOR | 12/20/11 | (5 | ) | |||||
Lehman Brothers | EUR 2,430 | Six Month LIBOR | 4.300% | 12/20/16 | (84 | ) | |||||
Lehman Brothers | GBP 1,650 | 5.000% | Six Month LIBOR | 12/20/16 | 25 | ||||||
Merrill Lynch | GBP 19,300 | 4.500% | Six Month LIBOR | 09/20/09 | (502 | ) | |||||
Merrill Lynch | GBP 300 | 4.000% | Six Month LIBOR | 12/15/35 | (9 | ) | |||||
Morgan Stanley | EUR 2,800 | 6.000% | Six Month LIBOR | 06/18/34 | 648 | ||||||
Royal Bank of Scotland | GBP 1,100 | 4.550% | Six Month LIBOR | 12/20/09 | 83 | ||||||
Royal Bank of Scotland | JPY 1,270,000 | Six Month LIBOR | 1.850% | 12/20/13 | (156 | ) | |||||
Royal Bank of Scotland | GBP 1,100 | 4.550% | Six Month LIBOR | 12/22/36 | 83 | ||||||
Royal Bank of Scotland | USD 3,360 | Three Month LIBOR | 5.750% | 12/22/36 | (248 | ) | |||||
Salomon Smith Barney | MXN 194,000 | 8.100% | Mexico Interbank 28 Day Deposit Rate | 07/04/08 | 170 | ||||||
Salomon Smith Barney | MXN 115,160 | 7.820% | Mexico Interbank 28 Day Deposit Rate | 09/25/08 | 25 | ||||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received)-$2,471 | 4,321 |
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | |||||||
Brazilian Government International Bond | Morgan Stanley | 500 | 1.660 | % | 03/20/13 | 8 | ||||||
Brazilian Government International Bond | Salomon Smith Barney | 4,500 | 1.500 | % | 08/22/11 | 60 | ||||||
Core Investment Grade Bond | Bank of America | 27,000 | 0.650 | % | 12/20/16 | (114 | ) | |||||
Core Investment Grade Bond | Bear Stearns | 27,000 | 0.400 | % | 12/20/11 | (34 | ) | |||||
Dow Jones CDX High Volatility 4 Index | UBS | 13,000 | 0.900 | % | 06/20/10 | 112 | ||||||
Dow Jones CDX High Volatility 5 Index | Goldman Sachs | 3,100 | 0.850 | % | 12/20/10 | 24 | ||||||
Ford Motor Credit Co. | UBS | 700 | 4.750 | % | 12/20/06 | 8 | ||||||
Mexico Government International Bond | JP Morgan | 2,400 | 0.920 | % | 03/20/16 | 40 | ||||||
Russia Government International Bond | JP Morgan | 300 | 0.800 | % | 03/20/16 | 2 | ||||||
Russia Government International Bond | Morgan Stanley | 300 | 0.780 | % | 03/20/16 | 2 | ||||||
Russia Government International Bond | Morgan Stanley | 200 | 0.460 | % | 06/20/07 | 1 | ||||||
Softbank Corp | Deutsche Bank | 45,000 | 2.300 | % | 09/20/07 | 1 | ||||||
Total Market Value of Open Credit Default Swap Contracts Premiums Paid(Received)-($310) | 110 | |||||||||||
253
Table of Contents
Russell Investment Company
Multistrategy Bond Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Asset-Backed Securities | 6.8 | ||
Corporate Bonds and Notes | 15.7 | ||
International Debt | 4.8 | ||
Loan Agreements | 0.8 | ||
Mortgage-Backed Securities | 42.9 | ||
Municipal Bonds | 0.3 | ||
Non-US Bonds | 0.9 | ||
United States Government Agencies | 4.7 | ||
United States Government Treasuries | 8.2 | ||
Common Stocks | 0.1 | ||
Preferred Stocks | 0.3 | ||
Warrants & Rights | — | * | |
Options Purchased | 0.1 | ||
Short-Term Investments | 23.2 | ||
Other Securities | 11.8 | ||
Total Investments | 120.6 | ||
Other Assets and Liabilities, Net | (20.6 | ) | |
100.0 | |||
Futures Contracts | — | * | |
Options Written | (0.1 | ) | |
Foreign Currency Exchange Contracts | (— | *) | |
Index Swap Contracts | (— | *) | |
Interest Rate Swap Contracts | 0.2 | ||
Credit Default Swap Contracts | — | * |
* | Less than .05% of net assets. |
See accompanying noted which are an integral part of the financial statements.
Multistrategy Bond Fund
254
Table of Contents
(This page intentionally left blank)
255
Table of Contents
Tax Exempt Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Tax Exempt Bond Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.53 | % | |
5 Years | 3.49 | %§ | |
10 Years | 4.17 | %§ |
Tax Exempt Bond Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.26 | % | |
5 Years | 3.24 | %§ | |
10 Years | 3.98 | %§ |
Tax Exempt Bond Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.50 | % | |
5 Years | 2.49 | %§ | |
10 Years | 3.40 | %§ |
Lehman Brothers Municipal 1-10 Year Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.42 | % | |
5 Years | 3.90 | %§ | |
10 Years | 4.95 | %§ |
256
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide federal tax-exempt current income consistent with the preservation of capital. The Fund will invest, under normal circumstances, at least 80% of the value of its assets in investments the income from which is exempt from federal income tax.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Tax Exempt Bond Fund Class S, Class E and Class C Shares gained 4.53%, 4.26% and 3.50%, respectively. This compared to the Lehman Brothers Municipal 1-10 Year Index, which gained 4.42% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Intermediate Municipal Debt Funds Average returned 4.34%. For the same period, the Lipper(R) Short-Intermediate Municipal Debt Funds Average returned 3.22%. These returns serve as peer comparisons and are expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The municipal bond market presented active managers with many challenges over the year. Fears of rising interest rates, the lack of traditional investor demand and strong influence by hedge funds were among the main challenges at the beginning of the period and remained major themes throughout the fiscal year.
Given the uncertainty in the market, the Fund’s money managers tended to follow strategies that attempted to add value through sector rotation and security selection, while maintaining more opportunistic duration positions relative to the benchmark. This contributed positively to relative performance from both a security selection and sector allocation perspective.
The Fund’s overall municipal bond market sector allocations remained relatively constant. The Fund maintained an overweight position as compared to the benchmark in the higher yielding sectors within the municipal bond market. Correspondingly, the Fund maintained an underweight position with respect to lower yielding sectors, such as the general obligation and pre-refunded sectors. The underweight to these lower dividend yielding sectors resulted in a better-than-benchmark yield which contributed positively to Fund performance. Additionally, many of the sectors in which the Fund was overweight outperformed the Fund’s benchmark contributing positively to performance.
Finally, the Fund’s tactical duration positioning as well as state selection also contributed positively to performance.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The main investment strategies employed in tax exempt investing include tactical interest rate and maturity management, sector allocation and security selection. The sector allocation strategy used throughout the fiscal year was to overweight higher yielding sectors while underweighting lower yielding sectors. This strategy resulted in an overweight to the revenue sector and an underweight to the pre-refunded sector which contributed positively to the Fund’s performance. Security selection, particularly in tobacco settlement bonds, also contributed positively to performance. Additionally, interest rate and maturity management added to performance.
Describe any changes to the Fund’s structure or the money manager line-up.
In 2006, RIMCo expanded the Fund’s ability to invest in non-investment grade municipal securities.
Money Managers as of October 31, 2006 | Styles | |
Delaware Management Company, a series of Delaware Management Business Trust | Fully Discretionary | |
Standish Mellon Asset Management Company, LLC | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
257
Table of Contents
* | Assumes initial investment on November 1, 1996. |
** | Lehman Brothers Municipal 1-10 Year Index is an index, with income reinvested, representative of municipal bonds with maturities ranging from 1-10 years. |
‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares prior to May 14, 1999 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. |
‡‡ | The Fund first issued Class C Shares on March 29, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to March 28, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
258
Table of Contents
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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,028.50 | $ | 1,017.34 | ||
Expenses Paid During Period* | $ | 7.98 | $ | 7.93 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.56% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,030.20 | $ | 1,021.12 | ||
Expenses Paid During Period* | $ | 4.15 | $ | 4.13 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.81% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,033.60 | $ | 1,022.38 | ||
Expenses Paid During Period* | $ | 2.87 | $ | 2.85 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.56% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
259
Table of Contents
Russell Investment Company
Tax Exempt Bond Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Rate % | Date of Maturity | Market Value $ | |||||
Municipal Bonds - 97.8% | ||||||||
Alabama - 0.5% | ||||||||
City of Tuscaloosa Alabama General Obligation Unlimited | 340 | 5.000 | 02/15/07 | 341 | ||||
County of Jefferson Alabama General Obligation Unlimited (µ) | 500 | 5.000 | 04/01/10 | 523 | ||||
Courtland Industrial Development Board Revenue Bonds | 250 | 5.000 | 11/01/13 | 263 | ||||
Mobile County Board of School Commissioners General Obligation Unlimited (µ) (æ) | 375 | 5.000 | 03/01/12 | 397 | ||||
1,524 | ||||||||
Alaska - 0.4% City of Anchorage Alaska General Obligation Unlimited, weekly demand (µ) (æ) | 500 | 5.750 | 12/01/16 | 542 | ||||
Northern TOB Securitization Corp. Revenue Bonds | 500 | 4.625 | 06/01/23 | 501 | ||||
1,043 | ||||||||
Arizona - 2.8% | ||||||||
Arizona State Transportation Board Revenue Bonds | 500 | 5.250 | 07/01/12 | 536 | ||||
Arizona State Transportation Board Revenue Bonds | 1,500 | 5.000 | 07/01/14 | 1,636 | ||||
Maricopa County Pollution Control Corp. Revenue Bonds | 1,000 | 2.900 | 06/01/35 | 976 | ||||
Maricopa County Pollution Control Corp. Revenue Bonds (Ê) | 1,000 | 4.000 | 01/01/38 | 997 | ||||
Mesa Arizona General Obligation Unlimited (µ)(æ) | 1,000 | 5.000 | 07/01/17 | 1,037 | ||||
Phoenix Civic Improvement Corp. Revenue Bonds (µ) | 250 | 5.500 | 07/01/07 | 253 | ||||
Phoenix Civic Improvement Corp. Revenue Bonds (µ) | 1,325 | 5.000 | 07/01/35 | 1,398 | ||||
Salt River Project Agricultural Improvement & Power District Revenue Bonds | 1,350 | 5.000 | 01/01/25 | 1,422 | ||||
8,255 | ||||||||
California - 10.2% | ||||||||
Abag Finance Authority for Nonprofit Corps. Certificate Of Participation | 600 | 5.700 | 08/15/14 | 617 | ||||
California Health Facilities Financing Authority Revenue Bonds (Ê) | 500 | 4.950 | 07/01/26 | 527 | ||||
California State Department of Water Resources Revenue Bonds | 250 | 5.500 | 05/01/10 | 266 | ||||
California State Department of Water Resources Revenue Bonds (µ) | 500 | 5.250 | 05/01/11 | 537 | ||||
California State Department of Water Resources Revenue Bonds (µ) | 1,000 | 5.250 | 05/01/12 | 1,087 | ||||
California State Public Works Board Revenue Bonds | 630 | 5.000 | 06/01/10 | 659 | ||||
California Statewide Communities Development Authority Revenue Bonds (Ê)(µ) | 610 | 4.100 | 04/01/28 | 624 | ||||
California Statewide Communities Development Authority Revenue Bonds (Ê) | 1,000 | 5.200 | 12/01/29 | 1,030 | ||||
California Statewide Communities Development Authority Revenue Bonds (Ê) | 1,250 | 2.300 | 04/01/33 | 1,242 | ||||
California Statewide Communities Development Authority Revenue Bonds (Ê) | 1,100 | 2.625 | 04/01/34 | 1,086 | ||||
California Statewide Communities Development Authority Revenue Bonds (Ê) | 900 | 4.350 | 11/01/36 | 902 | ||||
California Statewide Communities Development Authority Revenue Bonds | 1,500 | 5.250 | 03/01/45 | 1,590 | ||||
Golden State Tobacco Securitization Corp. Revenue Bonds (æ) | 405 | 5.500 | 06/01/18 | 410 | ||||
Golden State Tobacco Securitization Corp. Revenue Bonds (µ) | 500 | 5.000 | 06/01/20 | 522 | ||||
Golden State Tobacco Securitization Corp. Revenue Bonds | 570 | 5.000 | 06/01/21 | 572 | ||||
Golden State Tobacco Securitization Corp. Revenue Bonds (µ) | 750 | 4.600 | 06/01/23 | 643 | ||||
Kings River Conservation District Certificate Of Participation | 850 | 5.000 | 05/01/15 | 909 | ||||
Roseville Westpark Community Facilities District No. 1 Special Tax | 600 | 5.250 | 09/01/37 | 614 | ||||
Southern California Public Power Authority Revenue Bonds (µ) | 405 | 5.375 | 01/01/12 | 442 | ||||
State of California General Obligation Unlimited | 1,000 | 6.600 | 02/01/10 | 1,091 | ||||
State of California General Obligation Unlimited | 1,000 | 5.000 | 10/01/11 | 1,064 | ||||
State of California General Obligation Unlimited | 2,050 | 5.000 | 02/01/12 | 2,186 |
260
Table of Contents
Principal Amount ($) or Shares | Rate % | Date of Maturity | Market Value $ | |||||
State of California General Obligation Unlimited | 1,000 | 5.250 | 07/01/12 | 1,087 | ||||
State of California General Obligation Unlimited | 500 | 5.250 | 02/01/14 | 548 | ||||
State of California General Obligation Unlimited (µ) | 1,500 | 5.000 | 02/01/26 | 1,570 | ||||
State of California General Obligation Unlimited (µ) | 1,500 | 5.250 | 02/01/30 | 1,594 | ||||
State of California General Obligation Unlimited | 2,000 | 5.000 | 06/01/31 | 2,105 | ||||
State of California General Obligation Unlimited | 1,250 | 5.000 | 02/01/33 | 1,301 | ||||
Tobacco Securitization Authority of Southern California Revenue Bonds | 1,000 | 4.750 | 06/01/25 | 1,009 | ||||
University of California Revenue Bonds (µ) | 1,500 | 5.000 | 05/15/13 | 1,631 | ||||
University of California Revenue Bonds (µ) | 1,000 | 5.000 | 05/15/33 | 1,055 | ||||
30,520 | ||||||||
Colorado - 1.2% | ||||||||
Broomfield Colorado Sales & Use Tax Revenue Bonds (µ) | 1,250 | 5.500 | 12/01/22 | 1,371 | ||||
Colorado Department of Transportation Revenue Bonds (µ) | 265 | 6.000 | 06/15/08 | 275 | ||||
Colorado Health Facilities Authority Revenue Bonds | 1,000 | 5.250 | 06/01/23 | 1,068 | ||||
Colorado Housing & Finance Authority Revenue Bonds | 55 | 7.250 | 04/01/10 | 56 | ||||
Colorado Housing & Finance Authority Revenue Bonds | 55 | 6.300 | 08/01/12 | 55 | ||||
Colorado Housing & Finance Authority Revenue Bonds (Ê) | 50 | 6.300 | 08/01/16 | 51 | ||||
Colorado Housing & Finance Authority Revenue Bonds | 30 | 6.700 | 10/01/16 | 30 | ||||
Jefferson County School District R-001 General Obligation Unlimited (µ) | 500 | 5.000 | 12/15/14 | 546 | ||||
3,452 | ||||||||
Connecticut - 0.3% | ||||||||
Connecticut State Health & Educational Facility Authority Revenue Bonds (Ê) | 1,001 | 3.600 | 07/01/35 | 1,001 | ||||
Delaware - 0.5% | ||||||||
Delaware State Economic Development Authority Revenue Bonds | 435 | 6.500 | 01/01/08 | 443 | ||||
Delaware State Economic Development Authority Revenue Bonds (Ê)(µ) | 250 | 4.900 | 05/01/26 | 261 | ||||
University of Delaware Revenue Bonds (Ê) | 850 | 3.590 | 11/01/26 | 850 | ||||
1,554 | ||||||||
District of Columbia - 0.7% | ||||||||
District of Columbia General Obligation Unlimited (µ) | 1,000 | 5.500 | 06/01/09 | 1,046 | ||||
District of Columbia Revenue Bonds (µ) | 1,000 | 5.000 | 02/01/12 | 1,064 | ||||
2,110 | ||||||||
Florida - 5.3% | ||||||||
City of Tallahassee Florida Revenue Bonds (µ) | 500 | 5.000 | 10/01/11 | 531 | ||||
County of Hillsborough Florida Revenue Bonds | 65 | 6.200 | 12/01/08 | 67 | ||||
County of Miami-Dade Florida Revenue Bonds (µ) | 1,000 | 5.000 | 06/01/14 | 1,080 | ||||
Escambia County Health Facilities Authority Revenue Bonds | 1,000 | 5.000 | 11/15/06 | 1,000 | ||||
Escambia County Health Facilities Authority Revenue Bonds | 1,000 | 5.250 | 11/15/13 | 1,095 | ||||
Florida State Board of Education General Obligation Unlimited | 1,500 | 5.000 | 01/01/09 | 1,545 | ||||
Florida State Division of Bond Finance Revenue Bonds (µ) | 1,600 | 5.250 | 07/01/13 | 1,680 | ||||
Florida Water Pollution Control Financing Corp. Revenue Bonds | 500 | 5.500 | 01/15/12 | 541 | ||||
Highlands County Health Facilities Authority Revenue Bonds | 1,500 | 5.250 | 11/15/36 | 1,600 | ||||
Hillsborough County Educational Facilities Authority Revenue Revenue Bonds (µ) | 825 | 5.750 | 04/01/18 | 862 | ||||
North Miami Florida Revenue Bonds (µ) | 1,325 | 5.000 | 04/01/10 | 1,383 | ||||
Orlando Utilities Commission Revenue Bonds | 1,000 | 5.900 | 10/01/08 | 1,044 | ||||
Orlando Utilities Commission Revenue Bonds | 1,000 | 5.250 | 10/01/20 | 1,073 | ||||
Palm Glades Community Development District Special Assessment | 1,175 | 4.850 | 08/01/11 | 1,185 | ||||
Verandah East Community Development District Special Assessment | 1,000 | 5.400 | 05/01/37 | 1,019 | ||||
15,705 | ||||||||
Georgia - 1.8% | ||||||||
County of Fulton Georgia Revenue Bonds (µ) | 1,500 | 5.250 | 01/01/35 | 1,619 | ||||
Dalton Georgia Revenue Bonds (µ) | 500 | 5.750 | 01/01/09 | 522 | ||||
Georgia Municipal Electric Authority Revenue Bonds (µ) | 850 | 6.250 | 01/01/17 | 1,023 | ||||
Georgia State Road & Tollway Authority Revenue Bonds | 590 | 5.250 | 03/01/11 | 630 | ||||
State of Georgia General Obligation Unlimited | 1,000 | 5.750 | 08/01/08 | 1,038 |
261
Table of Contents
State of Georgia General Obligation Unlimited | 600 | 6.500 | 12/01/09 | 652 | ||||
5,484 | ||||||||
Hawaii - 1.0% | ||||||||
Hawaii Housing & Community Development Corp. Revenue Bonds | 500 | 3.700 | 01/01/22 | 496 | ||||
Kauai County Hawaii General Obligation Unlimited (µ)(æ) | 375 | 6.250 | 08/01/19 | 411 | ||||
State of Hawaii General Obligation Unlimited (µ) | 1,000 | 5.750 | 01/01/10 | 1,065 | ||||
State of Hawaii General Obligation Unlimited (µ) | 1,000 | 5.000 | 03/01/12 | 1,067 | ||||
3,039 | ||||||||
Idaho - 0.5% | ||||||||
Boise State University Revenue Bonds (µ) | 1,250 | 5.375 | 04/01/22 | 1,349 | ||||
Illinois - 4.5% | ||||||||
Chicago Metropolitan Water Reclamation District-Greater Chicago General Obligation Unlimited | 2,000 | 6.500 | 12/01/07 | 2,063 | ||||
City of Chicago Illinois General Obligation Unlimited (µ) | 750 | 6.000 | 01/01/11 | 810 | ||||
City of Chicago Illinois Tax Allocation (µ) | 700 | Zero coupon | 12/01/07 | 673 | ||||
Cook County Community Consolidated School District No. 15-Palatine General Obligation Limited (µ) | 2,235 | Zero coupon | 12/01/13 | 1,704 | ||||
County of Cook Illinois General Obligation Unlimited (µ)(æ) | 2,160 | 5.375 | 11/15/21 | 2,326 | ||||
Illinois Finance Authority Revenue Bonds (µ) | 400 | Zero coupon | 01/01/10 | 356 | ||||
Illinois Finance Authority Revenue Bonds | 670 | 5.500 | 10/01/12 | 728 | ||||
Illinois Finance Authority Revenue Bonds | 750 | 5.000 | 06/01/14 | 787 | ||||
Illinois Finance Authority Revenue Bonds | 575 | 5.000 | 04/01/36 | 595 | ||||
Illinois Finance Authority Revenue Bonds | 1,350 | 6.000 | 11/15/39 | 1,405 | ||||
Illinois Health Facilities Authority Revenue Bonds | 385 | 6.000 | 05/15/10 | 395 | ||||
Lake County Community Unit School District No. 116-Round | ||||||||
Lake General Obligation Unlimited (µ) | 400 | 7.600 | 02/01/14 | 500 | ||||
State of Illinois Revenue Bonds (µ) | 1,000 | 5.000 | 06/15/16 | 1,096 | ||||
13,438 | ||||||||
Indiana - 2.9% | ||||||||
Columbus Multi School Building Corp. Indiana Revenue Bonds (µ) | 450 | 5.000 | 01/10/10 | 469 | ||||
Indiana Bond Bank Revenue Bonds (µ) | 315 | 5.750 | 08/01/13 | 331 | ||||
Indiana Health Facility Financing Authority Revenue Bonds | 1,000 | 5.500 | 11/15/10 | 1,068 | ||||
Indiana Health Facility Financing Authority Revenue Bonds | 1,000 | 5.000 | 11/01/11 | 1,057 | ||||
Indiana Health Facility Financing Authority Revenue Bonds (Ê)(æ) | 1,220 | 5.000 | 11/01/26 | 1,238 | ||||
Indiana Health Facility Financing Authority Revenue Bonds (Ê)(æ) | 1,300 | 3.640 | 03/01/30 | 1,300 | ||||
Indiana State Finance Authority Revenue Bonds (µ) | 925 | 5.000 | 07/01/11 | 976 | ||||
Indiana State Finance Authority Revenue Bonds | 1,500 | 5.250 | 02/01/18 | 1,692 | ||||
Indiana University Revenue Bonds (æ) | 500 | 5.750 | 08/01/10 | 533 | ||||
8,664 | ||||||||
Iowa - 0.5% | ||||||||
Iowa Finance Authority Revenue Bonds | 290 | 6.000 | 07/01/10 | 310 | ||||
Tobacco Settlement Authority of Iowa Revenue Bonds (æ) | 1,000 | 5.600 | 06/01/35 | 1,091 | ||||
1,401 | ||||||||
Kansas - 1.0% | ||||||||
Butler & Sedgwick Counties Unified School District No. 385 | ||||||||
Andover General Obligation Unlimited (µ) | 500 | 5.000 | 09/01/09 | 519 | ||||
Kansas Development Finance Authority Revenue Bonds (µ) | 150 | 5.000 | 08/01/10 | 158 | ||||
Kansas Development Finance Authority Revenue Bonds (µ) | 1,000 | 5.000 | 08/01/13 | 1,081 | ||||
Kansas State Department of Transportation Revenue Bonds (Ê) | 200 | 3.600 | 09/01/20 | 200 | ||||
Wyandotte County-Kansas City Unified Government Revenue Bonds | 305 | 4.750 | 12/01/16 | 317 | ||||
Wyandotte County-Kansas City Unified Government | ||||||||
Transportation Development District Revenue Bonds | 750 | 4.875 | 10/01/28 | 750 | ||||
3,025 | ||||||||
Kentucky - 0.6% | ||||||||
Louisville & Jefferson County Metropolitan Government | ||||||||
Revenue Bonds | 1,750 | 5.250 | 10/01/36 | 1,847 | ||||
Louisiana - 0.9% | ||||||||
Louisiana Energy & Power Authority Revenue Bonds (µ) | 200 | 5.500 | 01/01/08 | 205 |
262
Table of Contents
Louisiana Offshore Terminal Authority Revenue Bonds, annual demand (Ê) | 1,000 | 4.000 | 09/01/23 | 1,004 | ||||
Morehouse Parish Louisiana Revenue Bonds | 1,450 | 5.250 | 11/15/13 | 1,549 | ||||
2,758 | ||||||||
Maryland - 1.6% | ||||||||
City of Baltimore Maryland Revenue Bonds (µ) | 1,000 | 5.250 | 09/01/39 | 1,081 | ||||
Maryland Health & Higher Educational Facilities Authority Revenue Bonds | 1,000 | 5.400 | 01/01/31 | 1,037 | ||||
State of Maryland General Obligation Unlimited | 2,500 | 5.250 | 03/01/13 | 2,741 | ||||
4,859 | ||||||||
Massachusetts - 3.1% | ||||||||
Commonwealth of Massachusetts General Obligation Limited (æ) | 430 | 6.000 | 02/01/11 | 465 | ||||
Commonwealth of Massachusetts General Obligation Limited | 2,000 | 5.000 | 07/01/12 | 2,136 | ||||
Commonwealth of Massachusetts General Obligation Limited | 1,000 | 5.500 | 11/01/15 | 1,130 | ||||
Commonwealth of Massachusetts General Obligation Limited (æ) | 1,000 | 5.750 | 10/01/19 | 1,078 | ||||
Commonwealth of Massachusetts General Obligation Limited (µ)(æ) | 1,000 | 5.250 | 01/01/22 | 1,088 | ||||
Commonwealth of Massachusetts General Obligation Limited (µ) | 750 | 5.250 | 09/01/22 | 858 | ||||
Commonwealth of Massachusetts General Obligation Unlimited | 1,000 | 5.500 | 10/01/16 | 1,137 | ||||
Massachusetts Development Finance Agency Revenue Bonds | 145 | 5.125 | 12/01/11 | 148 | ||||
Massachusetts Development Finance Agency Revenue Bonds | 50 | 5.150 | 10/01/14 | 52 | ||||
Massachusetts Health & Educational Facilities Authority Revenue Bonds | 35 | 5.000 | 07/01/07 | 35 | ||||
Massachusetts School Building Authority Revenue Bonds (µ) | 750 | 5.000 | 08/15/13 | 811 | ||||
Massachusetts State Port Authority Revenue Bonds | 125 | 5.250 | 07/01/07 | 126 | ||||
Massachusetts State Port Authority Revenue Bonds | 150 | 5.750 | 07/01/10 | 161 | ||||
9,225 | ||||||||
Michigan - 0.8% | ||||||||
Bishop International Airport Authority Revenue Bonds (µ) | 750 | 5.000 | 12/01/10 | 771 | ||||
Kent Hospital Finance Authority Revenue Bonds | 250 | 5.250 | 01/15/07 | 251 | ||||
Manistee Area Public Schools General Obligation Unlimited (µ) | 235 | 6.000 | 05/01/08 | 243 | ||||
Michigan Municipal Bond Authority Revenue Bonds (æ) | 500 | 5.750 | 10/01/11 | 545 | ||||
Michigan State Hospital Finance Authority Revenue Bonds (µ) | 250 | 5.000 | 05/15/07 | 252 | ||||
Michigan State Housing Development Authority Revenue Bonds (µ) | 405 | 4.150 | 10/01/13 | 410 | ||||
2,472 | ||||||||
Minnesota - 0.3% | ||||||||
State of Minnesota General Obligation Unlimited | 1,000 | 5.000 | 06/01/13 | 1,022 | ||||
Missouri - 1.0% | ||||||||
City of St. Louis Missouri Revenue Bonds (µ) | 1,000 | 5.250 | 07/01/11 | 1,071 | ||||
Joplin Missouri Industrial Development Authority Health Revenue Bonds | 270 | 5.500 | 02/15/13 | 291 | ||||
Missouri Development Finance Board Revenue Bonds | 1,150 | 5.000 | 03/01/28 | 1,195 | ||||
Missouri Housing Development Commission Revenue Bonds | 150 | 4.350 | 12/01/07 | 150 | ||||
Southeast Missouri State University Revenue Bonds (µ) | 250 | 5.625 | 04/01/10 | 267 | ||||
2,974 | ||||||||
Montana - 0.5% | ||||||||
City of Forsyth Montana Revenue Bonds (Ê) | 1,450 | 5.200 | 05/01/33 | 1,486 | ||||
Nevada - 0.3% | ||||||||
Clark County School District General Obligation Limited (µ)(æ) | 330 | 5.250 | 06/15/10 | 344 | ||||
Truckee Meadows Water Authority Revenue Bonds (µ) | 500 | 5.500 | 07/01/11 | 540 | ||||
884 | ||||||||
New Hampshire - 0.7% | ||||||||
New Hampshire Health & Education Facilities Authority Revenue Bonds | 325 | 4.600 | 10/01/07 | 326 | ||||
New Hampshire Health & Education Facilities Authority Revenue Bonds | 1,675 | 5.000 | 07/01/32 | 1,744 | ||||
2,070 | ||||||||
New Jersey - 3.6% | ||||||||
New Jersey Economic Development Authority Revenue Bonds | 1,000 | 5.000 | 09/01/12 | 1,067 | ||||
New Jersey Economic Development Authority Revenue Bonds | 1,000 | 5.250 | 03/01/14 | 1,094 | ||||
New Jersey Economic Development Authority Revenue Bonds | 1,020 | 5.375 | 06/15/15 | 1,106 | ||||
New Jersey Economic Development Authority Revenue Bonds | 1,500 | 5.625 | 06/15/18 | 1,562 | ||||
New Jersey Health Care Facilities Financing Authority Revenue Bonds | 500 | 5.250 | 07/01/25 | 538 | ||||
New Jersey State Educational Facilities Authority Revenue Bonds | 1,000 | 5.750 | 09/01/10 | 1,072 | ||||
New Jersey State Housing & Mortgage Finance Agency Revenue Bonds (µ) | 885 | 4.300 | 11/01/07 | 889 | ||||
New Jersey State Transit Corp. Certificate Of Participation (µ) | 1,000 | 5.500 | 09/15/07 | 1,016 |
263
Table of Contents
New Jersey State Turnpike Authority Revenue Bonds (µ) | 500 | 5.500 | 01/01/09 | 520 | ||||
New Jersey Transportation Trust Fund Authority Revenue Bonds | 500 | 6.000 | 06/15/07 | 508 | ||||
Tobacco Settlement Financing Corp. Revenue Bonds | 1,000 | 5.500 | 06/01/11 | 1,056 | ||||
Tobacco Settlement Financing Corp. Revenue Bonds | 415 | 4.375 | 06/01/19 | 415 | ||||
10,843 | ||||||||
New York - 12.7% | ||||||||
Battery Park City Authority Revenue Bonds | 1,500 | 5.250 | 11/01/22 | 1,637 | ||||
City of New York New York General Obligation Unlimited | 500 | 5.000 | 08/01/10 | 523 | ||||
City of New York New York General Obligation Unlimited | 1,000 | 5.250 | 08/01/10 | 1,056 | ||||
City of New York New York General Obligation Unlimited | 1,500 | 5.000 | 08/01/11 | 1,586 | ||||
City of New York New York General Obligation Unlimited | 125 | 5.750 | 08/01/11 | 135 | ||||
City of New York New York General Obligation Unlimited | 850 | 5.000 | 03/01/12 | 903 | ||||
City of New York New York General Obligation Unlimited | 750 | 5.000 | 11/01/12 | 802 | ||||
City of New York New York General Obligation Unlimited | 235 | 5.250 | 11/01/12 | 253 | ||||
City of New York New York General Obligation Unlimited | 470 | 5.000 | 08/01/13 | 505 | ||||
City of New York New York General Obligation Unlimited (µ) | 1,000 | 5.000 | 08/01/14 | 1,083 | ||||
City of New York New York General Obligation Unlimited (µ) | 1,000 | 5.000 | 08/01/17 | 1,077 | ||||
City of New York New York General Obligation Unlimited | 1,500 | 5.000 | 08/01/21 | 1,590 | ||||
City of New York New York General Obligation Unlimited | 1,500 | 5.000 | 11/01/34 | 1,571 | ||||
City of New York New York General Obligation Unlimited | 1,000 | 5.000 | 03/01/35 | 1,049 | ||||
Long Island Power Authority Revenue Bonds (µ) | 1,000 | 5.000 | 12/01/22 | 1,080 | ||||
Long Island Power Authority Revenue Bonds (µ) | 1,250 | 5.000 | 12/01/23 | 1,342 | ||||
Metropolitan Transportation Authority Revenue Bonds (µ) | 1,000 | 5.000 | 11/15/30 | 1,046 | ||||
New York City Municipal Finance Authority Water and Sewer Systems Revenue Bonds | 1,000 | 5.000 | 06/15/36 | 1,060 | ||||
New York City Municipal Water Finance Authority Revenue Bonds | 1,500 | 5.250 | 06/15/12 | 1,623 | ||||
New York City Municipal Water Finance Authority Revenue Bonds (Ê) | 1,900 | 3.580 | 06/15/35 | 1,900 | ||||
New York City Transitional Finance Authority Revenue Bonds | 1,000 | 5.500 | 02/01/09 | 1,043 | ||||
New York Mortgage Agency Revenue Bonds | 450 | 5.150 | 04/01/17 | 457 | ||||
New York State Dormitory Authority Revenue Bonds (µ) | 815 | 7.000 | 07/01/09 | 857 | ||||
New York State Dormitory Authority Revenue Bonds (µ) | 960 | 5.000 | 02/15/13 | 1,032 | ||||
New York State Dormitory Authority Revenue Bonds (Ê) | 2,000 | 5.250 | 11/15/23 | 2,153 | ||||
New York State Dormitory Authority Revenue Bonds | 1,300 | 5.000 | 03/15/31 | 1,386 | ||||
New York State Environmental Facilities Corp. Revenue Bonds (µ) | 1,000 | 6.000 | 06/15/12 | 1,123 | ||||
New York State Environmental Facilities Corp. Revenue Bonds | 1,500 | 5.000 | 06/15/34 | 1,585 | ||||
Sales Tax Asset Receivables Corp. Revenue Bonds (µ) | 1,000 | 5.000 | 10/15/29 | 1,063 | ||||
Suffolk County Industrial Development Agency Revenue Bonds | 1,500 | 5.000 | 11/01/28 | 1,541 | ||||
Suffolk County Judicial Facilities Agency Revenue Bonds (µ) | 500 | 5.500 | 04/15/09 | 522 | ||||
Tobacco Settlement Financing Authority Revenue Bonds | 35 | 5.500 | 06/01/10 | 35 | ||||
TSASC, Inc. Revenue Bonds (æ) | 1,000 | 5.500 | 07/15/13 | 1,033 | ||||
TSASC, Inc. Revenue Bonds | 1,165 | 4.750 | 06/01/22 | 1,166 | ||||
United Nations Development Corp. Revenue Bonds | 1,000 | 5.000 | 07/01/11 | 1,016 | ||||
37,833 | ||||||||
North Carolina - 2.4% | ||||||||
Mecklenburg County North Carolina General Obligation Unlimited | 1,000 | 5.000 | 02/01/11 | 1,060 | ||||
North Carolina Capital Facilities Finance Agency Revenue Bonds | 1,000 | 5.000 | 10/01/44 | 1,058 | ||||
North Carolina Eastern Municipal Power Agency Revenue Bonds | 250 | 5.500 | 01/01/10 | 262 | ||||
North Carolina Medical Care Commission Revenue Bonds | 750 | 5.400 | 10/01/27 | 779 | ||||
North Carolina Municipal Power Agency No. 1 Catawba Revenue Bonds (µ) | 1,500 | 6.000 | 01/01/12 | 1,666 | ||||
North Carolina Municipal Power Agency No. 1 Catawba Revenue Bonds | 200 | 5.500 | 01/01/13 | 216 | ||||
State of North Carolina General Obligation Unlimited | 1,000 | 5.000 | 03/01/12 | 1,072 | ||||
University of North Carolina Revenue Bonds (æ) | 1,065 | 5.375 | 12/01/14 | 1,147 | ||||
7,260 | ||||||||
North Dakota - 0.3% | ||||||||
Williams County North Dakota Revenue Bonds | 750 | 5.000 | 11/01/31 | 768 | ||||
Ohio - 1.0% | ||||||||
City of Columbus Ohio General Obligation Limited | 585 | 5.250 | 01/01/11 | 624 | ||||
Jackson Local School District Stark & Summit Counties General Obligation Unlimited (µ) | 500 | Zero coupon | 12/01/07 | 481 |
264
Table of Contents
Ohio State Building Authority Revenue Bonds | 575 | 5.750 | 04/01/08 | 592 | ||||
Ohio State Higher Educational Facility Commission Revenue Bonds | 1,000 | 5.000 | 12/01/09 | 1,036 | ||||
University of Cincinnati Revenue Bonds (µ) | 300 | 5.500 | 06/01/08 | 309 | ||||
3,042 | ||||||||
Oklahoma - 0.5% | ||||||||
Oklahoma Development Finance Authority Revenue Bonds | 275 | 5.000 | 10/01/13 | 291 | ||||
Oklahoma Housing Finance Agency Revenue Bonds | 60 | 7.600 | 09/01/15 | 61 | ||||
Tulsa Industrial Authority Revenue Bonds | 1,000 | 5.000 | 10/01/37 | 1,031 | ||||
1,383 | ||||||||
Oregon - 1.4% | ||||||||
Clackamas County School District No. 62C Oregon City General Obligation Unlimited (æ) | 435 | 6.000 | 06/15/11 | 471 | ||||
Oregon State Department of Administrative Services Revenue Bonds (µ) | 1,000 | 5.000 | 09/01/08 | 1,026 | ||||
Oregon State Department of Administrative Services Revenue Bonds (µ) | 750 | 5.250 | 04/01/10 | 786 | ||||
Oregon State Department of Transportation Revenue Bonds | 1,000 | 5.000 | 11/15/13 | 1,082 | ||||
State of Oregon General Obligation Limited | 745 | 5.700 | 10/01/32 | 757 | ||||
4,122 | ||||||||
Pennsylvania - 4.1% | ||||||||
Allegheny County Higher Education Building Authority Revenue Bonds (Ê) | 1,000 | 3.590 | 12/01/33 | 1,000 | ||||
Allegheny County Port Authority Revenue Bonds (µ) | 250 | 5.500 | 03/01/17 | 270 | ||||
Berks County Vocational Technical School Authority Revenue Bonds (µ) | 1,260 | 5.000 | 06/01/15 | 1,380 | ||||
City of Philadelphia Pennsylvania Revenue Bonds (µ) | 500 | 5.500 | 07/01/07 | 506 | ||||
Commonwealth of Pennsylvania General Obligation Unlimited (µ) | 1,300 | 5.375 | 07/01/17 | 1,481 | ||||
County of Allegheny Pennsylvania General Obligation Unlimited (µ) | 1,000 | 5.000 | 10/01/15 | 1,092 | ||||
Erie County Industrial Development Authority Revenue Bonds | 180 | 5.300 | 04/01/12 | 191 | ||||
Lancaster Higher Education Authority Revenue Bonds | 1,705 | 5.000 | 04/15/25 | 1,812 | ||||
Montgomery County Higher Education & Health Authority Revenue Bonds | 1,000 | 5.125 | 06/01/32 | 1,043 | ||||
Norwin School District General Obligation Unlimited (µ)(æ) | 250 | 6.000 | 04/01/20 | 268 | ||||
Pennsylvania Turnpike Commission Revenue Bonds (Ê)(µ) | 1,000 | 3.560 | 10/01/22 | 1,000 | ||||
Pennsylvania Turnpike Commission Revenue Bonds (Ê)(µ) | 500 | 3.560 | 07/15/41 | 500 | ||||
Sayre Health Care Facilities Authority Revenue Bonds | 625 | 5.300 | 12/01/12 | 654 | ||||
Westmoreland County Industrial Development Authority Revenue Bonds (Ê)(µ) | 1,000 | 3.560 | 07/01/27 | 1,000 | ||||
12,197 | ||||||||
Puerto Rico - 6.1% | ||||||||
Commonwealth of Puerto Rico General Obligation Unlimited (µ) | 1,000 | 5.250 | 07/01/27 | 1,069 | ||||
Commonwealth of Puerto Rico General Obligation Unlimited | 1,000 | 5.250 | 07/01/32 | 1,074 | ||||
Government Development Bank for Puerto Rico Revenue Bonds | 3,250 | 5.000 | 12/01/09 | 3,361 | ||||
Puerto Rico Convention Center Authority Revenue Bonds (µ) | 1,250 | 5.000 | 07/01/31 | 1,344 | ||||
Puerto Rico Electric Power Authority Revenue Bonds | 500 | 5.000 | 07/01/08 | 509 | ||||
Puerto Rico Electric Power Authority Revenue Bonds (µ) | 500 | 5.500 | 07/01/17 | 574 | ||||
Puerto Rico Highway & Transportation Authority Revenue Bonds | 2,000 | 5.000 | 07/01/13 | 2,128 | ||||
Puerto Rico Infrastructure Financing Authority Special Tax | 800 | 5.000 | 07/01/46 | 835 | ||||
Puerto Rico Public Buildings Authority Revenue Bonds (Ê) | 1,500 | 4.500 | 07/01/22 | 1,507 | ||||
Puerto Rico Public Buildings Authority Revenue Bonds | 2,000 | 5.500 | 07/01/23 | 2,181 | ||||
Puerto Rico Public Finance Corp. Revenue Bonds (Ê)(µ) | 3,250 | 5.750 | 08/01/27 | 3,528 | ||||
18,110 | ||||||||
Rhode Island - 0.4% | ||||||||
Rhode Island Economic Development Corp. Revenue Bonds (µ) | 1,000 | 5.000 | 06/15/12 | 1,072 | ||||
South Carolina - 1.9% | ||||||||
Greenville County School District Revenue Bonds | 1,000 | 5.000 | 12/01/11 | 1,058 | ||||
Richland-Lexington Airport District Revenue Bonds (µ) | 500 | 5.000 | 01/01/09 | 515 | ||||
Richland-Lexington Airport District Revenue Bonds (µ) | 440 | 5.000 | 01/01/10 | 457 | ||||
South Carolina State Public Service Authority Revenue Bonds (µ) | 375 | 5.500 | 01/01/11 | 400 | ||||
South Carolina Transportation Infrastructure Bank Revenue Bonds (µ) | 2,500 | 5.250 | 10/01/31 | 2,657 | ||||
Spartanburg County South Carolina Revenue Bonds (µ) | 500 | 6.000 | 04/15/07 | 505 | ||||
5,592 | ||||||||
South Dakota - 0.5% | ||||||||
South Dakota State Building Authority Revenue Bonds (µ) | 1,330 | 5.000 | 09/01/12 | 1,424 | ||||
265
Table of Contents
Tennessee - 1.4% | ||||||||
Clarksville Natural Gas Acquisition Corp. Revenue Bonds | 1,000 | 5.000 | 12/15/14 | 1,076 | ||||
Metropolitan Government Nashville & Davidson County Health & Educational Facility Board Revenue Bonds | 920 | 5.000 | 11/01/06 | 920 | ||||
Tennessee Energy Acquisition Corp. Revenue Bonds | 1,000 | 5.250 | 09/01/17 | 1,108 | ||||
Tennessee Housing Development Agency Revenue Bonds | 950 | 5.375 | 01/01/18 | 994 | ||||
4,098 | ||||||||
Texas - 10.6% | ||||||||
Alvin Independent School District General Obligation Unlimited | 515 | 6.750 | 08/15/09 | 558 | ||||
Alvin Independent School District General Obligation Unlimited | 545 | 6.750 | 08/15/10 | 606 | ||||
Boerne Independent School District General Obligation Unlimited | 1,380 | 5.250 | 02/01/27 | 1,480 | ||||
Boerne Independent School District General Obligation Unlimited | 1,500 | 5.250 | 02/01/29 | 1,606 | ||||
Brazos River Harbor Navigation District Revenue Bonds (Ê) | 220 | 4.750 | 05/15/33 | 221 | ||||
Canadian River Municipal Water Authority Revenue Bonds (µ) | 1,080 | 5.000 | 02/15/11 | 1,139 | ||||
Canadian River Municipal Water Authority Revenue Bonds (µ) | 800 | 5.000 | 02/15/17 | 871 | ||||
Canadian River Municipal Water Authority Revenue Bonds (µ) | 415 | 5.000 | 02/15/18 | 450 | ||||
City of San Antonio Texas Revenue Bonds | 1,000 | 5.250 | 02/01/13 | 1,087 | ||||
City of San Antonio Texas Revenue Bonds | 1,000 | 5.000 | 02/01/14 | 1,086 | ||||
Conroe Independent School District General Obligation Unlimited | 1,445 | 5.000 | 02/15/13 | 1,553 | ||||
County of Harris Texas General Obligation Limited | 1,435 | 5.250 | 08/15/09 | 1,497 | ||||
County of Harris Texas Revenue Bonds (Ê)(µ) | 1,500 | 5.000 | 08/15/21 | 1,552 | ||||
County of Travis Texas General Obligation Limited | 1,000 | 5.250 | 03/01/10 | 1,052 | ||||
Dallas Independent School District General Obligation Unlimited | 2,100 | 5.000 | 02/15/14 | 2,271 | ||||
Lower Colorado River Authority Revenue Bonds (µ) | 1,500 | 5.875 | 05/15/17 | 1,591 | ||||
North Texas Tollway Authority Revenue Bonds (Ê)(µ)(æ) | 15 | 5.000 | 01/01/18 | 15 | ||||
North Texas Tollway Authority Revenue Bonds (Ê)(µ) | 985 | 5.000 | 01/01/18 | 1,008 | ||||
Port of Corpus Christi Authority of Nueces County Texas Revenue Bonds | 385 | 5.350 | 11/01/10 | 389 | ||||
Round Rock Independent School District General Obligation Unlimited | 1,000 | 6.500 | 08/01/10 | 1,102 | ||||
Round Rock Independent School District General Obligation Unlimited (æ) | 750 | 6.500 | 08/01/11 | 827 | ||||
Round Rock Independent School District General Obligation Unlimited | 430 | 5.375 | 08/01/12 | 469 | ||||
Sabine River Authority Revenue Bonds | 1,500 | 5.200 | 05/01/28 | 1,565 | ||||
State of Texas General Obligation Unlimited | 1,500 | 5.000 | 04/01/24 | 1,611 | ||||
State of Texas General Obligation Unlimited (µ) | 750 | 4.500 | 04/01/35 | 743 | ||||
Texas A & M University Revenue Bonds | 1,000 | 5.000 | 07/01/08 | 1,024 | ||||
Texas Water Development Board Revenue Bonds | 500 | 5.250 | 07/15/17 | 501 | ||||
Tyler Independent School District General Obligation Unlimited | 1,350 | 5.000 | 02/15/10 | 1,407 | ||||
University of Houston Revenue Bonds (µ)(æ) | 2,000 | 5.500 | 02/15/30 | 2,119 | ||||
Waco Health Facilities Development Corp. Revenue Bonds | 250 | 5.200 | 11/15/06 | 250 | ||||
31,650 | ||||||||
Utah - 1.1% | ||||||||
County of Utah Utah Revenue Bonds | 200 | 5.050 | 11/01/17 | 213 | ||||
Intermountain Power Agency Revenue Bonds (µ) | 1,400 | 6.500 | 07/01/10 | 1,542 | ||||
Utah State Board of Regents Revenue Bonds (µ) | 1,500 | 5.000 | 08/01/24 | 1,609 | ||||
3,364 | ||||||||
Virgin Islands - 0.9% | ||||||||
Virgin Islands Public Finance Authority Revenue Bonds | 200 | 5.000 | 10/01/13 | 212 | ||||
Virgin Islands Public Finance Authority Revenue Bonds | 2,500 | 5.500 | 10/01/14 | 2,595 | ||||
2,807 | ||||||||
Virginia - 0.7% | ||||||||
Suffolk Industrial Development Authority Revenue Bonds | 625 | 5.300 | 09/01/31 | 638 | ||||
Virginia Commonwealth Transportation Board Revenue Bonds | 360 | 5.375 | 05/15/12 | 387 | ||||
Virginia Housing Development Authority Revenue Bonds (µ) | 400 | 5.375 | 07/01/36 | 417 | ||||
Virginia Public Building Authority Revenue Bonds | 500 | 5.750 | 08/01/07 | 508 | ||||
1,950 | ||||||||
Washington - 2.0% | ||||||||
Energy Northwest Revenue Bonds | 1,000 | 5.000 | 07/01/11 | 1,057 | ||||
King County Public Hospital District No. 2 General Obligation Limited (µ) | 1,000 | 5.000 | 12/01/19 | 1,078 | ||||
King County School District No. 405 Bellevue General Obligation Unlimited (µ) | 1,000 | 5.000 | 12/01/14 | 1,088 | ||||
Kitsap County Washington General Obligation Limited (µ)(æ) | 775 | 5.750 | 07/01/14 | 834 |
266
Table of Contents
Tobacco Settlement Authority of Washington Revenue Bonds | 865 | 6.500 | 06/01/26 | 959 | ||||
Washington Public Power Supply System Revenue Bonds | 1,000 | 7.000 | 07/01/08 | 1,054 | ||||
6,070 | ||||||||
Wisconsin - 2.3% | ||||||||
City of Madison Wisconsin Revenue Bonds | 280 | 4.875 | 10/01/27 | 293 | ||||
Oconto Falls Public School District General Obligation Unlimited (µ)(æ) | 750 | 5.750 | 03/01/13 | 816 | ||||
State of Wisconsin Certificate of Participation (µ) | 2,825 | 5.000 | 03/01/11 | 2,981 | ||||
State of Wisconsin General Obligation Unlimited | 625 | 5.125 | 11/01/11 | 668 | ||||
Wisconsin Housing & Economic Development Authority Revenue Bonds | 50 | 6.850 | 11/01/12 | 51 | ||||
Wisconsin State Health & Educational Facilities Authority Revenue Bonds (µ) | 1,425 | 5.000 | 12/01/10 | 1,496 | ||||
Wisconsin State Health & Educational Facilities Authority Revenue Bonds | 210 | 5.250 | 05/01/12 | 219 | ||||
Wisconsin State Health & Educational Facilities Authority Revenue Bonds | 220 | 5.250 | 05/01/13 | 231 | ||||
6,755 | ||||||||
Total Municipal Bonds (cost $287,734) | 291,501 | |||||||
Short-Term Investments - 1.8% | ||||||||
Russell Investment Company Tax Free Money Market Fund | 5,514,848 | 5,515 | ||||||
Total Short-Term Investments (cost $5,515) | 5,515 | |||||||
Total Investments - 99.6% (identified cost $293,249) | 297,016 | |||||||
Other Assets and Liabilities, Net - 0.4% | 1,046 | |||||||
Net Assets - 100% | 298,062 | |||||||
% | ||
Quality Ratings as a % of Value | ||
(Unaudited) | ||
AAA | 47 | |
AA | 19 | |
A | 16 | |
BBB | 14 | |
BB | 1 | |
Other | 3 | |
100 | ||
Economic Sector Emphasis as a % of Value (Unaudited) | ||
General Obligation | 29 | |
Other Revenue | 15 | |
Utility Revenue | 13 | |
Healthcare Revenue | 11 | |
Education | 9 | |
Cash Equivalents | 7 | |
Industrial Revenue | 6 | |
Leasing Revenue | 4 | |
Pollution Control Revenue | 3 | |
Housing Revenue | 2 | |
Refunded and Special Obligations | 1 | |
100 | ||
267
Table of Contents
Russell Investment Company
Tax Exempt Bond Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | |
Alabama | 0.5 | |
Alaska | 0.4 | |
Arizona | 2.8 | |
California | 10.2 | |
Colorado | 1.2 | |
Connecticut | 0.3 | |
Delaware | 0.5 | |
District of Columbia | 0.7 | |
Florida | 5.3 | |
Georgia | 1.8 | |
Hawaii | 1.0 | |
Idaho | 0.5 | |
Illinois | 4.5 | |
Indiana | 2.9 | |
Iowa | 0.5 | |
Kansas | 1.0 | |
Kentucky | 0.6 | |
Louisiana | 0.9 | |
Maryland | 1.6 | |
Massachusetts | 3.1 | |
Michigan | 0.8 | |
Minnesota | 0.3 | |
Missouri | 1.0 | |
Montana | 0.5 | |
Nevada | 0.3 | |
New Hampshire | 0.7 | |
New Jersey | 3.6 | |
New York | 12.7 | |
North Carolina | 2.4 | |
North Dakota | 0.3 | |
Ohio | 1.0 | |
Oklahoma | 0.5 | |
Oregon | 1.4 | |
Pennsylvania | 4.1 | |
Puerto Rico | 6.1 | |
Rhode Island | 0.4 | |
South Carolina | 1.9 | |
South Dakota | 0.5 | |
Tennessee | 1.4 | |
Texas | 10.6 | |
Utah | 1.1 | |
Virgin Islands | 0.9 | |
Virginia | 0.7 | |
Washington | 2.0 | |
Wisconsin | 2.3 | |
Short-Term Investments | 1.8 | |
Total Investments | 99.6 | |
Other Assets and Liabilities, Net | 0.4 | |
100.0 | ||
268
Table of Contents
Tax-Managed Large Cap Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Tax-Managed Large Cap Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 12.12 | % | |
5 Years | 5.80 | %§ | |
10 Years | 7.91 | %§ |
Tax-Managed Large Cap Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 11.82 | % | |
5 Years | 5.53 | %§ | |
10 Years | 7.76 | %§ |
Tax-Managed Large Cap Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 10.97 | % | |
5 Years | 4.71 | %§ | |
10 Years | 7.15 | %§ |
Standard & Poor’s 500(R) Composite Stock Price Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.34 | % | |
5 Years | 7.26 | %§ | |
10 Years | 8.64 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth on an after-tax basis.
269
Table of Contents
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Tax-Managed Large Cap Fund Class S, Class E and Class C Shares gained 12.12%, 11.82% and 10.97%, respectively. This compared to the S&P 500(R) Index, which gained 16.34% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Core Funds Average returned 13.60%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The significant out-performance of high dividend yielding stocks that many value managers considered overvalued and the underperformance of higher growth companies within the growth area contributed to a difficult environment for active management. The Fund’s underweight to the higher dividend yielding stocks (as well its overweight to the lowest yielding stocks) and its overweight to the higher growth stocks negatively impacted benchmark relative performance. Utilities, materials and processing, and integrated oils were the strongest performing sectors in the S&P 500 Index. The Fund’s underweight to the other energy and utilities sectors contributed negatively to performance. An overweight to health care and consumer discretionary sectors, two of the weaker segments of the market, also detracted from performance. The Fund’s underweight to higher dividend yielding stocks and overweight to low or no yield stocks, and its overweight to higher growth stocks, were key factors to contributing to the Fund’s benchmark relative underperformance.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund’s growth money managers, Sands Capital Management, Inc. and Turner Investment Partners, Inc., underperformed their respective style benchmarks, as well as the S&P 500 Index. Relative to the Fund’s benchmark, Sands was the weakest performer in the Fund as it favored higher growth companies that were out of favor over this period. Poor stock selection, particularly in consumer discretionary, health care and technology, detracted materially from Sands’ performance. Sector allocation (e.g., an underweight in other energy and overweights in health care and consumer discretionary) also detracted from Sands overall performance. Similar to Sands, Turner had both weak stock selection and sector allocation. The bulk of Turner’s underperformance relative to the Fund benchmark was from poor stock selection in the health care, consumer discretionary, and consumer staples sectors where health care service providers, commercial services, and grocery and drug retail chains struggled. Turner’s overweight in the health care and technology sectors, as well as underweights in the financial services and utilities sectors, also detracted from its performance.
The performance of J.P. Morgan Investment Management, Inc., a market-oriented money manager, closely mirrored the benchmark. Positive stock selection in the financial services and materials and processing sectors offset weak stock selection in the integrated oils and technology sectors.
The two value money managers in the Fund, Nicholas-Applegate Capital Management LLC and Palisades Investment Partners, LLC, underperformed their style benchmarks. While Nicholas-Applegate outperformed the S&P 500 Index, Palisades lagged the Fund’s benchmark. Nicholas-Applegate’s outperformance relative to the Fund’s benchmark was due both to its stock selection and sector allocation. Strong stock selection in technology, health care, and consumer discretionary contributed the most to performance. Overweighting the producer durables sector and underweighting the technology sector contributed to performance as well. Palisades underperformed the Fund benchmark with most of its underperformance coming from poor stock selection in the technology sector. Many of the stocks in this sector are higher growth, lower yielding companies, which were out of favor during the period.
Describe any changes to the Fund’s structure or the money manager line-up.
In early June 2006, Nicholas-Applegate and Palisades replaced BKF Asset Management, Inc. (formerly John A. Levin & Co., Inc.) and Kayne Anderson Rudnick Investment Management, LLC, respectively, as money managers in the Fund. Also in early June 2006, Turner’s weighting in the Fund was increased from 10% to 15% and Sands’ weight was increased from 15% to 18%. With the change in money manager line-up and the modification to the growth money managers’ weightings in the Fund, the Fund structure now includes two value money managers, two growth money managers and a market-oriented money manager.
Money Managers as of October 31, 2006 | Styles | |
J.P. Morgan Investment Management, Inc. | Market-Oriented | |
Nicholas-Applegate Capital Management, LLC | Value | |
Palisades Investment Partners, LLC | Value | |
Sands Capital Management, Inc. | Growth | |
Turner Investment Partners, Inc. | Growth |
270
Table of Contents
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
** | The Standard & Poor’s 500(R) Composite Stock Price Index is composed of 500 common stocks which are chosen by Standard & Poor’s Corporation to best capture the price performance of a large cross-section of the US publicly traded stock market. The Index is structured to approximate the general distribution of industries in the US economy. |
‡ | The Fund first issued Class E Shares on December 6, 2000. The returns shown for Class E Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to December 5, 2000 and do not reflect deduction of the shareholder services fees that apply to Class E Shares. Had it done so, the returns shown would have been lower. |
‡‡ | The Fund first issued Class C Shares on December 1, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to November 30, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
271
Table of Contents
Portfolio Management Discussion — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
272
Table of Contents
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,035.90 | $ | 1,015.48 | ||
Expenses Paid During Period* | $ | 9.90 | $ | 9.80 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.93% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,039.80 | $ | 1,019.31 | ||
Expenses Paid During Period* | $ | 6.02 | $ | 5.96 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.17% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,041.20 | $ | 1,020.57 | ||
Expenses Paid During Period* | $ | 4.73 | $ | 4.69 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.92% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 95.2% | ||||
Auto and Transportation - 1.3% | ||||
Burlington Northern Santa Fe Corp. | 15,520 | 1,203 | ||
CSX Corp. | 32,500 | 1,159 | ||
FedEx Corp. | 8,400 | 962 | ||
Harley-Davidson, Inc. (Ñ) | 3,100 | 213 | ||
Norfolk Southern Corp. | 22,100 | 1,162 | ||
Southwest Airlines Co. | 28,200 | 424 | ||
Toyota Motor Corp. - ADR | 9,970 | 1,176 | ||
6,299 | ||||
Consumer Discretionary - 16.0% | ||||
Abercrombie & Fitch Co. Class A | 10,700 | 820 | ||
Allied Waste Industries, Inc. (Æ)(Ñ) | 176,600 | 2,146 | ||
Apollo Group, Inc. Class A (Æ) | 32,589 | 1,204 |
273
Table of Contents
Best Buy Co., Inc. | 22,260 | 1,230 | ||
Carnival Corp. | 5,300 | 259 | ||
CBS Corp. Class B | 32,650 | 945 | ||
Circuit City Stores, Inc. | 3,000 | 81 | ||
Coach, Inc. (Æ) | 58,250 | 2,309 | ||
eBay, Inc. (Æ) | 147,600 | 4,742 | ||
Electronic Arts, Inc. (Æ) | 3,400 | 180 | ||
EW Scripps Co. Class A | 16,900 | 836 | ||
Federated Department Stores, Inc. | 82,700 | 3,631 | ||
Focus Media Holding, Ltd. - ADR (Æ) | 15,750 | 833 | ||
Gannett Co., Inc. | 6,400 | 378 | ||
Google, Inc. Class A (Æ) | 23,980 | 11,424 | ||
Hilton Hotels Corp. | 6,600 | 191 | ||
Home Depot, Inc. | 15,000 | 560 | ||
InterActiveCorp (Æ)(Ñ) | 25,400 | 787 | ||
International Game Technology | 28,060 | 1,193 | ||
Iron Mountain, Inc. (Æ) | 24,700 | 1,071 | ||
JC Penney Co., Inc. | 7,200 | 542 | ||
Jones Apparel Group, Inc. | 18,900 | 631 | ||
Kohl’s Corp. (Æ) | 8,300 | 586 | ||
Las Vegas Sands Corp. (Æ) | 21,040 | 1,603 | ||
Lowe’s Cos., Inc. | 161,700 | 4,874 | ||
Mattel, Inc. | 58,400 | 1,322 | ||
McDonald’s Corp. | 79,800 | 3,345 | ||
News Corp. Class A | 90,000 | 1,876 | ||
Nike, Inc. Class B | 12,800 | 1,176 | ||
Omnicom Group, Inc. | 14,110 | 1,431 | ||
RadioShack Corp. (Ñ) | 64,500 | 1,151 | ||
Scientific Games Corp. (Æ) | 20,590 | 577 | ||
Staples, Inc. | 33,700 | 869 | ||
Starbucks Corp. (Æ) | 224,640 | 8,480 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 17,150 | 1,025 | ||
Target Corp. | 22,900 | 1,355 | ||
Tim Hortons, Inc. (Æ)(Ñ) | 2,573 | 74 | ||
Time Warner, Inc. | 149,275 | 2,987 | ||
VF Corp. | 15,800 | 1,201 | ||
Viacom, Inc. Class B (Æ) | 30,750 | 1,197 | ||
Wal-Mart Stores, Inc. | 33,700 | 1,661 | ||
Walt Disney Co. | 80,000 | 2,517 | ||
Yahoo!, Inc. (Æ) | 90,800 | 2,392 | ||
Yum! Brands, Inc. | 8,000 | 476 | ||
78,168 | ||||
Consumer Staples - 4.8% | ||||
Altria Group, Inc. | 60,300 | 4,904 | ||
Anheuser-Busch Cos., Inc. | 14,200 | 673 | ||
Coca-Cola Co. (The) | 52,500 | 2,453 | ||
Coca-Cola Enterprises, Inc. | 3,900 | 78 | ||
ConAgra Foods, Inc. | 33,300 | 871 | ||
CVS Corp. | 35,400 | 1,111 | ||
General Mills, Inc. | 13,700 | 778 | ||
Kraft Foods, Inc. Class A (Ñ) | 4,700 | 162 | ||
PepsiCo, Inc. | 58,180 | 3,691 | ||
Procter & Gamble Co. | 96,825 | 6,138 | ||
Walgreen Co. | 59,800 | 2,612 | ||
23,471 | ||||
Financial Services - 22.0% | ||||
Aflac, Inc. | 3,800 | 171 | ||
AllianceBernstein Holding, LP (Ñ) | 25,800 | 2,005 | ||
Allstate Corp. (The) | 66,200 | 4,062 | ||
AMBAC Financial Group, Inc. | 23,800 | 1,987 |
274
Table of Contents
American Express Co. | 52,190 | 3,017 | ||
American International Group, Inc. | 84,400 | 5,669 | ||
Apartment Investment & Management Co. Class A (ö) | 3,100 | 178 | ||
Assurant, Inc. | 6,900 | 363 | ||
Bank of America Corp. | 119,779 | 6,453 | ||
Bank of New York Co., Inc. (The) | 27,500 | 945 | ||
Capital One Financial Corp. | 23,754 | 1,884 | ||
Charles Schwab Corp. (The) | 131,890 | 2,403 | ||
Chicago Mercantile Exchange Holdings, Inc. Class A | 11,140 | 5,581 | ||
Cigna Corp. | 8,900 | 1,041 | ||
CIT Group, Inc. | 19,000 | 989 | ||
Citigroup, Inc. | 121,000 | 6,069 | ||
City National Corp. | 500 | 33 | ||
Comerica, Inc. | 2,500 | 145 | ||
Compass Bancshares, Inc. | 6,000 | 338 | ||
Countrywide Financial Corp. | 149,800 | 5,710 | ||
E*TRADE Financial Corp. (Æ) | 18,600 | 433 | ||
First Data Corp. | 2,440 | 59 | ||
Genworth Financial, Inc. Class A | 19,700 | 659 | ||
Goldman Sachs Group, Inc. | 44,950 | 8,531 | ||
Hartford Financial Services Group, Inc. | 9,800 | 854 | ||
Hospitality Properties Trust (ö) | 600 | 29 | ||
Host Hotels & Resorts, Inc. (ö) | 19,332 | 446 | ||
IntercontinentalExchange, Inc. (Æ) | 30,200 | 2,549 | ||
Janus Capital Group, Inc. | 62,600 | 1,257 | ||
JPMorgan Chase & Co. | 37,800 | 1,793 | ||
Lehman Brothers Holdings, Inc. | 39,600 | 3,082 | ||
Lincoln National Corp. | 6,600 | 418 | ||
Marshall & Ilsley Corp. | 5,000 | 240 | ||
MBIA, Inc. | 12,900 | 800 | ||
Merrill Lynch & Co., Inc. | 32,300 | 2,824 | ||
Moody’s Corp. | 47,700 | 3,163 | ||
Morgan Stanley | 100,400 | 7,674 | ||
North Fork Bancorporation, Inc. | 141,400 | 4,041 | ||
Piper Jaffray Cos., Inc. (Æ) | 700 | 48 | ||
ProLogis (ö) | 7,200 | 456 | ||
Simon Property Group, Inc. (ö) | 1,900 | 185 | ||
St. Paul Travelers Cos., Inc. (The) | 6,700 | 343 | ||
State Street Corp. | 25,400 | 1,631 | ||
TCF Financial Corp. | 5,300 | 138 | ||
Torchmark Corp. | 7,900 | 487 | ||
UBS AG | 15,520 | 929 | ||
US Bancorp | 165,500 | 5,601 | ||
Wachovia Corp. | 23,100 | 1,282 | ||
Washington Mutual, Inc. (Ñ) | 74,500 | 3,151 | ||
Wells Fargo & Co. | 155,000 | 5,625 | ||
Western Union Co. (The) (Æ) | 2,440 | 54 | ||
WR Berkley Corp. | 1,950 | 72 | ||
107,897 | ||||
Health Care - 14.1% | ||||
Abbott Laboratories | 51,600 | 2,451 | ||
Abraxis BioScience, Inc. (Æ)(Ñ) | 33,400 | 882 | ||
Aetna, Inc. | 73,800 | 3,042 | ||
Allergan, Inc. | 40,220 | 4,645 | ||
Amgen, Inc. (Æ) | 24,900 | 1,890 | ||
Baxter International, Inc. | 14,700 | 676 | ||
Biomet, Inc. (Æ) | 3,100 | 117 | ||
Boston Scientific Corp. (Æ) | 36,285 | 577 | ||
Celgene Corp. (Æ)(Ñ) | 30,220 | 1,615 | ||
Eli Lilly & Co. | 4,000 | 224 |
275
Table of Contents
Express Scripts, Inc. Class A (Æ) | 15,420 | 983 | ||
Forest Laboratories, Inc. (Æ) | 12,100 | 592 | ||
Genentech, Inc. (Æ) | 79,080 | 6,587 | ||
Genzyme Corp. (Æ) | 59,700 | 4,030 | ||
Gilead Sciences, Inc. (Æ) | 46,760 | 3,222 | ||
GlaxoSmithKline PLC - ADR | 12,300 | 655 | ||
HCA, Inc. (Ñ) | 6,000 | 303 | ||
Intuitive Surgical, Inc. (Æ)(Ñ) | 23,970 | 2,377 | ||
Johnson & Johnson | 47,000 | 3,168 | ||
McKesson Corp. | 400 | 20 | ||
Merck & Co., Inc. | 61,200 | 2,780 | ||
Patterson Cos., Inc. (Æ)(Ñ) | 29,800 | 979 | ||
Pfizer, Inc. | 179,200 | 4,776 | ||
Schering-Plough Corp. | 66,400 | 1,470 | ||
Sepracor, Inc. (Æ)(Ñ) | 14,700 | 761 | ||
Shire Pharmaceuticals PLC - ADR (Ñ) | 28,360 | 1,556 | ||
Stryker Corp. | 32,800 | 1,715 | ||
Teva Pharmaceutical Industries, Ltd. - ADR | 101,500 | 3,346 | ||
Varian Medical Systems, Inc. (Æ) | 46,000 | 2,524 | ||
WellPoint, Inc. (Æ) | 87,290 | 6,662 | ||
Wyeth | 55,900 | 2,853 | ||
Zimmer Holdings, Inc. (Æ) | 20,900 | 1,505 | ||
68,983 | ||||
Integrated Oils - 4.1% | ||||
BP PLC - ADR | 19,100 | 1,282 | ||
Chevron Corp. | 48,087 | 3,231 | ||
ConocoPhillips | 97,979 | 5,902 | ||
Exxon Mobil Corp. | 95,246 | 6,803 | ||
Marathon Oil Corp. | 18,900 | 1,633 | ||
Occidental Petroleum Corp. | 17,400 | 817 | ||
Royal Dutch Shell PLC - ADR | 7,300 | 508 | ||
20,176 | ||||
Materials and Processing - 2.2% | ||||
Air Products & Chemicals, Inc. | 10,400 | 725 | ||
Alcoa, Inc. | 14,900 | 431 | ||
Archer-Daniels-Midland Co. | 35,800 | 1,378 | ||
Cemex SAB de CV - ADR | 48,880 | 1,503 | ||
Dow Chemical Co. (The) | 5,100 | 208 | ||
Eastman Chemical Co. (Ñ) | 6,900 | 420 | ||
Martin Marietta Materials, Inc. (Ñ) | 12,500 | 1,100 | ||
Masco Corp. | 12,100 | 335 | ||
Monsanto Co. | 27,650 | 1,223 | ||
Praxair, Inc. | 9,500 | 572 | ||
Rohm & Haas Co. | 2,900 | 150 | ||
Temple-Inland, Inc. | 11,600 | 457 | ||
United States Steel Corp. | 30,700 | 2,075 | ||
10,577 | ||||
Miscellaneous - 5.3% | ||||
3M Co. | 22,200 | 1,750 | ||
Eaton Corp. | 21,000 | 1,521 | ||
Fortune Brands, Inc. | 2,000 | 154 | ||
General Electric Co. | 351,220 | 12,331 | ||
Honeywell International, Inc. | 14,600 | 615 | ||
ITT Corp. | 71,300 | 3,878 | ||
Johnson Controls, Inc. | 16,500 | 1,345 | ||
Textron, Inc. | 28,570 | 2,598 | ||
Tyco International, Ltd. | 64,100 | 1,887 | ||
26,079 | ||||
Other Energy - 3.0% | ||||
Anadarko Petroleum Corp. | 30,200 | 1,402 |
276
Table of Contents
Apache Corp. | 57,900 | 3,782 | ||
Devon Energy Corp. | 11,900 | 795 | ||
Halliburton Co. | 12,300 | 398 | ||
Peabody Energy Corp. | 22,690 | 952 | ||
Schlumberger, Ltd. | 42,200 | 2,662 | ||
Valero Energy Corp. | 53,000 | 2,774 | ||
Weatherford International, Ltd. (Æ) | 6,900 | 283 | ||
XTO Energy, Inc. | 32,760 | 1,529 | ||
14,577 | ||||
Producer Durables - 4.0% | ||||
American Tower Corp. Class A (Æ) | 14,600 | 526 | ||
Applied Materials, Inc. | 99,810 | 1,736 | ||
Boeing Co. | 27,310 | 2,181 | ||
Caterpillar, Inc. | 19,360 | 1,175 | ||
Centex Corp. (Ñ) | 1,400 | 73 | ||
Deere & Co. | 3,100 | 264 | ||
DR Horton, Inc. | 200 | 5 | ||
Emerson Electric Co. | 7,300 | 616 | ||
Ingersoll-Rand Co., Ltd. Class A | 20,400 | 749 | ||
KB Home (Ñ) | 1,800 | 81 | ||
Lennar Corp. Class A (Ñ) | 1,200 | 57 | ||
Lexmark International, Inc. Class A (Æ) | 31,100 | 1,978 | ||
Lockheed Martin Corp. | 8,600 | 747 | ||
Nokia OYJ - ADR | 35,300 | 702 | ||
Northrop Grumman Corp. | 12,000 | 797 | ||
Parker Hannifin Corp. | 8,000 | 669 | ||
Thermo Electron Corp. (Æ) | 17,870 | 766 | ||
Toll Brothers, Inc. (Æ)(Ñ) | 8,500 | 246 | ||
United Technologies Corp. | 93,100 | 6,118 | ||
19,486 | ||||
Technology - 12.3% | ||||
Akamai Technologies, Inc. (Æ)(Ñ) | 34,720 | 1,627 | ||
Altera Corp. (Æ) | 54,700 | 1,009 | ||
Analog Devices, Inc. | 5,600 | 178 | ||
Apple Computer, Inc. (Æ) | 76,420 | 6,196 | ||
Broadcom Corp. Class A (Æ) | 2,800 | 85 | ||
Cisco Systems, Inc. (Æ) | 219,730 | 5,302 | ||
Computer Sciences Corp. (Æ) | 12,200 | 645 | ||
Corning, Inc. (Æ) | 147,110 | 3,005 | ||
Dell, Inc. (Æ) | 12,700 | 309 | ||
Electronics for Imaging, Inc. (Æ)(Ñ) | 15,800 | 374 | ||
EMC Corp. (Æ) | 118,600 | 1,453 | ||
Freescale Semiconductor, Inc. Class B | 76,100 | 2,993 | ||
Hewlett-Packard Co. | 173,190 | 6,709 | ||
Ingram Micro, Inc. Class A (Æ) | 68,400 | 1,410 | ||
Intel Corp. | 23,300 | 497 | ||
International Business Machines Corp. | 76,800 | 7,091 | ||
Intersil Corp. Class A | 1,700 | 40 | ||
Jabil Circuit, Inc. | 32,600 | 936 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 22,472 | 327 | ||
Juniper Networks, Inc. (Æ) | 15,400 | 265 | ||
Linear Technology Corp. | 13,900 | 433 | ||
Microsoft Corp. | 190,500 | 5,469 | ||
Motorola, Inc. | 43,600 | 1,005 | ||
NCR Corp. (Æ) | 22,300 | 926 | ||
Oracle Corp. (Æ) | 119,500 | 2,207 | ||
Qualcomm, Inc. | 149,500 | 5,440 | ||
Raytheon Co. | 9,800 | 490 | ||
Salesforce.com, Inc. (Æ)(Ñ) | 22,030 | 860 | ||
Seagate Technology, Inc. (Æ)(ø) | 26,700 | — |
277
Table of Contents
Sun Microsystems, Inc. (Æ) | 399,450 | 2,169 | |||
Sybase, Inc. (Æ)(Ñ) | 25,600 | 623 | |||
Xilinx, Inc. | 17,500 | 446 | |||
60,519 | |||||
Utilities - 6.1% | |||||
Alltel Corp. | 11,500 | 613 | |||
America Movil SA de CV Series L | 73,200 | 3,138 | |||
AT&T, Inc. (Ñ) | 99,419 | 3,405 | |||
BellSouth Corp. | 29,500 | 1,330 | |||
Comcast Corp. Class A (Æ)(Ñ) | 60,600 | 2,465 | |||
Comcast Corp. Class A (Æ) | 800 | 32 | |||
Constellation Energy Group, Inc. | 1,100 | 69 | |||
Dominion Resources, Inc. | 300 | 24 | |||
Duke Energy Corp. | 9,200 | 291 | |||
Edison International | 26,300 | 1,169 | |||
Embarq Corp. (Æ)(Ñ) | 17,052 | 824 | |||
Entergy Corp. | 1,000 | 86 | |||
Exelon Corp. | 26,700 | 1,655 | |||
FirstEnergy Corp. | 900 | 53 | |||
NII Holdings, Inc. (Æ)(Ñ) | 23,000 | 1,496 | |||
Northeast Utilities | 16,300 | 408 | |||
PG&E Corp. (Ñ) | 46,600 | 2,010 | |||
Pinnacle West Capital Corp. (Ñ) | 18,800 | 899 | |||
PPL Corp. | 1,600 | 55 | |||
Sierra Pacific Resources (Æ) | 21,800 | 330 | |||
Sprint Nextel Corp. (Ñ) | 249,956 | 4,673 | |||
TXU Corp. | 4,400 | 278 | |||
Verizon Communications, Inc. | 111,180 | 4,114 | |||
Windstream Corp. (Æ) | 11,890 | 163 | |||
Xcel Energy, Inc. (Ñ) | 23,300 | 514 | |||
30,094 | |||||
Total Common Stocks | |||||
(cost $348,797) | 466,326 | ||||
Short-Term Investments - 4.7% | |||||
Russell Investment Company | |||||
Money Market Fund | 21,959,000 | 21,959 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.891% due 12/07/06 | 1,000 | 995 | |||
Total Short-Term Investments | |||||
(cost $22,954) | 22,954 | ||||
Other Securities - 5.2% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 6,527,207 | 6,527 | |||
State Street Securities Lending Quality Trust (×) | 18,909,478 | 18,909 | |||
Total Other Securities | |||||
(cost $25,436) | 25,436 | ||||
Total Investments - 105.1% | |||||
(identified cost $397,187) | 514,716 | ||||
Other Assets and Liabilities, | |||||
Net - (5.1%) | (24,876 | ) | |||
Net Assets - 100.0% | 489,840 | ||||
278
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
S&P 500 E-Mini Index (CME) expiration date 12/06 (102) | 7,054 | 335 | ||
S&P 500 Index (CME) expiration date 12/06 (44) | 15,215 | 421 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 756 | |||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 1.3 | ||
Consumer Discretionary | 16.0 | ||
Consumer Staples | 4.8 | ||
Financial Services | 22.0 | ||
Health Care | 14.1 | ||
Integrated Oils | 4.1 | ||
Materials and Processing | 2.2 | ||
Miscellaneous | 5.3 | ||
Other Energy | 3.0 | ||
Producer Durables | 4.0 | ||
Technology | 12.3 | ||
Utilities | 6.1 | ||
Short-Term Investments | 4.7 | ||
Other Securities | 5.2 | ||
Total Investments | 105.1 | ||
Other Assets and Liabilities, Net | (5.1 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
See accompanying notes which are an integral part of the financial statements.
Tax –Managed Large Cap Fund
279
Table of Contents
(This page intentionally left blank)
280
Table of Contents
Tax-Managed Mid & Small Cap Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Tax-Managed Mid & Small Cap Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.16 | % | |
5 Years | 12.01 | %§ | |
Inception | 5.15 | %§ |
Tax-Managed Mid & Small Cap Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.84 | % | |
5 Years | 11.73 | %§ | |
Inception | 4.92 | %§ |
Tax-Managed Mid & Small Cap Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.06 | % | |
5 Years | 10.90 | %§ | |
Inception | 4.13 | %§ |
Russell 2500(TM) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.69 | % | |
5 Years | 14.36 | %§ | |
Inception | 10.57 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth on an after tax basis.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Tax-Managed Mid & Small Cap Fund Class S, Class E and Class C Shares gained 15.16%, 14.84% and 14.06%, respectively. This compared to the Russell 2500(TM) Index, which gained 17.69% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Mid-Cap Core Funds Average returned 14.03%. For the same period, the Lipper(R) Small-Cap Core Funds Average returned 16.45%. These results serve as peer comparisons and are expressed net of operating expenses.
281
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The stronger performance of high dividend yielding shares that many value managers considered overvalued and the poor results of higher growth companies within the growth area contributed to a difficult environment for active management. As a result, the Fund’s underweight to the highest dividend yielding stocks and overweight to higher growth stocks were the key factors detracting from the Fund’s benchmark relative performance.
Market leadership continued to favor smaller and medium sized companies, although the spread narrowed as investors grew more defensive. The Fund’s exposure to smaller capitalization stocks benefited performance.
Integrated oils, materials and processing, and utilities were the strongest performing sectors in the Russell 2500 Index. An overweight by the Fund in the other energy and health care sectors, two of the weaker segments of the market, and an underweight to materials and processing negatively impacted performance. Overweighting producer durables contributed positively to Fund performance.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Two of the five money managers outperformed their respective style benchmarks. The Fund’s two value money managers outperformed the Fund’s benchmark positively contributing to the Fund’s overall performance. Chartwell Investment Partners was the only money manager in the Fund to outperform its style and Fund benchmarks over the 12 month period.
Both of the Fund’s growth money managers, Transamerica Investment Management, LLC and Turner Investment Partners, Inc., underperformed both their style and Fund benchmarks. Poor stock selection, particularly in the financial services, health care, and technology sectors, resulted in the bulk of Transamerica’s underperformance. Sector allocation detracted from performance because of an underweight to materials and processing and an overweight to the other energy sector. Similar to Transamerica, Turner’s underperformance was due primarily to poor stock selection. Sector allocation detracted from Turner’s return due to an underweight to the materials and processing sector and overweights to the health care and other energy sectors. Strong stock selection by Turner in the materials and processing and financial services sectors was not sufficient to offset weak stock selection in the technology and health care sectors.
Parametric Portfolio Associates LLC, a market oriented manager, underperformed the Fund’s benchmark as a result of its stock selection and sector allocations. Parametric’s index optimization strategy to minimize unrealized taxable capital gains led to stock selection within the other energy sector to detract from results. An overweight in other energy and underweights in materials and processing and technology detracted from performance as well.
Chartwell Investment Partners, a value money manager, outperformed both its style and Fund benchmarks. Relative to the Russell 2500 Index, strong stock selection within the other energy, technology, and autos and transportation sectors offset poor stock selection within the consumer discretionary sector. Underweighting the health care sector also benefited Chartwell’s relative performance.
Netols Asset Management, a value money manager, lagged its style benchmark but outperformed the Fund’s benchmark. Netols’ outperformed the Fund benchmark as a result of its stock selection in materials and processing, autos and transportation, consumer discretionary, and health care. Sector allocation negatively impacted performance. An underweight in materials and processing, one of the better performing sectors in the Russell 2500 Index, as well as overweighting autos and transportation, health care, and other energy, the weaker performing sectors in the Index, hurt Netols’ performance.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
Chartwell Investment Partners | Value | |
Netols Asset Management, Inc. | Value | |
Parametric Portfolio Associates, LLC | Market-Oriented | |
Transamerica Investment Management, LLC | Growth | |
Turner Investment Partners, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
282
Table of Contents
* | Commenced operations on November 30, 1999. |
** | Russell 2500(TM) Index is composed of the bottom 500 stocks in the Russell 1000(R) Index and all the stocks in the Russell 2000(R) Index. The Russell 2500(TM) Index return reflects adjustments for income dividends and capital gains distribution reinvested as of the ex- dividend dates. |
‡ | The Fund first issued Class E Shares on December 6, 2000. The returns shown for Class E Shares are the performance of the Fund’s Class S Shares from November 30, 1999 to December 5, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. |
‡‡ | The Fund first issued Class C Shares on December 2, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 30, 1999 to December 1, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
283
Table of Contents
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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 980.70 | $ | 1,013.86 | ||
Expenses Paid During Period* | $ | 11.23 | $ | 11.42 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.25% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 983.80 | $ | 1,017.64 | ||
Expenses Paid During Period* | $ | 7.50 | $ | 7.63 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.50% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 985.40 | $ | 1,018.90 | ||
Expenses Paid During Period* | $ | 6.26 | $ | 6.36 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.25% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
284
Table of Contents
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 91.2% | ||||
Auto and Transportation - 4.1% | ||||
AAR Corp. (Æ)(Ñ) | 19,175 | 499 | ||
Airtran Holdings, Inc. (Æ)(Ñ) | 44,890 | 447 | ||
Alexander & Baldwin, Inc. (Ñ) | 12,327 | 567 | ||
American Commercial Lines, Inc. (Æ)(Ñ) | 6,245 | 401 | ||
AMR Corp. (Æ) | 9,300 | 264 | ||
ArvinMeritor, Inc. (Ñ) | 8,240 | 124 | ||
Con-way, Inc. | 3,310 | 156 | ||
Fleetwood Enterprises, Inc. (Æ)(Ñ) | 37,242 | 266 | ||
Forward Air Corp. | 23,375 | 759 | ||
General Maritime Corp. (Ñ) | 14,496 | 530 | ||
Genesee & Wyoming, Inc. Class A (Æ)(Ñ) | 5,331 | 150 | ||
Gentex Corp. (Ñ) | 11,610 | 185 | ||
Keystone Automotive Industries, Inc. (Æ)(Ñ) | 17,673 | 680 | ||
Landstar System, Inc. | 11,500 | 534 | ||
Modine Manufacturing Co. | 2,700 | 64 | ||
Overseas Shipholding Group, Inc. | 5,400 | 338 | ||
RailAmerica, Inc. (Æ) | 9,000 | 105 | ||
Skywest, Inc. | 5,380 | 143 | ||
Strattec Security Corp. (Æ) | 2,790 | 108 | ||
Superior Industries International (Ñ) | 5,400 | 91 | ||
US Airways Group, Inc. (Æ) | 5,710 | 285 | ||
Visteon Corp. (Æ) | 81,566 | 602 | ||
Wabtec Corp. (Ñ) | 26,665 | 837 | ||
Winnebago Industries, Inc. (Ñ) | 16,996 | 566 | ||
8,701 | ||||
Consumer Discretionary - 17.5% | ||||
99 Cents Only Stores (Æ)(Ñ) | 34,317 | 411 | ||
Aaron Rents, Inc. (Ñ) | 11,869 | 295 | ||
Activision, Inc. (Æ)(Ñ) | 44,095 | 680 | ||
Advisory Board Co. (The) (Æ) | 6,307 | 348 | ||
Advo, Inc. | 5,650 | 166 | ||
Aeropostale, Inc. (Æ) | 9,690 | 284 | ||
Alderwoods Group, Inc. (Æ)(Ñ) | 4,200 | 84 | ||
America’s Car-Mart, Inc. (Æ)(Ñ) | 2,397 | 36 | ||
AMN Healthcare Services, Inc. (Æ) | 7,590 | 192 | ||
AnnTaylor Stores Corp. (Æ) | 4,200 | 185 | ||
Applebees International, Inc. | 9,745 | 222 | ||
aQuantive, Inc. (Æ)(Ñ) | 33,800 | 919 | ||
Arbitron, Inc. (Ñ) | 18,103 | 760 | ||
Big 5 Sporting Goods Corp. | 10,660 | 256 | ||
Bright Horizons Family Solutions, Inc. (Æ) | 7,800 | 300 | ||
Casual Male Retail Group, Inc. (Æ)(Ñ) | 48,939 | 725 | ||
CDI Corp. (Ñ) | 5,480 | 130 | ||
CEC Entertainment, Inc. (Æ) | 15,200 | 524 | ||
Central European Distribution Corp. (Æ)(Ñ) | 11,812 | 300 | ||
Corinthian Colleges, Inc. (Æ)(Ñ) | 43,542 | 533 | ||
Corrections Corp. of America (Æ) | 5,152 | 235 | ||
Cost Plus, Inc. (Æ)(Ñ) | 55,356 | 662 | ||
Cox Radio, Inc. Class A (Æ)(Ñ) | 43,196 | 727 | ||
Crown Media Holdings, Inc. Class A (Æ)(Ñ) | 6,625 | 26 |
285
Table of Contents
DeVry, Inc. (Æ)(Ñ) | 25,169 | 613 | ||
Diamond Management & Technology Consultants, Inc. (Æ)(Ñ) | 55,567 | 602 | ||
Discovery Holding Co. Class A (Æ)(Ñ) | 4,050 | 60 | ||
DreamWorks Animation SKG, Inc. Class A (Æ)(Ñ) | 6,140 | 162 | ||
Earthlink, Inc. (Æ)(Ñ) | 14,900 | 105 | ||
Fossil, Inc. (Æ)(Ñ) | 29,336 | 641 | ||
FTI Consulting, Inc. (Æ)(Ñ) | 41,274 | 1,173 | ||
Getty Images, Inc. (Æ)(Ñ) | 18,520 | 802 | ||
Global Imaging Systems, Inc. (Æ) | 16,000 | 348 | ||
Greenfield Online, Inc. (Æ)(Ñ) | 29,790 | 303 | ||
Guess?, Inc. (Æ) | 6,600 | 376 | ||
Harman International Industries, Inc. (Ñ) | 3,200 | 328 | ||
Harte-Hanks, Inc. | 5,960 | 150 | ||
Haverty Furniture Cos., Inc. (Ñ) | 4,200 | 66 | ||
Hearst-Argyle Television, Inc. | 6,010 | 151 | ||
HOT Topic, Inc. (Æ)(Ñ) | 40,900 | 413 | ||
Hudson Highland Group, Inc. (Æ)(Ñ) | 4,720 | 55 | ||
Iconix Brand Group, Inc. (Æ)(Ñ) | 16,580 | 309 | ||
International Speedway Corp. Class A | 3,790 | 197 | ||
inVentiv Health, Inc. (Æ) | 5,220 | 149 | ||
Ipass, Inc. (Æ)(Ñ) | 35,482 | 189 | ||
Jarden Corp. (Æ)(Ñ) | 18,715 | 673 | ||
John Wiley & Sons, Inc. Class A | 4,290 | 151 | ||
Jos. A. Bank Clothiers, Inc. (Æ)(Ñ) | 1,758 | 52 | ||
Kellwood Co. (Ñ) | 6,060 | 185 | ||
Kelly Services, Inc. Class A | 5,540 | 159 | ||
Krispy Kreme Doughnuts, Inc. (Æ)(Ñ) | 20,600 | 221 | ||
Lamar Advertising Co. Class A (Æ)(Ñ) | 4,000 | 231 | ||
Landry’s Restaurants, Inc. (Ñ) | 6,600 | 193 | ||
Lodgenet Entertainment Corp. (Æ) | 2,500 | 58 | ||
Matthews International Corp. Class A | 6,060 | 233 | ||
MAXIMUS, Inc. | 3,632 | 101 | ||
McClatchy Co. Class A | 3,820 | 166 | ||
Men’s Wearhouse, Inc. (The) | 4,230 | 169 | ||
Michaels Stores, Inc. | 3,900 | 172 | ||
Monster Worldwide, Inc. (Æ) | 7,050 | 286 | ||
MPS Group, Inc. (Æ) | 13,170 | 201 | ||
MSC Industrial Direct Co., Inc. Class A | 8,069 | 330 | ||
Navigant Consulting, Inc. (Æ)(Ñ) | 20,605 | 367 | ||
New York & Co., Inc. (Æ)(Ñ) | 8,430 | 110 | ||
Nutri System, Inc. (Æ)(Ñ) | 8,130 | 501 | ||
O’Charleys, Inc. (Æ) | 33,778 | 672 | ||
Oxford Industries, Inc. (Ñ) | 10,850 | 573 | ||
PF Chang’s China Bistro, Inc. (Æ)(Ñ) | 30,740 | 1,286 | ||
Playboy Enterprises, Inc. Class B (Æ)(Ñ) | 3,646 | 39 | ||
Polo Ralph Lauren Corp. | 6,110 | 434 | ||
RadioShack Corp. (Ñ) | 9,750 | 174 | ||
RC2 Corp. (Æ) | 14,700 | 664 | ||
Reader’s Digest Association, Inc. (The) (Ñ) | 31,011 | 446 | ||
Red Robin Gourmet Burgers, Inc. (Æ)(Ñ) | 4,800 | 232 | ||
Rent-A-Center, Inc. (Æ) | 8,837 | 254 | ||
School Specialty, Inc. (Æ)(Ñ) | 17,250 | 676 | ||
Scientific Games Corp. (Æ) | 13,380 | 375 | ||
Service Corp. International | 21,330 | 195 | ||
ServiceMaster Co. (The) | 17,210 | 195 | ||
Sharper Image Corp. (Æ)(Ñ) | 8,900 | 99 | ||
Shuffle Master, Inc. (Æ)(Ñ) | 45,968 | 1,286 | ||
Sirva, Inc. (Æ)(Ñ) | 18,230 | 61 | ||
Startek, Inc. (Ñ) | 8,500 | 116 |
286
Table of Contents
Station Casinos, Inc. (Ñ) | 4,910 | 296 | ||
Stein Mart, Inc. | 15,875 | 260 | ||
Strayer Education, Inc. (Ñ) | 17,606 | 1,992 | ||
Sturm Ruger & Co., Inc. (Æ)(Ñ) | 57,775 | 481 | ||
Tetra Tech, Inc. (Æ) | 3,737 | 68 | ||
Toro Co. (Ñ) | 4,270 | 184 | ||
Tractor Supply Co. (Æ) | 7,042 | 341 | ||
Under Armour, Inc. Class A (Æ)(Ñ) | 9,730 | 451 | ||
United Online, Inc. | 10,126 | 137 | ||
USANA Health Sciences, Inc. (Æ)(Ñ) | 2,896 | 130 | ||
Valueclick, Inc. (Æ)(Ñ) | 111,163 | 2,090 | ||
VistaPrint, Ltd. (Æ)(Ñ) | 14,470 | 453 | ||
Watson Wyatt Worldwide, Inc. Class A | 5,111 | 231 | ||
WESCO International, Inc. (Æ)(Ñ) | 14,390 | 939 | ||
WMS Industries, Inc. (Æ)(Ñ) | 15,440 | 545 | ||
37,126 | ||||
Consumer Staples - 2.0% | ||||
Coca-Cola Bottling Co. Consolidated (Ñ) | 1,870 | 118 | ||
Del Monte Foods Co. | 55,160 | 595 | ||
Hain Celestial Group, Inc. (Æ) | 6,774 | 191 | ||
Hansen Natural Corp. (Æ)(Ñ) | 7,520 | 239 | ||
Lance, Inc. (Ñ) | 25,237 | 493 | ||
Loews Corp. - Carolina Group | 1,700 | 98 | ||
Longs Drug Stores Corp. | 2,500 | 108 | ||
Performance Food Group Co. (Æ)(Ñ) | 7,464 | 217 | ||
Ralcorp Holdings, Inc. (Æ) | 3,900 | 193 | ||
Rite Aid Corp. (Æ)(Ñ) | 37,050 | 173 | ||
Ruddick Corp. | 6,990 | 197 | ||
Sensient Technologies Corp. (Ñ) | 19,275 | 444 | ||
SunOpta, Inc. (Æ)(Ñ) | 78,725 | 775 | ||
Tiens Biotech Group USA, Inc. (Æ)(Ñ) | 32,760 | 104 | ||
Tootsie Roll Industries, Inc. (Ñ) | 5,339 | 170 | ||
Weis Markets, Inc. | 3,320 | 135 | ||
4,250 | ||||
Financial Services - 18.8% | ||||
21st Century Insurance Group (Ñ) | 27,820 | 439 | ||
Advanta Corp. Class B (Ñ) | 19,775 | 776 | ||
Affiliated Managers Group, Inc. (Æ)(Ñ) | 3,810 | 382 | ||
Alabama National Bancorporation (Ñ) | 6,100 | 414 | ||
Alexander’s, Inc. (Æ)(ö)(Ñ) | 460 | 168 | ||
Alfa Corp. (Ñ) | 6,100 | 113 | ||
American Financial Realty Trust (ö)(Ñ) | 20,567 | 240 | ||
AmerUs Group Co. | 6,600 | 452 | ||
Aspen Insurance Holdings, Ltd. (Ñ) | 27,250 | 676 | ||
Bank of the Ozarks, Inc. (Ñ) | 7,400 | 232 | ||
BioMed Realty Trust, Inc. (ö) | 11,275 | 363 | ||
BlackRock, Inc. Class A | 1,400 | 211 | ||
Capital One Financial Corp. | 1,966 | 156 | ||
Capital Southwest Corp. (Æ)(Ñ) | 730 | 87 | ||
Capital Trust, Inc. Class A (ö)(Ñ) | 2,485 | 111 | ||
Cedar Shopping Centers, Inc. (ö)(Ñ) | 58,911 | 984 | ||
Central Pacific Financial Corp. (Ñ) | 9,475 | 349 | ||
Chemical Financial Corp. (Ñ) | 4,430 | 132 | ||
CIT Group, Inc. | 6,400 | 333 | ||
Crescent Real Estate Equities Co. (ö)(Ñ) | 8,013 | 175 | ||
Cullen/Frost Bankers, Inc. | 8,625 | 467 | ||
Delphi Financial Group Class A | 7,245 | 284 | ||
Digital Insight Corp. (Æ) | 55,987 | 1,723 | ||
Doral Financial Corp. (Ñ) | 8,200 | 38 | ||
Dun & Bradstreet Corp. (Æ) | 3,010 | 232 |
287
Table of Contents
Enstar Group, Inc. (Æ)(Ñ) | 800 | 73 | ||
EuroBancshares, Inc. (Æ)(Ñ) | 10,590 | 100 | ||
Euronet Worldwide, Inc. (Æ)(Ñ) | 45,270 | 1,345 | ||
Federal Realty Investors Trust (ö) | 3,200 | 256 | ||
FelCor Lodging Trust, Inc. (ö) | 6,585 | 137 | ||
Fidelity National Financial, Inc. | 7,154 | 160 | ||
Fidelity National Title Group, Inc. Class A (Ñ) | 8,746 | 192 | ||
First Citizens BancShares, Inc. Class A | 660 | 124 | ||
First Commonwealth Financial Corp. (Ñ) | 11,190 | 150 | ||
First Financial Corp. (Ñ) | 4,970 | 171 | ||
First Industrial Realty Trust, Inc. (ö)(Ñ) | 13,996 | 643 | ||
First Marblehead Corp. (The) | 8,693 | 586 | ||
First Midwest Bancorp, Inc. (Ñ) | 13,603 | 517 | ||
First Potomac Realty Trust (ö)(Ñ) | 12,525 | 388 | ||
Fulton Financial Corp. (Ñ) | 10,390 | 166 | ||
GATX Corp. (Ñ) | 28,478 | 1,241 | ||
General Growth Properties, Inc. (ö)(Ñ) | 10,200 | 529 | ||
Glacier Bancorp, Inc. (Ñ) | 5,828 | 204 | ||
Greenhill & Co., Inc. | 5,190 | 353 | ||
Hanover Insurance Group, Inc. (The) | 11,927 | 541 | ||
HCC Insurance Holdings, Inc. (Ñ) | 10,215 | 344 | ||
Health Care Property Investors, Inc. (ö) | 70 | 2 | ||
Health Care REIT, Inc. (ö)(Ñ) | 4,210 | 174 | ||
Healthcare Realty Trust, Inc. (ö)(Ñ) | 4,830 | 196 | ||
Hersha Hospitality Trust (ö)(Ñ) | 59,850 | 656 | ||
Highland Hospitality Corp. (ö)(Ñ) | 32,925 | 455 | ||
Home Properties, Inc. (ö) | 9,300 | 587 | ||
Host Hotels & Resorts, Inc. (ö) | 6,300 | 145 | ||
Hub International, Ltd. | 15,975 | 479 | ||
IndyMac Bancorp, Inc. | 4,290 | 195 | ||
Integra Bank Corp. | 6,470 | 171 | ||
IntercontinentalExchange, Inc. (Æ) | 4,570 | 386 | ||
Investment Technology Group, Inc. (Æ) | 16,801 | 785 | ||
Investors Financial Services Corp. (Ñ) | 5,160 | 203 | ||
Investors Real Estate Trust (ö)(Ñ) | 8,500 | 85 | ||
Kronos, Inc. (Æ)(Ñ) | 34,560 | 1,172 | ||
LandAmerica Financial Group, Inc. (Ñ) | 1,592 | 100 | ||
Leucadia National Corp. | 10,410 | 275 | ||
Mercury General Corp. | 2,770 | 143 | ||
Mid-America Apartment Communities, Inc. (ö) | 14,752 | 939 | ||
Mills Corp. (The) (ö)(Ñ) | 1,400 | 26 | ||
Nasdaq Stock Market, Inc. (The) (Æ)(Ñ) | 13,050 | 466 | ||
National Penn Bancshares, Inc. (Ñ) | 7,374 | 151 | ||
National Western Life Insurance Co. Class A (Æ) | 340 | 82 | ||
Nationwide Health Properties, Inc. (ö) | 7,270 | 209 | ||
NCO Group, Inc. (Æ) | 5,570 | 150 | ||
Nuveen Investments, Inc. Class A (Ñ) | 1,400 | 69 | ||
Old Republic International Corp. | 14,527 | 327 | ||
Omega Financial Corp. (Ñ) | 6,460 | 210 | ||
optionsXpress Holdings, Inc. | 9,480 | 295 | ||
Phoenix Cos., Inc. (The) (Ñ) | 6,100 | 97 | ||
Placer Sierra Bancshares (Ñ) | 16,350 | 388 | ||
PMI Group, Inc. (The) (Ñ) | 4,480 | 191 | ||
Popular, Inc. (Ñ) | 13,900 | 253 | ||
Post Properties, Inc. (ö) | 15,305 | 750 | ||
Provident Bankshares Corp. (Ñ) | 4,496 | 162 | ||
Public Storage, Inc. (ö)(Ñ) | 2,788 | 250 | ||
Radian Group, Inc. | 3,802 | 203 | ||
Raymond James Financial, Inc. | 7,488 | 239 | ||
Reinsurance Group of America, Inc. | 3,610 | 204 |
288
Table of Contents
RLI Corp. | 9,300 | 504 | ||
Selective Insurance Group, Inc. | 2,700 | 149 | ||
Signature Bank (Æ)(Ñ) | 15,925 | 483 | ||
Sky Financial Group, Inc. | 11,420 | 286 | ||
South Financial Group, Inc. (The) | 5,720 | 152 | ||
Sovereign Bancorp, Inc. | 11,963 | 285 | ||
State Auto Financial Corp. | 1,610 | 52 | ||
Sterling Financial Corp. | 17,295 | 575 | ||
Sun Communities, Inc. (ö) | 11,981 | 419 | ||
TD Ameritrade Holding Corp. | 13,900 | 229 | ||
TD Banknorth, Inc. | 4,931 | 146 | ||
Texas Capital Bancshares, Inc. (Æ)(Ñ) | 66,525 | 1,333 | ||
Triad Guaranty, Inc. (Æ)(Ñ) | 6,675 | 344 | ||
UnionBanCal Corp. | 3,300 | 190 | ||
United Bankshares, Inc. | 13,300 | 508 | ||
United Fire & Casualty Co. | 18,825 | 666 | ||
Valley National Bancorp (Ñ) | 9,901 | 258 | ||
Vornado Realty Trust (ö) | 5,300 | 632 | ||
Waddell & Reed Financial, Inc. Class A | 28,725 | 732 | ||
Washington Real Estate Investment Trust (ö)(Ñ) | 6,930 | 292 | ||
Westamerica Bancorporation (Ñ) | 10,384 | 518 | ||
Wintrust Financial Corp. (Ñ) | 32,713 | 1,579 | ||
WR Berkley Corp. | 2,719 | 100 | ||
40,059 | ||||
Health Care - 11.2% | ||||
Abraxis BioScience, Inc. (Æ) | 6,020 | 159 | ||
Affymetrix, Inc. (Æ)(Ñ) | 23,732 | 605 | ||
Align Technology, Inc. (Æ)(Ñ) | 21,950 | 304 | ||
Amedisys, Inc. (Æ) | 3,500 | 142 | ||
Arrow International, Inc. (Ñ) | 4,880 | 174 | ||
Bio-Reference Labs, Inc. (Æ)(Ñ) | 12,050 | 285 | ||
Celgene Corp. (Æ)(Ñ) | 16,800 | 898 | ||
Charles River Laboratories International, Inc. (Æ)(Ñ) | 4,618 | 198 | ||
Chattem, Inc. (Æ)(Ñ) | 14,665 | 622 | ||
Cooper Cos., Inc. (The) (Ñ) | 4,149 | 239 | ||
Coventry Health Care, Inc. (Æ) | 8,550 | 401 | ||
Cytyc Corp. (Æ) | 12,551 | 332 | ||
Datascope Corp. | 4,090 | 147 | ||
DaVita, Inc. (Æ) | 10,160 | 565 | ||
Diversa Corp. (Æ)(Ñ) | 35,315 | 329 | ||
Durect Corp. (Æ)(Ñ) | 69,949 | 325 | ||
Emdeon Corp. (Æ) | 17,940 | 209 | ||
Endo Pharmaceuticals Holdings, Inc. (Æ) | 24,610 | 702 | ||
Enzon Pharmaceuticals, Inc. (Æ) | 15,400 | 132 | ||
Fisher Scientific International, Inc. (Æ) | 4,200 | 360 | ||
Gentiva Health Services, Inc. (Æ) | 81,419 | 1,510 | ||
Haemonetics Corp. (Æ) | 8,800 | 401 | ||
Henry Schein, Inc. (Æ)(Ñ) | 25,011 | 1,243 | ||
Hooper Holmes, Inc. | 33,920 | 122 | ||
Idexx Laboratories, Inc. (Æ) | 4,068 | 339 | ||
ImClone Systems, Inc. (Æ) | 4,530 | 142 | ||
Intuitive Surgical, Inc. (Æ) | 1,990 | 197 | ||
Invitrogen Corp. (Æ)(Ñ) | 24,736 | 1,435 | ||
Kinetic Concepts, Inc. (Æ)(Ñ) | 2,440 | 85 | ||
Kos Pharmaceuticals, Inc. (Æ)(Ñ) | 3,050 | 152 | ||
KV Pharmaceutical Co. (Æ)(Ñ) | 31,242 | 697 | ||
LifePoint Hospitals, Inc. (Æ)(Ñ) | 19,341 | 687 | ||
Ligand Pharmaceuticals, Inc. Class B (Æ) | 13,900 | 153 | ||
Lincare Holdings, Inc. (Æ) | 5,190 | 174 |
289
Table of Contents
Matria Healthcare, Inc. (Æ)(Ñ) | 26,193 | 739 | ||
Millennium Pharmaceuticals, Inc. (Æ)(Ñ) | 9,600 | 112 | ||
NuVasive, Inc. (Æ)(Ñ) | 2,200 | 52 | ||
Omnicare, Inc. (Ñ) | 3,000 | 114 | ||
Omnicell, Inc. (Æ)(Ñ) | 4,970 | 93 | ||
OSI Pharmaceuticals, Inc. (Æ)(Ñ) | 2,694 | 103 | ||
Par Pharmaceutical Cos., Inc. (Æ)(Ñ) | 34,935 | 681 | ||
Pharmaceutical Product Development, Inc. | 8,620 | 273 | ||
PolyMedica Corp. (Ñ) | 20,224 | 840 | ||
PSS World Medical, Inc. (Æ) | 30,961 | 623 | ||
Psychiatric Solutions, Inc. (Æ) | 14,520 | 482 | ||
Quality Systems, Inc. (Ñ) | 12,000 | 509 | ||
Respironics, Inc. (Æ) | 14,660 | 518 | ||
Stericycle, Inc. (Æ)(Ñ) | 11,148 | 788 | ||
Sunrise Senior Living, Inc. (Æ)(Ñ) | 18,333 | 572 | ||
Symmetry Medical, Inc. (Æ)(Ñ) | 26,300 | 410 | ||
Techne Corp. (Æ)(Ñ) | 3,040 | 170 | ||
Tenet Healthcare Corp. (Æ)(Ñ) | 28,190 | 199 | ||
US Physical Therapy, Inc. (Æ) | 26,225 | 316 | ||
Varian Medical Systems, Inc. (Æ) | 3,900 | 214 | ||
VCA Antech, Inc. (Æ) | 11,310 | 366 | ||
WebMD Health Corp. Class A (Æ)(Ñ) | 2,800 | 102 | ||
WellCare Health Plans, Inc. (Æ) | 3,900 | 229 | ||
West Pharmaceutical Services, Inc. (Ñ) | 12,540 | 527 | ||
Zoll Medical Corp. (Æ) | 5,380 | 208 | ||
Zymogenetics, Inc. (Æ)(Ñ) | 3,462 | 56 | ||
23,761 | ||||
Integrated Oils - 0.1% | ||||
Murphy Oil Corp. | 4,600 | 217 | ||
Materials and Processing - 6.4% | ||||
Acuity Brands, Inc. | 14,529 | 720 | ||
Allegheny Technologies, Inc. | 9,180 | 723 | ||
Apogee Enterprises, Inc. (Ñ) | 50,100 | 806 | ||
Arch Chemicals, Inc. | 5,050 | 169 | ||
Armor Holdings, Inc. (Æ) | 6,530 | 336 | ||
Brush Engineered Materials, Inc. (Æ)(Ñ) | 23,553 | 793 | ||
Buckeye Technologies, Inc. (Æ)(Ñ) | 12,300 | 128 | ||
Commercial Metals Co. | 23,340 | 621 | ||
Compx International, Inc. (Ñ) | 6,900 | 124 | ||
Crown Holdings, Inc. (Æ) | 26,925 | 523 | ||
Cytec Industries, Inc. | 6,110 | 338 | ||
FMC Corp. | 3,580 | 245 | ||
GrafTech International, Ltd. (Æ) | 26,820 | 162 | ||
Graphic Packaging Corp. (Æ)(Ñ) | 32,500 | 127 | ||
Griffon Corp. (Æ)(Ñ) | 27,575 | 678 | ||
Hercules, Inc. (Æ) | 43,575 | 793 | ||
Huntsman Corp. (Æ) | 8,740 | 151 | ||
Jacobs Engineering Group, Inc. (Æ) | 18,527 | 1,400 | ||
Lennox International, Inc. | 3,600 | 97 | ||
Martin Marietta Materials, Inc. | 3,390 | 298 | ||
Modtech Holdings, Inc. (Æ)(Ñ) | 54,416 | 277 | ||
PAN American Silver Corp. (Æ) | CAD 12,740 | 282 | ||
Precision Castparts Corp. | 5,000 | 340 | ||
Rogers Corp. (Æ)(Ñ) | 3,550 | 248 | ||
Royal Gold, Inc. (Ñ) | 2,800 | 82 | ||
RPM International, Inc. (Ñ) | 9,501 | 182 | ||
Sonoco Products Co. | 6,500 | 231 | ||
Southern Copper Corp. (Ñ) | 8,000 | 411 | ||
Spartech Corp. | 32,176 | 882 | ||
St. Joe Co. (The) (Ñ) | 2,130 | 115 |
290
Table of Contents
Standard Register Co. (The) (Ñ) | 20,000 | 271 | ||
Texas Industries, Inc. (Ñ) | 7,000 | 435 | ||
Universal Forest Products, Inc. (Ñ) | 3,500 | 159 | ||
USG Corp. (Æ)(Ñ) | 5,492 | 268 | ||
Washington Group International, Inc. | 1,396 | 79 | ||
Wausau Paper Corp. | 11,530 | 156 | ||
13,650 | ||||
Miscellaneous - 0.5% | ||||
Carlisle Cos., Inc. | 2,661 | 222 | ||
Foster Wheeler, Ltd. (Æ)(Ñ) | 9,185 | 413 | ||
Lancaster Colony Corp. (Ñ) | 4,690 | 190 | ||
Walter Industries, Inc. (Ñ) | 7,353 | 342 | ||
1,167 | ||||
Other Energy - 6.5% | ||||
Arch Coal, Inc. (Ñ) | 7,800 | 270 | ||
Basic Energy Services, Inc. (Æ)(Ñ) | 12,900 | 315 | ||
Cameron International Corp. (Æ)(Ñ) | 16,742 | 839 | ||
CARBO Ceramics, Inc. (Ñ) | 2,550 | 86 | ||
Dynegy, Inc. Class A (Æ)(Ñ) | 120,275 | 731 | ||
Encore Acquisition Co. (Æ)(Ñ) | 23,289 | 583 | ||
Forest Oil Corp. (Æ)(Ñ) | 27,439 | 896 | ||
Global Industries, Ltd. (Æ)(Ñ) | 31,295 | 520 | ||
Grant Prideco, Inc. (Æ) | 18,951 | 716 | ||
Grey Wolf, Inc. (Æ)(Ñ) | 21,050 | 147 | ||
Hanover Compressor Co. (Æ)(Ñ) | 37,100 | 687 | ||
Helix Energy Solutions Group, Inc. (Æ)(Ñ) | 25,980 | 839 | ||
Houston Exploration Co. (Æ)(Ñ) | 4,950 | 268 | ||
Matrix Service Co. (Æ)(Ñ) | 39,452 | 567 | ||
National-Oilwell Varco, Inc. (Æ) | 3,098 | 187 | ||
Oil States International, Inc. (Æ)(Ñ) | 4,340 | 126 | ||
Parallel Petroleum Corp. (Æ) | 15,350 | 311 | ||
Patterson-UTI Energy, Inc. (Ñ) | 7,930 | 184 | ||
Peabody Energy Corp. | 13,600 | 571 | ||
Plains Exploration & Production Co. (Æ) | 9,447 | 400 | ||
Range Resources Corp. | 17,535 | 476 | ||
SEACOR Holdings, Inc. (Æ)(Ñ) | 7,400 | 662 | ||
Southwestern Energy Co. (Æ) | 16,670 | 593 | ||
Superior Energy Services, Inc. (Æ) | 16,380 | 513 | ||
Tesoro Corp. | 9,590 | 613 | ||
Todco (Æ) | 8,750 | 299 | ||
W-H Energy Services, Inc. (Æ) | 9,800 | 459 | ||
Whiting Petroleum Corp. (Æ) | 12,944 | 577 | ||
XTO Energy, Inc. | 7,253 | 338 | ||
13,773 | ||||
Producer Durables - 8.1% | ||||
ACCO Brands Corp. (Æ) | 28,250 | 686 | ||
Applied Industrial Technologies, Inc. (Ñ) | 8,560 | 246 | ||
Applied Signal Technology, Inc. (Ñ) | 26,076 | 387 | ||
ASV, Inc. (Æ)(Ñ) | 23,120 | 338 | ||
BE Aerospace, Inc. (Æ)(Ñ) | 26,527 | 671 | ||
C&D Technologies, Inc. (Ñ) | 94,642 | 469 | ||
Champion Enterprises, Inc. (Æ)(Ñ) | 61,717 | 572 | ||
Crane Co. | 24,814 | 966 | ||
Crown Castle International Corp. (Æ) | 19,400 | 653 | ||
Cymer, Inc. (Æ)(Ñ) | 11,220 | 520 | ||
Dionex Corp. (Æ)(Ñ) | 5,400 | 294 | ||
Donaldson Co., Inc. (Ñ) | 17,924 | 673 | ||
EnPro Industries, Inc. (Æ)(Ñ) | 17,650 | 565 | ||
Entegris, Inc. (Æ)(Ñ) | 11,100 | 124 | ||
Esterline Technologies Corp. (Æ) | 13,911 | 524 |
291
Table of Contents
Federal Signal Corp. | 43,987 | 671 | ||
General Cable Corp. (Æ)(Ñ) | 33,144 | 1,246 | ||
IDEX Corp. | 10,693 | 502 | ||
Kadant, Inc. (Æ) | 15,175 | 414 | ||
Kennametal, Inc. | 14,335 | 885 | ||
Knoll, Inc. | 23,575 | 467 | ||
Lam Research Corp. (Æ) | 3,700 | 183 | ||
Lennar Corp. Class A (Ñ) | 6,700 | 318 | ||
Littelfuse, Inc. (Æ) | 5,230 | 177 | ||
Mastec, Inc. (Æ)(Ñ) | 40,024 | 438 | ||
MDC Holdings, Inc. (Ñ) | 4,267 | 213 | ||
Orbital Sciences Corp. (Æ)(Ñ) | 11,051 | 201 | ||
Pall Corp. | 80 | 3 | ||
Pentair, Inc. | 8,540 | 281 | ||
Polycom, Inc. (Æ) | 13,740 | 376 | ||
Power-One, Inc. (Æ)(Ñ) | 22,100 | 151 | ||
Robbins & Myers, Inc. | 22,656 | 872 | ||
Roper Industries, Inc. | 6,240 | 299 | ||
SBA Communications Corp. Class A (Æ)(Ñ) | 15,200 | 406 | ||
Technical Olympic USA, Inc. (Ñ) | 12,686 | 141 | ||
Tecumseh Products Co. Class A (Æ)(Ñ) | 6,150 | 103 | ||
Terex Corp. (Æ) | 14,120 | 731 | ||
Varian Semiconductor Equipment Associates, Inc. (Æ)(Ñ) | 9,492 | 346 | ||
WCI Communities, Inc. (Æ)(Ñ) | 5,113 | 82 | ||
17,194 | ||||
Technology - 12.1% | ||||
3Com Corp. (Æ) | 17,700 | 86 | ||
Actel Corp. (Æ) | 8,300 | 136 | ||
Agere Systems, Inc. (Æ) | 14,226 | 242 | ||
Agile Software Corp. (Æ) | 127,609 | 860 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 13,210 | 619 | ||
American Science & Engineering, Inc. (Æ)(Ñ) | 10,357 | 545 | ||
Anixter International, Inc. (Æ)(Ñ) | 18,430 | 1,101 | ||
Ansys, Inc. (Æ) | 8,300 | 382 | ||
Avid Technology, Inc. (Æ)(Ñ) | 7,478 | 270 | ||
Avnet, Inc. (Æ) | 7,710 | 183 | ||
BEA Systems, Inc. (Æ) | 18,550 | 302 | ||
Benchmark Electronics, Inc. (Æ) | 37,342 | 991 | ||
Black Box Corp. (Ñ) | 3,611 | 161 | ||
Broadwing Corp. (Æ) | 29,840 | 447 | ||
CACI International, Inc. Class A (Æ)(Ñ) | 10,357 | 596 | ||
Cognizant Technology Solutions Corp. Class A (Æ) | 3,000 | 226 | ||
CSG Systems International, Inc. (Æ)(Ñ) | 6,273 | 169 | ||
Ditech Networks, Inc. (Æ) | 17,100 | 135 | ||
Electronics for Imaging, Inc. (Æ)(Ñ) | 22,750 | 538 | ||
Emulex Corp. (Æ) | 52,823 | 993 | ||
Excel Technology, Inc. (Æ) | 4,000 | 102 | ||
F5 Networks, Inc. (Æ) | 6,100 | 404 | ||
Fairchild Semiconductor International, Inc. (Æ) | 19,500 | 314 | ||
Formfactor, Inc. (Æ) | 2,374 | 91 | ||
Harris Corp. | 5,320 | 227 | ||
Hutchinson Technology, Inc. (Æ)(Ñ) | 17,425 | 403 | ||
Informatica Corp. (Æ)(Ñ) | 114,179 | 1,415 | ||
Integrated Device Technology, Inc. (Æ)(Ñ) | 20,500 | 325 | ||
Intersil Corp. Class A (Ñ) | 5,200 | 122 | ||
JDS Uniphase Corp. (Æ) | 20,675 | 300 | ||
Juniper Networks, Inc. (Æ)(Ñ) | 8,730 | 150 | ||
Kemet Corp. (Æ)(Ñ) | 17,800 | 131 | ||
Lattice Semiconductor Corp. (Æ) | 19,700 | 122 |
292
Table of Contents
Leadis Technology, Inc. (Æ) | 19,570 | 90 | ||
Lions Gate Entertainment Corp. (Æ)(Ñ) | 56,890 | 576 | ||
Macrovision Corp. (Æ)(Ñ) | 76,915 | 2,047 | ||
Mantech International Corp. Class A (Æ)(Ñ) | 23,475 | 800 | ||
McAfee, Inc. (Æ) | 3,400 | 98 | ||
Microchip Technology, Inc. | 13,250 | 436 | ||
NAVTEQ Corp. (Æ) | 10,135 | 337 | ||
ON Semiconductor Corp. (Æ)(Ñ) | 9,500 | 59 | ||
Parametric Technology Corp. (Æ) | 43,460 | 849 | ||
Perot Systems Corp. Class A (Æ)(Ñ) | 47,375 | 699 | ||
Progress Software Corp. (Æ) | 32,575 | 938 | ||
Redback Networks, Inc. (Æ)(Ñ) | 32,402 | 513 | ||
Riverbed Technology, Inc. (Æ)(Ñ) | 15,110 | 362 | ||
Salesforce.com, Inc. (Æ) | 7,480 | 292 | ||
SanDisk Corp. (Æ) | 3,510 | 169 | ||
Semtech Corp. (Æ) | 4,600 | 60 | ||
Skyworks Solutions, Inc. (Æ)(Ñ) | 43,350 | 287 | ||
Sonus Networks, Inc. (Æ)(Ñ) | 50,620 | 265 | ||
SRA International, Inc. Class A (Æ)(Ñ) | 5,060 | 162 | ||
Sybase, Inc. (Æ) | 21,855 | 532 | ||
Sycamore Networks, Inc. (Æ) | 15,200 | 57 | ||
Syntel, Inc. (Ñ) | 6,241 | 156 | ||
Utstarcom, Inc. (Æ)(Ñ) | 15,360 | 165 | ||
Varian, Inc. (Æ)(Ñ) | 25,611 | 1,201 | ||
Vignette Corp. (Æ) | 8,677 | 141 | ||
Zebra Technologies Corp. Class A (Æ)(Ñ) | 34,911 | 1,301 | ||
25,680 | ||||
Utilities - 3.9% | ||||
Alaska Communications Systems Group, Inc. (Ñ) | 90,869 | 1,308 | ||
Cablevision Systems Corp. Class A | 4,300 | 119 | ||
Cascade Natural Gas Corp. (Ñ) | 5,400 | 139 | ||
Central Vermont Public Service Corp. (Ñ) | 6,600 | 149 | ||
Cleco Corp. | 17,413 | 447 | ||
El Paso Electric Co. (Æ) | 21,825 | 510 | ||
Empire District Electric Co. (The) | 6,820 | 162 | ||
Great Plains Energy, Inc. (Ñ) | 6,060 | 197 | ||
Level 3 Communications, Inc. (Æ)(Ñ) | 42,680 | 226 | ||
Middlesex Water Co. (Ñ) | 6,210 | 118 | ||
NeuStar, Inc. Class A (Æ)(Ñ) | 58,688 | 1,715 | ||
New Jersey Resources Corp. (Ñ) | 4,580 | 238 | ||
NII Holdings, Inc. (Æ) | 4,250 | 276 | ||
NSTAR | 6,996 | 243 | ||
Otter Tail Corp. (Ñ) | 4,870 | 146 | ||
PNM Resources, Inc. | 17,350 | 489 | ||
Premiere Global Services, Inc. (Æ) | 5,268 | 44 | ||
Puget Energy, Inc. | 7,450 | 178 | ||
Questar Corp. (Ñ) | 2,450 | 200 | ||
SCANA Corp. | 8,400 | 336 | ||
Southwest Gas Corp. | 7,455 | 267 | ||
Telephone & Data Systems, Inc. | 6,110 | 298 | ||
Telephone & Data Systems, Inc. Special Shares | 1,200 | 56 | ||
Wisconsin Energy Corp. (Ñ) | 10,660 | 490 | ||
8,351 | ||||
Total Common Stocks | ||||
(cost $152,797) | 193,929 | |||
Short-Term Investments - 9.2% | ||||
Russell Investment Company Money Market Fund | 18,702,000 | 18,702 | ||
United States Treasury Bills (ç)(ž)(§) 4.891% due 12/07/06 | 800 | 796 | ||
Total Short-Term Investments | ||||
(cost $19,498) | 19,498 | |||
293
Table of Contents
Other Securities - 28.9% | |||||
Russell Investment Company Money Market Fund (×) | 15,768,262 | 15,768 | |||
State Street Securities Lending Quality Trust (×) | 45,681,037 | 45,681 | |||
Total Other Securities | |||||
(cost $61,449) | 61,449 | ||||
Total Investments - 129.3% | |||||
(identified cost $233,744) | 274,876 | ||||
Other Assets and Liabilities, | |||||
Net - (29.3%) | (62,296 | ) | |||
Net Assets - 100.0% | 212,580 | ||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Russell 2000 Mini Index (CME) expiration date 12/06 (245) | 18,890 | 1,196 | |||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 1,196 | ||||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 4.1 | ||
Consumer Discretionary | 17.5 | ||
Consumer Staples | 2.0 | ||
Financial Services | 18.8 | ||
Health Care | 11.2 | ||
Integrated Oils | 0.1 | ||
Materials and Processing | 6.4 | ||
Miscellaneous | 0.5 | ||
Other Energy | 6.5 | ||
Producer Durables | 8.1 | ||
Technology | 12.1 | ||
Utilities | 3.9 | ||
Short-Term Investments | 9.2 | ||
Other Securities | 28.9 | ||
Total Investments | 129.3 | ||
Other Assets and Liabilities, Net | (29.3 | ) | |
100.0 | |||
Futures Contracts | 0.6 |
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Mid & Small Cap Fund
294
Table of Contents
Select Growth Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Select Growth - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.48 | % | |
5 Years | 4.55 | %§ | |
Inception* | (3.03 | )%§ |
Select Growth - Class E
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.31 | % | |
5 Years | 4.31 | %§ | |
Inception* | (3.29 | )%§ |
Select Growth - Class C
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.23 | % | |
5 Years | 3.35 | %§ | |
Inception* | (4.15 | )%§ |
Select Growth - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.75 | % | |
5 Years | 4.70 | %§ | |
Inception* | (2.90 | )%§ |
Russell 1000(R) Growth Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 10.84 | % | |
5 Years | 4.07 | %§ | |
Inception* | (3.18 | )%§ |
295
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Select Growth Fund Class I, Class S, Class E and Class C Shares gained 6.75%, 6.48%, 6.31% and 5.23%, respectively. This compared to the Russell 1000(R) Growth Index, which gained 10.84% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Growth Funds Average returned 7.54%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s overweight in companies with higher growth rates, higher price/earnings multiples and lower dividend yields detracted significantly from the Fund’s performance in the fiscal year ended October 31, 2006. This was mainly due to the fact that during the last seven months of the fiscal year, the market rewarded slower growing and higher dividend yielding companies. Investor concern over a “hard landing” for the economy due to the Federal Reserve’s focus on containing inflation, quickly rising energy prices, weakening home sales and prices and weakened consumer confidence overshadowed the favorable earnings growth being generated by many companies during the period. Also during the last seven months of the fiscal year, the Fund’s emphasis on companies with positive earnings momentum went unrewarded due to investor skepticism over the ability of these companies to continue to grow their earnings at such attractive rates in an economic environment that was perceived to be weakening. This strong focus by the market on more defensive investments was not shared by the Fund’s money managers, which continued to expect more of a “soft landing” for the economy and kept their focus on higher growth companies.
This market environment was in stark contrast to the first five months of the fiscal year during which the market rewarded more cyclically oriented companies that were generating strong earnings growth, and the Fund was rewarded for its investments in these companies. During that period the Fund benefited from strong stock selection in the technology, financial services, materials and processing, and autos and transportation sectors.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Stock selection and sector allocations by the Fund’s money managers detracted from Fund performance during the period. Almost half of the underperformance in the Fund was due to weak stock selection in the health care sector. The Fund was underweight in many of the larger drug manufacturers, a sector which performed well during the period despite suffering from weak new product pipelines, pricing pressure and fears regarding regulation. Stock selection in the technology sector also detracted from results largely because of the Fund’s money manager stock selections in the communication technology area. The Fund’s underweight in producer durables and the more defensive consumer staples and utilities sectors, coupled with its overweight in higher growth technology stocks, detracted from Fund results.
As investor concerns over interest rates, energy prices and a potentially softening economy increased, Delaware Management Company, Ark Asset Management Co., Inc., Turner Investment Partners, Inc. and Fuller & Thaler Asset Management, Inc. each fell behind their respective style benchmarks for the final seven months of the fiscal year. In contrast, each of the money managers in the Fund, except Ark, outperformed its respective style benchmarks in the first five months of the fiscal year as the market rewarded strong earnings growth. CapitalWorks Investment Partners, LLC outperformed its benchmark for the entire period.
Delaware Management Company, the Fund’s best performer in fiscal 2005, detracted the most from returns in fiscal 2006 as its emphasis on a focused portfolio of quickly growing companies with what it deemed to be attractive long-term growth prospects was not rewarded by the market. Delaware’s stock selection in the consumer discretionary and technology sectors, particularly in the radio and TV broadcasting and computer technology, services and communications technology segments, was the largest detractor from its performance.
296
Table of Contents
Ark’s overweights and stock selection in the technology and health care sectors detracted the most from its performance as its emphasis on companies experiencing positive changes caused it to buy stocks in the communications technology and health care services areas. Stocks selected by Ark underperformed despite what it deemed to be improving earnings growth situations.
Turner’s stock selection in the health care and technology sectors detracted the most from its performance as its aggressive emphasis on companies with high earnings growth and strong earnings and price momentum was not rewarded by the market’s more defensive focus. Turner’s focus away from higher dividend paying stocks also worked against it. CapitalWorks outperformed its style benchmark by a wide margin during the overall period. CapitalWorks provides the Fund with exposure to smaller capitalization companies that are experiencing strong earnings growth. CapitalWorks contributed positively to the Fund’s performance particularly as smaller capitalization stocks outperformed the Fund’s Russell 1000 Growth Index benchmark. Strong stock selection, particularly in the technology and consumer discretionary sectors drove this outperformance.
Fuller & Thaler trailed its style benchmark. Strong stock selection in the technology and consumer discretionary sectors was offset by weaker stock selection in the financial services and health care sectors. Fuller & Thaler contributed positively to the Fund’s overall benchmark relative performance due to its focus on small capitalization stocks which outperformed the Fund’s Russell 1000 Growth Fund benchmark.
Describe any changes to the Fund’s structure or the money manager line-up.
Sustainable Growth Advisers, L.P. was added to the Fund’s money manager line-up in September to provide a consistent growth complement to the existing managers in the Fund structure. As a result, allocations to Ark and Turner were reduced and small reductions were also made in the target allocations of CapitalWorks and Fuller & Thaler. Among other goals, these changes where made to reduce the extent of the earnings momentum and small-capitalization tilts within the Fund.
Money Managers as of October 31, 2006 | Styles | |
Ark Asset Management Co., Inc. | Growth | |
CapitalWorks Investment Partners, LLC | Growth | |
Delaware Management Company, a series of Delaware Management Business Trust | Growth | |
Fuller & Thaler Asset Management, Inc. | Growth | |
Sustainable Growth Advisers, L.P. | Growth | |
Turner Investment Partners, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Commenced operations on January 31, 2001. |
** | The Russell 1000(R) Growth Index measures the performance of those Russell 1000(R) Index companies with higher price-to-book ratios and higher forecasted growth values. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
297
Table of Contents
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 976.30 | $ | 1,013.96 | ||
Expenses Paid During Period* | $ | 11.11 | $ | 11.32 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.23% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 982.10 | $ | 1,018.30 | ||
Expenses Paid During Period* | $ | 6.84 | $ | 6.97 |
298
Table of Contents
* | Expenses are equal to the Fund’s annualized expense ratio of 1.37% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 984.20 | $ | 1,020.37 | ||
Expenses Paid During Period* | $ | 4.80 | $ | 4.89 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.96% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 982.40 | $ | 1,019.31 | ||
Expenses Paid During Period* | $ | 5.85 | $ | 5.96 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.17% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 95.8% | ||||
Auto and Transportation - 3.8% | ||||
CH Robinson Worldwide, Inc. | 12,120 | 506 | ||
Expeditors International Washington, Inc. | 32,000 | 1,517 | ||
FedEx Corp. | 10,250 | 1,174 | ||
Union Pacific Corp. | 3,600 | 326 | ||
United Parcel Service, Inc. Class B | 38,200 | 2,879 | ||
US Airways Group, Inc. (Æ)(Ñ) | 7,400 | 369 | ||
6,771 | ||||
Consumer Discretionary - 21.6% | ||||
Activision, Inc. (Æ)(Ñ) | 8,300 | 128 | ||
Alloy, Inc. (Æ)(Ñ) | 4,650 | 64 | ||
AMN Healthcare Services, Inc. (Æ)(Ñ) | 11,700 | 296 | ||
AnnTaylor Stores Corp. (Æ)(Ñ) | 2,900 | 128 | ||
Apollo Group, Inc. Class A (Æ) | 14,000 | 517 | ||
Best Buy Co., Inc. | 3,300 | 182 | ||
Bright Horizons Family Solutions, Inc. (Æ)(Ñ) | 2,000 | 77 | ||
Buca, Inc. (Æ)(Ñ) | 19,900 | 107 | ||
Buffalo Wild Wings, Inc. (Æ)(Ñ) | 2,700 | 140 | ||
Casual Male Retail Group, Inc. (Æ) | 13,700 | 203 | ||
Charlotte Russe Holding, Inc. (Æ)(Ñ) | 7,700 | 213 |
299
Table of Contents
Christopher & Banks Corp. | 5,500 | 148 | ||
Coach, Inc. (Æ) | 29,650 | 1,175 | ||
Corrections Corp. of America (Æ)(Ñ) | 3,800 | 174 | ||
Costco Wholesale Corp. | 12,100 | 646 | ||
Crown Media Holdings, Inc. Class A (Æ)(Ñ) | 12,100 | 48 | ||
Deckers Outdoor Corp. (Æ)(Ñ) | 3,400 | 181 | ||
dELIA*s, Inc. (Æ)(Ñ) | 10,100 | 92 | ||
Design Within Reach, Inc. (Æ)(Ñ) | 14,900 | 93 | ||
DeVry, Inc. (Æ)(Ñ) | 5,000 | 122 | ||
Diamond Management & Technology Consultants, Inc. (Æ)(Ñ) | 10,800 | 117 | ||
eBay, Inc. (Æ) | 106,200 | 3,412 | ||
Electronic Arts, Inc. (Æ) | 46,440 | 2,456 | ||
Ezcorp, Inc. Class A (Æ)(Ñ) | 3,800 | 172 | ||
Gap, Inc. (The) | 16,000 | 336 | ||
Gemstar-TV Guide International, Inc. (Æ) | 31,600 | 110 | ||
Google, Inc. Class A (Æ) | 10,899 | 5,192 | ||
Gray Television, Inc. (Ñ) | 12,400 | 80 | ||
Great Wolf Resorts, Inc. (Æ)(Ñ) | 12,000 | 158 | ||
Home Depot, Inc. | 16,700 | 623 | ||
Iconix Brand Group, Inc. (Æ)(Ñ) | 4,782 | 89 | ||
Interchange Corp. (Æ)(Ñ) | 9,800 | 56 | ||
International Game Technology | 60,380 | 2,567 | ||
ITT Educational Services, Inc. (Æ)(Ñ) | 3,000 | 207 | ||
Kohl’s Corp. (Æ) | 4,700 | 332 | ||
Las Vegas Sands Corp. (Æ) | 9,080 | 692 | ||
Leapfrog Enterprises, Inc. Class A (Æ)(Ñ) | 22,200 | 214 | ||
LIFE TIME FITNESS, Inc. (Æ)(Ñ) | 1,800 | 93 | ||
Lowe’s Cos., Inc. (Ñ) | 25,900 | 781 | ||
MGM Mirage (Æ) | 35,000 | 1,506 | ||
Multimedia Games, Inc. (Æ)(Ñ) | 11,100 | 104 | ||
New Frontier Media, Inc. (Æ) | 10,600 | 93 | ||
News Corp. Class A | 37,100 | 774 | ||
Omnicom Group, Inc. | 8,680 | 881 | ||
On Assignment, Inc. (Æ)(Ñ) | 7,500 | 85 | ||
Parlux Fragrances, Inc. (Æ)(Ñ) | 19,300 | 134 | ||
Revlon, Inc. Class A (Æ)(Ñ) | 75,500 | 100 | ||
SAIC, Inc. (Æ) | 3,800 | 76 | ||
Sears Holdings Corp. (Æ)(Ñ) | 2,900 | 506 | ||
Sharper Image Corp. (Æ)(Ñ) | 7,600 | 84 | ||
Staples, Inc. | 156,400 | 4,034 | ||
Starbucks Corp. (Æ)(Ñ) | 51,236 | 1,934 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 9,600 | 573 | ||
Steven Madden, Ltd. (Ñ) | 5,100 | 220 | ||
TeleTech Holdings, Inc. (Æ)(Ñ) | 6,600 | 128 | ||
TJX Cos., Inc. | 17,010 | 492 | ||
Topps Co., Inc. (The) (Ñ) | 14,900 | 130 | ||
Urban Outfitters, Inc. (Æ)(Ñ) | 20,900 | 366 | ||
Valuevision Media, Inc. Class A (Æ)(Ñ) | 9,700 | 125 | ||
Viacom, Inc. Class A (Æ) | 13,000 | 506 | ||
Wal-Mart Stores, Inc. | 42,800 | 2,109 | ||
WebSideStory, Inc. (Æ)(Ñ) | 10,800 | 141 | ||
Weight Watchers International, Inc. (Ñ) | 26,000 | 1,134 | ||
38,656 | ||||
Consumer Staples - 9.2% | ||||
Altria Group, Inc. | 9,000 | 732 | ||
Boston Beer Co., Inc. Class A (Æ)(Ñ) | 2,600 | 95 | ||
Clorox Co. | 2,700 | 174 | ||
Coca-Cola Co. (The) | 29,600 | 1,383 | ||
Colgate-Palmolive Co. | 18,900 | 1,209 | ||
CVS Corp. | 7,000 | 220 |
300
Table of Contents
PepsiCo, Inc. | 69,355 | 4,400 | ||
Procter & Gamble Co. | 73,560 | 4,663 | ||
Sysco Corp. | 36,500 | 1,277 | ||
Walgreen Co. | 41,000 | 1,791 | ||
Whole Foods Market, Inc. (Ñ) | 5,200 | 332 | ||
Wild Oats Markets, Inc. (Æ)(Ñ) | 10,200 | 183 | ||
16,459 | ||||
Financial Services - 10.4% | ||||
Advent Software, Inc. (Æ)(Ñ) | 7,000 | 259 | ||
American Express Co. | 12,200 | 705 | ||
American International Group, Inc. | 13,300 | 893 | ||
Automatic Data Processing, Inc. | 31,000 | 1,533 | ||
Charles Schwab Corp. (The) | 43,360 | 790 | ||
Chicago Mercantile Exchange Holdings, Inc. Class A | 4,920 | 2,465 | ||
Chubb Corp. | 11,810 | 628 | ||
Commerce Bancorp, Inc. (Ñ) | 8,500 | 297 | ||
Cybersource Corp. (Æ)(Ñ) | 9,400 | 96 | ||
First Data Corp. | 8,200 | 199 | ||
Goldman Sachs Group, Inc. | 5,560 | 1,055 | ||
Hartford Financial Services Group, Inc. | 2,200 | 192 | ||
HealthExtras, Inc. (Æ)(Ñ) | 4,400 | 101 | ||
Hypercom Corp. (Æ)(Ñ) | 16,700 | 108 | ||
IntercontinentalExchange, Inc. (Æ) | 16,600 | 1,401 | ||
Merrill Lynch & Co., Inc. | 4,500 | 394 | ||
Moody’s Corp. | 22,000 | 1,459 | ||
Morgan Stanley | 4,600 | 352 | ||
Open Solutions, Inc. (Æ)(Ñ) | 3,400 | 127 | ||
Paychex, Inc. | 40,000 | 1,579 | ||
Pico Holdings, Inc. (Æ)(Ñ) | 3,800 | 123 | ||
State Street Corp. | 18,400 | 1,182 | ||
UBS AG | 13,120 | 785 | ||
Wells Fargo & Co. | 21,460 | 779 | ||
Western Union Co. (The) (Æ) | 53,200 | 1,173 | ||
18,675 | ||||
Health Care - 17.9% | ||||
Abbott Laboratories | 27,510 | 1,307 | ||
Albany Molecular Research, Inc. (Æ)(Ñ) | 7,900 | 94 | ||
Allergan, Inc. | 31,010 | 3,582 | ||
Amgen, Inc. (Æ)(Ñ) | 23,900 | 1,814 | ||
Analogic Corp. (Ñ) | 1,400 | 78 | ||
Applera Corp. - Celera Genomics Group (Æ)(Ñ) | 8,700 | 135 | ||
Baxter International, Inc. | 33,870 | 1,557 | ||
Bruker BioSciences Corp. (Æ) | 20,400 | 162 | ||
Cardinal Health, Inc. | 3,900 | 255 | ||
Caremark Rx, Inc. | 8,400 | 414 | ||
Celgene Corp. (Æ)(Ñ) | 17,800 | 951 | ||
Charles River Laboratories International, Inc. (Æ) | 2,500 | 107 | ||
Cholestech Corp. (Æ) | 2,600 | 40 | ||
Conor Medsystems, Inc. (Æ)(Ñ) | 4,100 | 101 | ||
Cooper Cos., Inc. (The) (Ñ) | 1,500 | 86 | ||
Covance, Inc. (Æ)(Ñ) | 900 | 53 | ||
DaVita, Inc. (Æ)(Ñ) | 5,400 | 300 | ||
Dendreon Corp. (Æ)(Ñ) | 11,900 | 60 | ||
DOV Pharmaceutical, Inc. (Æ)(Ñ) | 40,600 | 12 | ||
Eli Lilly & Co. | 3,600 | 202 | ||
Genentech, Inc. (Æ) | 28,100 | 2,341 | ||
Genzyme Corp. (Æ)(Ñ) | 21,500 | 1,451 | ||
Gilead Sciences, Inc. (Æ) | 31,185 | 2,149 | ||
GTx, Inc. (Æ)(Ñ) | 9,100 | 101 | ||
Healthcare Services Group (Ñ) | 2,500 | 68 |
301
Table of Contents
Healthways, Inc. (Æ)(Ñ) | 1,100 | 47 | ||
Henry Schein, Inc. (Æ)(Ñ) | 3,000 | 149 | ||
Illumina, Inc. (Æ)(Ñ) | 2,400 | 106 | ||
Intralase Corp. (Æ)(Ñ) | 3,600 | 71 | ||
Inverness Medical Innovations, Inc. (Æ)(Ñ) | 2,300 | 87 | ||
Invitrogen Corp. (Æ)(Ñ) | 700 | 41 | ||
Johnson & Johnson | 21,900 | 1,476 | ||
Lifecell Corp. (Æ)(Ñ) | 3,900 | 91 | ||
Medco Health Solutions, Inc. (Æ) | 12,900 | 690 | ||
Medtronic, Inc. | 18,700 | 910 | ||
Merck & Co., Inc. | 3,800 | 173 | ||
Neopharm, Inc. (Æ)(Ñ) | 14,100 | 102 | ||
Neose Technologies, Inc. (Æ) | 16,300 | 43 | ||
Neurometrix, Inc. (Æ)(Ñ) | 5,800 | 95 | ||
Omnicell, Inc. (Æ)(Ñ) | 5,600 | 105 | ||
Oxigene, Inc. (Æ)(Ñ) | 10,400 | 41 | ||
Palatin Technologies, Inc. (Æ)(Ñ) | 18,700 | 53 | ||
Phase Forward, Inc. (Æ) | 7,700 | 107 | ||
PolyMedica Corp. (Ñ) | 2,600 | 108 | ||
PSS World Medical, Inc. (Æ) | 2,900 | 58 | ||
Rita Medical Systems, Inc. (Æ)(Ñ) | 23,000 | 83 | ||
Schering-Plough Corp. | 7,500 | 166 | ||
St. Jude Medical, Inc. (Æ) | 29,700 | 1,020 | ||
Stryker Corp. | 18,000 | 941 | ||
Tercica, Inc. (Æ)(Ñ) | 17,800 | 90 | ||
Teva Pharmaceutical Industries, Ltd. - ADR | 35,100 | 1,157 | ||
UnitedHealth Group, Inc. | 45,000 | 2,195 | ||
Ventana Medical Systems, Inc. (Æ)(Ñ) | 1,900 | 77 | ||
WellPoint, Inc. (Æ) | 18,500 | 1,412 | ||
Wyeth | 28,000 | 1,429 | ||
Zimmer Holdings, Inc. (Æ) | 21,000 | 1,512 | ||
32,055 | ||||
Materials and Processing - 2.4% | ||||
Archer-Daniels-Midland Co. | 21,945 | 845 | ||
Caraustar Industries, Inc. (Æ)(Ñ) | 15,300 | 166 | ||
Harsco Corp. | 1,300 | 106 | ||
Housevalues, Inc. (Æ)(Ñ) | 20,100 | 118 | ||
Insituform Technologies, Inc. Class A (Æ) | 6,500 | 152 | ||
Monsanto Co. | 24,630 | 1,089 | ||
Praxair, Inc. | 26,000 | 1,566 | ||
Unifi, Inc. (Æ) | 27,100 | 75 | ||
Valmont Industries, Inc. | 1,600 | 89 | ||
4,206 | ||||
Miscellaneous - 3.3% | ||||
3M Co. | 3,000 | 237 | ||
Foster Wheeler, Ltd. (Æ)(Ñ) | 2,900 | 130 | ||
General Electric Co. | 152,028 | 5,338 | ||
Textron, Inc. | 2,700 | 245 | ||
5,950 | ||||
Other Energy - 1.5% | ||||
Baker Hughes, Inc. | 4,100 | 283 | ||
Cameron International Corp. (Æ) | 3,800 | 190 | ||
ENSCO International, Inc. | 2,200 | 108 | ||
Foundation Coal Holdings, Inc. (Ñ) | 2,400 | 88 | ||
Hercules Offshore, Inc. (Æ)(Ñ) | 3,100 | 110 | ||
Petroquest Energy, Inc. (Æ)(Ñ) | 11,300 | 129 | ||
Schlumberger, Ltd. | 4,600 | 290 | ||
Smith International, Inc. (Ñ) | 4,000 | 158 | ||
TGC Industries, Inc. (Æ) | 4,700 | 37 | ||
Weatherford International, Ltd. (Æ) | 16,520 | 679 |
302
Table of Contents
XTO Energy, Inc. | 11,950 | 558 | ||
2,630 | ||||
Producer Durables - 3.8% | ||||
American Tower Corp. Class A (Æ) | 12,900 | 465 | ||
Applied Materials, Inc. | 47,677 | 829 | ||
Boeing Co. | 4,200 | 335 | ||
CalAmp Corp. (Æ)(Ñ) | 13,100 | 87 | ||
Credence Systems Corp. (Æ)(Ñ) | 32,900 | 106 | ||
Crown Castle International Corp. (Æ)(Ñ) | 2,800 | 94 | ||
Danaher Corp. | 10,460 | 751 | ||
Deere & Co. | 5,300 | 451 | ||
Entegris, Inc. (Æ)(Ñ) | 11,027 | 124 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 2,200 | 96 | ||
Flow International Corp. (Æ)(Ñ) | 8,500 | 100 | ||
General Cable Corp. (Æ)(Ñ) | 4,600 | 173 | ||
Goodrich Corp. | 5,600 | 247 | ||
Intevac, Inc. (Æ)(Ñ) | 6,922 | 143 | ||
Kla-Tencor Corp. | 15,600 | 767 | ||
L-1 Identity Solutions, Inc. (Æ)(Ñ) | 5,500 | 79 | ||
Polycom, Inc. (Æ)(Ñ) | 7,000 | 192 | ||
Radyne Corp. (Æ)(Ñ) | 11,300 | 114 | ||
Rudolph Technologies, Inc. (Æ)(Ñ) | 9,500 | 168 | ||
SBA Communications Corp. Class A (Æ)(Ñ) | 6,500 | 174 | ||
Sonic Solutions, Inc. (Æ)(Ñ) | 9,600 | 155 | ||
Tektronix, Inc. | 4,100 | 124 | ||
Teradyne, Inc. (Æ)(Ñ) | 16,700 | 234 | ||
Thermo Electron Corp. (Æ)(Ñ) | 11,650 | 499 | ||
United Technologies Corp. | 3,000 | 197 | ||
Zygo Corp. (Æ) | 4,200 | 73 | ||
6,777 | ||||
Technology - 20.9% | ||||
Actuate Corp. (Æ)(Ñ) | 16,200 | 85 | ||
Agile Software Corp. (Æ)(Ñ) | 14,600 | 98 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 10,500 | 492 | ||
Amdocs, Ltd. (Æ) | 3,200 | 124 | ||
Apple Computer, Inc. (Æ) | 35,964 | 2,916 | ||
Art Technology Group, Inc. (Æ)(Ñ) | 46,100 | 115 | ||
AsiaInfo Holdings, Inc. (Æ)(Ñ) | 19,100 | 92 | ||
Aspen Technology, Inc. (Æ)(Ñ) | 3,600 | 36 | ||
Authentidate Holding Corp. (Æ)(Ñ) | 13,900 | 26 | ||
BEA Systems, Inc. (Æ)(Ñ) | 11,600 | 189 | ||
Broadcom Corp. Class A (Æ)(Ñ) | 38,950 | 1,179 | ||
Captaris, Inc. (Æ)(Ñ) | 15,100 | 89 | ||
Centillium Communications, Inc. (Æ) | 26,526 | 56 | ||
Cisco Systems, Inc. (Æ) | 121,070 | 2,921 | ||
Citrix Systems, Inc. (Æ)(Ñ) | 2,900 | 86 | ||
Cognizant Technology Solutions Corp. Class A (Æ) | 6,160 | 464 | ||
Corning, Inc. (Æ) | 45,500 | 930 | ||
Daktronics, Inc. (Ñ) | 5,000 | 118 | ||
Dell, Inc. (Æ) | 38,600 | 939 | ||
Ditech Networks, Inc. (Æ)(Ñ) | 13,000 | 103 | ||
Equinix, Inc. (Æ)(Ñ) | 1,500 | 103 | ||
Gartner, Inc. (Æ)(Ñ) | 17,400 | 324 | ||
Harmonic, Inc. (Æ) | 22,700 | 184 | ||
Integrated Device Technology, Inc. (Æ)(Ñ) | 7,300 | 116 | ||
Intuit, Inc. (Æ) | 59,690 | 2,107 | ||
Iomega Corp. (Æ)(Ñ) | 17,400 | 72 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 10,849 | 158 | ||
Lawson Software, Inc. (Æ)(Ñ) | 17,400 | 133 | ||
LCC International, Inc. Class A (Æ)(Ñ) | 28,500 | 103 |
303
Table of Contents
Microsoft Corp. | 124,600 | 3,577 | |||
Motorola, Inc. | 62,120 | 1,432 | |||
Napster, Inc. (Æ)(Ñ) | 23,400 | 111 | |||
National Semiconductor Corp. | 24,900 | 605 | |||
Network Appliance, Inc. (Æ) | 20,900 | 763 | |||
Newport Corp. (Æ)(Ñ) | 9,000 | 195 | |||
Nuance Communications, Inc. (Æ)(Ñ) | 10,000 | 115 | |||
NVE Corp. (Æ)(Ñ) | 4,600 | 204 | |||
Nvidia Corp. (Æ) | 30,550 | 1,065 | |||
Opsware, Inc. (Æ)(Ñ) | 5,200 | 47 | |||
PMC - Sierra, Inc. (Æ)(Ñ) | 17,900 | 119 | |||
Qualcomm, Inc. | 116,300 | 4,232 | |||
Redback Networks, Inc. (Æ) | 10,345 | 164 | |||
Research In Motion, Ltd. (Æ) | 8,030 | 943 | |||
Safeguard Scientifics, Inc. (Æ)(Ñ) | 35,500 | 87 | |||
SanDisk Corp. (Æ)(Ñ) | 56,230 | 2,705 | |||
SAP AG - ADR | 12,000 | 596 | |||
Seachange International, Inc. (Æ)(Ñ) | 18,400 | 154 | |||
Seagate Technology (Ñ) | 75,000 | 1,693 | |||
Semtech Corp. (Æ) | 5,800 | 76 | |||
SimpleTech, Inc. (Æ)(Ñ) | 17,300 | 150 | |||
Standard Microsystems Corp. (Æ)(Ñ) | 6,100 | 188 | |||
Sun Microsystems, Inc. (Æ) | 185,600 | 1,008 | |||
Sykes Enterprises, Inc. (Æ)(Ñ) | 8,600 | 174 | |||
Texas Instruments, Inc. | 67,350 | 2,033 | |||
Transaction Systems Architects, Inc. (Æ) | 3,000 | 101 | |||
Transwitch Corp. (Æ)(Ñ) | 49,800 | 73 | |||
Ultimate Software Group, Inc. (Æ)(Ñ) | 7,000 | 173 | |||
Varian, Inc. (Æ) | 1,400 | 66 | |||
Zhone Technologies, Inc. (Æ) | 63,700 | 90 | |||
37,297 | |||||
Utilities - 1.0% | |||||
Comcast Corp. Class A (Æ) | 16,190 | 658 | |||
Leap Wireless International, Inc. (Æ)(Ñ) | 3,100 | 172 | |||
Level 3 Communications, Inc. (Æ)(Ñ) | 35,100 | 186 | |||
MDU Communications International, Inc. (Æ) | 29,200 | 21 | |||
NeuStar, Inc. Class A (Æ)(Ñ) | 2,300 | 67 | |||
NII Holdings, Inc. (Æ) | 10,820 | 704 | |||
1,808 | |||||
Total Common Stocks | |||||
(cost $149,450) | 171,284 | ||||
Short-Term Investments - 4.1% | |||||
Russell Investment Company | |||||
Money Market Fund | 6,304,000 | 6,304 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.891% due 12/07/06 | 1,000 | 995 | |||
Total Short-Term Investments | |||||
(cost $7,299) | 7,299 | ||||
Other Securities - 17.5% | |||||
Russell Investment Company | |||||
Money Market Fund (x) | 8,034,151 | 8,034 | |||
State Street Securities Lending Quality Trust (x) | 23,275,131 | 23,275 | |||
Total Other Securities | |||||
(cost $31,309) | 31,309 | ||||
Total Investments - 117.4% | |||||
(identified cost $188,058) | 209,892 | ||||
Other Assets and Liabilities, | |||||
Net - (17.4%) | (31,152 | ) | |||
Net Assets - 100.0% | 178,740 | ||||
304
Table of Contents
Schedule of Investments — October 31, 2006
Amounts in thousands
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Nasdaq 100 Index (CME) expiration date 12/06 (13) | 2,266 | 202 | ||
Russell 1000 Growth Index expiration date 12/06 (11) | 2,996 | 177 | ||
S&P 500 E-Mini Index (CME) expiration date 12/06 (11) | 761 | 40 | ||
S&P 500 Index (CME) expiration date 12/06 (4) | 1,383 | 5 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 424 | |||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 3.8 | ||
Consumer Discretionary | 21.6 | ||
Consumer Staples | 9.2 | ||
Financial Services | 10.4 | ||
Health Care | 17.9 | ||
Materials and Processing | 2.4 | ||
Miscellaneous | 3.3 | ||
Other Energy | 1.5 | ||
Producer Durables | 3.8 | ||
Technology | 20.9 | ||
Utilities | 1.0 | ||
Short-Term Investments | 4.1 | ||
Other Securities | 17.5 | ||
Total Investments | 117.4 | ||
Other Assets and Liabilities, Net | (17.4 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund
305
Table of Contents
(This page intentionally left blank)
306
Table of Contents
Select Value Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Select Value Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.32 | % | |
5 Years | 10.49 | %§ | |
Inception* | 6.24 | %§ |
Select Value Fund - Class E
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.15 | % | |
5 Years | 10.25 | %§ | |
Inception* | 5.97 | %§ |
Select Value Fund - Class C
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.01 | % | |
5 Years | 9.26 | %§ | |
Inception* | 5.05 | %§ |
Select Value Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.47 | % | |
5 Years | 10.63 | %§ | |
Inception* | 6.38 | %§ |
Russell 1000(R) Value Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 21.46 | % | |
5 Years | 11.64 | %§ | |
Inception* | 7.38 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Select Value Fund Class I, Class S, Class E and Class C Shares gained 18.47%, 18.32%, 18.15% and 17.01%, respectively. This compared to the Russell 1000(R) Value Index, which gained 21.46% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
307
Table of Contents
For the year ended October 31, 2006, the Lipper(R) Large-Cap Value Funds Average returned 17.65%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
In the first nine months of the fiscal year, the Fund was negatively impacted by three of the primary market drivers. These were soaring energy prices, continued outperformance of value stocks relative to growth stocks, and investor’s preference for high yield, defensive stocks.
Given the strength in oil prices and related stocks, the money managers in the Fund believed these stocks were overvalued and took significant underweight positions. Unfortunately, oil prices continued to surge through mid-August, at which point they peaked near $80 a barrel.
Similarly, value stocks have outperformed relative to growth stocks since early 2000. The Fund’s money managers believed this trend was unsustainable. They positioned their portfolios to take advantage of attractive valuations in stocks with growth expectations that were above the Russell 1000 Value Index. However, value stocks continued to outperform through mid-August, detracting from the Fund’s performance.
Lastly, most of the Fund’s money managers believed that the economy would slow to moderate growth levels. However, in May, investors became fearful of a sharp correction in the economy which led them to seek defensive, high yield stocks. This trend continued through July, having a notable negative impact on Fund performance as the money managers had positioned the Fund to benefit from a slowing economy by underweighting the highest dividend yielding stocks.
Beginning mid-August, these trends reversed. As such, the Fund has outperformed since that time.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Value managers tend to be contrarian, buying stocks that have underperformed and are selling at attractive valuations. The strong relative performance of energy, deep value, and high yielding stocks made those stocks less fundamentally attractive to value managers. With a tilt towards owning stocks with both attractive values and good growth prospects, the Fund’s money managers focused on higher growth, less defensive, and larger capitalization stocks. As a result, the Fund had a pronounced tilt toward stocks with higher growth characteristics selling at moderate valuations. Also, the Fund’s money managers avoided stocks with high dividend yields. These tilts contributed negatively to the Fund’s performance during the fiscal year as the market rewarded defensive, high dividend yield stocks.
Poor stock and industry selection by the Fund’s money managers during the period also contributed negatively to performance. Iridian Asset Management LLC was the biggest detractor, significantly underperforming its benchmark due mainly to poor stock and industry selection but also because of the factors discussed above. Systematic Financial Management, L.P. also underperformed for the same reasons. DePrince Race & Zollo, Inc. outperformed the benchmark due to positive industry and sector selection.
At the stock selection level, overweights in Boston Scientific and Unitedhealth detracted from performance, as did underweights in BellSouth and Exxon Mobil. Overweights in China Mobile, Guidant and Allegheny Technologies contributed positively to performance.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
DePrince, Race & Zollo, Inc. | Value | |
Iridian Asset Management, LLC | Value | |
MFS Institutional Advisors, Inc. | Value | |
Netols Asset Management, Inc. | Value | |
Systematic Financial Management, L.P. | Value |
308
Table of Contents
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Commenced operations on January 31, 2001. |
** | Russell 1000(R) Value Index measures the performance of those Russell 1000(R) Index securities with higher price-to-book ratios and higher forecasted growth values. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
309
Table of Contents
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,046.40 | $ | 1,014.62 | ||
Expenses Paid During Period* | $ | 10.83 | $ | 10.66 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,050.60 | $ | 1,018.75 | ||
Expenses Paid During Period* | $ | 6.62 | $ | 6.51 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.28% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,052.10 | $ | 1,020.47 | ||
Expenses Paid During Period* | $ | 4.86 | $ | 4.79 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.94% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,052.40 | $ | 1,019.76 | ||
Expenses Paid During Period* | $ | 5.59 | $ | 5.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.08% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 94.0% | ||||
Auto and Transportation - 2.1% | ||||
Airtran Holdings, Inc. (Æ)(Ñ) | 36,138 | 360 | ||
Alexander & Baldwin, Inc. (Ñ) | 9,923 | 457 |
310
Table of Contents
Burlington Northern Santa Fe Corp. | 16,110 | 1,249 | ||
Con-way, Inc. | 1,720 | 81 | ||
Continental AG - ADR (Æ) | 12,600 | 1,399 | ||
CSX Corp. | 23,656 | 844 | ||
Fleetwood Enterprises, Inc. (Æ)(Ñ) | 29,985 | 214 | ||
General Maritime Corp. (Ñ) | 11,670 | 426 | ||
Keystone Automotive Industries, Inc. (Æ)(Ñ) | 14,228 | 547 | ||
Norfolk Southern Corp. | 14,760 | 776 | ||
Polaris Industries, Inc. (Ñ) | 17,700 | 758 | ||
United Parcel Service, Inc. Class B | 10,700 | 806 | ||
Visteon Corp. (Æ) | 65,667 | 485 | ||
Wabtec Corp. (Ñ) | 21,466 | 674 | ||
9,076 | ||||
Consumer Discretionary - 9.0% | ||||
99 Cents Only Stores (Æ)(Ñ) | 27,627 | 331 | ||
Accenture, Ltd. Class A (Æ) | 37,770 | 1,243 | ||
Arbitron, Inc. (Ñ) | 14,574 | 612 | ||
Casual Male Retail Group, Inc. (Æ)(Ñ) | 39,398 | 584 | ||
Corinthian Colleges, Inc. (Æ)(Ñ) | 35,031 | 429 | ||
Cost Plus, Inc. (Æ)(Ñ) | 44,565 | 533 | ||
Cox Radio, Inc. Class A (Æ)(Ñ) | 21,806 | 367 | ||
DeVry, Inc. (Æ)(Ñ) | 20,263 | 493 | ||
Diamond Management & Technology Consultants, Inc. (Æ)(Ñ) | 44,735 | 485 | ||
Family Dollar Stores, Inc. | 27,000 | 795 | ||
Federated Department Stores, Inc. | 38,120 | 1,674 | ||
Gap, Inc. (The) | 56,500 | 1,188 | ||
Hanesbrands, Inc. (Æ) | 3,271 | 77 | ||
Harrah’s Entertainment, Inc. | 28,500 | 2,118 | ||
Hasbro, Inc. (Ñ) | 66,720 | 1,729 | ||
Home Depot, Inc. | 9,760 | 364 | ||
International Flavors & Fragrances, Inc. | 15,800 | 671 | ||
Jarden Corp. (Æ)(Ñ) | 15,064 | 542 | ||
JC Penney Co., Inc. | 24,400 | 1,836 | ||
Kimberly-Clark Corp. | 30,000 | 1,996 | ||
Liberty Media Holding Corp. (Æ) | 56,000 | 1,236 | ||
Liberty Media Holding Corp. Series A (Æ) | 11,900 | 1,060 | ||
Limited Brands, Inc. | 20,900 | 616 | ||
McDonald’s Corp. | 58,100 | 2,436 | ||
MGM Mirage (Æ) | 64,900 | 2,792 | ||
New York Times Co. Class A (Ñ) | 10,660 | 258 | ||
Nike, Inc. Class B | 13,980 | 1,284 | ||
O’Charleys, Inc. (Æ)(Ñ) | 27,193 | 541 | ||
Omnicom Group, Inc. | 5,000 | 507 | ||
Reader’s Digest Association, Inc. (The) (Ñ) | 24,966 | 359 | ||
Ross Stores, Inc. | 23,900 | 703 | ||
RR Donnelley & Sons Co. | 27,000 | 914 | ||
Sabre Holdings Corp. Class A | 37,700 | 958 | ||
School Specialty, Inc. (Æ)(Ñ) | 10,796 | 423 | ||
Sears Holdings Corp. (Æ)(Ñ) | 4,200 | 733 | ||
ServiceMaster Co. (The) (Ñ) | 48,500 | 550 | ||
Sturm Ruger & Co., Inc. (Æ)(Ñ) | 46,513 | 387 | ||
TJX Cos., Inc. | 54,000 | 1,563 | ||
Viacom, Inc. Class A (Æ) | 21,047 | 819 | ||
Walt Disney Co. | 52,580 | 1,654 | ||
WPP Group PLC - ADR (Æ)(Ñ) | 4,040 | 259 | ||
38,119 | ||||
Consumer Staples - 4.1% | ||||
Altria Group, Inc. | 75,600 | 6,149 | ||
Coca-Cola Co. (The) | 22,100 | 1,033 | ||
ConAgra Foods, Inc. | 26,100 | 683 |
311
Table of Contents
Del Monte Foods Co. | 44,413 | 479 | ||
Diageo PLC - ADR | 13,020 | 970 | ||
Fomento Economico Mexicano SA de CV - ADR | 3,500 | 338 | ||
Hershey Co. (The) (Ñ) | 19,800 | 1,048 | ||
HJ Heinz Co. | 19,600 | 826 | ||
Kellogg Co. | 24,000 | 1,207 | ||
Lance, Inc. (Ñ) | 20,317 | 397 | ||
Molson Coors Brewing Co. Class B (Ñ) | 16,100 | 1,146 | ||
Nestle SA - ADR | 8,830 | 754 | ||
PepsiCo, Inc. | 7,510 | 476 | ||
Procter & Gamble Co. | 26,100 | 1,654 | ||
Tyson Foods, Inc. Class A | 13,320 | 192 | ||
17,352 | ||||
Financial Services - 25.9% | ||||
Aflac, Inc. | 4,440 | 199 | ||
AG Edwards, Inc. | 11,900 | 679 | ||
Allstate Corp. (The) | 56,940 | 3,494 | ||
American Express Co. | 17,610 | 1,018 | ||
American International Group, Inc. | 65,000 | 4,366 | ||
AmSouth Bancorporation | 29,600 | 895 | ||
Amvescap PLC - ADR (Æ)(Ñ) | 46,300 | 1,064 | ||
Annaly Capital Management, Inc. (ö) | 73,600 | 966 | ||
Assurant, Inc. | 26,800 | 1,411 | ||
Astoria Financial Corp. | 21,900 | 635 | ||
Bank of America Corp. | 234,785 | 12,648 | ||
Bank of New York Co., Inc. (The) | 35,990 | 1,237 | ||
Bear Stearns Cos., Inc. (The) | 11,400 | 1,725 | ||
Cedar Shopping Centers, Inc. (ö)(Ñ) | 26,576 | 444 | ||
Chubb Corp. | 12,240 | 651 | ||
Cigna Corp. | 17,490 | 2,046 | ||
Citigroup, Inc. | 175,810 | 8,819 | ||
Colonial BancGroup, Inc. (The) | 26,800 | 639 | ||
Countrywide Financial Corp. | 64,900 | 2,474 | ||
Douglas Emmett, Inc. (Æ)(ö) | 2,700 | 64 | ||
Dow Jones & Co., Inc. (Ñ) | 22,300 | 783 | ||
Fannie Mae | 32,520 | 1,927 | ||
Federated Investors, Inc. Class B | 33,000 | 1,132 | ||
First Horizon National Corp. (Ñ) | 17,100 | 672 | ||
First Industrial Realty Trust, Inc. (ö)(Ñ) | 11,268 | 518 | ||
First Marblehead Corp. (The) (Ñ) | 7,020 | 474 | ||
Franklin Resources, Inc. | 4,760 | 542 | ||
Freddie Mac | 6,650 | 459 | ||
GATX Corp. (Ñ) | 10,066 | 439 | ||
Genworth Financial, Inc. Class A | 30,940 | 1,035 | ||
Goldman Sachs Group, Inc. | 15,810 | 3,001 | ||
H&R Block, Inc. | 31,500 | 689 | ||
Hanover Insurance Group, Inc. (The) | 9,602 | 435 | ||
Hartford Financial Services Group, Inc. | 25,070 | 2,185 | ||
Huntington Bancshares, Inc. | 49,600 | 1,211 | ||
Jones Lang LaSalle, Inc. | 15,400 | 1,417 | ||
JPMorgan Chase & Co. | 128,900 | 6,115 | ||
KeyCorp | 25,500 | 947 | ||
Kronos, Inc. (Æ)(Ñ) | 11,902 | 403 | ||
Legg Mason, Inc. | 22,300 | 2,007 | ||
Lehman Brothers Holdings, Inc. | 36,500 | 2,841 | ||
Lincoln National Corp. | 15,100 | 956 | ||
Loews Corp. | 26,200 | 1,020 | ||
MBIA, Inc. | 19,600 | 1,216 | ||
Mellon Financial Corp. | 22,690 | 880 | ||
Mercury General Corp. | 12,100 | 626 |
312
Table of Contents
Merrill Lynch & Co., Inc. | 69,320 | 6,060 | ||
Metlife, Inc. | 51,370 | 2,935 | ||
Morgan Stanley | 11,200 | 856 | ||
New York Community Bancorp, Inc. (Ñ) | 64,300 | 1,051 | ||
PNC Financial Services Group, Inc. | 19,340 | 1,354 | ||
South Financial Group, Inc. (The) (Ñ) | 29,600 | 785 | ||
St. Paul Travelers Cos., Inc. (The) | 28,600 | 1,462 | ||
Sun Communities, Inc. (ö) | 9,645 | 338 | ||
SunTrust Banks, Inc. | 40,890 | 3,230 | ||
UBS AG | 73,710 | 4,411 | ||
US Bancorp | 101,900 | 3,448 | ||
Wachovia Corp. | 16,600 | 921 | ||
Washington Mutual, Inc. (Ñ) | 60,200 | 2,546 | ||
Westamerica Bancorporation (Ñ) | 8,360 | 417 | ||
109,218 | ||||
Health Care - 11.5% | ||||
Abbott Laboratories | 22,850 | 1,086 | ||
AmerisourceBergen Corp. | 24,300 | 1,147 | ||
Amgen, Inc. (Æ) | 51,700 | 3,925 | ||
Biogen Idec, Inc. (Æ)(Ñ) | 66,115 | 3,147 | ||
Boston Scientific Corp. (Æ) | 89,500 | 1,424 | ||
Chattem, Inc. (Æ)(Ñ) | 11,806 | 501 | ||
Diversa Corp. (Æ)(Ñ) | 28,430 | 265 | ||
Eli Lilly & Co. | 31,530 | 1,766 | ||
Gentiva Health Services, Inc. (Æ)(Ñ) | 30,432 | 565 | ||
Genzyme Corp. (Æ) | 36,800 | 2,484 | ||
Johnson & Johnson | 60,540 | 4,080 | ||
KV Pharmaceutical Co. Class A (Æ)(Ñ) | 25,151 | 561 | ||
LifePoint Hospitals, Inc. (Æ)(Ñ) | 15,573 | 553 | ||
Matria Healthcare, Inc. (Æ)(Ñ) | 21,086 | 595 | ||
McKesson Corp. | 10,700 | 536 | ||
Medco Health Solutions, Inc. (Æ) | 11,500 | 615 | ||
Medtronic, Inc. | 59,300 | 2,887 | ||
Merck & Co., Inc. | 78,890 | 3,583 | ||
Par Pharmaceutical Cos., Inc. (Æ)(Ñ) | 28,124 | 548 | ||
Pfizer, Inc. | 219,900 | 5,860 | ||
PolyMedica Corp. (Ñ) | 16,281 | 676 | ||
PSS World Medical, Inc. (Æ) | 24,925 | 502 | ||
Sunrise Senior Living, Inc. (Æ)(Ñ) | 14,759 | 461 | ||
UnitedHealth Group, Inc. | 85,000 | 4,146 | ||
US Physical Therapy, Inc. (Æ) | 21,118 | 254 | ||
WellPoint, Inc. (Æ) | 55,240 | 4,216 | ||
Wyeth | 44,630 | 2,277 | ||
48,660 | ||||
Integrated Oils - 4.8% | ||||
Chevron Corp. | 69,902 | 4,697 | ||
ConocoPhillips | 54,910 | 3,308 | ||
Exxon Mobil Corp. | 129,690 | 9,262 | ||
Hess Corp. | 23,670 | 1,004 | ||
Marathon Oil Corp. | 7,600 | 657 | ||
Total SA - ADR | 17,960 | 1,224 | ||
20,152 | ||||
Materials and Processing - 7.6% | ||||
Acuity Brands, Inc. (Ñ) | 11,696 | 579 | ||
Air Products & Chemicals, Inc. | 11,120 | 775 | ||
Airgas, Inc. | 19,700 | 745 | ||
Albemarle Corp. (Æ) | 8,900 | 579 | ||
American Standard Cos., Inc. | 73,800 | 3,269 | ||
Avery Dennison Corp. (Ñ) | 12,400 | 783 | ||
Bowater, Inc. (Ñ) | 35,130 | 735 |
313
Table of Contents
Brush Engineered Materials, Inc. (Æ)(Ñ) | 18,962 | 638 | ||
Chemtura Corp. | 51,200 | 439 | ||
Commercial Metals Co. | 18,789 | 500 | ||
Dow Chemical Co. (The) | 44,620 | 1,820 | ||
EI Du Pont de Nemours & Co. | 42,600 | 1,951 | ||
Freeport-McMoRan Copper & Gold, Inc. Class B | 17,700 | 1,070 | ||
International Paper Co. | 45,450 | 1,516 | ||
IPSCO, Inc. | 9,500 | 869 | ||
Lubrizol Corp. | 13,900 | 625 | ||
Lyondell Chemical Co. | 17,300 | 444 | ||
Masco Corp. | 67,230 | 1,859 | ||
MeadWestvaco Corp. | 31,200 | 859 | ||
Modtech Holdings, Inc. (Æ)(Ñ) | 43,809 | 223 | ||
Nalco Holding Co. (Æ) | 11,550 | 234 | ||
Packaging Corp. of America | 26,700 | 613 | ||
Phelps Dodge Corp. | 5,100 | 512 | ||
PPG Industries, Inc. | 19,410 | 1,328 | ||
Praxair, Inc. | 10,640 | 641 | ||
Precision Castparts Corp. | 42,800 | 2,913 | ||
RPM International, Inc. (Ñ) | 33,100 | 634 | ||
Sherwin-Williams Co. (The) | 10,420 | 617 | ||
Smurfit-Stone Container Corp. (Æ) | 17,360 | 185 | ||
Spartech Corp. | 20,349 | 557 | ||
Steel Dynamics, Inc. (Ñ) | 8,100 | 487 | ||
Syngenta AG - ADR | 32,590 | 1,050 | ||
Teck Cominco, Ltd. Class B | 21,600 | 1,592 | ||
Valspar Corp. | 21,500 | 576 | ||
32,217 | ||||
Miscellaneous - 2.7% | ||||
3M Co. | 26,100 | 2,058 | ||
General Electric Co. | 72,100 | 2,531 | ||
Honeywell International, Inc. | 32,300 | 1,361 | ||
Johnson Controls, Inc. | 12,990 | 1,059 | ||
Textron, Inc. | 27,900 | 2,537 | ||
Trinity Industries, Inc. (Ñ) | 49,050 | 1,769 | ||
11,315 | ||||
Other Energy - 4.8% | ||||
Apache Corp. | 10,960 | 716 | ||
Chesapeake Energy Corp. | 111,300 | 3,611 | ||
Devon Energy Corp. | 54,850 | 3,666 | ||
Diamond Offshore Drilling, Inc. (Ñ) | 19,600 | 1,357 | ||
Encore Acquisition Co. (Æ)(Ñ) | 18,749 | 469 | ||
EOG Resources, Inc. | 35,500 | 2,362 | ||
Forest Oil Corp. (Æ) | 9,161 | 299 | ||
Global Industries, Ltd. (Æ) | 25,196 | 418 | ||
Hanover Compressor Co. (Æ)(Ñ) | 29,867 | 553 | ||
Matrix Service Co. (Æ)(Ñ) | 31,761 | 456 | ||
National-Oilwell Varco, Inc. (Æ) | 33,700 | 2,035 | ||
Noble Corp. | 5,000 | 351 | ||
Sunoco, Inc. | 6,300 | 417 | ||
Transocean, Inc. (Æ) | 22,800 | 1,654 | ||
Valero Energy Corp. | 28,100 | 1,470 | ||
Whiting Petroleum Corp. (Æ)(Ñ) | 10,420 | 465 | ||
20,299 | ||||
Producer Durables - 7.4% | ||||
Agilent Technologies, Inc. (Æ) | 104,900 | 3,734 | ||
Applied Signal Technology, Inc. (Ñ) | 20,993 | 311 | ||
BE Aerospace, Inc. (Æ) | 21,356 | 540 | ||
Boeing Co. | 50,500 | 4,033 | ||
C&D Technologies, Inc. (Ñ) | 76,191 | 378 |
314
Table of Contents
Champion Enterprises, Inc. (Æ)(Ñ) | 49,685 | 460 | ||
Cooper Industries, Ltd. Class A | 4,440 | 397 | ||
Crane Co. | 10,578 | 412 | ||
Deere & Co. | 27,670 | 2,356 | ||
Esterline Technologies Corp. (Æ)(Ñ) | 11,199 | 422 | ||
Federal Signal Corp. (Ñ) | 35,412 | 540 | ||
General Cable Corp. (Æ) | 18,635 | 701 | ||
Goodrich Corp. | 41,200 | 1,816 | ||
IDEX Corp. | 8,608 | 404 | ||
Illinois Tool Works, Inc. | 4,220 | 202 | ||
Lam Research Corp. (Æ) | 16,800 | 831 | ||
Lockheed Martin Corp. | 42,420 | 3,688 | ||
Nokia OYJ - ADR | 66,300 | 1,318 | ||
Northrop Grumman Corp. | 32,500 | 2,158 | ||
Pentair, Inc. (Ñ) | 26,000 | 856 | ||
Robbins & Myers, Inc. | 18,240 | 702 | ||
Terex Corp. (Æ) | 22,600 | 1,170 | ||
United Technologies Corp. | 41,010 | 2,695 | ||
Varian Semiconductor Equipment Associates, Inc. (Æ) | 7,641 | 279 | ||
WW Grainger, Inc. | 9,330 | 679 | ||
31,082 | ||||
Technology - 5.3% | ||||
Advanced Micro Devices, Inc. (Æ)(Ñ) | 13,000 | 276 | ||
American Science & Engineering, Inc. (Æ)(Ñ) | 8,338 | 439 | ||
Analog Devices, Inc. | 32,370 | 1,030 | ||
Avid Technology, Inc. (Æ)(Ñ) | 6,020 | 217 | ||
Broadcom Corp. Class A (Æ) | 17,800 | 539 | ||
CACI International, Inc. Class A (Æ)(Ñ) | 8,338 | 480 | ||
Cisco Systems, Inc. (Æ) | 45,300 | 1,093 | ||
General Dynamics Corp. | 41,900 | 2,979 | ||
Harris Corp. | 18,400 | 784 | ||
Hewlett-Packard Co. | 130,760 | 5,066 | ||
Intel Corp. | 144,730 | 3,089 | ||
International Business Machines Corp. | 8,400 | 776 | ||
Linear Technology Corp. | 20,500 | 638 | ||
LSI Logic Corp. (Æ) | 41,400 | 416 | ||
Mantech International Corp. Class A (Æ)(Ñ) | 15,480 | 527 | ||
Oracle Corp. (Æ) | 53,120 | 981 | ||
Rockwell Automation, Inc. | 6,940 | 430 | ||
Seagate Technology, Inc. (Æ) | 1,900 | — | ||
Sybase, Inc. (Æ) | 17,594 | 428 | ||
Symantec Corp. (Æ) | 38,000 | 754 | ||
Synopsys, Inc. (Æ) | 23,000 | 518 | ||
Trimble Navigation, Ltd. (Æ) | 9,900 | 458 | ||
Varian, Inc. (Æ)(Ñ) | 8,520 | 399 | ||
22,317 | ||||
Utilities - 8.8% | ||||
Alaska Communications Systems Group, Inc. (Ñ) | 40,912 | 589 | ||
Alltel Corp. | 65,200 | 3,476 | ||
Ameren Corp. (Ñ) | 5,600 | 303 | ||
America Movil SA de CV Series L | 49,400 | 2,118 | ||
American Electric Power Co., Inc. | 18,500 | 766 | ||
Aqua America, Inc. (Ñ) | 26,900 | 652 | ||
AT&T, Inc. | 86,600 | 2,966 | ||
Atmos Energy Corp. | 13,600 | 418 | ||
BellSouth Corp. | 12,100 | 546 | ||
China Mobile, Ltd. - ADR (Ñ) | 63,100 | 2,573 | ||
Citizens Communications Co. | 59,200 | 868 | ||
Comcast Corp. Class A (Æ) | 43,800 | 1,781 | ||
Consolidated Edison, Inc. (Ñ) | 6,600 | 319 |
315
Table of Contents
Dominion Resources, Inc. | 33,820 | 2,739 | |||
Embarq Corp. (Æ) | 9,857 | 477 | |||
Entergy Corp. | 7,420 | 637 | |||
Exelon Corp. | 25,400 | 1,574 | |||
FPL Group, Inc. (Ñ) | 52,090 | 2,657 | |||
Level 3 Communications, Inc. (Æ)(Ñ) | 65,000 | 344 | |||
NiSource, Inc. | 25,900 | 603 | |||
Oneok, Inc. | 13,200 | 549 | |||
PPL Corp. | 54,870 | 1,894 | |||
Progress Energy, Inc. - CVO | 1,300 | — | |||
Public Service Enterprise Group, Inc. | 3,370 | 206 | |||
Rogers Communications, Inc. Class B (Æ) | 10,700 | 640 | |||
SCANA Corp. | 7,200 | 288 | |||
Sprint Nextel Corp. | 77,790 | 1,454 | |||
TECO Energy, Inc. | 23,500 | 387 | |||
TELUS Corp. Class A (Æ) | 3,800 | 218 | |||
TXU Corp. | 8,880 | 561 | |||
Verizon Communications, Inc. | 62,540 | 2,314 | |||
Vodafone Group PLC - ADR (Æ) | 63,143 | 1,632 | |||
Windstream Corp. (Æ) | 45,400 | 623 | |||
37,172 | |||||
Total Common Stocks | |||||
(cost $327,004) | 396,979 | ||||
Short-Term Investments - 6.3% | |||||
Russell Investment Company Money Market Fund | 25,543,000 | 25,543 | |||
United States Treasury Bills (ç)(ž)(§) 4.891% due 12/07/06 | 1,000 | 995 | |||
Total Short-Term Investments | |||||
(cost $26,538) | 26,538 | ||||
Other Securities - 10.9% | |||||
Russell Investment Company Money Market Fund (x) | 11,791,608 | 11,792 | |||
State Street Securities Lending Quality Trust (x) | 34,160,573 | 34,161 | |||
Total Other Securities | |||||
(cost $45,953) | 45,953 | ||||
Total Investments - 111.2% | |||||
(identified cost $399,495) | 469,470 | ||||
Other Assets and Liabilities, | |||||
Net - (11.2%) | (47,351 | ) | |||
Net Assets - 100.0% | 422,119 | ||||
Amount in thousands
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Russell 1000 Value Index expiration date 12/06 (29) | 11,424 | 593 | ||
S&P 500 E-Mini Index (CME) expiration date 12/06 (51) | 3,527 | 186 | ||
S&P 500 Index (CME) expiration date 12/06 (24) | 8,299 | 127 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 906 | |||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | |
Auto and Transportation | 2.1 | |
Consumer Discretionary | 9.0 |
316
Table of Contents
Consumer Staples | 4.1 | ||
Financial Services | 25.9 | ||
Health Care | 11.5 | ||
Integrated Oils | 4.8 | ||
Materials and Processing | 7.6 | ||
Miscellaneous | 2.7 | ||
Other Energy | 4.8 | ||
Producer Durables | 7.4 | ||
Technology | 5.3 | ||
Utilities | 8.8 | ||
Short-Term Investments | 6.3 | ||
Other Securities | 10.9 | ||
Total Investments | 111.2 | ||
Other Assets and Liabilities, Net | (11.2 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
See accompanying notes which are an integral part of the financial statements.
Select Value Fund
317
Table of Contents
Russell Funds
Notes to Schedules of Investments — October 31, 2006
Footnotes:
(Æ) | Non-income producing |
(Ï) | Forward commitment. |
(Ê) | 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. |
(ö) | Real Estate Investment Trust (REIT). |
(µ) | Bond is insured by a guarantor. |
(ß) | Illiquid security. |
(ø) | In default. |
(ç) | At amortized cost, which approximates market. |
(ž) | Rate noted is yield-to-maturity from date of acquisition. |
(æ) | 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. |
(§) | 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. |
(Ñ) | All or a portion of the shares of this security are on loan. |
(Þ) | Restricted security. Security may have contractual restrictions on resale, may have been offered in a private placement transaction, and may not be registered under the Securities Act of 1933. |
(Å) | Illiquid and restricted security. |
(å) | Currency balances were held in connection with futures contracts purchased (sold), options written, or swaps entered into by the Fund. See Note 2. |
(Û) | All or a portion of the shares of this security are held as collateral in connection with securities sold short. |
Abbreviations:
ADR - American Depositary Receipt
ADS - American Depositary Share
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
318
Table of Contents
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:
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 | IEP - Irish pundt | RUB - Russian ruble | ||
CHF - Swiss franc | ILS - Israeli shekel | SEK - Swedish krona | ||
CLP - Chilean peso | INR - Indian rupee | 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 - Vietnam dong | ||
GBP - British pound sterling | PEN - Peruvian nouveau sol | ZAR - South African rand |
319
Table of Contents
Statement of Assets and Liabilities — October 31, 2006
Amounts in thousands | Diversified Equity Fund | Special Growth Fund | ||||
Assets | ||||||
Investments, at identified cost | $ | 3,698,538 | $ | 1,431,345 | ||
Investments, at market*** | 4,224,382 | 1,575,819 | ||||
Cash | — | — | ||||
Cash (Restricted) | — | — | ||||
Foreign currency holdings* | — | — | ||||
Unrealized appreciation on foreign currency exchange contracts | — | — | ||||
Receivables: | ||||||
Dividends and interest | 2,619 | 461 | ||||
Dividends from affiliated money market funds | 995 | 361 | ||||
Investments sold | 28,057 | 7,228 | ||||
Fund shares sold | 6,893 | 1,704 | ||||
Foreign taxes recoverable | — | — | ||||
From Adviser | 74 | 44 | ||||
Daily variation margin on futures contracts | — | — | ||||
Prepaid expenses | 23 | 21 | ||||
Unrealized appreciation on index swap contracts | — | — | ||||
Interest rate swap contracts, at market value***** | — | — | ||||
Credit default swap contracts, at market value**** | — | — | ||||
Total Assets | 4,263,043 | 1,585,638 | ||||
Liabilities | ||||||
Payables: | ||||||
Due to Custodian | — | — | ||||
Investments purchased | 33,937 | 7,951 | ||||
Fund shares redeemed | 2,393 | 1,211 | ||||
Accrued fees to affiliates | 3,545 | 1,390 | ||||
Other accrued expenses | 132 | 87 | ||||
Dividends for securities sold short | — | — | ||||
Daily variation margin on futures contracts | 279 | 294 | ||||
Deferred tax liability | — | — | ||||
Unrealized depreciation on foreign currency exchange contracts | — | — | ||||
Options written, at market value** | — | — | ||||
Securities sold short, at market value ****** | — | — | ||||
Payable upon return of securities loaned | 441,853 | 386,299 | ||||
Unrealized depreciation on index swap contracts | — | — | ||||
Interest rate swap contracts, at market value***** | — | — | ||||
Credit default swaps, at market value**** | — | — | ||||
Total Liabilities | 482,139 | 397,232 | ||||
Net Assets | $ | 3,780,904 | $ | 1,188,406 | ||
Quantitative Equity Fund | International Securities Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | |||||||||||
$ | 3,619,870 | $ | 3,485,826 | $ | 888,971 | $ | 1,487,711 | $ | 1,185,919 | ||||||
4,185,373 | 4,177,095 | 1,223,505 | 2,306,508 | 1,179,774 | |||||||||||
— | — | 612 | — | — | |||||||||||
— | 6,987 | — | — | — | |||||||||||
— | 17,500 | 5,092 | — | 666 | |||||||||||
— | 6,870 | 405 | — | 7 | |||||||||||
3,420 | 3,371 | 1,544 | 296 | 8,219 | |||||||||||
619 | 1,170 | 236 | 286 | 353 | |||||||||||
48,457 | 32,996 | 2,316 | 15,974 | 9,732 | |||||||||||
6,337 | 4,692 | 1,538 | 2,800 | 550 | |||||||||||
— | 161 | 1 | — | — | |||||||||||
42 | 112 | 16 | 26 | 19 | |||||||||||
— | — | 188 | — | 351 |
320
Table of Contents
23 | 20 | 4 | 6 | 6 | ||||||||||
— | — | — | — | — | ||||||||||
— | — | — | — | 16 | ||||||||||
— | — | — | — | 1 | ||||||||||
4,244,271 | 4,250,974 | 1,235,457 | 2,325,896 | 1,199,694 | ||||||||||
23 | 3,880 | — | — | 34 | ||||||||||
68,619 | 37,201 | 4,865 | 18,643 | 18,490 | ||||||||||
2,632 | 2,810 | 970 | 2,827 | 1,550 | ||||||||||
3,657 | 3,788 | 1,567 | 2,166 | 697 | ||||||||||
231 | 339 | 324 | 97 | 100 | ||||||||||
53 | — | — | — | — | ||||||||||
196 | 544 | — | — | — | ||||||||||
— | 24 | 1,303 | — | — | ||||||||||
— | 8,026 | 167 | — | 13 | ||||||||||
— | 1,916 | 842 | — | 1,185 | ||||||||||
168,538 | — | — | — | — | ||||||||||
95,404 | 680,911 | 60,497 | 228,743 | 21,916 | ||||||||||
— | 69 | — | — | — | ||||||||||
— | — | — | — | 123 | ||||||||||
— | — | — | — | — | ||||||||||
339,353 | 739,508 | 70,535 | 252,476 | 44,108 | ||||||||||
$3,904,918 | $ | 3,511,466 | $ | 1,164,922 | $ | 2,073,420 | $ | 1,155,586 | ||||||
Amounts in thousands | Diversified Equity Fund | Special Growth Fund | |||||
Net Assets Consist of: | |||||||
Undistributed (overdistributed) net investment income | $ | 1,111 | $ | (1 | ) | ||
Accumulated net realized gain (loss) | 122,160 | 143,974 | |||||
Unrealized appreciation (depreciation) on: | |||||||
Investments (International Securities Fund and Emerging Markets | |||||||
Fund - net of deferred tax liability for foreign capital gains taxes) | 525,844 | 144,474 | |||||
Futures contracts | 9,195 | 5,101 | |||||
Options written | — | — | |||||
Credit default swaps | — | — | |||||
Index swap contracts | — | — | |||||
Interest rate swap contracts | — | — | |||||
Securities sold short | — | — | |||||
Foreign currency-related transactions | — | — | |||||
Shares of beneficial interest | 772 | 214 | |||||
Additional paid-in capital | 3,121,822 | 894,644 | |||||
Net Assets | $ | 3,780,904 | $ | 1,188,406 | |||
Net Asset Value, offering and redemption price per share: | |||||||
Net asset value per share: Class C******* | $ | 47.30 | $ | 50.08 | |||
Class C - Net assets | $ | 151,890,015 | $ | 67,164,276 | |||
Class C - Shares outstanding ($.01 par value) | 3,211,244 | 1,341,134 | |||||
Net asset value per share: Class E******* | $ | 49.01 | $ | 53.90 | |||
Class E - Net assets | $ | 69,010,781 | $ | 25,434,812 | |||
Class E - Shares outstanding ($.01 par value) | 1,407,959 | 471,851 | |||||
Net asset value per share: Class I******* | $ | — | $ | — | |||
Class I - Net assets | $ | — | $ | — | |||
Class I - Shares outstanding ($.01 par value) | — | — | |||||
Net asset value per share: Class S******* | $ | 49.02 | $ | 56.07 | |||
Class S - Net assets | $ | 3,560,003,161 | $ | 1,095,806,789 | |||
Class S - Shares outstanding ($.01 par value) | 72,621,197 | 19,543,131 | |||||
Amounts in thousands | |||||||
* Foreign currency holdings - cost | $ | — | $ | — | |||
** Premiums received on options written | $ | — | $ | — | |||
*** Securities on loan included in investments | $ | 428,978 | $ | 374,967 | |||
**** Credit default swap contracts - premiums paid (received) | $ | — | $ | — |
321
Table of Contents
***** Interest rate swap contracts - premiums paid (received) | $ | — | $ | — | ||
****** Proceeds on securities sold short | $ | — | $ | — | ||
******* Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
Quantitative Equity Fund | International Securities Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | ||||||||||||||
$ | 1,537 | $ | 54,339 | $ | (7,191 | ) | $ | 1,960 | $ | 4,238 | ||||||||
171,712 | 289,628 | 157,008 | 166,739 | (16,442 | ) | |||||||||||||
565,503 | 691,245 | 333,231 | 818,797 | (6,145 | ) | |||||||||||||
4,708 | 3,945 | 778 | — | (1,002 | ) | |||||||||||||
— | (30 | ) | (14 | ) | — | (412 | ) | |||||||||||
— | — | — | — | 1 | ||||||||||||||
— | (69 | ) | — | — | — | |||||||||||||
— | — | — | — | 283 | ||||||||||||||
(8,286) | — | — | — | — | ||||||||||||||
— | (1,018 | ) | 268 | — | — | |||||||||||||
931 | 444 | 532 | 361 | 618 | ||||||||||||||
3,168,813 | 2,472,982 | 680,310 | 1,085,563 | 1,174,447 | ||||||||||||||
$ | 3,904,918 | $ | 3,511,466 | $ | 1,164,922 | $ | 2,073,420 | $ | 1,155,586 | |||||||||
$ | 40.71 | $ | 75.34 | $ | 21.17 | $ | 56.11 | $ | 18.66 | |||||||||
$ | 155,977,982 | $ | 156,760,230 | $ | 44,977,040 | $ | 110,287,180 | $ | 21,839,992 | |||||||||
3,831,649 | 2,080,720 | 2,124,522 | 1,965,708 | 1,170,230 | ||||||||||||||
$ | 41.86 | $ | 78.34 | $ | 21.89 | $ | 56.95 | $ | 18.73 | |||||||||
$ | 73,033,453 | $ | 73,044,086 | $ | 27,861,556 | $ | 59,768,271 | $ | 26,799,482 | |||||||||
1,744,587 | 932,430 | 1,272,592 | 1,049,440 | 1,431,052 | ||||||||||||||
$ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
$ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
— | — | — | — | — | ||||||||||||||
$ | 41.99 | $ | 79.23 | $ | 21.91 | $ | 57.53 | $ | 18.70 | |||||||||
$ | 3,675,906,671 | $ | 3,281,661,445 | $ | 1,092,083,632 | $ | 1,903,364,431 | $ | 1,106,946,034 | |||||||||
87,549,981 | 41,418,497 | 49,852,578 | 33,087,167 | 59,192,512 | ||||||||||||||
$ | — | $ | 17,292 | $ | 5,088 | $ | — | $ | 659 | |||||||||
$ | — | $ | 1,886 | $ | 828 | $ | — | $ | 773 | |||||||||
$ | 96,067 | $ | 656,101 | $ | 58,893 | $ | 223,316 | $ | 21,445 | |||||||||
$ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
$ | — | $ | — | $ | — | $ | — | $ | (390 | ) | ||||||||
$ | 160,252 | $ | — | $ | — | $ | — | $ | — |
Amounts in thousands | Diversified Bond Fund | Multistrategy Bond Fund | ||||
Assets | ||||||
Investments, at identified cost | $ | 2,910,458 | $ | 3,132,429 | ||
Investments, at market*** | 2,916,732 | 3,149,435 | ||||
Cash | 6,257 | 6,242 | ||||
Cash (Restricted) | — | 104 | ||||
Foreign currency holdings* | 775 | 2,158 | ||||
Unrealized appreciation on foreign currency exchange contracts | 198 | 1,143 | ||||
Receivables: | ||||||
Dividends and interest | 15,117 | 20,201 | ||||
Dividends from affiliated money market funds | 738 | 1,701 | ||||
Investments sold | 106,756 | 196,400 | ||||
Fund shares sold | 3,644 | 4,764 | ||||
Foreign taxes recoverable | — | — | ||||
Miscellaneous receivables | — | — | ||||
From Adviser | 75 | 124 | ||||
Daily variation margin on futures contracts | 966 | 3,131 | ||||
Prepaid expenses | 15 | 18 | ||||
Unrealized appreciation on index swap contracts | — | 101 |
322
Table of Contents
Interest rate swap contracts, at market value***** | 472 | 9,491 | ||||
Credit default swap contracts, at market value**** | 1 | 258 | ||||
Total Assets | 3,051,746 | 3,395,271 | ||||
Liabilities | ||||||
Payables: | ||||||
Due to Custodian | — | — | ||||
Investments purchased | 461,264 | 460,087 | ||||
Fund shares redeemed | 1,700 | 1,922 | ||||
Accrued fees to affiliates | 1,326 | 2,051 | ||||
Other accrued expenses | 157 | 189 | ||||
Dividends for securities sold short | — | — | ||||
Daily variation margin on futures contracts | 18 | 263 | ||||
Deferred tax liability | — | — | ||||
Unrealized depreciation on foreign currency exchange contracts | 454 | 1,997 | ||||
Options written, at market value** | 266 | 2,680 | ||||
Securities sold short, at market value ****** | — | — | ||||
Payable upon return of securities loaned | 445,812 | 308,645 | ||||
Unrealized depreciation on index swap contracts | — | 354 | ||||
Interest rate swap contracts, at market value***** | 918 | 5,170 | ||||
Credit default swaps, at market value**** | — | 148 | ||||
Total Liabilities | 911,915 | 783,506 | ||||
Net Assets | $ | 2,139,831 | $ | 2,611,765 | ||
Tax Exempt Bond Fund | Tax-Managed Large Cap Fund | Tax-Managed Mid & Small Cap Fund | Select Growth Fund | Select Value Fund | |||||||||||
$ | 293,249 | $ | 397,187 | $ | 233,744 | $ | 188,058 | $ | 399,495 | ||||||
297,016 | 514,716 | 274,876 | 209,892 | 469,470 | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
4,048 | 348 | 62 | 58 | 304 | |||||||||||
19 | 75 | 75 | 28 | 104 | |||||||||||
2,994 | 3,394 | 676 | 1,196 | 3,474 | |||||||||||
879 | 571 | 514 | 720 | 649 | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | 176 | 8 | |||||||||||
4 | 6 | 71 | 13 | — | |||||||||||
— | — | 25 | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
304,960 | 519,110 | 276,299 | 212,083 | 474,009 | |||||||||||
— | — | — | 53 | — | |||||||||||
6,626 | 2,929 | 1,540 | 1,443 | 4,439 | |||||||||||
76 | 447 | 349 | 322 | 1,012 | |||||||||||
149 | 408 | 250 | 174 | 419 | |||||||||||
47 | 50 | 43 | 42 | 54 | |||||||||||
— | — | — | — | — | |||||||||||
— | — | 88 | — | 13 | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | 25,436 | 61,449 | 31,309 | 45,953 | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
6,898 | 29,270 | 63,719 | 33,343 | 51,890 | |||||||||||
$ | 298,062 | $ | 489,840 | $ | 212,580 | $ | 178,740 | $ | 422,119 | ||||||
323
Table of Contents
Amounts in thousands | Diversified Bond Fund | Multistrategy Bond Fund | ||||||
Net Assets Consist of: | ||||||||
Undistributed (overdistributed) net investment income | $ | 9,110 | $ | 10,284 | ||||
Accumulated net realized gain (loss) | (24,479 | ) | (19,068 | ) | ||||
Unrealized appreciation (depreciation) on: | ||||||||
Investments (International Securities Fund and Emerging Markets Fund - net of deferred tax liability for foreign capital gains taxes) | 6,274 | 17,006 | ||||||
Futures contracts | 473 | 1,159 | ||||||
Options written | (58 | ) | (685 | ) | ||||
Credit default swaps | 1 | 420 | ||||||
Index swap contracts | — | (253 | ) | |||||
Interest rate swap contracts | (154 | ) | 1,851 | |||||
Securities sold short | — | — | ||||||
Foreign currency-related transactions | (248 | ) | (896 | ) | ||||
Shares of beneficial interest | 915 | 2,521 | ||||||
Additional paid-in capital | 2,147,997 | 2,599,426 | ||||||
Net Assets | $ | 2,139,831 | $ | 2,611,765 | ||||
Net Asset Value, offering and redemption price per share: | ||||||||
Net asset value per share: Class C******* | $ | 23.90 | $ | 10.34 | ||||
Class C - Net assets | $ | 60,670,151 | $ | 83,362,624 | ||||
Class C - Shares outstanding ($.01 par value) | 2,538,693 | 8,062,553 | ||||||
Net asset value per share: Class E******* | $ | 23.98 | $ | 10.35 | ||||
Class E - Net assets | $ | 55,948,726 | $ | 51,698,209 | ||||
Class E - Shares outstanding ($.01 par value) | 2,333,491 | $ | 4,994,461 | |||||
Net asset value per share: Class I******* | $ | — | — | |||||
Class I - Net assets | $ | — | — | |||||
Class I - Shares outstanding ($.01 par value) | — | — | ||||||
Net asset value per share: Class S******* | $ | 23.36 | 10.36 | |||||
Class S - Net assets | $ | 2,023,211,833 | $ | 2,476,703,834 | ||||
Class S - Shares outstanding ($.01 par value) | 86,594,933 | $ | 239,039,361 | |||||
Amounts in thousands | ||||||||
* Foreign currency holdings - cost | $ | 773 | $ | 2,143 | ||||
** Premiums received on options written | $ | 208 | $ | 1,995 | ||||
*** Securities on loan included in investments | $ | 438,218 | $ | 303,522 | ||||
**** Credit default swap contracts - premiums paid (received) | $ | — | $ | (310 | ) | |||
***** Interest rate swap contracts - premiums paid (received) | $ | (292 | ) | $ | 2,471 | |||
****** Proceeds on securities sold short | $ | — | $ | — | ||||
******* Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
Tax Exempt Bond Fund | Tax-Managed Large Cap Fund | Tax-Managed Mid & Small Cap Fund | Select Growth Fund | Select Value Fund | |||||||||||||
$ | 950 | $ | 2,680 | $ | 1 | $ | 1 | $ | 69 | ||||||||
(1,677) | (78,936 | ) | 1,616 | (11,537 | ) | 15,749 | |||||||||||
3,767 | 117,529 | 41,132 | 21,834 | 69,975 | |||||||||||||
— | 756 | 1,196 | 424 | 906 | |||||||||||||
— | — | — | — | — | |||||||||||||
— | — | — | — | — | |||||||||||||
— | — | — | — | — | |||||||||||||
— | — | — | — | — | |||||||||||||
— | — | — | — | — | |||||||||||||
— | — | — | — | — | |||||||||||||
138 | 243 | 151 | 214 | 333 | |||||||||||||
294,884 | 447,568 | 168,484 | 167,804 | 335,087 | |||||||||||||
$ | 298,062 | $ | 489,840 | $ | 212,580 | $ | 178,740 | $ | 422,119 | ||||||||
$ | 21.63 | $ | 19.62 | $ | 13.22 | $ | 7.84 | $ | 12.44 | ||||||||
$ | 11,818,917 | $ | 19,111,766 | $ | 11,975,183 | $ | 9,763,685 | $ | 26,167,854 |
324
Table of Contents
546,383 | 973,887 | 906,110 | 1,244,795 | 2,102,714 | |||||||||||
$ | 21.70 | $ | 20.12 | $ | 13.93 | $ | 8.25 | $ | 12.66 | ||||||
$ | 11,805,386 | $ | 12,725,619 | $ | 2,523,367 | $ | 6,590,057 | $ | 10,871,152 | ||||||
543,999 | 632,435 | 181,106 | 798,980 | 858,868 | |||||||||||
$ | — | $ | — | $ | — | $ | 8.44 | $ | 12.69 | ||||||
$ | — | $ | — | $ | — | $ | 90,953,635 | $ | 131,493,682 | ||||||
— | — | — | 10,781,078 | 10,359,400 | |||||||||||
$ | 21.67 | $ | 20.21 | $ | 14.13 | $ | 8.38 | $ | 12.67 | ||||||
$ | 274,437,810 | $ | 458,002,510 | $ | 198,081,169 | $ | 71,432,767 | $ | 253,586,676 | ||||||
12,661,814 | 22,659,241 | 14,019,744 | 8,527,655 | 20,020,606 | |||||||||||
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||
$ | — | $ | 24,830 | $ | 59,466 | $ | 30,374 | $ | 44,732 | ||||||
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||
$ | — | $ | — | $ | — | $ | — | $ | — |
Statement of Operations — For the Fiscal Year Ended October 31, 2006
Amounts in thousands | Diversified Equity Fund | Special Growth Fund | ||||||
Investment Income | ||||||||
Dividends | $ | 45,705 | $ | 9,355 | ||||
Dividends from affiliated money market funds | 9,117 | 3,102 | ||||||
Interest | 506 | 158 | ||||||
Securities lending income | 383 | 714 | ||||||
Less foreign taxes withheld | — | — | ||||||
Total investment income | 55,711 | 13,329 | ||||||
Expenses | ||||||||
Advisory fees | 23,621 | 9,554 | ||||||
Administrative fees | 1,631 | 530 | ||||||
Custodian fees | 796 | 500 | ||||||
Distribution fees - Class C | 1,062 | 480 | ||||||
Transfer agent fees | 4,890 | 2,233 | ||||||
Transfer agent fees - Class C | — | — | ||||||
Transfer agent fees - Class E | — | — | ||||||
Transfer agent fees - Class I | — | — | ||||||
Transfer agent fees - Class S | — | — | ||||||
Professional fees | 125 | 79 | ||||||
Registration fees | 147 | 85 | ||||||
Shareholder servicing fees - Class C | 354 | 160 | ||||||
Shareholder servicing fees - Class E | 154 | 59 | ||||||
Trustees’ fees | 76 | 25 | ||||||
Printing fees | 146 | 57 | ||||||
Dividends from securities sold short | — | — | ||||||
Interest expense from securities sold short | — | — | ||||||
Miscellaneous | 56 | 19 | ||||||
Expenses before reductions | 33,058 | 13,781 | ||||||
Expense reductions | (87 | ) | (52 | ) | ||||
Net expenses | 32,971 | 13,729 | ||||||
Net investment income (loss) | 22,740 | (400 | ) | |||||
Net Realized and Unrealized Gain (Loss) | ||||||||
Net realized gain (loss) on: | ||||||||
Investments (International Securities Fund and Emerging Markets Fund - net of deferred tax liability for foreign capital gains taxes) | 144,897 | 146,642 | ||||||
Futures contracts | 4,918 | 1,548 |
325
Table of Contents
Options written | — | — | ||||||
Credit default swaps | — | — | ||||||
Index swap contracts | — | — | ||||||
Interest rate swap contracts | — | — | ||||||
Short sales | — | — | ||||||
Foreign currency-related transactions | (1 | ) | (1 | ) | ||||
Net realized gain (loss) | 149,814 | 148,189 | ||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Securities Fund and Emerging Markets Fund - net of deferred tax liability for foreign capital gains taxes) | 237,741 | 12,354 | ||||||
Futures contracts | 12,434 | 6,587 | ||||||
Options written | — | — | ||||||
Credit default swaps | — | — | ||||||
Index swap contracts | — | — | ||||||
Interest rate swap contracts | — | — | ||||||
Securities sold short | — | — | ||||||
Foreign currency-related transactions | — | — | ||||||
Net change in unrealized appreciation (depreciation) | 250,175 | 18,941 | ||||||
Net realized and unrealized gain (loss) | 399,989 | 167,130 | ||||||
Net Increase (Decrease) in Net Assets from Operations | $ | 422,729 | $ | 166,730 | ||||
Quantitative Equity Fund | International Securities Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | |||||||||||||||
$ | 57,864 | $ | 83,512 | $ | 28,371 | $ | 42,134 | $ | 189 | ||||||||||
6,452 | 10,494 | 2,301 | 2,293 | 2,456 | |||||||||||||||
330 | 930 | 212 | — | 47,651 | |||||||||||||||
101 | 3,055 | 182 | 197 | 14 | |||||||||||||||
— | (5,838 | ) | (2,641 | ) | — | — | |||||||||||||
64,747 | 92,153 | 28,425 | 44,624 | 50,310 | |||||||||||||||
24,355 | 26,954 | 11,961 | 14,117 | 5,172 | |||||||||||||||
1,686 | 1,508 | 522 | 883 | 576 | |||||||||||||||
771 | 2,755 | 2,260 | 402 | 363 | |||||||||||||||
1,082 | 1,079 | 322 | 714 | 187 | |||||||||||||||
5,041 | 4,526 | 2,383 | 3,215 | 1,200 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
118 | 154 | 164 | 65 | 78 | |||||||||||||||
143 | 151 | 84 | 102 | 44 | |||||||||||||||
361 | 360 | 107 | 238 | 62 | |||||||||||||||
160 | 156 | 63 | 121 | 64 | |||||||||||||||
78 | 55 | 25 | 42 | 27 | |||||||||||||||
132 | 128 | 37 | 68 | 47 | |||||||||||||||
356 | — | — | — | — | |||||||||||||||
168 | — | — | — | — | |||||||||||||||
59 | 46 | 20 | 36 | 20 | |||||||||||||||
34,510 | 37,872 | 17,948 | 20,003 | 7,840 | |||||||||||||||
(52) | (121 | ) | (33 | ) | (32 | ) | (56 | ) | |||||||||||
34,458 | 37,751 | 17,915 | 19,971 | 7,784 | |||||||||||||||
30,289 | 54,402 | 10,510 | 24,653 | 42,526 | |||||||||||||||
186,905 | 284,844 | 150,099 | 169,551 | (4,680 | ) | ||||||||||||||
7,074 | 34,736 | 7,046 | — | (2,060 | ) | ||||||||||||||
— | (1,397 | ) | 3,286 | — | 343 | ||||||||||||||
— | — | — | — | — | |||||||||||||||
— | 4,302 | — | — | — | |||||||||||||||
— | — | — | — | (780 | ) | ||||||||||||||
(3,969) | — | — | — | — | |||||||||||||||
— | (5,029 | ) | (177 | ) | — | (29 | ) | ||||||||||||
326
Table of Contents
190,010 | 317,456 | 160,254 | 169,551 | (7,206 | ) | ||||||||||||
260,883 | 319,376 | 112,845 | 380,628 | 8,237 | |||||||||||||
6,455 | (426 | ) | 477 | — | 63 | ||||||||||||
— | 6 | 124 | — | (469 | ) | ||||||||||||
— | — | — | — | 1 | |||||||||||||
— | (567 | ) | — | — | — | ||||||||||||
— | — | — | — | 739 | |||||||||||||
(8,286) | — | — | — | — | |||||||||||||
— | 3,541 | 514 | — | (20 | ) | ||||||||||||
259,052 | 321,930 | 113,960 | 380,628 | 8,551 | |||||||||||||
449,062 | 639,386 | 274,214 | 550,179 | 1,345 | |||||||||||||
$ | 479,351 | $ | 693,788 | $ | 284,724 | $ | 574,832 | $ | 43,871 | ||||||||
Amounts in thousands | Diversified Bond Fund | Multistrategy Bond Fund | ||||||
Investment Income | ||||||||
Dividends | $ | 126 | $ | 384 | ||||
Dividends from affiliated money market funds | 7,746 | 15,218 | ||||||
Interest | 87,784 | 101,059 | ||||||
Securities lending income | — | 505 | ||||||
Less foreign taxes withheld | — | — | ||||||
Total investment income | 95,656 | 117,166 | ||||||
Expenses | ||||||||
Advisory fees | 7,553 | 13,389 | ||||||
Administrative fees | 944 | 1,117 | ||||||
Custodian fees | 762 | 990 | ||||||
Distribution fees - Class C | 417 | 574 | ||||||
Transfer agent fees | 2,229 | 3,377 | ||||||
Transfer agent fees - Class C | — | — | ||||||
Transfer agent fees - Class E | — | — | ||||||
Transfer agent fees - Class I | — | — | ||||||
Transfer agent fees - Class S | — | — | ||||||
Professional fees | 96 | 78 | ||||||
Registration fees | 121 | 144 | ||||||
Shareholder servicing fees - Class C | 139 | 191 | ||||||
Shareholder servicing fees - Class E | 131 | 112 | ||||||
Trustees’ fees | 44 | 52 | ||||||
Printing fees | 76 | 90 | ||||||
Dividends from securities sold short | — | — | ||||||
Interest expense from securities sold short | — | — | ||||||
Miscellaneous | 32 | 41 | ||||||
Expenses before reductions | 12,544 | 20,155 | ||||||
Expense reductions | (139 | ) | (614 | ) | ||||
Net expenses | 12,405 | 19,541 | ||||||
Net investment income (loss) | 83,251 | 97,625 | ||||||
Net Realized and Unrealized Gain (Loss) | ||||||||
Net realized gain (loss) on: | ||||||||
Investments (International Securities Fund and Emerging Markets Fund - net of deferred tax liability for foreign capital gains taxes) | (16,186 | ) | (15,313 | ) | ||||
Futures contracts | (4,573 | ) | (2,338 | ) | ||||
Options written | 758 | 1,530 | ||||||
Credit default swaps | — | 34 | ||||||
Index swap contracts | — | (142 | ) | |||||
Interest rate swap contracts | (555 | ) | (2,371 | ) | ||||
Short sales | — | — | ||||||
Foreign currency-related transactions | (406 | ) | (2,895 | ) | ||||
Net realized gain (loss) | (20,962 | ) | (21,495 | ) | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments (International Securities Fund and Emerging Markets Fund - net of deferred tax liability for foreign capital gains taxes) | 25,548 | 27,189 |
327
Table of Contents
Futures contracts | 3,093 | 3,922 | ||||||
Options written | 36 | (749 | ) | |||||
Credit default swaps | 1 | 406 | ||||||
Index swap contracts | — | (193 | ) | |||||
Interest rate swap contracts | 286 | 2,772 | ||||||
Securities sold short | — | — | ||||||
Foreign currency-related transactions | (41 | ) | (719 | ) | ||||
Net change in unrealized appreciation (depreciation) | 28,923 | 32,628 | ||||||
Net realized and unrealized gain (loss) | 7,961 | 11,133 | ||||||
Net Increase (Decrease) in Net Assets from Operations | $ | 91,212 | $ | 108,758 | ||||
Tax Exempt Bond Fund | Tax-Managed Large Cap Fund | Tax-Managed Mid & Small Cap Fund | Select Growth Fund | Select Value Fund | |||||||||||||||
$ | — | $ | 7,005 | $ | 1,466 | $ | 1,342 | $ | 7,328 | ||||||||||
208 | 972 | 591 | 480 | 922 | |||||||||||||||
11,231 | 62 | 36 | 44 | 46 | |||||||||||||||
— | 25 | 160 | 43 | 57 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
11,439 | 8,064 | 2,253 | 1,909 | 8,353 | |||||||||||||||
814 | 3,165 | 1,906 | 1,495 | 2,675 | |||||||||||||||
136 | 226 | 97 | 93 | 191 | |||||||||||||||
139 | 190 | 161 | 170 | 212 | |||||||||||||||
83 | 135 | 81 | 70 | 181 | |||||||||||||||
271 | 440 | 336 | — | — | |||||||||||||||
— | — | — | 24 | 62 | |||||||||||||||
— | — | — | 8 | 17 | |||||||||||||||
— | — | — | 123 | 118 | |||||||||||||||
— | — | — | 132 | 556 | |||||||||||||||
50 | 48 | 49 | 47 | 46 | |||||||||||||||
72 | 47 | 48 | 64 | 73 | |||||||||||||||
28 | 45 | 27 | 23 | 60 | |||||||||||||||
25 | 26 | 5 | 13 | 24 | |||||||||||||||
6 | 11 | 5 | 5 | 10 | |||||||||||||||
13 | 20 | 10 | 10 | 15 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
7 | 9 | 6 | 18 | 10 | |||||||||||||||
1,644 | 4,362 | 2,731 | 2,295 | 4,250 | |||||||||||||||
(6) | (7 | ) | (189 | ) | (239 | ) | (9 | ) | |||||||||||
1,638 | 4,355 | 2,542 | 2,056 | 4,241 | |||||||||||||||
9,801 | 3,709 | (289 | ) | (147 | ) | 4,112 | |||||||||||||
(638) | 19,829 | 11,289 | 6,679 | 28,103 | |||||||||||||||
— | 414 | 395 | 75 | 1,054 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — | |||||||||||||||
(638) | 20,243 | 11,684 | 6,754 | 29,157 | |||||||||||||||
3,055 | 26,493 | 13,341 | 3,029 | 29,741 | |||||||||||||||
— | 949 | 1,600 | 506 | 1,259 | |||||||||||||||
— | — | — | — | — | |||||||||||||||
— | — | — | — | — |
328
Table of Contents
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
— | — | — | — | — | |||||||||||
3,055 | 27,442 | 14,941 | 3,535 | 31,000 | |||||||||||
2,417 | 47,685 | 26,625 | 10,289 | 60,157 | |||||||||||
$ | 12,218 | $ | 51,394 | $ | 26,336 | $ | 10,142 | $ | 64,269 | ||||||
Statements of Changes in Net Assets — For the Fiscal Years Ended October 31,
Diversified Equity Fund | Special Growth Fund | |||||||||||||||
Amounts in thousands | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Increase (Decrease) in Net Assets Operations | ||||||||||||||||
Net investment income (loss) | 22,740 | 17,486 | (400 | ) | (2,731 | ) | ||||||||||
Net realized gain (loss) | 149,814 | 182,930 | 148,189 | 95,718 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 250,175 | 75,393 | 18,941 | 4,456 | ||||||||||||
Net increase (decrease) in net assets from operations | 422,729 | 275,809 | 166,730 | 97,443 | ||||||||||||
Distributions | ||||||||||||||||
From net investment income | ||||||||||||||||
Class C | (102 | ) | (101 | ) | — | — | ||||||||||
Class E | (298 | ) | (257 | ) | — | — | ||||||||||
Class I | — | — | — | — | ||||||||||||
Class S | (21,815 | ) | (17,162 | ) | (1 | ) | (1 | ) | ||||||||
From net realized gain | ||||||||||||||||
Class C | (3,691 | ) | — | (5,980 | ) | (6,286 | ) | |||||||||
Class E | (1,492 | ) | — | (2,068 | ) | (4,121 | ) | |||||||||
Class I | — | — | — | — | ||||||||||||
Class S | (71,829 | ) | — | (82,803 | ) | (86,902 | ) | |||||||||
Net decrease in net assets from distributions | (99,227 | ) | (17,520 | ) | (90,852 | ) | (97,310 | ) | ||||||||
Share Transactions | ||||||||||||||||
Net increase (decrease) in net assets from share transactions | 720,383 | 395,071 | 174,528 | 151,068 | ||||||||||||
Total Net Increase (Decrease) in Net Assets | 1,043,885 | 653,360 | 250,406 | 151,201 | ||||||||||||
Net Assets | ||||||||||||||||
Beginning of period | 2,737,019 | 2,083,659 | 938,000 | 786,799 | ||||||||||||
End of period | $ | 3,780,904 | $ | 2,737,019 | $ | 1,188,406 | $ | 938,000 | ||||||||
Undistributed (overdistributed) net investment income included in net assets | $ | 1,111 | $ | 587 | $ | (1 | ) | $ | (1 | ) |
Quantitative Equity Fund | International Securities Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | |||||||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||||||||||
30,289 | 22,664 | 54,402 | 29,580 | $ | 10,510 | 9,257 | 24,653 | 27,104 | 42,526 | 31,923 | |||||||||||||||||||||||||||||
190,010 | 154,488 | 317,456 | 177,312 | 160,254 | 102,118 | 169,551 | 149,115 | (7,206 | ) | (8,752 | ) | ||||||||||||||||||||||||||||
259,052 | 50,953 | 321,930 | 118,238 | 113,960 | 102,396 | 380,628 | 62,485 | 8,551 | (17,447 | ) | |||||||||||||||||||||||||||||
479,351 | 228,105 | 693,788 | 325,130 | 284,724 | 213,771 | 574,832 | 238,704 | 43,871 | 5,724 | ||||||||||||||||||||||||||||||
(120) | (209 | ) | (516 | ) | (820 | ) | (580 | ) | (83 | ) | (699 | ) | (700 | ) | (655 | ) | (523 | ) | |||||||||||||||||||||
(436) | (360 | ) | (539 | ) | (605 | ) | (442 | ) | (194 | ) | (630 | ) | (596 | ) | (882 | ) | (558 | ) | |||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
(28,910) | (22,089 | ) | (29,811 | ) | (29,701 | ) | (20,081 | ) | (9,858 | ) | (24,741 | ) | (25,047 | ) | (40,141 | ) | (29,494 | ) | |||||||||||||||||||||
(5,834) | — | (4,377 | ) | — | (887 | ) | — | (8,834 | ) | (5,310 | ) | — | (24 | ) | |||||||||||||||||||||||||
(2,398) | — | (1,760 | ) | — | (487 | ) | — | (4,267 | ) | (2,607 | ) | — | (16 | ) | |||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
(115,840) | — | (80,360 | ) | — | (20,087 | ) | — | (150,805 | ) | (98,198 | ) | — | (767 | ) | |||||||||||||||||||||||||
(153,538) | (22,658 | ) | (117,363 | ) | (31,126 | ) | (42,564 | ) | (10,135 | ) | (189,976 | ) | (132,458 | ) | (41,678 | (31,382 | ) | ||||||||||||||||||||||
746,425 | 423,493 | 467,484 | 380,785 | 75,860 | 59,004 | 132,283 | 187,997 | (60,187 | ) | 42,298 | |||||||||||||||||||||||||||||
1,072,238 | 628,940 | 1,043,909 | 674,789 | 318,020 | 262,640 | 517,139 | 294,243 | (57,994 | ) | 16,640 | |||||||||||||||||||||||||||||
2,832,680 | 2,203,740 | 2,467,557 | 1,792,768 | 846,902 | 584,262 | 1,556,281 | 1,262,038 | 1,213,580 | 1,196,940 | ||||||||||||||||||||||||||||||
�� | |||||||||||||||||||||||||||||||||||||||
$ | 3,904,918 | $ | 2,832,680 | $ | 3,511,466 | $ | 2,467,557 | $ | 1,164,922 | $ | 846,902 | $ | 2,073,420 | $ | 1,556,281 | $ | 1,155,586 | $ | 1,213,580 | ||||||||||||||||||||
$ | 1,537 | $ | 714 | $ | 54,339 | $ | 17,725 | $ | (7,191 | ) | $ | 4,215 | $ | 1,960 | $ | 1,374 | $ | 4,238 | $ | 3,335 |
329
Table of Contents
Diversified Bond Fund | Multistrategy Bond Fund | |||||||||||||||
Amounts in thousands | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Increase (Decrease) in Net Assets | ||||||||||||||||
Operations | ||||||||||||||||
Net investment income (loss) | $ | 83,251 | $ | 50,386 | $ | 97,625 | $ | 53,955 | ||||||||
Net realized gain (loss) | (20,962 | ) | (1,129 | ) | (21,495 | ) | 7,154 | |||||||||
Net change in unrealized appreciation (depreciation) | 28,923 | (42,853 | ) | 32,628 | (42,091 | ) | ||||||||||
Net increase (decrease) in net assets from operations | 91,212 | 6,404 | 108,758 | 19,018 | ||||||||||||
Distributions | ||||||||||||||||
From net investment income | ||||||||||||||||
Class C | (1,783 | ) | (1,088 | ) | (2,433 | ) | (1,363 | ) | ||||||||
Class E | (2,059 | ) | (1,375 | ) | (1,753 | ) | (1,025 | ) | ||||||||
Class I | — | — | — | — | ||||||||||||
Class S | (76,351 | ) | (45,399 | ) | (87,675 | ) | (48,760 | ) | ||||||||
From net realized gain | ||||||||||||||||
Class C | — | (234 | ) | (167 | ) | (700 | ) | |||||||||
Class E | — | (231 | ) | (93 | ) | (404 | ) | |||||||||
Class I | — | — | — | — | ||||||||||||
Class S | — | (6,573 | ) | (4,348 | ) | (16,986 | ) | |||||||||
Net decrease in net assets from distributions | (80,193 | ) | (54,900 | ) | (96,469 | ) | (69,238 | ) | ||||||||
Share Transactions | ||||||||||||||||
Net increase (decrease) in net assets from share transactions | 455,513 | 399,525 | 720,214 | 559,768 | ||||||||||||
Total Net Increase (Decrease) in Net Assets | 466,532 | 351,029 | 732,503 | 509,548 | ||||||||||||
Net Assets | ||||||||||||||||
Beginning of period | 1,673,299 | 1,322,270 | 1,879,262 | 1,369,714 | ||||||||||||
End of period | $ | 2,139,831 | $ | 1,673,299 | $ | 2,611,765 | $ | 1,879,262 | ||||||||
Undistributed (overdistributed) net investment income included in net assets | $ | 9,110 | $ | 6,263 | $ | 10,284 | $ | 7,040 |
See accompanying notes which are an integral part of the financial statements
Statement of Changes in Net Assets
330
Table of Contents
Tax Exempt Bond Fund | Tax-Managed Large Cap Fund | Tax-Managed Mid & Small Cap Fund | Select Growth Fund | Select Value Fund | |||||||||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||||||||
$9,801 | $ | 7,550 | $ | 3,709 | $ | 4,263 | $ | (289 | ) | $ | (171 | ) | $ | (147 | ) | $ | 43 | $ | 4,112 | $ | 3,268 | ||||||||||||||||
(638) | 277 | 20,243 | 11,253 | 11,684 | 7,898 | 6,754 | 7,903 | 29,517 | 25,574 | ||||||||||||||||||||||||||||
3,055 | (6,794 | ) | 27,442 | 13,679 | 14,941 | 12,588 | 3,535 | 6,530 | 31,000 | 9,493 | |||||||||||||||||||||||||||
12,218 | 1,033 | 51,394 | 29,195 | 26,336 | 20,315 | 10,142 | 14,476 | 64,269 | 38,335 | ||||||||||||||||||||||||||||
(285) | (248 | ) | — | (14 | ) | — | — | — | — | (49 | ) | (18 | ) | ||||||||||||||||||||||||
(324) | (221 | ) | (51 | ) | (55 | ) | — | — | — | — | (88 | ) | (72 | ) | |||||||||||||||||||||||
— | — | — | — | — | — | (44 | ) | — | (1,579 | ) | (1,393 | ) | |||||||||||||||||||||||||
(8,921) | (6,802 | ) | (3,088 | ) | (3,707 | ) | — | — | — | — | (2,401 | ) | (1,866 | ) | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | (1,230 | ) | (14 | ) | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | (494 | ) | (8 | ) | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | (7,528 | ) | (83 | ) | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | (11,306 | ) | (145 | ) | ||||||||||||||||||||||||||
(9,530) | (7,271 | ) | (3,139 | ) | (3,776 | ) | — | — | (44 | ) | — | (24,675 | ) | (3,599 | ) | ||||||||||||||||||||||
47,705 | 51,222 | 29,330 | 24,900 | 18,690 | 16,873 | (13,198 | ) | 44,098 | 18,217 | 27,540 | |||||||||||||||||||||||||||
50,393 | 44,984 | 77,585 | 50,319 | 45,026 | 37,188 | (3,100 | ) | 58,574 | 57,811 | 62,276 | |||||||||||||||||||||||||||
247,669 | 202,685 | 412,255 | 361,936 | 167,554 | 130,366 | 181,840 | 123,266 | 364,308 | 302,032 | ||||||||||||||||||||||||||||
$298,062 | $ | 247,669 | $ | 489,840 | $ | 412,255 | $ | 212,580 | $ | 167,554 | $ | 178,740 | $ | 181,840 | $ | 422,119 | $ | 364,308 | |||||||||||||||||||
$950 | $ | 679 | $ | 2,680 | $ | 2,110 | $ | 1 | $ | — | $ | 1 | $ | 43 | $ | 69 | $ | 74 |
Financial Highlights — For the Fiscal Years Ended
For a Share Outstanding Throughout Each Period.
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||||
Diversified Equity Fund | ||||||||||||||||||||
Class C | ||||||||||||||||||||
October 31, 2006 | 43.08 | (.11 | ) | 5.60 | 5.49 | (.03 | ) | (1.24 | ) | — | ||||||||||
October 31, 2005 | 38.64 | (.10 | ) | 4.58 | 4.48 | (.04 | ) | — | — | |||||||||||
October 31, 2004 | 36.27 | (.17 | ) | 2.54 | 2.37 | — | — | — | ||||||||||||
October 31, 2003 | 30.52 | (.13 | ) | 5.88 | 5.75 | — | (d) | — | — | |||||||||||
October 31, 2002 | 35.83 | (.18 | ) | (5.13 | ) | (5.31 | ) | — | — | — | ||||||||||
Class E | ||||||||||||||||||||
October 31, 2006 | 44.46 | .23 | 5.79 | 6.02 | (.23 | ) | (1.24 | ) | — | |||||||||||
October 31, 2005 | 39.75 | .23 | 4.70 | 4.93 | (.22 | ) | — | — | ||||||||||||
October 31, 2004 | 37.12 | .12 | 2.61 | 2.73 | (.10 | ) | — | — | ||||||||||||
October 31, 2003 | 31.10 | .12 | 6.00 | 6.12 | (.10 | ) | — | — | ||||||||||||
October 31, 2002 | 36.35 | .08 | (5.23 | ) | (5.15 | ) | (.09 | ) | — | (.01 | ) | |||||||||
Class S | ||||||||||||||||||||
October 31, 2006 | 44.45 | .35 | 5.79 | 6.14 | (.33 | ) | (1.24 | ) | — | |||||||||||
October 31, 2005 | 39.74 | .33 | 4.71 | 5.04 | (.33 | ) | — | — | ||||||||||||
October 31, 2004 | 37.13 | .22 | 2.60 | 2.82 | (.21 | ) | — | — | ||||||||||||
October 31, 2003 | 31.09 | .20 | 6.01 | 6.21 | (.17 | ) | — | — | ||||||||||||
October 31, 2002 | 36.35 | .16 | (5.23 | ) | (5.07 | ) | (.16 | ) | — | (.03 | ) | |||||||||
Special Growth Fund | ||||||||||||||||||||
Class C | ||||||||||||||||||||
October 31, 2006 | 47.85 | (.47 | ) | 7.76 | 7.29 | — | (5.06 | ) | — | |||||||||||
October 31, 2005 | 49.16 | (.59 | ) | 5.78 | 5.19 | — | (6.50 | ) | — | |||||||||||
October 31, 2004 | 46.99 | (.56 | ) | 4.05 | 3.49 | — | (1.32 | ) | — | |||||||||||
October 31, 2003 | 33.52 | (.46 | ) | 13.93 | 13.47 | — | — | — | ||||||||||||
October 31, 2002 | 37.42 | (.45 | ) | (3.45 | ) | (3.90 | ) | — | — | — | ||||||||||
Class E | ||||||||||||||||||||
October 31, 2006 | 50.79 | (.11 | ) | 8.28 | 8.17 | — | (5.06 | ) | — | |||||||||||
October 31, 2005 | 51.47 | (.26 | ) | 6.08 | 5.82 | — | (6.50 | ) | — | |||||||||||
October 31, 2004 | 48.77 | (.20 | ) | 4.22 | 4.02 | — | (1.32 | ) | — | |||||||||||
October 31, 2003 | 34.53 | (.18 | ) | 14.42 | 14.24 | — | — | — | ||||||||||||
October 31, 2002 | 38.27 | (.16 | ) | (3.58 | ) | (3.74 | ) | — | — | — | ||||||||||
Class S | ||||||||||||||||||||
October 31, 2006 | 52.52 | .02 | 8.59 | 8.61 | — | (d) | (5.06 | ) | — | |||||||||||
October 31, 2005 | 52.89 | (.12 | ) | 6.25 | 6.13 | — | (6.50 | ) | — | |||||||||||
October 31, 2004 | 49.95 | (.07 | ) | 4.33 | 4.26 | — | (1.32 | ) | — | |||||||||||
October 31, 2003 | 35.28 | (.08 | ) | 14.75 | 14.67 | — | — | — | ||||||||||||
October 31, 2002 | 39.01 | (.07 | ) | (3.66 | ) | (3.73 | ) | — | — | — | ||||||||||
331
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||||||
(1.27) | 47.30 | 12.98 | 151,890 | 1.97 | 1.97 | (.25 | ) | 96.67 | ||||||||||
(.04) | 43.08 | 11.60 | 126,123 | 1.98 | 1.98 | (.24 | ) | 110.70 | ||||||||||
— | 38.64 | 6.53 | 94,663 | 2.00 | 2.00 | (.45 | ) | 125.03 | ||||||||||
— | 36.27 | 18.88 | 64,316 | 2.05 | 2.05 | (.39 | ) | 109.50 | ||||||||||
— | 30.52 | (14.85 | ) | 33,858 | 2.03 | 2.03 | (.51 | ) | 128.80 | |||||||||
(1.47) | 49.01 | 13.80 | 69,011 | 1.22 | 1.22 | .50 | 96.67 | |||||||||||
(.22) | 44.46 | 12.46 | 53,227 | 1.23 | 1.23 | .53 | 110.70 | |||||||||||
(.10) | 39.75 | 7.33 | 45,413 | 1.24 | 1.25 | .30 | 125.03 | |||||||||||
(.10) | 37.12 | 19.77 | 34,229 | 1.30 | 1.30 | .36 | 109.50 | |||||||||||
(.10) | 31.10 | (14.22 | ) | 23,656 | 1.28 | 1.28 | .21 | 128.80 | ||||||||||
(1.57) | 49.02 | 14.12 | 3,560,003 | .97 | .97 | .75 | 96.67 | |||||||||||
(.33) | 44.45 | 12.71 | 2,557,669 | .98 | .98 | .77 | 110.70 | |||||||||||
(.21) | 39.74 | 7.61 | 1,943,583 | .99 | 1.00 | .55 | 125.03 | |||||||||||
(.17) | 37.13 | 20.09 | 1,445,118 | 1.04 | 1.04 | .61 | 109.50 | |||||||||||
(.19) | 31.09 | (14.02 | ) | 972,139 | 1.03 | 1.03 | .46 | 128.80 | ||||||||||
(5.06) | 50.08 | 16.26 | 67,164 | 2.23 | 2.23 | (.98 | ) | 154.79 | ||||||||||
(6.50) | 47.85 | 10.82 | 56,084 | 2.28 | 2.29 | (1.24 | ) | 153.63 | ||||||||||
(1.32) | 49.16 | 7.54 | 46,919 | 2.29 | 2.29 | (1.15 | ) | 124.97 | ||||||||||
— | 46.99 | 40.19 | 36,364 | 2.36 | 2.36 | (1.21 | ) | 127.15 | ||||||||||
— | 33.52 | (10.42 | ) | 18,583 | 2.31 | 2.31 | (1.15 | ) | 125.06 | |||||||||
(5.06) | 53.90 | 17.12 | 25,435 | 1.48 | 1.48 | (.22 | ) | 154.79 | ||||||||||
(6.50) | 50.79 | 11.65 | 21,436 | 1.54 | 1.54 | (.50 | ) | 153.63 | ||||||||||
(1.32) | 51.47 | 8.37 | 32,028 | 1.54 | 1.54 | (.39 | ) | 124.97 | ||||||||||
— | 48.77 | 41.24 | 16,581 | 1.62 | 1.62 | (.46 | ) | 127.15 | ||||||||||
— | 34.53 | (9.77 | ) | 11,731 | 1.56 | 1.56 | (.40 | ) | 125.06 | |||||||||
(5.06) | 56.07 | 17.42 | 1,095,807 | 1.23 | 1.23 | .03 | 154.79 | |||||||||||
(6.50) | 52.52 | 11.95 | 860,480 | 1.27 | 1.29 | (.23 | ) | 153.63 | ||||||||||
(1.32) | 52.89 | 8.64 | 707,851 | 1.29 | 1.29 | (.14 | ) | 124.97 | ||||||||||
— | 49.95 | 41.61 | 631,246 | 1.35 | 1.35 | (.19 | ) | 127.15 | ||||||||||
— | 35.28 | (9.56 | ) | 520,666 | 1.32 | 1.32 | (.17 | ) | 125.06 | |||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||||
Quantitative Equity Fund | ||||||||||||||||||||
Class C | ||||||||||||||||||||
October 31, 2006 | 37.22 | (.02 | ) | 5.20 | 5.18 | (.03 | ) | (1.66 | ) | — | ||||||||||
October 31, 2005 | 34.24 | (.02 | ) | 3.07 | 3.05 | (.07 | ) | — | — | |||||||||||
October 31, 2004 | 31.92 | (.12 | ) | 2.44 | 2.32 | — | — | — | ||||||||||||
October 31, 2003 | 26.53 | (.09 | ) | 5.49 | �� | 5.40 | (.01 | ) | — | — | ||||||||||
October 31, 2002 | 31.88 | (.15 | ) | (5.20 | ) | (5.35 | ) | — | — | — | ||||||||||
Class E | ||||||||||||||||||||
October 31, 2006 | 38.18 | .27 | 5.34 | 5.61 | (.27 | ) | (1.66 | ) | — | |||||||||||
October 31, 2005 | 35.04 | .26 | 3.14 | 3.40 | (.26 | ) | — | — | ||||||||||||
October 31, 2004 | 32.55 | .14 | 2.49 | 2.63 | (.14 | ) | — | — | ||||||||||||
October 31, 2003 | 26.94 | .12 | 5.60 | 5.72 | (.11 | ) | — | — | ||||||||||||
October 31, 2002 | 32.28 | .07 | (5.27 | ) | (5.20 | ) | (.13 | ) | — | (.01 | ) | |||||||||
Class S | ||||||||||||||||||||
October 31, 2006 | 38.28 | .38 | 5.36 | 5.74 | (.37 | ) | (1.66 | ) | — | |||||||||||
October 31, 2005 | 35.13 | .35 | 3.15 | 3.50 | (.35 | ) | — | — | ||||||||||||
October 31, 2004 | 32.64 | .22 | 2.49 | 2.71 | (.22 | ) | — | — | ||||||||||||
October 31, 2003 | 27.01 | .20 | 5.61 | 5.81 | (.18 | ) | — | — | ||||||||||||
October 31, 2002 | 32.36 | .15 | (5.28 | ) | (5.13 | ) | (.20 | ) | — | (.02 | ) | |||||||||
International Securities Fund | ||||||||||||||||||||
Class C | ||||||||||||||||||||
October 31, 2006 | 62.35 | .61 | 14.89 | 15.50 | (.26 | ) | (2.25 | ) | — | |||||||||||
October 31, 2005 | 54.38 | .25 | 8.24 | 8.49 | (.52 | ) | — | — | ||||||||||||
October 31, 2004 | 48.46 | — | (d) | 6.65 | 6.65 | (.73 | ) | — | — | |||||||||||
October 31, 2003 | 38.51 | (.05 | ) | 10.21 | 10.16 | (.21 | ) | — | — | |||||||||||
October 31, 2002 | 44.53 | (.18 | ) | (5.84 | ) | (6.02 | ) | — | — | — | ||||||||||
Class E | ||||||||||||||||||||
October 31, 2006 | 64.66 | 1.17 | 15.45 | 16.62 | (.69 | ) | (2.25 | ) | — | |||||||||||
October 31, 2005 | 56.28 | .69 | 8.55 | 9.24 | (.86 | ) | — | — | ||||||||||||
October 31, 2004 | 49.98 | .39 | 6.87 | 7.26 | (.96 | ) | — | — | ||||||||||||
October 31, 2003 | 39.61 | .28 | 10.50 | 10.78 | (.41 | ) | — | — | ||||||||||||
October 31, 2002 | 45.47 | .13 | (5.99 | ) | (5.86 | ) | — | — | — | |||||||||||
Class S | ||||||||||||||||||||
October 31, 2006 | 65.35 | 1.35 | 15.61 | 16.96 | (.83 | ) | (2.25 | ) | — | |||||||||||
October 31, 2005 | 56.84 | .88 | 8.62 | 9.50 | (.99 | ) | — | — | ||||||||||||
October 31, 2004 | 50.44 | .53 | 6.92 | 7.45 | (1.05 | ) | — | — | ||||||||||||
October 31, 2003 | 39.98 | .38 | 10.59 | 10.97 | (.51 | ) | — | — | ||||||||||||
October 31, 2002 | 45.78 | .25 | (6.05 | ) | (5.80 | ) | — | — | — | |||||||||||
332
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | ||||||||||||
(1.69) | 40.71 | 14.34 | 155,978 | 1.98 | (f) | 1.98 | (.05 | ) | 104.52 | ||||||||||
(.07) | 37.22 | 8.92 | 128,236 | 1.98 | 1.98 | (.07 | ) | 108.48 | |||||||||||
— | 34.24 | 7.27 | 98,012 | 1.99 | 1.99 | (.35 | ) | 91.31 | |||||||||||
(.01) | 31.92 | 20.35 | 65,096 | 2.02 | 2.02 | (.32 | ) | 108.71 | |||||||||||
— | 26.53 | (16.78 | ) | 34,113 | 2.02 | 2.02 | (.49 | ) | 71.10 | ||||||||||
(1.93) | 41.86 | 15.18 | 73,033 | 1.23 | (g) | 1.23 | .70 | 104.52 | |||||||||||
(.26) | 38.18 | 9.72 | 53,725 | 1.23 | 1.23 | .70 | 108.48 | ||||||||||||
(.14) | 35.04 | 8.08 | 48,646 | 1.24 | 1.24 | .40 | 91.31 | ||||||||||||
(.11) | 32.55 | 21.28 | 37,594 | 1.28 | 1.28 | .43 | 108.71 | ||||||||||||
(.14) | 26.94 | (16.16 | ) | 25,667 | 1.27 | 1.27 | .24 | 71.10 | |||||||||||
(2.03) | 41.99 | 15.49 | 3,675,907 | .98 | (h) | .98 | .95 | 104.52 | |||||||||||
(.35) | 38.28 | 9.99 | 2,650,719 | .98 | .98 | .94 | 108.48 | ||||||||||||
(.22) | 35.13 | 8.32 | 2,057,082 | .99 | .99 | .65 | 91.31 | ||||||||||||
(.18) | 32.64 | 21.58 | 1,555,289 | 1.02 | 1.02 | .69 | 108.71 | ||||||||||||
(.22) | 27.01 | (15.94 | ) | 1,070,673 | 1.02 | 1.02 | .48 | 71.10 | |||||||||||
(2.51) | 75.34 | 25.54 | 156,760 | 2.21 | 2.21 | .87 | 76.65 | ||||||||||||
(.52) | 62.35 | 15.72 | 118,556 | 2.24 | 2.25 | .42 | 79.49 | ||||||||||||
(.73) | 54.38 | 13.83 | 80,622 | 2.29 | 2.29 | — | 76.01 | ||||||||||||
(.21) | 48.46 | 26.52 | 47,087 | 2.42 | 2.42 | (.12 | ) | 69.11 | |||||||||||
— | 38.51 | (13.52 | ) | 21,860 | 2.46 | 2.46 | (.42 | ) | 79.09 | ||||||||||
(2.94) | 78.34 | 26.50 | 73,044 | 1.45 | 1.46 | 1.61 | 76.65 | ||||||||||||
(.86) | 64.66 | 16.56 | 49,490 | 1.49 | 1.50 | 1.12 | 79.49 | ||||||||||||
(.96) | 56.28 | 14.68 | 38,630 | 1.54 | 1.54 | .72 | 76.01 | ||||||||||||
(.41) | 49.98 | 27.57 | 26,768 | 1.67 | 1.67 | .67 | 69.11 | ||||||||||||
— | 39.61 | (12.91 | ) | 16,796 | 1.72 | 1.72 | .30 | 79.09 | |||||||||||
(3.08) | 79.23 | 26.80 | 3,281,662 | 1.20 | 1.21 | 1.85 | 76.65 | ||||||||||||
(.99) | 65.35 | 16.88 | 2,299,511 | 1.23 | 1.25 | 1.41 | 79.49 | ||||||||||||
(1.05) | 56.84 | 14.98 | 1,673,516 | 1.29 | 1.29 | .98 | 76.01 | ||||||||||||
(.51) | 50.44 | 27.81 | 1,247,393 | 1.42 | 1.42 | .90 | 69.11 | ||||||||||||
— | 39.98 | (12.67 | ) | 774,146 | 1.47 | 1.47 | .55 | 79.09 | |||||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||
Emerging Markets Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 16.73 | .01 | 5.14 | 5.15 | (.28 | ) | (.43 | ) | — | |||||||||
October 31, 2005 | 12.52 | .04 | 4.22 | 4.26 | (.05 | ) | — | — | ||||||||||
October 31, 2004 | 10.68 | — | (d) | 2.08 | 2.08 | (.24 | ) | — | — | |||||||||
October 31, 2003 | 7.22 | .02 | 3.44 | 3.46 | — | — | — | |||||||||||
October 31, 2002 | 6.89 | (.09 | ) | .42 | .33 | — | — | — | ||||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 17.25 | .17 | 5.29 | 5.46 | (.39 | ) | (.43 | ) | — | |||||||||
October 31, 2005 | 12.93 | .16 | 4.34 | 4.50 | (.18 | ) | — | — | ||||||||||
October 31, 2004 | 10.98 | .09 | 2.15 | 2.24 | (.29 | ) | — | — | ||||||||||
October 31, 2003 | 7.41 | .09 | 3.49 | 3.58 | (.01 | ) | — | — | ||||||||||
October 31, 2002 | 7.01 | (.02 | ) | .42 | .40 | — | — | — | ||||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 17.25 | .21 | 5.31 | 5.52 | (.43 | ) | (.43 | ) | — | |||||||||
October 31, 2005 | 12.94 | .20 | 4.34 | 4.54 | (.23 | ) | — | — | ||||||||||
October 31, 2004 | 10.98 | .12 | 2.15 | 2.27 | (.31 | ) | — | — | ||||||||||
October 31, 2003 | 7.43 | .11 | 3.48 | 3.59 | (.04 | ) | — | — | ||||||||||
October 31, 2002 | 7.05 | — | (d) | .40 | .40 | (.02 | ) | — | — | |||||||||
Real Estate Securities Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 46.08 | .22 | 15.14 | 15.36 | (.35 | ) | (4.98 | ) | — | |||||||||
October 31, 2005 | 43.10 | .42 | 6.66 | 7.08 | (.43 | ) | (3.67 | ) | — | |||||||||
October 31, 2004 | 33.94 | .46 | 9.92 | 10.38 | (1.21 | ) | (.01 | ) | — | |||||||||
October 31, 2003 | 26.52 | 1.11 | 7.53 | 8.64 | (1.11 | ) | (.11 | ) | — | |||||||||
October 31, 2002 | 26.97 | 1.07 | (.01 | ) | 1.06 | (1.51 | ) | — | — | |||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 46.62 | .59 | 15.36 | 15.95 | (.64 | ) | (4.98 | ) | — | |||||||||
October 31, 2005 | 43.55 | .76 | 6.74 | 7.50 | (.76 | ) | (3.67 | ) | — | |||||||||
October 31, 2004 | 34.24 | .75 | 10.04 | 10.79 | (1.47 | ) | (.01 | ) | — | |||||||||
October 31, 2003 | 26.72 | 1.34 | 7.60 | 8.94 | (1.31 | ) | (.11 | ) | — | |||||||||
October 31, 2002 | 27.14 | 1.32 | (.06 | ) | 1.26 | (1.68 | ) | — | — | |||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 47.03 | .73 | 15.51 | 16.24 | (.76 | ) | (4.98 | ) | — | |||||||||
October 31, 2005 | 43.90 | .88 | 6.79 | 7.67 | (.87 | ) | (3.67 | ) | — | |||||||||
October 31, 2004 | 34.51 | .87 | 10.09 | 10.96 | (1.56 | ) | (.01 | ) | — | |||||||||
October 31, 2003 | 26.89 | 1.42 | 7.67 | 9.09 | (1.36 | ) | (.11 | ) | — | |||||||||
October 31, 2002 | 27.31 | 1.41 | (.06 | ) | 1.35 | (1.77 | ) | — | — | |||||||||
333
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | ||||||||||
(.71) | 21.17 | 31.63 | 44,977 | 2.68 | 2.68 | .07 | 68.52 | ||||||||||
(.05) | 16.73 | 33.98 | 33,961 | 2.74 | 2.76 | .29 | 71.86 | ||||||||||
(.24) | 12.52 | 20.04 | 20,467 | 2.83 | 2.87 | .02 | 82.02 | ||||||||||
— | 10.68 | 47.58 | 12,306 | 3.09 | 3.09 | .19 | 95.13 | ||||||||||
— | 7.22 | 4.94 | 5,194 | 3.12 | 3.12 | (1.08 | ) | 90.21 | |||||||||
(.82) | 21.89 | 32.64 | 27,862 | 1.93 | 1.93 | .83 | 68.52 | ||||||||||
(.18) | 17.25 | 34.94 | 18,855 | 1.99 | 2.01 | 1.02 | 71.86 | ||||||||||
(.29) | 12.93 | 20.88 | 14,169 | 2.07 | 2.12 | .75 | 82.02 | ||||||||||
(.01) | 10.98 | 48.39 | 9,598 | 2.36 | 2.37 | 1.02 | 95.13 | ||||||||||
— | 7.41 | 5.71 | 6,478 | 2.38 | 2.38 | (.29 | ) | 90.21 | |||||||||
(.86) | 21.91 | 33.04 | 1,092,083 | 1.68 | 1.68 | 1.06 | 68.52 | ||||||||||
(.23) | 17.25 | 35.27 | 794,086 | 1.73 | 1.76 | 1.30 | 71.86 | ||||||||||
(.31) | 12.94 | 21.22 | 549,626 | 1.83 | 1.87 | 1.00 | 82.02 | ||||||||||
(.04) | 10.98 | 48.27 | 386,560 | 2.11 | 2.11 | 1.30 | 95.13 | ||||||||||
(.02) | 7.43 | 5.91 | 263,563 | 2.14 | 2.14 | (.02 | ) | 90.21 | |||||||||
(5.33) | 56.11 | 36.63 | 110,287 | 2.07 | 2.08 | .45 | 48.64 | ||||||||||
(4.10) | 46.08 | 17.22 | 81,876 | 2.10 | 2.10 | .95 | 63.95 | ||||||||||
(1.22) | 43.10 | 30.97 | 61,089 | 2.12 | 2.12 | 1.20 | 38.04 | ||||||||||
(1.22) | 33.94 | 33.23 | 32,784 | 2.20 | 2.30 | 3.67 | 46.09 | ||||||||||
(1.51) | 26.52 | 3.56 | 15,712 | 2.19 | 2.59 | 3.74 | 67.70 | ||||||||||
(5.62) | 56.95 | 37.65 | 59,768 | 1.32 | 1.32 | 1.19 | 48.64 | ||||||||||
(4.43) | 46.62 | 18.09 | 40,296 | 1.35 | 1.35 | 1.71 | 63.95 | ||||||||||
(1.48) | 43.55 | 32.00 | 29,436 | 1.37 | 1.37 | 1.95 | 38.04 | ||||||||||
(1.42) | 34.24 | 34.21 | 16,651 | 1.43 | 1.62 | 4.46 | 46.09 | ||||||||||
(1.68) | 26.72 | 4.27 | 10,661 | 1.46 | 1.82 | 4.54 | 67.70 | ||||||||||
(5.74) | 57.53 | 38.04 | 1,903,365 | 1.07 | 1.07 | 1.46 | 48.64 | ||||||||||
(4.54) | 47.03 | 18.35 | 1,434,109 | 1.10 | 1.10 | 1.95 | 63.95 | ||||||||||
(1.57) | 43.90 | 32.30 | 1,171,513 | 1.11 | 1.11 | 2.23 | 38.04 | ||||||||||
(1.47) | 34.51 | 34.58 | 830,448 | 1.18 | 1.18 | 4.66 | 46.09 | ||||||||||
(1.77) | 26.89 | 4.55 | 598,133 | 1.19 | 1.19 | 4.82 | 67.70 | ||||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||
Short Duration Bond Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 18.63 | .50 | .03 | .53 | (.50 | ) | — | — | ||||||||||
October 31, 2005 | 19.04 | .31 | (.40 | ) | (.09 | ) | (.31 | ) | (.01 | ) | — | |||||||
October 31, 2004 | 19.01 | .19 | (.01 | ) | .18 | (.15 | ) | — | — | |||||||||
October 31, 2003 | 18.98 | .31 | .06 | .37 | (.34 | ) | — | — | ||||||||||
October 31, 2002 | 19.01 | .56 | .13 | .69 | (.72 | ) | — | — | ||||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 18.70 | .65 | .03 | .68 | (.65 | ) | — | — | ||||||||||
October 31, 2005 | 19.10 | .46 | (.41 | ) | .05 | (.44 | ) | (.01 | ) | — | ||||||||
October 31, 2004 | 19.08 | .34 | (.01 | ) | .33 | (.31 | ) | — | — | |||||||||
October 31, 2003 | 19.04 | .48 | .03 | .51 | (.47 | ) | — | — | ||||||||||
October 31, 2002 | 19.02 | .77 | .06 | .83 | (.81 | ) | — | — | ||||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 18.67 | .69 | .03 | .72 | (.69 | ) | — | — | ||||||||||
October 31, 2005 | 19.07 | .51 | (.41 | ) | .10 | (.49 | ) | (.01 | ) | — | ||||||||
October 31, 2004 | 19.05 | .38 | (.01 | ) | .37 | (.35 | ) | — | — | |||||||||
October 31, 2003 | 19.01 | .52 | .03 | .55 | (.51 | ) | — | — | ||||||||||
October 31, 2002 | 18.99 | .80 | .08 | .88 | (.86 | ) | — | — | ||||||||||
Diversified Bond Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 23.80 | .81 | .05 | .86 | (.76 | ) | — | — | ||||||||||
October 31, 2005 | 24.54 | .58 | (.67 | ) | (.09 | ) | (.53 | ) | (.12 | ) | — | |||||||
October 31, 2004 | 24.49 | .41 | .58 | .99 | (.41 | ) | (.53 | ) | — | |||||||||
October 31, 2003 | 24.68 | .48 | .38 | .86 | (.49 | ) | (.56 | ) | — | |||||||||
October 31, 2002 | 24.49 | .74 | .23 | .97 | (.78 | ) | — | — | ||||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 23.87 | .99 | .06 | 1.05 | (.94 | ) | — | — | ||||||||||
October 31, 2005 | 24.62 | .76 | (.68 | ) | .08 | (.71 | ) | (.12 | ) | — | ||||||||
October 31, 2004 | 24.56 | .60 | .58 | 1.18 | (.59 | ) | (.53 | ) | — | |||||||||
October 31, 2003 | 24.74 | .67 | .37 | 1.04 | (.66 | ) | (.56 | ) | — | |||||||||
October 31, 2002 | 24.54 | .92 | .24 | 1.16 | (.96 | ) | — | — | ||||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 23.28 | 1.03 | .05 | 1.08 | (1.00 | ) | — | — | ||||||||||
October 31, 2005 | 24.04 | .80 | (.67 | ) | .13 | (.77 | ) | (.12 | ) | — | ||||||||
October 31, 2004 | 24.00 | .64 | .58 | 1.22 | (.65 | ) | (.53 | ) | — | |||||||||
October 31, 2003 | 24.21 | .71 | .36 | 1.07 | (.72 | ) | (.56 | ) | — | |||||||||
October 31, 2002 | 24.03 | .97 | .23 | 1.20 | (1.02 | ) | — | — | ||||||||||
334
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | ||||||||||
(.50) | 18.66 | 2.89 | 21,840 | 1.65 | 1.66 | 2.71 | 111.57 | ||||||||||
(.32) | 18.63 | (.50 | ) | 30,290 | 1.65 | 1.66 | 1.65 | 202.53 | |||||||||
(.15) | 19.04 | .97 | 38,427 | 1.63 | 1.66 | 1.00 | 131.57 | ||||||||||
(.34) | 19.01 | 1.97 | 41,644 | 1.56 | 1.72 | 1.63 | 187.92 | ||||||||||
(.72) | 18.98 | 3.73 | 16,294 | 1.52 | 1.70 | 3.08 | 163.86 | ||||||||||
(.65) | 18.73 | 3.69 | 26,800 | .90 | .91 | 3.49 | 111.57 | ||||||||||
(.45) | 18.70 | .25 | 24,851 | .90 | .91 | 2.43 | 202.53 | ||||||||||
(.31) | 19.10 | 1.74 | 23,181 | .88 | .91 | 1.76 | 131.57 | ||||||||||
(.47) | 19.08 | 2.70 | 20,274 | .80 | .97 | 2.52 | 187.92 | ||||||||||
(.81) | 19.04 | 4.53 | 17,516 | .77 | .96 | 4.04 | 163.86 | ||||||||||
(.69) | 18.70 | 3.95 | 1,106,946 | .65 | .65 | 3.73 | 111.57 | ||||||||||
(.50) | 18.67 | .51 | 1,158,439 | .65 | .66 | 2.67 | 202.53 | ||||||||||
(.35) | 19.07 | 1.98 | 1,135,332 | .63 | .66 | 2.01 | 131.57 | ||||||||||
(.51) | 19.05 | 2.95 | 958,064 | .56 | .72 | 2.70 | 187.92 | ||||||||||
(.86) | 19.01 | 4.81 | 599,795 | .52 | .71 | 4.26 | 163.86 | ||||||||||
(.76) | 23.90 | 3.72 | 60,670 | 1.62 | 1.63 | 3.43 | 105.80 | ||||||||||
(.65) | 23.80 | (.39 | ) | 53,204 | 1.65 | 1.66 | 2.38 | 225.67 | |||||||||
(.94) | 24.54 | 4.16 | 45,970 | 1.66 | 1.66 | 1.71 | 140.92 | ||||||||||
(1.05) | 24.49 | 3.58 | 36,159 | 1.69 | 1.70 | 1.94 | 147.44 | ||||||||||
(.78) | 24.68 | 4.11 | 26,915 | 1.66 | 1.66 | 3.09 | 156.21 | ||||||||||
(.94) | 23.98 | 4.52 | 55,949 | .87 | .88 | 4.19 | 105.80 | ||||||||||
(.83) | 23.87 | .32 | 49,514 | .90 | .91 | 3.12 | 225.67 | ||||||||||
(1.12) | 24.62 | 4.97 | 43,724 | .91 | .91 | 2.46 | 140.92 | ||||||||||
(1.22) | 24.56 | 4.36 | 34,339 | .94 | .94 | 2.70 | 147.44 | ||||||||||
(.96) | 24.74 | 4.90 | 26,985 | .91 | .91 | 3.85 | 156.21 | ||||||||||
(1.00) | 23.36 | 4.77 | 2,023,212 | .62 | .63 | 4.45 | 105.80 | ||||||||||
(.89) | 23.28 | .54 | 1,570,581 | .65 | .66 | 3.38 | 225.67 | ||||||||||
(1.18) | 24.04 | 5.22 | 1,232,576 | .66 | .66 | 2.71 | 140.92 | ||||||||||
(1.28) | 24.00 | 4.63 | 977,601 | .69 | .69 | 2.95 | 147.44 | ||||||||||
(1.02) | 24.21 | 5.18 | 783,332 | .66 | .66 | 4.11 | 156.21 |
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||
Multistrategy Bond Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 10.31 | .35 | .03 | .38 | (.33 | ) | (.02 | ) | — | |||||||||
October 31, 2005 | 10.63 | .24 | (.20 | ) | .04 | (.23 | ) | (.13 | ) | — | ||||||||
October 31, 2004 | 10.54 | .17 | .31 | .48 | (.24 | ) | (.15 | ) | — | |||||||||
October 31, 2003 | 10.03 | .23 | .50 | .73 | (.22 | ) | — | — | ||||||||||
October 31, 2002 | 10.20 | .30 | (.04 | ) | .26 | (.43 | ) | — | — | |||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 10.32 | .43 | .03 | .46 | (.41 | ) | (.02 | ) | — | |||||||||
October 31, 2005 | 10.64 | .32 | (.20 | ) | .12 | (.31 | ) | (.13 | ) | — | ||||||||
October 31, 2004 | 10.55 | .24 | .32 | .56 | (.32 | ) | (.15 | ) | — | |||||||||
October 31, 2003 | 10.03 | .31 | .50 | .81 | (.29 | ) | — | — | ||||||||||
October 31, 2002 | 10.21 | .38 | (.06 | ) | .32 | (.50 | ) | — | — | |||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 10.33 | .45 | .03 | .48 | (.43 | ) | (.02 | ) | — | |||||||||
October 31, 2005 | 10.65 | .35 | (.21 | ) | .14 | (.33 | ) | (.13 | ) | — | ||||||||
October 31, 2004 | 10.56 | .27 | .31 | .58 | (.34 | ) | (.15 | ) | — | |||||||||
October 31, 2003 | 10.04 | .34 | .50 | .84 | (.32 | ) | — | — | ||||||||||
October 31, 2002 | 10.22 | .40 | (.05 | ) | .35 | (.53 | ) | — | — | |||||||||
Tax Exempt Bond Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 21.45 | .57 | .17 | .74 | (.56 | ) | — | — | ||||||||||
October 31, 2005 | 22.03 | .51 | (.61 | ) | (.10 | ) | (.48 | ) | — | — | ||||||||
October 31, 2004 | 21.99 | .53 | .04 | .57 | (.53 | ) | — | — | ||||||||||
October 31, 2003 | 21.94 | .58 | .07 | .65 | (.60 | ) | — | — | ||||||||||
October 31, 2002 | 21.76 | .60 | .22 | .82 | (.64 | ) | — | — | ||||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 21.52 | .73 | .17 | .90 | (.72 | ) | — | — | ||||||||||
October 31, 2005 | 22.10 | .67 | (.60 | ) | .07 | (.65 | ) | — | — | |||||||||
October 31, 2004 | 22.06 | .69 | .04 | .73 | (.69 | ) | — | — | ||||||||||
October 31, 2003 | 21.99 | .75 | .06 | .81 | (.74 | ) | — | — | ||||||||||
October 31, 2002 | 21.81 | .78 | .18 | .96 | (.78 | ) | — | — | ||||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 21.49 | .79 | .16 | .95 | (.77 | ) | — | — | ||||||||||
October 31, 2005 | 22.07 | .72 | (.60 | ) | .12 | (.70 | ) | — | — | |||||||||
October 31, 2004 | 22.03 | .75 | .03 | .78 | (.74 | ) | — | — | ||||||||||
October 31, 2003 | 21.96 | .80 | .07 | .87 | (.80 | ) | — | — | ||||||||||
October 31, 2002 | 21.79 | .83 | .18 | 1.01 | (.84 | ) | — | — | ||||||||||
335
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | ||||||||||
(.35) | 10.34 | 3.80 | 83,363 | 1.84 | 1.86 | 3.39 | 261.90 | ||||||||||
(.36) | 10.31 | .35 | 69,427 | 1.87 | 1.87 | 2.31 | 196.81 | ||||||||||
(.39) | 10.63 | 4.66 | 53,573 | 1.89 | 1.89 | 1.58 | 221.31 | ||||||||||
(.22) | 10.54 | 7.37 | 36,397 | 1.94 | 1.95 | 2.22 | 281.71 | ||||||||||
(.43) | 10.03 | 2.71 | 24,569 | 1.85 | 1.85 | 3.08 | 252.09 | ||||||||||
(.43) | 10.35 | 4.57 | 51,698 | 1.09 | 1.11 | 4.16 | 261.90 | ||||||||||
(.44) | 10.32 | 1.10 | 38,311 | 1.12 | 1.12 | 3.06 | 196.81 | ||||||||||
(.47) | 10.64 | 5.43 | 31,621 | 1.14 | 1.14 | 2.32 | 221.31 | ||||||||||
(.29) | 10.55 | 8.23 | 20,975 | 1.18 | 1.19 | 3.01 | 281.71 | ||||||||||
(.50) | 10.03 | 3.36 | 14,017 | 1.17 | 1.17 | 3.80 | 252.09 | ||||||||||
(.45) | 10.36 | 4.82 | 2,476,704 | .84 | .86 | 4.41 | 261.90 | ||||||||||
(.46) | 10.33 | 1.35 | 1,771,524 | .87 | .87 | 3.32 | 196.81 | ||||||||||
(.49) | 10.65 | 5.68 | 1,284,520 | .89 | .89 | 2.58 | 221.31 | ||||||||||
(.32) | 10.56 | 8.49 | 886,596 | .94 | .94 | 3.22 | 281.71 | ||||||||||
(.53) | 10.04 | 3.72 | 595,577 | .92 | .92 | 4.06 | 252.09 | ||||||||||
(.56) | 21.63 | 3.50 | 11,819 | 1.56 | 1.56 | 2.66 | 63.34 | ||||||||||
(.48) | 21.45 | (.46 | ) | 10,493 | 1.53 | 1.53 | 2.31 | 43.13 | |||||||||
(.53) | 22.03 | 2.62 | 10,611 | 1.53 | 1.53 | 2.39 | 36.68 | ||||||||||
(.60) | 21.99 | 2.98 | 8,701 | 1.56 | 1.56 | 2.62 | 37.46 | ||||||||||
(.64) | 21.94 | 3.84 | 7,179 | 1.56 | 1.56 | 2.82 | 39.83 | ||||||||||
(.72) | 21.70 | 4.26 | 11,805 | .80 | .81 | 3.41 | 63.34 | ||||||||||
(.65) | 21.52 | .31 | 8,572 | .78 | .78 | 3.07 | 43.13 | ||||||||||
(.69) | 22.10 | 3.38 | 6,488 | .78 | .78 | 3.14 | 36.68 | ||||||||||
(.74) | 22.06 | 3.75 | 5,849 | .81 | .81 | 3.37 | 37.46 | ||||||||||
(.78) | 21.99 | 4.54 | 5,051 | .83 | .83 | 3.57 | 39.83 | ||||||||||
(.77) | 21.67 | 4.53 | 274,438 | .55 | .56 | 3.66 | 63.34 | ||||||||||
(.70) | 21.49 | .55 | 228,604 | .53 | .53 | 3.31 | 43.13 | ||||||||||
(.74) | 22.07 | 3.64 | 185,587 | .53 | .53 | 3.39 | 36.68 | ||||||||||
(.80) | 22.03 | 4.01 | 144,402 | .56 | .56 | 3.62 | 37.46 | ||||||||||
(.84) | 21.96 | 4.77 | 148,675 | .57 | .57 | 3.84 | 39.83 | ||||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||
Tax-Managed Large Cap Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 17.68 | (.02 | ) | 1.96 | 1.94 | — | — | — | ||||||||||
October 31, 2005 | 16.55 | .01 | 1.14 | 1.15 | (.02 | ) | — | — | ||||||||||
October 31, 2004 | 15.02 | (.06 | ) | 1.59 | 1.53 | — | — | — | ||||||||||
October 31, 2003 | 12.61 | (.04 | ) | 2.45 | 2.41 | — | — | — | ||||||||||
October 31, 2002 | 15.60 | (.06 | ) | (2.93 | ) | (2.99 | ) | — | — | — | ||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 18.09 | .11 | 2.02 | 2.13 | (.10 | ) | — | — | ||||||||||
October 31, 2005 | 16.93 | .15 | 1.15 | 1.30 | (.14 | ) | — | — | ||||||||||
October 31, 2004 | 15.30 | .06 | 1.63 | 1.69 | (.06 | ) | — | — | ||||||||||
October 31, 2003 | 12.83 | .06 | 2.50 | 2.56 | (.09 | ) | — | — | ||||||||||
October 31, 2002 | 15.78 | .05 | (2.95 | ) | (2.90 | ) | (.05 | ) | — | — | ||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 18.16 | .17 | 2.02 | 2.19 | (.14 | ) | — | — | ||||||||||
October 31, 2005 | 16.99 | .20 | 1.15 | 1.35 | (.18 | ) | — | — | ||||||||||
October 31, 2004 | 15.34 | .10 | 1.63 | 1.73 | (.08 | ) | — | — | ||||||||||
October 31, 2003 | 12.87 | .10 | 2.48 | 2.58 | (.11 | ) | — | — | ||||||||||
October 31, 2002 | 15.81 | .09 | (2.95 | ) | (2.86 | ) | (.08 | ) | — | — | ||||||||
Tax-Managed Mid & Small Cap Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 11.59 | (.14 | ) | 1.77 | 1.63 | — | — | — | ||||||||||
October 31, 2005 | 10.17 | (.12 | ) | 1.54 | 1.42 | — | — | — | ||||||||||
October 31, 2004 | 9.33 | (.13 | ) | .97 | .84 | — | — | — | ||||||||||
October 31, 2003 | 7.12 | (.08 | ) | 2.29 | 2.21 | — | — | — | ||||||||||
October 31, 2002 | 7.88 | (.09 | ) | (.67 | ) | (.76 | ) | — | — | — | ||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 12.13 | (.05 | ) | 1.85 | 1.80 | — | — | — | ||||||||||
October 31, 2005 | 10.56 | (.04 | ) | 1.61 | 1.57 | — | — | — | ||||||||||
October 31, 2004 | 9.62 | (.06 | ) | 1.00 | .94 | — | — | — | ||||||||||
October 31, 2003 | 7.28 | (.02 | ) | 2.36 | 2.34 | — | — | — | ||||||||||
October 31, 2002 | 8.00 | (.03 | ) | (.69 | ) | (.72 | ) | — | — | — | ||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 12.27 | (.01 | ) | 1.87 | 1.86 | — | — | — | ||||||||||
October 31, 2005 | 10.65 | (.01 | ) | 1.63 | 1.62 | — | — | — | ||||||||||
October 31, 2004 | 9.68 | (.03 | ) | 1.00 | .97 | — | — | — | ||||||||||
October 31, 2003 | 7.31 | — | (d) | 2.37 | 2.37 | — | — | — | ||||||||||
October 31, 2002 | 8.02 | (.01 | ) | (.69 | ) | (.70 | ) | (.01 | ) | — | — | |||||||
336
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||||||
— | 19.62 | 10.97 | 19,112 | 1.92 | 1.92 | (.13 | ) | 60.63 | ||||||||||
(.02) | 17.68 | 6.94 | 16,955 | 1.91 | 1.91 | .08 | 42.92 | |||||||||||
— | 16.55 | 10.19 | 13,304 | 1.92 | 1.92 | (.38 | ) | 32.15 | ||||||||||
— | 15.02 | 19.11 | 10,022 | 1.94 | 1.94 | (.30 | ) | 127.47 | ||||||||||
— | 12.61 | (19.17 | ) | 7,740 | 1.91 | 1.91 | (.40 | ) | 65.39 | |||||||||
(.10) | 20.12 | 11.82 | 12,726 | 1.17 | 1.17 | .60 | 60.63 | |||||||||||
(.14) | 18.09 | 7.72 | 8,695 | 1.16 | 1.16 | .84 | 42.92 | |||||||||||
(.06) | 16.93 | 11.05 | 5,991 | 1.17 | 1.17 | .37 | 32.15 | |||||||||||
(.09) | 15.30 | 20.04 | 4,743 | 1.19 | 1.19 | .46 | 127.47 | |||||||||||
(.05) | 12.83 | (18.47 | ) | 2,618 | 1.16 | 1.16 | .36 | 65.39 | ||||||||||
(.14) | 20.21 | 12.12 | 458,002 | .92 | .92 | .87 | 60.63 | |||||||||||
(.18) | 18.16 | 7.98 | 386,605 | .90 | .91 | 1.12 | 42.92 | |||||||||||
(.08) | 16.99 | 11.33 | 342,640 | .92 | .92 | .62 | 32.15 | |||||||||||
(.11) | 15.34 | 20.24 | 307,458 | .94 | .94 | .71 | 127.47 | |||||||||||
(.08) | 12.87 | (18.21 | ) | 345,335 | .91 | .91 | .58 | 65.39 | ||||||||||
— | 13.22 | 14.06 | 11,975 | 2.25 | 2.35 | (1.09 | ) | 54.34 | ||||||||||
— | 11.59 | 13.96 | 9,295 | 2.24 | 2.37 | (1.06 | ) | 57.90 | ||||||||||
— | 10.17 | 9.00 | 6,041 | 2.25 | 2.34 | (1.33 | ) | 203.33 | ||||||||||
— | 9.33 | 31.04 | 5,025 | 2.25 | 2.49 | (1.06 | ) | 81.91 | ||||||||||
— | 7.12 | (9.65 | ) | 3,450 | 2.25 | 2.53 | (1.12 | ) | 89.13 | |||||||||
— | 13.93 | 14.84 | 2,523 | 1.50 | 1.60 | (.34 | ) | 54.34 | ||||||||||
— | 12.13 | 14.87 | 1,663 | 1.48 | 1.62 | (.32 | ) | 57.90 | ||||||||||
— | 10.56 | 9.77 | 1,279 | 1.50 | 1.59 | (.58 | ) | 203.33 | ||||||||||
— | 9.62 | 32.14 | 850 | 1.50 | 1.74 | (.31 | ) | 81.91 | ||||||||||
— | 7.28 | (9.00 | ) | 885 | 1.50 | 1.78 | (.37 | ) | 89.13 | |||||||||
— | 14.13 | 15.16 | 198,081 | 1.25 | 1.35 | (.09 | ) | 54.34 | ||||||||||
— | 12.27 | 15.21 | 156,596 | 1.22 | 1.38 | (.06 | ) | 57.90 | ||||||||||
— | 10.65 | 10.02 | 123,045 | 1.25 | 1.34 | (.32 | ) | 203.33 | ||||||||||
— | 9.68 | 32.42 | 106,738 | 1.25 | 1.49 | (.06 | ) | 81.91 | ||||||||||
(.01) | 7.31 | (8.77 | ) | 82,523 | 1.25 | 1.53 | (.13 | ) | 89.13 | |||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||
Select Growth Fund | ||||||||||||||||||
Class C | ||||||||||||||||||
October 31, 2006 | 7.45 | (.09 | ) | .48 | .39 | — | — | — | ||||||||||
October 31, 2005 | 6.85 | (.08 | ) | .68 | .60 | — | — | — | ||||||||||
October 31, 2004 | 6.85 | (.11 | ) | .11 | — | — | — | — | ||||||||||
October 31, 2003 | 5.23 | (.09 | ) | 1.71 | 1.62 | — | — | — | ||||||||||
October 31, 2002 | 6.65 | (.10 | ) | (1.32 | ) | (1.42 | ) | — | — | — | ||||||||
Class E | ||||||||||||||||||
October 31, 2006 | 7.76 | (.03 | ) | .52 | .49 | — | — | — | ||||||||||
October 31, 2005 | 7.08 | (.01 | ) | .69 | .68 | — | — | — | ||||||||||
October 31, 2004 | 7.03 | (.05 | ) | .10 | .05 | — | — | — | ||||||||||
October 31, 2003 | 5.31 | (.04 | ) | 1.76 | 1.72 | — | — | — | ||||||||||
October 31, 2002 | 6.68 | (.04 | ) | (1.33 | ) | (1.37 | ) | — | — | — | ||||||||
Class I | ||||||||||||||||||
October 31, 2006 | 7.91 | .01 | .52 | .53 | — | (d) | — | — | ||||||||||
October 31, 2005 | 7.19 | .01 | .71 | .72 | — | — | — | |||||||||||
October 31, 2004 | 7.10 | (.02 | ) | .11 | .09 | — | — | — | ||||||||||
October 31, 2003 | 5.35 | (.02 | ) | 1.77 | 1.75 | — | — | — | ||||||||||
October 31, 2002 | 6.71 | (.02 | ) | (1.34 | ) | (1.36 | ) | — | — | — | ||||||||
Class S | ||||||||||||||||||
October 31, 2006 | 7.87 | (.01 | ) | .52 | .51 | — | — | — | ||||||||||
October 31, 2005 | 7.15 | — | (d) | .72 | .72 | — | — | — | ||||||||||
October 31, 2004 | 7.08 | (.03 | ) | .10 | .07 | — | — | — | ||||||||||
October 31, 2003 | 5.34 | (.02 | ) | 1.76 | 1.74 | — | — | — | ||||||||||
October 31, 2002 | 6.71 | (.02 | ) | (1.35 | ) | (1.37 | ) | — | — | — | ||||||||
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||||||
— | 7.84 | 5.23 | 9.764 | 2.22 | 2.27 | (1.20 | ) | 148.35 | ||||||||||
— | 7.45 | 8.76 | 8,149 | 2.23 | 2.32 | (1.15 | ) | 127.68 | ||||||||||
— | 6.85 | (.15 | ) | 5,942 | 2.25 | 2.50 | (1.53 | ) | 134.00 | |||||||||
— | 6.85 | 31.17 | 3,265 | 2.20 | 2.74 | (1.57 | ) | 149.76 | ||||||||||
— | 5.23 | (21.35 | ) | 1,341 | 2.11 | 2.82 | (1.53 | ) | 212.37 | |||||||||
— | 8.25 | 6.31 | 6.590 | 1.36 | 1.42 | (.34 | ) | 148.35 | ||||||||||
— | 7.76 | 9.60 | 4,255 | 1.28 | 1.40 | (.15 | ) | 127.68 | ||||||||||
— | 7.08 | .71 | 5,749 | 1.36 | 1.54 | (.65 | ) | 134.00 | ||||||||||
— | 7.03 | 32.39 | 4,865 | 1.26 | 1.79 | (.62 | ) | 149.76 | ||||||||||
— | 5.31 | (20.51 | ) | 2,814 | 1.16 | 1.87 | (.58 | ) | 212.37 | |||||||||
— | 8.44 | 6.75 | 90,953 | .95 | 1.13 | .07 | 148.35 | |||||||||||
— | 7.91 | 10.17 | 112,112 | .92 | 1.08 | .12 | 127.68 | |||||||||||
— | 7.19 | 1.13 | 60,006 | .95 | 1.20 | (.23 | ) | 134.00 | ||||||||||
— | 7.10 | 32.71 | 32,003 | .93 | 1.58 | (.31 | ) | 149.76 |
337
Table of Contents
— | 5.35 | (20.27 | ) | 18,150 | .89 | 1.65 | (.31 | ) | 212.37 | |||||||||
— | 8.38 | 6.48 | 71,433 | 1.15 | 1.21 | (.13 | ) | 148.35 | ||||||||||
— | 7.87 | 10.07 | 57,324 | 1.06 | 1.18 | .04 | 127.68 | |||||||||||
— | 7.15 | .99 | 51,569 | 1.09 | 1.27 | (.38 | ) | 134.00 | ||||||||||
— | 7.08 | 32.58 | 42,421 | 1.03 | 1.56 | (.40 | ) | 149.76 | ||||||||||
— | 5.34 | (20.42 | ) | 24,389 | .97 | 1.68 | (.39 | ) | 212.37 | |||||||||
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | |||||||||||||
Select Value Fund | |||||||||||||||||||
Class C | |||||||||||||||||||
October 31, 2006 | 11.27 | .01 | 1.83 | 1.84 | (.03 | ) | (.64 | ) | — | ||||||||||
October 31, 2005 | 10.15 | (.02 | ) | 1.16 | 1.14 | (.01 | ) | (.01 | ) | — | |||||||||
October 31, 2004 | 8.97 | (.03 | ) | 1.22 | 1.19 | (.01 | ) | — | — | ||||||||||
October 31, 2003 | 7.41 | (.01 | ) | 1.58 | 1.57 | (.01 | ) | — | — | ||||||||||
October 31, 2002 | 8.51 | (.02 | ) | (1.07 | ) | (1.09 | ) | (.01 | ) | — | — | ||||||||
Class E | |||||||||||||||||||
October 31, 2006 | 11.43 | .11 | 1.87 | 1.98 | (.11 | ) | (.64 | ) | — | ||||||||||
October 31, 2005 | 10.28 | .09 | 1.16 | 1.25 | (.09 | ) | (.01 | ) | — | ||||||||||
October 31, 2004 | 9.05 | .05 | 1.23 | 1.28 | (.05 | ) | — | — | |||||||||||
October 31, 2003 | 7.46 | .06 | 1.58 | 1.64 | (.05 | ) | — | — | |||||||||||
October 31, 2002 | 8.53 | .06 | (1.07 | ) | (1.01 | ) | (.06 | ) | — | — | |||||||||
Class I | |||||||||||||||||||
October 31, 2006 | 11.46 | .15 | 1.87 | 2.02 | (.15 | ) | (.64 | ) | — | ||||||||||
October 31, 2005 | 10.30 | .13 | 1.17 | 1.30 | (.13 | ) | (.01 | ) | — | ||||||||||
October 31, 2004 | 9.07 | .10 | 1.22 | 1.32 | (.09 | ) | — | — | |||||||||||
October 31, 2003 | 7.46 | .08 | 1.61 | 1.69 | (.08 | ) | — | — | |||||||||||
October 31, 2002 | 8.54 | .08 | (1.07 | ) | (.99 | ) | (.09 | ) | — | — | |||||||||
Class S | |||||||||||||||||||
October 31, 2006 | 11.44 | .13 | 1.87 | 2.00 | (.13 | ) | (.64 | ) | — | ||||||||||
October 31, 2005 | 10.29 | .11 | 1.16 | 1.27 | (.11 | ) | (.01 | ) | — | ||||||||||
October 31, 2004 | 9.05 | .08 | 1.24 | 1.32 | (.08 | ) | — | — | |||||||||||
October 31, 2003 | 7.45 | .07 | 1.60 | 1.67 | (.07 | ) | — | — | |||||||||||
October 31, 2002 | 8.53 | .07 | (1.07 | ) | (1.00 | ) | (.08 | ) | — | — | |||||||||
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||||
(.67) | 12.44 | 17.01 | 26,168 | 2.11 | 2.11 | .08 | 86.60 | |||||||||
(.02) | 11.27 | 11.23 | 21,228 | 2.18 | 2.20 | (.18 | ) | 84.74 | ||||||||
(.01) | 10.15 | 13.24 | 16,834 | 2.25 | 2.32 | (.31 | ) | 96.07 | ||||||||
(.01) | 8.97 | 21.19 | 9,972 | 2.15 | 2.42 | (.12 | ) | 105.71 | ||||||||
(.01) | 7.41 | (12.82 | ) | 2,061 | 2.00 | 2.40 | (.27 | ) | 92.95 | |||||||
(.75) | 12.66 | 18.15 | 10,871 | 1.27 | 1.27 | .91 | 86.60 | |||||||||
(.10) | 11.43 | 12.14 | 8,770 | 1.25 | 1.30 | .78 | 84.74 | |||||||||
(.05) | 10.28 | 14.31 | 9,167 | 1.39 | 1.39 | .55 | 96.07 | |||||||||
(.05) | 9.05 | 22.01 | 7,778 | 1.21 | 1.48 | .77 | 105.71 | |||||||||
(.06) | 7.46 | (11.86 | ) | 3,314 | 1.04 | 1.43 | .70 | 92.95 | ||||||||
(.79) | 12.69 | 18.47 | 131,494 | .94 | .94 | 1.26 | 86.60 | |||||||||
(.14) | 11.46 | 12.63 | 135,759 | .86 | .91 | 1.14 | 84.74 | |||||||||
(.09) | 10.30 | 14.77 | 102,397 | .95 | .95 | 1.00 | 96.07 | |||||||||
(.08) | 9.07 | 22.60 | 74,600 | .90 | 1.23 | 1.12 | 105.71 | |||||||||
(.09) | 7.46 | (11.72 | ) | 35,169 | .79 | 1.22 | .95 | 92.95 | ||||||||
(.77) | 12.67 | 18.32 | 253,586 | 1.09 | 1.10 | 1.09 | 86.60 | |||||||||
(.12) | 11.44 | 12.36 | 198,551 | 1.07 | 1.10 | .95 | 84.74 | |||||||||
(.08) | 10.29 | 14.61 | 173,635 | 1.10 | 1.10 | .84 | 96.07 | |||||||||
(.07) | 9.05 | 22.53 | 128,383 | 1.01 | 1.28 | 1.03 | 105.71 | |||||||||
(.08) | 7.45 | (11.78 | ) | 31,806 | .87 | 1.27 | .86 | 92.95 | ||||||||
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
338
Table of Contents
Notes to Financial Highlights — October 31, 2006
(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 RIMCo as the investment adviser and transfer agent, and for certain funds, custodycredit arrangements. |
(f) | The annualized net expense ratio is 1.97% not including the dividends from securities sold short as contractually agreed by the Adviser. |
(g) | The annualized net expense ratio is 1.22% not including the dividends from securities sold short as contractually agreed by the Adviser. |
(h) | The annualized net expense ratio is .96% not including the dividends from securities sold short as contractually agreed by the Adviser. |
1. | Organization |
Russell Investment Company (the “Investment Company” or “RIC”) is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on fourteen of these Funds. 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 an amended and restated master trust agreement dated August 19, 2002. 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.
On July 1, 2006, Frank Russell Investment Company changed its name to Russell Investment Company and Frank Russell Investment Management Company changed its name to Russell Investment Management Company (“RIMCo”).
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. Money market fund securities are priced using the amortized cost method of valuation, as are debt obligation securities maturing within 60 days at the time of purchase, 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 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; |
339
Table of Contents
• | 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 New York Stock Exchange, 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 Fund’s 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 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. RIC 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. RIC 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. RIC 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Funds financial statement disclosure.
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.
340
Table of Contents
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. 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 or excise tax provision was required for the Funds.
In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund’s net assets and results of operations.
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 according to the following schedule:
Declared | Payable | Funds | ||
Monthly | Early in the following month | Tax-Exempt Bond, | ||
Diversified Bond and | ||||
Multistrategy Bond Funds | ||||
Quarterly | April, July, October and December | Diversified Equity, | ||
Quantitative Equity, | ||||
Real Estate Securities, | ||||
Short Duration Bond and | ||||
Select Value Funds | ||||
Annually | Mid-December | Special Growth, | ||
International Securities, | ||||
Emerging Markets, | ||||
Tax-Managed Large Cap, | ||||
Tax-Managed Mid & Small Cap and | ||||
Select Growth Funds |
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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by Russell Investment Management Company (“RIMCo” or “Adviser”). 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.
341
Table of Contents
Class Allocation
The Funds presented herein offer the following classes of shares: Class C, Class E, Class I and Class S. All share classes have identical voting, dividend, liquidation and other rights and the same terms and conditions. The separate classes of shares differ principally in the applicable distribution fees and shareholder servicing fees. Shareholders of each class bear certain expenses that pertain to that particular class. Realized and unrealized gains (losses), net investment income, and expenses with the exception of class level expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.
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 Funds’ 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 International Securities Fund and Emerging Markets Fund may be subject to capital gains taxes and repatriation taxes imposed by certain countries in which they invest. The Funds have recorded a deferred tax liability in respect of the unrealized appreciation on foreign securities for potential capital gains and repatriation taxes at October 31, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized appreciation (depreciation) on investments in the Statement of Asset and Liabilities for the Funds. The amounts related to capital gains taxes are included in net realized gain (loss) on investments in the Statements of Operations for the Funds.
Funds | Deferred Tax Liability | Capital Gains Taxes | ||||
International Securities | $ | 23,923 | $ | 26,472 | ||
Emerging Markets | 1,303,228 | 1,117,018 |
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
342
Table of Contents
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, certain Funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“contracts”). The International Securities Fund may enter into forward foreign currency overlays on liquidity reserve balances. Additionally, from time to time the International Securities, Emerging Markets, Short Duration Bond, Diversified Bond and Multistrategy 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 October 31, 2006 are presented on the Schedule of Investments for the applicable 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.
343
Table of Contents
Loan Agreements
The Diversified Bond Fund and Multistrategy 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. At the period ended October 31, 2006, there were no unfunded loan commitments in the Diversified Bond Fund or Multistrategy 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 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.
Futures Contracts
The Funds presented herein 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. As of October 31, 2006, included in the Statement of Assets and Liabilities, the Multistrategy Bond Fund had cash collateral balances of $103,587 and the International Securities Fund had cash collateral balances of $6,986,823 in connection with futures contracts purchased (sold).
344
Table of Contents
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 Short Duration Bond, Diversified Bond, Multistrategy Bond and International Securities Funds 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 a Fund engages in a swap, it exchanges its obligations to pay or rights to receive payments for the obligations or rights to receive payments of another party (i.e., an exchange of floating rate payments for fixed rate payments).
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 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 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 Fund’s custodian. To the extent that the Fund enters into swaps on other than a net basis, the amount maintained in a segregated account will be the full amount of the 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 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.
Short Sales
The Quantitative Equity Fund may enter into short sale transactions. In a short sale, the seller sells a security that it does not own, typically a security borrowed from a broker or dealer. Because the seller remains liable to return the underlying security that it borrowed from the broker or dealer, the seller must purchase the security prior to the date on which delivery to the broker or dealer is required. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. The making of short sales exposes the Fund to the risk of liability for the market value of the security that is sold (the amount of which liability increases as the market value of the underlying security increases), in addition to the costs associated with establishing, maintaining and closing out the short position.
Although the Fund’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. The proceeds of the short sale will be retained as collateral in a segregated account for the broker’s benefit at the Fund’s custodian, to the extent necessary to meet margin requirements, until the short position is closed out. Until a Fund
345
Table of Contents
replaces a borrowed security in connection with a short sale, the Fund will: (a) maintain daily a segregated account, containing cash, cash equivalents, or liquid marketable securities, at such a level that the amount deposited in the segregated account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; or (b) otherwise cover its short position in accordance with positions taken by the staff of the SEC (e.g., taking an offsetting long position in the security sold short.) As of October 31, 2006, $512,688,999 was held as collateral.
Investments in Emerging Markets
Investing in emerging markets may involve special risks and considerations for the Emerging Markets Fund and International Securities 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 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.
Mortgage-Related and Other Asset-Backed Securities
The Fund may invest in mortgage or other asset-backed securities. Theses securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of some mortgage or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). Payments received for the IOs are included in interest income on the Statement of Operations. Because principal will not be received at the maturity of an IO, adjustments are made to the book value of the security on a daily basis until maturity. These adjustments are included in interest income on the Statement of Operations. Payments received for POs are treated as reductions to the cost and par value of the securities.
Inflation-Indexed Bonds
The Fund may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity.
3. | Investment Transactions |
Securities
During the period ended October 31, 2006, purchases and sales of investment securities (excluding US Government and Agency obligations, short-term investments, options, futures and repurchase agreements) were as follows:
346
Table of Contents
Funds | Purchases | Sales | ||||
Diversified Equity | $ | 3,556,912,911 | $ | 2,939,121,967 | ||
Special Growth | 1,591,757,939 | 1,542,213,248 | ||||
Quantitative Equity | 4,045,320,239 | 3,393,203,355 | ||||
International Securities | 2,507,466,030 | 2,120,432,348 | ||||
Emerging Markets | 708,055,661 | 669,426,536 | ||||
Real Estate Securities | 836,281,515 | 857,200,817 | ||||
Short Duration Bond | 559,999,439 | 621,526,376 | ||||
Diversified Bond | $ | 1,143,543,599 | $ | 758,632,425 | ||
Multistrategy Bond | 3,446,180,376 | 2,720,576,030 | ||||
Tax Exempt Bond | 215,308,035 | 161,016,688 | ||||
Tax-Managed Large Cap | 287,193,291 | 260,192,247 | ||||
Tax-Managed Mid & Small Cap | 111,882,619 | 98,439,339 | ||||
Select Growth | 256,873,072 | 266,151,384 | ||||
Select Value | 313,994,264 | 312,353,848 |
Purchases and sales of US Government and Agency obligations (excluding short-term investments, options, futures and repurchase agreements) were as follows:
Funds | Purchases | Sales | ||||
Short Duration Bond | $ | 395,895,466 | $ | 434,294,615 | ||
Diversified Bond | 1,203,283,305 | 1,147,454,473 | ||||
Multistrategy Bond | 2,328,960,837 | 2,258,515,336 |
Written Options Contracts
Transactions in written options contracts for the period ended October 31, 2006 for the following Funds were as follows:
International Securities Fund | Emerging Markets Fund | |||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||
Outstanding October 31, 2005 | 40 | $ | 173,744 | 286 | $ | 723,862 | ||||||||
Opened | 2,152 | 10,440,675 | 3,764 | 4,942,625 | ||||||||||
Closed | (1,757 | ) | (8,610,763 | ) | (3,424 | ) | (4,838,058 | ) | ||||||
Expired | (19 | ) | (117,016 | ) | — | — | ||||||||
Outstanding October 31, 2006 | 416 | $ | 1,886,640 | 626 | $ | 828,429 | ||||||||
Short Duration Bond Fund | Diversified Bond Fund | |||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||
Outstanding October 31, 2005 | 160 | $ | 321,656 | 377 | $ | 169,060 | ||||||||
Opened | 267 | 795,465 | 2,650 | 973,613 | ||||||||||
Closed | (4 | ) | (69,050 | ) | (1,432 | ) | (655,502 | ) | ||||||
Expired | (8 | ) | (274,756 | ) | (878 | ) | (278,842 | ) | ||||||
Outstanding October 31, 2006 | 415 | $ | 773,315 | 717 | $ | 208,329 | ||||||||
Multistrategy Bond Fund | |||||||
Number of Contracts | Premiums Received | ||||||
Outstanding October 31, 2005 | 535 | $ | 563,340 | ||||
Opened | 3,760 | 3,118,674 | |||||
Closed | (1,664 | ) | (998,144 | ) | |||
Expired | (1,462 | ) | (688,571 | ) | |||
Outstanding October 31, 2006 | 1,169 | $ | 1,995,299 | ||||
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,
347
Table of Contents
State Street Bank and Trust Company (“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 Schedules 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 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 October 31, 2006, the non-cash collateral received for the securities on loan in the following funds was:
Funds | Non-Cash Collateral Value | Non-Cash Collateral Holding | |||
Special Growth | $ | 12,324 | Pool of US Government Securities | ||
International Securities | 7,365,019 | Pool of US Government Securities | |||
Quantitative Equity | 3,822,796 | Pool of US Government Securities |
4. | Related Parties |
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment Company. RIMCo is a wholly-owned subsidiary of Russell Investment Group (a subsidiary of The Northwestern Mutual Life Insurance Company). Russell Investment Group provides money manager evaluation services to RIMCo.
The Funds are permitted to invest their cash reserves (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses) and also may invest a portion of the collateral received from the Investment Company’s securities lending program, in the Investment Company’s Money Market and Tax Free Money Market Funds (two of the Funds of the Investment Company not presented herein). As of October 31, 2006, $1,550,881,737 of the Money Market Fund’s net assets and $5,514,848 of the Tax Free Money Market Fund’s net assets represents investments by the Funds presented herein and $487,373,370 of the Money Market Funds’ net assets represents the investments of other RIC Funds not presented herein.
Effective August 1, 2006, the funds adopted new rules under the Investment Company Act of 1940 that addresses the ability of an investment company (“fund”) to acquire shares of another fund. As of this date, the Adviser has agreed to rebate back to the Funds, the amount that was permitted to invest their cash reserves (cash awaiting investment and collateral received from the Securities Lending Program). The amounts for the period ended October 31, 2006 are as follows:
Funds | Amount | ||
Diversified Equity | $ | 74,342 | |
Special Growth | 43,857 | ||
Quantitative Equity | 42,153 | ||
International Securities | 112,370 | ||
Emerging Markets | 16,143 | ||
Real Estate Securities | 26,316 | ||
Short Duration Bond | $ | 19,010 | |
Diversified Bond | $ | 75,088 | |
Multistrategy Bond | 123,877 | ||
Tax Exempt Bond | 3,701 | ||
Tax-Managed Large Cap | 6,231 | ||
Tax-Managed Mid & Small Cap | 9,607 | ||
Select Growth | 3,933 | ||
Select Value | 7,879 |
348
Table of Contents
The advisory and administrative 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 $146,731,559 and $10,140,266 respectively, for the period ended October 31, 2006.
Annual Rate | ||||||
Funds | Adviser | Administrator | ||||
Special Growth | .90 | % | .05 | % | ||
Emerging Markets | 1.15 | .05 | ||||
Real Estate Securities | .80 | .05 | ||||
Short Duration Bond | .45 | .05 | ||||
Diversified Bond | .40 | .05 | ||||
Multistrategy Bond | .60 | .05 | ||||
Tax Exempt Bond | .30 | % | .05 | % | ||
Tax-Managed Large Cap | .70 | .05 | ||||
Tax-Managed Mid & Small Cap | .98 | .05 | ||||
Select Growth | .80 | .05 | ||||
Select Value | .70 | .05 |
For the Diversified Equity Fund, the Quantitative Equity Fund and the International Securities Fund, the advisory fee is based on the asset levels of the Funds. The advisory fee rates for these Funds are as follows:
Diversified Equity Annual Rate | Quantitative Equity Annual Rate | International Securities Annual Rate | ||||||||||||||||
Average Daily Net Assets | Advisory | Administrator | Advisory | Administrator | Advisory | Administrator | ||||||||||||
First $2 Billion | .73 | % | .05 | % | .73 | % | .05 | % | .90 | % | .05 | % | ||||||
Next $3 Billion | .72 | .05 | .72 | .05 | .89 | .05 | ||||||||||||
Over $5 Billion | .70 | .05 | .70 | .05 | .87 | .05 |
For the Tax-Managed Mid & Small Cap Fund, RIMCo has contractually agreed to waive, at least until February 28, 2007, up to the full amount of its 1.03% combined advisory and administrative fees and to reimburse the Fund to the extent that Fund-level expenses exceed 1.25% of the average daily net assets of that Fund on an annual basis. Fund-level expenses for the Tax- Managed Mid & Small Cap Fund do not include 12b-1 fees or shareholder servicing fees. The total amount of the waiver for the period ended October 31, 2006 was $178,899. There were no reimbursements for the period ended October 31, 2006.
For the Select Growth Fund, RIMCo has contractually agreed to waive, at least until February 28, 2007, up to the full amount of its transfer agency fees, administrative fees, and advisory fees to the extent that expenses for Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory or administrative fees is required for any class of shares of the Fund, advisory or administrative fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expense for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively. The total amount of the waiver for the period ended October 31, 2006 was $234,128. There were no contractual reimbursements for the period ended October 31, 2006.
For the Select Value Fund, RIMCo has contractually agreed to waive, at least until February 28, 2007, up to the full amount of its transfer agency fees, administrative fees, and advisory fees to the extent that expenses for Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory or administrative fees is required for any class of shares of the Fund, advisory or administrative fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expense for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively. There were no waivers or reimbursements for the period ended October 31, 2006.
The Adviser does not have the ability to recover amounts waived or reimbursed from previous periods.
349
Table of Contents
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 Fund’s expenses. During the period ended October 31, 2006, the Fund’s custodian fees were reduced by the following amounts under these arrangements which are included in expense reductions on the Statement of Operations:
Funds | Amount Paid | ||
Diversified Equity | $ | 12,590 | |
Special Growth | 8,195 | ||
Quantitative Equity | 9,855 | ||
International Securities | 9,270 | ||
Emerging Markets | 16,797 | ||
Real Estate Securities | 5,727 | ||
Short Duration Bond | 37,100 | ||
Diversified Bond | $ | 63,482 | |
Multistrategy Bond | 127,578 | ||
Tax Exempt Bond | 2,194 | ||
Tax-Managed Large Cap | 750 | ||
Tax-Managed Mid & Small Cap | 931 | ||
Select Growth | 1,274 | ||
Select Value | 913 |
Transfer agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment Company. For this service, RIMCo is paid a fee for transfer agency and dividend disbursing services provided to the Fund. RIMCo retains a portion of this fee for its services provided to the Fund and pays the balance to unaffiliated agents who assist in providing these services. Total fees for the Funds presented herein for the period ended October 31, 2006 were $31,181,592.
Distributor and Shareholder Servicing
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the “Plan”) under the 1940 Act. Under this Plan, the Investment Company is authorized to make payments to Russell Fund Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, or any Selling Agents, as defined in the Plan, for sales support services provided and related expenses incurred which were primarily intended to result in the sale of the Class C shares subject to the Distribution Plan. The 12b-1 distribution payments shall not exceed 0.75% of the average daily net assets of a Fund’s Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan (the “Services Plan”) under which the Funds may make payments to the Distributor or any Servicing Agent for any activities or expenses primarily intended to assist, support or service the Servicing Agents’ clients who beneficially own Class C or Class E shares of the Funds. The shareholder servicing payments shall not exceed 0.25% of the average daily net assets of a Fund’s Class C and Class E shares on an annual basis.
Pursuant to the rules of the National Association of Securities Dealers, Inc. (“NASD”), the asset-based sales charges on Shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed at the class level of each Fund rather than on a per shareholder basis. Therefore, long-term shareholders may pay more than the economic equivalent of the maximum sales charges permitted by the NASD.
Brokerage Commissions
The Funds will effect transactions through Russell Implementation Services, Inc. (“RIS”) and its global network of unaffiliated correspondent brokers. RIS is a registered broker and investment adviser and an affiliate of RIMCo. Trades placed through RIS and its correspondents are used (i) to obtain research services for RIMCo 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
350
Table of Contents
research services and to generate commission rebates from RIS and LJR (as defined and described more fully below). During the transition, some of these trades may continue to be executed through RIS. For purposes of trading to obtain research services for RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through RIS and its correspondents or other brokers only to the extent that the Funds will receive competitive execution, price and commissions. In addition, RIMCo recommends targets for the amount of trading that money managers allocate through RIS based upon asset class, investment style and other factors. Research services provided to RIMCo by RIS 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 RIMCo 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 RIMCo 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 RIMCo. Trades placed through LJR and its correspondents are used (i) to obtain research services for RIMCo 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 RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through LJR and its correspondents or other brokers only to the extent that the Funds will receive competitive execution, price and commissions. In addition, RIMCo 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 RIMCo by LJR or other brokers include performance measurement statistics, fund analytics systems and market monitoring systems. Research services will be generally obtained from unaffiliated third parties at market rates. Research provided to RIMCo 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 RIMCo or its affiliates. Similarly, the Funds may benefit from research provided with respect to trading by those other funds and clients.
RIS, LJR or other brokers also may rebate to the Funds a portion of commissions earned on certain trading by the Funds through RIS, 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 RIMCo’s research budget has been met, as determined annually in the Soft Dollar Committee budgeting process.
Amounts retained by RIS for the period ended October 31, 2006 were as follows:
Funds | Amount | ||
Diversified Equity | $ | 20,215 | |
Special Growth | 5,950 | ||
Quantitative Equity | 2,017 | ||
International Securities | 4,441 | ||
Emerging Markets | 3,174 | ||
Real Estate Securities | $ | 1,587 | |
Tax-Managed Mid & Small Cap | 377 | ||
Select Growth | 944 | ||
Select Value | 2,601 |
Additionally, the Funds paid brokerage commissions to non-affiliated brokers who provided brokerage and research services to the Adviser.
Accrued fees payable to affiliates as October 31, 2006 were as follows:
Diversified Equity | Special Growth | Quantitative Equity | International Securities | Emerging Markets | Real Estate Securities | Short Duration Bond | |||||||||||||||
Advisory fees | $ | 2,322,907 | $ | 897,435 | $ | 2,396,733 | $ | 2,642,442 | $ | 1,106,525 | $ | 1,374,607 | $ | 433,288 | |||||||
Administration fees | 158,230 | 49,858 | 163,225 | 146,212 | �� | 48,111 | 85,913 | 48,143 | |||||||||||||
Distribution fees | 96,216 | 42,391 | 98,609 | 98,952 | 28,093 | 69,000 | 13,854 | ||||||||||||||
Shareholder servicing fees | 46,545 | 19,414 | 48,125 | 48,055 | 15,071 | 34,998 | 10,198 | ||||||||||||||
Transfer agent fees | 912,569 | 377,613 | 941,093 | 844,528 | 366,102 | 597,174 | 187,876 | ||||||||||||||
Trustee fees | 8,873 | 2,992 | 9,150 | 8,192 | 2,959 | 4,774 | 3,443 | ||||||||||||||
$ | 3,545,340 | $ | 1,389,703 | $ | 3,656,935 | $ | 3,788,381 | $ | 1,566,861 | $ | 2,166,466 | $ | 696,802 | ||||||||
351
Table of Contents
Diversified Bond | Multistrategy Bond | Tax Exempt Bond | Tax Managed Large Cap | Tax Managed Mid & Small Cap | Select Growth | Select Value | |||||||||||||||
Advisory fees | $ | 711,109 | $ | 1,227,367 | $ | 74,699 | $ | 288,583 | $ | 178,829 | $ | 118,708 | $ | 253,189 | |||||||
Administration fees | 88,889 | 108,079 | 12,438 | 20,611 | 4,907 | 7,278 | 17,674 | ||||||||||||||
Distribution fees | 37,917 | 52,629 | 7,217 | 11,817 | 7,451 | 6,181 | 16,753 | ||||||||||||||
Shareholder servicing fees | 24,689 | 28,346 | 4,795 | 6,562 | 3,004 | 3,448 | 7,842 | ||||||||||||||
Transfer agent fees | 458,237 | 628,376 | 48,630 | 79,248 | 55,721 | 37,674 | 122,534 | ||||||||||||||
Trustee fees | 5,204 | 6,055 | 759 | 1,297 | 556 | 563 | 1,083 | ||||||||||||||
$ | 1,326,045 | $ | 2,050,852 | $ | 148,538 | $ | 408,118 | $ | 250,468 | $ | 173,852 | $ | 419,075 | ||||||||
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 34 Funds, and Russell Investment Funds (“RIF”), which has five Funds. Each of the Trustees is a Trustee for both RIC 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, 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 chair person of the Board receives additional annual compensation of $52,000.
5. | Federal Income Taxes |
At October 31, 2006, 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:
Funds | 10/31/07 | 10/31/08 | 10/31/09 | 10/31/10 | |||||||||||
Short Duration Bond | $ | — | $ | — | $ | — | $ | — | |||||||
Diversified Bond | — | — | — | — | |||||||||||
Multistrategy Bond | — | — | — | — | |||||||||||
Tax Exempt Bond | — | 682,095 | — | — | |||||||||||
Tax-Managed Large Cap | — | — | 18,201,536 | 59,069,223 | |||||||||||
Select Growth | — | — | — | 9,306,293 | |||||||||||
Select Value | 3,596,153 | 451,724 | 2,362,680 | 362,611 | |||||||||||
Funds | 10/31/11 | 10/31/12 | 10/31/13 | 10/31/14 | Totals | ||||||||||
Short Duration Bond | $ | — | $ | — | $ | 10,268,501 | $ | 7,439,440 | $ | 17,707,941 | |||||
Diversified Bond | — | — | 4,923,732 | 16,820,169 | 21,743,901 | ||||||||||
Multistrategy Bond | — | — | — | 14,540,672 | 14,540,672 | ||||||||||
Tax Exempt Bond | — | 357,343 | — | 634,298 | 1,673,736 | ||||||||||
Tax-Managed Large Cap | — | — | — | — | 77,270,759 | ||||||||||
Select Growth | 263,497 | — | — | — | 9,569,790 | ||||||||||
Select Value | — | — | — | — | 6,773,168 |
Select Value Fund had a capital loss carryforward of $6,773,168 that it acquired from the Equity Income Fund and Equity III Fund of which $3,596,153, $451,724, $2,362,680, and $362,611 will expire on October 31 of the years 2007, 2008, 2009 and 2010, respectively. This capital loss carryforward can be utilized at a pace of up to $5,101,116 each year with any unused capital loss annual limitation carried over to each succeeding year or until its respective expiration dates, whichever occurs first.
At October 31, 2006, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
352
Table of Contents
Diversified Equity | Special Growth | Quantitative Equity | International Securities | |||||||||||||
Cost of Investments | $ | 3,739,824,866 | $ | 1,439,107,458 | $ | 3,644,549,674 | $ | 3,525,623,156 | ||||||||
Unrealized Appreciation | $ | 526,294,985 | $ | 160,525,610 | $ | 568,854,335 | $ | 676,073,215 | ||||||||
Unrealized Depreciation | (41,738,133 | ) | (23,814,359 | ) | (28,030,623 | ) | (24,600,899 | ) | ||||||||
Net Unrealized Appreciation | ||||||||||||||||
(Depreciation) | $ | 484,556,852 | $ | 136,711,251 | $ | 540,823,712 | $ | 651,472,316 | ||||||||
Undistributed Ordinary Income | $ | 37,328,185 | $ | 40,240,190 | $ | 35,049,374 | $ | 179,870,960 | ||||||||
Undistributed Long-Term Capital | ||||||||||||||||
Gains (Capital Loss Carryforward) | $ | 136,423,227 | $ | 116,594,140 | $ | 167,597,383 | $ | 202,324,959 | ||||||||
Tax Composition of Distributions: | ||||||||||||||||
Ordinary Income | $ | 22,214,600 | $ | 14,044,196 | $ | 29,466,585 | $ | 30,832,036 | ||||||||
Long-Term Capital Gains | $ | 77,012,537 | $ | 76,806,776 | $ | 124,071,970 | $ | 86,530,951 |
Emerging Markets | Real Estate Securities | Short Duration Bond | Diversified Bond | Multistrategy Bond | ||||||||||||||||
Cost of Investments | $ | 923,845,118 | $ | 1,489,793,978 | $ | 1,185,944,875 | $ | 2,912,743,378 | $ | 3,135,315,478 | ||||||||||
Unrealized Appreciation | $ | 313,736,516 | $ | 817,208,344 | $ | 2,681,451 | $ | 12,555,862 | $ | 43,561,051 | ||||||||||
Unrealized Depreciation | (14,076,728 | ) | (494,429 | ) | (8,852,770 | ) | (8,566,950 | ) | (29,441,168 | ) | ||||||||||
Net Unrealized Appreciation | ||||||||||||||||||||
(Depreciation) | $ | 299,659,788 | $ | 816,713,915 | $ | (6,171,319 | ) | $ | 3,988,912 | $ | 14,119,883 | |||||||||
Undistributed Ordinary Income | $ | 63,170,225 | $ | 42,496,827 | $ | 4,129,419 | $ | 8,546,009 | $ | 11,162,195 | ||||||||||
Undistributed Long-Term Capital | ||||||||||||||||||||
Gains (Capital Loss Carryforward) | $ | 121,612,014 | $ | 128,286,813 | $ | (17,707,941 | ) | $ | (21,743,901 | ) | $ | (14,540,672 | ) | |||||||
Tax Composition of Distributions: | ||||||||||||||||||||
Ordinary Income | $ | 21,103,981 | $ | 66,623,117 | $ | 41,678,386 | $ | 80,193,365 | $ | 94,147,747 | ||||||||||
Long-Term Capital Gains | $ | 21,459,465 | $ | 123,352,626 | $ | — | $ | — | $ | 2,321,868 |
Tax Exempt Bond | Tax-Managed Large Cap | Tax-Managed Mid & Small Cap | Select Growth | Select Value | ||||||||||||||||
Cost of investments | $ | 293,253,353 | $ | 398,051,455 | $ | 234,009,433 | $ | 189,600,717 | $ | 401,096,721 | ||||||||||
Unrealized Appreciation | $ | 4,636,421 | $ | 122,277,321 | $ | 46,342,549 | $ | 23,189,835 | 73,765,657 | |||||||||||
Unrealized Depreciation | (873,979 | ) | (5,612,350 | ) | (5,475,504 | ) | (2,898,908 | ) | (5,392,208 | ) | ||||||||||
Net Unrealized Appreciation | ||||||||||||||||||||
(Depreciation) | $ | 3,762,442 | $ | 116,664,971 | $ | 40,867,045 | $ | 20,290,927 | $ | 68,373,449 | ||||||||||
Undistributed Ordinary Income | $ | 949,126 | $ | 2,678,610 | $ | — | $ | — | $ | 4,542,778 | ||||||||||
Undistributed Long-Term Capital | ||||||||||||||||||||
Gains (Capital Loss Carryforward) | $ | (1,673,736 | ) | $ | (77,270,759 | ) | $ | 3,077,295 | $ | (9,569,790 | ) | $ | 20,555,040 | |||||||
Tax Composition of Distributions: | ||||||||||||||||||||
Ordinary Income | $ | 9,530,948 | $ | 3,139,274 | $ | — | $ | 43,635 | $ | 10,510,791 | ||||||||||
Long-Term Capital Gains | $ | — | $ | — | $ | — | $ | — | $ | 14,164,436 |
6. | Fund Share Transactions (amounts in thousands) |
Share transactions for the periods ended October 31, 2006 and October 31, 2005 were as follows:
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Diversified Equity | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 653 | 913 | $ | 29,359 | $ | 38,059 | ||||||||
Proceeds from reinvestment of distributions | 83 | 2 | 3,657 | 97 | ||||||||||
Payments for shares redeemed | (453 | ) | (437 | ) | (20,433 | ) | (18,261 | ) | ||||||
Total net increase (decrease) | 283 | 478 | 12,583 | 19,895 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 403 | 342 | 18,678 | 14,843 |
353
Table of Contents
Proceeds from reinvestment of distributions | 39 | 6 | 1,788 | 257 | ||||||||||
Payments for shares redeemed | (232 | ) | (294 | ) | (10,766 | ) | (12,728 | ) | ||||||
Total net increase (decrease) | 210 | 54 | 9,700 | 2,372 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 18,131 | 13,816 | 842,087 | 596,026 | ||||||||||
Proceeds from reinvestment of distributions | 2,004 | 292 | 91,133 | 12,661 | ||||||||||
Payments for shares redeemed | (5,050 | ) | (5,474 | ) | (235,120 | ) | (235,883 | ) | ||||||
Net increase (decrease) | 15,085 | 8,634 | 698,100 | 372,804 | ||||||||||
Total increase (decrease) | 15,578 | 9,166 | $ | 720,383 | $ | 395,071 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Special Growth | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 270 | 316 | $ | 13,121 | $ | 15,054 | ||||||||
Proceeds from reinvestment of distributions | 127 | 130 | 5,785 | 6,105 | ||||||||||
Payments for shares redeemed | (228 | ) | (228 | ) | (11,060 | ) | (10,882 | ) | ||||||
Net increase (decrease) | 169 | 218 | 7,846 | 10,277 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 121 | 208 | 6,297 | 10,673 | ||||||||||
Proceeds from reinvestment of distributions | 42 | 83 | 2,068 | 4,119 | ||||||||||
Payments for shares redeemed | (114 | ) | (491 | ) | (5,898 | ) | (25,280 | ) | ||||||
Net increase (decrease) | 49 | (200 | ) | 2,467 | (10,488 | ) | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 4,747 | 4,539 | 253,937 | 232,791 | ||||||||||
Proceeds from reinvestment of distributions | 1,570 | 1,596 | 79,639 | 81,481 | ||||||||||
Payments for shares redeemed | (3,158 | ) | (3,134 | ) | (169,361 | ) | (162,993 | ) | ||||||
Net increase (decrease) | 3,159 | 3,001 | 164,215 | 151,279 | ||||||||||
Total increase (decrease) | 3,377 | 3,019 | $ | 174,528 | $ | 151,068 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Quantitative Equity | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 773 | 1,084 | $ | 29,611 | $ | 39,574 | ||||||||
Proceeds from reinvestment of distributions | 154 | 5 | 5,745 | 199 | ||||||||||
Payments for shares redeemed | (540 | ) | (506 | ) | (20,768 | ) | (18,512 | ) | ||||||
Net increase (decrease) | 387 | 583 | 14,588 | 21,261 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 450 | 330 | 17,705 | 12,388 | ||||||||||
Proceeds from reinvestment of distributions | 73 | 10 | 2,821 | 359 | ||||||||||
Payments for shares redeemed | (186 | ) | (321 | ) | (7,324 | ) | (12,054 | ) | ||||||
Net increase (decrease) | 337 | 19 | 13,202 | 693 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 20,967 | 17,055 | 827,015 | 640,244 | ||||||||||
Proceeds from reinvestment of distributions | 3,628 | 424 | 139,968 | 16,035 | ||||||||||
Payments for shares redeemed | (6,291 | ) | (6,785 | ) | (248,348 | ) | (254,740 | ) | ||||||
Net increase (decrease) | 18,304 | 10,694 | 718,635 | 401,539 | ||||||||||
Total increase (decrease) | 19,028 | 11,296 | $ | 746,425 | $ | 423,493 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
International Securities | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 432 | 656 | $ | 29,899 | $ | 38,805 | ||||||||
Proceeds from reinvestment of distributions | 73 | 14 | 4,728 | 784 | ||||||||||
Payments for shares redeemed | (326 | ) | (251 | ) | (22,969 | ) | (14,956 | ) | ||||||
Net increase (decrease) | 179 | 419 | 11,658 | 24,633 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 288 | 229 | 20,770 | 14,246 | ||||||||||
Proceeds from reinvestment of distributions | 34 | 10 | 2,297 | 605 |
354
Table of Contents
Payments for shares redeemed | (155 | ) | (160 | ) | (11,177 | ) | (9,930 | ) | ||||||
Net increase (decrease) | 167 | 79 | 11,890 | 4,921 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 9,112 | 8,450 | 662,381 | 520,578 | ||||||||||
Proceeds from reinvestment of distributions | 1,599 | 478 | 107,525 | 28,531 | ||||||||||
Payments for shares redeemed | (4,482 | ) | (3,183 | ) | (325,970 | ) | (197,878 | ) | ||||||
Net increase (decrease) | 6,229 | 5,745 | 443,936 | 351,231 | ||||||||||
Total increase (decrease) | 6,575 | 6,243 | $ | 467,484 | $ | 380,785 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Emerging Markets | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 600 | 720 | $ | 11,923 | $ | 10,819 | ||||||||
Proceeds from reinvestment of distributions | 79 | 6 | 1,405 | 79 | ||||||||||
Payments for shares redeemed | (585 | ) | (330 | ) | (11,516 | ) | (4,983 | ) | ||||||
Net increase (decrease) | 94 | 396 | 1,812 | 5,915 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 483 | 368 | 9,842 | 5,846 | ||||||||||
Proceeds from reinvestment of distributions | 50 | 13 | 907 | 190 | ||||||||||
Payments for shares redeemed | (354 | ) | (384 | ) | (7,160 | ) | (6,138 | ) | ||||||
Net increase (decrease) | 179 | (3 | ) | 3,589 | (102 | ) | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 13,204 | 9,775 | 265,826 | 151,220 | ||||||||||
Proceeds from reinvestment of distributions | 2,101 | 633 | 38,232 | 9,268 | ||||||||||
Payments for shares redeemed | (11,478 | ) | (6,854 | ) | (233,599 | ) | (107,297 | ) | ||||||
Net increase (decrease) | 3,827 | 3,554 | 70,459 | 53,191 | ||||||||||
Total increase (decrease) | 4,100 | 3,947 | $ | 75,860 | $ | 59,004 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Real Estate Securities | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 360 | 529 | $ | 17,358 | $ | 23,052 | ||||||||
Proceeds from reinvestment of distributions | 209 | 135 | 9,190 | 5,811 | ||||||||||
Payments for shares redeemed | (380 | ) | (304 | ) | (18,551 | ) | (13,369 | ) | ||||||
Net increase (decrease) | 189 | 360 | 7,997 | 15,494 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 334 | 398 | 16,642 | 17,861 | ||||||||||
Proceeds from reinvestment of distributions | 109 | 73 | 4,891 | 3,199 | ||||||||||
Payments for shares redeemed | (258 | ) | (283 | ) | (12,859 | ) | (12,674 | ) | ||||||
Net increase (decrease) | 185 | 188 | 8,674 | 8,386 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 6,471 | 8,037 | 317,576 | 355,555 | ||||||||||
Proceeds from reinvestment of distributions | 3,663 | 1,955 | 166,170 | 85,775 | ||||||||||
Payments for shares redeemed | (7,539 | ) | (6,187 | ) | (368,134 | ) | (277,213 | ) | ||||||
Net increase (decrease) | 2,595 | 3,805 | 115,612 | 164,117 | ||||||||||
Total increase (decrease) | 2,969 | 4,353 | $ | 132,283 | $ | 187,997 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Short Duration Bond | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 287 | 617 | $ | 5,330 | $ | 11,614 | ||||||||
Proceeds from reinvestment of distributions | 32 | 27 | 599 | 502 | ||||||||||
Payments for shares redeemed | (774 | ) | (1,036 | ) | (14,409 | ) | (19,514 | ) | ||||||
Net increase (decrease) | (455 | ) | (392 | ) | (8,480 | ) | (7,398 | ) | ||||||
Class E | ||||||||||||||
Proceeds from shares sold | 363 | 320 | 6,787 | 6,052 | ||||||||||
Proceeds from reinvestment of distributions | 44 | 27 | 821 | 521 | ||||||||||
Payments for shares redeemed | (306 | ) | (232 | ) | (5,701 | ) | (4,389 | ) | ||||||
355
Table of Contents
Net increase (decrease) | 101 | 115 | 1,907 | 2,184 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 14,343 | 16,712 | 267,444 | 315,510 | ||||||||||
Proceeds from reinvestment of distributions | 2,054 | 1,504 | 38,127 | 28,236 | ||||||||||
Payments for shares redeemed | (19,246 | ) | (15,698 | ) | (359,185 | ) | (296,234 | ) | ||||||
Net increase (decrease) | (2,849 | ) | 2,518 | (53,614 | ) | 47,512 | ||||||||
Total increase (decrease) | (3,203 | ) | 2,241 | $ | (60,187 | ) | $ | 42,298 | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Diversified Bond | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 756 | 735 | $ | 17,854 | $ | 17,801 | ||||||||
Proceeds from reinvestment of distributions | 71 | 52 | 1,674 | 1,257 | ||||||||||
Payments for shares redeemed | (524 | ) | (424 | ) | (12,366 | ) | (10,266 | ) | ||||||
Net increase (decrease) | 303 | 363 | 7,162 | 8,792 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 633 | 713 | 14,980 | 17,317 | ||||||||||
Proceeds from reinvestment of distributions | 87 | 66 | 2,051 | 1,598 | ||||||||||
Payments for shares redeemed | (460 | ) | (481 | ) | (10,929 | ) | (11,706 | ) | ||||||
Net increase (decrease) | 260 | 298 | 6,102 | 7,209 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 23,509 | 20,002 | 543,516 | 474,388 | ||||||||||
Proceeds from reinvestment of distributions | 3,175 | 1,927 | 73,071 | 45,639 | ||||||||||
Payments for shares redeemed | (7,541 | ) | (5,758 | ) | (174,338 | ) | (136,503 | ) | ||||||
Net increase (decrease) | 19,143 | 16,171 | 442,249 | 383,524 | ||||||||||
Total increase (decrease) | 19,706 | 16,832 | $ | 455,513 | $ | 399,525 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Multistrategy Bond | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 2,562 | 2,641 | $ | 26,226 | $ | 27,699 | ||||||||
Proceeds from reinvestment of distributions | 244 | 191 | 2,488 | 1,997 | ||||||||||
Payments for shares redeemed | (1,475 | ) | (1,140 | ) | (15,077 | ) | (11,937 | ) | ||||||
Net increase (decrease) | 1,331 | 1,692 | 13,637 | 17,759 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 1,533 | 1,080 | 15,701 | 11,328 | ||||||||||
Proceeds from reinvestment of distributions | 181 | 136 | 1,843 | 1,427 | ||||||||||
Payments for shares redeemed | (430 | ) | (477 | ) | (4,406 | ) | (4,997 | ) | ||||||
Net increase (decrease) | 1,284 | 739 | 13,138 | 7,758 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 75,561 | 57,162 | 775,132 | 600,754 | ||||||||||
Proceeds from reinvestment of distributions | 8,695 | 5,721 | 88,843 | 59,962 | ||||||||||
Payments for shares redeemed | (16,654 | ) | (12,051 | ) | (170,536 | ) | (126,465 | ) | ||||||
Net increase (decrease) | 67,602 | 50,832 | 693,439 | 534,251 | ||||||||||
Total increase (decrease) | 70,217 | 53,263 | $ | 720,214 | $ | 559,768 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Tax Exempt Bond | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 126 | 173 | $ | 2,696 | $ | 3,770 | ||||||||
Proceeds from reinvestment of distributions | 11 | 8 | 225 | 188 | ||||||||||
Payments for shares redeemed | (79 | ) | (174 | ) | (1,694 | ) | (3,785 | ) | ||||||
Net increase (decrease) | 58 | 7 | 1,227 | 173 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 187 | 161 | 4,006 | 3,512 | ||||||||||
Proceeds from reinvestment of distributions | 15 | 10 | 324 | 220 | ||||||||||
Payments for shares redeemed | (56 | ) | (66 | ) | (1,203 | ) | (1,446 | ) | ||||||
Net increase (decrease) | 146 | 105 | 3,127 | 2,286 | ||||||||||
356
Table of Contents
Class S | ||||||||||||||
Proceeds from shares sold | 5,079 | 4,673 | 108,842 | 101,967 | ||||||||||
Proceeds from reinvestment of distributions | 360 | 254 | 7,703 | 5,537 | ||||||||||
Payments for shares redeemed | (3,416 | ) | (2,697 | ) | (73,194 | ) | (58,741 | ) | ||||||
Net increase (decrease) | 2,023 | 2,230 | 43,351 | 48,763 | ||||||||||
Total increase (decrease) | 2,227 | 2,342 | $ | 47,705 | $ | 51,222 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Tax-Managed Large Cap | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 201 | 393 | $ | 3,747 | $ | 6,872 | ||||||||
Proceeds from reinvestment of distributions | — | 1 | — | 14 | ||||||||||
Payments for shares redeemed | (186 | ) | (239 | ) | (3,441 | ) | (4,179 | ) | ||||||
Net increase (decrease) | 15 | 155 | 306 | 2,707 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 192 | 186 | 3,652 | 3,292 | ||||||||||
Proceeds from reinvestment of distributions | 3 | 3 | 51 | 55 | ||||||||||
Payments for shares redeemed | (43 | ) | (62 | ) | (823 | ) | (1,104 | ) | ||||||
Net increase (decrease) | 152 | 127 | 2,880 | 2,243 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 4,237 | 4,824 | 80,602 | 86,084 | ||||||||||
Proceeds from reinvestment of distributions | 152 | 193 | 2,903 | 3,437 | ||||||||||
Payments for shares redeemed | (3,016 | ) | (3,897 | ) | (57,361 | ) | (69,571 | ) | ||||||
Net increase (decrease) | 1,373 | 1,120 | 26,144 | 19,950 | ||||||||||
Total increase (decrease) | 1,540 | 1,402 | $ | 29,330 | $ | 24,900 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Tax-Managed Mid & Small Cap | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 233 | 394 | $ | 2,955 | $ | 4,384 | ||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (129 | ) | (186 | ) | (1,624 | ) | (2,063 | ) | ||||||
Net increase (decrease) | 104 | 208 | 1,331 | 2,321 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 58 | 62 | 772 | 711 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (14 | ) | (46 | ) | (191 | ) | (541 | ) | ||||||
Net increase (decrease) | 44 | 16 | 581 | 170 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 3,087 | 3,311 | 41,391 | 38,832 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (1,828 | ) | (2,100 | ) | (24,613 | ) | (24,450 | ) | ||||||
Net increase (decrease) | 1,259 | 1,211 | 16,778 | 14,382 | ||||||||||
Total increase (decrease) | 1,407 | 1,435 | $ | 18,690 | $ | 16,873 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Select Growth | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 403 | 527 | $ | 3,166 | $ | 3,803 | ||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (253 | ) | (300 | ) | (1,970 | ) | (2,175 | ) | ||||||
Net increase (decrease) | 150 | 227 | 1,196 | 1,628 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 322 | 110 | 2,672 | 810 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (71 | ) | (375 | ) | (575 | ) | (2,825 | ) | ||||||
Net increase (decrease) | 251 | (265 | ) | 2,097 | (2,015 | ) | ||||||||
Class I |
357
Table of Contents
Proceeds from shares sold | 3,901 | 7,135 | 32,598 | 54,091 | ||||||||||
Proceeds from reinvestment of distributions | 5 | — | 41 | — | ||||||||||
Payments for shares redeemed | (7,298 | ) | (1,314 | ) | (59,655 | ) | (9,983 | ) | ||||||
Net increase (decrease) | (3,392 | ) | 5,821 | (27,016 | ) | 44,108 | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 4,481 | 3,690 | 36,926 | 27,958 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (3,241 | ) | (3,612 | ) | (26,401 | ) | (27,581 | ) | ||||||
Net increase (decrease) | 1,240 | 78 | 10,525 | 377 | ||||||||||
Total increase (decrease) | (1,751 | ) | 5,861 | $ | (13,198 | ) | $ | 44,098 | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Select Value | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 407 | 599 | $ | 4,719 | $ | 6,615 | ||||||||
Proceeds from reinvestment of distributions | 110 | 3 | 1,226 | 31 | ||||||||||
Payments for shares redeemed | (298 | ) | (375 | ) | (3,508 | ) | (4,176 | ) | ||||||
Net increase (decrease) | 219 | 227 | 2,437 | 2,470 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 219 | 195 | 2,586 | 2,201 | ||||||||||
Proceeds from reinvestment of distributions | 51 | 7 | 582 | 79 | ||||||||||
Payments for shares redeemed | (179 | ) | (326 | ) | (2,117 | ) | (3,702 | ) | ||||||
Net increase (decrease) | 91 | (124 | ) | 1,051 | (1,422 | ) | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 2,050 | 3,950 | 24,190 | 44,387 | ||||||||||
Proceeds from reinvestment of distributions | 766 | 123 | 8,716 | 1,384 | ||||||||||
Payments for shares redeemed | (4,301 | ) | (2,165 | ) | (49,514 | ) | (24,171 | ) | ||||||
Net increase (decrease) | (1,485 | ) | 1,908 | (16,608 | ) | 21,600 | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 5,847 | 5,202 | 69,086 | 58,345 | ||||||||||
Proceeds from reinvestment of distributions | 1,143 | 168 | 12,991 | 1,876 | ||||||||||
Payments for shares redeemed | (4,328 | ) | (4,888 | ) | (50,740 | ) | (55,329 | ) | ||||||
Net increase (decrease) | 2,662 | 482 | 31,337 | 4,892 | ||||||||||
Total increase (decrease) | 1,487 | 2,493 | $ | 18,217 | $ | 27,540 | ||||||||
7. | Line of Credit |
The Investment Company has a $75 million revolving credit facility for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Investment Company is charged an annual commitment fee of ..125% on the average daily unused amount of the aggregate commitment, which is allocated among each of the Funds. Interest is calculated at the Federal Fund Rate plus .50% annually. The Investment Company’s Funds may borrow up to a maximum of 33.33% of the value of their net assets under the agreement. The agreement will expire December 20, 2006 and will not be renewed at that time. The Funds did not have any drawdowns for the period ended October 31, 2006.
8. | Interfund Lending Program |
The Investment Company Funds have been granted permission from the Securities and Exchange Commission to participate in a joint lending and borrowing facility (the “Credit Facility”). Portfolios of the Funds may borrow money from the RIC Money Market Fund for temporary purposes. All such borrowing and lending will be subject to a participating Fund’s fundamental investment limitations. The RIC Money Market Fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves. The Investment Company Funds will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. A participating fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the RIC Money Market Fund could result in a lost investment opportunity or additional borrowing costs.
358
Table of Contents
9. Record Ownership
As of October 31, 2006, the following table includes shareholders of record with greater than 10% of the total outstanding shares of each respective Fund:
Fund | # of Shareholders | % | ||
Diversified Equity | 3 | 51.3 | ||
Special Growth | 3 | 41.4 | ||
Quantitative Equity | 3 | 49.9 | ||
International Securities | 3 | 49.4 | ||
Emerging Markets | 3 | 48.1 | ||
Real Estate Securities | 2 | 31.2 | ||
Short Duration Bond | 3 | 66.0 | ||
Diversified Bond | 2 | 58.6 | ||
Multistrategy Bond | 2 | 62.4 | ||
Tax Exempt Bond | 2 | 58.9 | ||
Tax-Managed Large Cap | 1 | 53.6 | ||
Tax-Managed Mid & Small Cap | 1 | 60.4 | ||
Select Growth | 1 | 34.3 | ||
Select Value | 1 | 30.5 |
10. 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 RIMCo 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.
Fund - % of Net Assets Securities | Acquisition Date | Principal Amount ($) or Shares | Cost per Unit $ | Cost (000) $ | Market Value (000) $ | |||||
Emerging Markets Fund - 0.3% | ||||||||||
Nova Tek OAO | 07/21/05 | 54,900 | 22.13 | 1,215 | 3,184 | |||||
3,184 | ||||||||||
Short Duration Bond Fund - 1.1% | ||||||||||
ASIF Global Financing | 10/25/06 | 2,984,000 | 98.46 | 2,938 | 2,938 | |||||
DG Funding Trust | 11/04/03 | 219 | 10,537.12 | 2,308 | 2,331 | |||||
Principal Life Global Funding I | 10/25/06 | 1,250,000 | 97.62 | 1,220 | 1,219 | |||||
SBI Heloc Trust | 09/28/06 | 700,000 | 100.00 | 700 | 700 | |||||
Unicredit Luxembourg Finance SA | 10/17/06 | 3,900,000 | 100.00 | 3,900 | 3,899 | |||||
VTB Capital SA | 10/27/06 | 700,000 | 100.00 | 700 | 700 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 1,258,112 | 100.04 | 1,259 | 1,258 | |||||
13,045 | ||||||||||
Diversified Bond Fund - 0.8% | ||||||||||
Aiful Corp. | 08/04/05 | 300,000 | 99.75 | 299 | 292 | |||||
DG Funding Trust | 11/04/03 | 240 | 10,594.65 | 2,543 | 2,553 | |||||
Glitnir Banki HF | 06/12/06 | 570,000 | 99.96 | 570 | 588 | |||||
GS Mortgage Securities Corp. II | 07/28/06 | 3,779,982 | 100.00 | 3,780 | 3,780 | |||||
ILFC E-Capital Trust II | 09/12/06 | 50,000 | 99.45 | 50 | 51 | |||||
Kaupthing Bank Hf | 09/28/06 | 110,000 | 99.46 | 109 | 110 | |||||
Kaupthing Bank Hf | 05/12/06 | 1,730,000 | 99.49 | 1,721 | 1,843 | |||||
Mastr Reperforming Loan Trust | 03/09/05 | 823,336 | 102.31 | 842 | 825 |
359
Table of Contents
Owens Corning, Inc. | 10/26/06 | 1,080,000 | 99.73 | 1,077 | 1,098 | |||||
Pemex Project Funding Master Trust | 01/27/06 | 390,000 | 99.64 | 389 | 393 | |||||
Rabobank Capital Funding II | 05/23/05 | 30,000 | 101.80 | 31 | 29 | |||||
Rabobank Capital Funding Trust | 05/19/05 | 60,000 | 100.77 | 60 | 58 | |||||
Resona Preferred Global Securities Cayman,Ltd. | 07/20/05 | 375,000 | 100.88 | 378 | 393 | |||||
SBI Heloc Trust | 09/28/06 | 700,000 | 100.00 | 700 | 700 | |||||
Shinsei Finance Cayman, Ltd. | 02/16/06 | 660,000 | 99.85 | 659 | 664 | |||||
Sigma Finance, Inc. | 07/26/06 | 970,000 | 100.00 | 970 | 970 | |||||
TNK-BP Finance SA | 07/13/06 | 430,000 | 99.75 | 429 | 450 | |||||
Unicredit Luxembourg Finance SA | 10/17/06 | 4,100,000 | 100.00 | 4,100 | 4,099 | |||||
VTB Capital SA | 10/27/06 | 800,000 | 100.00 | 800 | 800 | |||||
WEA Finance LLC/WCI Finance LLC | 09/21/06 | 2,575,000 | 99.77 | 2,569 | 2,579 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 1,328,007 | 100.04 | 1,328 | 1,328 | |||||
23,603 | ||||||||||
Multistrategy Bond Fund—1.1% | ||||||||||
BNP Paribas Capital Trust | 10/24/00 | 2,600,000 | 112.22 | 2,918 | 2,930 | |||||
Corp. Nacional del Cobre de Chile | 10/19/06 | 100,000 | 99.30 | 99 | 102 | |||||
DG Funding Trust | 11/04/03 | 361 | 10,584.58 | 3,821 | 3,841 | |||||
DNB Nor Bank ASA | 10/05/06 | 6,300,000 | 100.00 | 6,300 | 6,297 | |||||
Embraer Overseas, Ltd. | 10/20/06 | 495,000 | 99.29 | 491 | 495 | |||||
Glitnir Banki HF | 06/12/06 | 965,000 | 100.00 | 965 | 996 | |||||
Great West Life & Annuity Insurance Co. | 09/29/06 | 660,000 | 103.80 | 685 | 695 | |||||
GS Mortgage Securities Corp. | 03/13/06 | 6,191,871 | 4.03 | 250 | 250 | |||||
HBOS Treasury Services PLC | 10/10/06 | 1,600,000 | 100.04 | 1,601 | 1,601 | |||||
Host Hotels & Resorts, LP | 10/27/06 | 465,000 | 99.25 | 461 | 467 | |||||
Majapahit Holding BV | 10/11/06 | 480,000 | 99.39 | 477 | 486 | |||||
Mid-State Trust | 10/27/06 | 1,670,000 | 100.00 | 1,670 | 1,670 | |||||
Plains All American Pipeline, LP/PAA Finance Corp. | 10/23/06 | 380,000 | 99.17 | 377 | 389 | |||||
SB Treasury Co. LLC | 02/06/98 | 2,028,000 | 106.82 | 2,166 | 2,150 | |||||
Unicredit Luxembourg Finance SA | 02/06/98 | 1,245,000 | 100.00 | 1,245 | 1,245 | |||||
VTB Capital SA | 10/27/06 | 4,685,000 | 100.00 | 4,685 | 4,685 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 1,887,168 | 100.04 | 1,888 | 1,887 | |||||
West Corp. | 10/16/06 | 1,375,000 | 99.90 | 1,374 | 1,372 | |||||
31,558 | ||||||||||
Illiquid securities and restricted securities may be priced by the Funds using fair value procedures approved by the Board of Trustees.
11. | Dividends |
On November 1, 2006, the Board of Trustees of Russell Investment Company declared the following dividends from net investment income payable on November 6, 2006 to shareholders on record November 2, 2006.
Funds | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | ||||||
Diversified Bond - Class C | $ | 0.0735 | $ | — | $ | — | |||
Diversified Bond - Class E | 0.0890 | — | — | ||||||
Diversified Bond - Class S | 0.0945 | — | — | ||||||
Multistrategy Bond - Class C | 0.0352 | — | — | ||||||
Multistrategy Bond - Class E | 0.0421 | — | — | ||||||
Multistrategy Bond - Class S | 0.0444 | — | — | ||||||
Tax Exempt Bond - Class C | 0.0516 | — | — | ||||||
Tax Exempt Bond - Class E | 0.0657 | — | — | ||||||
Tax Exempt Bond - Class S | 0.0703 | — | — |
On December 1, 2006, the Board of Trustees of Russell Investment Company declared the following dividends from net investment income payable on December 6, 2006 to shareholders on record December 4, 2006.
360
Table of Contents
Funds | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | ||||||
Diversified Bond - Class C | $ | 0.0646 | $ | — | $ | — | |||
Diversified Bond - Class E | 0.0787 | — | — | ||||||
Diversified Bond - Class S | 0.0834 | — | — | ||||||
Multistrategy Bond - Class C | 0.0265 | — | — | ||||||
Multistrategy Bond - Class E | 0.0326 | — | — | ||||||
Multistrategy Bond - Class S | 0.0346 | — | — | ||||||
Tax Exempt Bond - Class C | 0.0467 | — | — | ||||||
Tax Exempt Bond - Class E | 0.0595 | — | — | ||||||
Tax Exempt Bond - Class S | 0.0637 | — | — |
On December 12, 2006, the Board of Trustees of Russell Investment Company declared the following dividends from net investment income and capital gains, respectively, payable on December 15, 2006 to shareholders on record December 13, 2006
Funds | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | ||||||
Diversified Equity - Class C | $ | 0.0368 | $ | 0.4638 | $ | 1.7347 | |||
Diversified Equity - Class E | 0.1265 | 0.4638 | 1.7347 | ||||||
Diversified Equity - Class S | 0.1579 | 0.4638 | 1.7347 | ||||||
Special Growth - Class C | — | 1.9379 | 5.4158 | ||||||
Special Growth - Class E | — | 1.9379 | 5.4158 | ||||||
Special Growth - Class S | — | 1.9379 | 5.4158 | ||||||
Quantitative Equity - Class C | 0.0426 | 0.3640 | 1.7603 | ||||||
Quantitative Equity - Class E | 0.1194 | 0.3640 | 1.7603 | ||||||
Quantitative Equity - Class S | 0.1462 | 0.3640 | 1.7603 | ||||||
International Securities - Class C | 1.0641 | 2.3318 | 4.4753 | ||||||
International Securities - Class E | 1.6040 | 2.3318 | 4.4753 | ||||||
International Securities - Class S | 1.7770 | 2.3318 | 4.4753 | ||||||
Emerging Markets - Class C | 0.2532 | 0.7332 | 2.3047 | ||||||
Emerging Markets - Class E | 0.4103 | 0.7332 | 2.3047 | ||||||
Emerging Markets - Class S | 0.4634 | 0.7332 | 2.3047 | ||||||
Real Estate Securities - Class C | — | 1.1244 | 3.6969 | ||||||
Real Estate Securities - Class E | 0.0248 | 1.1244 | 3.6969 | ||||||
Real Estate Securities - Class S | 0.0608 | 1.1244 | 3.6969 | ||||||
Short Duration Bond - Class C | 0.1629 | — | — | ||||||
Short Duration Bond - Class E | 0.1997 | — | — | ||||||
Short Duration Bond - Class S | 0.2116 | — | — | ||||||
Diversified Bond - Class C | 0.0705 | — | — | ||||||
Diversified Bond - Class E | 0.0859 | — | — | ||||||
Diversified Bond - Class S | 0.0912 | — | — | ||||||
Multistrategy Bond - Class C | 0.0223 | — | — | ||||||
Multistrategy Bond - Class E | 0.0289 | — | — | ||||||
Multistrategy Bond - Class S | 0.0312 | — | — | ||||||
Tax Exempt Bond - Class C | 0.0787 | — | — | ||||||
Tax Exempt Bond - Class E | 0.0927 | — | — | ||||||
Tax Exempt Bond - Class S | 0.0973 | — | — | ||||||
Tax-Managed Large Cap - Class C | — | — | — | ||||||
Tax-Managed Large Cap - Class E | 0.1157 | — | — | ||||||
Tax-Managed Large Cap - Class S | 0.1599 | — | — | ||||||
Tax-Managed Mid & Small Cap - Class C | — | — | 0.2013 | ||||||
Tax-Managed Mid & Small Cap - Class E | — | — | 0.2013 | ||||||
Tax-Managed Mid & Small Cap - Class S | — | — | 0.2013 | ||||||
Select Value - Class C | 0.0158 | 0.1337 | 0.6117 | ||||||
Select Value - Class E | 0.0421 | 0.1337 | 0.6117 | ||||||
Select Value - Class I | 0.0533 | 0.1337 | 0.6117 | ||||||
Select Value - Class S | 0.0473 | 0.1337 | 0.6117 |
Notes to Financial Statements
361
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Company (formerly Frank Russell Investment Company):
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Diversified Equity Fund, Special Growth Fund, Quantitative Equity Fund, International Securities Fund, Emerging Market Fund, Real Estate Securities Fund, Short Duration Bond Fund, Diversified Bond Fund, Multistrategy Bond Fund, Tax Exempt Bond Fund, Tax-Managed Large Cap Fund, Tax-Managed Mid & Small Cap Fund, Select Growth Fund and Select Value Fund (fourteen of the portfolios constituting Russell Investment Company, hereafter collectively referred to as the “Funds”) at October 31, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodians, brokers and transfer agents, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 22, 2006
362
Table of Contents
Tax Information — October 31, 2006 (Unaudited)
For the tax year ended October 31, 2006, the Funds hereby designate 100% or the maximum amount allowable, of its net taxable income as qualified dividends taxed at individual net capital gain rates.
For the tax year ended October 31, 2006, the Funds hereby designate under Section 871(k)(2)(c) of the Code, the maximum amount allowable as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(l)(A) of the Code. This applies to nonresident alien shareholders only.
The Form 1099 mailed to you in January 2007 will show the tax status of all distributions paid to your account in calendar year 2006.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate shareholders as follows:
Diversified Equity | 71.3 | % | |
Special Growth | 15.4 | % | |
Quantitative Equity | 97.5 | % | |
International Securities | 0.0 | % | |
Emerging Markets | 0.0 | % | |
Diversified Bond | 0.0 | % | |
Multistrategy Bond | 0.0 | % | |
Real Estate Securities | 0.0 | % | |
Short Duration Bond | 0.0 | % | |
Tax Exempt Bond | 0.0 | % | |
Tax Managed Large Cap | 100.0 | % | |
Select Value | 75.4 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain dividends for their taxable year ended October 31, 2006:
Diversified Equity | $ | 77,012,537 | |
Special Growth | 76,806,776 | ||
Quantitative Equity | 124,071,970 | ||
International Securities | 86,530,951 | ||
Emerging Markets | 21,459,465 | ||
Real Estate Securities | 123,352,626 | ||
Multistrategy Bond | 2,321,868 | ||
Select Value | 14,164,436 |
Of the dividends paid by the Tax Exempt Bond Fund from the net investment income for the taxable year ended October 31, 2006, 100% were exempt interest dividends which are tax exempt for the purposes of regular federal income tax, and for purposes of the federal alternative minimum tax.
Please consult a tax adviser for any questions about federal or state income tax laws.
The Emerging Markets Fund and International Securities Fund paid foreign taxes of $3,400,832 and $5,840,397 and recognized $23,117,721 and $79,708,521 of foreign source income, respectively, during the taxable year ended October 31, 2006, Pursuant to Section 853 of the Internal Revenue Code, the Emerging Markets Fund and International Securities Fund designates $0.0639 and $0.1314 per share of foreign taxes paid and $0.4341 and $1.7940. of gross income earned from foreign sources, respectively, in the taxable year ended October 31, 2006.
363
Table of Contents
Basis for Approval of Investment Advisory Contracts (Unaudited)
Approval of Investment Advisory Agreement
The Board of Trustees, including all of the Independent Trustees, last considered and approved the continuation of the advisory agreement with RIMCo (the “RIMCo Agreement”) and the portfolio management contract with each Money Manager of the Funds (collectively, the “portfolio management contracts”) at a meeting held 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 RIMCo. 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 RIMCo relating to the services provided by RIMCo (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 RIMCo 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 RIMCo (the “RIMCo Analysis” and, with the other information requested by the Independent Trustees or provided by RIMCo 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 RIMCo 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 RIMCo 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 RIMCo 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. RIMCo has engaged multiple Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible under the RIMCo Agreement for determining, implementing and maintaining the investment program for each Fund. Assets of each Fund have been allocated among the multiple Money Managers selected by RIMCo, subject to Board approval, for that Fund. RIMCo 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 RIMCo 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. RIMCo may also directly manage portions of a Fund during transitions between money managers.
RIMCo 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 RIMCo in accordance with the Fund’s applicable investment objective, policies and restrictions (each, a “segment”). RIMCo is responsible for communicating performance expectations to each Money Manager; supervising compliance by each Money Manager with each Fund’s investment objective and policies; authorizing Money Managers to engage in certain investment strategies for a Fund; and recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board the restructuring of Fund segments and additions of new Money Managers or replacements of existing Money Managers at any time when, based on RIMCo’s research and analysis, such actions are appropriate. RIMCo 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, RIMCo’s selection of Money Managers is made not only on the basis of performance considerations but anticipated compatibility with other Money Managers in the same Fund. The performance of individual Money Managers for a Fund may reflect the roles assigned to them by RIMCo in the Fund’s investment activities and
364
Table of Contents
any constraints placed by RIMCo 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 RIMCo 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.
The Board also considered that the prospectuses for the Funds and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for each Fund, rather than the investment 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 RIMCo 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 RIMCo 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 RIMCo Agreement, including the following:
1. | The nature, scope and quality of the services provided to the Fund by RIMCo; |
2. | The advisory fee paid by the Fund to RIMCo and the fact that it encompasses all investment advisory fees paid by the Fund, including the fees for any Money Managers of such Fund; |
3. | Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund, including any administrative, transfer agent, cash management and securities lending fees, soft dollar arrangements and commissions in connection with portfolio securities transactions; |
4. | Information provided by RIMCo as to expenses incurred by the Fund; and |
5. | Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from each Fund. |
At the April 18 Board meeting, RIMCo and management reviewed the reasonableness of the Funds’ investment advisory fees. In discussing whether the Funds’ performance supported these fees, RIMCo 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 RIMCo, these strategies may be expected to result, and for certain Funds during the periods covered by the Third-Party Information did result, in lower relative performance than that of some of their respective Comparable Funds. RIMCo 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 that its Comparable Funds may experience over time.
On the basis of the Agreement Renewal Information, including the RIMCo Analysis, and other information previously received by the Board from RIMCo during the course of the year or presented at the Board meeting by RIMCo, at the April 18 Board meeting, the Board, in respect of each Fund, found the advisory fee charged by RIMCo 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; RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; and RIMCo’s profitability with respect to each Fund was not excessive in light of the nature, scope and quality of the services provided by RIMCo.
At the April 18 Board meeting, the Board concluded that the performance of the Funds supported continuation of the RIMCo Agreement, again based upon the Agreement Renewal Information, including the RIMCo Analysis, and other information previously received by the Board from RIMCo during the course of the year or presented at the Board meeting by RIMCo. 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 RIMCo’s investment strategy of managing the Funds in a risk aware manner.
365
Table of Contents
At the April 18 Board Meeting, 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 investment advisory fees for each Fund, with the implementation of new breakpoints for the Multistrategy Bond Fund proposed by RIMCo at that meeting, appropriately reflect any economies of scale realized by that Fund. Its findings at the earlier meeting were based upon information and analyses prepared by RIMCo, 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 RIMCo 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. RIMCo 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 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.
At the April 18 Board meeting, in voting to approve the continuation of the RIMCo 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 RIMCo Agreement was in the best interests of the Funds and their respective shareholders.
At the April 18 Board meeting, with respect to the evaluation of the terms of portfolio management contracts with Money Managers, the Board received and considered information from RIMCo reporting for each Money Manager, among other things, the Money Manager’s performance over various periods; RIMCo’s assessment of the performance of each Money Manager; any significant business relationships between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the Funds’ underwriter; and RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate or to terminate the Money Manager. RIMCo recommended that each Money Manager be retained at its current fee rate. RIMCo has advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo is aware of the fees charged by Money Managers to other clients; and RIMCo believes that the fees agreed upon with Money Managers are reasonable in light of the anticipated quality of investment advisory services to be rendered. The Board accepted RIMCo’s explanation in light of the Board’s findings as to the aggregate investment advisory fees paid by each Fund and the fact that each Money Manager’s fee is paid by RIMCo.
Based substantially upon RIMCo’s recommendations together with the information received from RIMCo in support of its recommendations, at the April 18 meeting, 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.
During 2005 and 2006, the Trustees received proposals from RIMCo to manage directly approximately up to 10% of the assets of the Diversified Equity Fund, the Quantitative Equity Fund and the International Securities Fund (each a “Participating Fund”) utilizing a “select holdings strategy” pursuant to the terms of the RIMCo Agreement, the actual allocation to be determined by each Participating Fund’s RIMCo portfolio manager. Under this strategy, RIMCo analyzes the holdings of a Participating Fund’s Money Managers in their Fund segments to identify particular stocks that have been selected by multiple Money Managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo 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 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 RIMCo’s proposals, the Trustees received and considered information from RIMCo regarding the potential enhancements to the Participating Fund’s performance based upon RIMCo’s experience in employing the same strategy for other types of investment accounts under its management. The Trustees also considered that RIMCo 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 RIMCo generally and from the Participating Fund consequently may increase incrementally. The Board, however, considered RIMCo’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 RIMCo pursuant to the select holdings strategy; the fact that the aggregate investment advisory fees paid by the Participating Fund would not increase as a result of the implementation of the select holdings strategy. At the April 18, 2006 meeting, RIMCo advised the Board that the select holdings strategy has been implemented for the Diversified Equity and Quantitative Equity Funds, although a reasonable period of time is needed to evaluate fairly its impact on those Participating Funds’ performance. Based upon the information received from RIMCo during 2005 and 2006
366
Table of Contents
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 investment advisory fees paid to RIMCo by each such Fund under the RIMCo Agreement in connection with the select holdings strategy continue to be reasonable in light of the nature and anticipated quality of the investment advisory services to be rendered by RIMCo.
In their deliberations, the Trustees did not identify any particular information as to the RIMCo Agreement or, other than RIMCo’s recommendation, the portfolio management 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.
Also, at the meeting held on April 18, 2006, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Special Growth Fund and the Emerging Markets Fund. At a meeting held on May 23, 2006, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Tax-Managed Large Cap Fund and Multistrategy Bond Fund. At that same meeting, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Diversified Equity Fund resulting from a change of control of one of this Fund’s Money Managers. At a meeting held on August 22, 2006 the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Select Growth 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 RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of profitability to the evaluation of portfolio management contracts with money managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’s belief that the proposed investment advisory fees would be reasonable in light of the anticipated quality of investment advisory services to be rendered. The Trustees also considered their findings at their April 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 RIMCo.
At a meeting held on December 4, 2006, RIMCo advised the Board that the select holdings strategy was implemented in the International Securities Fund in the third quarter of 2006.
Shareholder Requests for Additional Information — October 31, 2006
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 fiscal year. These reports are available (i) free of charge, upon request, by calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the Securities and Exchange Commission’s website at www.sec.gov, and (iv) at the Securities and Exchange Commission’s public reference room.
The Board has delegated to RIMCo, as RIC’s investment adviser, the primary responsibility for monitoring, evaluating and voting proxies solicited by or with respect to issuers of securities in which assets of the Funds may be invested. RIMCo has established a proxy voting committee (“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, (ii) at www.russell.com, and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
To reduce expenses, we may mail only one copy of the Fund’s prospectus and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call us at (800) 787-7354 or contact your financial institution and we will begin sending you individual copies thirty days after receiving your request.
If you wish to receive the Fund’s prospectus and each annual and semi-annual report electronically, please call us at (800) 787-7354 or contact your financial institution.
367
Table of Contents
Disclosure of Information about Fund Directors — October 31, 2006 (Unaudited)
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 34 funds, and Russell Investment Funds (“RIF”), which has five funds. Each of the trustees is a trustee of both RIC 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.
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | |||||
INTERESTED TRUSTEES | ||||||||||
* Michael J.A. Phillips, Born January 20, 1948
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Chairman of the Board, FRC • 1990-2003, President, FRC • 1993-2003, CEO, FRC • Trustee, RIC and RIF • Director, RTC; Russell Investments (Suisse) S.A. (global investment services); Russell Investments Limited (consultant to institutional investors in Europe and the UK) • Chairman of the Board and President, Russell 20-20 Association; and Russell Investments Delaware Inc. (general partner in various limited partnerships (“RIDI”)) | 39 | None | |||||
INDEPENDENT TRUSTEES | ||||||||||
Thaddas L. Alston, Born April 7, 1945 909 A Street Tacoma, Washington 98402-1616 | Trustee since 2006 | Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. | 39 | None | |||||
Paul E. Anderson, Born October 15, 1931 909 A Street Tacoma, Washington 98402-1616 | Trustee since 1984 | Appointed until successor is duly elected and qualified | • President, Anderson Management Group LLC (private investments consulting) • February 2002 to June 2005, Lead Trustee, RIC and RIF | 39 | None | |||||
Chairman of the Nominating and Governance Committtee since 2006 | Appointed until successor is duly elected and qualified | |||||||||
Kristianne Blake, Born January 22, 1954 | Trustee since 2000 | Appointed until successor is duly elected and qualified | • President, Kristianne Gates Blake, P.S. (accounting services) • Director and Chairman of the Audit Committee, Avista Corp. | 39 | • Trustee WM Group of Funds (investment company) • Director, Avista Corp. | |||||
909 A Street Tacoma, Washington 98402-1616 | Chairperson since 2005 | Annual | • Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds • February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF | |||||||
Daniel P. Connealy Born June 6, 1946 909 A Street Tacoma, Washington 98402-1616 | Trustee since 2003 | Appointed until successor is duly elected and qualified | • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc. • 2003, Retired | 39 | None | |||||
Chairman of Audit Committee since 2005 | Appointed until successor is duly elected and qualified | • 2001-2003, Vice President and Chief Financial Officer, Janus Capital Group Inc. • 1979-2001, Audit and Accounting Partner, PricewaterhouseCoopers LLP |
368
Table of Contents
Jonathan Fine Born July 8, 1954
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 39 | None | |||||
Raymond P. Tennison, Jr. Born December 21, 1955
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2000 | Appointed until successor is duly elected and qualified | • President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 39 | None | |||||
Jack Thompson, Born March 21, 1949
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to present, Independent Board Chair and Chairman of the Audit Committee, Sparx Japan Fund • May 1999 to May 2003, President, Chief Executive Officer and Director, Berger Financial Group, LLC • May 1999 to May 2003, President and Trustee, Berger Funds | 39 | Director, Sparx Japan Fund | |||||
Julie W. Weston, Born October 2, 1943
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Retired since 2000 • 1987 to 2002, Director, Smith Barney Fundamental Value Fund | 39 | None | |||||
Chairperson of the Investment Committee since 2006 | Appointed until successor is duly elected and qualified | |||||||||
TRUSTEES EMERITUS | ||||||||||
*George F. Russell, Jr., Born July 3, 1932
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo • Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non-depository trust company (“RTC”)) • Chairman, Sunshine Management Services, LLC (investment adviser) | 39 | None | |||||
Paul Anton, Ph.D., Born December 1, 1919
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2003 | Five year term | • Retired since 1997 • Trustee of RIC and RIF until 2002 | 39 | None | |||||
William E. Baxter, Born June 8, 1925
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1986 • Trustee of RIC and RIF until 2004 | 39 | None | |||||
Lee C. Gingrich, Born October 6, 1930
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2006 | Five year term | • Retired since 1995 • Trustee of RIC and RIF until 2005 • Chairman of the Nominating and Governance Committee 2001-2005 | 39 | None | |||||
Eleanor W. Palmer, Born May 5, 1926
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1981 • Trustee of RIC and RIF until 2004 | 39 | None |
369
Table of Contents
OFFICERS | ||||||||||
Cheryl Wichers Born December 16, 1966
909 A Street Tacoma, Washington 98402-1616 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | • Chief Compliance Officer, RIC • Chief Compliance Officer, RIF • Chief Compliance Officer, RIMCo • April 2002-May 2005, Manager, Global Regulatory Policy • 1998-2002, Compliance Supervisor, Russell Investment Group | |||||||
Greg J. Stark, Born May 3, 1968
909 A Street Tacoma, Washington 98402-1616 | President and Chief Executive Officer since 2004 | Until successor is chosen and qualified by Trustees | • President and CEO, RIC and RIF • Chairman of the Board, President and CEO, RIMCo • Chairman of the Board, President and CEO, RFD • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • Until 2004, Managing Director of Individual Investor Services, FRC • 2000 to 2004, Managing Director, Sales and Client Service, RIMCo | |||||||
Mark E. Swanson, Born November 26, 1963
909 A Street Tacoma, Washington 98402-1616 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | • Treasurer, Chief Accounting Officer and CFO, RIC and RIF • Director, Funds Administration, RIMCo, RTC and RFD • Treasurer and Principal Accounting Officer, SSgA Funds | |||||||
Thomas F. Hanly, Born November 17, 1964
909 A Street Tacoma, Washington 98402-1616 | Chief Investment Officer since 2004 | Until removed by Trustees | • Chief Investment Officer, RIC, RIF, FRC, RTC • Director and Chief Investment Officer, RIMCo and RFD • 1999 to 2003, Chief Financial Officer, FRC, RIC and RIF | |||||||
Karl J. Ege, Born October 8, 1941
909 A Street Tacoma, Washington 98402-1616 | Secretary since 1994 | Until successor is chosen and qualified by Trustees | • General Counsel and Managing Director of Law and Government Affairs, Secretary, FRC |
370
Table of Contents
Russell Funds
Russell Investment Company
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
Advisor, Administrator, Transfer and Dividend Disbursing Agent
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
371
Table of Contents
Custodian
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
Office of Shareholder Inquiries
909 A Street
Tacoma, WA 98402
(800) 787-7354
Legal Counsel
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
Distributor
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
1420 5th Avenue
Suite 1900
Seattle, WA 98101
Money Managers as of October 31, 2006
Diversified Equity Fund
AllianceBernstein, L.P., New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Montag & Caldwell, Inc., Atlanta, GA
Schneider Capital Management, Wayne, PA
Suffolk Capital Management, LLC, New York, NY
372
Table of Contents
Turner Investment Partners, Inc., Berwyn, PA
Special Growth Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners, LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
PanAgora Asset Management, Inc., Boston, MA
Tygh Capital Management, Inc., Portland, OR
Quantitative Equity Fund
Aronson+Johnson+Ortiz, L.P., Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
International Securities Fund
AllianceBernstein, L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
Axiom International Investors, LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Emerging Markets Fund
AllianceBernstein, L.P., New York, NY
Arrowstreet Capital, L.P., Cambridge, MA
373
Table of Contents
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Somerville, NJ
T. Rowe Price International, Inc., Baltimore, MD
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities, LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund through its INVESCO Real Estate division, Dallas, TX
RREEF America, LLC, Chicago, IL
Short Duration Bond Fund
Merganser Capital Management, L.P., Boston, MA
Pacific Investment Management Company, LLC, Newport Beach, CA
STW Fixed Income Management, Carpinteria, CA
Diversified Bond Fund
Bear Stearns Asset Management, Inc., New York, NY
Lehman Brothers Asset Management, LLC, Chicago, IL
Pacific Investment Management Company, LLC, Newport Beach, CA
Western Asset Management, Pasadena, CA
Western Asset Management Company Ltd., London England
Multistrategy Bond Fund
Bear Stearns Asset Management, Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust, Philadelphia, PA
Goldman Sachs Asset Management, L.P., New York, NY
Morgan Stanley Investment Management, Inc.,
West Conshohocken, PA
Pacific Investment Management Company, LLC,
Newport Beach, CA
Tax Exempt Bond Fund
Delaware Management Company, a series of Delaware Management Business Trust, Philadelphia, PA
Standish Mellon Asset Management Company, LLC, Boston, MA
374
Table of Contents
Tax-Managed Large Cap Fund
J.P. Morgan Investment Management, Inc., New York, NY
Nicholas-Applegate Capital Management, LLC, San Diego, CA
Palisades Investment Partners, LLC, Santa Monica, CA
Sands Capital Management, Inc., Arlington, VA
Turner Investment Partners, Inc., Berwyn, PA
Tax-Managed Mid & Small Cap Fund
Chartwell Investment Partners, Berwyn, PA
Netols Asset Management, Inc., Mequon, WI
Parametric Portfolio Associates, LLC, Seattle, WA
Transamerica Investment Management, LLC, Los Angeles, CA
Turner Investment Partners, Inc., Berwyn, PA
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
CapitalWorks Investment Partners, LLC, San Diego, CA
Delaware Management Company, a series of Delaware Management Business Trust, Philadelphia, PA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
Sustainable Growth Advisers, L.P., Stamford, CT
Turner Investment Partners, Inc., Berwyn, PA
Select Value Fund
DePrince, Race & Zollo, Inc., Orlando, FL
Iridian Asset Management, LLC, Westport, CT
MFS Institutional Advisors, Inc., Boston, MA
Netols Asset Management, Inc., Mequon, WI
Systematic Financial Management, L.P., Teaneck, NJ
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 Company. Such offering is made only by Prospectus, which includes details as to offering price and other material information.
375
Table of Contents
Russell Investment Company
Russell Investment Company is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on eleven of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
Table of Contents
[Blank Page]
2
Table of Contents
Institutional Funds
Annual Report
October 31, 2006
Table of Contents
Page | ||
5 | ||
6 | ||
10 | ||
25 | ||
49 | ||
67 | ||
97 | ||
144 | ||
208 | ||
226 | ||
236 | ||
265 | ||
278 | ||
291 | ||
293 | ||
298 | ||
301 | ||
305 | ||
312 | ||
313 | ||
335 | ||
336 | ||
337 | ||
341 | ||
342 | ||
3
Table of Contents
Russell Investment Company - Institutional Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Fund Distributors, Inc. member NASD, part of Russell Investment Group.
Effective July 1, 2006 Frank Russell Investment Company changed its name to Russell Investment Company (“RIC”). RIC Funds are distributed by Russell Fund Distributors, Inc., and advised by Russell Investment Management Company (“RIMCo”). Effective July 1, 2006 RIMCo changed its name from Frank Russell Investment Management Company.
Russell Investment Group and Standard & Poor’s Corporation are the owners of the trademarks, service marks, and copyrights related to their respective indexes. Index performance is not indicative of the performance of any specific investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current to the most recent month-end performance data may be obtained by visiting www.russell.com/us/fundperformance.
4
Table of Contents
As you read Russell Investment Company’s 2006 Annual Report, we would like to take this opportunity to review our investment approach, which is designed to help long-term investors build financial security and save for retirement.
Our process is complex, but our goal is simple. We evaluate and select money managers in each asset class and within each investment style. Then we build diversified mutual funds aimed at providing long-term, consistent results.
Russell guides investments for some of the world’s largest investors—and we provide that same manager research to our mutual funds, which are available to individual investors.
Thank you for your continued support and for choosing Russell, GLOBAL LEADERS IN MULTI-MANAGER INVESTING.
Regards,
(/s/ GREG STARK)
Greg Stark
Chief Executive Officer, Chairman and President.
5
Table of Contents
Market Summary as of October 31, 2006 (Unaudited)
U.S. Equity Markets
For the fiscal year ending October 31, 2006, investors were preoccupied by The Federal Reserve Board’s actions and commentary. In the first half of the year, when both economic growth and inflation were running above the Fed’s comfort levels, the U.S. stock market was led by highly cyclical stocks, especially those tied to the strong performing commodities market. The stock market rewarded companies that were generating strong earnings growth in an economy that was growing at unsustainable levels.
However, the cumulative effects of rising energy prices and interest rates, and a notable slowdown in housing activity eventually resulted in the moderation in economic activity that the Fed had been seeking. By late spring and early summer 2006, investors were now asking whether the Fed had engineered a hard landing for the economy and whether a housing-led recession was unavoidable. This marked change in investor sentiment was reflected in a significant leadership reversal with lower risk, recession resistant stocks gaining favor. Now, the market favored stocks with the highest dividend yields as companies with above-average earnings growth prospects lost favor. Interestingly, however, overall market indexes showed impressive gains during the fiscal year, as the market responded to both sensational corporate earnings and evidence that the Fed’s tightening cycle had ended. For the fiscal year ending October 31, 2006, the Russell 3000(R) Index returned 16.37%.
Despite the backdrop of strong corporate earnings (that have grown at double digit rates for the last three years), overall market leadership in this period was highly defensive. Stocks with high dividend yields substantially outperformed lower yielding stocks. Companies with well above-average growth rates lagged, in favor of slower growing firms. This investor preference for yield over growth was reflected in style leadership for the fiscal year, as the Russell 1000 Value(R) Index (+21.45%) outperformed the Russell 1000 Growth(R) Index (+10.86%). This extended the multi-year outperformance of value stocks and resulted in a further compression of valuations among companies (i.e., the dispersion of P/E multiples within the stock market).
Some of the value leadership is attributable to the market’s preference for yield and interest rate sensitivity as investors digested the Fed’s interest rate pause. Among the best sector performers were utilities (+26.77%) and financial services (+19.77%). Meanwhile, REITs returned an extraordinary 36.37%. In contrast, traditional growth sector returns within the Russell 1000(R) Index such as technology (+11.68%), health care (+10.34%), and consumer discretionary (+13.68%), while delivering positive absolute returns, lagged the Russell 1000(R) Index.
Market leadership continued to favor smaller and medium sized companies, although the spread narrowed as investors grew more defensive. The Russell 1000(R) Index (an index of large and medium capitalization companies) returned 16.02% versus 19.96% for the Russell 2000(R) Index (an index of small capitalization companies).
The fiscal year was extremely challenging for active money managers across the style spectrum. The Lipper Large-Cap Core Funds Average trailed the Russell 1000(R) Index by 1.81%, the Lipper Large Cap Value Funds Average lagged the Russell 1000(R) Value Index by 3.72%, the Lipper Large Cap Growth Funds Average underperformed the Russell 1000(R) Growth Index by 3.44%, and the Lipper Small-Cap Core Funds Average trailed the Russell 2000(R) by 3.56%. Even though the Lipper returns are net of fees, the actively managed mutual funds still trailed the indexes by a large margin.
The main contributors to the difficult active management environment were the significant out-performance of higher yielding stocks that many value investors considered overvalued and the poor returns of the faster growing companies within the growth arena. With the narrow valuation spreads among companies of differing growth rates, active money managers were positioned toward “growthier” companies within their benchmarks. The market did not reward this positioning during this period.
6
Table of Contents
U.S. Real Estate Markets
During the past fiscal year, the public real estate investment trust (REIT) market again exhibited strong performance. REITs, as measured by the FTSE-NAREIT US Equity REIT Index (NAREIT Equity Index), posted a 36.37% total return for the fiscal year ending October 31, 2006. Several factors helped boost REIT performance including robust demand for real estate by private institutional investors, a wave of REIT privatizations and an overall equity market that continued to reward higher yielding stocks.
Apartment, office and industrial were the best performing sectors for the year; all generating total returns in excess of 40%. The specialty sector, which includes several timber companies, and the manufactured home sub-sector were the poorest performers.
Over the first ten months of calendar year 2006, there were ten major REIT mergers/privatizations transactions with a total value over $37 billion. These transactions, in which the acquirers, mainly private buyers, purchase all of the outstanding publicly traded shares of a REIT, have helped increase REIT share prices to higher levels. The level of transaction activity in the first 10 months of 2006 increased significantly over the entire year of 2005, which saw approximately $27 billion in transactions. Putting this transaction volume in perspective, with the market capitalization of the NAREIT Equity Index at approximately $387 billion on October 31, 2006, about 10% of the REIT industry was sold to a combination of public and private buyers. When compared to REIT share prices prior to the announcements, the 2006 transactions averaged an overall 8.60% premium. Privatization activity was driven by well-capitalized buyers, including so called “club deals” involving more than one buyer and motivated sellers willing to sell their companies into a strong real estate market to take advantage of the attractive 15% capital gains tax rate. The majority of activity was focused among office companies, which accounted for approximately 60% of the 2006 transaction value. The office sector’s strong performance was driven by improvement in property fundamentals and deal activity.
At the end of the fiscal year, while REITs were trading near private market valuation levels, they were also trading at the top of historic ranges versus stocks and bonds.
Non-U.S. Equity Markets
Non-U.S. stocks gained 28.04% as measured by the MSCI EAFE Index (gross) for the fiscal year ending October 31, 2006. Non-U.S. stocks were boosted as the US dollar weakened over the course of the fiscal year. In local currency, the MSCI EAFE Index rose 22.41% over the 12-month period.
Non-U.S. stocks benefited from continued global growth and strong corporate earnings. The world became more integrated; however, the U.S. economy and markets continued to drive the prospects for global growth. There was evidence of this as the U.S. interest rate cycle and direction of the Federal Reserve affected global markets. Growth in emerging economies like India and China also had an increasing impact on the strength of developed markets through their demand for goods and infrastructure development.
After strong gains in 2005, MSCI Japan Index lagged other major non-U.S. markets in the fiscal year, returning 16.63%. Investor sentiment waned towards Japanese stocks on fears of a deceleration in the economy. Elsewhere in the region, MSCI Pacific ex Japan Index gained 28.73% due to strong gains in Australian and Singapore companies.
Europe, as represented by the MSCI Europe Index, outperformed the Pacific Basin, as represented by the MSCI Pacific Basin Index, returning 32.32% over the fiscal year. Across Europe, the best performing sectors were utilities and materials, both up over 50%. By country, smaller markets such as Spain and the Netherlands fared best. Helped by strong performance of health care, materials and utilities stocks, Europe’s larger markets of Germany and France delivered returns above the index. Elsewhere, MSCI United Kingdom Index lagged Europe with a gain of 28.55%. The U.K. underperformed the rest of Europe due to weakness in its energy and telecommunication sectors. The Bank of England raised interest rates due to greater inflationary pressures as small signs of economic improvement became evident over the fiscal year.
From the sector perspective, utilities performed best across the non-U.S. developed markets, returning 42.50%, as represented by the MSCI EAFE Index, largely due to a mid-year shift in market sentiment whereby defensive-oriented, high dividend yielding stocks gained favor. The materials sector, led by metals and mining stocks, was also a strong performer, up 38.79% as measured by the materials sector grouping based on the Global Industry Classification Standard (GICS) definitions. The financial sector also performed well returning 34.16% as measured by the financials sector grouping based on the GICS definitions; whereas, technology and energy were the worst performing sectors over the period, with gains of only 14.04% and 13.23%, respectively, as measured by the technology and energy sector groupings based on the GICS definitions. Energy stocks fell from mid-July to late September as the price of oil fell dramatically, from nearly $80 per barrel to less than $60.
7
Table of Contents
With the value segment of MSCI EAFE Index more weighted towards industrial cyclicals (materials) and financials, the market environment was slightly more favorable for value-oriented investors. The MSCI EAFE Value Index rose 31.66%, compared with 24.41% for the MSCI EAFE Growth Index. Investors continued to favor smaller capitalization stocks over larger capitalization stocks with the S&P/Citigroup EMI World ex US Index (an index of smaller capitalization companies) up 32.03% in the period versus the S&P/Citigroup PMI World ex US (in index of larger capitalization companies) up 27.47%.
Markets not represented in the MSCI EAFE Index, but commonly included in non-U.S. stock funds, offered significant opportunities for gains during the period. Emerging markets outperformed their developed counterparts, as the MSCI Emerging Markets Index rose 35.42%. Emerging markets countries benefited from the materials and industrials sectors. Canadian stocks rose 27.50% (MSCI Canada Index) during the period.
Emerging Markets
During the fiscal year, the MSCI Emerging Markets Index (gross) posted strong returns of 35.42%, outperforming developed markets as measured by the MSCI World Index Free which returned 21.91%. The emerging markets asset class performed strongly in the first half of the fiscal year until early May 2006. The strong returns were driven by strong performance of large capitalization emerging markets stocks, significant asset inflows and outperformance of energy and material stocks on the back of strong commodity prices. In early May, there was a strong market reversal, which brought with it an increase in risk aversion. Investors re-focused on global inflation and interest rate concerns and commodity prices slipped from their record highs. The markets that had performed well earlier in the year were subject to the largest sell-offs and emerging markets fell more than 24% from its high point. In mid-June, the markets stabilized and recovered most of the losses from the sell-off. Contained U.S. inflation and expectations that global monetary tightening had peaked outweighed concerns of a U.S. economic slowdown and gave a positive backdrop for improved performance in emerging markets equities.
In terms of regions, both Asia (+38.71% as measured by the MSCI EM Asia Index) and Latin America (+38.47% as measured by the MSCI EM Latin America Index) were strong performers. The MSCI EM (Emerging Markets) Europe, Middle East and Africa Index (EMEA) underperformed the MSCI EM (Emerging Markets) Index, but still posted a respectable return of 27.47%. Some of the smaller markets such as Indonesia, Morocco, Peru and the Philippines, were the best performers, each returning more than 59% as measured by the MSCI Indonesia, MSCI Morocco, MSCI Peru and MSCI Philippines Indexes, respectively. However, some large markets, such as India, which enjoyed strong macroeconomic strength (+66.79% as measured by the MSCI India Index), China (+58.94% as measured by the MSCI China Index), and Russia (+54.76% as measured by the MSCI Russia Index) also posted strong returns. MSCI Barra increased Russia’s weight in the MSCI EM (Emerging Markets) Index twice over the fiscal year, and at the end of the period, Russia was the third largest country weight in that Index. The small market of Jordan was the only country with negative absolute returns, falling 27.45% as measured by the MSCI Jordan Index. Other notable relative underperformers included Turkey (+17.07% as measured by the MSCI Turkey Index), Egypt (+22.48% as measured by the MSCI Egypt Index), South Africa (+25.54% as measured by the MSCI South Africa Index), and Taiwan (+26.06% as measured by the MSCI Taiwan Index). Returns from Turkey and South Africa were dampened by their currencies, which fell more than 7% each. Israel (+4.14% as measured by the MSCI Israel Index) also underperformed following Prime Minister Ariel Sharon’s stroke and Islamist militant group Hamas’ Palestinian parliamentary elections victory.
Currencies were broadly strong against the U.S. dollar with some, such as the Korean won, up more than 10%.
The industrial sectors performed well. Although consumer discretionary and technology stocks underperformed the index, they still returned more than 25% in absolute terms. The small sector of health care was notably weak returning only 3.99% due to stock-specific concerns of the large cap company, Teva Pharmaceuticals.
U.S. Fixed Income Markets
The Federal Reserve Board’s interest rate hikes were one of the biggest factors impacting the fixed income markets. The Fed raised the target fed funds rate (the interest rate at which depository institutions lend money at the Fed to other depository institutions overnight) six times throughout the fiscal year, from 3.75% at the end of October 2005 to 5.25% one year later. The Fed’s interest rate
8
Table of Contents
hikes reflected a continued attempt to move toward a neutral monetary policy to counter rising inflationary pressures. Despite inflation measures that remained elevated and above the Fed’s comfort level, the Fed’s highly anticipated pause, after 17 consecutive rate hikes since June 2004, came in August,. The Fed cited moderating economic growth and the cumulative effects of previous interest rate hikes as impetuses for the pause. The Treasury yield curve moved markedly from month to month as investors tried to reconcile conflicting economic signals (e.g., a slowing housing market, rising (and falling) commodity prices, wage inflation, and productivity concerns). On a rolling one-year basis, however, shorter-term rates followed Fed policy, while longer-term rates remained virtually unchanged. This resulted in an upward-sloping, normal yield curve becoming inverted (when short term interest rates exceed long rates) by fiscal year end. With nearly static intermediate and long-term rates, investment grade bonds relied upon higher coupon rates in order to provide yield higher than US Treasuries. The Lehman Brothers US Aggregate Bond Index, a broad measure of US investment grade fixed income securities, returned 5.19% for the fiscal year ending October 31, 2006.
Among sectors, the riskier sectors continued to post strong performance. As in the three prior years, high yield and emerging market debt bonds outperformed other bond sectors. High yield bonds continued to benefit from record low corporate default levels, as well as strong technical demand for increased yield. The high yield bond sector, as represented by the Lehman Brothers US Corporate High Yield Index, returned 10.31% over the year compared to 4.43% for the Lehman Brothers US Treasury Index. Emerging market debt performed well due in part to commodity price increases, credit ratings upgrades and relatively non-turbulent election cycles. Emerging market bonds, as represented by the Lehman Brothers Emerging Markets (US Dollar) Index, returned 12.02%.
Investment grade corporate bonds benefited from the same factors that drove the high yield market. For the fiscal year, the Lehman Brothers US Credit Index returned 5.36%. Despite another year of increased regulatory scrutiny of the mortgage market, mortgage securities continued to do well. The Lehman Brothers MBS Fixed Rate Index returned 5.68%. As the fiscal year ended, yield spreads between corporate bonds and mortgages relative to Treasuries continued to be at historical lows. This reflected a search for yield even in the face of a bondholder-unfriendly market environment with loosening underwriting standards, share repurchases and escalating leveraged buyout activity.
9
Table of Contents
Russell Investment Company Equity I Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Equity I - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.34 | % | |
5 Years | 7.73 | %§ | |
10 Years | 7.82 | %§ |
Equity I - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.07 | % | |
5 Years | 7.47 | %§ | |
10 Years | 7.63 | %§ |
Equity I - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 14.48 | % | |
5 Years | 7.81 | %§ | |
10 Years | 7.87 | %§ |
Russell 1000(R) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.02 | % | |
5 Years | 7.92 | %§ | |
10 Years | 8.87 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Equity I Fund Class I, Class E and Class Y gained 14.34%, 14.07% and 14.48%, respectively. This compared to the Russell 1000(R) Index, which gained 16.02% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Core Funds Average returned 13.60%. This result serves as a peer comparison and is expressed net of operating expenses.
10
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The market’s preference during the year for stocks with high dividend yields and its relative disfavor of companies with above-average growth rates and strong earnings trends represented a difficult environment for the Fund, given the Fund’s focus on undervalued companies with above-average growth rates. After many years of value stocks outpacing growth stocks, growth stocks are selling at unusually low valuation premiums. The Fund’s preference for growth stocks was unrewarded in the period as the market favored high dividend yield stocks. The Fund’s performance was competitive to its peers, however, during this difficult environment for active money managers.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
During the past year, the Fund’s money managers maintained their preference for companies with above-average growth rates that were selling at attractive valuations. Additionally, Fund money managers emphasized companies showing strong current earnings trends. With an anticipated slowdown in the economy and corporate earnings growth rates, the Fund’s money managers believed that the market would reward growth companies that could sustain their growth rates. However, with the market’s preference for yield rather than growth and continued strong corporate earnings, the relative advantage of undervalued growth companies was not rewarded.
The main driver of the Fund’s underperformance relative to the benchmark was its underweight in high dividend yield groups such as utilities and REITs and its overweight in growth companies. Industry selection also detracted from relative performance with the Fund being overweight in underperforming industry groups, such as communications technology, biotechnology, health services, and oil service. Finally, the market did not reward companies that generated positive earnings surprises or raised their earnings forecasts. The Fund’s money managers focused on such companies, which detracted from relative performance.
At the money manager level, AllianceBernstein L.P., MFS Institutional Advisors, Inc., Schneider Capital Management Corporation, and Suffolk Capital Management LLC outperformed their benchmarks due to favorable stock selection. The market environment was challenging for the Fund’s growth money managers such as Ark Asset Management Co., Inc., Marsico Capital Management, LLC, Turner Investment Partners, Inc. and Montag & Caldwell, Inc. and they underperformed their benchmarks.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers in their Fund segments to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. As the Fund underperformed for the period, the select holdings strategy also underperformed the benchmark. The strategy’s overweight to under-valued growth companies was not rewarded during the period.
At the stock selection level, the Fund benefited from overweighted positions in strong performers such as Goldman Sachs, CSX, Kohls, McDonald’s, and Google, as well as from underweighted positions in underperformers such as Intel and Dell. However, overweights in underperformers such as Genentech, UnitedHealth, Qualcomm, and JDS Uniphase, as well as underweights in strong performers such as AT&T, ExxonMobil, and Microsoft, detracted from performance.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
Ark Asset Management Co., Inc. | Growth | |
Institutional Capital Corporation | Value | |
Marsico Capital Management, LLC | Growth | |
MFS Institutional Advisors, Inc. | Value | |
Montag & Caldwell, Inc. | Growth |
11
Table of Contents
Schneider Capital Management | Value | |
Suffolk Capital Management, LLC | Market-Oriented | |
Turner Investment Partners, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments from income dividends and capital gain distributions reinvested as of the ex-dividend dates. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on March 29, 2000. The returns shown for Class Y Shares prior to March 29, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
12
Table of Contents
Russell Investment Company Equity I Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,028.40 | $ | 1,020.47 | ||
Expenses Paid During Period* | $ | 4.81 | $ | 4.79 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.94% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
13
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,029.70 | $ | 1,021.63 | ||
Expenses Paid During Period* | $ | 3.63 | $ | 3.62 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.71% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,030.50 | $ | 1,021.98 | ||
Expenses Paid During Period* | $ | 3.28 | $ | 3.26 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
14
Table of Contents
Russell Investment Company Equity I Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 93.3% | ||||
Auto and Transportation - 3.8% | ||||
American Axle & Manufacturing Holdings, Inc. (Ñ) | 14,200 | 266 | ||
Autoliv, Inc. | 8,800 | 501 | ||
BorgWarner, Inc. | 7,000 | 403 | ||
Burlington Northern Santa Fe Corp. | 136,118 | 10,553 | ||
CH Robinson Worldwide, Inc. | 43,650 | 1,822 | ||
CSX Corp. | 414,800 | 14,796 | ||
FedEx Corp. | 95,641 | 10,955 | ||
Ford Motor Co. (Ñ) | 17,400 | 144 | ||
General Motors Corp. (Ñ) | 18,500 | 646 | ||
Lear Corp. | 1,400 | 42 | ||
Magna International, Inc. Class A | 2,800 | 210 | ||
Navistar International Corp. (Æ) | 135,450 | 3,756 | ||
Norfolk Southern Corp. | 44,500 | 2,339 | ||
Southwest Airlines Co. | 36,650 | 551 | ||
Toyota Motor Corp. - ADR | 56,653 | 6,685 | ||
Union Pacific Corp. | 53,342 | 4,834 | ||
United Parcel Service, Inc. Class B | 10,100 | 761 | ||
US Airways Group, Inc. (Æ)(Ñ) | 33,600 | 1,675 | ||
Visteon Corp. (Æ) | 253,400 | 1,870 | ||
62,809 | ||||
Consumer Discretionary - 13.8% | ||||
Accenture, Ltd. Class A | 70,450 | 2,319 | ||
Activision, Inc. (Æ) | 48,250 | 744 | ||
Best Buy Co., Inc. | 14,900 | 823 | ||
Big Lots, Inc. (Æ) | 17,400 | 367 | ||
Black & Decker Corp. | 6,400 | 537 | ||
Carnival Corp. | 23,950 | 1,169 | ||
CBS Corp. Class B | 43,200 | 1,250 | ||
Coach, Inc. (Æ) | 151,070 | 5,988 | ||
Costco Wholesale Corp. | 79,900 | 4,265 | ||
Dollar General Corp. | 17,700 | 248 | ||
eBay, Inc. (Æ) | 38,800 | 1,247 | ||
Electronic Arts, Inc. (Æ) | 142,300 | 7,526 | ||
Estee Lauder Cos., Inc. (The) Class A | 29,800 | 1,204 | ||
Family Dollar Stores, Inc. | 8,400 | 247 | ||
Federated Department Stores, Inc. | 76,000 | 3,337 | ||
Focus Media Holding, Ltd. - ADR (Æ)(Ñ) | 25,250 | 1,336 | ||
Four Seasons Hotels, Inc. | 52,879 | 3,392 | ||
GameStop Corp. Class A (Æ)(Ñ) | 33,050 | 1,688 | ||
Gannett Co., Inc. | 16,800 | 994 | ||
Gap, Inc. (The) | 104,000 | 2,186 | ||
Google, Inc. Class A (Æ) | 52,658 | 25,086 | ||
Harman International Industries, Inc. | 12,600 | 1,290 | ||
Hewitt Associates, Inc. Class A (Æ) | 120,000 | 3,004 |
15
Table of Contents
Hilton Hotels Corp. | 225,900 | 6,533 | ||
Home Depot, Inc. | 11,000 | 411 | ||
Intercontinental Hotels Group PLC - ADR (Æ)(Ñ) | 208,200 | 4,052 | ||
International Game Technology | 69,140 | 2,939 | ||
Interpublic Group of Cos., Inc. (Æ)(Ñ) | 40,900 | 446 | ||
JC Penney Co., Inc. | 45,000 | 3,385 | ||
Jones Apparel Group, Inc. (Ñ) | 15,700 | 524 | ||
Kimberly-Clark Corp. | 6,350 | 422 | ||
Kohl’s Corp. (Æ) | 102,800 | 7,258 | ||
Las Vegas Sands Corp. (Æ) | 85,287 | 6,499 | ||
Liberty Global, Inc. Series A (Æ)(Ñ) | 51,857 | 1,361 | ||
Liberty Global, Inc. Series C (Æ) | 56,171 | 1,428 | ||
Liberty Media Holding Corp. Class A (Æ) | 52,662 | 2,754 | ||
Limited Brands, Inc. | 21,650 | 638 | ||
Liz Claiborne, Inc. | 29,200 | 1,231 | ||
Lowe’s Cos., Inc. | 156,575 | 4,719 | ||
Mattel, Inc. | 37,500 | 849 | ||
McDonald’s Corp. (Ñ) | 426,400 | 17,875 | ||
McGraw-Hill Cos., Inc. (The) | 26,900 | 1,726 | ||
MGM Mirage (Æ) | 80,267 | 3,453 | ||
Monster Worldwide, Inc. (Æ) | 32,000 | 1,296 | ||
Newell Rubbermaid, Inc. | 13,150 | 379 | ||
News Corp. Class A | 210,140 | 4,381 | ||
Nike, Inc. Class B | 34,900 | 3,207 | ||
Nutri System, Inc. (Æ)(Ñ) | 31,570 | 1,947 | ||
Office Depot, Inc. (Æ) | 13,700 | 575 | ||
Omnicom Group, Inc. | 35,230 | 3,574 | ||
Quiksilver, Inc. (Æ)(Ñ) | 183,100 | 2,554 | ||
RadioShack Corp. (Ñ) | 67,000 | 1,195 | ||
Saks, Inc. (Ñ) | 16,300 | 315 | ||
Scientific Games Corp. (Æ) | 47,820 | 1,340 | ||
Sears Holdings Corp. (Æ)(Ñ) | 13,100 | 2,286 | ||
Staples, Inc. | 225,300 | 5,811 | ||
Starbucks Corp. (Æ) | 365,358 | 13,792 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 43,300 | 2,587 | ||
Station Casinos, Inc. (Ñ) | 34,831 | 2,100 | ||
Target Corp. | 138,073 | 8,171 | ||
Tech Data Corp. (Æ) | 10,600 | 417 | ||
Time Warner, Inc. | 284,800 | 5,699 | ||
TJX Cos., Inc. | 57,250 | 1,657 | ||
Urban Outfitters, Inc. (Æ)(Ñ) | 94,600 | 1,656 | ||
VF Corp. | 7,500 | 570 | ||
Viacom, Inc. Class A (Æ) | 135,320 | 5,267 | ||
Wal-Mart Stores, Inc. | 208,750 | 10,287 | ||
Walt Disney Co. | 15,300 | 481 | ||
Wynn Resorts, Ltd. (Æ) | 15,145 | 1,114 | ||
XM Satellite Radio Holdings, Inc. Class A (Æ)(Ñ) | 244,550 | 2,851 | ||
Yum! Brands, Inc. | 54,775 | 3,257 | ||
227,516 | ||||
Consumer Staples - 6.9% | ||||
Altria Group, Inc. | 347,530 | 28,265 | ||
Clorox Co. | 12,200 | 788 | ||
Coca-Cola Co. (The) | 115,000 | 5,373 | ||
Coca-Cola Enterprises, Inc. | 8,600 | 172 | ||
Colgate-Palmolive Co. | 84,700 | 5,418 | ||
ConAgra Foods, Inc. | 11,300 | 295 | ||
Constellation Brands, Inc. Class A (Æ)(Ñ) | 103,100 | 2,834 |
16
Table of Contents
CVS Corp. | 31,900 | 1,001 | ||
Diageo PLC - ADR | 31,940 | 2,379 | ||
General Mills, Inc. | 3,700 | 210 | ||
Heineken NV - ADR (Æ) | 73,888 | 1,666 | ||
Kellogg Co. (Ñ) | 73,610 | 3,703 | ||
Kroger Co. (The) | 35,400 | 796 | ||
Molson Coors Brewing Co. Class B (Ñ) | 16,900 | 1,203 | ||
NBTY, Inc. (Æ) | 39,160 | 1,089 | ||
PepsiCo, Inc. | 329,095 | 20,878 | ||
Procter & Gamble Co. | 465,528 | 29,510 | ||
Safeway, Inc. | 14,700 | 432 | ||
Sara Lee Corp. | 40,100 | 686 | ||
Tyson Foods, Inc. Class A | 61,200 | 884 | ||
UST, Inc. (Ñ) | 11,200 | 600 | ||
Walgreen Co. | 114,100 | 4,984 | ||
113,166 | ||||
Financial Services - 21.4% | ||||
ACE, Ltd. | 5,300 | 303 | ||
Allstate Corp. (The) | 138,560 | 8,502 | ||
American Express Co. | 144,800 | 8,371 | ||
American International Group, Inc. | 364,800 | 24,504 | ||
Annaly Capital Management, Inc. (ö) | 273,050 | 3,582 | ||
AON Corp. | 132,800 | 4,620 | ||
Astoria Financial Corp. | 8,400 | 244 | ||
Bank of America Corp. | 579,771 | 31,232 | ||
Bank of New York Co., Inc. (The) | 83,100 | 2,856 | ||
BB&T Corp. (Ñ) | 12,800 | 557 | ||
Capital One Financial Corp. | 46,500 | 3,689 | ||
CB Richard Ellis Group, Inc. Class A (Æ) | 80,105 | 2,406 | ||
Charles Schwab Corp. (The) | 132,480 | 2,414 | ||
Chicago Mercantile Exchange Holdings, Inc. Class A | 4,840 | 2,425 | ||
Chubb Corp. | 48,270 | 2,566 | ||
Citigroup, Inc. | 446,140 | 22,378 | ||
Comerica, Inc. | 13,200 | 768 | ||
Commerce Bancorp, Inc. (Ñ) | 38,900 | 1,358 | ||
Countrywide Financial Corp. | 399,700 | 15,237 | ||
Fannie Mae | 273,480 | 16,206 | ||
Fidelity National Financial, Inc. | 5,050 | 113 | ||
Fidelity National Title Group, Inc. Class A | 10,991 | 242 | ||
First American Corp. | 2,500 | 102 | ||
First Data Corp. | 37,300 | 905 | ||
First Horizon National Corp. (Ñ) | 14,300 | 562 | ||
Franklin Resources, Inc. | 16,400 | 1,869 | ||
Freddie Mac | 30,700 | 2,118 | ||
Genworth Financial, Inc. Class A | 362,594 | 12,125 | ||
Global Payments, Inc. | 36,190 | 1,582 | ||
Goldman Sachs Group, Inc. | 151,485 | 28,750 | ||
Hartford Financial Services Group, Inc. | 83,530 | 7,281 | ||
Hudson City Bancorp, Inc. | 47,550 | 653 | ||
Huntington Bancshares, Inc. (Ñ) | 12,900 | 315 | ||
IndyMac Bancorp, Inc. (Ñ) | 8,550 | 389 | ||
iShares Russell 1000 Value Index Fund (Ñ) | 41,350 | 3,285 | ||
JPMorgan Chase & Co. | 528,650 | 25,079 | ||
KeyCorp | 26,500 | 984 | ||
Lehman Brothers Holdings, Inc. | 106,844 | 8,317 | ||
Lincoln National Corp. | 5,200 | 329 |
17
Table of Contents
Loews Corp. | 27,150 | 1,057 | ||
MBIA, Inc. (Ñ) | 11,100 | 688 | ||
Merrill Lynch & Co., Inc. | 196,100 | 17,143 | ||
Metlife, Inc. | 170,840 | 9,760 | ||
MGIC Investment Corp. (Ñ) | 9,200 | 541 | ||
Morgan Stanley | 112,632 | 8,608 | ||
National City Corp. | 32,510 | 1,211 | ||
North Fork Bancorporation, Inc. | 150,700 | 4,307 | ||
Old Republic International Corp. | 28,600 | 644 | ||
PartnerRe, Ltd. (Ñ) | 5,300 | 371 | ||
Paychex, Inc. | 141,900 | 5,602 | ||
PNC Financial Services Group, Inc. | 42,370 | 2,967 | ||
RenaissanceRe Holdings, Ltd. (Ñ) | 32,925 | 1,791 | ||
St. Paul Travelers Cos., Inc. (The) | 138,414 | 7,077 | ||
SunTrust Banks, Inc. | 56,030 | 4,426 | ||
Torchmark Corp. | 3,400 | 210 | ||
UBS AG (Ñ) | 241,299 | 14,439 | ||
UnumProvident Corp. (Ñ) | 61,850 | 1,223 | ||
US Bancorp | 7,974 | 270 | ||
Wachovia Corp. | 69,200 | 3,841 | ||
Waddell & Reed Financial, Inc. Class A | 9,200 | 235 | ||
Washington Mutual, Inc. (Ñ) | 59,535 | 2,518 | ||
Wells Fargo & Co. | 369,755 | 13,418 | ||
Western Union Co. (The) (Æ) | 37,300 | 823 | ||
XL Capital, Ltd. Class A | 4,750 | 335 | ||
352,723 | ||||
Health Care - 11.2% | ||||
Abbott Laboratories | 147,310 | 6,999 | ||
Allergan, Inc. | 37,670 | 4,351 | ||
AmerisourceBergen Corp. | 16,300 | 769 | ||
Amgen, Inc. (Æ) | 141,200 | 10,719 | ||
Amylin Pharmaceuticals, Inc. (Æ)(Ñ) | 50,053 | 2,200 | ||
Baxter International, Inc. | 213,800 | 9,828 | ||
Boston Scientific Corp. (Æ) | 42,350 | 674 | ||
Bristol-Myers Squibb Co. | 132,400 | 3,277 | ||
Cardinal Health, Inc. | 24,200 | 1,584 | ||
Caremark Rx, Inc. | 122,500 | 6,031 | ||
Celgene Corp. (Æ)(Ñ) | 59,700 | 3,190 | ||
Community Health Systems, Inc. (Æ) | 59,100 | 1,918 | ||
Covance, Inc. (Æ) | 43,860 | 2,566 | ||
DaVita, Inc. (Æ) | 12,700 | 707 | ||
Eli Lilly & Co. | 103,000 | 5,769 | ||
Endo Pharmaceuticals Holdings, Inc. (Æ)(Ñ) | 6,600 | 188 | ||
Fisher Scientific International, Inc. (Æ)(Ñ) | 44,800 | 3,836 | ||
Genentech, Inc. (Æ) | 189,281 | 15,767 | ||
Genzyme Corp. (Æ) | 38,688 | 2,612 | ||
Gilead Sciences, Inc. (Æ) | 87,280 | 6,014 | ||
Henry Schein, Inc. (Æ) | 33,190 | 1,649 | ||
Human Genome Sciences, Inc. (Æ)(Ñ) | 249,300 | 3,328 | ||
Intuitive Surgical, Inc. (Æ)(Ñ) | 19,220 | 1,906 | ||
Invitrogen Corp. (Æ)(Ñ) | 43,400 | 2,518 | ||
Johnson & Johnson | 208,950 | 14,083 | ||
Medco Health Solutions, Inc. (Æ) | 58,500 | 3,130 | ||
Medtronic, Inc. | 50,700 | 2,468 | ||
Merck & Co., Inc. | 215,770 | 9,800 | ||
Novartis AG - ADR | 100,550 | 6,106 | ||
Omnicare, Inc. (Ñ) | 68,900 | 2,610 |
18
Table of Contents
Panacos Pharmaceuticals, Inc. (Æ)(Ñ) | 97,200 | 667 | ||
PDL BioPharma, Inc. (Æ)(Ñ) | 91,500 | 1,933 | ||
Pfizer, Inc. | 222,000 | 5,916 | ||
Sanofi-Aventis - ADR (Æ) | 75,950 | 3,242 | ||
Schering-Plough Corp. | 33,900 | 751 | ||
St. Jude Medical, Inc. (Æ) | 134,300 | 4,613 | ||
Stryker Corp. | 106,100 | 5,548 | ||
Tenet Healthcare Corp. (Æ)(Ñ) | 67,200 | 474 | ||
Triad Hospitals, Inc. (Æ)(Ñ) | 51,850 | 1,920 | ||
UnitedHealth Group, Inc. | 250,526 | 12,221 | ||
WellPoint, Inc. (Æ) | 61,800 | 4,717 | ||
Wyeth | 107,080 | 5,464 | ||
184,063 | ||||
Integrated Oils - 4.1% | ||||
Chevron Corp. | 138,751 | 9,324 | ||
ConocoPhillips | 109,760 | 6,612 | ||
Exxon Mobil Corp. | 327,960 | 23,423 | ||
Hess Corp. | 244,990 | 10,388 | ||
Marathon Oil Corp. | 20,600 | 1,780 | ||
Murphy Oil Corp. | 72,700 | 3,428 | ||
Occidental Petroleum Corp. | 125,600 | 5,896 | ||
Total SA - ADR | 109,530 | 7,463 | ||
68,314 | ||||
Materials and Processing - 3.1% | ||||
Air Products & Chemicals, Inc. | 33,133 | 2,308 | ||
Archer-Daniels-Midland Co. | 108,061 | 4,160 | ||
Ashland, Inc. | 8,500 | 502 | ||
Avery Dennison Corp. | 3,400 | 215 | ||
BHP Billiton, Ltd. - ADR (Ñ) | 32,400 | 1,379 | ||
Bunge, Ltd. (Ñ) | 5,000 | 321 | ||
Cameco Corp. | 61,200 | 2,150 | ||
Cytec Industries, Inc. | 17,650 | 978 | ||
Dow Chemical Co. (The) | 32,800 | 1,338 | ||
Ecolab, Inc. | 33,300 | 1,510 | ||
EI Du Pont de Nemours & Co. | 15,400 | 705 | ||
Hercules, Inc. (Æ) | 23,400 | 426 | ||
Imperial Chemical Industries PLC - ADR (Æ)(Ñ) | 80,500 | 2,510 | ||
International Paper Co. | 169,600 | 5,656 | ||
Lubrizol Corp. | 8,950 | 403 | ||
Masco Corp. | 131,690 | 3,641 | ||
Monsanto Co. | 144,290 | 6,381 | ||
Mosaic Co. (The) (Æ)(Ñ) | 41,000 | 768 | ||
PPG Industries, Inc. | 46,940 | 3,211 | ||
Praxair, Inc. | 6,365 | 384 | ||
Rio Tinto PLC - ADR (Ñ) | 12,500 | 2,767 | ||
Sherwin-Williams Co. (The) | 34,800 | 2,061 | ||
Smurfit-Stone Container Corp. (Æ) | 39,000 | 416 | ||
Sonoco Products Co. | 6,300 | 224 | ||
St. Joe Co. (The) (Ñ) | 30,940 | 1,664 | ||
Syngenta AG - ADR | 127,503 | 4,109 | ||
United States Steel Corp. | 7,800 | 527 | ||
50,714 | ||||
Miscellaneous - 3.4% | ||||
3M Co. | 83,100 | 6,551 | ||
Eaton Corp. | 12,200 | 884 | ||
General Electric Co. | 1,041,240 | 36,558 | ||
Hillenbrand Industries, Inc. | 8,800 | 516 |
19
Table of Contents
Honeywell International, Inc. | 100,650 | 4,239 | ||
SPX Corp. | 8,950 | 515 | ||
Textron, Inc. | 25,400 | 2,310 | ||
Tyco International, Ltd. | 130,500 | 3,841 | ||
55,414 | ||||
Other Energy - 3.2% | ||||
Apache Corp. | 51,300 | 3,351 | ||
Baker Hughes, Inc. | 92,300 | 6,373 | ||
Cameron International Corp. (Æ) | 17,200 | 862 | ||
Devon Energy Corp. | 57,410 | 3,837 | ||
Halliburton Co. | 336,100 | 10,873 | ||
Massey Energy Co. (Æ)(Ñ) | 163,550 | 4,130 | ||
National-Oilwell Varco, Inc. (Æ) | 30,360 | 1,834 | ||
Reliant Energy, Inc. (Æ)(Ñ) | 615,300 | 7,802 | ||
Rowan Cos., Inc. | 4,000 | 133 | ||
Schlumberger, Ltd. | 178,039 | 11,231 | ||
Smith International, Inc. | 18,100 | 714 | ||
Valero Energy Corp. | 25,600 | 1,340 | ||
52,480 | ||||
Producer Durables - 5.3% | ||||
AGCO Corp. (Æ) | 104,850 | 2,805 | ||
Agilent Technologies, Inc. (Æ) | 49,950 | 1,778 | ||
Alcatel SA - ADR (Æ)(Ñ) | 122,850 | 1,560 | ||
American Power Conversion Corp. (Ñ) | 89,500 | 2,706 | ||
Applied Materials, Inc. | 160,060 | 2,783 | ||
Boeing Co. | 94,200 | 7,523 | ||
Bombardier, Inc. (Æ) | 508,900 | 1,754 | ||
Caterpillar, Inc. | 69,200 | 4,201 | ||
Centex Corp. (Ñ) | 61,600 | 3,222 | ||
Crown Castle International Corp. (Æ)(Ñ) | 56,210 | 1,891 | ||
Danaher Corp. | 32,610 | 2,340 | ||
Deere & Co. | 63,610 | 5,415 | ||
Emerson Electric Co. | 18,400 | 1,553 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 13,900 | 604 | ||
Goodrich Corp. | 56,850 | 2,507 | ||
Ingersoll-Rand Co., Ltd. Class A | 8,800 | 323 | ||
Itron, Inc. (Æ)(Ñ) | 9,700 | 528 | ||
KB Home (Ñ) | 37,963 | 1,706 | ||
Lennar Corp. Class A (Ñ) | 36,384 | 1,727 | ||
Lexmark International, Inc. Class A (Æ) | 2,800 | 178 | ||
Lockheed Martin Corp. | 146,865 | 12,767 | ||
Northrop Grumman Corp. | 108,660 | 7,214 | ||
Pitney Bowes, Inc. | 3,500 | 163 | ||
Pulte Homes, Inc. (Ñ) | 71,250 | 2,208 | ||
Roper Industries, Inc. | 35,000 | 1,675 | ||
Teradyne, Inc. (Æ)(Ñ) | 75,600 | 1,060 | ||
Thermo Electron Corp. (Æ) | 66,920 | 2,869 | ||
United Technologies Corp. | 177,402 | 11,659 | ||
86,719 | ||||
Technology - 12.1% | ||||
Adobe Systems, Inc. (Æ) | 66,400 | 2,540 | ||
Agere Systems, Inc. (Æ) | 26,200 | 445 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 84,410 | 3,955 | ||
Apple Computer, Inc. (Æ) | 250,030 | 20,272 | ||
Arrow Electronics, Inc. (Æ) | 16,500 | 493 | ||
AU Optronics Corp. - ADR (Æ)(Ñ) | 241,246 | 3,276 | ||
Avnet, Inc. (Æ) | 12,700 | 301 |
20
Table of Contents
BearingPoint, Inc. (Æ)(Ñ) | 254,350 | 2,119 | ||
Broadcom Corp. Class A (Æ) | 117,200 | 3,548 | ||
Celestica, Inc. (Æ)(Ñ) | 139,850 | 1,375 | ||
Cisco Systems, Inc. (Æ) | 676,119 | 16,315 | ||
Citrix Systems, Inc. (Æ) | 42,640 | 1,259 | ||
Cognizant Technology Solutions Corp. Class A (Æ) | 15,840 | 1,192 | ||
Corning, Inc. (Æ) | 206,200 | 4,213 | ||
Dell, Inc. (Æ) | 192,050 | 4,673 | ||
Electronic Data Systems Corp. | 27,000 | 684 | ||
EMC Corp. (Æ) | 143,400 | 1,757 | ||
F5 Networks, Inc. (Æ) | 17,700 | 1,172 | ||
Flextronics International, Ltd. (Æ) | 20,450 | 237 | ||
Formfactor, Inc. (Æ) | 62,500 | 2,386 | ||
General Dynamics Corp. | 73,818 | 5,248 | ||
Hewlett-Packard Co. | 460,277 | 17,831 | ||
Intel Corp. | 132,660 | 2,831 | ||
International Business Machines Corp. | 75,900 | 7,008 | ||
International Rectifier Corp. (Æ) | 49,650 | 1,786 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 238,600 | 3,467 | ||
L-3 Communications Holdings, Inc. Class 3 | 40,900 | 3,293 | ||
Lucent Technologies, Inc. (Æ)(Ñ) | 118,050 | 287 | ||
MEMC Electronic Materials, Inc. (Æ) | 39,800 | 1,413 | ||
Microsoft Corp. | 505,800 | 14,521 | ||
Motorola, Inc. | 651,073 | 15,014 | ||
National Semiconductor Corp. | 112,600 | 2,735 | ||
Nvidia Corp. (Æ) | 64,000 | 2,232 | ||
Oracle Corp. (Æ) | 194,060 | 3,584 | ||
PerkinElmer, Inc. | 126,800 | 2,708 | ||
Qualcomm, Inc. | 402,400 | 14,643 | ||
Research In Motion, Ltd. (Æ) | 65,000 | 7,636 | ||
Salesforce.com, Inc. (Æ)(Ñ) | 50,960 | 1,988 | ||
SanDisk Corp. (Æ)(Ñ) | 100,700 | 4,844 | ||
Sanmina-SCI Corp. (Æ) | 132,400 | 523 | ||
Seagate Technology, Inc. (Æ) | 9,400 | — | ||
Silicon Image, Inc. (Æ) | 60,000 | 710 | ||
Solectron Corp. (Æ)(Ñ) | 97,600 | 326 | ||
Sun Microsystems, Inc. (Æ) | 324,090 | 1,760 | ||
Tellabs, Inc. (Æ) | 23,300 | 246 | ||
Texas Instruments, Inc. | 345,801 | 10,436 | ||
199,282 | ||||
Utilities - 5.0% | ||||
America Movil SA de CV Series L | 53,814 | 2,307 | ||
AT&T, Inc. | 201,800 | 6,912 | ||
BellSouth Corp. | 182,750 | 8,242 | ||
Comcast Corp. Class A (Æ) | 283,217 | 11,518 | ||
Constellation Energy Group, Inc. | 11,500 | 718 | ||
Dominion Resources, Inc. | 140,850 | 11,407 | ||
Embarq Corp. (Æ) | 33,838 | 1,636 | ||
Entergy Corp. | 68,550 | 5,884 | ||
FPL Group, Inc. (Ñ) | 50,600 | 2,580 | ||
Level 3 Communications, Inc. (Æ)(Ñ) | 159,500 | 844 | ||
NII Holdings, Inc. (Æ)(Ñ) | 38,270 | 2,489 | ||
Pinnacle West Capital Corp. (Ñ) | 5,000 | 239 | ||
Progress Energy, Inc. | 3,100 | 143 | ||
Progress Energy, Inc. - CVO | 3,200 | 1 | ||
Sprint Nextel Corp. | 821,586 | 15,355 | ||
Telephone & Data Systems, Inc. Special Shares | 5,800 | 270 | ||
TXU Corp. | 54,430 | 3,436 | ||
Verizon Communications, Inc. | 186,629 | 6,905 | ||
Wisconsin Energy Corp. | 13,300 | 610 | ||
81,496 | ||||
21
Table of Contents
Total Common Stocks | |||||
(cost $1,305,505) | 1,534,696 | ||||
Preferred Stocks - 0.1% | |||||
Auto and Transportation - 0.1% | |||||
General Motors Corp. | 65,800 | 1,562 | |||
Total Preferred Stocks | |||||
(cost $1,138) | 1,562 | ||||
Long-Term Investments - 0.0% | |||||
Corporate Bonds and Notes - 0.0% | |||||
AMR Corp. | |||||
4.250% due 09/23/23 | 58 | 102 | |||
Total Long-Term Investments | |||||
(cost $50) | 102 | ||||
Short-Term Investments - 6.6% | |||||
Russell Investment Company | |||||
Money Market Fund | 102,543,285 | 102,543 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.830% due 12/07/06 | 1,000 | 995 | |||
4.891% due 12/07/06 | 5,000 | 4,976 | |||
Total Short-Term Investments | |||||
(cost $108,514) | 108,514 | ||||
Other Securities - 7.6% | |||||
Russell Investment Company Money Market Fund (×) | 31,875,508 | 31,876 | |||
State Street Securities Lending Quality Trust (×) | 92,344,119 | 92,344 | |||
Total Other Securities | |||||
(cost $124,220) | 124,220 | ||||
Total Investments - 107.6% | |||||
(identified cost $1,539,427) | 1,769,094 | ||||
Other Assets and Liabilities, | |||||
Net - (7.6%) | (125,084 | ) | |||
Net Assets - 100.0% | 1,644,010 | ||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Russell 1000 Index expiration date 12/06 (16) | 6,002 | 335 | |||
Russell 1000 Mini Index (CME)expiration date 12/06 (40) | 3,001 | 157 | |||
S&P 500 E-Mini Index (CME)expiration date 12/06 (169) | 11,688 | 508 | |||
S&P 500 Index (CME)expiration date 12/06 (183) | 63,281 | 1,936 | |||
S&P Midcap 400 E-Mini Index (CME)expiration date 12/06 (283) | 22,320 | 1,159 | |||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 4,095 | ||||
22
Table of Contents
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % o Net Assets | ||
Auto and Transportation | 3.8 | ||
Consumer Discretionary | 13.8 | ||
Consumer Staples | 6.9 | ||
Financial Services | 21.4 | ||
Health Care | 11.2 | ||
Integrated Oils | 4.1 | ||
Materials and Processing | 3.1 | ||
Miscellaneous | 3.4 | ||
Other Energy | 3.2 | ||
Producer Durables | 5.3 | ||
Technology | 12.1 | ||
Utilities | 5.0 | ||
Preferred Stocks | 0.1 | ||
Long-Term Investments | —* | ||
Short-Term Investments | 6.6 | ||
Other Securities | 7.6 | ||
Total Investments | 107.6 | ||
Other Assets and Liabilities, Net | (7.6 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
23
Table of Contents
(This page is intentionally left blank)
24
Table of Contents
Russell Investment Company Equity II Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Equity II Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.17 | % | |
5 Years | 13.19 | %§ | |
10 Years | 11.09 | %§ |
Equity II Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.91 | % | |
5 Years | 12.95 | %§ | |
10 Years | 10.91 | %§ |
Equity II Fund - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.31 | % | |
5 Years | 13.31 | %§ | |
10 Years | 11.17 | %§ |
Russell 2500(TM) Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.69 | % | |
5 Years | 14.36 | %§ | |
10 Years | 11.53 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Equity II Fund Class I, Class E and Class Y gained 18.17%, 17.91% and 18.31%, respectively. This compared to the Russell 2500(TM) Index, which gained 17.69% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper Mid-Cap(R) Core Funds Average returned 14.03%, while the Lipper(R) Small-Cap Core Funds Average rose 16.45%. These results serve as peer comparisons and are expressed net of operating expenses.
25
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Generally, market conditions presented a difficult environment for active small capitalization managers as evidenced by the underperformance of the Lipper averages for the fiscal year. The significant swings in market leadership over this period, combined with periods of defensiveness, were not favorable for active small capitalization managers. Specifically, the continued leadership of REITs and higher yielding securities served as notable barriers to outperformance for most active managers. Despite these hurdles, the Fund outperformed its benchmark for the period. The Fund’s outperformance was driven by strong stock selection by the Fund’s money managers.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Positive stock selection drove performance for the year. In particular, stock selection within traditional growth sectors such as technology and consumer discretionary was significantly positive while stock selection was also positive in the more defensive and interest sensitive financial services sector. Holdings among computer technology, retail, and semiconductor stocks all contributed positively to Fund performance. While stock selection was positive within the financial services sector, the Fund’s underweight to REITs within the financial services sector detracted from the Fund’s performance.
The Fund has eight money managers: three growth, two market-oriented and three value. Five of the eight money managers in the Fund outperformed their respective style indices while five of the eight also outperformed the Russell 2500 Index.
Two of the three growth money managers outperformed their respective benchmarks. Tygh Capital Management, Inc. and Capitalworks Investment Partners, LLC both significantly outperformed the Russell 2500 Growth Index. Gould Investment Partners, LLC, the most growth oriented money manager, underperformed the benchmark. This underperformance is reasonably expected for an aggressive growth money manager during a period where the market favored value stocks and a defensive positioning.
Two of the three value money managers outperformed, with solid outperformance from both David J. Greene & Company, LLC and Jacobs Levy Equity Management, Inc. David J. Greene’s outperformance was notable given its focus on contrarian, higher growth value stocks. Its performance was driven by positive stock selection in technology, energy and health care. Delphi Management, Inc. underperformed the index.
The performance of Goldman Sachs Asset Management, L.P., a market-oriented money manager, was disappointing as it had the largest underperformance of the Fund’s managers. Goldman’s stock selection was weak, with poor stock selection in health care and financials. PanAgora Asset Management, Inc., a recently added market-oriented money manager, outperformed during the period it was in the Fund.
Describe any changes to the Fund’s structure or the money manager line-up.
TimesSquare Capital Management, LLC was removed from the Fund in February 2006. TimeSquare’s assets were reallocated to other money managers. In May 2006, PanAgora Asset Management, Inc. was hired to replace Nicholas-Applegate.
Money Managers as of October 31, 2006 | Styles | |
CapitalWorks Investment Partners, LLC | Growth | |
David J. Greene and Company, LLC | Value | |
Delphi Management, Inc. | Value | |
Goldman Sachs Asset Management, L.P. | Market-Oriented | |
Gould Investment Partners, LLC | Growth | |
Jacobs Levy Equity Management, Inc. | Value | |
PanAgora Asset Management, Inc. | Market-Oriented | |
Tygh Capital Management, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other
26
Table of Contents
events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Russell 2500(TM) Index is composed of the bottom 500 stocks the Russell 1000(R) Index and all the stocks in the Russell 2000(R) Index. The Russell 2500(TM) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex- dividend dates. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on March 29, 2000. The returns shown for Class Y Shares prior to March 29, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
27
Table of Contents
Russell Investment Company Equity II Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 982.40 | $ | 1,019.61 | ||
Expenses Paid During Period* | $ | 5.55 | $ | 5.65 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.11% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
28
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 983.70 | $ | 1,020.67 | ||
Expenses Paid During Period* | $ | 4.50 | $ | 4.58 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.90% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 984.20 | $ | 1,021.12 | ||
Expenses Paid During Period* | $ | 4.05 | $ | 4.13 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.81% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
29
Table of Contents
Russell Investment Company Equity II Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 96.0% | ||||
Auto and Transportation - 3.6% | ||||
Aftermarket Technology Corp. (Æ)(Ñ) | 12,180 | 229 | ||
American Commercial Lines, Inc. (Æ)(Ñ) | 11,000 | 706 | ||
Arctic Cat, Inc. | 9,100 | 163 | ||
ArvinMeritor, Inc. (Ñ) | 76,460 | 1,148 | ||
Autoliv, Inc. (Ñ) | 24,300 | 1,382 | ||
Bristow Group, Inc. (Æ)(Ñ) | 30,275 | 1,005 | ||
Commercial Vehicle Group, Inc. (Æ) | 7,900 | 163 | ||
Continental Airlines, Inc. Class B (Æ)(Ñ) | 5,311 | 196 | ||
Dana Corp. (Ñ) | 116,600 | 188 | ||
Danaos Corp. (Æ)(Ñ) | 9,100 | 187 | ||
DryShips, Inc. (Ñ) | 41,528 | 575 | ||
EGL, Inc. (Æ) | 2,209 | 75 | ||
ExpressJet Holdings, Inc. Class A (Æ)(Ñ) | 32,058 | 254 | ||
Freightcar America, Inc. (Ñ) | 8,034 | 427 | ||
Frozen Food Express Industries (Æ)(Ñ) | 56,958 | 454 | ||
Grupo TMM SA Series A - ADR (Æ)(Ñ) | 39,800 | 97 | ||
Heartland Express, Inc. | 30,900 | 505 | ||
HUB Group, Inc. Class A (Æ) | 18,417 | 500 | ||
Kansas City Southern (Æ)(Ñ) | 16,900 | 480 | ||
Laidlaw International, Inc. | 35,300 | 1,024 | ||
Navistar International Corp. (Æ) | 44,900 | 1,245 | ||
OMI Corp. (Ñ) | 31,330 | 699 | ||
Overseas Shipholding Group, Inc. | 3,809 | 238 | ||
PAM Transportation Services (Æ)(Ñ) | 6,300 | 159 | ||
Pinnacle Airlines Corp. (Æ)(Ñ) | 13,426 | 114 | ||
Republic Airways Holdings, Inc. (Æ) | 13,800 | 247 | ||
Saia, Inc. (Æ) | 29,235 | 783 | ||
Standard Motor Products, Inc. (Æ) | 9,915 | 110 | ||
Swift Transportation Co., Inc. (Æ)(Ñ) | 3,200 | 80 | ||
Teekay Shipping Corp. (Ñ) | 20,213 | 831 | ||
Tenneco, Inc. (Æ)(Ñ) | 16,861 | 383 | ||
Tidewater, Inc. | 20,800 | 1,034 | ||
TRW Automotive Holdings Corp. (Æ) | 30,600 | 785 | ||
US Xpress Enterprises, Inc. Class A (Æ) | 16,360 | 323 | ||
UTI Worldwide, Inc. | 84,393 | 2,182 | ||
Visteon Corp. (Æ) | 43,200 | 319 | ||
Vitran Corp., Inc. Class A (Æ) | 38,400 | 645 | ||
Wabtec Corp. (Ñ) | 38,025 | 1,194 | ||
YRC Worldwide, Inc. (Æ)(Ñ) | 42,800 | 1,658 | ||
22,787 | ||||
Consumer Discretionary - 19.6% | ||||
24/7 Real Media, Inc. (Æ)(Ñ) | 68,200 | 675 | ||
Abercrombie & Fitch Co. Class A | 12,839 | 984 | ||
ABM Industries, Inc. (Ñ) | 3,300 | 66 |
30
Table of Contents
Activision, Inc. (Æ)(Ñ) | 195,947 | 3,022 | ||
Adesa, Inc. (Ñ) | 25,600 | 644 | ||
Advance Auto Parts, Inc. (Ñ) | 6,100 | 214 | ||
Advisory Board Co. (The) (Æ) | 31,548 | 1,742 | ||
AFC Enterprises (Æ)(Ñ) | 6,400 | 104 | ||
Alderwoods Group, Inc. (Æ)(Ñ) | 6,393 | 127 | ||
Alloy, Inc. (Æ)(Ñ) | 5,710 | 78 | ||
American Greetings Corp. Class A (Ñ) | 49,861 | 1,192 | ||
American Woodmark Corp. (Ñ) | 14,964 | 554 | ||
AMN Healthcare Services, Inc. (Æ)(Ñ) | 121,900 | 3,083 | ||
AnnTaylor Stores Corp. (Æ)(Ñ) | 22,300 | 982 | ||
aQuantive, Inc. (Æ)(Ñ) | 101,844 | 2,768 | ||
Arbitron, Inc. (Ñ) | 3,636 | 153 | ||
Asbury Automotive Group, Inc. (Ñ) | 27,586 | 662 | ||
Autonation, Inc. (Æ)(Ñ) | 28,572 | 573 | ||
Baidu.com - ADR (Æ)(Ñ) | 10,600 | 925 | ||
Bally Technologies, Inc. (Æ)(Ñ) | 10,200 | 202 | ||
Barnes & Noble, Inc. | 9,100 | 376 | ||
Bebe Stores, Inc. | 47,673 | 1,184 | ||
Belo Corp. Class A (Ñ) | 5,676 | 99 | ||
Big Lots, Inc. (Æ)(Ñ) | 67,344 | 1,420 | ||
Blockbuster, Inc. Class A (Ñ) | 74,334 | 291 | ||
Blyth, Inc. | 7,500 | 179 | ||
Bob Evans Farms, Inc. (Ñ) | 14,754 | 500 | ||
Books-A-Million, Inc. Class A (Ñ) | 5,101 | 102 | ||
Bowne & Co., Inc. (Æ) | 10,500 | 164 | ||
Bright Horizons Family Solutions, Inc. (Æ)(Ñ) | 15,900 | 611 | ||
Brightpoint, Inc. (Æ) | 8,190 | 99 | ||
Brown Shoe Co., Inc. | 16,956 | 661 | ||
Carmax, Inc. (Æ)(Ñ) | 33,000 | 1,462 | ||
Catalina Marketing Corp. (Æ) | 15,530 | 394 | ||
Cato Corp. (The) Class A (Ñ) | 828 | 19 | ||
CBRL Group, Inc. | 15,900 | 698 | ||
Central Parking Corp. (Ñ) | 15,102 | 259 | ||
Chemed Corp. (Ñ) | 15,577 | 553 | ||
Children’s Place Retail Stores, Inc. (The) (Æ) | 6,133 | 431 | ||
Choice Hotels International, Inc. (Ñ) | 13,780 | 578 | ||
Christopher & Banks Corp. | 60,483 | 1,632 | ||
Churchill Downs, Inc. | 1,400 | 59 | ||
Circuit City Stores, Inc. | 5,600 | 151 | ||
Citadel Broadcasting Corp. (Ñ) | 13,000 | 133 | ||
Coach, Inc. (Æ) | 33,397 | 1,324 | ||
Conn’s, Inc. (Æ)(Ñ) | 13,200 | 317 | ||
Consolidated Graphics, Inc. (Æ) | 8,700 | 541 | ||
Convergys Corp. (Æ)(Ñ) | 61,190 | 1,298 | ||
Corinthian Colleges, Inc. (Æ)(Ñ) | 37,100 | 454 | ||
Corporate Executive Board Co. | 14,310 | 1,285 | ||
Corrections Corp. of America (Æ) | 87,149 | 3,982 | ||
Cox Radio, Inc. Class A (Æ)(Ñ) | 5,830 | 98 | ||
Crocs, Inc. (Æ)(Ñ) | 65,500 | 2,595 | ||
CSS Industries, Inc. | 1,100 | 35 | ||
DeVry, Inc. (Æ) | 38,800 | 945 | ||
Dick’s Sporting Goods, Inc. (Æ)(Ñ) | 7,700 | 383 | ||
Dillard’s, Inc. Class A (Ñ) | 20,120 | 607 | ||
Dollar Thrifty Automotive Group (Æ)(Ñ) | 7,406 | 297 | ||
Dollar Tree Stores, Inc. (Æ)(Ñ) | 29,700 | 923 | ||
Dover Downs Gaming & Entertainment, Inc. (Ñ) | 8,200 | 116 |
31
Table of Contents
DreamWorks Animation SKG, Inc. Class A (Æ)(Ñ) | 26,100 | 690 | ||
Dress Barn, Inc. (Æ)(Ñ) | 16,755 | 364 | ||
DSW, Inc. Class A (Æ)(Ñ) | 12,553 | 434 | ||
Earthlink, Inc. (Æ)(Ñ) | 74,600 | 524 | ||
Ethan Allen Interiors, Inc. (Ñ) | 20,489 | 730 | ||
Expedia, Inc. (Æ)(Ñ) | 14,200 | 231 | ||
Ezcorp, Inc. Class A (Æ)(Ñ) | 22,497 | 1,016 | ||
Family Dollar Stores, Inc. | 31,400 | 925 | ||
Federated Department Stores, Inc. | 18,613 | 817 | ||
Foot Locker, Inc. | 71,563 | 1,660 | ||
Forrester Research, Inc. (Æ)(Ñ) | 44,364 | 1,394 | ||
FTD Group, Inc. (Æ) | 16,070 | 256 | ||
Furniture Brands International, Inc. (Ñ) | 2,460 | 46 | ||
Gemstar-TV Guide International, Inc. (Æ)(Ñ) | 245,500 | 854 | ||
Great Wolf Resorts, Inc. (Æ) | 18,400 | 242 | ||
Group 1 Automotive, Inc. (Ñ) | 16,461 | 943 | ||
Guess?, Inc. (Æ)(Ñ) | 35,300 | 2,010 | ||
Gymboree Corp. (Æ)(Ñ) | 14,914 | 693 | ||
Harris Interactive, Inc. (Æ)(Ñ) | 8,610 | 58 | ||
Hasbro, Inc. (Ñ) | 64,700 | 1,677 | ||
Haverty Furniture Cos., Inc. (Ñ) | 26,531 | 419 | ||
Hearst-Argyle Television, Inc. (Ñ) | 28,941 | 729 | ||
Helen of Troy, Ltd. (Æ) | 33,535 | 825 | ||
Home Solutions of America, Inc. (Æ) | 91,000 | 533 | ||
Hooker Furniture Corp. (Ñ) | 4,500 | 64 | ||
Iconix Brand Group, Inc. (Æ)(Ñ) | 115,669 | 2,156 | ||
ICT Group, Inc. (Æ) | 6,719 | 213 | ||
IKON Office Solutions, Inc. (Ñ) | 45,147 | 673 | ||
Infospace, Inc. (Æ)(Ñ) | 4,790 | 97 | ||
infoUSA, Inc. (Ñ) | 18,989 | 209 | ||
Inter Parfums, Inc. (Ñ) | 2,483 | 49 | ||
Interstate Hotels & Resorts, Inc. (Æ)(Ñ) | 31,290 | 281 | ||
ITT Educational Services, Inc. (Æ)(Ñ) | 23,200 | 1,600 | ||
J Crew Group, Inc. (Æ)(Ñ) | 34,200 | 1,055 | ||
Jack in the Box, Inc. (Æ) | 36,964 | 2,074 | ||
Jackson Hewitt Tax Service, Inc. | 2,700 | 93 | ||
Jo-Ann Stores, Inc. (Æ)(Ñ) | 33,800 | 615 | ||
Jones Apparel Group, Inc. (Ñ) | 27,211 | 909 | ||
Journal Register Co. (Ñ) | 40,247 | 317 | ||
K-Swiss, Inc. Class A (Ñ) | 7,600 | 268 | ||
K2, Inc. (Æ)(Ñ) | 21,398 | 292 | ||
Kellwood Co. (Ñ) | 39,564 | 1,211 | ||
Kelly Services, Inc. Class A | 3,900 | 112 | ||
Knology, Inc. (Æ) | 5,262 | 54 | ||
Korn/Ferry International (Æ) | 95,436 | 2,110 | ||
Leapfrog Enterprises, Inc. (Æ)(Ñ) | 34,900 | 336 | ||
Lee Enterprises, Inc. (Ñ) | 18,375 | 524 | ||
LIFE TIME FITNESS, Inc. (Æ)(Ñ) | 53,400 | 2,752 | ||
Lightbridge, Inc. (Æ)(Ñ) | 32,168 | 372 | ||
Live Nation, Inc. (Æ) | 3,160 | 67 | ||
Liz Claiborne, Inc. (Ñ) | 19,019 | 802 | ||
Lodgenet Entertainment Corp. (Æ)(Ñ) | 10,873 | 250 | ||
Maidenform Brands, Inc. (Æ)(Ñ) | 2,927 | 65 | ||
Manpower, Inc. | 22,621 | 1,533 | ||
Marcus Corp. | 2,480 | 62 | ||
Marvel Entertainment, Inc. (Æ)(Ñ) | 34,021 | 862 | ||
McClatchy Co. Class A | 12,863 | 558 |
32
Table of Contents
McCormick & Schmick’s Seafood Restaurants, Inc. (Æ) | 6,535 | 172 | ||
Men’s Wearhouse, Inc. (The) | 36,100 | 1,439 | ||
Meredith Corp. | 11,500 | 604 | ||
Mothers Work, Inc. (Æ)(Ñ) | 3,070 | 156 | ||
Movado Group, Inc. (Ñ) | 13,100 | 337 | ||
MPS Group, Inc. (Æ)(Ñ) | 81,562 | 1,244 | ||
O’Charleys, Inc. (Æ)(Ñ) | 7,053 | 140 | ||
O’Reilly Automotive, Inc. (Æ) | 38,370 | 1,239 | ||
Orient-Express Hotels, Ltd. Class A | 70,224 | 2,770 | ||
Pacific Sunwear of California, Inc. (Æ)(Ñ) | 36,419 | 642 | ||
Papa John’s International, Inc. (Æ)(Ñ) | 27,918 | 1,025 | ||
Payless Shoesource, Inc. (Æ)(Ñ) | 20,459 | 547 | ||
PC Connection, Inc. (Æ) | 7,400 | 81 | ||
Penn National Gaming, Inc. (Æ) | 29,985 | 1,097 | ||
Perficient, Inc. (Æ)(Ñ) | 54,400 | 912 | ||
Perry Ellis International, Inc. (Æ)(Ñ) | 8,252 | 302 | ||
PHH Corp. (Æ)(Ñ) | 39,435 | 1,088 | ||
Phillips-Van Heusen Corp. | 40,590 | 1,857 | ||
Pier 1 Imports, Inc. (Ñ) | 64,500 | 422 | ||
Pre-Paid Legal Services, Inc. (Ñ) | 6,913 | 293 | ||
Prestige Brands Holdings, Inc. (Æ) | 17,700 | 209 | ||
Priceline.com, Inc. (Æ)(Ñ) | 12,600 | 508 | ||
ProQuest Co. (Æ)(Ñ) | 32,200 | 412 | ||
Quiksilver, Inc. (Æ)(Ñ) | 46,800 | 653 | ||
RadioShack Corp. (Ñ) | 28,500 | 508 | ||
Republic Services, Inc. Class A | 34,026 | 1,395 | ||
Retail Ventures, Inc. (Æ)(Ñ) | 7,844 | 134 | ||
RH Donnelley Corp. | 15,000 | 903 | ||
Ryan’s Restaurant Group, Inc. (Æ) | 29,520 | 479 | ||
SAIC, Inc. (Æ) | 29,400 | 588 | ||
Scholastic Corp. (Æ)(Ñ) | 37,560 | 1,180 | ||
Service Corp. International (Ñ) | 7,290 | 67 | ||
Shoe Carnival, Inc. (Æ) | 14,756 | 422 | ||
Sonic Automotive, Inc. Class A (Ñ) | 20,480 | 539 | ||
Spanish Broadcasting System, Inc. Class A (Æ)(Ñ) | 5,000 | 24 | ||
Spherion Corp. (Æ) | 14,140 | 103 | ||
Stage Stores, Inc. (Ñ) | 16,666 | 540 | ||
Standard Parking Corp. (Æ)(Ñ) | 2,992 | 104 | ||
Stanley Furniture Co., Inc. (Ñ) | 4,234 | 94 | ||
Stanley Works (The) | 2,709 | 129 | ||
Tech Data Corp. (Æ)(Ñ) | 22,020 | 867 | ||
TeleTech Holdings, Inc. (Æ)(Ñ) | 71,950 | 1,397 | ||
Topps Co., Inc. (The) (Ñ) | 24,600 | 215 | ||
Trans World Entertainment Corp. (Æ) | 200 | 1 | ||
Tween Brands, Inc. (Æ) | 36,309 | 1,518 | ||
Under Armour, Inc. Class A (Æ)(Ñ) | 6,400 | 297 | ||
Unifirst Corp. | 2,900 | 105 | ||
United Online, Inc. (Ñ) | 72,032 | 974 | ||
United Stationers, Inc. (Æ) | 11,575 | 553 | ||
Valassis Communications, Inc. (Æ) | 11,400 | 171 | ||
Viad Corp. | 10,800 | 399 | ||
Volt Information Sciences, Inc. (Æ)(Ñ) | 19,500 | 770 | ||
Washington Post Co. (The) Class B | 896 | 675 | ||
Waste Connections, Inc. (Æ) | 24,893 | 1,013 | ||
Watson Wyatt Worldwide, Inc. Class A | 6,400 | 289 | ||
WESCO International, Inc. (Æ)(Ñ) | 12,000 | 783 | ||
122,095 | ||||
33
Table of Contents
Consumer Staples - 1.4% | ||||
Alliance One International, Inc. (Æ) | 9,358 | 45 | ||
Boston Beer Co., Inc. Class A (Æ)(Ñ) | 4,600 | 168 | ||
Chiquita Brands International, Inc. | 4,900 | 67 | ||
Coca-Cola Bottling Co. Consolidated | 8,823 | 556 | ||
Dean Foods Co. (Æ)(Ñ) | 11,100 | 465 | ||
Delta & Pine Land Co. (Æ) | 2,900 | 117 | ||
Imperial Sugar Co. (Æ)(Ñ) | 2,900 | 77 | ||
J&J Snack Foods Corp. (Ñ) | 6,430 | 215 | ||
Longs Drug Stores Corp. | 14,223 | 612 | ||
McCormick & Co., Inc. | 26,300 | 984 | ||
Molson Coors Brewing Co. Class B (Ñ) | 30,800 | 2,192 | ||
Nash Finch Co. (Ñ) | 5,965 | 155 | ||
NBTY, Inc. (Æ) | 13,545 | 377 | ||
Pathmark Stores, Inc. (Æ) | 21,700 | 220 | ||
PepsiAmericas, Inc. | 26,800 | 548 | ||
Performance Food Group Co. (Æ)(Ñ) | 5,972 | 173 | ||
Premium Standard Farms, Inc. (Ñ) | 15,065 | 290 | ||
Reddy Ice Holdings, Inc. (Æ) | 4,700 | 113 | ||
Seaboard Corp. (Ñ) | 270 | 381 | ||
Sensient Technologies Corp. | 2,600 | 60 | ||
Smithfield Foods, Inc. (Æ)(Ñ) | 10,890 | 293 | ||
Spartan Stores, Inc. | 21,993 | 455 | ||
Weis Markets, Inc. (Ñ) | 2,220 | 90 | ||
Wild Oats Markets, Inc. (Æ)(Ñ) | 13,690 | 246 | ||
8,899 | ||||
Financial Services - 18.0% | ||||
21st Century Holding Co. (Ñ) | 3,238 | 91 | ||
Accredited Home Lenders Holding Co. (Æ)(Ñ) | 8,497 | 260 | ||
Advance America Cash Advance Centers, Inc. (Ñ) | 10,718 | 161 | ||
Advent Software, Inc. (Æ)(Ñ) | 54,800 | 2,029 | ||
Affiliated Managers Group, Inc. (Æ) | 30,923 | 3,097 | ||
Affordable Residential Communities (Æ) | 13,900 | 153 | ||
AG Edwards, Inc. | 18,500 | 1,055 | ||
Alleghany Corp. (Æ)(Ñ) | 405 | 124 | ||
Alliance Data Systems Corp. (Æ)(Ñ) | 63,114 | 3,832 | ||
AMB Property Corp. (ö) | 26,500 | 1,548 | ||
American Financial Group, Inc. | 10,900 | 522 | ||
American Home Mortgage Investment Corp. (ö)(Ñ) | 40,852 | 1,396 | ||
AmeriCredit Corp. (Æ)(Ñ) | 30,200 | 772 | ||
Anthracite Capital, Inc. (ö) | 24,907 | 357 | ||
Ares Capital Corp. | 41,000 | 760 | ||
Argonaut Group, Inc. (Æ)(Ñ) | 8,720 | 297 | ||
Arthur J Gallagher & Co. (Æ)(Ñ) | 25,400 | 707 | ||
Ashford Hospitality Trust, Inc. (ö) | 59,720 | 769 | ||
Aspen Insurance Holdings, Ltd. | 29,401 | 730 | ||
Assurant, Inc. | 35,623 | 1,876 | ||
Axis Capital Holdings, Ltd. | 20,672 | 679 | ||
Bancfirst Corp. | 2,500 | 124 | ||
Bankunited Financial Corp. Class A (Ñ) | 62,556 | 1,687 | ||
Banner Corp. (Ñ) | 3,000 | 130 | ||
Bear Stearns Cos., Inc. (The) (Ñ) | 6,340 | 960 | ||
BOK Financial Corp. (Ñ) | 5,420 | 279 | ||
Capital Trust, Inc. Class A (ö)(Ñ) | 4,100 | 182 | ||
CapitalSource, Inc. (ö)(Ñ) | 21,300 | 591 | ||
Cascade Bancorp (Ñ) | 5,840 | 213 | ||
Cash America International, Inc. | 16,150 | 667 |
34
Table of Contents
Cathay General Bancorp (Ñ) | 2,363 | 81 | ||
CBL & Associates Properties, Inc. (ö) | 21,900 | 958 | ||
Central Pacific Financial Corp. (Ñ) | 13,837 | 509 | ||
Chemical Financial Corp. (Ñ) | 3,990 | 119 | ||
Chittenden Corp. | 17,300 | 510 | ||
CIT Group, Inc. | 12,100 | 630 | ||
City Holding Co. | 2,529 | 99 | ||
City National Corp. (Ñ) | 21,200 | 1,411 | ||
CNA Surety Corp. (Æ) | 34,270 | 697 | ||
Colonial BancGroup, Inc. (The) | 83,625 | 1,994 | ||
Colonial Properties Trust (ö) | 1,768 | 89 | ||
Commerce Bancshares, Inc. (Ñ) | 6,400 | 317 | ||
Commerce Group, Inc. | 15,000 | 444 | ||
Community Bancorp (Æ)(Ñ) | 4,068 | 118 | ||
Conseco, Inc. (Æ)(Ñ) | 11,790 | 240 | ||
Corus Bankshares, Inc. (Ñ) | 59,455 | 1,221 | ||
Crescent Real Estate Equities Co. (ö)(Ñ) | 22,500 | 490 | ||
Cybersource Corp. (Æ)(Ñ) | 73,100 | 749 | ||
Deerfield Triarc Capital Corp. (ö) | 20,300 | 302 | ||
Delphi Financial Group Class A | 31,362 | 1,231 | ||
Deluxe Corp. | 26,300 | 596 | ||
DiamondRock Hospitality Co. (ö) | 22,900 | 386 | ||
Downey Financial Corp. (Ñ) | 13,962 | 962 | ||
Duke Realty Corp. (ö)(Ñ) | 21,700 | 869 | ||
East West Bancorp, Inc. (Ñ) | 12,516 | 457 | ||
Entertainment Properties Trust (ö)(Ñ) | 6,812 | 375 | ||
Euronet Worldwide, Inc. (Æ) | 36,912 | 1,097 | ||
Fair Isaac Corp. (Ñ) | 1,840 | 67 | ||
Federal Realty Investors Trust (ö) | 2,100 | 168 | ||
FelCor Lodging Trust, Inc. (ö) | 53,687 | 1,115 | ||
First American Corp. (Ñ) | 59,919 | 2,446 | ||
First Cash Financial Services, Inc. (Æ)(Ñ) | 23,813 | 515 | ||
First Community Bancorp, Inc. | 3,558 | 190 | ||
First Place Financial Corp. (Ñ) | 2,853 | 66 | ||
First Regional Bancorp (Æ)(Ñ) | 2,226 | 71 | ||
FirstFed Financial Corp. (Æ)(Ñ) | 10,922 | 675 | ||
FPIC Insurance Group, Inc. (Æ)(Ñ) | 4,326 | 155 | ||
Franklin Street Properties Corp. (ö)(Ñ) | 6,340 | 130 | ||
Frontier Financial Corp. (Ñ) | 4,150 | 120 | ||
Fulton Financial Corp. (Ñ) | 22,284 | 357 | ||
GFI Group, Inc. (Æ)(Ñ) | 7,200 | 415 | ||
Global Payments, Inc. | 54,776 | 2,394 | ||
Gramercy Capital Corp. (ö)(Ñ) | 1,749 | 49 | ||
Greater Bay Bancorp | 9,643 | 248 | ||
Hanmi Financial Corp. (Ñ) | 59,205 | 1,265 | ||
Hanover Insurance Group, Inc. (The) | 2,400 | 109 | ||
HCC Insurance Holdings, Inc. | 32,300 | 1,087 | ||
Health Care Property Investors, Inc. (ö) | 7,800 | 245 | ||
Health Care REIT, Inc. (ö)(Ñ) | 3,000 | 124 | ||
HealthExtras, Inc. (Æ)(Ñ) | 34,600 | 797 | ||
Highland Hospitality Corp. (ö) | 14,400 | 199 | ||
Horace Mann Educators Corp. | 16,000 | 322 | ||
Hospitality Properties Trust (ö)(Ñ) | 22,400 | 1,085 | ||
HRPT Properties Trust (ö)(Ñ) | 150,305 | 1,789 | ||
IBERIABANK Corp. | 1,600 | 94 | ||
IMPAC Mortgage Holdings, Inc. (ö)(Ñ) | 65,421 | 620 | ||
Infinity Property & Casualty Corp. | 2,300 | 99 |
35
Table of Contents
Innkeepers USA Trust (ö) | 34,200 | 587 | ||
International Securities Exchange Holdings, Inc. Class A (Ñ) | 39,800 | 2,044 | ||
Intervest Bancshares Corp. Class A (Æ)(Ñ) | 5,747 | 205 | ||
Investors Real Estate Trust (ö)(Ñ) | 7,900 | 79 | ||
IPC Holdings, Ltd. (Ñ) | 21,591 | 649 | ||
iStar Financial, Inc. (ö)(Ñ) | 18,375 | 851 | ||
ITLA Capital Corp. | 500 | 29 | ||
Jefferies Group, Inc. (Ñ) | 33,000 | 948 | ||
John H Harland Co. (Ñ) | 2,960 | 121 | ||
Jones Lang LaSalle, Inc. (Ñ) | 13,212 | 1,215 | ||
Knight Capital Group, Inc. Class A (Æ)(Ñ) | 135,006 | 2,518 | ||
LandAmerica Financial Group, Inc. (Ñ) | 20,383 | 1,286 | ||
Liberty Property Trust (ö) | 6,000 | 289 | ||
LTC Properties, Inc. (ö) | 11,598 | 314 | ||
Luminent Mortgage Capital, Inc. (ö) | 29,700 | 315 | ||
Macatawa Bank Corp. (Ñ) | 3,500 | 77 | ||
Mack-Cali Realty Corp. (ö) | 24,700 | 1,307 | ||
MB Financial, Inc. (Æ)(Ñ) | 4,300 | 155 | ||
Medical Properties Trust, Inc. (ö)(Ñ) | 15,990 | 217 | ||
Mercantile Bank Corp. | 2,200 | 87 | ||
Mercantile Bankshares Corp. | 7,387 | 333 | ||
Municipal Mortgage & Equity LLC (Ñ) | 4,800 | 133 | ||
Nara Bancorp, Inc. (Ñ) | 14,359 | 273 | ||
National Penn Bancshares, Inc. (Ñ) | 6,420 | 132 | ||
National Retail Properties, Inc. (ö)(Ñ) | 33,240 | 747 | ||
Nationwide Financial Services, Inc. (Ñ) | 13,800 | 703 | ||
Nelnet, Inc. Class A (Æ)(Ñ) | 9,300 | 274 | ||
New Century Financial Corp. (ö)(Ñ) | 17,650 | 695 | ||
Newcastle Investment Corp. (ö)(Ñ) | 6,000 | 178 | ||
NorthStar Realty Finance Corp. (ö)(Ñ) | 107,845 | 1,634 | ||
Odyssey Re Holdings Corp. (Ñ) | 1,900 | 67 | ||
Ohio Casualty Corp. | 21,200 | 581 | ||
Open Solutions, Inc. (Æ)(Ñ) | 26,300 | 983 | ||
Pacific Capital Bancorp | 12,200 | 375 | ||
PFF Bancorp, Inc. | 7,815 | 242 | ||
Philadelphia Consolidated Holding Co. (Æ) | 17,600 | 688 | ||
Piper Jaffray Cos., Inc. (Æ)(Ñ) | 16,500 | 1,141 | ||
PMI Group, Inc. (The) (Ñ) | 12,244 | 522 | ||
Preferred Bank | 2,000 | 117 | ||
ProAssurance Corp. (Æ) | 45,783 | 2,230 | ||
Protective Life Corp. | 9,200 | 407 | ||
Provident Financial Holdings, Inc. (Ñ) | 3,708 | 112 | ||
Provident Financial Services, Inc. (Ñ) | 2,720 | 50 | ||
PS Business Parks, Inc. (ö) | 12,149 | 800 | ||
R&G Financial Corp. Class B | 10,800 | 83 | ||
Radian Group, Inc. (Ñ) | 14,700 | 783 | ||
RAIT Investment Trust (ö)(Ñ) | 3,000 | 90 | ||
Raymond James Financial, Inc. | 39,350 | 1,254 | ||
Realty Income Corp. (ö)(Ñ) | 24,900 | 657 | ||
Reinsurance Group of America, Inc. (Ñ) | 22,262 | 1,256 | ||
RenaissanceRe Holdings, Ltd. (Ñ) | 16,538 | 900 | ||
Resource Capital Corp. (Æ)(Ñ) | 3,400 | 56 | ||
Ryder System, Inc. (Ñ) | 30,400 | 1,601 | ||
S1 Corp. (Æ)(Ñ) | 28,100 | 139 | ||
Safety Insurance Group, Inc. (Ñ) | 26,015 | 1,301 | ||
SeaBright Insurance Holdings, Inc. (Æ) | 9,000 | 148 | ||
SEI Investments Co. (Ñ) | 32,220 | 1,813 |
36
Table of Contents
Senior Housing Properties Trust (ö)(Ñ) | 33,758 | 774 | ||
Sky Financial Group, Inc. | 15,200 | 381 | ||
SL Green Realty Corp. (ö) | 3,479 | 421 | ||
Southwest Bancorp, Inc. | 27,941 | 757 | ||
Sovran Self Storage, Inc. (ö) | 13,598 | 802 | ||
Spirit Finance Corp. (ö)(Ñ) | 9,990 | 119 | ||
Stancorp Financial Group, Inc. | 25,400 | 1,161 | ||
Sterling Bancorp | 4,305 | 84 | ||
Sterling Bancshares, Inc. | 20,100 | 368 | ||
Sterling Financial Corp. | 4,500 | 104 | ||
Stewart Information Services Corp. | 10,440 | 387 | ||
Sunstone Hotel Investors, Inc. (ö) | 28,298 | 834 | ||
Susquehanna Bancshares, Inc. (Ñ) | 15,600 | 390 | ||
SWS Group, Inc. (Ñ) | 6,535 | 182 | ||
Taylor Capital Group, Inc. | 1,199 | 42 | ||
TCF Financial Corp. (Ñ) | 15,900 | 414 | ||
TD Banknorth, Inc. (Ñ) | 23,429 | 693 | ||
TierOne Corp. (Ñ) | 5,775 | 185 | ||
Tower Group, Inc. (Ñ) | 36,980 | 1,307 | ||
TradeStation Group, Inc. (Æ) | 15,600 | 244 | ||
Triad Guaranty, Inc. (Æ)(Ñ) | 21,601 | 1,113 | ||
U-Store-It Trust (ö)(Ñ) | 28,200 | 619 | ||
Umpqua Holdings Corp. (Ñ) | 5,400 | 152 | ||
Unitrin, Inc. | 15,400 | 661 | ||
Virginia Commerce Bancorp (Æ)(Ñ) | 3,370 | 69 | ||
Weingarten Realty Investors (ö)(Ñ) | 3,700 | 172 | ||
Whitney Holding Corp. | 14,950 | 488 | ||
Williams Scotsman International, Inc. (Æ)(Ñ) | 5,000 | 118 | ||
Winston Hotels, Inc. (ö) | 5,090 | 62 | ||
World Acceptance Corp. (Æ)(Ñ) | 3,698 | 185 | ||
Zenith National Insurance Corp. (Ñ) | 29,274 | 1,362 | ||
Zions Bancorporation | 9,000 | 724 | ||
112,180 | ||||
Health Care - 11.1% | ||||
Accelrys, Inc. (Æ) | 53,900 | 340 | ||
Adams Respiratory Therapeutics, Inc. (Æ) | 29,958 | 1,291 | ||
Albany Molecular Research, Inc. (Æ)(Ñ) | 11,912 | 142 | ||
Alkermes, Inc. (Æ)(Ñ) | 37,660 | 633 | ||
Alliance Imaging, Inc. (Æ)(Ñ) | 10,200 | 86 | ||
Allscripts Healthcare Solutions, Inc. (Æ) | 61,701 | 1,456 | ||
Alpharma, Inc. Class A | 10,040 | 222 | ||
American Medical Systems Holdings, Inc. (Æ) | 117,892 | 2,100 | ||
AMERIGROUP Corp. (Æ) | 36,040 | 1,080 | ||
Amsurg Corp. Class A (Æ)(Ñ) | 4,703 | 99 | ||
Analogic Corp. (Ñ) | 11,100 | 619 | ||
Applera Corp. - Celera Genomics Group (Æ)(Ñ) | 107,290 | 1,665 | ||
Apria Healthcare Group, Inc. (Æ)(Ñ) | 7,386 | 172 | ||
Arqule, Inc. (Æ)(Ñ) | 2,600 | 10 | ||
Arthrocare Corp. (Æ) | 36,125 | 1,460 | ||
Beckman Coulter, Inc. | 5,300 | 305 | ||
Bio-Rad Laboratories, Inc. Class A (Æ) | 10,968 | 805 | ||
Bruker BioSciences Corp. (Æ) | 14,834 | 118 | ||
Cerner Corp. (Æ)(Ñ) | 25,400 | 1,227 | ||
Charles River Laboratories International, Inc. (Æ)(Ñ) | 19,900 | 854 | ||
Community Health Systems, Inc. (Æ)(Ñ) | 43,634 | 1,416 | ||
Computer Programs & Systems, Inc. (Ñ) | 2,441 | 83 | ||
Conor Medsystems, Inc. (Æ)(Ñ) | 31,900 | 783 |
37
Table of Contents
Cooper Cos., Inc. (The) (Ñ) | 27,900 | 1,608 | ||
Covance, Inc. (Æ)(Ñ) | 19,700 | 1,152 | ||
Dade Behring Holdings, Inc. | 2,637 | 96 | ||
DaVita, Inc. (Æ)(Ñ) | 81,386 | 4,527 | ||
Dendreon Corp. (Æ)(Ñ) | 14,200 | 72 | ||
Dendrite International, Inc. (Æ) | 4,302 | 45 | ||
Discovery Laboratories, Inc. (Æ)(Ñ) | 34,800 | 91 | ||
Endo Pharmaceuticals Holdings, Inc. (Æ)(Ñ) | 22,530 | 643 | ||
Enzon Pharmaceuticals, Inc. (Æ)(Ñ) | 27,937 | 239 | ||
Flamel Technologies SA - ADR (Æ)(Ñ) | 9,100 | 226 | ||
Genesis HealthCare Corp. (Æ)(Ñ) | 5,580 | 270 | ||
Greatbatch, Inc. (Æ)(Ñ) | 13,520 | 304 | ||
Haemonetics Corp. (Æ) | 8,468 | 386 | ||
Hanger Orthopedic Group, Inc. (Æ)(Ñ) | 1,100 | 9 | ||
Healthcare Services Group (Ñ) | 28,700 | 780 | ||
Healthspring, Inc. (Æ) | 15,400 | 310 | ||
Healthways, Inc. (Æ) | 36,457 | 1,544 | ||
Henry Schein, Inc. (Æ)(Ñ) | 49,211 | 2,445 | ||
Hologic, Inc. (Æ) | 51,813 | 2,495 | ||
ICU Medical, Inc. (Æ)(Ñ) | 4,639 | 196 | ||
Idexx Laboratories, Inc. (Æ) | 1,500 | 125 | ||
Illumina, Inc. (Æ)(Ñ) | 82,941 | 3,646 | ||
Intralase Corp. (Æ)(Ñ) | 27,700 | 545 | ||
Inverness Medical Innovations, Inc. (Æ)(Ñ) | 19,000 | 716 | ||
Invitrogen Corp. (Æ)(Ñ) | 5,100 | 296 | ||
Kendle International, Inc. (Æ) | 6,736 | 233 | ||
King Pharmaceuticals, Inc. (Æ)(Ñ) | 11,790 | 197 | ||
Kos Pharmaceuticals, Inc. (Æ)(Ñ) | 2,400 | 119 | ||
Landauer, Inc. (Æ)(Ñ) | 2,591 | 142 | ||
LCA-Vision, Inc. | 9,706 | 341 | ||
Lifecell Corp. (Æ)(Ñ) | 30,100 | 705 | ||
LifePoint Hospitals, Inc. (Æ) | 16,300 | 579 | ||
Magellan Health Services, Inc. (Æ) | 5,744 | 251 | ||
Medcath Corp. (Æ) | 8,400 | 223 | ||
Medical Action Industries, Inc. (Æ) | 6,012 | 160 | ||
Mentor Corp. | 25,798 | 1,207 | ||
Millennium Pharmaceuticals, Inc. (Æ)(Ñ) | 45,450 | 532 | ||
Molecular Devices Corp. (Æ) | 2,640 | 53 | ||
Molina Healthcare, Inc. (Æ)(Ñ) | 25,829 | 1,013 | ||
Myriad Genetics, Inc. (Æ)(Ñ) | 21,800 | 586 | ||
Neurocrine Biosciences, Inc. (Æ)(Ñ) | 14,500 | 167 | ||
Noven Pharmaceuticals, Inc. (Æ)(Ñ) | 18,194 | 404 | ||
Omnicell, Inc. (Æ)(Ñ) | 4,000 | 75 | ||
Pain Therapeutics, Inc. (Æ)(Ñ) | 9,390 | 78 | ||
Palomar Medical Technologies, Inc. (Æ)(Ñ) | 3,940 | 186 | ||
Parexel International Corp. (Æ) | 11,237 | 333 | ||
Patterson Cos., Inc. (Æ) | 29,995 | 985 | ||
Perrigo Co. (Ñ) | 36,616 | 655 | ||
Pharmaceutical Product Development, Inc. | 37,539 | 1,188 | ||
Pharmacopeia Drug Discovery, Inc. (Æ) | 30,900 | 136 | ||
Pharmacyclics, Inc. (Æ)(Ñ) | 6,200 | 33 | ||
PharmaNet Development Group, Inc. (Æ)(Ñ) | 13,412 | 251 | ||
Phase Forward, Inc. (Æ) | 60,200 | 836 | ||
PolyMedica Corp. | 20,000 | 831 | ||
PSS World Medical, Inc. (Æ) | 46,416 | 934 | ||
Psychiatric Solutions, Inc. (Æ) | 54,383 | 1,806 | ||
Quality Systems, Inc. | 31,297 | 1,328 |
38
Table of Contents
Savient Pharmaceuticals, Inc. (Æ)(Ñ) | 31,348 | 239 | ||
Sciclone Pharmaceuticals, Inc. (Æ)(Ñ) | 16,500 | 42 | ||
Sierra Health Services, Inc. (Æ) | 3,903 | 134 | ||
Stericycle, Inc. (Æ)(Ñ) | 18,100 | 1,280 | ||
STERIS Corp. | 30,500 | 743 | ||
Sunrise Senior Living, Inc. (Æ)(Ñ) | 15,314 | 478 | ||
Techne Corp. (Æ) | 28,764 | 1,607 | ||
Tenet Healthcare Corp. (Æ)(Ñ) | 72,000 | 508 | ||
Universal Health Services, Inc. Class B | 7,700 | 408 | ||
Varian Medical Systems, Inc. (Æ) | 17,470 | 958 | ||
Ventana Medical Systems, Inc. (Æ)(Ñ) | 15,200 | 614 | ||
Viasys Healthcare, Inc. (Æ) | 3,500 | 100 | ||
Viropharma, Inc. (Æ) | 47,000 | 627 | ||
Vital Images, Inc. (Æ) | 11,401 | 354 | ||
Watson Pharmaceuticals, Inc. (Æ)(Ñ) | 48,560 | 1,307 | ||
WellCare Health Plans, Inc. (Æ)(Ñ) | 46,214 | 2,715 | ||
West Pharmaceutical Services, Inc. | 8,827 | 371 | ||
Zoll Medical Corp. (Æ) | 12,866 | 498 | ||
69,282 | ||||
Integrated Oils - 0.1% | ||||
Giant Industries, Inc. (Æ)(Ñ) | 5,993 | 485 | ||
Materials and Processing - 8.9% | ||||
Acuity Brands, Inc. | 11,322 | 561 | ||
AEP Industries, Inc. (Æ)(Ñ) | 4,379 | 231 | ||
Airgas, Inc. | 44,136 | 1,669 | ||
Albemarle Corp. (Æ) | 18,800 | 1,223 | ||
Aleris International, Inc. (Æ) | 30,058 | 1,548 | ||
AM Castle & Co. | 30,892 | 1,033 | ||
Amrep Corp. (Ñ) | 2,460 | 176 | ||
Arch Chemicals, Inc. | 3,900 | 131 | ||
Ashland, Inc. (Ñ) | 3,090 | 183 | ||
Barnes Group, Inc. | 27,600 | 553 | ||
Builders FirstSource, Inc. (Æ)(Ñ) | 17,690 | 280 | ||
Cambrex Corp. (Ñ) | 38,992 | 912 | ||
CF Industries Holdings, Inc. | 22,080 | 438 | ||
Chaparral Steel Co. (Æ) | 16,600 | 690 | ||
Chesapeake Corp. | 8,800 | 136 | ||
Chicago Bridge & Iron Co. NV | 42,097 | 1,034 | ||
Comfort Systems USA, Inc. | 39,800 | 462 | ||
Commercial Metals Co. | 30,600 | 814 | ||
Constar International, Inc. (Æ)(Ñ) | 29,400 | 206 | ||
Crown Holdings, Inc. (Æ)(Ñ) | 18,000 | 350 | ||
Cytec Industries, Inc. | 33,338 | 1,847 | ||
Eastern Co. (The) | 34,838 | 610 | ||
Eastman Chemical Co. | 20,000 | 1,218 | ||
EMCOR Group, Inc. (Æ) | 42,344 | 2,505 | ||
Encore Wire Corp. (Æ)(Ñ) | 14,190 | 381 | ||
Energizer Holdings, Inc. (Æ)(Ñ) | 11,530 | 901 | ||
Energy Conversion Devices, Inc. (Æ) | 15,464 | 569 | ||
Ennis, Inc. | 31,789 | 730 | ||
Ferro Corp. | 24,700 | 487 | ||
FMC Corp. | 17,100 | 1,172 | ||
Georgia Gulf Corp. | 22,497 | 481 | ||
Granite Construction, Inc. | 10,331 | 538 | ||
Greif, Inc. Class A | 1,007 | 94 | ||
Harsco Corp. (Ñ) | 9,800 | 800 | ||
HB Fuller Co. | 41,400 | 1,026 |
39
Table of Contents
Hercules, Inc. (Æ) | 35,800 | 652 | ||
Huntsman Corp. (Æ)(Ñ) | 19,000 | 328 | ||
Infrasource Services, Inc. (Æ) | 25,747 | 504 | ||
Innospec, Inc. | 3,000 | 100 | ||
Insituform Technologies, Inc. Class A (Æ)(Ñ) | 51,100 | 1,194 | ||
Kaydon Corp. (Ñ) | 8,991 | 376 | ||
Lamson & Sessions Co. (The) (Æ)(Ñ) | 26,735 | 585 | ||
Lennox International, Inc. | 15,700 | 423 | ||
LSI Industries, Inc. | 5,447 | 98 | ||
Lubrizol Corp. | 28,800 | 1,296 | ||
Material Sciences Corp. (Æ) | 1,473 | 18 | ||
Metal Management, Inc. | 42,929 | 1,180 | ||
Mueller Industries, Inc. (Ñ) | 33,385 | 1,224 | ||
Mueller Water Products, Inc. Class A (Æ) | 75,044 | 1,198 | ||
Myers Industries, Inc. (Ñ) | 26,185 | 474 | ||
Neenah Paper, Inc. (Æ)(Ñ) | 8,455 | 311 | ||
Newkirk Realty Trust, Inc. | 4,890 | 83 | ||
NewMarket Corp. | 7,670 | 493 | ||
Novagold Resources, Inc. (Æ) | 41,069 | 648 | ||
Olin Corp. | 28,200 | 488 | ||
OM Group, Inc. (Æ) | 35,767 | 2,039 | ||
Perini Corp. (Æ) | 7,500 | 185 | ||
Pioneer Cos., Inc. (Æ) | 8,929 | 229 | ||
PolyOne Corp. (Æ)(Ñ) | 76,539 | 628 | ||
PW Eagle, Inc. (Ñ) | 6,264 | 222 | ||
Quanex Corp. | 17,000 | 570 | ||
Reliance Steel & Aluminum Co. | 19,800 | 680 | ||
Rock-Tenn Co. Class A | 20,003 | 413 | ||
Rockwood Holdings, Inc. (Æ)(Ñ) | 23,900 | 557 | ||
Ryerson, Inc. (Ñ) | 2,240 | 54 | ||
Schnitzer Steel Industries, Inc. Class A (Ñ) | 19,500 | 682 | ||
Schulman A, Inc. | 4,550 | 110 | ||
Spartech Corp. | 42,525 | 1,165 | ||
Standard Register Co. (The) (Ñ) | 16,400 | 222 | ||
Steel Technologies, Inc. | 8,600 | 165 | ||
Superior Essex, Inc. (Æ) | 19,090 | 716 | ||
Temple-Inland, Inc. | 8,400 | 331 | ||
Terra Industries, Inc. (Æ)(Ñ) | 21,030 | 195 | ||
Timken Co. | 20,213 | 607 | ||
Trammell Crow Co. (Æ) | 35,029 | 1,708 | ||
Universal Forest Products, Inc. (Ñ) | 1,453 | 66 | ||
USEC, Inc. (Ñ) | 10,119 | 113 | ||
USG Corp. (Æ)(Ñ) | 22,700 | 1,110 | ||
Valmont Industries, Inc. | 20,981 | 1,171 | ||
Washington Group International, Inc. | 61,491 | 3,482 | ||
Westlake Chemical Corp. (Ñ) | 12,278 | 387 | ||
Wheeling-Pittsburgh Corp. (Æ)(Ñ) | 3,070 | 61 | ||
Xerium Technologies, Inc. | 5,500 | 68 | ||
55,598 | ||||
Miscellaneous - 1.8% | ||||
Brunswick Corp. | 6,900 | 217 | ||
Foster Wheeler, Ltd. (Æ)(Ñ) | 22,900 | 1,029 | ||
GP Strategies Corp. (Æ) | 7,456 | 60 | ||
Hillenbrand Industries, Inc. (Ñ) | 19,600 | 1,150 | ||
Johnson Controls, Inc. (Ñ) | 9,096 | 742 | ||
Lancaster Colony Corp. | 1,900 | 77 | ||
McDermott International, Inc. (Æ) | 80,246 | 3,587 |
40
Table of Contents
SPX Corp. (Ñ) | 24,290 | 1,397 | ||
Walter Industries, Inc. | 45,203 | 2,102 | ||
Wesco Financial Corp. | 2,481 | 1,190 | ||
11,551 | ||||
Other Energy - 4.4% | ||||
Alon USA Energy, Inc. (Ñ) | 5,200 | 146 | ||
Bois d’Arc Energy, Inc. (Æ)(Ñ) | 14,800 | 238 | ||
Bronco Drilling Co., Inc. (Æ)(Ñ) | 6,000 | 102 | ||
Cameron International Corp. (Æ) | 20,649 | 1,035 | ||
Comstock Resources, Inc. (Æ) | 21,854 | 610 | ||
Core Laboratories NV (Æ) | 36,160 | 2,636 | ||
Denbury Resources, Inc. (Æ) | 15,343 | 441 | ||
Dresser-Rand Group, Inc. (Æ)(Ñ) | 17,200 | 373 | ||
Edge Petroleum Corp. (Æ) | 14,000 | 255 | ||
Enbridge Energy Partners, LP Class A (Ñ) | 16,078 | 795 | ||
ENSCO International, Inc. (Ñ) | 17,300 | 847 | ||
Equitable Resources, Inc. (Ñ) | 1,420 | 58 | ||
FMC Technologies, Inc. (Æ)(Ñ) | 3,600 | 218 | ||
Foundation Coal Holdings, Inc. (Ñ) | 18,800 | 690 | ||
Frontier Oil Corp. | 23,100 | 679 | ||
Global Industries, Ltd. (Æ) | 37,900 | 629 | ||
Grey Wolf, Inc. (Æ)(Ñ) | 58,174 | 407 | ||
Hercules Offshore, Inc. (Æ)(Ñ) | 24,000 | 855 | ||
Holly Corp. (Ñ) | 10,890 | 518 | ||
Hornbeck Offshore Services, Inc. (Æ) | 40,251 | 1,453 | ||
Input/Output, Inc. (Æ)(Ñ) | 46,900 | 526 | ||
Meridian Resource Corp. (Æ)(Ñ) | 34,800 | 117 | ||
National-Oilwell Varco, Inc. (Æ) | 22,173 | 1,339 | ||
Newfield Exploration Co. (Æ) | 9,300 | 379 | ||
Ormat Technologies, Inc. (Ñ) | 6,500 | 250 | ||
Penn Virginia Corp. (Ñ) | 6,075 | 435 | ||
Pioneer Drilling Co. (Æ)(Ñ) | 35,924 | 472 | ||
Reliant Energy, Inc. (Æ)(Ñ) | 9,714 | 123 | ||
St. Mary Land & Exploration Co. (Ñ) | 15,267 | 569 | ||
Swift Energy Co. (Æ) | 21,310 | 996 | ||
Talisman Energy, Inc. | 43,557 | 719 | ||
TEPPCO Partners, LP (Ñ) | 20,137 | 794 | ||
Tetra Technologies, Inc. (Æ) | 77,985 | 2,020 | ||
Trico Marine Services, Inc. (Æ)(Ñ) | 16,800 | 573 | ||
Unit Corp. (Æ) | 13,525 | 627 | ||
Universal Compression Holdings, Inc. (Æ) | 910 | 55 | ||
Veritas DGC, Inc. (Æ) | 33,181 | 2,389 | ||
Western Refining, Inc. (Ñ) | 12,200 | 287 | ||
Whiting Petroleum Corp. (Æ) | 20,007 | 892 | ||
XTO Energy, Inc. | 18,821 | 878 | ||
27,425 | ||||
Producer Durables - 6.6% | ||||
AGCO Corp. (Æ)(Ñ) | 20,343 | 544 | ||
AO Smith Corp. (Ñ) | 9,400 | 331 | ||
Arris Group, Inc. (Æ) | 25,234 | 338 | ||
ASML Holding NV (Æ) | 84,018 | 1,919 | ||
BE Aerospace, Inc. (Æ) | 64,787 | 1,638 | ||
Belden CDT, Inc. (Ñ) | 5,990 | 217 | ||
Briggs & Stratton Corp. (Ñ) | 16,446 | 419 | ||
C&D Technologies, Inc. (Ñ) | 15,600 | 77 | ||
C-COR, Inc. (Æ) | 33,549 | 335 | ||
Cascade Corp. | 19,043 | 975 |
41
Table of Contents
Cavco Industries, Inc. (Æ) | 700 | 24 | ||
Crane Co. (Ñ) | 11,778 | 459 | ||
Credence Systems Corp. (Æ)(Ñ) | 48,589 | 156 | ||
Crown Castle International Corp. (Æ)(Ñ) | 22,200 | 747 | ||
CTS Corp. (Ñ) | 13,002 | 184 | ||
Desarrolladora Homex SA de CV - ADR (Æ)(Ñ) | 30,340 | 1,332 | ||
DR Horton, Inc. | 19,020 | 446 | ||
EnPro Industries, Inc. (Æ)(Ñ) | 8,118 | 260 | ||
Entegris, Inc. (Æ)(Ñ) | 85,831 | 962 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 41,310 | 1,794 | ||
Flow International Corp. (Æ)(Ñ) | 1,377 | 16 | ||
Flowserve Corp. (Æ) | 8,500 | 451 | ||
Garmin, Ltd. (Ñ) | 22,100 | 1,180 | ||
Gmarket, Inc. - ADR (Æ)(Ñ) | 15,700 | 261 | ||
Herman Miller, Inc. | 34,300 | 1,176 | ||
Interdigital Communications Corp. (Æ)(Ñ) | 16,380 | 586 | ||
Itron, Inc. (Æ)(Ñ) | 7,389 | 402 | ||
Kennametal, Inc. | 15,720 | 970 | ||
Kimball International, Inc. Class B (Ñ) | 19,559 | 486 | ||
Kulicke & Soffa Industries, Inc. (Æ)(Ñ) | 9,600 | 86 | ||
L-1 Identity Solutions, Inc. (Æ)(Ñ) | 43,100 | 617 | ||
Lam Research Corp. (Æ) | 32,800 | 1,622 | ||
Lennar Corp. Class A (Ñ) | 12,403 | 589 | ||
Mettler Toledo International, Inc. (Æ) | 41,912 | 2,877 | ||
Milacron, Inc. (Æ)(Ñ) | 94,258 | 85 | ||
MKS Instruments, Inc. (Æ) | 19,800 | 429 | ||
NACCO Industries, Inc. Class A | 1,238 | 186 | ||
Orbital Sciences Corp. (Æ) | 33,594 | 610 | ||
Pall Corp. (Ñ) | 30,200 | 963 | ||
Polycom, Inc. (Æ)(Ñ) | 79,215 | 2,170 | ||
Regal-Beloit Corp. (Ñ) | 11,961 | 591 | ||
Robbins & Myers, Inc. (Ñ) | 25,926 | 998 | ||
SBA Communications Corp. Class A (Æ)(Ñ) | 50,700 | 1,354 | ||
Steelcase, Inc. Class A (Ñ) | 27,600 | 457 | ||
Technitrol, Inc. | 22,100 | 557 | ||
Tecumseh Products Co. Class A (Æ)(Ñ) | 30,700 | 516 | ||
Tektronix, Inc. | 31,900 | 969 | ||
Teledyne Technologies, Inc. (Æ)(Ñ) | 12,800 | 534 | ||
Tennant Co. | 19,578 | 541 | ||
Toll Brothers, Inc. (Æ)(Ñ) | 16,997 | 491 | ||
Tollgrade Communications, Inc. (Æ)(Ñ) | 12,740 | 105 | ||
Triumph Group, Inc. (Æ)(Ñ) | 2,200 | 106 | ||
Ultratech, Inc. (Æ)(Ñ) | 25,800 | 369 | ||
United Industrial Corp. (Ñ) | 1,180 | 53 | ||
Varian Semiconductor Equipment Associates, Inc. (Æ) | 108,188 | 3,948 | ||
Waters Corp. (Æ) | 7,203 | 359 | ||
Zygo Corp. (Æ) | 1,400 | 24 | ||
40,891 | ||||
Technology - 17.3% | ||||
Actel Corp. (Æ) | 12,700 | 208 | ||
ActivIdentity Corp. (Æ)(Ñ) | 8,900 | 50 | ||
Acxiom Corp. | 18,429 | 456 | ||
Adaptec, Inc. (Æ)(Ñ) | 180,995 | 820 | ||
Agile Software Corp. (Æ)(Ñ) | 113,300 | 764 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 45,600 | 2,137 | ||
Alliance Semiconductor Corp. (Æ) | 44,600 | 165 | ||
Altiris, Inc. (Æ) | 2,800 | 63 |
42
Table of Contents
Amdocs, Ltd. (Æ) | 21,600 | 837 | ||
American Reprographics Co. (Æ) | 17,755 | 630 | ||
American Software, Inc. Class A | 5,242 | 38 | ||
Amphenol Corp. Class A | 63,231 | 4,293 | ||
Anaren, Inc. (Æ) | 9,953 | 200 | ||
Ansoft Corp. (Æ)(Ñ) | 27,115 | 723 | ||
Ansys, Inc. (Æ) | 50,946 | 2,344 | ||
Applera Corp. - Applied Biosystems Group | 17,800 | 664 | ||
Applied Micro Circuits Corp. (Æ) | 32,800 | 100 | ||
Ariba, Inc. (Æ)(Ñ) | 68,000 | 513 | ||
Arrow Electronics, Inc. (Æ) | 29,069 | 868 | ||
ASE Test, Ltd. (Æ)(Ñ) | 64,969 | 574 | ||
Aspen Technology, Inc. (Æ)(Ñ) | 28,300 | 284 | ||
Atmel Corp. (Æ)(Ñ) | 114,042 | 656 | ||
Avanex Corp. (Æ)(Ñ) | 95,500 | 152 | ||
Avnet, Inc. (Æ) | 38,579 | 914 | ||
Avocent Corp. (Æ) | 7,900 | 290 | ||
BEA Systems, Inc. (Æ) | 90,800 | 1,477 | ||
BearingPoint, Inc. (Æ)(Ñ) | 35,900 | 299 | ||
Benchmark Electronics, Inc. (Æ) | 142,941 | 3,795 | ||
Blackbaud, Inc. | 19,422 | 486 | ||
Broadwing Corp. (Æ)(Ñ) | 21,621 | 324 | ||
Brocade Communications Systems, Inc. (Æ)(Ñ) | 249,516 | 2,024 | ||
Captaris, Inc. (Æ) | 17,202 | 101 | ||
Carrier Access Corp. (Æ)(Ñ) | 11,364 | 71 | ||
Cbeyond, Inc. (Æ)(Ñ) | 31,600 | 959 | ||
Ceridian Corp. (Æ) | 8,200 | 193 | ||
Ciena Corp. (Æ)(Ñ) | 94,707 | 2,227 | ||
Cirrus Logic, Inc. (Æ) | 32,638 | 230 | ||
Citrix Systems, Inc. (Æ)(Ñ) | 22,700 | 670 | ||
Cognizant Technology Solutions Corp. Class A (Æ)(Ñ) | 21,200 | 1,596 | ||
Coherent, Inc. (Æ)(Ñ) | 17,427 | 562 | ||
Comverse Technology, Inc. (Æ) | 55,552 | 1,209 | ||
Cray, Inc. (Æ)(Ñ) | 9,654 | 89 | ||
CSG Systems International, Inc. (Æ)(Ñ) | 41,780 | 1,127 | ||
Cubic Corp. (Ñ) | 24,068 | 503 | ||
Daktronics, Inc. (Ñ) | 39,000 | 925 | ||
Digital River, Inc. (Æ)(Ñ) | 28,300 | 1,637 | ||
DSP Group, Inc. (Æ) | 2,390 | 52 | ||
Echelon Corp. (Æ)(Ñ) | 4,200 | 35 | ||
Emulex Corp. (Æ) | 2,741 | 52 | ||
Equinix, Inc. (Æ)(Ñ) | 53,231 | 3,641 | ||
Exar Corp. (Æ)(Ñ) | 4,000 | 52 | ||
Extreme Networks (Æ) | 94,877 | 361 | ||
Fairchild Semiconductor International, Inc. (Æ) | 24,400 | 393 | ||
Flir Systems, Inc. (Æ)(Ñ) | 18,500 | 591 | ||
Formfactor, Inc. (Æ)(Ñ) | 16,000 | 611 | ||
Foundry Networks, Inc. (Æ) | 45,400 | 575 | ||
Gartner, Inc. (Æ)(Ñ) | 136,000 | 2,530 | ||
Genesis Microchip, Inc. (Æ)(Ñ) | 35,115 | 360 | ||
Gerber Scientific, Inc. (Æ) | 3,900 | 57 | ||
Hittite Microwave Corp. (Æ)(Ñ) | 24,100 | 826 | ||
II-VI, Inc. (Æ) | 11,600 | 284 | ||
Ikanos Communications, Inc. (Æ)(Ñ) | 25,300 | 213 | ||
InFocus Corp. (Æ) | 44,700 | 126 | ||
Ingram Micro, Inc. Class A (Æ) | 70,140 | 1,446 | ||
Integrated Device Technology, Inc. (Æ) | 123,500 | 1,957 |
43
Table of Contents
Integrated Silicon Solutions, Inc. (Æ)(Ñ) | 67,070 | 355 | ||
Interwoven, Inc. (Æ) | 41,767 | 531 | ||
JDA Software Group, Inc. (Æ)(Ñ) | 11,182 | 165 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 27,250 | 396 | ||
Keane, Inc. (Æ) | 4,400 | 51 | ||
Keynote Systems, Inc. (Æ)(Ñ) | 36,100 | 390 | ||
Lattice Semiconductor Corp. (Æ)(Ñ) | 67,056 | 416 | ||
Lawson Software, Inc. (Æ)(Ñ) | 135,900 | 1,036 | ||
Leadis Technology, Inc. (Æ) | 2,600 | 12 | ||
Logility, Inc. (Æ)(Ñ) | 2,962 | 26 | ||
LSI Logic Corp. (Æ)(Ñ) | 93,545 | 940 | ||
McData Corp. Class A (Æ)(Ñ) | 71,827 | 407 | ||
MEMC Electronic Materials, Inc. (Æ) | 21,407 | 760 | ||
Mentor Graphics Corp. (Æ)(Ñ) | 211,743 | 3,572 | ||
Mercury Computer Systems, Inc. (Æ) | 8,600 | 106 | ||
Merge Technologies, Inc. (Æ)(Ñ) | 18,999 | 146 | ||
Methode Electronics, Inc. | 12,400 | 137 | ||
Micros Systems, Inc. (Æ) | 30,777 | 1,529 | ||
MicroStrategy, Inc. Class A (Æ)(Ñ) | 5,626 | 671 | ||
MIPS Technologies, Inc. Class A (Æ) | 8,600 | 63 | ||
Novell, Inc. (Æ) | 129,000 | 774 | ||
Nuance Communications, Inc. (Æ)(Ñ) | 78,500 | 906 | ||
Opnet Technologies, Inc. (Æ)(Ñ) | 9,128 | 133 | ||
Opsware, Inc. (Æ)(Ñ) | 87,400 | 794 | ||
Orckit Communications, Ltd. (Æ)(Ñ) | 28,800 | 248 | ||
Parametric Technology Corp. (Æ) | 83,488 | 1,631 | ||
Park Electrochemical Corp. (Ñ) | 15,788 | 485 | ||
Pegasystems, Inc. (Ñ) | 5,502 | 53 | ||
Plexus Corp. (Æ)(Ñ) | 10,791 | 237 | ||
PMC - Sierra, Inc. (Æ)(Ñ) | 139,800 | 927 | ||
Portalplayer, Inc. (Æ)(Ñ) | 28,435 | 342 | ||
PowerDsine, Ltd. (Æ)(Ñ) | 32,000 | 348 | ||
Quantum Corp. (Æ)(Ñ) | 184,200 | 402 | ||
Rackable Systems, Inc. (Æ)(Ñ) | 32,500 | 1,008 | ||
Radisys Corp. (Æ)(Ñ) | 17,287 | 317 | ||
RADVision, Ltd. (Æ) | 7,800 | 150 | ||
RADWARE, Ltd. (Æ) | 13,300 | 194 | ||
RealNetworks, Inc. (Æ)(Ñ) | 123,990 | 1,361 | ||
Riverbed Technology, Inc. (Æ) | 7,800 | 187 | ||
Rockwell Automation, Inc. | 33,096 | 2,052 | ||
Sanmina-SCI Corp. (Æ) | 122,700 | 485 | ||
Seachange International, Inc. (Æ)(Ñ) | 50,500 | 424 | ||
Seagate Technology (Ñ) | 61,562 | 1,390 | ||
Semtech Corp. (Æ) | 45,500 | 593 | ||
Sigma Designs, Inc. (Æ)(Ñ) | 30,600 | 643 | ||
Sigmatel, Inc. (Æ)(Ñ) | 52,800 | 274 | ||
Silicon Image, Inc. (Æ) | 40,590 | 480 | ||
Silicon Motion Technology Corp. - ADR (Æ) | 7,900 | 121 | ||
Silicon Storage Technology, Inc. (Æ)(Ñ) | 88,337 | 370 | ||
Skyworks Solutions, Inc. (Æ)(Ñ) | 168,100 | 1,115 | ||
Smith Micro Software, Inc. (Æ)(Ñ) | 23,700 | 403 | ||
Solectron Corp. (Æ)(Ñ) | 183,300 | 612 | ||
SonicWALL, Inc. (Æ) | 77,450 | 813 | ||
Spansion, Inc. Class A (Æ)(Ñ) | 1,000 | 14 | ||
SPSS, Inc. (Æ) | 2,810 | 78 | ||
Stellent, Inc. | 12,100 | 135 | ||
SupportSoft, Inc. (Æ) | 11,200 | 57 |
44
Table of Contents
Sybase, Inc. (Æ)(Ñ) | 6,979 | 170 | ||
Sycamore Networks, Inc. (Æ)(Ñ) | 128,100 | 480 | ||
Sykes Enterprises, Inc. (Æ) | 23,962 | 486 | ||
Syniverse Holdings, Inc. (Æ) | 7,854 | 116 | ||
SYNNEX Corp. (Æ)(Ñ) | 28,205 | 633 | ||
Synopsys, Inc. (Æ)(Ñ) | 98,612 | 2,220 | ||
Tekelec (Æ)(Ñ) | 65,200 | 962 | ||
Tessera Technologies, Inc. (Æ) | 84,259 | 2,941 | ||
TIBCO Software, Inc. (Æ) | 116,380 | 1,077 | ||
Transaction Systems Architects, Inc. (Æ) | 56,609 | 1,908 | ||
Triquint Semiconductor, Inc. (Æ)(Ñ) | 126,481 | 569 | ||
Tyler Technologies, Inc. (Æ)(Ñ) | 16,477 | 234 | ||
Ultimate Software Group, Inc. (Æ) | 54,900 | 1,358 | ||
Unisys Corp. (Æ)(Ñ) | 275,360 | 1,801 | ||
Utstarcom, Inc. (Æ)(Ñ) | 100,590 | 1,083 | ||
Varian, Inc. (Æ)(Ñ) | 26,900 | 1,261 | ||
VeriFone Holdings, Inc. (Æ)(Ñ) | 7,900 | 231 | ||
Vignette Corp. (Æ) | 69,921 | 1,140 | ||
Vocus, Inc. (Æ) | 71,900 | 1,166 | ||
Wavecom Sa - ADR (Æ)(Ñ) | 20,400 | 277 | ||
webMethods, Inc. (Æ)(Ñ) | 79,549 | 598 | ||
Westell Technologies, Inc. Class A (Æ) | 37,800 | 91 | ||
Western Digital Corp. (Æ) | 53,748 | 983 | ||
Zhone Technologies, Inc. (Æ)(Ñ) | 3,300 | 5 | ||
Zoran Corp. (Æ) | 25,800 | 359 | ||
107,823 | ||||
Utilities - 3.2% | ||||
Allete, Inc. (Ñ) | 9,400 | 424 | ||
Alliant Energy Corp. (Ñ) | 18,659 | 716 | ||
Avista Corp. (Ñ) | 23,100 | 595 | ||
Black Hills Corp. (Ñ) | 8,542 | 295 | ||
Centerpoint Energy, Inc. (Ñ) | 47,400 | 734 | ||
CenturyTel, Inc. | 9,850 | 396 | ||
Cincinnati Bell, Inc. (Æ)(Ñ) | 92,069 | 432 | ||
Cleco Corp. | 6,170 | 159 | ||
CMS Energy Corp. (Æ)(Ñ) | 44,700 | 666 | ||
CT Communications, Inc. (Ñ) | 27,416 | 639 | ||
Laclede Group, Inc. (The) | 2,600 | 93 | ||
Leap Wireless International, Inc. (Æ)(Ñ) | 26,520 | 1,471 | ||
NeuStar, Inc. Class A (Æ)(Ñ) | 65,239 | 1,906 | ||
New Jersey Resources Corp. (Ñ) | 3,700 | 192 | ||
NII Holdings, Inc. (Æ) | 22,652 | 1,473 | ||
NorthWestern Corp. | 13,714 | 485 | ||
OGE Energy Corp. (Ñ) | 30,900 | 1,192 | ||
Pepco Holdings, Inc. (Ñ) | 52,060 | 1,323 | ||
Pinnacle West Capital Corp. (Ñ) | 22,000 | 1,052 | ||
Portland General Electric Co. | 10,080 | 260 | ||
Puget Energy, Inc. | 4,400 | 105 | ||
RCN Corp. (Æ) | 13,500 | 390 | ||
Southern Union Co. | 28,400 | 786 | ||
Southwest Gas Corp. | 4,383 | 157 | ||
TECO Energy, Inc. | 79,500 | 1,311 | ||
Telephone & Data Systems, Inc. | 6,500 | 317 | ||
UGI Corp. | 33,300 | 882 | ||
Unisource Energy Corp. | 16,700 | 594 | ||
USA Mobility, Inc. (Ñ) | 8,017 | 203 | ||
Westar Energy, Inc. (Ñ) | 24,238 | 614 | ||
19,862 | ||||
45
Table of Contents
Total Common Stocks | ||||
(cost $516,473) | 598,878 | |||
Warrants & Rights - 0.0% | ||||
Washington Mutual, Inc. 2050 Warrants (Æ) | 103,100 | 11 | ||
Total Warrants & Rights | ||||
(cost $17) | 11 | |||
Short-Term Investments - 4.3% | ||||
Russell Investment Company Money Market Fund | 25,328,001 | 25,328 | ||
United States Treasury Bills (ç)(ž)(§) | ||||
4.727% due 12/07/06 | 200 | 199 | ||
4.891% due 12/07/06 | 1,000 | 995 | ||
Total Short-Term Investments | ||||
(cost $26,522) | 26,522 | |||
Other Securities - 35.9% | ||||
Russell Investment Company Money Market Fund (×) | 57,429,305 | 57,429 | ||
State Street Securities Lending Quality Trust (×) | 166,374,090 | 166,374 | ||
Total Other Securities | ||||
(cost $223,803) | 223,803 | |||
Total Investments - 136.2% | ||||
(identified cost $766,815) | 849,214 | |||
Other Assets and Liabilities, | ||||
Net - (36.2%) | (225,877) | |||
Net Assets - 100.0% | 623,337 | |||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Russell 2000 Mini Index (CME) expiration date 12/06 (345) | 26,600 | 1,162 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 1,162 | |||
46
Table of Contents
Russell Investment Company Equity II Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 3.6 | ||
Consumer Discretionary | 19.6 | ||
Consumer Staples | 1.4 | ||
Financial Services | 18.0 | ||
Health Care | 11.1 | ||
Integrated Oils | 0.1 | ||
Materials and Processing | 8.9 | ||
Miscellaneous | 1.8 | ||
Other Energy | 4.4 | ||
Producer Durables | 6.6 | ||
Technology | 17.3 | ||
Utilities | 3.2 | ||
Warrants & Rights | —* | ||
Short-Term Investments | 4.3 | ||
Other Securities | 35.9 | ||
Total Investments | 136.2 | ||
Other Assets and Liabilities, Net | (36.2 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
47
Table of Contents
(This page intentionally left blank)
48
Table of Contents
Russell Investment Company Equity Q Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Equity Q Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.87 | % | |
5 Years | 7.40 | %§ | |
10 Years | 8.99 | %§ |
Equity Q Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.56 | % | |
5 Years | 7.15 | %§ | |
10 Years | 8.80 | %§ |
Equity Q Fund - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 15.93 | % | |
5 Years | 7.41 | %§ | |
10 Years | 8.99 | %§ |
Russell 1000 Index(R)**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 16.02 | % | |
5 Years | 7.92 | %§ | |
10 Years | 8.87 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Equity Q Fund Class I, Class E and Class Y gained 15.84%, 15.56% and 15.87%, respectively. This compared to the Russell 1000(R) Index, which gained 16.02% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Core Funds Average returned 13.60%. This result serves as a peer comparison and is expressed net of operating expenses.
49
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s money managers typically use a variety of quantitative investment models (mathematical formulas based on statistical analyses) and techniques to rank the relative attractiveness of securities based upon expected ability to outperform the total return of the Russell 1000(R) Index. Examples of those quantitative models are dividend discount models, price/cash flow models, price/earnings models, earnings surprise and earnings estimate revisions models and price momentum models. The money managers select stocks that are deemed attractive based upon the quantitative models and factors or characteristics that the money managers’ research has found to be predictive of positive excess returns over the long term.
Two of the primary long-term factors on which the Fund’s money managers select stocks, positive price momentum and positive earnings surprises and revisions, were not rewarded by the market during the fiscal year. This contributed to the Fund’s relative underperformance. Another detractor from performance was an underweight to stocks with higher dividend yields, which significantly outperformed.
The utilities sector posted the best performance of any sector during the fiscal year. This contributed to the Fund’s relative underperformance as the Fund was underweighted in this sector. An underweight in the best-performing industry, cable TV and radio, was the biggest detractor within the utilities sector. Weak stock selection in the strong integrated oil sector as well as in the weak technology sector contributed negatively.
The primary positive contributors to Fund performance were the Fund’s strategy to be fully invested by exposing cash reserves to appropriate markets and its exposure to companies with factor exposures the Fund’s money managers believed to be predictive of positive long-term excess returns. The key factors that were positively rewarded by the market during the fiscal year were low valuation measures and low forecasted growth. The Fund’s performance benefited from an overweight in lower valuation stocks and an underweight in stocks with high forecasted growth. Good stock selection in the strong materials and processing, the weak health care, and the weak consumer discretionary sectors contributed positively to excess returns.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Detracting from performance were weak stock selection in the strong and overweighted integrated oil sector as well as weak selection in the weak and overweighted health care sector. Contributing positively to the Fund’s relative performance were the Fund’s overweight in the strong materials and processing and producer durables sectors coupled with strong stock selection. While the Fund was underweight in the strong financial services sector, strong stock selection in that sector overcame the underweight and contributed positively to performance.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. Implementation of this strategy includes periodic rebalancing of the holdings. The select holdings contributed positively to relative performance during the fiscal year, particularly during the third quarter.
Franklin Portfolio Associates, LLC outperformed due to its overweight in lower valuation stocks, as well as less of an emphasis on momentum. Franklin also benefited from strong stock selection, particularly in the health care and materials and processing sectors.
Aronson + Johnson + Ortiz, L.P.’s strong tilt toward lower valuation stocks helped it overcome negative contributions to relative performance caused by its price momentum component and outperform its benchmark. Aronson also benefited from favorable sector allocations, especially an underweight in other energy. Strong stock selection, particularly in the materials and processing, technology, and producer durable sectors contributed positively to its outperformance.
Goldman Sachs Asset Management, L.P. outperformed on the strength of its stock selection, which was particularly strong in the materials and processing and consumer discretionary sectors.
Jacobs Levy Equity Management, Inc. (“JLEM”) was the only money manager to underperform over the course of the year due to both weak sector allocation decisions and poor stock selection. During the period, its underweight in the strong utilities and
50
Table of Contents
overweight of the weak health care sectors had the most negative effect on its sector allocation contributions. Weak stock selection in producer durables, materials and processing, and integrated oils also negatively impacted the Fund’s relative performance. During the first 10 months of the fiscal year, JLEM had a long-only investment assignment. Weak stock selection and sector allocations contributed to its underperformance during that time period. Stock selection in the materials and processing, producer durables, and other energy sectors were poor. In August, JLEM’s assignment was changed to a limited long-short strategy. The limited long-short strategy outperformed the Index in the remaining two months of the fiscal year due to stronger stock selection, particularly in the consumer discretionary and utility sectors.
Describe any changes to the Fund’s structure or the money manager line-up.
The target allocation of the select holdings strategy was increased from 5% to 10% in February. Additionally, Jacobs Levy’s long-only mandate was changed to a limited long-short assignment in August. There were no changes to the money manager line-up for the fiscal year ended October 31, 2006. In order to increase the Select Holdings portfolio from a 5% allocation to 10% in February, the target weighting for each of the four money managers in the Fund were reduced.
Money Managers as of October 31, 2006 | Style | |
Aronson+Johnson+Ortiz, L.P. | Market-Oriented | |
Franklin Portfolio Associates, LLC | Market-Oriented | |
Goldman Sachs Asset Management, L.P. | Market-Oriented | |
Jacobs Levy Equity Management, Inc. | Market-Oriented |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on March 30, 2000. The returns shown for Class Y Shares prior to March 30, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
51
Table of Contents
Russell Investment Company Equity Q Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,049.00 | $ | 1,020.42 | ||
Expenses Paid During Period* | $ | 4.91 | $ | 4.84 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.95% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
52
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,050.20 | $ | 1,021.63 | ||
Expenses Paid During Period* | $ | 3.67 | $ | 3.62 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.71% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,050.50 | $ | 1,021.88 | ||
Expenses Paid During Period* | $ | 3.41 | $ | 3.36 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.66% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
53
Table of Contents
Russell Investment Company Equity Q Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 102.5% | ||||
Auto and Transportation - 2.8% | ||||
Burlington Northern Santa Fe Corp. (Û) | 48,100 | 3,729 | ||
CH Robinson Worldwide, Inc. | 18,500 | 772 | ||
Continental Airlines, Inc. Class A (Æ)(Ñ) | 12,900 | 476 | ||
CSX Corp. | 262,100 | 9,349 | ||
EGL, Inc. (Æ) | 10,600 | 360 | ||
Expeditors International Washington, Inc. | 22,500 | 1,067 | ||
FedEx Corp. (Û) | 32,000 | 3,665 | ||
Goodyear Tire & Rubber Co. (The) (Æ) | 43,100 | 661 | ||
Harley-Davidson, Inc. (Ñ) | 22,000 | 1,510 | ||
Heartland Express, Inc. | 8,800 | 144 | ||
JB Hunt Transport Services, Inc. (Ñ) | 46,100 | 998 | ||
Norfolk Southern Corp. | 94,000 | 4,941 | ||
Overseas Shipholding Group, Inc. | 33,601 | 2,102 | ||
Paccar, Inc. | 118,568 | 7,020 | ||
Southwest Airlines Co. | 124,200 | 1,867 | ||
Thor Industries, Inc. (Ñ) | 27,000 | 1,183 | ||
TRW Automotive Holdings Corp. (Æ) | 9,600 | 246 | ||
Union Pacific Corp. (Û) | 60,500 | 5,483 | ||
45,573 | ||||
Consumer Discretionary - 13.7% | ||||
Abercrombie & Fitch Co. Class A | 1,900 | 146 | ||
Accenture, Ltd. Class A (Æ) | 99,100 | 3,261 | ||
Aeropostale, Inc. (Æ) | 23,900 | 701 | ||
American Eagle Outfitters, Inc. | 115,400 | 5,285 | ||
American Greetings Corp. Class A | 58,400 | 1,396 | ||
AnnTaylor Stores Corp. (Æ) | 46,900 | 2,065 | ||
Aramark Corp. Class B | 20,200 | 675 | ||
Autonation, Inc. (Æ) | 157,699 | 3,162 | ||
Avis Budget Group, Inc. (Æ) | 9,800 | 194 | ||
Best Buy Co., Inc. (Û) | 60,700 | 3,354 | ||
Big Lots, Inc. (Æ) | 61,800 | 1,303 | ||
Brinker International, Inc. | 47,800 | 2,219 | ||
CBS Corp. Class B | 230,578 | 6,673 | ||
Chipotle Mexican Grill, Inc. Class B (Æ) | 6,660 | 389 | ||
Circuit City Stores, Inc. | 157,289 | 4,244 | ||
Clear Channel Communications, Inc. | 96,600 | 3,367 | ||
Coach, Inc. (Æ) | 170,200 | 6,747 | ||
Coldwater Creek, Inc. (Æ) | 11,000 | 335 | ||
Corporate Executive Board Co. | 11,100 | 997 | ||
Costco Wholesale Corp. | 34,300 | 1,831 | ||
Darden Restaurants, Inc. | 104,000 | 4,358 | ||
Dillard’s, Inc. Class A | 107,400 | 3,240 | ||
DIRECTV Group, Inc. (The) (Æ) | 166,800 | 3,716 | ||
DreamWorks Animation SKG, Inc. Class A (Æ) | 9,500 | 251 |
54
Table of Contents
Dress Barn, Inc. (Æ) | 29,400 | 639 | ||
Earthlink, Inc. (Æ) | 11,100 | 78 | ||
Eastman Kodak Co. | 20,700 | 505 | ||
eBay, Inc. (Æ)(Û) | 83,500 | 2,683 | ||
EchoStar Communications Corp. Class A (Æ) | 38,500 | 1,368 | ||
Electronic Arts, Inc. (Æ) | 6,200 | 328 | ||
Estee Lauder Cos., Inc. (The) Class A | 69,900 | 2,823 | ||
Expedia, Inc. (Æ) | 12,200 | 198 | ||
Family Dollar Stores, Inc. | 58,800 | 1,732 | ||
Federated Department Stores, Inc. (Û) | 76,300 | 3,350 | ||
Foot Locker, Inc. | 49,900 | 1,157 | ||
Gemstar-TV Guide International, Inc. (Æ) | 1,000 | 3 | ||
Google, Inc. Class A (Æ)(Û) | 16,240 | 7,737 | ||
Guess?, Inc. (Æ) | 6,100 | 347 | ||
Hasbro, Inc. | 36,800 | 954 | ||
Home Depot, Inc. | 30,890 | 1,153 | ||
JC Penney Co., Inc. | 75,500 | 5,680 | ||
Jones Apparel Group, Inc. | 23,500 | 785 | ||
Kimberly-Clark Corp. | 47,335 | 3,149 | ||
Kohl’s Corp. (Æ) | 137,100 | 9,679 | ||
Liberty Media Holding Corp. Series A (Æ) | 15,015 | 1,337 | ||
Limited Brands, Inc. | 34,200 | 1,008 | ||
Lowe’s Cos., Inc. | 238,400 | 7,185 | ||
Manpower, Inc. | 83,301 | 5,645 | ||
Marriott International, Inc. Class A | 84,700 | 3,538 | ||
McDonald’s Corp. (Û) | 99,499 | 4,171 | ||
McGraw-Hill Cos., Inc. (The) | 151,300 | 9,709 | ||
Men’s Wearhouse, Inc. (The) | 17,100 | 681 | ||
NetFlix, Inc. (Æ) | 2,900 | 80 | ||
News Corp. Class A | 592,000 | 12,343 | ||
Nordstrom, Inc. | 68,200 | 3,229 | ||
Office Depot, Inc. (Æ) | 228,700 | 9,603 | ||
Omnicom Group, Inc. | 26,100 | 2,648 | ||
Phillips-Van Heusen Corp. | 6,000 | 275 | ||
Republic Services, Inc. Class A | 13,800 | 566 | ||
Robert Half International, Inc. | 20,200 | 738 | ||
RR Donnelley & Sons Co. | 38,700 | 1,310 | ||
Sears Holdings Corp. (Æ)(Ñ) | 7,000 | 1,221 | ||
Sirius Satellite Radio, Inc. (Æ) | 70,700 | 271 | ||
Staples, Inc. | 26,550 | 685 | ||
Starbucks Corp. (Æ)(Û) | 73,800 | 2,786 | ||
Target Corp. (Ñ)(Û) | 157,000 | 9,291 | ||
Time Warner, Inc. | 966,700 | 19,344 | ||
TJX Cos., Inc. | 223,800 | 6,479 | ||
Walt Disney Co. | 325,800 | 10,250 | ||
Warner Music Group Corp. (Æ) | 2,500 | 65 | ||
Waste Management, Inc. | 58,500 | 2,193 | ||
Wendy’s International, Inc. | 11,700 | 405 | ||
Williams-Sonoma, Inc. (Ñ) | 30,700 | 1,044 | ||
Yum! Brands, Inc. (Ñ) | 79,700 | 4,739 | ||
227,096 | ||||
Consumer Staples - 5.6% | ||||
Altria Group, Inc. | 44,600 | 3,627 | ||
Anheuser-Busch Cos., Inc. (Û) | 69,600 | 3,300 | ||
Clorox Co. | 700 | 45 | ||
Coca-Cola Co. (The) (Û) | 126,200 | 5,896 | ||
Coca-Cola Enterprises, Inc. | 43,200 | 865 |
55
Table of Contents
ConAgra Foods, Inc. (Ñ) | 57,800 | 1,512 | ||
CVS Corp. (Û) | 161,800 | 5,077 | ||
Dean Foods Co. (Æ) | 11,700 | 490 | ||
General Mills, Inc. | 78,200 | 4,443 | ||
Hormel Foods Corp. (Ñ) | 15,800 | 571 | ||
Kraft Foods, Inc. Class A | 24,600 | 846 | ||
Kroger Co. (The) | 283,835 | 6,384 | ||
Loews Corp. - Carolina Group | 23,600 | 1,365 | ||
McCormick & Co., Inc. | 53,000 | 1,982 | ||
Pepsi Bottling Group, Inc. | 19,900 | 629 | ||
PepsiCo, Inc. (Û) | 355,600 | 22,559 | ||
Procter & Gamble Co. (Û) | 165,150 | 10,469 | ||
Reynolds American, Inc. (Ñ) | 96,700 | 6,108 | ||
Safeway, Inc. | 168,000 | 4,933 | ||
Supervalu, Inc. | 69,400 | 2,318 | ||
Tyson Foods, Inc. Class A | 181,600 | 2,624 | ||
UST, Inc. | 53,000 | 2,839 | ||
Whole Foods Market, Inc. | 46,400 | 2,962 | ||
91,844 | ||||
Financial Services - 24.0% | ||||
Aflac, Inc. | 99,900 | 4,488 | ||
Alliance Data Systems Corp. (Æ) | 24,900 | 1,512 | ||
Allstate Corp. (The) | 121,400 | 7,449 | ||
AMBAC Financial Group, Inc. | 48,200 | 4,024 | ||
American Express Co. (Û) | 36,000 | 2,081 | ||
American International Group, Inc. (Û) | 99,500 | 6,683 | ||
AmeriCredit Corp. (Æ)(Ñ) | 86,000 | 2,199 | ||
Ameriprise Financial, Inc. | 81,320 | 4,188 | ||
AON Corp. | 39,300 | 1,367 | ||
Arthur J Gallagher & Co. (Æ) | 2,400 | 67 | ||
Automatic Data Processing, Inc. (Û) | 80,300 | 3,970 | ||
Bank of America Corp. (Û) | 719,255 | 38,746 | ||
Bank of Hawaii Corp. | 18,600 | 970 | ||
Bank of New York Co., Inc. (The) (Û) | 11,000 | 378 | ||
Boston Properties, Inc. (ö) | 3,500 | 374 | ||
Brown & Brown, Inc. | 17,900 | 524 | ||
CapitalSource, Inc. (ö) | 49,800 | 1,381 | ||
CB Richard Ellis Group, Inc. Class A (Æ) | 74,800 | 2,246 | ||
Charles Schwab Corp. (The) | 35,700 | 650 | ||
Chubb Corp. | 24,600 | 1,308 | ||
Cigna Corp. | 3,100 | 363 | ||
Cincinnati Financial Corp. | 39,522 | 1,804 | ||
CIT Group, Inc. | 72,400 | 3,768 | ||
Citigroup, Inc. (Û) | 491,502 | 24,654 | ||
Comerica, Inc. | 51,100 | 2,974 | ||
Commerce Group, Inc. | 1,400 | 41 | ||
Corus Bankshares, Inc. | 8,600 | 177 | ||
Countrywide Financial Corp. | 399,600 | 15,233 | ||
Covanta Holding Corp. (Æ) | 69,100 | 1,405 | ||
Crescent Real Estate Equities Co. (ö) | 20,300 | 443 | ||
Duke Realty Corp. (ö) | 14,300 | 573 | ||
Equity Office Properties Trust (ö) | 75,900 | 3,226 | ||
FelCor Lodging Trust, Inc. (ö) | 10,000 | 208 | ||
Fifth Third Bancorp | 8,700 | 347 | ||
First American Corp. | 9,800 | 400 | ||
First Data Corp. | 33,400 | 810 | ||
First Marblehead Corp. (The) (Ñ) | 36,000 | 2,428 |
56
Table of Contents
Fiserv, Inc. (Æ) | 132,000 | 6,521 | ||
Franklin Resources, Inc. (Û) | 35,400 | 4,034 | ||
Genworth Financial, Inc. Class A | 109,900 | 3,675 | ||
Global Payments, Inc. | 38,300 | 1,674 | ||
Goldman Sachs Group, Inc. (Û) | 136,400 | 25,887 | ||
HCC Insurance Holdings, Inc. | 11,900 | 401 | ||
Hospitality Properties Trust (ö)(Ñ) | 14,100 | 683 | ||
Host Hotels & Resorts, Inc. (ö) | 153,500 | 3,540 | ||
HRPT Properties Trust (ö)(Ñ) | 13,600 | 162 | ||
Hudson City Bancorp, Inc. | 53,300 | 732 | ||
IndyMac Bancorp, Inc. (Ñ) | 51,000 | 2,318 | ||
IntercontinentalExchange, Inc. (Æ) | 7,500 | 633 | ||
Investment Technology Group, Inc. (Æ) | 15,300 | 715 | ||
Jones Lang LaSalle, Inc. | 15,700 | 1,444 | ||
JPMorgan Chase & Co. (Û) | 588,500 | 27,918 | ||
KeyCorp | 132,000 | 4,902 | ||
Kimco Realty Corp. (ö) | 23,300 | 1,035 | ||
Lehman Brothers Holdings, Inc. (Û) | 159,100 | 12,384 | ||
Loews Corp. | 228,600 | 8,897 | ||
MBIA, Inc. | 55,600 | 3,448 | ||
Mellon Financial Corp. | 13,200 | 512 | ||
Merrill Lynch & Co., Inc. | 201,900 | 17,650 | ||
Metlife, Inc. (Û) | 247,600 | 14,145 | ||
MGIC Investment Corp. (Ñ) | 10,300 | 605 | ||
Moody’s Corp. | 31,000 | 2,055 | ||
Morgan Stanley (Û) | 203,200 | 15,531 | ||
National City Corp. (Ñ) | 273,100 | 10,173 | ||
Nationwide Financial Services, Inc. | 14,700 | 749 | ||
New Century Financial Corp. (ö) | 22,700 | 894 | ||
New Plan Excel Realty Trust (ö)(Ñ) | 13,100 | 377 | ||
Northern Trust Corp. | 5,300 | 311 | ||
NYSE Group, Inc. (Æ) | 9,800 | 725 | ||
Old Republic International Corp. | 74,450 | 1,677 | ||
PNC Financial Services Group, Inc. | 46,300 | 3,242 | ||
Principal Financial Group, Inc. | 57,300 | 3,237 | ||
Progressive Corp. (The) | 92,500 | 2,236 | ||
ProLogis (ö) | 14,000 | 886 | ||
Prudential Financial, Inc. (Û) | 22,200 | 1,708 | ||
Radian Group, Inc. | 76,199 | 4,061 | ||
Raymond James Financial, Inc. | 10,300 | 328 | ||
Rayonier, Inc. (ö) | 26,900 | 1,103 | ||
Regions Financial Corp. | 113,790 | 4,318 | ||
Ryder System, Inc. | 26,900 | 1,416 | ||
Safeco Corp. (Ñ) | 76,200 | 4,434 | ||
SL Green Realty Corp. (ö) | 7,200 | 872 | ||
SLM Corp. | 14,300 | 696 | ||
Sotheby’s Holdings Class A (Æ) | 28,900 | 1,098 | ||
St. Paul Travelers Cos., Inc. (The) | 43,900 | 2,245 | ||
Stancorp Financial Group, Inc. | 10,000 | 457 | ||
State Street Corp. | 25,000 | 1,606 | ||
SunTrust Banks, Inc. (Ñ) | 20,200 | 1,596 | ||
Synovus Financial Corp. | 21,000 | 617 | ||
T Rowe Price Group, Inc. | 19,000 | 899 | ||
TCF Financial Corp. | 18,700 | 487 | ||
UnionBanCal Corp. | 34,400 | 1,981 | ||
United Rentals, Inc. (Æ) | 39,500 | 936 | ||
Unitrin, Inc. | 5,900 | 253 |
57
Table of Contents
US Bancorp | 190,300 | 6,440 | ||
Ventas, Inc. (ö) | 3,800 | 148 | ||
Wachovia Corp. (Û) | 75,118 | 4,169 | ||
Washington Mutual, Inc. (Ñ)(Û) | 91,400 | 3,866 | ||
Wells Fargo & Co. (Û) | 449,400 | 16,309 | ||
Wilmington Trust Corp. | 6,100 | 254 | ||
WR Berkley Corp. | 110,150 | 4,060 | ||
Zenith National Insurance Corp. | 9,700 | 451 | ||
Zions Bancorporation | 4,500 | 362 | ||
396,637 | ||||
Health Care - 15.0% | ||||
Abbott Laboratories (Û) | 67,900 | 3,226 | ||
Aetna, Inc. | 178,200 | 7,345 | ||
AmerisourceBergen Corp. | 320,000 | 15,104 | ||
Amgen, Inc. (Æ) | 378,900 | 28,762 | ||
Becton Dickinson & Co. | 88,800 | 6,219 | ||
Bio-Rad Laboratories, Inc. Class A (Æ) | 600 | 44 | ||
Biogen Idec, Inc. (Æ) | 66,200 | 3,151 | ||
Biomet, Inc. (Æ)(Ñ) | 3,200 | 121 | ||
Boston Scientific Corp. (Æ) | 109,900 | 1,749 | ||
Bristol-Myers Squibb Co. | 106,000 | 2,623 | ||
Cardinal Health, Inc. (Û) | 131,700 | 8,620 | ||
Caremark Rx, Inc. | 357,700 | 17,610 | ||
Cephalon, Inc. (Æ) | 17,700 | 1,242 | ||
Cytyc Corp. (Æ) | 28,000 | 740 | ||
Dade Behring Holdings, Inc. | 20,800 | 758 | ||
Dentsply International, Inc. (Æ) | 28,000 | 876 | ||
Emdeon Corp. (Æ) | 156,700 | 1,826 | ||
Express Scripts, Inc. Class A (Æ) | 52,800 | 3,364 | ||
Forest Laboratories, Inc. (Æ) | 95,300 | 4,664 | ||
Genentech, Inc. (Æ)(Û) | 98,200 | 8,180 | ||
Gilead Sciences, Inc. (Æ) | 39,800 | 2,742 | ||
Health Net, Inc. (Æ) | 50,100 | 2,080 | ||
Humana, Inc. (Æ) | 69,800 | 4,188 | ||
Idexx Laboratories, Inc. (Æ) | 5,700 | 474 | ||
IMS Health, Inc. | 36,500 | 1,017 | ||
Johnson & Johnson (Û) | 430,100 | 28,989 | ||
King Pharmaceuticals, Inc. (Æ) | 30,700 | 514 | ||
Laboratory Corp. of America Holdings (Æ) | 26,600 | 1,822 | ||
McKesson Corp. | 287,000 | 14,376 | ||
Medco Health Solutions, Inc. (Æ) | 38,100 | 2,038 | ||
Medtronic, Inc. | 33,000 | 1,606 | ||
Merck & Co., Inc. (Û) | 437,800 | 19,885 | ||
MGI Pharma, Inc. (Æ) | 1,000 | 19 | ||
Mylan Laboratories, Inc. | 89,000 | 1,824 | ||
Nektar Therapeutics (Æ) | 15,400 | 222 | ||
PDL BioPharma, Inc. (Æ) | 16,900 | 357 | ||
Pediatrix Medical Group, Inc. (Æ) | 600 | 27 | ||
Pfizer, Inc. (Û) | 1,491,300 | 39,743 | ||
Pharmaceutical Product Development, Inc. | 3,700 | 117 | ||
Schering-Plough Corp. (Û) | 148,500 | 3,288 | ||
Sierra Health Services, Inc. (Æ) | 8,500 | 291 | ||
Tenet Healthcare Corp. (Æ) | 81,800 | 577 | ||
UnitedHealth Group, Inc. (Û) | 39,700 | 1,937 | ||
Varian Medical Systems, Inc. (Æ) | 10,300 | 565 | ||
WellPoint, Inc. (Æ)(Û) | 49,400 | 3,770 | ||
248,692 | ||||
58
Table of Contents
Integrated Oils - 6.5% | ||||
Chevron Corp. | 81,900 | 5,504 | ||
ConocoPhillips (Ñ)(Û) | 352,974 | 21,263 | ||
Exxon Mobil Corp. (Û) | 857,822 | 61,266 | ||
Hess Corp. | 59,400 | 2,518 | ||
Marathon Oil Corp. (Û) | 201,500 | 17,410 | ||
107,961 | ||||
Materials and Processing - 5.5% | ||||
Alcoa, Inc. | 167,300 | 4,837 | ||
Archer-Daniels-Midland Co. (Û) | 257,800 | 9,925 | ||
Ashland, Inc. | 39,200 | 2,317 | ||
Avery Dennison Corp. (Ñ) | 9,700 | 613 | ||
Bemis Co. | 22,700 | 763 | ||
Celanese Corp. Class A | 13,900 | 287 | ||
Chaparral Steel Co. (Æ) | 15,200 | 632 | ||
Corn Products International, Inc. | 10,900 | 395 | ||
Dow Chemical Co. (The) (Û) | 124,500 | 5,078 | ||
Eagle Materials, Inc. | 61,500 | 2,257 | ||
Eastman Chemical Co. | 5,200 | 317 | ||
EI Du Pont de Nemours & Co. (Û) | 30,300 | 1,388 | ||
EMCOR Group, Inc. (Æ) | 5,000 | 296 | ||
Energizer Holdings, Inc. (Æ) | 40,800 | 3,189 | ||
Fluor Corp. | 22,000 | 1,726 | ||
Freeport-McMoRan Copper & Gold, Inc. Class B (Ñ) | 156,700 | 9,477 | ||
Granite Construction, Inc. | 15,400 | 802 | ||
HB Fuller Co. | 19,900 | 493 | ||
Hercules, Inc. (Æ) | 15,000 | 273 | ||
Huntsman Corp. (Æ) | 13,800 | 238 | ||
Jacobs Engineering Group, Inc. (Æ) | 16,300 | 1,231 | ||
Lyondell Chemical Co. | 60,900 | 1,563 | ||
Masco Corp. | 95,200 | 2,632 | ||
Monsanto Co. | 92,900 | 4,108 | ||
Mueller Industries, Inc. | 10,000 | 367 | ||
Newmont Mining Corp. | 5,900 | 267 | ||
Nucor Corp. | 156,002 | 9,112 | ||
OM Group, Inc. (Æ) | 16,600 | 946 | ||
Packaging Corp. of America | 10,400 | 239 | ||
Pactiv Corp. (Æ) | 116,400 | 3,590 | ||
PPG Industries, Inc. | 30,400 | 2,079 | ||
Praxair, Inc. | 500 | 30 | ||
Quanex Corp. | 7,800 | 261 | ||
Reliance Steel & Aluminum Co. | 30,800 | 1,058 | ||
Rohm & Haas Co. | 116,100 | 6,016 | ||
Sherwin-Williams Co. (The) | 72,000 | 4,265 | ||
Steel Dynamics, Inc. (Ñ) | 45,000 | 2,705 | ||
United States Steel Corp. (Ñ) | 18,600 | 1,257 | ||
USG Corp. (Æ) | 44,300 | 2,166 | ||
Vulcan Materials Co. | 14,100 | 1,149 | ||
90,344 | ||||
Miscellaneous - 2.1% | ||||
3M Co. (Û) | 4,300 | 339 | ||
Eaton Corp. | 13,100 | 949 | ||
General Electric Co. (Û) | 666,540 | 23,402 | ||
Honeywell International, Inc. | 36,100 | 1,520 | ||
ITT Corp. | 8,800 | 479 | ||
Johnson Controls, Inc. | 40,800 | 3,327 | ||
SPX Corp. | 31,600 | 1,818 |
59
Table of Contents
Textron, Inc. | 17,600 | 1,600 | ||
Trinity Industries, Inc. | 20,100 | 725 | ||
Tyco International, Ltd. | 21,900 | 644 | ||
34,803 | ||||
Other Energy - 2.6% | ||||
Alon USA Energy, Inc. | 12,100 | 340 | ||
Anadarko Petroleum Corp. | 81,800 | 3,797 | ||
Apache Corp. | 36,700 | 2,397 | ||
Devon Energy Corp. | 88,600 | 5,922 | ||
EOG Resources, Inc. | 54,000 | 3,593 | ||
Frontier Oil Corp. | 16,800 | 494 | ||
Global Industries, Ltd. (Æ) | 39,600 | 657 | ||
Halliburton Co. (Û) | 73,000 | 2,362 | ||
Helix Energy Solutions Group, Inc. (Æ) | 21,200 | 685 | ||
Helmerich & Payne, Inc. | 49,200 | 1,178 | ||
Holly Corp. | 48,500 | 2,307 | ||
Newfield Exploration Co. (Æ) | 56,900 | 2,321 | ||
Oceaneering International, Inc. (Æ) | 30,100 | 1,083 | ||
Oil States International, Inc. (Æ) | 19,900 | 578 | ||
Patterson-UTI Energy, Inc. | 49,400 | 1,146 | ||
Plains Exploration & Production Co. (Æ) | 4,500 | 190 | ||
Sunoco, Inc. | 33,300 | 2,202 | ||
Superior Energy Services, Inc. (Æ) | 14,100 | 441 | ||
Tetra Technologies, Inc. (Æ) | 29,400 | 762 | ||
Todco (Æ) | 18,200 | 621 | ||
Western Refining, Inc. | 20,100 | 474 | ||
XTO Energy, Inc. | 208,900 | 9,747 | ||
43,297 | ||||
Producer Durables - 5.5% | ||||
AGCO Corp. (Æ) | 38,500 | 1,030 | ||
Agilent Technologies, Inc. (Æ) | 67,900 | 2,417 | ||
Applied Industrial Technologies, Inc. | 8,800 | 253 | ||
Boeing Co. | 7,700 | 615 | ||
Caterpillar, Inc. | 226,500 | 13,751 | ||
Cummins, Inc. (Ñ) | 15,400 | 1,955 | ||
Emerson Electric Co. | 18,900 | 1,595 | ||
Gardner Denver, Inc. (Æ) | 16,600 | 564 | ||
Genlyte Group, Inc. (Æ) | 5,400 | 417 | ||
Joy Global, Inc. | 26,300 | 1,029 | ||
Lam Research Corp. (Æ) | 129,400 | 6,399 | ||
Lexmark International, Inc. Class A (Æ) | 14,400 | 916 | ||
Lockheed Martin Corp. (Û) | 264,700 | 23,010 | ||
Manitowoc Co., Inc. (The) | 27,200 | 1,493 | ||
Mettler Toledo International, Inc. (Æ) | 2,600 | 178 | ||
MKS Instruments, Inc. (Æ) | 8,200 | 178 | ||
Molex, Inc. | 12,000 | 419 | ||
Northrop Grumman Corp. | 291,601 | 19,359 | ||
Novellus Systems, Inc. (Æ) | 33,100 | 915 | ||
NVR, Inc. (Æ) | 1,500 | 842 | ||
Parker Hannifin Corp. | 17,800 | 1,489 | ||
Steelcase, Inc. Class A | 16,200 | 268 | ||
Technitrol, Inc. | 7,300 | 184 | ||
United Technologies Corp. | 136,400 | 8,964 | ||
Waters Corp. (Æ) | 16,400 | 817 | ||
Xerox Corp. (Æ) | 95,500 | 1,624 | ||
90,681 | ||||
Technology - 13.2% |
60
Table of Contents
Advanced Micro Devices, Inc. (Æ) | 125,500 | 2,669 | ||
Agere Systems, Inc. (Æ) | 46,100 | 783 | ||
Altera Corp. (Æ) | 44,700 | 824 | ||
Apple Computer, Inc. (Æ)(Û) | 48,600 | 3,941 | ||
Applera Corp. - Applied Biosystems Group | 70,900 | 2,645 | ||
Arrow Electronics, Inc. (Æ) | 12,400 | 370 | ||
Atmel Corp. (Æ) | 254,400 | 1,463 | ||
AVX Corp. (Ñ) | 35,300 | 556 | ||
BEA Systems, Inc. (Æ) | 165,700 | 2,696 | ||
Benchmark Electronics, Inc. (Æ) | 12,600 | 335 | ||
BMC Software, Inc. (Æ) | 59,000 | 1,788 | ||
Brocade Communications Systems, Inc. (Æ) | 128,500 | 1,042 | ||
Cadence Design Systems, Inc. (Æ) | 122,700 | 2,191 | ||
Ciena Corp. (Æ) | 45,614 | 1,072 | ||
Cisco Systems, Inc. (Æ)(Û) | 1,472,900 | 35,541 | ||
Computer Sciences Corp. (Æ) | 96,701 | 5,111 | ||
Conexant Systems, Inc. (Æ) | 10,400 | 20 | ||
Electronic Data Systems Corp. | 64,800 | 1,641 | ||
F5 Networks, Inc. (Æ) | 16,000 | 1,059 | ||
Fairchild Semiconductor International, Inc. (Æ) | 29,700 | 479 | ||
Freescale Semiconductor, Inc. Class B | 55,900 | 2,199 | ||
General Dynamics Corp. | 22,100 | 1,571 | ||
Harris Corp. | 38,900 | 1,657 | ||
Hewlett-Packard Co. | 700,400 | 27,134 | ||
Ingram Micro, Inc. Class A (Æ) | 37,300 | 769 | ||
Integrated Device Technology, Inc. (Æ) | 75,300 | 1,194 | ||
Intel Corp. (Û) | 308,700 | 6,588 | ||
International Business Machines Corp. | 172,500 | 15,927 | ||
Intuit, Inc. (Æ) | 169,299 | 5,976 | ||
Jabil Circuit, Inc. | 73,600 | 2,113 | ||
LSI Logic Corp. (Æ) | 81,900 | 823 | ||
MEMC Electronic Materials, Inc. (Æ) | 4,900 | 174 | ||
Micron Technology, Inc. (Æ) | 249,900 | 3,611 | ||
Microsoft Corp. | 715,500 | 20,542 | ||
Motorola, Inc. (Û) | 290,200 | 6,692 | ||
National Semiconductor Corp. (Ñ) | 62,700 | 1,523 | ||
NCR Corp. (Æ) | 10,300 | 428 | ||
ON Semiconductor Corp. (Æ) | 39,900 | 248 | ||
Oracle Corp. (Æ)(Û) | 510,900 | 9,436 | ||
QLogic Corp. (Æ) | 15,400 | 317 | ||
Qualcomm, Inc. (Û) | 204,500 | 7,442 | ||
Raytheon Co. | 128,300 | 6,409 | ||
Sanmina-SCI Corp. (Æ) | 79,000 | 312 | ||
Seagate Technology, Inc. (Æ) | 57,274 | — | ||
Spansion, Inc. Class A (Æ) | 1,000 | 14 | ||
Sun Microsystems, Inc. (Æ) | 728,200 | 3,954 | ||
Sycamore Networks, Inc. (Æ) | 74,200 | 278 | ||
Symantec Corp. (Æ) | 25,000 | 496 | ||
Synopsys, Inc. (Æ) | 87,001 | 1,958 | ||
Tellabs, Inc. (Æ) | 15,100 | 159 | ||
Texas Instruments, Inc. (Ñ) | 560,100 | 16,904 | ||
Unisys Corp. (Æ) | 59,300 | 388 | ||
Utstarcom, Inc. (Æ) | 70,500 | 759 | ||
Western Digital Corp. (Æ) | 217,200 | 3,970 | ||
Xilinx, Inc. | 6,500 | 166 | ||
218,357 | ||||
Utilities - 6.0% |
61
Table of Contents
Alltel Corp. | 20,500 | 1,093 | ||||
AT&T, Inc. (Û) | 486,444 | 16,661 | ||||
BellSouth Corp. | 93,600 | 4,221 | ||||
CenturyTel, Inc. | 83,400 | 3,356 | ||||
Citizens Communications Co. | 35,600 | 522 | ||||
Comcast Corp. Class A (Æ) | 186,300 | 7,577 | ||||
Constellation Energy Group, Inc. | 26,100 | 1,628 | ||||
Duke Energy Corp. | 80,000 | 2,531 | ||||
Edison International | 82,800 | 3,679 | ||||
Embarq Corp. (Æ) | 55,840 | 2,700 | ||||
FirstEnergy Corp. | 49,000 | 2,884 | ||||
KeySpan Corp. | 43,100 | 1,749 | ||||
Leap Wireless International, Inc. Class W (Æ)(Ñ) | 6,800 | 377 | ||||
Mirant Corp. (Æ) | 24,000 | 710 | ||||
PG&E Corp. | 137,199 | 5,919 | ||||
PPL Corp. | 85,900 | 2,965 | ||||
Qwest Communications International, Inc. (Æ)(Ñ) | 123,500 | 1,066 | ||||
Sprint Nextel Corp. | 74,000 | 1,383 | ||||
TXU Corp. | 291,799 | 18,421 | ||||
Verizon Communications, Inc. (Û) | 525,100 | 19,428 | ||||
98,870 | ||||||
Total Common Stocks | ||||||
(cost $1,420,478) | 1,694,155 | |||||
Short-Term Investments - 2.0% | ||||||
Russell Investment Company Money Market Fund | 29,719,900 | 29,720 | ||||
United States Treasury Bills (ç)(ž)(§) 4.891% due 12/07/06 | 3,000 | 2,986 | ||||
Total Short-Term Investments | ||||||
(cost $32,706) | 32,706 | |||||
Other Securities - 2.9% | ||||||
Russell Investment Company Money Market Fund (×) | 12,288,304 | 12,288 | ||||
State Street Securities Lending Quality Trust (×) | 35,599,514 | 35,600 | ||||
Total Other Securities | ||||||
(cost $47,888) | 47,888 | |||||
Total Investments - 107.4% | ||||||
(identified cost $1,501,072) | 1,774,749 | |||||
Securities Sold Short - (4.3%) | ||||||
Auto and Transportation - (0.2%) | ||||||
Airtran Holdings, Inc. (Æ) | (24,100 | ) | (240 | ) | ||
AMR Corp. (Æ) | (22,900 | ) | (649 | ) | ||
Continental Airlines, Inc. | (12,800 | ) | (472 | ) | ||
Florida East Coast Industries, Inc. (Æ) | (10,300 | ) | (616 | ) | ||
Genesee & Wyoming, Inc. Class A (Æ) | (4,700 | ) | (132 | ) | ||
Oshkosh Truck Corp. | (5,500 | ) | (249 | ) | ||
Overseas Shipholding Group, Inc. | (8,400 | ) | (525 | ) | ||
Thor Industries, Inc. | (12,600 | ) | (552 | ) | ||
US Airways Group, Inc. (Æ) | (10,400 | ) | (519 | ) | ||
Winnebago Industries, Inc. | (7,100 | ) | (236 | ) | ||
(4,190 | ) | |||||
Consumer Discretionary - (1.0%) | ||||||
Advance Auto Parts, Inc. | (13,600 | ) | (476 | ) | ||
Allied Waste Industries, Inc. (Æ) | (53,100 | ) | (645 | ) | ||
American Greetings Corp. | (18,900 | ) | (452 | ) | ||
Borders Group, Inc. | (31,600 | ) | (651 | ) | ||
Boyd Gaming Corp. | (4,100 | ) | (162 | ) | ||
Cheesecake Factory, Inc. (The) (Æ) | (8,500 | ) | (240 | ) | ||
ChoicePoint, Inc. (Æ) | (7,700 | ) | (280 | ) | ||
Cogent, Inc. (Æ) | (4,700 | ) | (54 | ) |
62
Table of Contents
Fastenal Co. | (34,700 | ) | (1,396 | ) | ||
Guitar Center, Inc. (Æ) | (7,200 | ) | (312 | ) | ||
Hearst-Argyle Television, Inc. | (8,700 | ) | (219 | ) | ||
Hewitt Associates, Inc. Class A (Æ) | (40,500 | ) | (1,014 | ) | ||
Interpublic Group of Cos., Inc. (Æ) | (114,500 | ) | (1,249 | ) | ||
Las Vegas Sands Corp. (Æ) | (22,800 | ) | (1,738 | ) | ||
Live Nation, Inc. (Æ) | (3,400 | ) | (72 | ) | ||
Navigant Consulting, Inc. (Æ) | (3,600 | ) | (64 | ) | ||
Pacific Sunwear of California, Inc. (Æ) | (29,000 | ) | (511 | ) | ||
Panera Bread Co. Class A (Æ) | (9,000 | ) | (556 | ) | ||
Quiksilver, Inc. (Æ) | (3,800 | ) | (53 | ) | ||
RadioShack Corp. | (41,500 | ) | (741 | ) | ||
Reader’s Digest Association, Inc. (The) | (38,200 | ) | (549 | ) | ||
Regis Corp. | (2,600 | ) | (98 | ) | ||
Saks, Inc. | (28,300 | ) | (547 | ) | ||
Service Corp. International | (66,200 | ) | (604 | ) | ||
Station Casinos, Inc. | (3,900 | ) | (235 | ) | ||
Tractor Supply Co. (Æ) | (3,100 | ) | (150 | ) | ||
Under Armour, Inc. Class A (Æ) | (2,800 | ) | (130 | ) | ||
Urban Outfitters, Inc. (Æ) | (9,200 | ) | (161 | ) | ||
Waste Connections, Inc. (Æ) | (8,700 | ) | (354 | ) | ||
Yahoo!, Inc. (Æ) | (77,500 | ) | (2,042 | ) | ||
(15,755 | ) | |||||
Consumer Staples - (0.1%) | ||||||
Rite Aid Corp. (Æ) | (12,900 | ) | (60 | ) | ||
Tootsie Roll Industries, Inc. | (6,000 | ) | (191 | ) | ||
Tyson Foods, Inc. | (42,900 | ) | (620 | ) | ||
(871 | ) | |||||
Financial Services - (0.9%) | ||||||
Eaton Vance Corp. | (59,800 | ) | (1,856 | ) | ||
eFunds Corp. (Æ) | (1,000 | ) | (25 | ) | ||
Fannie Mae | (13,000 | ) | (770 | ) | ||
Federated Investors, Inc. Class B | (18,300 | ) | (628 | ) | ||
First Data Corp. | (41,100 | ) | (997 | ) | ||
Fremont General Corp. | (15,600 | ) | (227 | ) | ||
General Growth Properties, Inc. (ö) | (21,300 | ) | (1,106 | ) | ||
Global Signal, Inc. (Æ)(ö) | (8,700 | ) | (472 | ) | ||
Greenhill & Co., Inc. | (11,300 | ) | (768 | ) | ||
H&R Block, Inc. | (63,300 | ) | (1,384 | ) | ||
Investors Financial Services Corp. | (14,100 | ) | (554 | ) | ||
Kronos, Inc. (Æ) | (1,900 | ) | (64 | ) | ||
LandAmerica Financial Group, Inc. | (13,000 | ) | (820 | ) | ||
MBIA, Inc. | (5,500 | ) | (341 | ) | ||
Piper Jaffray Cos., Inc. (Æ) | (6,700 | ) | (463 | ) | ||
Potlatch Corp. (Æ)(ö) | (800 | ) | (33 | ) | ||
Redwood Trust, Inc. (Æ)(ö) | (2,600 | ) | (143 | ) | ||
SEI Investments Co. | (21,400 | ) | (1,204 | ) | ||
Sovereign Bancorp, Inc. | (27,700 | ) | (661 | ) | ||
State Auto Financial Corp. | (1,600 | ) | (51 | ) | ||
United Rentals, Inc. | (9,000 | ) | (213 | ) | ||
UnumProvident Corp. | (47,600 | ) | (942 | ) | ||
Vornado Realty Trust (ö) | (4,100 | ) | (489 | ) | ||
(14,211 | ) | |||||
Health Care - (0.3%) | ||||||
Abraxis BioScience, Inc. (Æ) | (11,500 | ) | (303 | ) | ||
Adams Respiratory Therapeutics, Inc. (Æ) | (7,700 | ) | (332 | ) | ||
Affymetrix, Inc. (Æ) | (12,500 | ) | (319 | ) |
63
Table of Contents
Alexion Pharmaceuticals, Inc. (Æ) | (13,200 | ) | (493 | ) | ||
Gilead Sciences, Inc. | (26,600 | ) | (1,833 | ) | ||
Inverness Medical Innovations, Inc. (Æ) | (4,000 | ) | (151 | ) | ||
Omnicare, Inc. | (32,100 | ) | (1,216 | ) | ||
United Therapeutics Corp. (Æ) | (5,400 | ) | (323 | ) | ||
(4,970 | ) | |||||
Integrated Oils - 0.0% | ||||||
Delta Petroleum Corp. (Æ) | (8,300 | ) | (213 | ) | ||
Murphy Oil Corp. | (12,000 | ) | (566 | ) | ||
(779 | ) | |||||
Materials and Processing - (0.2%) | ||||||
Century Aluminum Co. (Æ) | (10,700 | ) | (417 | ) | ||
Clarcor, Inc. | (500 | ) | (16 | ) | ||
Energy Conversion Devices, Inc. (Æ) | (8,100 | ) | (298 | ) | ||
Hexcel Corp. (Æ) | (17,900 | ) | (290 | ) | ||
Lone Star Technologies, Inc. (Æ) | (6,800 | ) | (328 | ) | ||
Mosaic Co. (The) (Æ) | (26,400 | ) | (494 | ) | ||
Scotts Miracle-Gro Co. (The) Class A | (22,700 | ) | (1,123 | ) | ||
Shaw Group, Inc. (The) (Æ) | (23,000 | ) | (611 | ) | ||
(3,577 | ) | |||||
Miscellaneous - 0.0% | ||||||
Walter Industries, Inc. | (16,400 | ) | (762 | ) | ||
Other Energy - (0.4%) | ||||||
Arch Coal, Inc. | (27,500 | ) | (952 | ) | ||
ATP Oil & Gas Corp. (Æ) | (2,500 | ) | (108 | ) | ||
Baker Hughes, Inc. | (4,100 | ) | (283 | ) | ||
Cabot Oil & Gas Corp. | (5,700 | ) | (302 | ) | ||
Consol Energy, Inc. | (21,000 | ) | (743 | ) | ||
Crosstex Energy, Inc. (Æ) | (3,700 | ) | (355 | ) | ||
El Paso Corp. | (103,200 | ) | (1,414 | ) | ||
Equitable Resources, Inc. | (10,300 | ) | (417 | ) | ||
Massey Energy Co. (Æ) | (34,500 | ) | (871 | ) | ||
Noble Energy, Inc. | (2,500 | ) | (122 | ) | ||
PetroHawk Energy Corp. (Æ) | (7,600 | ) | (86 | ) | ||
Pogo Producing Co. | (20,900 | ) | (935 | ) | ||
SEACOR Holdings, Inc. (Æ) | (5,000 | ) | (447 | ) | ||
(7,035 | ) | |||||
Producer Durables - (0.5%) | ||||||
ACCO Brands Corp. (Æ) | (11,700 | ) | (284 | ) | ||
American Power Conversion Corp. | (4,500 | ) | (136 | ) | ||
Beazer Homes USA, Inc. (Æ) | (12,000 | ) | (520 | ) | ||
Centex Corp. | (31,400 | ) | (1,642 | ) | ||
Crown Castle International Corp. (Æ) | (44,400 | ) | (1,494 | ) | ||
Dionex Corp. (Æ) | (12,700 | ) | (691 | ) | ||
Entegris, Inc. (Æ) | (30,800 | ) | (345 | ) | ||
MDC Holdings, Inc. | (11,200 | ) | (559 | ) | ||
Pitney Bowes, Inc. | (37,500 | ) | (1,752 | ) | ||
SBA Communications Corp. Class A (Æ) | (11,900 | ) | (318 | ) | ||
Standard-Pacific Corp. | (30,000 | ) | (727 | ) | ||
(8,468 | ) | |||||
Technology - (0.5%) | ||||||
American Reprographics Co. (Æ) | (17,200 | ) | (611 | ) | ||
Amphenol Corp. Class A | (8,400 | ) | (570 | ) | ||
Avid Technology, Inc. (Æ) | (1,900 | ) | (69 | ) | ||
Dell, Inc. (Æ) | (59,400 | ) | (1,445 | ) | ||
EMC Corp. (Æ) | (42,400 | ) | (519 | ) | ||
Juniper Networks, Inc. (Æ) | (52,000 | ) | (896 | ) |
64
Table of Contents
Maxim Integrated Products, Inc. | (48,900 | ) | (1,468 | ) | ||
Microchip Technology, Inc. | (55,300 | ) | (1,821 | ) | ||
Palm, Inc. (Æ) | (7,700 | ) | (118 | ) | ||
SRA International, Inc. Class A (Æ) | (4,000 | ) | (128 | ) | ||
Inc. (Æ) | (4,400 | ) | (148 | ) | ||
(7,793 | ) | |||||
Utilities - (0.2%) | ||||||
Atmos Energy Corp. | (17,100 | ) | (525 | ) | ||
Black Hills Corp. | (1,200 | ) | (41 | ) | ||
CenturyTel, Inc. | (19,100 | ) | (769 | ) | ||
Comcast Corp. | (19,600 | ) | (797 | ) | ||
Southern Union Co. | (15,500 | ) | (429 | ) | ||
(2,561 | ) | |||||
Total Securities Sold Short | ||||||
(proceeds $67,017) | (70,972 | ) | ||||
Other Assets and Liabilities, | ||||||
Net - (3.1%) | (51,938 | ) | ||||
Net Assets - 100.0% | 1,651,839 | |||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||||
Long Positions | ||||||
Russell 1000 Index expiration date 12/06 (20) | 7,503 | 418 | ||||
Russell 1000 Mini Index (CME) expiration date 12/06 (8) | 600 | 31 | ||||
S&P 500 E-Mini Index (CME) expiration date 12/06 (66) | 4,565 | 221 | ||||
S&P 500 Index (CME) expiration date 12/06 (5) | 1,729 | — | ||||
S&P Midcap 400 E-Mini | ||||||
Index (CME) expiration date 12/06 (188) | 14,828 | 782 | ||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 1,452 | |||||
65
Table of Contents
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 2.8 | ||
Consumer Discretionary | 13.7 | ||
Consumer Staples | 5.6 | ||
Financial Services | 24.0 | ||
Health Care | 15.0 | ||
Integrated Oils | 6.5 | ||
Materials and Processing | 5.5 | ||
Miscellaneous | 2.1 | ||
Other Energy | 2.6 | ||
Producer Durables | 5.5 | ||
Technology | 13.2 | ||
Utilities | 6.0 | ||
Short-Term Investments | 2.0 | ||
Other Securities | 2.9 | ||
Total Investments | 107.4 | ||
Securities Sold Short | (4.3 | ) | |
Other Assets and Liabilities, Net | (3.1 | ) | |
100.0 | |||
Futures Contracts | (—)* |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
66
Table of Contents
Russell Investment Company International Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
International Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 27.17 | % | |
5 Years | 14.15 | %§ | |
10 Years | 7.05 | %§ |
International Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 26.84 | % | |
5 Years | 13.92 | %§ | |
10 Years | 6.88 | %§ |
International Fund - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 27.24 | % | |
5 Years | 14.23 | %§ | |
10 Years | 7.10 | %§ |
MSCI EAFE Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 27.52 | % | |
5 Years | 14.56 | %§ | |
10 Years | 7.34 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide long-term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the International Fund Class I, Class E and Class Y gained 27.17%, 26.84% and 27.24%, respectively. This compared to the MSCI EAFE(R) Index, which gained 27.52% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) International Funds Average returned 26.25%. This result serves as a peer comparison and is expressed net of operating expenses.
67
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
For most of the period, the Fund had a slight tilt towards growth stocks. The Fund had a small valuation premium to the market and slightly above-market forecasted growth rates. This was due to the money managers’ views that growth stocks were undervalued relative to value stocks. This positioning and negative contributions to relative performance caused by factors such as price momentum, above-market growth and yield underweight detracted from Fund performance overall. In addition, the Fund was underweight in high dividend yielding stocks and overweight in stocks with positive price momentum. These factors were well rewarded at the end of 2005 and into 2006, but in May of 2006, market sentiment reversed and began to reward stocks with higher dividend yields, and more defensive, predictable earnings streams. This shift in market strength proved difficult for most active managers. While the Fund had some exposure to this area of the market through money managers such as MFS Institutional Advisors, Inc. and Mondrian Investment Partners Limited, the Fund’s overall orientation favoring positive momentum and away from high yield hurt performance. Two chief detractors in this regard were Axiom International Investors LLC and Marvin & Palmer Associates, Inc. Their focus on high growth stocks led to a level of underperformance in the last five months that negatively impacted the overall Fund.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Sector allocation did not contribute to performance. The Fund’s overweight to the energy sector and underweight in the financial services sector detracted from performance. Within the energy sector, however, the Fund benefited from stock selection with an overweight in the better performing equipment and services companies rather than oil and gas companies.
An overweight to European stocks within the industrials sector proved to be favorable. Vallourec S.A., a French manufacturer of steel tubing, was among the top contributors to Fund performance. Vallourec benefited from many of the favorable trends experienced by energy companies. Telecommunications stocks, especially wireless services, underperformed the broad benchmark, and the Fund benefited from its underweight to this sector. On the negative side, stock selection within the consumer discretionary sector was ineffective. Rakuten Inc., an internet retail store in Japan, in particular, detracted from returns. Stock selection within the health care sector was also a detractor to Fund performance as many of the pharmaceutical companies viewed favorably by the Fund’s money managers failed to keep pace with the broad market.
At the country level, stock selection was best in the U.K. due to an overweight position in staples combined with an underweight to the large oil and gas companies such as BG Group, BP, and Royal Dutch Shell. An underweight to Japanese local industrial companies and good stock selection in the financial services sector contributed positively to performance. Emerging markets exposure was a slight detractor to Fund performance. Despite strength among emerging markets in general, stock selection decisions produced less effective results. Non-U.S. currency exposure had a slightly positive effect on performance during the year due to U.S. dollar weakness.
Value money managers in the Fund tended to have the best returns during the period. AllianceBernstein L.P. benefited from broad value exposure and strong stock selection. Mondrian performed well largely due to its preference for cash generating, high dividend yielding stocks and its underweight to Japan.
MFS, a growth money manager with a focus on earnings quality, outperformed for the period due to its more defensive-growth orientation. Aggressive growth money managers such as Marvin��& Palmer and Axiom, with exposure to price momentum, underperformed. These money managers’ portfolios contained a high level of forecasted growth potential that was not rewarded by the market during the latter half of the year.
Describe any changes to the Fund’s structure or the money manager line-up.
RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. The select holdings strategy was implemented in the Fund at a 5% target weight at the end of September 2006.
68
Table of Contents
During the year, RIMCo increased the Fund’s allowable exposure to emerging markets to further expand the investable universe.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
AQR Capital Management, LLC | Market-Oriented | |
Axiom International Investors, LLC | Growth | |
Fidelity Management & Research Company | Market-Oriented | |
Marvin & Palmer Associates, Inc. | Growth | |
MFS Institutional Advisors, Inc. | Growth | |
Mondrian Investment Partners Limited | Value | |
The Boston Company Asset Management, LLC | Value | |
Wellington Management Company, LLP | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index is an index composed of an arithmetic, market value-weighted average of the performance of approximately 1,600 securities listed on the stock exchange of the countries of Europe, Australia, and the Far East. The index is calculated on a total-return basis, which includes reinvestment of gross dividends before deduction of withholding taxes. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on March 29, 2000. The returns shown for Class Y Shares prior to March 29, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
69
Table of Contents
Russell Investment Company International Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,019.20 | $ | 1,019.31 | ||
Expenses Paid During Period* | $ | 5.95 | $ | 5.96 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.17% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
70
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,020.40 | $ | 1,020.57 | ||
Expenses Paid During Period* | $ | 4.69 | $ | 4.69 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.92% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,020.80 | $ | 1,020.82 | ||
Expenses Paid During Period* | $ | 4.43 | $ | 4.43 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.87% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
71
Table of Contents
Russell Investment Company International Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 92.0% | ||||
Australia - 3.5% | ||||
AGL Energy, Ltd. (Æ)(Ñ) | 10,400 | 124 | ||
Alinta, Ltd. | 6,006 | 49 | ||
Amcor, Ltd. | 754,375 | 4,042 | ||
AMP, Ltd. | 121,498 | 894 | ||
Aristocrat Leisure, Ltd. | 84,625 | 913 | ||
Australia & New Zealand Banking Group, Ltd. | 84,725 | 1,905 | ||
Australian Stock Exchange, Ltd. | 11,700 | 321 | ||
Australian Wealth Management, Ltd. | 158,350 | 319 | ||
AXA Asia Pacific Holdings, Ltd. (Ñ) | 30,604 | 158 | ||
BHP Billiton, Ltd. (Ñ) | 229,779 | 4,854 | ||
Billabong International, Ltd. | 29,100 | 353 | ||
Boral, Ltd. | 29,900 | 168 | ||
Bradken, Ltd. | 26,901 | 127 | ||
Caltex Australia, Ltd. | 9,068 | 156 | ||
Centro Properties Group | 20,800 | 124 | ||
Coca-Cola Amatil, Ltd. (Ñ) | 195,476 | 1,054 | ||
Coles Myer, Ltd. | 278,929 | 2,933 | ||
Commonwealth Bank of Australia | 27,374 | 1,011 | ||
Computershare, Ltd. | 111,200 | 663 | ||
CSR, Ltd. | 62,264 | 156 | ||
David Jones, Ltd. (Ñ) | 70,000 | 196 | ||
DB RREEF Trust | 41,660 | 53 | ||
Downer EDI, Ltd. | 59,629 | 297 | ||
Dyno Nobel, Ltd. (Æ) | 43,400 | 79 | ||
Foster’s Group, Ltd. | 1,141,636 | 5,702 | ||
Futuris Corp., Ltd. | 63,846 | 87 | ||
Goodman Fielder, Ltd. | 44,429 | 72 | ||
GPT Group (Ñ) | 41,700 | 152 | ||
Harvey Norman Holdings, Ltd. (Ñ) | 27,395 | 77 | ||
Insurance Australia Group, Ltd. | 154,220 | 663 | ||
Investa Property Group | 9,267 | 17 | ||
Leighton Holdings, Ltd. (Ñ) | 8,599 | 142 | ||
Lend Lease Corp., Ltd. | 9,655 | 126 | ||
Macquarie Airports Management, Ltd. | 388,400 | 965 | ||
Macquarie Bank, Ltd. (Ñ) | 17,358 | 1,002 | ||
Macquarie Goodman Group | 23,987 | 123 | ||
Macquarie Infrastructure Group | 28,207 | 74 | ||
McGuigan Simeon Wines, Ltd. | 70,457 | 144 | ||
Metcash, Ltd. (Ñ) | 73,621 | 244 | ||
Minara Resources, Ltd. (Æ) | 9,631 | 40 | ||
Mirvac Group | 7,900 | 30 | ||
National Australia Bank, Ltd. | 524,134 | 15,496 | ||
Newcrest Mining, Ltd. | 5,729 | 106 | ||
OneSteel, Ltd. (Ñ) | 69,543 | 227 |
72
Table of Contents
Oxiana, Ltd. (Æ) | 18,534 | 48 | ||
Pacific Brands, Ltd. | 109,603 | 225 | ||
PaperlinX, Ltd. | 35,465 | 113 | ||
Promina Group, Ltd. | 33,662 | 177 | ||
Publishing & Broadcasting, Ltd. (Ñ) | 18,530 | 278 | ||
Qantas Airways, Ltd. | 64,786 | 213 | ||
QBE Insurance Group, Ltd. (Ñ) | 155,315 | 2,971 | ||
Ramsay Health Care, Ltd. | 26,815 | 223 | ||
Rinker Group, Ltd. | 39,160 | 562 | ||
Rio Tinto, Ltd. (Ñ) | 7,423 | 451 | ||
Santos, Ltd. | 21,571 | 177 | ||
Sims Group, Ltd. | 5,604 | 94 | ||
Smorgon Steel Group, Ltd. | 18,477 | 24 | ||
Sons of Gwalia, Ltd. (Æ) | 22,400 | — | ||
Stockland (Ñ) | 28,400 | 167 | ||
Suncorp-Metway, Ltd. (Ñ) | 15,458 | 249 | ||
Symbion Health, Ltd. (Ñ) | 133,817 | 340 | ||
TABCORP Holdings, Ltd. (Ñ) | 128,509 | 1,642 | ||
Tattersall’s, Ltd. (Æ)(Ñ) | 29,926 | 84 | ||
Telstra Corp., Ltd. (Ñ) | 1,174,067 | 3,600 | ||
Transurban Group (Ñ) | 46,300 | 259 | ||
United Group, Ltd. (Ñ) | 25,100 | 284 | ||
Wesfarmers, Ltd. (Ñ) | 79,020 | 2,113 | ||
Westfield Group | 29,794 | 430 | ||
Westpac Banking Corp. | 41,577 | 771 | ||
Woodside Petroleum, Ltd. | 1,011 | 29 | ||
Woolworths, Ltd. | 174,128 | 2,790 | ||
Zinifex, Ltd. | 27,511 | 323 | ||
65,075 | ||||
Austria - 0.5% | ||||
Erste Bank der Oesterreichischen Sparkassen AG (Ñ) | 90,280 | 6,147 | ||
OMV AG | 20,000 | 1,087 | ||
Verbund - Oesterreichische Elektrizitaetswirtschafts AG Class A | 9,800 | 489 | ||
Voestalpine AG (Ñ) | 37,100 | 1,750 | ||
9,473 | ||||
Belgium - 1.1% | ||||
Belgacom SA | 24,994 | 1,023 | ||
Delhaize Group | 12,890 | 1,042 | ||
Dexia | 5,139 | 139 | ||
Fortis (Ñ) | 256,243 | 10,750 | ||
Fortis | 95,657 | 4,015 | ||
KBC Groep NV | 28,508 | 3,114 | ||
UCB SA | 12,998 | 805 | ||
20,888 | ||||
Bermuda - 0.4% | ||||
CNPC Hong Kong, Ltd. | 310,000 | 155 | ||
Cofco International, Ltd. | 78,000 | 69 | ||
Esprit Holdings, Ltd. | 244,000 | 2,362 | ||
Great Eagle Holdings, Ltd. | 35,000 | 94 | ||
Jardine Matheson Holdings, Ltd. | 102,500 | 2,050 | ||
Kerry Properties, Ltd. (Ñ) | 23,500 | 87 | ||
Li & Fung, Ltd. | 928,600 | 2,430 | ||
Orient Overseas International, Ltd. | 25,900 | 113 | ||
People’s Food Holdings, Ltd. | 42,000 | 32 | ||
TPV Technology, Ltd. | 128,000 | 107 | ||
Vostok Nafta Investment, Ltd. (Æ) | 10,825 | 686 | ||
8,185 | ||||
73
Table of Contents
Brazil - 0.2% | ||||
Cia Vale do Rio Doce - ADR | 27,100 | 689 | ||
Gerdau SA - ADR (Ñ) | 56,100 | 829 | ||
Petroleo Brasileiro SA - ADR (Æ) | 14,640 | 1,300 | ||
Unibanco - Uniao de Bancos Brasileiros SA - ADR | 7,000 | 551 | ||
3,369 | ||||
Canada - 1.2% | ||||
Bombardier, Inc. (Æ) | 45,989 | 158 | ||
Cameco Corp. | 27,400 | 962 | ||
Canadian Imperial Bank of Commerce (Ñ) | 19,700 | 1,537 | ||
Canadian National Railway Co. | 38,300 | 1,825 | ||
Canadian Natural Resources, Ltd. | 28,600 | 1,489 | ||
EnCana Corp. (Ñ) | 11,200 | 532 | ||
Gerdau Ameristeel Corp. | 37,900 | 386 | ||
ING Canada, Inc. | 13,100 | 690 | ||
Nexen, Inc. | 23,922 | 1,276 | ||
Potash Corp. of Saskatchewan | 8,100 | 1,012 | ||
Research In Motion, Ltd. (Æ) | 43,800 | 5,146 | ||
Rogers Communications, Inc. Class B | 67,400 | 4,033 | ||
SNC-Lavalin Group, Inc. | 62,300 | 1,701 | ||
Teck Cominco, Ltd. Class B | 16,400 | 1,208 | ||
Toronto-Dominion Bank (Ñ) | 11,800 | 684 | ||
22,639 | ||||
Cayman Islands - 0.1% | ||||
Chaoda Modern Agriculture | 88,000 | 53 | ||
Foxconn International Holdings, Ltd. (Æ) | 363,000 | 1,207 | ||
1,260 | ||||
China - 0.3% | ||||
China Life Insurance Co., Ltd. Class H (Ñ) | 1,670,000 | 3,517 | ||
China Merchants Bank Co., Ltd. (Æ)(Ñ) | 108,500 | 170 | ||
China Telecom Corp., Ltd. Class H | 914,000 | 344 | ||
PetroChina Co., Ltd. Class H | 532,000 | 586 | ||
Ping An Insurance (Group) Co. of China, Ltd. Class H (Ñ) | 86,000 | 299 | ||
4,916 | ||||
Denmark - 0.1% | ||||
Carlsberg A/S Class B | 4,700 | 404 | ||
Danske Bank A/S | 12,900 | 541 | ||
FLSmidth & Co. A/S | 9,050 | 477 | ||
Genmab A/S (Æ) | 6,500 | 291 | ||
Novo-Nordisk A/S Class B | 13,050 | 985 | ||
2,698 | ||||
Finland - 0.7% | ||||
Cargotec Corp. Class B | 5,040 | 229 | ||
Fortum OYJ | 112,571 | 3,098 | ||
Kesko OYJ Class B | 3,939 | 186 | ||
M-real OYJ Class B | 89,470 | 528 | ||
Metso OYJ | 11,700 | 508 | ||
Neste Oil OYJ (Ñ) | 18,417 | 580 | ||
Nokia OYJ | 92,719 | 1,840 | ||
Nokia OYJ - ADR | 4,653 | 93 | ||
Orion OYJ Class B (Æ)(Ñ) | 13,000 | 260 | ||
Rautaruukki OYJ | 32,551 | 1,075 | ||
UPM-Kymmene OYJ | 184,951 | 4,695 | ||
13,092 | ||||
France - 11.9% | ||||
Air France-KLM | 37,612 | 1,340 | ||
Air Liquide SA (Ñ) | 30,922 | 6,583 |
74
Table of Contents
Alcatel SA | 67,506 | 857 | ||
Alstom RGPT (Æ) | 27,600 | 2,547 | ||
Arkema (Æ) | 14,774 | 721 | ||
Assurances Generales de France | 8,700 | 1,221 | ||
AXA SA (Ñ) | 305,276 | 11,630 | ||
BNP Paribas (Ñ) | 194,720 | 21,410 | ||
Capgemini SA (Ñ) | 17,415 | 989 | ||
Carrefour SA (Ñ) | 63,072 | 3,843 | ||
Casino Guichard Perrachon SA | 7,139 | 606 | ||
Christian Dior SA | 8,460 | 904 | ||
Cie de Saint-Gobain (Ñ) | 73,194 | 5,395 | ||
Cie Generale d’Optique Essilor International SA (Ñ) | 18,537 | 1,945 | ||
CNP Assurances (Ñ) | 10,702 | 1,126 | ||
Credit Agricole SA (Ñ) | 342,160 | 14,546 | ||
Eiffage SA (Ñ) | 7,902 | 726 | ||
Electricite de France | 12,361 | 750 | ||
France Telecom SA (Ñ) | 254,591 | 6,612 | ||
Gaz de France SA (Ñ) | 36,770 | 1,478 | ||
Groupe Danone (Ñ) | 57,335 | 8,401 | ||
Iliad SA | 13,092 | 1,118 | ||
L’Oreal SA | 18,130 | 1,763 | ||
Lafarge SA (Ñ) | 9,495 | 1,276 | ||
Lagardere SCA (Ñ) | 14,390 | 1,035 | ||
Legrand SA (Ñ) | 57,940 | 1,642 | ||
LVMH Moet Hennessy Louis Vuitton SA (Ñ) | 42,694 | 4,449 | ||
Natexis Banques Populaires | 3,464 | 958 | ||
Nexans SA | 3,501 | 314 | ||
Pernod-Ricard SA (Ñ) | 16,990 | 3,402 | ||
Peugeot SA (Ñ) | 17,650 | 1,014 | ||
PPR SA | 38,881 | 5,801 | ||
Renault SA (Ñ) | 90,544 | 10,591 | ||
Sanofi-Aventis (Ñ) | 171,522 | 14,580 | ||
Sanofi-Aventis | 2,746 | 233 | ||
Schneider Electric SA (Ñ) | 61,587 | 6,398 | ||
Societe BIC SA | 3,555 | 229 | ||
Societe Generale (Ñ) | 117,168 | 19,470 | ||
Sodexho Alliance SA (Ñ) | 12,700 | 682 | ||
Suez SA (Ñ) | 86,972 | 3,892 | ||
Suez SA (Æ)(Ñ) | 27,332 | — | ||
Thomson (Æ)(Ñ) | 71,850 | 1,239 | ||
Total SA (Ñ) | 370,604 | 25,093 | ||
Total SA - ADR | 21,452 | 1,462 | ||
Unibail (Ñ) | 13,752 | 2,994 | ||
Valeo SA (Ñ) | 43,997 | 1,656 | ||
Vallourec SA (Ñ) | 26,776 | 6,664 | ||
Veolia Environnement (Ñ) | 116,472 | 7,131 | ||
Vivendi Universal SA | 39,310 | 1,489 | ||
220,205 | ||||
Germany - 6.4% | ||||
Aareal Bank AG (Æ)(Ñ) | 4,250 | 181 | ||
Allianz SE | 28,151 | 5,225 | ||
BASF AG | 16,900 | 1,490 | ||
Bayer AG | 330,274 | 16,629 | ||
Bayerische Motoren Werke AG | 9,400 | 540 | ||
Bilfinger Berger AG | 15,800 | 985 | ||
Celanese AG (Ñ) | 1,000 | 89 | ||
Celesio AG | 8,474 | 437 |
75
Table of Contents
Continental AG | 46,700 | 5,222 | ||
DaimlerChrysler AG | 14,788 | 844 | ||
Deutsche Bank AG | 33,388 | 4,202 | ||
Deutsche Boerse AG | 44,515 | 7,178 | ||
Deutsche Lufthansa AG | 131,608 | 3,035 | ||
Deutsche Post AG | 121,530 | 3,366 | ||
Deutsche Telekom AG | 184,153 | 3,187 | ||
E.ON AG | 159,053 | 19,082 | ||
GEA Group AG | 26,541 | 477 | ||
Hannover Rueckversicherung AG (Æ)(Ñ) | 36,690 | 1,557 | ||
Hochtief AG | 11,325 | 740 | ||
Infineon Technologies AG (Æ) | 181,060 | 2,204 | ||
KarstadtQuelle AG (Æ)(Ñ) | 22,022 | 517 | ||
Lanxess AG (Æ) | 22,180 | 1,014 | ||
Linde AG | 8,892 | 881 | ||
MAN AG | 63,489 | 5,644 | ||
Medion AG (Ñ) | 23,550 | 250 | ||
Merck KGaA | 18,100 | 1,908 | ||
Metro AG | 31,750 | 1,886 | ||
Muenchener Rueckversicherungs AG | 32,126 | 5,215 | ||
Praktiker Bau- und Heimwerkermaerkte AG | 6,181 | 197 | ||
Rheinmetall AG | 5,733 | 412 | ||
RWE AG | 102,351 | 10,115 | ||
Salzgitter AG | 27,117 | 2,901 | ||
SAP AG | 15,400 | 3,064 | ||
Siemens AG | 43,165 | 3,884 | ||
Suedzucker AG | 21,965 | 542 | ||
ThyssenKrupp AG | 883 | 33 | ||
TUI AG (Ñ) | 44,400 | 971 | ||
Volkswagen AG (Ñ) | 15,955 | 1,574 | ||
Wacker Chemie AG (Æ) | 9,600 | 1,154 | ||
Wincor Nixdorf AG | 2,502 | 348 | ||
119,180 | ||||
Greece - 0.3% | ||||
Alpha Bank AE | 50,700 | 1,476 | ||
EFG Eurobank Ergasias SA | 55,560 | 1,848 | ||
Public Power Corp. | 55,640 | 1,420 | ||
4,744 | ||||
Hong Kong - 1.7% | ||||
Bank of East Asia, Ltd. | 71,200 | 340 | ||
BOC Hong Kong Holdings, Ltd. (Ñ) | 2,106,000 | 4,712 | ||
Cheung Kong Holdings, Ltd. | 49,200 | 535 | ||
China Mobile, Ltd. | 546,000 | 4,437 | ||
China Netcom Group Corp. Hong Kong, Ltd. (Ñ) | 132,000 | 235 | ||
China Resources Power Holdings Co. | 58,000 | 72 | ||
Citic Pacific, Ltd. | 176,100 | 541 | ||
CNOOC, Ltd. (Ñ) | 1,842,000 | 1,549 | ||
Dah Sing Financial Holdings, Ltd. (Æ) | 6,000 | 53 | ||
Guangdong Investment, Ltd. | 126,000 | 53 | ||
Guangzhou Investment Co., Ltd. | 798,000 | 154 | ||
Hang Seng Bank, Ltd. | 42,800 | 545 | ||
Henderson Land Development Co., Ltd. (Ñ) | 34,000 | 187 | ||
Hong Kong Exchanges and Clearing, Ltd. | 270,000 | 2,139 | ||
HongKong Electric Holdings | 657,500 | 3,094 | ||
Hopewell Holdings (Ñ) | 37,000 | 110 | ||
Hutchison China Meditech, Ltd. (Æ) | 2 | — | ||
Hutchison Telecommunications International, Ltd. (Æ)(Ñ) | 685,000 | 1,319 |
76
Table of Contents
Hutchison Whampoa, Ltd. | 186,100 | 1,651 | ||
Link REIT (The) (Æ)(ö) | 433,500 | 892 | ||
Melco International Development | 488,000 | 1,196 | ||
New World Development, Ltd. | 107,000 | 183 | ||
Shenzhen Investment, Ltd. (Ñ) | 162,000 | 64 | ||
Shun TAK Holdings, Ltd. | 1,478,000 | 1,954 | ||
Sino Land Co. (Ñ) | 344,293 | 599 | ||
Sun Hung Kai Properties, Ltd. | 104,000 | 1,137 | ||
Swire Pacific, Ltd. | 25,900 | 274 | ||
Television Broadcasts, Ltd. | 33,000 | 189 | ||
Wharf Holdings, Ltd. | 669,537 | 2,273 | ||
Wheelock & Co., Ltd. | 52,000 | 94 | ||
30,581 | ||||
Hungary - 0.0% | ||||
MOL Hungarian Oil and Gas PLC | 5,900 | 587 | ||
India - 0.1% | ||||
State Bank of India, Ltd. - GDR | 15,300 | 964 | ||
Indonesia - 0.1% | ||||
Bank Central Asia Tbk PT | 2,869,500 | 1,464 | ||
Telekomunikasi Indonesia Tbk PT | 1,230,500 | 1,135 | ||
Telekomunikasi Indonesia Tbk PT - ADR | 5,423 | 198 | ||
2,797 | ||||
Ireland - 0.5% | ||||
Allied Irish Banks PLC | 54,300 | 1,483 | ||
Bank of Ireland | 7,600 | 153 | ||
Bank of Ireland PLC | 117,084 | 2,357 | ||
CRH PLC | 51,439 | 1,815 | ||
Elan Corp. PLC - ADR (Æ)(Ñ) | 122,800 | 1,778 | ||
Ryanair Holdings PLC - ADR (Æ)(Ñ) | 36,713 | 2,453 | ||
10,039 | ||||
Israel - 0.0% | ||||
Teva Pharmaceutical Industries, Ltd. - ADR | 21,200 | 699 | ||
Italy - 3.7% | ||||
Amplifon SpA | 23,152 | 174 | ||
Assicurazioni Generali SpA (Ñ) | 82,660 | 3,280 | ||
Banca Intesa SpA (Ñ) | 1,294,268 | 8,847 | ||
Banco Popolare di Verona e Novara SCRL (Ñ) | 65,378 | 1,759 | ||
Benetton Group SpA | 26,860 | 509 | ||
Buzzi Unicem SpA (Ñ) | 62,360 | 1,643 | ||
Capitalia SpA (Ñ) | 27,784 | 246 | ||
Enel SpA (Ñ) | 180,350 | 1,731 | ||
ENI SpA (Ñ) | 499,174 | 15,054 | ||
ERG SpA (Ñ) | 27,249 | 571 | ||
Esprinet SpA | 9,280 | 167 | ||
Fastweb | 26,300 | 1,302 | ||
Fiat SpA (Æ)(Ñ) | 116,400 | 2,056 | ||
Fondiaria-Sai SpA (Ñ) | 67,127 | 2,991 | ||
Italcementi SpA (Ñ) | 42,372 | 1,124 | ||
Lottomatica SpA (Ñ) | 27,610 | 1,008 | ||
Mediaset SpA | 182,280 | 2,045 | ||
Milano Assicurazioni SpA | 120,800 | 942 | ||
Parmalat Finanziaria SpA (Æ) | 46,200 | — | ||
Saipem SpA (Ñ) | 35,900 | 846 | ||
SanPaolo IMI SpA | 12,303 | 263 | ||
Saras SpA (Æ)(Ñ) | 213,760 | 1,114 | ||
Telecom Italia SpA | 390,553 | 987 | ||
Toro Assicurazioni SpA | 9,374 | 252 |
77
Table of Contents
UniCredito Italiano SpA (Ñ) | 2,114,966 | 17,535 | ||
Unipol SpA | 345,630 | 1,195 | ||
67,641 | ||||
Japan - 19.3% | ||||
77 Bank, Ltd. (The) | 151,500 | 996 | ||
Access Co., Ltd. (Æ)(Ñ) | 31 | 207 | ||
Aderans Co., Ltd. (Ñ) | 6,800 | 158 | ||
Aeon Co., Ltd. (Ñ) | 118,400 | 2,789 | ||
Aeon Credit Service Co., Ltd. (Ñ) | 52,900 | 1,183 | ||
Aida Engineering, Ltd. | 34,000 | 205 | ||
Aiful Corp. | 26,253 | 907 | ||
Aioi Insurance Co., Ltd. | 26,000 | 179 | ||
Ajinomoto Co., Inc. | 83,100 | 961 | ||
Alpen Co., Ltd. | 11,200 | 337 | ||
Amada Co., Ltd. | 31,000 | 308 | ||
Asahi Breweries, Ltd. | 18,200 | 259 | ||
Asahi Glass Co., Ltd. (Ñ) | 255,000 | 2,937 | ||
Asahi Kasei Corp. | 69,000 | 441 | ||
Astellas Pharma, Inc. | 38,700 | 1,744 | ||
Bandai Visual Co., Ltd. | 66 | 207 | ||
Bank of Nagoya, Ltd. (The) | 16,000 | 109 | ||
Bridgestone Corp. (Ñ) | 125,900 | 2,627 | ||
Brother Industries, Ltd. | 33,000 | 416 | ||
Calsonic Kansei Corp. | 33,000 | 215 | ||
Canon Marketing Japan, Inc. | 6,800 | 161 | ||
Canon, Inc. | 429,995 | 23,052 | ||
Central Japan Railway Co. | 115 | 1,239 | ||
Chiba Bank, Ltd. (The) | 21,000 | 188 | ||
Chubu Electric Power Co., Inc. | 23,800 | 659 | ||
Chugai Pharmaceutical Co., Ltd. (Ñ) | 78,200 | 1,605 | ||
Credit Saison Co., Ltd. | 11,400 | 412 | ||
Cyber Communications, Inc. (Ñ) | 58 | 88 | ||
Dai Nippon Printing Co., Ltd. | 11,000 | 164 | ||
Daiei, Inc. (The) (Æ)(Ñ) | 16,500 | 310 | ||
Daiichi Sankyo Co., Ltd. | 105,800 | 3,148 | ||
Daikin Industries, Ltd. (Ñ) | 15,500 | 437 | ||
Daishi Bank, Ltd. (The) (Æ) | 10,000 | 41 | ||
Daiwa House Industry Co., Ltd. | 11,000 | 198 | ||
Daiwa Securities Group, Inc. | 115,000 | 1,305 | ||
Denki Kagaku Kogyo Kabushiki Kaisha | 39,000 | 148 | ||
Denso Corp. | 10,800 | 412 | ||
Dentsu, Inc. (Ñ) | 785 | 2,161 | ||
East Japan Railway Co. | 367 | 2,567 | ||
EDION Corp. | 63,700 | 918 | ||
Eighteenth Bank, Ltd. (The) | 3,000 | 14 | ||
Eisai Co., Ltd. | 85,100 | 4,359 | ||
Electric Power Development Co., Ltd. | 6,300 | 262 | ||
Elpida Memory, Inc. (Æ) | 48,200 | 2,250 | ||
Exedy Corp. | 11,500 | 337 | ||
Fancl Corp. (Ñ)(p) | 28,400 | 371 | ||
Fanuc, Ltd. | 32,500 | 2,821 | ||
Frontier Real Estate Investment Corp. (ö) | 21 | 168 | ||
Fuji Electric Holdings Co., Ltd. (Ñ) | 23,000 | 125 | ||
Fuji Fire & Marine Insurance Co., Ltd. (The) | 37,000 | 148 | ||
Fuji Heavy Industries, Ltd. | 109,000 | 629 | ||
FUJIFILM Holdings Corp. | 73,700 | 2,735 | ||
Fujikura, Ltd. | 20,000 | 214 |
78
Table of Contents
Fujitsu, Ltd. | 165,000 | 1,346 | ||
Funai Electric Co., Ltd. (Ñ) | 13,970 | 1,224 | ||
Hachijuni Bank, Ltd. (The) | 11,000 | 78 | ||
Higo Bank, Ltd. (The) | 6,000 | 42 | ||
Hino Motors, Ltd. (Ñ) | 321,000 | 1,586 | ||
Hiroshima Bank, Ltd. (The) | 41,000 | 245 | ||
Hitachi Koki Co., Ltd. (Ñ) | 28,000 | 399 | ||
Hitachi, Ltd. | 382,000 | 2,205 | ||
Honda Motor Co., Ltd. | 89,700 | 3,175 | ||
Hoya Corp. | 18,600 | 719 | ||
Hyakugo Bank, Ltd. (The) | 6,000 | 38 | ||
Hyakujushi Bank, Ltd. (The) | 5,000 | 31 | ||
Ibiden Co., Ltd. | 35,800 | 1,876 | ||
Inpex Holdings, Inc. (Æ) | 74 | 605 | ||
Itochu Corp. | 86,000 | 685 | ||
Itochu-Shokuhin Co., Ltd. | 7,000 | 233 | ||
Iyo Bank, Ltd. (The) | 10,000 | 99 | ||
Izumi Co., Ltd. (Ñ) | 6,600 | 246 | ||
Japan Asia Investment Co., Ltd. | 47,000 | 263 | ||
Japan Logistics Fund, Inc. Class A (ö) | 50 | 372 | ||
Japan Petroleum Exploration Co. | 2,500 | 146 | ||
Japan Tobacco, Inc. | 3,557 | 15,511 | ||
JFE Holdings, Inc. (Ñ) | 137,300 | 5,518 | ||
JS Group Corp. | 70,800 | 1,453 | ||
JSR Corp. (Ñ) | 28,600 | 719 | ||
Kadokawa Holdings, Inc. (Ñ) | 11,300 | 402 | ||
Kagoshima Bank, Ltd. (The) | 6,000 | 43 | ||
Kandenko Co., Ltd. | 19,000 | 115 | ||
Kansai Electric Power Co., Inc. (The) | 35,400 | 835 | ||
Kansai Paint Co., Ltd. (Ñ) | 52,000 | 435 | ||
Kao Corp. | 440,700 | 11,568 | ||
Kawasaki Kisen Kaisha, Ltd. (Ñ) | 26,000 | 185 | ||
KDDI Corp. | 863 | 5,379 | ||
Keio Corp. (Ñ) | 17,000 | 113 | ||
Keiyo Bank, Ltd. (The) | 15,000 | 86 | ||
Kenedix, Inc. | 243 | 1,365 | ||
Kobayashi Pharmaceutical Co., Ltd. | 8,700 | 334 | ||
Kobe Steel, Ltd. | 548,000 | 1,677 | ||
Koei Co., Ltd. (Ñ) | 21,010 | 335 | ||
Koito Manufacturing Co., Ltd. (Ñ) | 26,000 | 368 | ||
Komatsu, Ltd. | 58,600 | 1,057 | ||
Komori Corp. | 3,000 | 58 | ||
Konica Minolta Holdings, Inc. (Æ) | 25,500 | 340 | ||
Kose Corp. (Ñ) | 7,010 | 211 | ||
Kubota Corp. | 66,000 | 577 | ||
Kuraray Co., Ltd. | 75,300 | 852 | ||
Kurita Water Industries, Ltd. (Ñ) | 14,100 | 288 | ||
Kyocera Corp. | 2,900 | 260 | ||
Lawson, Inc. (Ñ) | 26,700 | 906 | ||
Leopalace21 Corp. | 42,700 | 1,606 | ||
Lintec Corp. | 2,500 | 57 | ||
Mabuchi Motor Co., Ltd. (Ñ) | 9,400 | 548 | ||
Makita Corp. | 16,800 | 500 | ||
Marui Co., Ltd. | 15,500 | 208 | ||
Matsumotokiyoshi Co., Ltd. (Ñ) | 41,400 | 1,000 | ||
Matsushita Electric Industrial Co., Ltd. | 104,000 | 2,174 | ||
Matsushita Electric Works, Ltd. | 28,000 | 314 |
79
Table of Contents
Mazda Motor Corp. | 89,000 | 602 | ||
Millea Holdings, Inc. | 81,700 | 3,088 | ||
Minebea Co., Ltd. | 40,600 | 248 | ||
Mitsubishi Chemical Holdings Corp. | 9,000 | 58 | ||
Mitsubishi Corp. | 92,400 | 1,786 | ||
Mitsubishi Electric Corp. (Ñ) | 83,000 | 724 | ||
Mitsubishi Estate Co., Ltd. | 26,000 | 622 | ||
Mitsubishi Gas Chemical Co., Inc. | 16,000 | 152 | ||
Mitsubishi Heavy Industries, Ltd. | 57,000 | 254 | ||
Mitsubishi Rayon Co., Ltd. (Ñ) | 64,000 | 404 | ||
Mitsubishi UFJ Financial Group, Inc. (Ñ) | 541 | 6,800 | ||
Mitsui & Co., Ltd. (Ñ) | 102,000 | 1,393 | ||
Mitsui Chemicals, Inc. | 285,000 | 1,957 | ||
Mitsui Engineering & Shipbuilding Co., Ltd. (Æ)(Ñ) | 27,000 | 101 | ||
Mitsui Fudosan Co., Ltd. | 204,000 | 5,023 | ||
Mitsui OSK Lines, Ltd. (Ñ) | 355,000 | 2,959 | ||
Mitsui Trust Holdings, Inc. | 90,100 | 1,061 | ||
Mizuho Financial Group, Inc. | 724 | 5,639 | ||
Mori Seiki Co., Ltd. (Ñ) | 19,300 | 404 | ||
Murata Manufacturing Co., Ltd. | 29,700 | 2,077 | ||
Nabtesco Corp. (Ñ) | 13,000 | 156 | ||
Nafco Co., Ltd. | 7,500 | 208 | ||
Netprice, Ltd. (Æ)(Ñ) | 29 | 39 | ||
Nichirei Corp. | 52,000 | 278 | ||
Nidec Corp. (Ñ) | 5,800 | 444 | ||
Nidec Sankyo Corp. | 24,000 | 268 | ||
Nihon Unisys, Ltd. (Æ) | 5,900 | 111 | ||
Nikon Corp. (Ñ) | 36,000 | 740 | ||
Nintendo Co., Ltd. | 41,000 | 8,385 | ||
Nippon Electric Glass Co., Ltd. (Ñ) | 24,000 | 517 | ||
Nippon Express Co., Ltd. (Ñ) | 558,600 | 3,023 | ||
Nippon Kayaku Co., Ltd. | 3,000 | 24 | ||
Nippon Mining Holdings, Inc. | 197,000 | 1,472 | ||
Nippon Oil Corp. | 79,000 | 588 | ||
Nippon Paint Co., Ltd. | 11,000 | 59 | ||
Nippon Paper Group, Inc. (Ñ) | 274 | 982 | ||
Nippon Steel Corp. | 196,000 | 798 | ||
Nippon Telegraph & Telephone Corp. | 606 | 3,052 | ||
Nippon Yusen KK (Ñ) | 83,000 | 539 | ||
Nissan Motor Co., Ltd. | 377,300 | 4,520 | ||
Nissha Printing Co., Ltd. | 5,700 | 267 | ||
Nisshin Seifun Group, Inc. | 21,500 | 226 | ||
Nitto Denko Corp. (Ñ) | 47,900 | 2,732 | ||
Nomura Holdings, Inc. | 29,100 | 514 | ||
Noritsu Koki Co., Ltd. | 1,400 | 26 | ||
NTN Corp. (Ñ) | 20,000 | 165 | ||
NTT DoCoMo, Inc. | 761 | 1,165 | ||
NTT Urban Development Corp. (Ñ) | 93 | 803 | ||
Obic Co., Ltd. | 2,030 | 431 | ||
OJI Paper Co., Ltd. (Ñ) | 73,000 | 387 | ||
Okasan Holdings, Inc. (Ñ) | 20,000 | 155 | ||
Oki Electric Industry Co., Ltd. (Ñ) | 383,000 | 904 | ||
Omron Corp. | 74,300 | 1,919 | ||
ORIX Corp. (Ñ) | 39,540 | 11,140 | ||
Pacific Metals Co., Ltd. | 45,000 | 387 | ||
Parco Co., Ltd. (Ñ) | 6,800 | 82 | ||
Rakuten, Inc. (Ñ) | 3,215 | 1,429 |
80
Table of Contents
Rengo Co., Ltd. (Ñ) | 17,000 | 109 | ||
Resona Holdings, Inc. (Ñ) | 133 | 405 | ||
Ricoh Co., Ltd. | 487,500 | 9,629 | ||
Rinnai Corp. | 22,570 | 641 | ||
Rohm Co., Ltd. | 32,800 | 3,018 | ||
San-In Godo Bank, Ltd. (The) (Æ) | 6,000 | 55 | ||
Sankyo Co., Ltd. | 17,500 | 893 | ||
Sapporo Hokuyo Holdings, Inc. | 32 | 320 | ||
Sega Sammy Holdings, Inc. | 4,300 | 108 | ||
Seino Holdings Corp. (Ñ) | 13,000 | 142 | ||
Sekisui Chemical Co., Ltd. | 195,900 | 1,732 | ||
Sekisui House, Ltd. | 137,400 | 2,172 | ||
SFCG Co., Ltd. | 3,589 | 664 | ||
Sharp Corp. (Ñ) | 174,000 | 3,102 | ||
Shiga Bank, Ltd. (The) | 8,000 | 52 | ||
Shimano, Inc. | 2,700 | 75 | ||
Shin-Etsu Chemical Co., Ltd. | 49,000 | 3,213 | ||
Shinko Electric Industries Co., Ltd. | 3,700 | 99 | ||
Shinsei Bank, Ltd. | 767,100 | 4,427 | ||
Shionogi & Co., Ltd. | 48,000 | 962 | ||
Shizuoka Bank, Ltd. (The) | 10,000 | 107 | ||
Sohgo Security Services Co., Ltd. | 13,200 | 235 | ||
Sompo Japan Insurance, Inc. | 93,000 | 1,237 | ||
Sony Corp. | 37,000 | 1,534 | ||
Stanley Electric Co., Ltd. (Ñ) | 24,700 | 490 | ||
Sumco Corp. (Ñ) | 39,300 | 2,796 | ||
Sumitomo Chemical Co., Ltd. | 37,000 | 264 | ||
Sumitomo Corp. | 27,300 | 359 | ||
Sumitomo Electric Industries, Ltd. (Ñ) | 52,400 | 742 | ||
Sumitomo Heavy Industries, Ltd. | 307,000 | 2,630 | ||
Sumitomo Metal Industries, Ltd. | 387,000 | 1,456 | ||
Sumitomo Mitsui Financial Group, Inc. (Ñ) | 1,535 | 16,800 | ||
Sumitomo Realty & Development Co., Ltd. (Ñ) | 144,000 | 4,777 | ||
Sumitomo Trust & Banking Co., Ltd. (The) | 94,000 | 1,011 | ||
Sumitomo Warehouse Co., Ltd. (The) (Ñ) | 29,000 | 205 | ||
Suzuken Co., Ltd. | 5,300 | 186 | ||
Suzuki Motor Corp. (Ñ) | 157,300 | 4,465 | ||
T&D Holdings, Inc. | 6,200 | 453 | ||
Take And Give Needs Co., Ltd. (Ñ) | 444 | 437 | ||
Takeda Pharmaceutical Co., Ltd. | 144,000 | 9,247 | ||
Takefuji Corp. | 38,360 | 1,391 | ||
TDK Corp. | 15,600 | 1,220 | ||
Telewave, Inc. (Ñ) | 135 | 269 | ||
Terumo Corp. | 34,100 | 1,379 | ||
Tobu Railway Co., Ltd. | 40,000 | 197 | ||
Tokai Carbon Co., Ltd. (Ñ) | 40,000 | 270 | ||
Tokai Rubber Industries, Inc. | 2,500 | 39 | ||
Tokai Tokyo Securities Co., Ltd. (Ñ) | 20,000 | 99 | ||
Tokyo Electric Power Co., Inc. (The) | 87,600 | 2,547 | ||
Tokyo Electron, Ltd. (Ñ) | 4,600 | 344 | ||
Tokyo Gas Co., Ltd. (Ñ) | 592,000 | 3,022 | ||
Tokyo Style Co., Ltd. | 3,000 | 33 | ||
Tokyu Corp. | 81,000 | 549 | ||
Toshiba Corp. (Ñ) | 58,000 | 367 | ||
Toyo Seikan Kaisha, Ltd. (Ñ) | 9,600 | 186 | ||
Toyobo Co., Ltd. (Ñ) | 66,000 | 174 | ||
Toyoda Gosei Co., Ltd. | 27,700 | 643 |
81
Table of Contents
Toyota Motor Corp. | 520,200 | 30,824 | ||
Trend Micro, Inc. (Ñ) | 11,000 | 353 | ||
Ube Industries, Ltd. | 116,000 | 342 | ||
UNY Co., Ltd. | 20,000 | 251 | ||
Valor Co., Ltd. (Ñ) | 15,600 | 229 | ||
West Japan Railway Co. | 416 | 1,778 | ||
Xebio Co., Ltd. | 5,850 | 180 | ||
Yahoo! Japan Corp. | 336 | 131 | ||
Yokogawa Electric Corp. | 20,200 | 277 | ||
356,471 | ||||
Luxembourg - 0.1% | ||||
Acergy SA (Æ)(Ñ) | 36,100 | 653 | ||
Millicom International Cellular SA (Æ)(Ñ) | 29,200 | 1,457 | ||
SES Global SA (Ñ) | 42,500 | 651 | ||
2,761 | ||||
Mexico - 0.7% | ||||
America Movil SA de CV Series L | 152,700 | 6,546 | ||
Coca-Cola Femsa SA de CV - ADR | 28,700 | 997 | ||
Fomento Economico Mexicano SA de CV - ADR | 26,900 | 2,601 | ||
Grupo Televisa SA - ADR | 51,750 | 1,277 | ||
Telefonos de Mexico SA de CV Series L | 36,680 | 968 | ||
12,389 | ||||
Netherlands - 4.1% | ||||
ABN AMRO Holding NV | 179,991 | 5,249 | ||
Aegon NV (Ñ) | 82,021 | 1,509 | ||
ASML Holding NV (Æ) | 83,754 | 1,916 | ||
Euronext NV (Æ)(Ñ) | 25,242 | 2,529 | ||
European Aeronautic Defense and Space Co. NV (Ñ) | 71,020 | 1,926 | ||
Heineken Holding NV | 10,167 | 398 | ||
Heineken NV | 136,100 | 6,168 | ||
Hunter Douglas NV | 3,692 | 284 | ||
ING Groep NV | 578,464 | 25,626 | ||
Koninklijke Philips Electronics NV | 206,571 | 7,216 | ||
Mittal Steel Co. NV | 70,678 | 3,034 | ||
Reed Elsevier NV | 258,369 | 4,442 | ||
Rodamco Europe NV | 11,179 | 1,293 | ||
Royal KPN NV | 168,855 | 2,256 | ||
Royal Numico NV | 87,100 | 3,894 | ||
SBM Offshore NV | 48,600 | 1,439 | ||
STMicroelectronics NV | 46,900 | 811 | ||
Unilever NV (Ñ) | 133,522 | 3,292 | ||
Univar NV (Æ) | 3,261 | 163 | ||
Wolters Kluwer NV | 56,400 | 1,551 | ||
74,996 | ||||
Netherlands Antilles - 0.0% | ||||
Schlumberger, Ltd. (Ñ) | 8,200 | 517 | ||
New Zealand - 0.1% | ||||
Telecom Corp. of New Zealand, Ltd. (Ñ) | 768,437 | 2,404 | ||
Norway - 0.5% | ||||
Aker Kvaerner ASA (Ñ) | 13,140 | 1,367 | ||
DNB Nor Bank ASA (Ñ) | 118,563 | 1,553 | ||
Pan Fish ASA (Æ)(Ñ) | 229,000 | 179 | ||
Petroleum Geo-Services ASA (Æ) | 12,100 | 704 | ||
Statoil ASA (Ñ) | 53,800 | 1,360 | ||
Telenor ASA | 171,300 | 2,706 | ||
Yara International ASA (Ñ) | 28,800 | 504 | ||
8,373 | ||||
82
Table of Contents
Panama - 0.0% | ||||
Carnival Corp. (Ñ) | 6,100 | 298 | ||
Papua New Guinea - 0.0% | ||||
Oil Search, Ltd. | 105,500 | 279 | ||
Singapore - 1.1% | ||||
CapitaLand, Ltd. | 381,000 | 1,334 | ||
City Developments, Ltd. | 36,000 | 255 | ||
CSE Global, Ltd. | 107,000 | 79 | ||
DBS Group Holdings, Ltd. | 436,140 | 5,715 | ||
Flextronics International, Ltd. (Æ)(Ñ) | 97,000 | 1,125 | ||
Fraser and Neave, Ltd. | 101,000 | 288 | ||
Jardine Cycle & Carriage, Ltd. | 22,000 | 175 | ||
Keppel Corp., Ltd. | 253,000 | 2,568 | ||
NatSteel, Ltd. | 46,400 | 39 | ||
Oversea-Chinese Banking Corp. (Ñ) | 492,800 | 2,216 | ||
Pacific Century Regional Developments, Ltd. (Æ) | 141,000 | 40 | ||
Parkway Holdings, Ltd. | 153,000 | 272 | ||
SembCorp Industries, Ltd. | 51,580 | 121 | ||
Singapore Airlines, Ltd. | 24,000 | 234 | ||
Singapore Exchange, Ltd. | 88,000 | 254 | ||
Singapore Petroleum Co., Ltd. | 33,000 | 96 | ||
Singapore Telecommunications, Ltd. (Æ) | 1,583,500 | 2,696 | ||
United Overseas Bank, Ltd. (Ñ) | 217,100 | 2,468 | ||
Want Want Holdings, Ltd. | 22,000 | 40 | ||
20,015 | ||||
South Africa - 0.1% | ||||
Nedbank Group, Ltd. | 61,403 | 1,016 | ||
Sanlam, Ltd. | 209,900 | 499 | ||
Standard Bank Group, Ltd. | 42,500 | 499 | ||
Tiger Brands, Ltd. | 20,100 | 417 | ||
2,431 | ||||
South Korea - 1.0% | ||||
Honam Petrochemical Corp. | 5,700 | 357 | ||
Hynix Semiconductor, Inc. (Æ) | 31,110 | 1,129 | ||
Hyundai Mobis | 3,800 | 371 | ||
Industrial Bank of Korea | 34,000 | 595 | ||
Kookmin Bank | 12,738 | 1,013 | ||
Korea Electric Power Corp. - ADR | 46,010 | 910 | ||
KT Corp. - ADR (Ñ) | 42,000 | 940 | ||
POSCO | 2,400 | 666 | ||
Samsung Electronics Co., Ltd. | 17,847 | 11,573 | ||
Shinhan Financial Group Co., Ltd. | 9,200 | 424 | ||
SK Telecom Co., Ltd. - ADR | 44,250 | 1,066 | ||
19,044 | ||||
Spain - 2.9% | ||||
Abengoa SA | 8,354 | 255 | ||
Actividades de Construccion y Servicios SA | 43,992 | 2,208 | ||
Altadis SA | 82,021 | 3,926 | ||
Antena 3 de Television SA (Ñ) | 36,392 | 789 | ||
Banco Bilbao Vizcaya Argentaria SA (Ñ) | 273,404 | 6,602 | ||
Banco Popular Espanol SA (Ñ) | 70,600 | 1,224 | ||
Banco Santander Central Hispano SA (Ñ) | 383,574 | 6,638 | ||
Cia de Distribucion Integral Logista SA | 10,100 | 571 | ||
Corporacion Mapfre SA | 486,685 | 2,155 | ||
Endesa SA | 21,265 | 943 | ||
Fomento de Construcciones y Contratas SA | 11,248 | 981 | ||
Gestevision Telecinco SA (Ñ) | 46,600 | 1,225 |
83
Table of Contents
Grifols SA (Æ) | 16,946 | 177 | ||
Iberdrola SA | 108,871 | 4,995 | ||
Iberia Lineas Aereas de Espana | 151,800 | 477 | ||
Inditex SA | 64,800 | 3,098 | ||
Obrascon Huarte Lain SA | 9,481 | 241 | ||
Repsol YPF SA (Ñ) | 123,594 | 4,101 | ||
Repsol YPF SA - ADR | 32,283 | 1,080 | ||
Telefonica SA | 622,166 | 11,990 | ||
Union Fenosa SA | 9,470 | 481 | ||
54,157 | ||||
Sweden - 1.4% | ||||
Alfa Laval AB | 21,500 | 796 | ||
Atlas Copco AB Class A | 8,900 | 260 | ||
D Carnegie & Co. AB | 11,300 | 216 | ||
Electrolux AB (Ñ) | 13,600 | 249 | ||
Hennes & Mauritz AB Class B | 91,640 | 3,952 | ||
Investor AB Class B | 35,000 | 785 | ||
JM AB | 19,600 | 386 | ||
Kungsleden AB | 12,800 | 162 | ||
Lindex AB (Ñ) | 20,000 | 266 | ||
Nordea Bank AB | 30,400 | 419 | ||
Sandvik AB (Ñ) | 74,800 | 914 | ||
Securitas AB Class B | 72,873 | 958 | ||
Securitas Direct AB Class B (Æ)(Ñ) | 72,873 | 222 | ||
Securitas Systems AB Class B (Æ)(Ñ) | 72,873 | 243 | ||
Skandinaviska Enskilda Banken AB Class A (Ñ) | 19,400 | 543 | ||
Skanska AB Class B | 25,000 | 446 | ||
Ssab Svenskt Staal AB Series A | 49,800 | 1,058 | ||
Ssab Svenskt Staal AB Series B | 22,200 | 443 | ||
Svenska Cellulosa AB Class B | 48,340 | 2,219 | ||
Svenska Handelsbanken Class A (Ñ) | 19,700 | 510 | ||
Swedish Match AB | 186,400 | 2,981 | ||
Telefonaktiebolaget LM Ericsson Class B | 1,824,997 | 6,924 | ||
TeliaSonera AB | 79,500 | 578 | ||
Volvo AB (Ñ) | 2,600 | 162 | ||
Volvo AB Class A | 3,100 | 200 | ||
25,892 | ||||
Switzerland - 6.9% | ||||
ABB, Ltd. | 550,412 | 8,185 | ||
Actelion, Ltd. (Æ) | 6,630 | 1,117 | ||
Alcon, Inc. | 8,100 | 859 | ||
Ciba Specialty Chemicals AG (Ñ) | 39,580 | 2,423 | ||
Clariant AG (Æ) | 60,960 | 843 | ||
Compagnie Financiere Richemont AG Class A (Ñ) | 84,011 | 4,156 | ||
Credit Suisse Group | 175,088 | 10,556 | ||
Geberit AG | 381 | 496 | ||
Julius Baer Holding AG | 53,297 | 5,629 | ||
Logitech International SA (Æ) | 160,424 | 4,217 | ||
Nestle SA | 63,209 | 21,594 | ||
Nobel Biocare Holding AG | 5,370 | 1,470 | ||
Novartis AG | 149,733 | 9,087 | ||
Pargesa Holding SA | 5,900 | 566 | ||
Roche Holding AG | 133,387 | 23,342 | ||
Sulzer AG | 1,109 | 976 | ||
Swatch Group AG | 50,008 | 1,998 | ||
Swiss Reinsurance | 77,930 | 6,389 | ||
Swisscom AG | 1,280 | 447 |
84
Table of Contents
Syngenta AG (Æ) | 19,100 | 3,084 | ||
UBS AG | 305,727 | 18,259 | ||
Zurich Financial Services AG | 5,251 | 1,298 | ||
126,991 | ||||
Taiwan - 0.4% | ||||
AU Optronics Corp. | 644,000 | 868 | ||
Compal Electronics, Inc. | 697,922 | 584 | ||
High Tech Computer Corp. | 29,000 | 719 | ||
Hon Hai Precision Industry Co., Ltd. | 501,800 | 3,251 | ||
Siliconware Precision Industries Co. | 519,000 | 659 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. | 369,000 | 677 | ||
United Microelectronics Corp. - ADR (Ñ) | 345,000 | 1,045 | ||
7,803 | ||||
Thailand - 0.1% | ||||
Bangkok Bank PCL | 388,380 | 1,270 | ||
PTT PCL | 48,200 | 292 | ||
1,562 | ||||
United Kingdom - 20.4% | ||||
3i Group PLC | 127,732 | 2,339 | ||
Admiral Group PLC | 29,625 | 525 | ||
Alliance Boots PLC | 502,709 | 7,767 | ||
Amvescap PLC | 210,100 | 2,403 | ||
Anglo American PLC | 67,498 | 3,044 | ||
ARM Holdings PLC | 1,084,541 | 2,436 | ||
AstraZeneca PLC | 187,080 | 11,058 | ||
Aviva PLC | 434,578 | 6,425 | ||
BAE Systems PLC | 732,600 | 5,862 | ||
Barclays PLC | 982,365 | 13,258 | ||
Barratt Developments PLC | 9,305 | 192 | ||
Berkeley Group Holdings PLC (Æ) | 7,075 | 194 | ||
BG Group PLC | 1,258,105 | 16,691 | ||
BHP Billiton PLC | 208,731 | 4,026 | ||
BP PLC | 1,589,026 | 17,672 | ||
Bradford & Bingley PLC | 73,500 | 648 | ||
Brambles Industries PLC (Ñ) | 93,143 | 877 | ||
British Airways PLC (Æ) | 308,184 | 2,701 | ||
British American Tobacco PLC | 456,000 | 12,430 | ||
British Energy Group PLC (Æ) | 64,194 | 515 | ||
British Land Co. PLC | 218,504 | 6,231 | ||
BT Group PLC | 300,650 | 1,596 | ||
Cadbury Schweppes PLC | 126,383 | 1,272 | ||
Capita Group PLC | 143,300 | 1,473 | ||
Carnival PLC | 14,800 | 723 | ||
Carphone Warehouse Group PLC | 768,380 | 4,155 | ||
Centrica PLC | 336,760 | 2,128 | ||
Charter PLC (Æ) | 34,639 | 609 | ||
Compass Group PLC | 155,874 | 834 | ||
Corus Group PLC | 77,496 | 691 | ||
Davis Service Group PLC | 13,200 | 124 | ||
De La Rue PLC | 18,000 | 213 | ||
Debenhams PLC | 820,821 | 2,944 | ||
Diageo PLC | 352,154 | 6,516 | ||
DSG International PLC | 170,711 | 708 | ||
easyJet PLC (Æ) | 206,427 | 2,075 | ||
EMI Group PLC | 587,725 | 3,021 | ||
Firstgroup PLC | 3,333 | 34 | ||
FKI PLC (Æ) | 136,179 | 249 |
85
Table of Contents
Friends Provident PLC | 680,930 | 2,689 | ||
George Wimpey PLC | 125,600 | 1,260 | ||
GKN PLC | 384,348 | 2,240 | ||
GlaxoSmithKline PLC | 855,015 | 22,834 | ||
Hammerson PLC | 6,004 | 154 | ||
HBOS PLC | 749,454 | 15,540 | ||
HMV Group PLC | 185,200 | 560 | ||
HSBC Holdings PLC (Ñ) | 13,200 | 249 | ||
HSBC Holdings PLC | 564,703 | 10,707 | ||
Inchcape PLC | 17,700 | 175 | ||
Invensys PLC (Æ) | 98,417 | 429 | ||
Investec PLC | 62,970 | 637 | ||
ITV PLC | 9,023 | 18 | ||
J Sainsbury PLC | 479,763 | 3,585 | ||
Kelda Group PLC | 61,400 | 1,014 | ||
Kesa Electricals PLC | 478,124 | 3,199 | ||
Ladbrokes PLC | 422,792 | 3,295 | ||
Land Securities Group PLC | 11,978 | 479 | ||
Legal & General Group PLC | 214,496 | 591 | ||
Lloyds TSB Group PLC | 630,675 | 6,731 | ||
Man Group PLC | 716,438 | 6,669 | ||
Marks & Spencer Group PLC | 438,421 | 5,490 | ||
Mitchells & Butlers PLC | 70,600 | 803 | ||
Next PLC | 167,538 | 6,008 | ||
Northern Rock PLC | 56,500 | 1,290 | ||
Old Mutual PLC | 389,918 | 1,261 | ||
Pearson PLC | 68,314 | 1,008 | ||
Premier Farnell PLC | 113,159 | 403 | ||
Prudential PLC | 147,771 | 1,811 | ||
Reckitt Benckiser PLC | 283,624 | 12,341 | ||
Reed Elsevier PLC | 461,212 | 5,252 | ||
Rentokil Initial PLC | 695,090 | 2,009 | ||
Resolution PLC | 2,239 | 27 | ||
Reuters Group PLC | 259,100 | 2,211 | ||
RHM PLC | 61,839 | 321 | ||
Rio Tinto PLC | 44,862 | 2,475 | ||
Rolls-Royce Group PLC | 143,000 | 1,281 | ||
Rolls-Royce Group PLC (Æ) | 5,248,100 | 10 | ||
Royal & Sun Alliance Insurance Group PLC | 805,861 | 2,267 | ||
Royal Bank of Scotland Group PLC | 438,269 | 15,617 | ||
Royal Dutch Shell PLC Class A (Ñ) | 315,307 | 10,926 | ||
Royal Dutch Shell PLC Class A | 167,050 | 5,793 | ||
Royal Dutch Shell PLC Class B | 126,738 | 4,540 | ||
SABMiller PLC | 106,900 | 2,068 | ||
Scottish & Southern Energy PLC | 101,881 | 2,554 | ||
Severn Trent PLC | 51,600 | 1,374 | ||
Smiths Group PLC | 275,380 | 4,969 | ||
Standard Chartered PLC | 146,752 | 4,129 | ||
Standard Life PLC (Æ) | 12,633 | 69 | ||
Taylor Woodrow PLC | 81,900 | 568 | ||
Tesco PLC | 1,910,464 | 14,340 | ||
Trinity Mirror PLC | 196,590 | 1,839 | ||
Unilever PLC | 352,667 | 8,752 | ||
Vodafone Group PLC (Æ) | 4,157,420 | 10,706 | ||
William Hill PLC | 373,514 | 4,638 | ||
Wolverhampton & Dudley Brew PLC | 35,600 | 990 | ||
WPP Group PLC | 287,810 | 3,687 |
86
Table of Contents
Xstrata PLC | 82,774 | 3,537 | ||
377,078 | ||||
United States - 0.1% | ||||
Synthes, Inc. | 10,171 | 1,154 | ||
Total Common Stocks | ||||
(cost $1,333,451) | 1,703,647 | |||
Preferred Stocks - 0.4% | ||||
Brazil - 0.2% | ||||
Banco Itau Holding Financeira SA | 57,100 | 1,880 | ||
Petroleo Brasileiro SA | 29,000 | 582 | ||
Usinas Siderurgicas de Minas Gerais SA | 27,500 | 935 | ||
3,397 | ||||
Germany - 0.1% | ||||
Fresenius AG | 13,066 | 2,451 | ||
Porsche AG | 503 | 587 | ||
3,038 | ||||
South Korea - 0.1% | ||||
Hyundai Motor Co. | 11,040 | 521 | ||
Samsung Electronics Co., Ltd. | 900 | 437 | ||
958 | ||||
Total Preferred Stocks | ||||
(cost $5,749) | 7,393 | |||
Notional Amount $ | ||||
Options Purchased - 0.1% | ||||
(Number of Contracts) | ||||
Belgium - 0.1% | ||||
Bel 20 Index | ||||
Dec 2006 4,163.07 (EUR) Call (73) | 3,879 | 466 | ||
Hong Kong - 0.0% | ||||
Hang Seng Index | ||||
Dec 2006 18,342.30 (HKD) Call (74) | 8,726 | 238 | ||
Switzerland - 0.0% | ||||
Swiss Market Index | ||||
Dec 2006 8,613.85 (CHF) Call (67) | 4,639 | 269 | ||
Total Options Purchased | ||||
(cost $968) | 973 | |||
Principal Amount ($) or Shares | Market Value $ | |||
Warrants & Rights - 0.2% | ||||
United States - 0.2% | ||||
Reliance Communication, Ltd. (Æ) 2010 Warrants | 201,400 | 1,687 | ||
Satyam Computer Services, Ltd. ((LOGO))(Æ) 2009 Warrants | 163,700 | 1,591 | ||
Total Warrants & Rights | ||||
(cost $2,762) | 3,278 | |||
Short-Term Investments - 6.5% | ||||
United States - 6.5% | ||||
Russell Investment Company Money Market Fund | 113,563,000 | 113,563 | ||
United States Treasury Bills (ç)(ž)(§) 4.891% due 12/07/06 | 7,000 | 6,967 | ||
Total Short-Term Investments | ||||
(cost $120,530) | 120,530 | |||
Other Securities - 15.4% | ||||
Russell Investment Company Money Market Fund (×) | 73,208,301 | 73,208 | ||
State Street Securities Lending Quality Trust (×) | 212,086,223 | 212,086 | ||
Total Other Securities |
87
Table of Contents
(cost $285,294) | 285,294 | ||||
Total Investments - 114.6% | |||||
(identified cost $1,748,754) | 2,121,115 | ||||
Other Assets and Liabilities, | |||||
Net - (14.6%) | (270,922 | ) | |||
Net Assets - 100.0% | 1,850,193 | ||||
A portion of the portfolio has been fair valued as of period end.
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
AEX Index (Netherlands) expiration date 11/06 (144) | 17,887 | (103 | ) | ||
CAC-40 Index (France) | |||||
expiration date 11/06 (134) | 9,164 | (60 | ) | ||
expiration date 12/06 (100) | 6,841 | 262 | |||
DAX Index (Germany) expiration date 12/06 (110) | 22,090 | 707 | |||
EUR STOXX 50 Index (EMU) expiration date 12/06 (490) | 25,092 | 1,131 | |||
FTSE-100 Index (UK) expiration date 12/06 (250) | 29,279 | 907 | |||
Hang Seng Index (Hong Kong) expiration date 11/06 (74) | 8,722 | 81 | |||
MSCI Singapore Index expiration date 11/06 (3) | 126 | — | |||
SPI 200 Index (Australia) expiration date 12/06 (62) | 6,430 | 316 | |||
TOPIX Index (Japan) expiration date 12/06 (201) | 27,682 | (426 | ) | ||
Short Positions | |||||
FTSE-100 Index (UK) expiration date 12/06 (129) | 15,108 | (439 | ) | ||
IBEX Plus Index (Spain) expiration date 11/06 (2) | 350 | (32 | ) | ||
MIB-30 (Italy) expiration date 12/06 (34) | 8,592 | (327 | ) | ||
OMX Stockholm 30 Index (Sweden) expiration date 11/06 (442) | 6,656 | 95 | |||
SPI 200 Index (Australia) expiration date 12/06 (105) | 10,890 | (571 | ) | ||
TOPIX Index (Japan) expiration date 12/06 (26) | 3,581 | 487 | |||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 2,028 | ||||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Belgium | |||||
Bel 20 Index Futures | |||||
Dec 2006 4,163.07 (EUR) Put (73) | 3,879 | (476 | ) | ||
Hong Kong | |||||
Hang Seng Index | |||||
Dec 2006 18,342.30 (HKD) Put (74) | 8,726 | (238 | ) | ||
Switzerland | |||||
Swiss Market Index | |||||
Dec 2006 8,613.85 (CHF) Put (67) | 4,639 | (269 | ) | ||
Total Liability for Options Written (premiums received $968) | (983 | ) | |||
88
Table of Contents
Foreign Currency Exchange Contracts | ||||||||||||||||
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | |||||||||||||
USD | 28 | AUD | 37 | 11/03/06 | — | |||||||||||
USD | 221 | AUD | 290 | 12/15/06 | 3 | |||||||||||
USD | 223 | AUD | 290 | 12/15/06 | 1 | |||||||||||
USD | 131 | AUD | 175 | 12/20/06 | 4 | |||||||||||
USD | 209 | AUD | 281 | 12/20/06 | 8 | |||||||||||
USD | 249 | AUD | 330 | 12/20/06 | 6 | |||||||||||
USD | 305 | AUD | 400 | 12/20/06 | 4 | |||||||||||
USD | 372 | AUD | 500 | 12/20/06 | 15 | |||||||||||
USD | 376 | AUD | 500 | 12/20/06 | 10 | |||||||||||
USD | 376 | AUD | 500 | 12/20/06 | 10 | |||||||||||
USD | 455 | AUD | 600 | 12/20/06 | 9 | |||||||||||
USD | 534 | AUD | 700 | 12/20/06 | 7 | |||||||||||
USD | 607 | AUD | 800 | 12/20/06 | 11 | |||||||||||
USD | 1,330 | AUD | 1,770 | 12/20/06 | 39 | |||||||||||
USD | 2,011 | AUD | 2,675 | 12/20/06 | 58 | |||||||||||
USD | 2,594 | AUD | 3,449 | 12/20/06 | 74 | |||||||||||
USD | 7,105 | AUD | 9,300 | 12/20/06 | 87 | |||||||||||
USD | 147 | CAD | 165 | 11/02/06 | — | |||||||||||
USD | 281 | CHF | 351 | 11/01/06 | 1 | |||||||||||
USD | 581 | CHF | 726 | 11/01/06 | 2 | |||||||||||
USD | 179 | CHF | 224 | 11/02/06 | 1 | |||||||||||
USD | 1,038 | CHF | 1,300 | 12/15/06 | 12 | |||||||||||
USD | 1,094 | CHF | 1,360 | 12/15/06 | 4 | |||||||||||
USD | 15 | CHF | 19 | 12/20/06 | — | |||||||||||
USD | 3,766 | CHF | 4,676 | 12/20/06 | 11 | |||||||||||
USD | 4,020 | CHF | 4,990 | 12/20/06 | 11 | |||||||||||
USD | 8,294 | CHF | 10,307 | 12/20/06 | 32 | |||||||||||
USD | 15,686 | CHF | 19,493 | 12/20/06 | 62 | |||||||||||
USD | 17,369 | CHF | 21,574 | 12/20/06 | 60 | |||||||||||
USD | 3 | DKK | 20 | 12/20/06 | — | |||||||||||
USD | 456 | DKK | 2,667 | 12/20/06 | 2 | |||||||||||
USD | 118 | EUR | 93 | 11/01/06 | — | |||||||||||
USD | 428 | EUR | 337 | 11/01/06 | 2 | |||||||||||
USD | 526 | EUR | 413 | 11/01/06 | 1 | |||||||||||
USD | 1,513 | EUR | 1,188 | 11/01/06 | 3 | |||||||||||
USD | 72 | EUR | 57 | 11/02/06 | — | |||||||||||
USD | 157 | EUR | 124 | 11/02/06 | — | |||||||||||
USD | 621 | EUR | 488 | 11/02/06 | 2 | |||||||||||
USD | 2,756 | EUR | 2,170 | 12/15/06 | 20 | |||||||||||
USD | 3,228 | EUR | 2,530 | 12/15/06 | 9 | |||||||||||
USD | 863 | EUR | 678 | 12/20/06 | 4 | |||||||||||
USD | 1,258 | EUR | 1,000 | 12/20/06 | 21 | |||||||||||
USD | 1,264 | EUR | 1,000 | 12/20/06 | 16 | |||||||||||
USD | 1,275 | EUR | 1,000 | 12/20/06 | 5 | |||||||||||
USD | 1,276 | EUR | 1,000 | 12/20/06 | 4 | |||||||||||
USD | 1,425 | EUR | 1,120 | 12/20/06 | 8 | |||||||||||
USD | 1,911 | EUR | 1,500 | 12/20/06 | 8 | |||||||||||
USD | 2,190 | EUR | 1,718 | 12/20/06 | 8 | |||||||||||
USD | 2,529 | EUR | 2,000 | 12/20/06 | 31 | |||||||||||
USD | 2,553 | EUR | 2,000 | 12/20/06 | 6 | |||||||||||
USD | 2,568 | EUR | 2,000 | 12/20/06 | (9) | |||||||||||
USD | 3,584 | EUR | 2,830 | 12/20/06 | 38 | |||||||||||
USD | 3,911 | EUR | 3,072 | 12/20/06 | 21 | |||||||||||
USD | 4,801 | EUR | 3,769 | 12/20/06 | 22 | |||||||||||
USD | 5,395 | EUR | 4,200 | 12/20/06 | (21) | |||||||||||
USD | 10,662 | EUR | 8,300 | 12/20/06 | (41) |
89
Table of Contents
USD | 15,631 | EUR | 12,281 | 12/20/06 | 85 | |||||||||||
USD | 18,643 | EUR | 14,626 | 12/20/06 | 73 | |||||||||||
USD | 57,154 | EUR | 44,500 | 12/20/06 | (209) | |||||||||||
USD | 396 | GBP | 209 | 11/01/06 | 2 | |||||||||||
USD | 438 | GBP | 230 | 11/01/06 | 1 | |||||||||||
USD | 590 | GBP | 311 | 11/01/06 | 3 | |||||||||||
USD | 57 | GBP | 30 | 11/02/06 | — | |||||||||||
USD | 255 | GBP | 134 | 11/02/06 | 1 | |||||||||||
USD | 217 | GBP | 114 | 11/03/06 | — | |||||||||||
USD | 428 | GBP | 224 | 11/03/06 | — | |||||||||||
USD | 1,738 | GBP | 920 | 12/15/06 | 18 | |||||||||||
USD | 1,848 | GBP | 970 | 12/15/06 | 3 | |||||||||||
USD | 934 | GBP | 500 | 12/20/06 | 20 | |||||||||||
USD | 939 | GBP | 500 | 12/20/06 | 16 | |||||||||||
USD | 942 | GBP | 500 | 12/20/06 | 12 | |||||||||||
USD | 1,296 | GBP | 690 | 12/20/06 | 21 | |||||||||||
USD | 1,873 | GBP | 1,000 | 12/20/06 | 35 | |||||||||||
USD | 1,876 | GBP | 1,000 | 12/20/06 | 33 | |||||||||||
USD | 1,878 | GBP | 1,000 | 12/20/06 | 30 | |||||||||||
USD | 2,825 | GBP | 1,500 | 12/20/06 | 38 | |||||||||||
USD | 4,415 | GBP | 2,349 | 12/20/06 | 68 | |||||||||||
USD | 6,969 | GBP | 3,708 | 12/20/06 | 108 | |||||||||||
USD | 7,161 | GBP | 3,811 | 12/20/06 | 112 | |||||||||||
USD | 7,920 | GBP | 4,213 | 12/20/06 | 119 | |||||||||||
USD | 12,935 | GBP | 6,883 | 12/20/06 | 200 | |||||||||||
USD | 15,788 | GBP | 8,402 | 12/20/06 | 246 | |||||||||||
USD | 36,169 | GBP | 19,200 | 12/20/06 | 472 | |||||||||||
USD | 79 | HKD | 614 | 11/01/06 | — | |||||||||||
USD | 95 | HKD | 736 | 11/01/06 | — | |||||||||||
USD | 34 | HKD | 261 | 12/20/06 | — | |||||||||||
USD | 58 | HKD | 454 | 12/20/06 | — | |||||||||||
USD | 69 | HKD | 536 | 12/20/06 | — | |||||||||||
USD | 97 | HKD | 756 | 12/20/06 | — | |||||||||||
USD | 138 | HKD | 1,072 | 12/20/06 | — | |||||||||||
USD | 52 | JPY | 6,072 | 11/01/06 | — | |||||||||||
USD | 888 | JPY | 104,425 | 11/01/06 | 5 | |||||||||||
USD | 115 | JPY | 13,572 | 11/02/06 | 1 | |||||||||||
USD | 322 | JPY | 37,956 | 11/02/06 | 2 | |||||||||||
USD | 3,358 | JPY | 391,410 | 12/15/06 | 10 | |||||||||||
USD | 845 | JPY | 100,000 | 12/20/06 | 16 | |||||||||||
USD | 858 | JPY | 100,000 | 12/20/06 | 3 | |||||||||||
USD | 862 | JPY | 100,000 | 12/20/06 | — | |||||||||||
USD | 863 | JPY | 100,000 | 12/20/06 | (1) | |||||||||||
USD | 868 | JPY | 100,000 | 12/20/06 | (7) | |||||||||||
USD | 1,279 | JPY | 150,000 | 12/20/06 | 12 | |||||||||||
USD | 1,697 | JPY | 200,000 | 12/20/06 | 25 | |||||||||||
USD | 1,722 | JPY | 200,000 | 12/20/06 | — | |||||||||||
USD | 1,739 | JPY | 200,000 | 12/20/06 | (17) | |||||||||||
USD | 2,199 | JPY | 256,333 | 12/20/06 | 8 | |||||||||||
USD | 2,941 | JPY | 342,600 | 12/20/06 | 9 | |||||||||||
USD | 5,201 | JPY | 600,000 | 12/20/06 | (34) | |||||||||||
USD | 32,942 | JPY | 3,800,000 | 12/20/06 | (218) | |||||||||||
USD | 223 | NOK | 1,460 | 11/01/06 | — | |||||||||||
USD | 191 | NOK | 1,246 | 11/03/06 | — | |||||||||||
USD | 1,055 | NOK | 6,895 | 11/03/06 | — | |||||||||||
USD | 113 | NOK | 740 | 12/15/06 | — | |||||||||||
USD | 118 | NOK | 770 | 12/15/06 | — | |||||||||||
USD | 390 | NOK | 2,543 | 12/20/06 | — | |||||||||||
USD | 1,988 | NOK | 12,973 | 12/20/06 | 2 | |||||||||||
USD | 2,668 | NOK | 17,405 | 12/20/06 | 1 | |||||||||||
USD | 8,962 | NOK | 58,463 | 12/20/06 | 6 |
90
Table of Contents
USD | 11,286 | NOK | 73,587 | 12/20/06 | 2 | |||||||||||
USD | 61 | SEK | 442 | 11/01/06 | — | |||||||||||
USD | 13 | SEK | 93 | 11/02/06 | — | |||||||||||
USD | 6 | SEK | 43 | 12/20/06 | — | |||||||||||
USD | 2,216 | SEK | 16,101 | 12/20/06 | 21 | |||||||||||
USD | 2,216 | SEK | 16,101 | 12/20/06 | 21 | |||||||||||
USD | 3,502 | SEK | 25,222 | 12/20/06 | 2 | |||||||||||
USD | 11,612 | SEK | 84,403 | 12/20/06 | 115 | |||||||||||
USD | 12,649 | SEK | 91,156 | 12/20/06 | 16 | |||||||||||
USD | 159 | SGD | 249 | 11/01/06 | — | |||||||||||
USD | 67 | SGD | 106 | 12/20/06 | 1 | |||||||||||
USD | 448 | SGD | 707 | 12/20/06 | 7 | |||||||||||
USD | 448 | SGD | 707 | 12/20/06 | 7 | |||||||||||
USD | 482 | SGD | 762 | 12/20/06 | 9 | |||||||||||
USD | 483 | SGD | 763 | 12/20/06 | 8 | |||||||||||
USD | 1,345 | SGD | 2,126 | 12/20/06 | 24 | |||||||||||
USD | 2,483 | SGD | 3,924 | 12/20/06 | 44 | |||||||||||
USD | 3,042 | SGD | 4,808 | 12/20/06 | 54 | |||||||||||
USD | 14,105 | SGD | 22,292 | 12/20/06 | 250 | |||||||||||
AUD | 17 | USD | 13 | 11/03/06 | — | |||||||||||
AUD | 22 | USD | 17 | 11/03/06 | — | |||||||||||
AUD | 300 | USD | 231 | 12/20/06 | (1) | |||||||||||
AUD | 500 | USD | 384 | 12/20/06 | (2) | |||||||||||
AUD | 500 | USD | 384 | 12/20/06 | (3) | |||||||||||
AUD | 600 | USD | 458 | 12/20/06 | (6) | |||||||||||
AUD | 900 | USD | 692 | 12/20/06 | (4) | |||||||||||
AUD | 1,000 | USD | 744 | 12/20/06 | (30) | |||||||||||
AUD | 1,031 | USD | 772 | 12/20/06 | (25) | |||||||||||
AUD | 1,600 | USD | 1,223 | 12/20/06 | (14) | |||||||||||
AUD | 3,382 | USD | 2,540 | 12/20/06 | (76) | |||||||||||
AUD | 3,809 | USD | 2,866 | 12/20/06 | (80) | |||||||||||
AUD | 4,289 | USD | 3,222 | 12/20/06 | (95) | |||||||||||
AUD | 9,745 | USD | 7,322 | 12/20/06 | (215) | |||||||||||
CAD | 9 | USD | 8 | 11/01/06 | — | |||||||||||
CAD | 8 | USD | 8 | 11/02/06 | — | |||||||||||
CHF | 17 | USD | 14 | 11/01/06 | — | |||||||||||
CHF | 1,370 | USD | 1,101 | 11/03/06 | — | |||||||||||
CHF | 2,660 | USD | 2,101 | 12/15/06 | (47) | |||||||||||
CHF | 1,252 | USD | 1,008 | 12/20/06 | (3) | |||||||||||
CHF | 2,026 | USD | 1,627 | 12/20/06 | (10) | |||||||||||
CHF | 6,995 | USD | 5,617 | 12/20/06 | (35) | |||||||||||
CHF | 34,264 | USD | 27,579 | 12/20/06 | (102) | |||||||||||
DKK | 77 | USD | 13 | 12/20/06 | — | |||||||||||
DKK | 1,459 | USD | 246 | 12/20/06 | (5) | |||||||||||
DKK | 1,484 | USD | 253 | 12/20/06 | (1) | |||||||||||
DKK | 1,623 | USD | 277 | 12/20/06 | (1) | |||||||||||
EUR | 7 | USD | 9 | 11/01/06 | — | |||||||||||
EUR | 464 | USD | 591 | 11/01/06 | (1) | |||||||||||
EUR | 505 | USD | 642 | 11/01/06 | (2) | |||||||||||
EUR | 26 | USD | 33 | 11/02/06 | — | |||||||||||
EUR | 29 | USD | 37 | 11/02/06 | — | |||||||||||
EUR | 106 | USD | 134 | 11/02/06 | (1) | |||||||||||
EUR | 114 | USD | 145 | 11/02/06 | (1) | |||||||||||
EUR | 57 | USD | 73 | 11/03/06 | — | |||||||||||
EUR | 196 | USD | 249 | 11/03/06 | — | |||||||||||
EUR | 4,700 | USD | 5,899 | 12/15/06 | (114) | |||||||||||
EUR | 60 | USD | 75 | 12/20/06 | (1) | |||||||||||
EUR | 294 | USD | 375 | 12/20/06 | (1) | |||||||||||
EUR | 400 | USD | 513 | 12/20/06 | 2 | |||||||||||
EUR | 500 | USD | 641 | 12/20/06 | 1 | |||||||||||
EUR | 781 | USD | 995 | 12/20/06 | (4) |
91
Table of Contents
EUR | 1,000 | USD | 1,286 | 12/20/06 | 6 | |||||||||||
EUR | 1,000 | USD | 1,277 | 12/20/06 | (3) | |||||||||||
EUR | 1,500 | USD | 1,913 | 12/20/06 | (6) | |||||||||||
EUR | 1,700 | USD | 2,192 | 12/20/06 | 16 | |||||||||||
EUR | 2,000 | USD | 2,552 | 12/20/06 | (7) | |||||||||||
EUR | 2,000 | USD | 2,530 | 12/20/06 | (29) | |||||||||||
EUR | 2,100 | USD | 2,699 | 12/20/06 | 11 | |||||||||||
EUR | 3,000 | USD | 3,882 | 12/20/06 | 43 | |||||||||||
EUR | 4,000 | USD | 5,152 | 12/20/06 | 33 | |||||||||||
EUR | 5,910 | USD | 7,532 | 12/20/06 | (31) | |||||||||||
EUR | 7,003 | USD | 8,921 | 12/20/06 | (40) | |||||||||||
EUR | 13,900 | USD | 17,852 | 12/20/06 | 65 | |||||||||||
EUR | 17,457 | USD | 22,253 | 12/20/06 | (86) | |||||||||||
GBP | 6 | USD | 12 | 11/01/06 | — | |||||||||||
GBP | 8 | USD | 15 | 11/01/06 | — | |||||||||||
GBP | 15 | USD | 28 | 11/01/06 | — | |||||||||||
GBP | 35 | USD | 66 | 11/01/06 | — | |||||||||||
GBP | 36 | USD | 69 | 11/01/06 | — | |||||||||||
GBP | 82 | USD | 156 | 11/01/06 | (1) | |||||||||||
GBP | 544 | USD | 1,032 | 11/01/06 | (6) | |||||||||||
GBP | 695 | USD | 1,318 | 11/01/06 | (8) | |||||||||||
GBP | 54 | USD | 103 | 11/02/06 | — | |||||||||||
GBP | 756 | USD | 1,436 | 11/02/06 | (6) | |||||||||||
GBP | 279 | USD | 532 | 11/03/06 | — | |||||||||||
GBP | 1,890 | USD | 3,532 | 12/15/06 | (74) | |||||||||||
GBP | 464 | USD | 861 | 12/20/06 | (25) | |||||||||||
GBP | 500 | USD | 951 | 12/20/06 | (3) | |||||||||||
GBP | 600 | USD | 1,130 | 12/20/06 | (15) | |||||||||||
GBP | 700 | USD | 1,309 | 12/20/06 | (27) | |||||||||||
GBP | 700 | USD | 1,327 | 12/20/06 | (8) | |||||||||||
GBP | 1,000 | USD | 1,887 | 12/20/06 | (22) | |||||||||||
GBP | 1,000 | USD | 1,903 | 12/20/06 | (5) | |||||||||||
GBP | 1,000 | USD | 1,869 | 12/20/06 | (39) | |||||||||||
GBP | 1,000 | USD | 1,907 | 12/20/06 | (1) | |||||||||||
GBP | 2,796 | USD | 5,246 | 12/20/06 | (90) | |||||||||||
GBP | 3,255 | USD | 6,118 | 12/20/06 | (92) | |||||||||||
GBP | 5,100 | USD | 9,604 | 12/20/06 | (128) | |||||||||||
GBP | 16,014 | USD | 30,097 | 12/20/06 | (461) | |||||||||||
GBP | 5,446 | USD | 10,332 | 01/31/07 | (63) | |||||||||||
HKD | 1,038 | USD | 133 | 11/01/06 | — | |||||||||||
HKD | 138 | USD | 18 | 11/02/06 | — | |||||||||||
HKD | 682 | USD | 88 | 12/20/06 | — | |||||||||||
JPY | 373 | USD | 3 | 11/01/06 | — | |||||||||||
JPY | 578 | USD | 5 | 11/01/06 | — | |||||||||||
JPY | 1,315 | USD | 11 | 11/01/06 | — | |||||||||||
JPY | 16,844 | USD | 143 | 11/01/06 | (1) | |||||||||||
JPY | 37,615 | USD | 320 | 11/01/06 | (2) | |||||||||||
JPY | 370 | USD | 3 | 11/02/06 | — | |||||||||||
JPY | 569 | USD | 5 | 11/02/06 | — | |||||||||||
JPY | 1,134 | USD | 10 | 11/02/06 | — | |||||||||||
JPY | 33,679 | USD | 287 | 11/02/06 | (1) | |||||||||||
JPY | 94,237 | USD | 802 | 11/02/06 | (4) | |||||||||||
JPY | 139 | USD | 1 | 11/06/06 | — | |||||||||||
JPY | 366 | USD | 3 | 11/06/06 | — | |||||||||||
JPY | 562 | USD | 5 | 11/06/06 | — | |||||||||||
JPY | 18,793 | USD | 160 | 11/06/06 | (1) | |||||||||||
JPY | 26,121 | USD | 223 | 11/06/06 | — | |||||||||||
JPY | 139,802 | USD | 1,194 | 11/06/06 | (1) | |||||||||||
JPY | 391,410 | USD | 3,311 | 12/15/06 | (57) | |||||||||||
JPY | 86,876 | USD | 744 | 12/20/06 | (4) | |||||||||||
JPY | 91,987 | USD | 789 | 12/20/06 | (3) |
92
Table of Contents
JPY | 100,000 | USD | 848 | 12/20/06 | (14) | |||||||||||
JPY | 100,000 | USD | 856 | 12/20/06 | (5) | |||||||||||
JPY | 100,000 | USD | 875 | 12/20/06 | 14 | |||||||||||
JPY | 188,010 | USD | 1,614 | 12/20/06 | (5) | |||||||||||
JPY | 200,000 | USD | 1,712 | 12/20/06 | (10) | |||||||||||
JPY | 200,000 | USD | 1,738 | 12/20/06 | 16 | |||||||||||
JPY | 200,000 | USD | 1,715 | 12/20/06 | (7) | |||||||||||
JPY | 200,000 | USD | 1,739 | 12/20/06 | 17 | |||||||||||
JPY | 238,714 | USD | 2,049 | 12/20/06 | (7) | |||||||||||
JPY | 250,000 | USD | 2,167 | 12/20/06 | 14 | |||||||||||
JPY | 288,298 | USD | 2,433 | 12/20/06 | (49) | |||||||||||
JPY | 300,000 | USD | 2,625 | 12/20/06 | 41 | |||||||||||
JPY | 350,000 | USD | 3,032 | 12/20/06 | 18 | |||||||||||
JPY | 351,852 | USD | 3,020 | 12/20/06 | (10) | |||||||||||
JPY | 423,552 | USD | 3,636 | 12/20/06 | (11) | |||||||||||
JPY | 600,000 | USD | 5,204 | 12/20/06 | 37 | |||||||||||
JPY | 1,039,548 | USD | 8,923 | 12/20/06 | (29) | |||||||||||
JPY | 1,873,031 | USD | 16,071 | 12/20/06 | (58) | |||||||||||
NOK | 1,510 | USD | 223 | 12/15/06 | (8) | |||||||||||
NOK | 6,024 | USD | 923 | 12/20/06 | (1) | |||||||||||
NOK | 13,085 | USD | 2,006 | 12/20/06 | (1) | |||||||||||
NOK | 17,061 | USD | 2,614 | 12/20/06 | (3) | |||||||||||
NOK | 42,651 | USD | 6,535 | 12/20/06 | (7) | |||||||||||
NOK | 86,149 | USD | 13,202 | 12/20/06 | (13) | |||||||||||
SEK | 4,806 | USD | 667 | 12/20/06 | — | |||||||||||
SEK | 6,802 | USD | 943 | 12/20/06 | (2) | |||||||||||
SEK | 44,649 | USD | 6,202 | 12/20/06 | (2) | |||||||||||
SEK | 49,979 | USD | 6,934 | 12/20/06 | (10) | |||||||||||
SEK | 52,414 | USD | 7,274 | 12/20/06 | (8) | |||||||||||
SGD | 292 | USD | 187 | 11/01/06 | — | |||||||||||
SGD | 425 | USD | 269 | 12/20/06 | (5) | |||||||||||
SGD | 621 | USD | 396 | 12/20/06 | (4) | |||||||||||
SGD | 1,477 | USD | 941 | 12/20/06 | (10) | |||||||||||
SGD | 1,477 | USD | 941 | 12/20/06 | (10) | |||||||||||
SGD | 1,477 | USD | 941 | 12/20/06 | (10) | |||||||||||
SGD | 1,477 | USD | 941 | 12/20/06 | (10) | |||||||||||
SGD | 2,204 | USD | 1,394 | 12/20/06 | (25) | |||||||||||
SGD | 2,953 | USD | 1,883 | 12/20/06 | (19) | |||||||||||
SGD | 4,430 | USD | 2,823 | 12/20/06 | (29) | |||||||||||
SGD | 4,740 | USD | 2,999 | 12/20/06 | (53) | |||||||||||
SGD | 5,269 | USD | 3,333 | 12/20/06 | (60) | |||||||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 222 | |||||||||||||||
Index Swap Contracts
Fund Receives Underlying Security | Counter Party | Notional Amount | Fund Pays Floating Rate | Termination Date | Unrealized Appreciation (Depreciation) $ | ||||||
MSCI Belgium II | 1 Month EUR Libor | ||||||||||
Local Net Total Return Index | Merrill Lynch | EUR 3,064 | plus 0.15% | 06/20/07 | (31 | ) | |||||
MSCI Belgium III | 1 Month EUR Libor | ||||||||||
Local Net Total Return Index | Merrill Lynch | EUR 369 | plus 0.15% | 06/22/07 | (4 | ) | |||||
MSCI Belgium IV | 1 Month EUR Libor | ||||||||||
Local Net Total Return Index | Merrill Lynch | EUR 299 | plus 0.15% | 09/19/07 | (3 | ) | |||||
Total Unrealized Appreciation (Depreciation) on Open Index Swaps | (38 | ) | |||||||||
93
Table of Contents
Industry Diversification | ||||||
(Unaudited) | % of Net Assets | Market Value $ | ||||
Auto and Transportation | 5.9 | 109,468 | ||||
Consumer Discretionary | 8.4 | 155,850 | ||||
Consumer Staples | 9.0 | 167,383 | ||||
Financial Services | 26.5 | 490,634 | ||||
Health Care | 6.6 | 121,269 | ||||
Integrated Oils | 5.9 | 108,733 | ||||
Materials and Processing | 9.8 | 181,912 | ||||
Miscellaneous | 0.9 | 15,686 | ||||
Other Energy | 0.7 | 13,859 | ||||
Producer Durables | 6.0 | 110,467 | ||||
Technology | 4.0 | 74,747 | ||||
Utilities | 8.7 | 161,032 | ||||
Options Purchased | 0.1 | 973 | ||||
Warrants & Rights | 0.2 | 3,278 | ||||
Short-Term Investments | 6.5 | 120,530 | ||||
Other Securities | 15.4 | 285,294 | ||||
Total Investments | 114.6 | 2,121,115 | ||||
Other Assets and Liabilities, Net | (14.6 | ) | (270,922 | ) | ||
Net Assets | 100.0 | 1,850,193 | ||||
Geographic Diversification | ||||||
(Unaudited) | % of Net Assets | Market Value $ | ||||
Africa | 0.1 | 2,431 | ||||
Asia | 8.5 | 156,636 | ||||
Europe | 41.3 | 766,007 | ||||
Japan | 19.3 | 356,471 | ||||
Latin America | 1.6 | 28,898 | ||||
Middle East | — | 699 | ||||
Other Regions | 8.0 | 147,601 | ||||
United Kingdom | 20.4 | 377,078 | ||||
Other Securities | 15.4 | 285,294 | ||||
Total Investments | 114.6 | 2,121,115 | ||||
Other Assets and Liabilities, Net | (14.6 | ) | (270,922 | ) | ||
Net Assets | 100.0 | 1,850,193 | ||||
See accompanying notes which are an integral part of the financial statements.
94
Table of Contents
Russell Investment Company International Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Australia | 3.5 | ||
Austria | 0.5 | ||
Belgium | 1.1 | ||
Bermuda | 0.4 | ||
Brazil | 0.2 | ||
Canada | 1.2 | ||
Cayman Islands | 0.1 | ||
China | 0.3 | ||
Denmark | 0.1 | ||
Finland | 0.7 | ||
France | 11.9 | ||
Germany | 6.4 | ||
Greece | 0.3 | ||
Hong Kong | 1.7 | ||
Hungary | —* | ||
India | 0.1 | ||
Indonesia | 0.1 | ||
Ireland | 0.5 | ||
Israel | —* | ||
Italy | 3.7 | ||
Japan | 19.3 | ||
Luxembourg | 0.1 | ||
Mexico | 0.7 | ||
Netherlands | 4.1 | ||
Netherlands Antilles | —* | ||
New Zealand | 0.1 | ||
Norway | 0.5 | ||
Panama | —* | ||
Papua New Guinea | —* | ||
Singapore | 1.1 | ||
South Africa | 0.1 | ||
South Korea | 1.0 | ||
Spain | 2.9 | ||
Sweden | 1.4 | ||
Switzerland | 6.9 | ||
Taiwan | 0.4 | ||
Thailand | 0.1 | ||
United Kingdom | 20.4 | ||
United States | 0.1 | ||
Preferred Stocks | 0.4 | ||
Options Purchased | 0.1 | ||
Warrants & Rights | 0.2 | ||
Short-Term Investments | 6.5 | ||
Other Securities | 15.4 | ||
Total Investments | 114.6 | ||
Other Assets and Liabilities, Net | (14.6 | ) | |
100.0 | |||
Futures Contracts | 0.1 |
95
Table of Contents
Options Written | (0.1) | |
Foreign Currency Exchange Contracts | —* | |
Index Swap Contracts | (—)* |
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
96
Table of Contents
Russell Investment Company Fixed Income I Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Fixed Income I Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.06 | % | |
5 Years | 4.40 | %§ | |
10 Years | 6.06 | %§ |
Fixed Income I Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.79 | % | |
5 Years | 4.13 | %§ | |
10 Years | 5.86 | %§ |
Fixed Income I Fund - Class Y ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.11 | % | |
5 Years | 4.47 | %§ | |
10 Years | 6.11 | %§ |
Lehman Brothers Aggregate Bond Index **
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.19 | % | |
5 Years | 4.51 | %§ | |
10 Years | 6.26 | %§ |
What is the Fund’s investment objective?
The Fund seeks to provide current income and the preservation of capital.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Fixed Income I Fund Class I, Class E and Class Y gained 5.06%, 4.79% and 5.11%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 5.19% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 4.61%. This return serves as a peer comparison and is expressed net of operating expenses.
97
Table of Contents
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Corporate bonds have performed well over the last four years, leaving the yield spread between corporates and Treasuries for bearing credit risk very thin. As a result, the Fund’s money managers were modestly underweight in this sector, which detracted from Fund performance as the corporate sector continued to post strong earnings and had very few defaults. Given low yields across the globe, strong demand also drove the corporate market as investors searched for any possible incremental yield. This led to continued strong market demand for corporate bonds.
As illustrated by the average actively managed mutual fund underperforming the benchmark, volatile markets over the fiscal year made it difficult for active money managers to correctly gauge the direction and magnitude of interest rate changes. While 10 year Treasuries started and ended the fiscal year with nearly the same yield, over the year, yields ranged from 4.33% to 5.24%. Further, the Federal Reserve’s aggressive rate hikes surprised the market as evidenced by futures markets that trade based on the probability of Fed rate hikes. Despite this volatility, over the fiscal year, the Fund was able to effectively offset losses from an underweight to the corporate market through modest interest rate timing and security selection.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund’s money managers successfully moved their duration (a measure of a bond price’s sensitivity to a change in interest rates) exposure longer as interest rates rose and shorter when interest rates fell. A longer duration increases returns in a falling interest rate environment as longer duration bonds outperform more when interest rates fall. This duration management added modestly to the Fund’s incremental return in a volatile market.
At the money manager level, Bear Stearns Asset Management Inc. was the best performer due to its overweight to corporate bonds and strong security selection within this sector. Lehman Brothers Asset Management, LLC also did well in security selection and through an overweight to both the asset-backed and mortgage sectors. Believing the Fed would be finished raising interest rates by year end of 2005, Pacific Investment Management Company, LLC (PIMCO) struggled early in the year by taking positions in short maturity bonds which fell in price as short-term interest rates rose. Near the end of the fiscal period, PIMCO’s positioning was rewarded and its performance rebounded to end modestly positive for the year. Lastly, Western Asset Management Company also struggled with a long duration view in the spring when interest rates rose. Western’s corporate overweight helped it have a very modest excess return for the year as well.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Styles | |
Bear Stearns Asset Management, Inc. | Sector Rotation | |
Lehman Brothers Asset Management, LLC | Enhanced Core | |
Pacific Investment Management Company, LLC | Fully Discretionary | |
Western Asset Management Company, Ltd. | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. |
98
Table of Contents
** | Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on March 29, 2000. The returns shown for Class Y Shares prior to March 29, 2000 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
99
Table of Contents
Russell Investment Company Fixed Income I Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,043.80 | $ | 1,021.98 | ||
Expenses Paid During Period* | $ | 3.30 | $ | 3.26 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
100
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,045.60 | $ | 1,023.24 | ||
Expenses Paid During Period* | $ | 2.01 | $ | 1.99 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.39% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value October 31, 2006 | $ | 1,045.80 | $ | 1,023.49 | ||
Expenses Paid During Period* | $ | 1.75 | $ | 1.73 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.34% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
101
Table of Contents
Russell Investment Company Fixed Income I Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments - 103.1% | ||||
Asset-Backed Securities - 8.0% | ||||
Aames Mortgage Investment Trust (Ê)(Å) | ||||
Series 2005-3 Class A1 | ||||
5.480% due 08/25/35 | 919 | 920 | ||
ABSC NIMs Trust (p) | ||||
Series 2005-HE6 Class A1 | ||||
5.050% due 08/27/35 | 143 | 142 | ||
Accredited Mortgage Loan Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.620% due 07/25/34 | 105 | 106 | ||
ACE Securities Corp. (Ê) | ||||
Series 2001-HE1 Class A | ||||
6.060% due 11/20/31 | 105 | 105 | ||
Series 2005-SD3 Class A | ||||
5.720% due 08/25/45 | 674 | 675 | ||
Series 2006-FM1 Class A2A | ||||
5.370% due 07/25/36 | 1,304 | 1,304 | ||
Series 2006-FM1 Class A2B | ||||
5.420% due 07/25/36 | 1,825 | 1,825 | ||
Aegis Asset Backed Securities Trust (Ê) | ||||
Series 2003-3 Class M2 | ||||
6.970% due 01/25/34 | 350 | 353 | ||
American Express Credit Account Master Trust (Ê)(p) | ||||
Series 2006-A Class A | ||||
5.310% due 01/15/09 | 1,680 | 1,680 | ||
Ameriquest Mortgage Securities, Inc. (Ê) | ||||
Series 2002-D Class M1 | ||||
7.820% due 02/25/33 | 155 | 155 | ||
Series 2004-R10 Class A5 | ||||
5.710% due 11/25/34 | 109 | 109 | ||
Asset Backed Funding Certificates (Ê) | ||||
Series 2006-OPT Class A3A | ||||
5.370% due 10/25/36 | 991 | 990 | ||
Asset Backed Funding Corp. NIMs Trust (p) | ||||
Series 2005-WF1 Class N1 | ||||
4.750% due 03/26/35 | 94 | 94 | ||
Asset Backed Securities Corp. Home Equity (Ê) | ||||
Series 2006-HE2 Class A1A | ||||
5.570% due 06/25/35 | 2,141 | 2,143 | ||
Bank One Issuance Trust (Ê) | ||||
Series 2003-A1 Class A1 | ||||
5.440% due 09/15/10 | 1,600 | 1,602 | ||
Bayview Financial Acquisition Trust | ||||
Series 2006-A Class 1A3 | ||||
5.865% due 02/28/41 | 325 | 326 |
102
Table of Contents
Burlington Northern Santa Fe Corp. Pass-Through Certificate | ||||
4.967% due 04/01/23 | 222 | 218 | ||
Chase Issuance Trust (Ê) | ||||
Series 2005-A3 Class A | ||||
5.340% due 10/17/11 | 3,095 | 3,096 | ||
Citigroup Mortgage Loan Trust, Inc. (Ê)(Å) | ||||
Series 2006-SHL Class A1 | ||||
5.443% due 11/25/45 | 2,100 | 2,100 | ||
Countrywide Asset-Backed Certificates | ||||
Series 2001-BC3 Class A (Ê) | ||||
5.810% due 12/25/31 | 81 | 81 | ||
Series 2004-13 Class AF3 | ||||
3.989% due 02/25/31 | 203 | 201 | ||
Series 2004-BC1 Class M1 (Ê) | ||||
5.820% due 02/25/34 | 190 | 191 | ||
Series 2005-17 Class 1AF1 (Ê) | ||||
5.510% due 12/25/36 | 410 | 410 | ||
Series 2005-17 Class 4AV1 (Ê) | ||||
5.430% due 05/25/36 | 954 | 954 | ||
Series 2005-5N Class N (p) | ||||
5.000% due 07/25/36 | 75 | 73 | ||
Series 2005-AB3 Class 2A1 (Ê) | ||||
5.450% due 02/25/36 | 712 | 712 | ||
Series 2006-11 Class 1AF4 | ||||
6.300% due 09/25/46 | 505 | 516 | ||
Series 2006-BC1 Class 1A (Ê) | ||||
5.520% due 04/25/36 | 3,762 | 3,763 | ||
Series 2006-BC4 Class 2A2 (Ê) | ||||
5.484% due 07/25/36 | 2,220 | 2,220 | ||
Countrywide Home Equity Loan Trust (Ê) | ||||
Series 2005-A Class 2A | ||||
5.570% due 04/15/35 | 180 | 180 | ||
Series 2005-G Class 2A | ||||
5.560% due 12/15/35 | 909 | 909 | ||
Series 2006-E Class 2A | ||||
5.470% due 12/25/31 | 1,788 | 1,789 | ||
Credit-Based Asset Servicing and Securitization (Ê) | ||||
Series 2005-CB5 Class AV2 | ||||
5.580% due 08/25/35 | 360 | 362 | ||
Credit-Based Asset Servicing and Securitization LLC | ||||
Series 2004-CB7 Class AF5 | ||||
4.585% due 10/25/34 | 550 | 529 | ||
Series 2005-CB1 Class AF2 | ||||
4.090% due 12/25/35 | 305 | 304 | ||
Series 2006-CB6 Class A21 (Ê) | ||||
5.370% due 07/25/36 | 2,556 | 2,556 | ||
Daimler Chrysler Master Owner Trust (Ê) | ||||
Series 2005-A Class A | ||||
5.370% due 04/15/10 | 6,720 | 6,721 | ||
Discover Card Master Trust I (Ê) | ||||
Series 2005-1 Class A | ||||
5.330% due 09/16/10 | 3,075 | 3,076 | ||
Equifirst Mortgage Loan Trust (Ê) | ||||
Series 2004-3 Class A2 | ||||
5.650% due 12/25/34 | 1,789 | 1,791 | ||
Equifirst Mortgage Loan Trust NIMs Notes (p) | ||||
Series 2005-1 Class N1 |
103
Table of Contents
4.458% due 04/25/35 | 229 | 228 | ||
Fannie Mae Grantor Trust (Ê) | ||||
Series 2002-T13 Class A1 | ||||
5.420% due 08/25/32 | — | — | ||
Series 2002-T5 Class A1 | ||||
5.560% due 05/25/32 | 520 | 520 | ||
Fannie Mae Whole Loan (Ê) | ||||
Series 2002-W2 Class AV1 | ||||
5.580% due 06/25/32 | 8 | 8 | ||
Series 2003-W16 Class AV1 | ||||
5.470% due 11/25/33 | 20 | 20 | ||
First Franklin Mortgage Loan Asset Backed | ||||
Certificates (Ê) | ||||
Series 2004-FF1 Class A2 | ||||
5.720% due 12/25/32 | 671 | 672 | ||
Series 2004-FFH Class 2A1 | ||||
5.700% due 10/25/34 | 437 | 439 | ||
Series 2006-FF3 Class A2A | ||||
5.400% due 02/25/36 | 926 | 926 | ||
First Franklin NIMs Trust (p) | ||||
Series 2005-FF1 Class N1 | ||||
4.213% due 01/25/35 | 75 | 74 | ||
Ford Credit Floorplan Master Owner Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.360% due 07/15/09 | 1,770 | 1,769 | ||
Fremont Home Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.700% due 03/25/35 | 5,032 | 5,046 | ||
Series 2006-3 Class 2A1 | ||||
5.390% due 02/27/37 | 492 | 492 | ||
Fremont NIMs Trust (p) | ||||
Series 2005-A | ||||
3.750% due 01/25/35 | 77 | 77 | ||
Series 2005-C Class NOTE | ||||
5.584% due 07/25/35 | 66 | 65 | ||
GE Dealer Floorplan Master Note Trust (Ê) | ||||
Series 2004-2 Class A | ||||
5.400% due 07/20/09 | 955 | 956 | ||
Series 2005-1 Class A | ||||
5.360% due 04/20/10 | 1,425 | 1,425 | ||
Series 2006-3 Class A | ||||
5.330% due 07/20/11 | 1,980 | 1,980 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-HE5 Class A3 | ||||
3.970% due 09/25/34 | 550 | 544 | ||
GSAA Home Equity Trust | ||||
Series 2006-4 Class 1A2 | ||||
5.977% due 03/25/36 | 501 | 503 | ||
GSAA Trust (Ê) | ||||
Series 2006-2 Class 2A3 | ||||
5.590% due 12/25/35 | 570 | 571 | ||
GSAMP Trust (Ê) | ||||
Series 2003-HE2 Class M1 | ||||
5.970% due 08/25/33 | 300 | 301 | ||
HFC Home Equity Loan Asset Backed Certificates (Ê) | ||||
Series 2006-2 Class A1 | ||||
5.520% due 03/20/36 | 2,411 | 2,411 |
104
Table of Contents
Home Equity Asset Trust (Ê) | ||||
Series 2003-5 Class M1 | ||||
6.020% due 12/25/33 | 345 | 347 | ||
Series 2005-2 Class 2A2 | ||||
5.520% due 07/25/35 | 275 | 275 | ||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||
Series 2005-FLD Class A1 | ||||
5.450% due 07/25/35 | 504 | 504 | ||
Series 2006-WMC Class A2 | ||||
5.380% due 08/25/36 | 366 | 366 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-1 Class 2A1 | ||||
4.660% due 07/25/35 | 880 | 868 | ||
Series 2005-1 Class 2A2 | ||||
4.660% due 07/25/35 | 298 | 298 | ||
Series 2006-16N Class A1A | ||||
5.410% due 11/25/46 | 900 | 900 | ||
Series 2006-17 Class WF11 | ||||
5.440% due 11/25/36 | 2,400 | 2,400 | ||
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.610% due 10/25/34 | 182 | 182 | ||
Series 2006-9 Class 2A1 | ||||
5.390% due 10/25/36 | 2,600 | 2,600 | ||
Mastr Asset Backed Securities Trust (Ê) | ||||
Series 2003-WMC Class M2 | ||||
6.970% due 08/25/33 | 84 | 84 | ||
Series 2004-OPT Class A3 | ||||
5.590% due 02/25/34 | 3 | 3 | ||
Series 2005-NC1 Class A1 | ||||
5.620% due 12/25/34 | 3,102 | 3,103 | ||
Merrill Auto Trust Securitization (Ê) | ||||
Series 2005-1 Class A2B | ||||
5.334% due 04/25/08 | 369 | 369 | ||
Morgan Stanley ABS Capital I (Ê) | ||||
Series 2003-NC8 Class M3 | ||||
7.420% due 09/25/33 | 131 | 132 | ||
Series 2004-NC5 Class A2 | ||||
5.620% due 05/25/34 | 689 | 689 | ||
Series 2006-HE7 Class A2A | ||||
5.424% due 09/25/36 | 2,600 | 2,600 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-12X Class A6A | ||||
5.726% due 10/25/36 | 415 | 415 | ||
Navistar Financial Corp. Owner Trust (Ê) | ||||
Series 2003-B Class A3 | ||||
5.520% due 04/15/08 | 181 | 181 | ||
New Century Home Equity Loan Trust (Ê) | ||||
Series 2004-4 Class M2 | ||||
5.850% due 02/25/35 | 370 | 372 | ||
Series 2005-B Class A2A | ||||
5.450% due 10/25/35 | 524 | 524 | ||
Nissan Master Owner Trust Receivables (Ê) | ||||
Series 2005-A Class A | ||||
5.350% due 07/15/10 | 1,305 | 1,305 | ||
Option One Mortgage Loan Trust (Ê) | ||||
Series 2001-4 Class A |
105
Table of Contents
5.930% due 01/25/32 | 5 | 5 | ||
Series 2003-2 Class M2 | ||||
7.020% due 04/25/33 | 124 | 125 | ||
Series 2003-3 Class M3 | ||||
7.320% due 06/25/33 | 86 | 87 | ||
Series 2003-4 Class M2 | ||||
6.970% due 07/25/33 | 228 | 229 | ||
Option One Mortgage Securities Corp. NIMs Trust (Ê)(p) | ||||
Series 2006-1A | ||||
5.430% due 12/25/10 | 1,575 | 1,575 | ||
Origen Manufactured Housing | ||||
Series 2005-B Class A4 | ||||
5.910% due 01/15/37 | 100 | 100 | ||
Ownit Mortgage Loan Asset Backed Certificates (Ê) | ||||
Series 2006-6 Class A2C | ||||
5.484% due 09/25/37 | 2,390 | 2,390 | ||
Park Place Securities, Inc. (Ê) | ||||
Series 2004-WWF Class A1D | ||||
5.780% due 02/25/35 | 729 | 731 | ||
Series 2005-WCW Class M1 | ||||
5.770% due 09/25/35 | 370 | 372 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2005-1 Class AF2 | ||||
3.914% due 05/25/35 | 116 | 116 | ||
Series 2005-6 Class A3 | ||||
5.680% due 01/25/36 | 390 | 390 | ||
RAAC Series (Ê)(Å) | ||||
Series 2006-RP2 Class A | ||||
5.580% due 02/25/37 | 1,267 | 1,269 | ||
Ramp NIMs Trust (p) | ||||
Series 2005-NM2 | ||||
5.193% due 04/25/35 | 91 | 90 | ||
Renaissance Home Equity Loan Trust | ||||
Series 2005-1 Class M1 | ||||
5.357% due 05/25/35 | 225 | 222 | ||
Series 2005-2 Class AF4 | ||||
4.934% due 08/25/35 | 245 | 241 | ||
Series 2005-3 Class AF1 (Ê) | ||||
5.480% due 11/25/35 | 529 | 529 | ||
Series 2005-3 Class AV1 (Ê) | ||||
5.470% due 10/25/35 | 712 | 712 | ||
Series 2005-4 Class N (p) | ||||
7.142% due 02/25/36 | 271 | 270 | ||
Series 2006-1 Class AF6 | ||||
5.746% due 05/25/36 | 305 | 309 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2002-RS5 Class AII (Ê) | ||||
5.700% due 09/25/32 | 4 | 4 | ||
Series 2003-RS1 Class AI6A | ||||
5.980% due 12/25/33 | 345 | 349 | ||
Series 2003-RS1 Class AII (Ê) | ||||
5.720% due 02/25/33 | 6 | 6 | ||
Series 2003-RS2 Class AII (Ê) | ||||
5.670% due 03/25/33 | 167 | 167 | ||
Series 2003-RS3 Class AII (Ê) | ||||
5.690% due 04/25/33 | 115 | 115 | ||
Series 2004-RS2 Class AIIB (Ê) |
106
Table of Contents
5.580% due 02/25/34 | 54 | 54 | ||
Residential Asset Securities Corp. | ||||
Series 2001-KS1 Class AII (Ê) | ||||
5.800% due 03/25/32 | 102 | 102 | ||
Series 2001-KS3 Class AII (Ê) | ||||
5.780% due 09/25/31 | 78 | 78 | ||
Series 2002-KS3 Class A1B (Ê) | ||||
5.830% due 05/25/32 | 169 | 169 | ||
Series 2003-KS1 Class M2 (Ê) | ||||
7.070% due 01/25/33 | 109 | 109 | ||
Series 2003-KS2 Class MI1 | ||||
4.800% due 04/25/33 | 755 | 740 | ||
Series 2006-KS6 Class A1 (Ê) | ||||
5.364% due 08/25/36 | 468 | 468 | ||
Residential Funding Mortgage Securities II, Inc. (Ê) | ||||
Series 2005-HI2 Class A1 | ||||
5.470% due 05/25/35 | 145 | 145 | ||
Series 2005-HS1 Class AI1 | ||||
5.450% due 09/25/35 | 912 | 910 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.600% due 03/25/35 | 125 | 125 | ||
Securitized Asset Backed Receivables LLC Trust (Ê) | ||||
Series 2005-FR4 Class A3 | ||||
5.530% due 01/25/36 | 396 | 396 | ||
SLM Student Loan Trust (Ê) | ||||
Series 2006-9 Class A1 | ||||
5.338% due 10/25/12 | 1,900 | 1,900 | ||
Small Business Administration | ||||
Series 2000-P10 Class 1 | ||||
7.449% due 08/01/10 | 72 | 76 | ||
Soundview Home Equity Loan Trust | ||||
Series 2006-WF1 Class A2 | ||||
5.645% due 10/25/36 | 825 | 825 | ||
Soundview NIMs Trust | ||||
Series 2005-DO1 Class N1 | ||||
4.703% due 06/25/35 | 52 | 51 | ||
Specialty Underwriting & Residential Finance (Ê) | ||||
Series 2003-BC1 Class A | ||||
5.670% due 01/25/34 | 15 | 15 | ||
Series 2004-BC2 Class A2 | ||||
5.600% due 05/25/35 | 10 | 10 | ||
Series 2006-AB1 Class A2 | ||||
5.470% due 12/25/36 | 850 | 850 | ||
Structured Asset Investment Loan Trust (Ê) | ||||
Series 2004-7 Class A1 | ||||
5.585% due 08/25/34 | 314 | 316 | ||
Series 2005-3 Class M2 | ||||
5.760% due 04/25/35 | 210 | 211 | ||
Structured Asset Securities Corp. | ||||
Series 2002-AL1 Class A3 | ||||
3.450% due 02/25/32 | 228 | 213 | ||
Series 2004-19X Class A2 | ||||
4.370% due 10/25/34 | 765 | 757 | ||
Series 2005-WF1 Class A2 (Ê) | ||||
5.530% due 02/25/35 | 2,304 | 2,306 | ||
Series 2006-BC3 Class A2 (Ê) |
107
Table of Contents
5.370% due 10/25/36 | 800 | 800 | ||
Tenaska Alabama II Partners, LP (p) | ||||
Series 2003 | ||||
6.125% due 03/30/23 | 226 | 230 | ||
Textron Financial Floorplan Master Note Trust (Ê)(p) | ||||
Series 2005-1A Class A | ||||
5.440% due 05/13/10 | 1,640 | 1,643 | ||
Truman Capital Mortgage Loan Trust (Ê)(Å) | ||||
Series 2006-1 Class A | ||||
5.584% due 03/25/36 | 1,845 | 1,845 | ||
Volkswagen Credit Auto Master Trust (Ê) | ||||
Series 2005-1 Class A | ||||
5.350% due 07/20/10 | 1,485 | 1,485 | ||
Wachovia Asset Securitization, Inc. (Ê) | ||||
Series 2003-HE3 Class A | ||||
5.580% due 11/25/33 | 233 | 233 | ||
Wachovia Mortgage Loan Trust LLC (Ê) | ||||
Series 2005-WMC Class A1 | ||||
5.440% due 10/25/35 | 171 | 170 | ||
Waverly Community School (Ê) | ||||
Series 2006-1 Class A1 | ||||
5.420% due 05/25/36 | 1,196 | 1,196 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 839 | 839 | ||
112,495 | ||||
Corporate Bonds and Notes - 16.3% | ||||
Abbott Laboratories | ||||
5.600% due 05/15/11 | 280 | 285 | ||
5.875% due 05/15/16 | 4,425 | 4,600 | ||
Alamosa Delaware, Inc. | ||||
8.500% due 01/31/12 | 180 | 191 | ||
Allstate Life Global Funding Trusts | ||||
3.850% due 01/25/08 | 1,355 | 1,331 | ||
Altria Group, Inc. | ||||
7.000% due 11/04/13 | 710 | 778 | ||
American Electric Power Co., Inc. | ||||
Series C | ||||
5.375% due 03/15/10 | 35 | 35 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.330% due 10/16/08 | 800 | 800 | ||
American General Finance Corp. (Ê) | ||||
Series MTNI | ||||
5.498% due 06/27/08 | 1,300 | 1,303 | ||
American International Group, Inc. | ||||
4.700% due 10/01/10 | 445 | 439 | ||
5.375% due 10/18/11 | 480 | 484 | ||
5.050% due 10/01/15 (Ñ) | 440 | 430 | ||
American RE Corp. (Ñ) | ||||
Series B | ||||
7.450% due 12/15/26 | 435 | 493 | ||
Ameriprise Financial, Inc. | ||||
5.650% due 11/15/15 | 835 | 845 | ||
Anadarko Petroleum Corp. | ||||
5.790% due 09/15/09 (Ê) | 480 | 481 | ||
5.950% due 09/15/16 | 1,090 | 1,107 |
108
Table of Contents
6.450% due 09/15/36 | 550 | 570 | ||
Anheuser-Busch Cos., Inc. (Ñ) | ||||
4.950% due 01/15/14 | 395 | 385 | ||
ASIF Global Financing (Å) | ||||
4.900% due 01/17/13 | 50 | 49 | ||
AT&T, Inc. | ||||
5.100% due 09/15/14 | 325 | 317 | ||
BAE Systems Holdings, Inc. (p) | ||||
6.400% due 12/15/11 | 1,025 | 1,063 | ||
Bank of America Corp. | ||||
5.875% due 02/15/09 | 180 | 183 | ||
5.400% due 06/19/09 (Ê) | 2,700 | 2,701 | ||
4.375% due 12/01/10 | 1,520 | 1,480 | ||
5.375% due 08/15/11 | 460 | 465 | ||
5.750% due 08/15/16 | 2,395 | 2,441 | ||
Bank of America NA | ||||
6.000% due 10/15/36 | 2,240 | 2,310 | ||
Bank of New York Co., Inc. | ||||
5.125% due 11/01/11 | 540 | 540 | ||
Banque Paribas | ||||
6.875% due 03/01/09 | 350 | 364 | ||
Bear Stearns Cos., Inc. (The) (Ê) | ||||
5.489% due 08/21/09 | 800 | 801 | ||
BellSouth Corp. | ||||
4.750% due 11/15/12 (Ñ) | 20 | 19 | ||
6.550% due 06/15/34 | 1,080 | 1,116 | ||
Boeing Capital Corp. (Ñ) | ||||
6.100% due 03/01/11 | 150 | 156 | ||
Boston Scientific Corp. | ||||
6.400% due 06/15/16 | 650 | 660 | ||
Burlington Northern Santa Fe Corp. | ||||
6.875% due 12/01/27 | 80 | 89 | ||
Campbell Soup Co. (Ñ) | ||||
5.875% due 10/01/08 | 165 | 167 | ||
Carolina Power & Light Co. | ||||
5.150% due 04/01/15 | 840 | 825 | ||
Caterpillar Financial Services Corp. (Ê) | ||||
5.454% due 10/09/09 | 2,100 | 2,100 | ||
Caterpillar, Inc. | ||||
6.050% due 08/15/36 | 1,435 | 1,504 | ||
CenterPoint Energy Houston Electric LLC | ||||
Series J2 | ||||
5.700% due 03/15/13 | 195 | 197 | ||
CenterPoint Energy Resources Corp. | ||||
Series B | ||||
7.875% due 04/01/13 | 440 | 491 | ||
Cingular Wireless Services, Inc. | ||||
7.875% due 03/01/11 | 1,125 | 1,233 | ||
8.750% due 03/01/31 | 1,920 | 2,516 | ||
Cisco Systems, Inc. | ||||
5.500% due 02/22/16 | 2,995 | 3,030 | ||
CIT Group Holdings, Inc. (Ê) | ||||
5.635% due 01/30/09 | 2,400 | 2,405 | ||
CIT Group, Inc. | ||||
6.875% due 11/01/09 | 80 | 84 | ||
Citicorp | ||||
7.250% due 10/15/11 | 455 | 493 |
109
Table of Contents
Citigroup, Inc. | ||||
3.500% due 02/01/08 | 985 | 965 | ||
5.408% due 12/26/08 (Ê) | 700 | 700 | ||
5.525% due 01/30/09 (Ê) | 2,000 | 2,001 | ||
4.125% due 02/22/10 | 630 | 612 | ||
6.500% due 01/18/11 | 300 | 315 | ||
5.000% due 09/15/14 | 5,475 | 5,348 | ||
6.125% due 08/25/36 | 100 | 104 | ||
Clear Channel Communications, Inc. | ||||
4.250% due 05/15/09 | 100 | 96 | ||
6.250% due 03/15/11 (Ñ) | 290 | 279 | ||
Clorox Co. | ||||
4.200% due 01/15/10 | 165 | 160 | ||
Columbus Southern Power Co. | ||||
Series C | ||||
5.500% due 03/01/13 | 85 | 85 | ||
Comcast Cable Communications, Inc. | ||||
6.875% due 06/15/09 | 480 | 499 | ||
Comcast Corp. | ||||
6.500% due 01/15/15 (Ñ) | 855 | 895 | ||
5.900% due 03/15/16 | 65 | 65 | ||
6.500% due 01/15/17 | 450 | 472 | ||
6.500% due 11/15/35 | 945 | 965 | ||
6.450% due 03/15/37 | 200 | 203 | ||
ConocoPhillips Holding Co. | ||||
6.950% due 04/15/29 | 1,155 | 1,333 | ||
Consolidated Edison Co. of New York (Ñ) | ||||
5.375% due 12/15/15 | 545 | 544 | ||
Consolidated Natural Gas Co. | ||||
6.850% due 04/15/11 | 385 | 406 | ||
Constellation Energy Group, Inc. | ||||
6.125% due 09/01/09 | 635 | 649 | ||
COX Communications, Inc. | ||||
3.875% due 10/01/08 | 240 | 233 | ||
6.750% due 03/15/11 | 2,895 | 3,028 | ||
Credit Suisse First Boston USA, Inc. | ||||
3.875% due 01/15/09 | 625 | 609 | ||
4.875% due 08/15/10 | 120 | 119 | ||
6.500% due 01/15/12 | 20 | 21 | ||
5.500% due 08/15/13 (Ñ) | 95 | 96 | ||
Credit Suisse USA, Inc. (Ñ) | ||||
5.250% due 03/02/11 | 310 | 311 | ||
CRH America, Inc. | ||||
6.000% due 09/30/16 | 1,355 | 1,365 | ||
CVS Corp. | ||||
5.750% due 08/15/11 | 250 | 254 | ||
6.125% due 08/15/16 | 665 | 685 | ||
DaimlerChrysler NA Holding Corp. | ||||
4.050% due 06/04/08 | 165 | 161 | ||
5.875% due 03/15/11 | 300 | 302 | ||
8.500% due 01/18/31 (Ñ) | 975 | 1,172 | ||
Detroit Edison Co. | ||||
6.125% due 10/01/10 | 120 | 124 | ||
6.350% due 10/15/32 | 105 | 111 | ||
Devon Energy Corp. | ||||
7.950% due 04/15/32 | 770 | 960 | ||
Dominion Resources, Inc. |
110
Table of Contents
4.750% due 12/15/10 | 90 | 88 | ||
5.700% due 09/17/12 | 390 | 395 | ||
Series B | ||||
6.250% due 06/30/12 | 90 | 93 | ||
Series C | ||||
5.150% due 07/15/15 | 950 | 922 | ||
DPL, Inc. | ||||
6.875% due 09/01/11 | 430 | 454 | ||
DR Horton, Inc. | ||||
6.500% due 04/15/16 | 660 | 658 | ||
Dresdner Funding Trust I (p) | ||||
8.151% due 06/30/31 | 410 | 495 | ||
DTE Energy Co. (Ñ) | ||||
7.050% due 06/01/11 | 1,400 | 1,486 | ||
Duke Energy Corp. | ||||
6.250% due 01/15/12 | 150 | 157 | ||
5.625% due 11/30/12 | 185 | 188 | ||
Duke Energy Field Services LLC | ||||
6.875% due 02/01/11 | 35 | 37 | ||
Duke Realty, LP | ||||
5.950% due 02/15/17 | 740 | 752 | ||
Eastman Kodak Co. (Ñ) | ||||
7.250% due 11/15/13 | 30 | 30 | ||
Electronic Data Systems Corp. | ||||
7.125% due 10/15/09 | 460 | 481 | ||
Eli Lilly & Co. (Ñ) | ||||
6.770% due 01/01/36 | 485 | 566 | ||
Embarq Corp. | ||||
7.082% due 06/01/16 | 1,055 | 1,079 | ||
Erac USA Finance Co. (p) | ||||
5.900% due 11/15/15 | 1,145 | 1,158 | ||
Exelon Corp. | ||||
4.900% due 06/15/15 | 1,065 | 1,007 | ||
5.625% due 06/15/35 | 520 | 494 | ||
FedEx Corp. | ||||
5.500% due 08/15/09 | 1,290 | 1,298 | ||
7.600% due 07/01/97 | 135 | 160 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 10P | ||||
Zero coupon due 11/30/17 | 940 | 543 | ||
Series 2P | ||||
Zero coupon due 11/30/17 | 100 | 58 | ||
Series 6P | ||||
Zero coupon due 08/03/18 | 510 | 283 | ||
FirstEnergy Corp. | ||||
Series B (Ñ) | ||||
6.450% due 11/15/11 | 2,470 | 2,584 | ||
Series C | ||||
7.375% due 11/15/31 | 1,125 | 1,316 | ||
Ford Motor Co. (Ñ) | ||||
7.450% due 07/16/31 | 290 | 227 | ||
Ford Motor Credit Co. | ||||
4.950% due 01/15/08 | 320 | 312 | ||
7.375% due 10/28/09 | 2,430 | 2,365 | ||
Freddie Mac (Ñ) | ||||
5.250% due 05/21/09 | 1,960 | 1,979 |
111
Table of Contents
General Electric Capital Corp. | ||||
3.250% due 06/15/09 | 1,065 | 1,019 | ||
5.570% due 01/20/10 (Ê) | 600 | 601 | ||
5.500% due 04/28/11 | 170 | 173 | ||
4.250% due 06/15/12 (Ñ) | 860 | 822 | ||
4.875% due 03/04/15 | 805 | 785 | ||
Series mtn (Ê) | ||||
5.410% due 10/26/09 | 2,700 | 2,699 | ||
Series MTNA | ||||
4.250% due 01/15/08 | 220 | 218 | ||
4.125% due 09/01/09 (Ñ) | 780 | 761 | ||
6.000% due 06/15/12 | 220 | 229 | ||
5.450% due 01/15/13 (Ñ) | 2,540 | 2,578 | ||
General Electric Co. | ||||
5.000% due 02/01/13 | 260 | 258 | ||
General Motors Corp. | ||||
8.375% due 07/05/33 | 70 | 82 | ||
8.375% due 07/15/33 (Ñ) | 90 | 80 | ||
Glencore Funding LLC (p) | ||||
6.000% due 04/15/14 | 395 | 384 | ||
GMAC LLC | ||||
5.625% due 05/15/09 | 1,375 | 1,348 | ||
7.750% due 01/19/10 | 230 | 238 | ||
Goldman Sachs Group, Inc. | ||||
5.478% due 06/23/09 (Ê) | 500 | 500 | ||
5.000% due 01/15/11 (Ñ) | 150 | 149 | ||
6.875% due 01/15/11 | 1,170 | 1,241 | ||
4.750% due 07/15/13 | 1,055 | 1,018 | ||
5.350% due 01/15/16 | 940 | 929 | ||
Series MTNB (Ê) | ||||
5.480% due 07/29/08 | 2,000 | 2,003 | ||
Goldman Sachs Group, LP (Ñ) | ||||
4.500% due 06/15/10 | 1,055 | 1,032 | ||
Hartford Financial Services Group, Inc. | ||||
5.550% due 08/16/08 | 785 | 789 | ||
5.250% due 10/15/11 | 630 | 631 | ||
Hess Corp. | ||||
7.300% due 08/15/31 | 845 | 958 | ||
Historic TW, Inc. | ||||
8.050% due 01/15/16 | 460 | 519 | ||
Home Depot, Inc. | ||||
5.400% due 03/01/16 | 1,015 | 1,013 | ||
HSBC Bank USA NA (Ê) | ||||
Series BKNT | ||||
5.530% due 06/10/09 | 800 | 803 | ||
HSBC Finance Corp. | ||||
5.531% due 12/05/08 (Ê) | 500 | 501 | ||
4.750% due 05/15/09 (Ñ) | 4,580 | 4,549 | ||
4.125% due 11/16/09 | 2,870 | 2,784 | ||
6.750% due 05/15/11 | 1,280 | 1,359 | ||
7.000% due 05/15/12 | 1,485 | 1,608 | ||
6.375% due 11/27/12 | 410 | 433 | ||
5.000% due 06/30/15 | 305 | 296 | ||
ILFC E-Capital Trust II (Å) | ||||
6.250% due 12/21/65 | 290 | 294 | ||
International Business Machines Corp. (Ñ) | ||||
7.125% due 12/01/96 | 430 | 504 |
112
Table of Contents
International Lease Finance Corp. | ||||
3.500% due 04/01/09 | 570 | 548 | ||
4.750% due 07/01/09 | 1,435 | 1,421 | ||
5.750% due 06/15/11 | 190 | 194 | ||
5.625% due 09/20/13 | 1,845 | 1,859 | ||
International Paper Co. | ||||
6.750% due 09/01/11 | 230 | 245 | ||
5.500% due 01/15/14 | 285 | 282 | ||
International Steel Group, Inc. | ||||
6.500% due 04/15/14 | 300 | 300 | ||
ITT Corp. | ||||
7.400% due 11/15/25 | 195 | 230 | ||
John Deere Capital Corp. | ||||
4.875% due 03/16/09 | 1,315 | 1,308 | ||
JP Morgan Chase Capital XV | ||||
5.875% due 03/15/35 | 2,040 | 1,986 | ||
JP Morgan Chase Capital XX | ||||
Series T | ||||
6.550% due 09/29/36 | 100 | 104 | ||
JPMorgan Chase & Co. | ||||
5.600% due 06/01/11 | 190 | 193 | ||
5.125% due 09/15/14 | 1,520 | 1,493 | ||
5.150% due 10/01/15 (Ñ) | 770 | 753 | ||
Kellogg Co. | ||||
Series B | ||||
6.600% due 04/01/11 | 950 | 1,002 | ||
Kinder Morgan Energy Partners, LP | ||||
7.125% due 03/15/12 | 185 | 197 | ||
5.000% due 12/15/13 (Ñ) | 115 | 110 | ||
Kinder Morgan Finance | ||||
Series WI | ||||
5.350% due 01/05/11 | 985 | 962 | ||
Kraft Foods, Inc. | ||||
4.000% due 10/01/08 | 1,180 | 1,153 | ||
5.625% due 11/01/11 | 1,335 | 1,353 | ||
Kroger Co. (The) (Ñ) | ||||
7.500% due 04/01/31 | 65 | 73 | ||
Lehman Brothers Holdings, Inc. | ||||
4.000% due 01/22/08 | 390 | 384 | ||
5.460% due 04/03/09 (Ê) | 1,000 | 1,001 | ||
5.493% due 08/21/09 (Ê) | 500 | 500 | ||
5.000% due 01/14/11 | 455 | 452 | ||
5.500% due 04/04/16 (Ñ) | 265 | 265 | ||
Manufacturers & Traders Trust Co. | ||||
5.585% due 12/28/20 | 180 | 180 | ||
Marshall & Ilsley Corp. | ||||
5.350% due 04/01/11 | 1,345 | 1,352 | ||
Merrill Lynch & Co., Inc. | ||||
5.685% due 07/25/11 (Ê) | 700 | 701 | ||
6.220% due 09/15/26 | 2,800 | 2,891 | ||
Series MTNB | ||||
3.125% due 07/15/08 | 1,125 | 1,087 | ||
Series MTNC | ||||
5.440% due 06/16/08 (Ê) | 1,900 | 1,903 | ||
4.250% due 02/08/10 | 1,235 | 1,201 | ||
Metlife, Inc. | ||||
5.700% due 06/15/35 | 780 | 770 |
113
Table of Contents
Midamerican Energy Holdings Co. | ||||
Series WI | ||||
6.125% due 04/01/36 | 4,150 | 4,268 | ||
Miller Brewing Co. (p) | ||||
5.500% due 08/15/13 | 275 | 272 | ||
Monumental Global Funding II (p) | ||||
4.625% due 03/15/10 | 200 | 196 | ||
Morgan Stanley | ||||
5.440% due 03/07/08 (Ê) | 500 | 500 | ||
3.625% due 04/01/08 | 100 | 98 | ||
3.875% due 01/15/09 | 840 | 819 | ||
5.625% due 01/09/12 | 370 | 376 | ||
4.750% due 04/01/14 (Ñ) | 250 | 239 | ||
5.375% due 10/15/15 | 265 | 263 | ||
Series GMTN (Ê) | ||||
5.550% due 02/09/09 | 100 | 100 | ||
Series MTNF (Ê) | ||||
5.499% due 01/18/08 | 1,100 | 1,102 | ||
Motorola, Inc. | ||||
5.220% due 10/01/97 | 780 | 635 | ||
Natexis Ambs Co. LLC (f)(p) | ||||
8.440% due 12/29/49 | 300 | 314 | ||
National Rural Utilities Cooperative Finance Corp. | ||||
5.750% due 08/28/09 | 2,005 | 2,036 | ||
News America Holdings, Inc. | ||||
7.750% due 12/01/45 | 35 | 39 | ||
7.900% due 12/01/95 | 250 | 277 | ||
8.250% due 10/17/96 | 50 | 58 | ||
News America, Inc. | ||||
6.200% due 12/15/34 | 195 | 190 | ||
Series WI | ||||
6.400% due 12/15/35 | 2,215 | 2,221 | ||
Nisource Finance Corp. | ||||
7.875% due 11/15/10 | 295 | 319 | ||
Norfolk Southern Corp. | ||||
6.200% due 04/15/09 | 645 | 659 | ||
7.050% due 05/01/37 | 195 | 229 | ||
7.900% due 05/15/97 | 795 | 996 | ||
6.000% due 03/15/05 | 410 | 396 | ||
Northern States Power Co. | ||||
Series B | ||||
8.000% due 08/28/12 | 1,110 | 1,258 | ||
Northern Trust Corp. | ||||
5.300% due 08/29/11 | 825 | 832 | ||
Occidental Petroleum Corp. | ||||
9.250% due 08/01/19 | 150 | 199 | ||
Ohio Power Co. | ||||
Series F | ||||
5.500% due 02/15/13 | 45 | 45 | ||
ONEOK Partners, LP | ||||
6.650% due 10/01/36 | 1,240 | 1,276 | ||
Owens Corning, Inc. (Å) | ||||
6.500% due 12/01/16 | 725 | 737 | ||
Pacific Gas & Electric Co. | ||||
3.600% due 03/01/09 | 75 | 72 | ||
4.200% due 03/01/11 | 640 | 615 | ||
6.050% due 03/01/34 | 495 | 506 |
114
Table of Contents
Pemex Project Funding Master Trust | ||||
7.375% due 12/15/14 (Ñ) | 600 | 659 | ||
8.625% due 02/01/22 | 100 | 122 | ||
Series 144a (p) | ||||
5.750% due 12/15/15 | 200 | 198 | ||
Progress Energy, Inc. | ||||
5.850% due 10/30/08 | 760 | 774 | ||
7.100% due 03/01/11 | 175 | 187 | ||
7.750% due 03/01/31 | 95 | 116 | ||
7.000% due 10/30/31 | 165 | 186 | ||
ProLogis | ||||
5.625% due 11/15/15 | 1,535 | 1,536 | ||
Rabobank Capital Funding II (f)(Å) | ||||
5.260% due 12/31/49 | 20 | 20 | ||
Rabobank Capital Funding Trust (f)(Å) | ||||
5.254% due 12/29/49 | 40 | 39 | ||
RBS Capital Trust III (f) | ||||
5.512% due 09/29/49 | 515 | 507 | ||
Regions Financial Corp. | ||||
4.500% due 08/08/08 | 1,220 | 1,206 | ||
Residential Capital Corp. | ||||
6.125% due 11/21/08 | 290 | 292 | ||
6.000% due 02/22/11 (Ñ) | 685 | 687 | ||
Safeway, Inc. (Ñ) | ||||
7.250% due 02/01/31 | 45 | 49 | ||
SBC Communications, Inc. | ||||
4.125% due 09/15/09 | 1,715 | 1,665 | ||
5.300% due 11/15/10 | 2,730 | 2,734 | ||
6.150% due 09/15/34 | 215 | 215 | ||
Sigma Finance, Inc. (Ê)(Å) | ||||
8.500% due 08/11/16 | 690 | 690 | ||
Simon Property Group, LP | ||||
4.600% due 06/15/10 | 990 | 969 | ||
4.875% due 08/15/10 | 1,100 | 1,083 | ||
5.750% due 12/01/15 | 2,765 | 2,814 | ||
6.100% due 05/01/16 | 850 | 886 | ||
SLM Corp. | ||||
5.400% due 10/25/11 | 1,065 | 1,070 | ||
Series MTNA | ||||
4.000% due 01/15/09 | 1,155 | 1,126 | ||
Southern Copper Corp. | ||||
7.500% due 07/27/35 | 555 | 593 | ||
Sovereign Bank | ||||
5.125% due 03/15/13 | 400 | 393 | ||
Sprint Capital Corp. | ||||
7.625% due 01/30/11 | 2,665 | 2,872 | ||
8.375% due 03/15/12 | 360 | 405 | ||
6.875% due 11/15/28 | 420 | 430 | ||
8.750% due 03/15/32 | 1,750 | 2,162 | ||
State Street Bank & Trust Co. (Ñ) | ||||
Series BKNT | ||||
5.300% due 01/15/16 | 250 | 249 | ||
Suntrust Bank | ||||
5.000% due 09/01/15 | 1,900 | 1,846 | ||
Tele-Communications-TCI Group | ||||
9.800% due 02/01/12 | 385 | 455 | ||
7.875% due 08/01/13 | 790 | 884 |
115
Table of Contents
Time Warner Entertainment Co., LP | ||||
Series * | ||||
8.375% due 07/15/33 | 1,280 | 1,560 | ||
Time Warner, Inc. | ||||
6.875% due 05/01/12 | 485 | 515 | ||
7.700% due 05/01/32 | 420 | 478 | ||
TXU Corp. | ||||
Series P (Ñ) | ||||
5.550% due 11/15/14 | 110 | 105 | ||
Series R | ||||
6.550% due 11/15/34 | 475 | 453 | ||
TXU Electric Delivery Co. | ||||
6.375% due 05/01/12 | 25 | 26 | ||
6.375% due 01/15/15 | 30 | 31 | ||
TXU Energy Co. LLC | ||||
7.000% due 03/15/13 | 465 | 490 | ||
Tyson Foods, Inc. | ||||
6.600% due 04/01/16 | 115 | 118 | ||
Unilever Capital Corp. | ||||
5.900% due 11/15/32 | 315 | 320 | ||
Union Pacific Corp. | ||||
3.625% due 06/01/10 | 450 | 426 | ||
United Technologies Corp. | ||||
5.400% due 05/01/35 | 70 | 69 | ||
UnitedHealth Group, Inc. | ||||
5.250% due 03/15/11 | 220 | 220 | ||
US Bancorp | ||||
5.300% due 04/28/09 | 1,450 | 1,456 | ||
US Bank NA | ||||
5.700% due 12/15/08 | 70 | 71 | ||
USB Capital IX (f) | ||||
6.189% due 04/15/42 | 100 | 102 | ||
Verizon Communications, Inc. | ||||
5.350% due 02/15/11 | 775 | 779 | ||
5.550% due 02/15/16 | 310 | 309 | ||
Verizon Global Funding Corp. | ||||
7.375% due 09/01/12 | 275 | 302 | ||
5.850% due 09/15/35 | 300 | 288 | ||
Verizon Maryland, Inc. (Ñ) | ||||
Series A | ||||
6.125% due 03/01/12 | 585 | 601 | ||
Verizon Virginia, Inc. (Ñ) | ||||
Series A | ||||
4.625% due 03/15/13 | 885 | 830 | ||
Viacom, Inc. | ||||
5.750% due 04/30/11 | 340 | 340 | ||
Wachovia Bank NA | ||||
Series BKNT | ||||
5.800% due 12/01/08 | 280 | 284 | ||
Wachovia Capital Trust III (f) | ||||
5.800% due 03/15/42 | 250 | 252 | ||
Wachovia Corp. | ||||
5.700% due 08/01/13 | 2,260 | 2,315 | ||
5.250% due 08/01/14 | 795 | 788 | ||
5.625% due 10/15/16 | 400 | 404 | ||
Waste Management, Inc. | ||||
6.375% due 11/15/12 | 555 | 580 |
116
Table of Contents
WellPoint, Inc. | ||||
5.850% due 01/15/36 | 100 | 98 | ||
Wells Fargo & Co. | ||||
5.300% due 08/26/11 | 340 | 342 | ||
4.950% due 10/16/13 | 215 | 210 | ||
Wells Fargo Bank NA | ||||
5.750% due 05/16/16 | 220 | 226 | ||
Weyerhaeuser Co. | ||||
6.750% due 03/15/12 | 1,675 | 1,754 | ||
Wyeth | ||||
6.950% due 03/15/11 | 1,985 | 2,115 | ||
5.500% due 03/15/13 | 100 | 101 | ||
5.500% due 02/01/14 | 55 | 55 | ||
XTO Energy, Inc. | ||||
7.500% due 04/15/12 | 40 | 44 | ||
Zurich Capital Trust I (p) | ||||
8.376% due 06/01/37 | 1,365 | 1,434 | ||
230,061 | ||||
International Debt - 3.5% | ||||
Abbey National PLC (Ê)(f) | ||||
6.700% due 06/29/49 | 720 | 734 | ||
Aiful Corp. (Å) | ||||
5.000% due 08/10/10 | 300 | 292 | ||
Anadarko Finance Co. | ||||
Series B | ||||
7.500% due 05/01/31 | 515 | 597 | ||
Apache Finance Canada Corp. | ||||
4.375% due 05/15/15 | 440 | 408 | ||
Arch Capital Group, Ltd. | ||||
7.350% due 05/01/34 | 175 | 195 | ||
AXA SA | ||||
8.600% due 12/15/30 | 1,245 | 1,635 | ||
Banque Centrale de Tunisie | ||||
8.250% due 09/19/27 | 550 | 674 | ||
BNP Paribas (f)(p) | ||||
5.186% due 06/29/49 | 800 | 763 | ||
British Telecommunications PLC (Ê)(f) | ||||
8.875% due 12/15/30 | 145 | 196 | ||
China Development Bank | ||||
5.000% due 10/15/15 | 100 | 98 | ||
CIT Group Funding Co. of Canada | ||||
5.600% due 11/02/11 | 220 | 222 | ||
Conoco Funding Co. | ||||
6.350% due 10/15/11 | 885 | 931 | ||
Corp. Nacional del Cobre de Chile (Ñ)(Å) | ||||
6.150% due 10/24/36 | 100 | 102 | ||
Crest, Ltd. (p) | ||||
Series 2003-2A Class C2 | ||||
5.709% due 12/28/38 | 1,710 | 1,689 | ||
Deutsche Telekom International Finance BV | ||||
5.569% due 03/23/09 (Ê) | 900 | 900 | ||
8.000% due 06/15/10 | 545 | 595 | ||
5.750% due 03/23/16 | 300 | 296 | ||
8.250% due 06/15/30 | 155 | 193 | ||
Egypt Government AID Bonds | ||||
4.450% due 09/15/15 | 660 | 639 | ||
Eksportfinans ASA |
117
Table of Contents
5.500% due 05/25/16 | 450 | 465 | ||
Export-Import Bank of China (p) | ||||
4.875% due 07/21/15 | 465 | 450 | ||
Export-Import Bank of Korea (p) | ||||
4.125% due 02/10/09 | 255 | 249 | ||
Falconbridge, Ltd. | ||||
6.000% due 10/15/15 | 405 | 407 | ||
Glitnir Banki HF (Å) | ||||
6.330% due 07/28/11 | 270 | 278 | ||
6.693% due 06/15/16 | 450 | 464 | ||
HBOS PLC (f)(p) | ||||
5.920% due 09/29/49 | 100 | 98 | ||
HSBC Holdings PLC | ||||
6.500% due 05/02/36 | 145 | 157 | ||
Ispat Inland ULC | ||||
9.750% due 04/01/14 | 610 | 683 | ||
Kaupthing Bank Hf (B) | ||||
6.062% due 04/12/11 | 750 | 750 | ||
Kaupthing Bank Hf (Å) | ||||
5.750% due 10/04/11 (Ñ) | 100 | 100 | ||
7.125% due 05/19/16 | 1,250 | 1,332 | ||
Klio Funding, Ltd. (Ê)(p) | ||||
Series 2004-1A Class A1 | ||||
6.030% due 04/23/39 | 1,515 | 1,526 | ||
Korea Development Bank (Ñ) | ||||
4.250% due 11/13/07 | 605 | 598 | ||
Korea Electric Power Corp. (p) | ||||
5.125% due 04/23/34 | 125 | 124 | ||
Mexico Government International Bond | ||||
5.625% due 01/15/17 | 16 | 16 | ||
8.300% due 08/15/31 | 945 | 1,202 | ||
Series MTNA | ||||
7.500% due 04/08/33 | 1,071 | 1,256 | ||
Mizuho Financial Group Cayman, Ltd. (p) | ||||
5.790% due 04/15/14 | 315 | 319 | ||
MUFG Capital Finance 1, Ltd. (f) | ||||
6.346% due 07/25/49 | 200 | 202 | ||
National Australia Bank, Ltd. (Ê)(p) | ||||
1.000% due 09/11/09 | 500 | 500 | ||
Newcastle CDO, Ltd. (p) | ||||
Series 2004-4A Class 3FX | ||||
5.110% due 03/24/39 | 845 | 803 | ||
Petrobras International Finance Co. | ||||
6.125% due 10/06/16 | 390 | 390 | ||
Petroleum Export, Ltd. (p) | ||||
5.265% due 06/15/11 | 93 | 90 | ||
Province of Quebec Canada | ||||
Series PJ | ||||
6.125% due 01/22/11 | 1,100 | 1,144 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. II (p) | ||||
5.298% due 09/30/20 | 435 | 420 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. III (p) | ||||
5.838% due 09/30/27 | 250 | 243 | ||
Resona Bank, Ltd. (f) | ||||
5.850% due 09/29/49 | 375 | 367 | ||
Resona Preferred Global Securities Cayman, Ltd. (f)(Ñ)(Å) | ||||
7.191% due 12/29/49 | 300 | 315 |
118
Table of Contents
Royal Bank of Scotland Group PLC (f) | ||||
Series 1 | ||||
9.118% due 03/31/49 | 200 | 223 | ||
Royal Bank of Scotland PLC (Ê) | ||||
5.770% due 07/06/12 | 2,400 | 2,404 | ||
Royal KPN NV | ||||
8.000% due 10/01/10 | 550 | 596 | ||
Russia Government International Bond | ||||
5.000% due 03/31/30 (p) | 565 | 633 | ||
Series REGS | ||||
5.000% due 03/31/30 | 1,150 | 1,288 | ||
Santander Financial Issuances | ||||
6.375% due 02/15/11 | 120 | 125 | ||
Sanwa Finance Aruba AEC | ||||
8.350% due 07/15/09 | 460 | 495 | ||
Shinsei Finance Cayman, Ltd. (f)(Å) | ||||
6.418% due 01/29/49 | 400 | 402 | ||
Siemens Financieringsmaatschappij NV (p) | ||||
5.750% due 10/17/16 | 1,025 | 1,046 | ||
6.125% due 08/17/26 | 3,725 | 3,875 | ||
Sumitomo Mitsui Banking Corp. (f)(p) | ||||
5.625% due 07/29/49 | 145 | 142 | ||
Systems 2001 AT LLC (p) | ||||
7.156% due 12/15/11 | 271 | 281 | ||
Telecom Italia Capital SA | ||||
5.250% due 10/01/15 | 2,470 | 2,310 | ||
Telefonica Emisiones SAU (Ê) | ||||
5.629% due 06/19/09 | 800 | 801 | ||
Telefonica Europe BV | ||||
7.750% due 09/15/10 | 1,910 | 2,067 | ||
Telefonos de Mexico SA de CV | ||||
4.500% due 11/19/08 | 515 | 505 | ||
TELUS Corp. | ||||
8.000% due 06/01/11 | 755 | 833 | ||
TNK-BP Finance SA (Å) | ||||
Series 144a | ||||
7.500% due 07/18/16 | 400 | 419 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 500 | 500 | ||
Tyco International Group SA | ||||
6.750% due 02/15/11 | 600 | 635 | ||
6.375% due 10/15/11 | 355 | 373 | ||
6.000% due 11/15/13 | 720 | 747 | ||
7.000% due 06/15/28 | 30 | 34 | ||
6.875% due 01/15/29 | 90 | 101 | ||
Vale Overseas, Ltd. | ||||
6.250% due 01/11/16 | 200 | 201 | ||
Vodafone Group PLC | ||||
7.750% due 02/15/10 | 375 | 402 | ||
WEA Finance LLC/WCI Finance LLC (Å) | ||||
5.700% due 10/01/16 | 1,820 | 1,823 | ||
49,368 | ||||
Loan Agreements - 0.3% | ||||
Starbound Reinsurance, Ltd., Term Loan B | ||||
6.738% due 03/31/08 | 4,000 | 4,000 | ||
Mortgage-Backed Securities - 55.8% | ||||
Adjustable Rate Mortgage Trust (Ê) |
119
Table of Contents
Series 2005-3 Class 8A2 | ||||
5.560% due 07/25/35 | 545 | 547 | ||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 346 | 337 | ||
Series 2005-2 Class 5A2 | ||||
5.470% due 09/25/35 | 719 | 719 | ||
Series 2005-3 Class 3A2 | ||||
5.500% due 09/25/35 | 570 | 570 | ||
Series 2005-4 Class 1A1 | ||||
5.610% due 11/25/45 | 1,360 | 1,367 | ||
Arcap Reit, Inc. (p) | ||||
Series 2004-RR3 Class B | ||||
5.040% due 09/21/45 | 420 | 407 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-3 Class A3 | ||||
4.875% due 06/10/39 | 885 | 880 | ||
Series 2004-4 Class A3 | ||||
4.128% due 07/10/42 | 580 | 565 | ||
Series 2005-2 Class A4 | ||||
4.783% due 07/10/43 | 865 | 849 | ||
Series 2005-3 Class A2 | ||||
4.501% due 07/10/43 | 445 | 436 | ||
Series 2005-3 Class A4 | ||||
4.668% due 07/10/43 | 1,200 | 1,150 | ||
Series 2005-5 Class A4 | ||||
5.115% due 10/10/45 | 1,625 | 1,605 | ||
Series 2005-6 Class A1 | ||||
5.001% due 09/10/47 | 1,766 | 1,762 | ||
Series 2005-6 Class A2 | ||||
5.165% due 09/10/47 | 1,275 | 1,277 | ||
Series 2006-1 Class A4 | ||||
5.372% due 09/10/45 | 305 | 307 | ||
Series 2006-3 Class A4 | ||||
5.889% due 07/10/44 | 1,030 | 1,074 | ||
Banc of America Funding Corp. | ||||
Series 2005-5 Class 1A11 | ||||
5.500% due 09/25/35 | 937 | 918 | ||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 484 | 473 | ||
Series 2006-3 Class 5A8 | ||||
5.500% due 03/25/36 | 820 | 816 | ||
Series 2006-A Class 3A2 | ||||
5.919% due 02/20/36 | 4,201 | 4,244 | ||
Series 2006-A Class 4A1 (Ê) | ||||
5.567% due 02/20/36 | 906 | 906 | ||
Series 2006-B Class 7A1 (Ê) | ||||
5.899% due 03/20/36 | 941 | 944 | ||
Series 2006-G Class 2A1 (Ê) | ||||
5.550% due 07/20/36 | 1,206 | 1,204 | ||
Series 2006-G Class 2A2 (Ê) | ||||
5.410% due 07/20/36 | 1,148 | 1,146 | ||
Banc of America Mortgage Securities | ||||
Series 2003-9 Class 1A12 (Ê) | ||||
5.770% due 12/25/33 | 1,212 | 1,217 | ||
Series 2004-1 Class 5A1 | ||||
6.500% due 09/25/33 | 40 | 40 |
120
Table of Contents
Series 2004-11 Class 2A1 | ||||
5.750% due 01/25/35 | 759 | 749 | ||
Series 2004-2 Class 5A1 | ||||
6.500% due 10/25/31 | 138 | 141 | ||
Series 2005-L Class 3A1 (Ê) | ||||
5.453% due 01/25/36 | 443 | 441 | ||
Series 2006-2 Class A15 | ||||
6.000% due 07/25/36 | 962 | 968 | ||
Bank of America Alternative Loan Trust | ||||
Series 2003-10 Class 2A2 (Ê) | ||||
5.770% due 12/25/33 | 455 | 458 | ||
Series 2003-2 Class CB2 (Ê) | ||||
5.820% due 04/25/33 | 198 | 199 | ||
Series 2006-5 Class CB17 | ||||
6.000% due 06/25/36 | 737 | 739 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
Series 2004-4 Class A4 | ||||
3.516% due 06/25/34 | 380 | 371 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 699 | 701 | ||
Series 2006-4 Class 32A1 | ||||
6.486% due 07/25/36 | 3,616 | 3,689 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 2005-PWR Class A1 | ||||
4.386% due 02/11/41 | 429 | 424 | ||
Chase Mortgage Finance Corp. (Ê) | ||||
Series 2005-A1 Class 2A2 | ||||
5.250% due 12/25/35 | 1,804 | 1,788 | ||
Series 2006-A1 Class 1A1 | ||||
6.075% due 09/25/36 | 1,776 | 1,783 | ||
Series 2006-A1 Class 4A1 | ||||
6.072% due 09/25/36 | 1,299 | 1,302 | ||
Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2004-HYB Class A2 (Ê) | ||||
4.306% due 02/25/34 | 142 | 142 | ||
Series 2005-11 Class A2A (Ê) | ||||
4.700% due 12/25/35 | 182 | 179 | ||
Series 2006-WF1 Class A2F | ||||
5.657% due 03/01/36 | 565 | 565 | ||
Series 2006-WFH Class A1 (Ê) | ||||
5.410% due 11/25/36 | 2,600 | 2,602 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||
Series 2006-CD3 Class A5 | ||||
5.617% due 10/15/48 | 540 | 543 | ||
Citimortgage Alternative Loan Trust | ||||
Series 2006-A3 Class 1A5 | ||||
6.000% due 07/25/36 | 498 | 501 | ||
Commercial Mortgage Acceptance Corp. | ||||
Series 1998-C2 Class A3 | ||||
6.040% due 09/15/30 | 3,715 | 3,751 | ||
Countrywide Alternative Loan Trust | ||||
Series 2004-2CB Class 1A4 (Ê) | ||||
5.720% due 03/25/34 | 810 | 812 | ||
Series 2005-56 Class 4A1 (Ê) | ||||
5.640% due 11/25/35 | 1,521 | 1,526 | ||
Series 2005-59 Class 1A1 (Ê) |
121
Table of Contents
5.656% due 11/20/35 | 1,775 | 1,781 | ||
Series 2005-J12 Class 2A1 (Ê) | ||||
5.600% due 11/25/35 | 1,374 | 1,377 | ||
Series 2005-J13 Class 2A3 | ||||
5.500% due 11/25/35 | 289 | 289 | ||
Series 2005-J8 Class 1A3 | ||||
5.500% due 07/25/35 | 689 | 688 | ||
Series 2006-9T1 Class A7 | ||||
6.000% due 05/25/36 | 383 | 387 | ||
Series 2006-J2 Class A3 | ||||
6.000% due 04/25/36 | 573 | 579 | ||
Countrywide Asset-Backed Certificates (Ê) | ||||
Series 2005-IM2 Class A3 | ||||
5.590% due 01/25/36 | 2,535 | 2,539 | ||
Countrywide Home Loan Mortgage Pass Through Trust | ||||
Series 2004-16 Class 1A1 (Ê) | ||||
5.720% due 09/25/34 | 705 | 708 | ||
Series 2004-7 Class 5A2 (Ê) | ||||
5.600% due 05/25/34 | 132 | 132 | ||
Series 2005-3 Class 1A2 (Ê) | ||||
5.620% due 04/25/35 | 106 | 106 | ||
Series 2005-HYB Class 3A2A (Ê) | ||||
5.250% due 02/20/36 | 174 | 172 | ||
Series 2005-R3 Class AF (Ê)(Å) | ||||
5.730% due 09/25/35 | 1,323 | 1,330 | ||
Series 2006-HYB Class 2A1A | ||||
5.702% due 05/20/36 | 914 | 922 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2003-C5 Class A1 | ||||
3.093% due 12/15/36 | 1,349 | 1,313 | ||
Series 2005-C4 Class A3 | ||||
5.120% due 08/15/38 | 5,050 | 5,025 | ||
Series 2005-C6 Class A1 | ||||
4.938% due 12/15/40 | 1,175 | 1,170 | ||
Series 2005-C6 Class A4 | ||||
5.230% due 12/15/40 | 1,265 | 1,259 | ||
Credit Suisse Morgan Stanley Commercial Mortgage Trust (Ê)(p) | ||||
Series 2006-HC1 Class A1 | ||||
5.510% due 05/15/23 | 1,445 | 1,445 | ||
Credit Suisse Mortgage Capital Certificates | ||||
Series 2006-C1 Class A1 | ||||
4.367% due 07/15/10 | 399 | 393 | ||
Series 2006-C1 Class AAB | ||||
5.681% due 02/15/39 | 945 | 960 | ||
Series 2006-C2 Class A1 | ||||
5.250% due 03/15/39 | 864 | 867 | ||
Series 2006-C2 Class A2 | ||||
5.659% due 03/15/39 | 870 | 893 | ||
Series 2006-C4 Class A1 | ||||
4.771% due 09/15/39 | 2,390 | 2,369 | ||
Series 2006-C4 Class A3 | ||||
5.467% due 09/15/39 | 1,210 | 1,223 | ||
Series 2006-TFL Class A1 (Ê)(p) | ||||
5.440% due 04/15/21 | 1,841 | 1,841 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 1998-C2 Class A2 | ||||
6.300% due 11/15/30 | 284 | 289 |
122
Table of Contents
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||
Series 2005-AR1 Class 2A3 | ||||
5.024% due 08/25/35 | 840 | 856 | ||
DLJ Commercial Mortgage Corp. | ||||
Series 1998-CF1 Class A1B | ||||
6.410% due 02/18/31 | 572 | 577 | ||
Downey Savings & Loan Association Mortgage Loan Trust | ||||
Series 2004-AR3 Class 1A1B (Ê) | ||||
6.910% due 07/19/44 | 282 | 285 | ||
Series 2005-AR6 Class 2A1A (Ê) | ||||
5.610% due 10/19/45 | 1,410 | 1,415 | ||
Fannie Mae | ||||
7.000% due 2011 | 8 | 8 | ||
8.000% due 2011 | 4 | 4 | ||
5.363% due 2012 | 598 | 599 | ||
5.500% due 2013 | 14 | 14 | ||
6.500% due 2013 | 48 | 49 | ||
6.500% due 2015 | 29 | 30 | ||
7.000% due 2015 | 10 | 10 | ||
6.000% due 2016 | 112 | 114 | ||
6.500% due 2016 | 33 | 34 | ||
5.000% due 2017 | 252 | 249 | ||
5.500% due 2017 | 20 | 20 | ||
6.000% due 2017 | 1,472 | 1,497 | ||
6.500% due 2017 | 356 | 363 | ||
7.500% due 2017 | 1 | 1 | ||
9.000% due 2017 | 1 | 1 | ||
4.500% due 2018 | 4,052 | 3,929 | ||
5.000% due 2018 | 3,334 | 3,292 | ||
5.500% due 2018 | 401 | 402 | ||
6.500% due 2018 | 372 | 385 | ||
4.500% due 2019 | 1,311 | 1,270 | ||
5.000% due 2019 | 10,660 | 10,514 | ||
6.500% due 2019 | 191 | 196 | ||
4.000% due 2020 | 3,458 | 3,274 | ||
4.500% due 2020 | 8,621 | 8,346 | ||
5.000% due 2020 | 12,165 | 11,992 | ||
6.500% due 2020 | 74 | 76 | ||
4.000% due 2021 | 882 | 836 | ||
5.000% due 2021 | 995 | 980 | ||
6.000% due 2021 | 996 | 1,010 | ||
8.000% due 2024 | 141 | 149 | ||
8.500% due 2024 | 27 | 28 | ||
9.000% due 2024 | 7 | 7 | ||
7.000% due 2025 | 29 | 30 | ||
8.000% due 2025 | 1 | 1 | ||
8.500% due 2025 | 25 | 26 | ||
7.000% due 2026 | 30 | 31 | ||
9.000% due 2026 | 6 | 6 | ||
7.000% due 2027 | 10 | 10 | ||
9.000% due 2027 | 1 | 1 | ||
6.500% due 2028 | 558 | 571 | ||
6.500% due 2029 | 1,202 | 1,236 | ||
7.000% due 2029 | 167 | 173 | ||
6.500% due 3030 | 9 | 10 | ||
8.000% due 3030 | 169 | 179 | ||
6.500% due 2031 | 189 | 194 |
123
Table of Contents
8.000% due 2031 | 165 | 174 | ||
5.500% due 2032 | 78 | 77 | ||
6.000% due 2032 | 1,687 | 1,703 | ||
6.500% due 2032 | 2,023 | 2,073 | ||
7.000% due 2032 | 748 | 771 | ||
8.000% due 2032 | 6 | 7 | ||
3.950% due 2033 (Ê) | 609 | 595 | ||
4.500% due 2033 | 1,060 | 997 | ||
4.644% due 2033 (Ê) | 377 | 376 | ||
5.000% due 2033 | 8,181 | 7,919 | ||
5.500% due 2033 | 20,772 | 20,585 | ||
6.000% due 2033 | 900 | 907 | ||
6.500% due 2033 | 1,154 | 1,180 | ||
4.500% due 2034 | 1,371 | 1,288 | ||
5.000% due 2034 | 12,932 | 12,514 | ||
5.500% due 2034 | 35,222 | 34,876 | ||
6.000% due 2034 | 9,346 | 9,418 | ||
6.500% due 2034 | 1,039 | 1,061 | ||
4.500% due 2035 | 3,895 | 3,658 | ||
4.554% due 2035 (Ê) | 1,026 | 1,020 | ||
5.000% due 2035 | 7,705 | 7,448 | ||
5.500% due 2035 | 56,622 | 56,008 | ||
6.000% due 2035 | 4,347 | 4,377 | ||
6.559% due 2035 (Ê) | 898 | 924 | ||
6.565% due 2035 (Ê) | 1,466 | 1,509 | ||
6.566% due 2035 (Ê) | 642 | 661 | ||
5.000% due 2036 | 12,979 | 12,535 | ||
5.500% due 2036 | 993 | 981 | ||
6.000% due 2036 | 8,405 | 8,457 | ||
6.500% due 2036 | 354 | 360 | ||
Series 1992-158 Class ZZ | ||||
7.750% due 08/25/22 | 286 | 303 | ||
Series 1993-134 Class H | ||||
6.500% due 08/25/08 | 1,011 | 1,015 | ||
Series 1999-56 Class Z | ||||
7.000% due 12/18/29 | 376 | 391 | ||
Series 2003-32 Class FH (Ê) | ||||
5.720% due 11/25/22 | 293 | 295 | ||
Series 2003-337 Class 1 | ||||
Principal Only STRIP | ||||
Zero coupon due 07/01/33 | 895 | 659 | ||
Series 2003-343 Class 6 | ||||
Interest Only STRIP | ||||
5.000% due 10/01/33 | 882 | 196 | ||
Series 2003-78 Class FI (Ê) | ||||
5.720% due 01/25/33 | 651 | 652 | ||
Series 2004-21 Class FL (Ê) | ||||
5.670% due 11/25/32 | 338 | 338 | ||
Series 2005-65 Class FP (Ê) | ||||
5.570% due 08/25/35 | 503 | 503 | ||
15 Year TBA (Ï) | ||||
4.500% | 1,705 | 1,649 | ||
5.000% | 14,460 | 14,239 | ||
5.500% | 3,000 | 3,003 | ||
6.000% | 2,485 | 2,523 | ||
30 Year TBA (Ï) | ||||
4.500% | 1,780 | 1,670 |
124
Table of Contents
5.000% | 49,485 | 47,759 | ||
5.500% | 48,150 | 47,572 | ||
6.000% | 27,615 | 27,779 | ||
6.500% | 21,910 | 22,322 | ||
Fannie Mae Grantor Trust | ||||
Series 2001-T6 Class B | ||||
6.088% due 05/25/11 | 1,810 | 1,889 | ||
Fannie Mae REMICS (Ê) | ||||
Series 2006-5 Class 3A2 | ||||
4.677% due 05/25/35 | 100 | 99 | ||
Fannie Mae Whole Loan (Ê) | ||||
Series 2004-W2 Class 5AF | ||||
5.680% due 03/25/44 | 658 | 658 | ||
Federal Home Loan Mortgage Corp. Structured Pass | ||||
Through Securities (Ê) | ||||
Series 2005-63 Class 1A1 | ||||
5.632% due 02/25/45 | 127 | 127 | ||
FHA Project Citi 68 NP | ||||
7.430% due 06/27/21 | 251 | 254 | ||
First Horizon Alternative Mortgage Securities | ||||
Series 2006-AA5 Class A2 (Ê) | ||||
6.626% due 09/25/36 | 576 | 590 | ||
Series 2006-FA3 Class A6 | ||||
6.000% due 07/25/36 | 480 | 486 | ||
First Horizon Asset Securities, Inc. (Ê) | ||||
Series 2005-AR5 Class 3A1 | ||||
5.525% due 10/25/35 | 211 | 211 | ||
Freddie Mac | ||||
4.500% due 01/15/13 (Ñ) | 2,140 | 2,092 | ||
9.000% due 06/01/16 | 53 | 55 | ||
5.000% due 01/01/18 | 336 | 332 | ||
5.000% due 02/01/19 | 660 | 650 | ||
4.500% due 09/01/20 | 917 | 886 | ||
7.078% due 07/01/27 (Ê) | 40 | 41 | ||
5.500% due 03/01/32 | 440 | 437 | ||
5.500% due 08/01/33 | 110 | 109 | ||
4.688% due 08/01/34 (Ê) | 419 | 420 | ||
5.000% due 10/01/35 | 2,555 | 2,471 | ||
5.000% due 03/01/36 | 2,875 | 2,779 | ||
5.500% due 10/01/36 | 190 | 188 | ||
Series 1993-160 Class I | ||||
Interest Only STRIP | ||||
6.500% due 11/15/08 | 93 | 4 | ||
Series 1998-210 Class ZM | ||||
6.000% due 12/15/28 | 732 | 738 | ||
Series 2000-226 Class F (Ê) | ||||
5.780% due 11/15/30 | 13 | 13 | ||
Series 2001-229 Class KF (Ê) | ||||
5.570% due 07/25/22 | 455 | 459 | ||
Series 2003-262 Class AB | ||||
2.900% due 11/15/14 | 684 | 662 | ||
Series 2004-277 Class UF (Ê) | ||||
5.630% due 06/15/33 | 828 | 829 | ||
Series 2004-281 Class DF (Ê) | ||||
5.780% due 06/15/23 | 251 | 253 | ||
Series 2005-292 Class IG | ||||
Interest Only STRIP |
125
Table of Contents
5.000% due 04/15/23 | 376 | 57 | ||
Series 2005-294 Class FA (Ê) | ||||
5.500% due 03/15/20 | 490 | 489 | ||
Series 2005-305 Class JF (Ê) | ||||
5.620% due 10/15/35 | 555 | 555 | ||
15 Year TBA (Ï) | ||||
5.000% | 4,000 | 3,936 | ||
30 Year TBA (Ï) | ||||
5.000% | 14,100 | 13,620 | ||
5.500% | 15,030 | 14,860 | ||
6.000% | 14,580 | 14,676 | ||
Freddie Mac Gold | ||||
7.000% due 2008 | 8 | 8 | ||
8.000% due 2009 | 6 | 6 | ||
6.000% due 2010 | 44 | 44 | ||
7.000% due 2010 | 75 | 77 | ||
8.000% due 2010 | 18 | 19 | ||
6.000% due 2011 | 165 | 169 | ||
7.000% due 2011 | 9 | 9 | ||
6.000% due 2012 | 4 | 4 | ||
6.000% due 2013 | 100 | 102 | ||
12.000% due 2014 | 22 | 23 | ||
6.000% due 2016 | 353 | 358 | ||
9.000% due 2016 | 24 | 25 | ||
6.000% due 2017 | 404 | 412 | ||
4.500% due 2018 | 2,123 | 2,053 | ||
5.000% due 2018 | 744 | 734 | ||
5.500% due 2019 | 875 | 876 | ||
5.500% due 2020 | 2,227 | 2,231 | ||
6.500% due 2025 | 18 | 19 | ||
8.000% due 2025 | 33 | 35 | ||
9.000% due 2026 | 1 | 1 | ||
6.500% due 2027 | 3 | 3 | ||
8.500% due 2027 | 68 | 73 | ||
6.500% due 2028 | 217 | 224 | ||
6.500% due 2029 | 386 | 395 | ||
7.222% due 2030 (Ê) | 7 | 8 | ||
6.000% due 2031 | 17 | 17 | ||
6.500% due 2031 | 659 | 676 | ||
5.500% due 2032 | 3,048 | 3,024 | ||
6.500% due 2032 | 678 | 695 | ||
7.000% due 2032 | 322 | 333 | ||
7.500% due 2032 | 85 | 89 | ||
5.000% due 2033 | 567 | 549 | ||
5.500% due 2033 | 5,936 | 5,888 | ||
6.000% due 2033 | 590 | 596 | ||
4.500% due 2034 | 156 | 147 | ||
5.000% due 2034 | 2,513 | 2,434 | ||
5.500% due 2034 | 2,862 | 2,836 | ||
6.000% due 2034 | 861 | 868 | ||
6.500% due 2034 | 59 | 60 | ||
5.000% due 2035 | 5,175 | 5,003 | ||
5.500% due 2035 | 2,100 | 2,081 | ||
5.000% due 2036 | 1,495 | 1,445 | ||
Freddie Mac Reference REMICS | ||||
Series 2006-R00 Class AK | ||||
5.750% due 12/15/18 | 638 | 641 |
126
Table of Contents
Freddie Mac REMICS | ||||
Series 2003-269 Class FE (Ê) | ||||
5.930% due 12/15/28 | 685 | 688 | ||
Series 2004-277 Class KE | ||||
3.500% due 12/15/17 | 456 | 451 | ||
Series 2006-323 Class PA | ||||
6.000% due 03/15/26 | 825 | 837 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2005-C1 Class A1 | ||||
4.012% due 06/10/48 | 550 | 539 | ||
Series 2005-C1 Class A5 | ||||
4.772% due 06/10/48 | 400 | 387 | ||
Series 2006-C1 Class A4 | ||||
5.339% due 03/10/44 | 905 | 912 | ||
Ginnie Mae I | ||||
6.500% due 2008 | 3 | 4 | ||
6.500% due 2009 | 32 | 32 | ||
6.500% due 2010 | 6 | 6 | ||
7.000% due 2011 | 14 | 14 | ||
9.500% due 2016 | 1 | 1 | ||
8.000% due 2017 | 11 | 11 | ||
10.500% due 2020 | 36 | 40 | ||
8.000% due 2022 | 23 | 24 | ||
8.500% due 2022 | 1 | 1 | ||
8.500% due 2024 | 12 | 13 | ||
8.000% due 2025 | 13 | 13 | ||
8.000% due 2026 | 115 | 122 | ||
8.000% due 2029 | 61 | 65 | ||
8.500% due 2029 | 21 | 22 | ||
8.000% due 2030 | 61 | 66 | ||
8.500% due 2030 | 15 | 16 | ||
7.000% due 2031 | 259 | 268 | ||
7.000% due 2032 | 128 | 132 | ||
5.000% due 2033 | 3,233 | 3,157 | ||
7.000% due 2033 | 17 | 18 | ||
5.000% due 2035 | 523 | 510 | ||
6.000% due 2035 | 4,829 | 4,896 | ||
5.500% due 2036 | 104 | 103 | ||
30 Year TBA (Ï) | ||||
5.500% | 5,495 | 5,471 | ||
6.000% | 1,000 | 1,013 | ||
6.500% | 3,200 | 3,285 | ||
Ginnie Mae II | ||||
5.125% due 10/20/27 (Ê) | 54 | 54 | ||
5.375% due 05/20/30 (Ê) | 39 | 39 | ||
5.000% due 07/20/30 (Ê) | 222 | 223 | ||
7.500% due 07/20/32 | 20 | 21 | ||
4.500% due 04/20/35 | 755 | 709 | ||
GMAC Commercial Mortgage Securities, Inc. | ||||
Series 2001-C1 Class A2 | ||||
6.465% due 04/15/34 | 510 | 533 | ||
Series 2005-C1 Class A2 | ||||
4.471% due 05/10/43 | 465 | 456 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2005-AR6 Class 3A1 | ||||
5.297% due 11/19/35 | 747 | 743 | ||
Series 2006-AR1 Class 1A1 (Ê) |
127
Table of Contents
5.633% due 03/19/36 | 1,836 | 1,844 | ||
Government National Mortgage Association (Ê) | ||||
Series 1999-40 Class FE | ||||
5.870% due 11/16/29 | 441 | 446 | ||
Greenpoint Mortgage Funding Trust (Ê) | ||||
Series 2006-AR5 Class A1A | ||||
5.400% due 10/25/46 | 1,994 | 1,993 | ||
Greenwich Capital Commercial Funding Corp. | ||||
Series 2004-GG1 Class A7 | ||||
5.317% due 06/10/36 | 1,380 | 1,384 | ||
Series 2005-GG3 Class A1 | ||||
3.919% due 08/10/42 | 704 | 692 | ||
Series 2005-GG5 Class A41 | ||||
5.243% due 04/10/37 | 695 | 696 | ||
GS Mortgage Securities Corp. II | ||||
Series 1998-C1 Class A2 | ||||
6.620% due 10/18/30 | 1,215 | 1,235 | ||
Series 2005-GG4 Class AABA | ||||
4.680% due 07/10/39 | 600 | 584 | ||
Series 2006-FL8 Class A1 (Ê)(p) | ||||
5.430% due 01/06/08 | 2,680 | 2,680 | ||
Series 2006-GG6 Class A4 | ||||
5.553% due 04/10/38 | 305 | 311 | ||
Series 2006-GG8 Class AAB | ||||
5.535% due 11/10/39 | 575 | 585 | ||
GSMPS Mortgage Loan Trust (Ê)(p) | ||||
Series 2004-4 Class 1AF | ||||
5.720% due 06/25/34 | 1,211 | 1,217 | ||
Harborview Mortgage Loan Trust | ||||
Series 2004-4 Class 3A (Ê) | ||||
2.975% due 06/19/34 | 1,838 | 1,824 | ||
Series 2005-14 Class 3A1A | ||||
5.319% due 12/19/35 | 219 | 218 | ||
Series 2006-2 Class 1A | ||||
5.454% due 02/25/36 | 519 | 530 | ||
Series 2006-3 Class 1A1A (Ê) | ||||
6.474% due 06/19/36 | 6,616 | 6,775 | ||
HSI Asset Securitization Corp. Trust (Ê) | ||||
Series 2005-I1 Class 2A1 | ||||
5.440% due 11/25/35 | 1,160 | 1,161 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.830% due 04/25/34 | 99 | 99 | ||
Series 2004-3 Class 1A | ||||
5.570% due 06/25/34 | 116 | 116 | ||
Series 2004-5 Class 1A1 | ||||
5.690% due 10/25/34 | 455 | 456 | ||
Impac Secured Assets CMN Owner Trust (Ê) | ||||
Series 2005-2 Class A1 | ||||
5.650% due 03/25/36 | 1,418 | 1,420 | ||
Indymac Index Mortgage Loan Trust | ||||
Series 2005-AR1 Class A2 | ||||
5.099% due 09/25/35 | 353 | 344 | ||
Series 2005-AR2 Class 4A1 | ||||
5.437% due 11/25/35 | 26 | 26 | ||
Series 2006-AR3 Class 2A1A | ||||
6.410% due 03/25/36 | 8,191 | 8,367 |
128
Table of Contents
Indymac Loan Trust (Ê) | ||||
Series 2004-L1 Class A1 (p) | ||||
5.610% due 07/25/09 | 292 | 292 | ||
Series 2005-L1 Class A | ||||
5.520% due 06/25/10 | 1,000 | 1,002 | ||
Series 2005-L2 Class A1 | ||||
5.540% due 01/25/11 | 1,292 | 1,295 | ||
JP Morgan Alternative Loan Trust | ||||
Series 2006-A2 Class 3A1 | ||||
5.925% due 05/25/36 | 3,026 | 3,062 | ||
Series 2006-A2 Class 5A1 | ||||
6.360% due 05/25/36 | 1,740 | 1,748 | ||
Series 2006-A3 Class 1A2 (Ê) | ||||
5.400% due 07/25/36 | 1,486 | 1,483 | ||
Series 2006-A4 Class A4 (Ê) | ||||
5.400% due 08/25/36 | 1,143 | 1,142 | ||
Series 2006-A6 Class 1A2 (Ê) | ||||
5.390% due 11/25/36 | 1,610 | 1,610 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2003-CB7 Class A3 | ||||
4.449% due 01/12/38 | 940 | 916 | ||
Series 2004-LN2 Class A1 | ||||
4.475% due 07/15/41 | 689 | 673 | ||
Series 2005-CB1 Class A1 | ||||
4.520% due 08/12/37 | 1,024 | 1,012 | ||
Series 2005-CB1 Class A2 | ||||
5.247% due 01/12/43 | 2,550 | 2,558 | ||
Series 2005-CB1 Class A4 | ||||
4.895% due 09/12/37 | 80 | 78 | ||
5.294% due 01/12/43 | 200 | 201 | ||
Series 2005-FL1 Class A1 (Ê)(p) | ||||
5.430% due 02/15/19 | 940 | 940 | ||
Series 2005-LDP Class A1 | ||||
5.035% due 12/15/44 | 3,225 | 3,216 | ||
4.116% due 03/15/46 | 512 | 504 | ||
Series 2005-LDP Class A3 | ||||
4.959% due 08/15/42 | 690 | 680 | ||
5.208% due 12/15/44 | 2,845 | 2,849 | ||
Series 2005-LDP Class A3A1 | ||||
4.871% due 10/15/42 | 630 | 620 | ||
Series 2005-LDP Class A4 | ||||
4.918% due 10/15/42 | 400 | 390 | ||
5.179% due 12/15/44 | 1,375 | 1,374 | ||
Series 2006-CB1 Class A3A (p) | ||||
5.491% due 12/12/44 | 1,370 | 1,388 | ||
Series 2006-CB1 Class A4 | ||||
5.814% due 06/12/43 | 725 | 753 | ||
5.481% due 12/12/44 | 460 | 466 | ||
5.817% due 05/12/45 | 1,685 | 1,715 | ||
Series 2006-CB1 Class ASB | ||||
5.506% due 12/12/44 | 365 | 369 | ||
Series 2006-FL1 Class A1A (Ê)(p) | ||||
5.410% due 02/15/20 | 2,584 | 2,585 | ||
Series 2006-LDP Class A2 | ||||
5.862% due 04/15/45 | 1,975 | 2,037 | ||
Series 2006-LDP Class A4 | ||||
5.876% due 04/15/45 | 2,790 | 2,925 |
129
Table of Contents
5.561% due 05/15/45 | 830 | 835 | ||
JP Morgan Mortgage Trust | ||||
Series 2005-A2 Class 3A1 | ||||
4.909% due 04/25/35 | 1,213 | 1,199 | ||
Series 2005-A3 Class 6A1 | ||||
4.913% due 06/25/35 | 1,613 | 1,591 | ||
Series 2005-A6 Class 2A2 | ||||
4.977% due 08/25/35 | 1,168 | 1,155 | ||
Series 2006-A2 Class 1A1 | ||||
5.473% due 04/25/36 | 1,781 | 1,774 | ||
Series 2006-A6 Class 3A1 | ||||
6.165% due 10/25/36 | 1,377 | 1,386 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2001-C3 Class A1 | ||||
6.058% due 06/15/20 | 248 | 252 | ||
Series 2003-C3 Class A1 | ||||
2.599% due 05/15/27 | 519 | 504 | ||
Series 2004-C2 Class A1 | ||||
2.946% due 03/15/29 | 1,398 | 1,343 | ||
Series 2004-C4 Class A3 | ||||
5.154% due 06/15/29 | 1,180 | 1,184 | ||
Series 2005-C3 Class A5 | ||||
4.739% due 07/15/30 | 340 | 328 | ||
Series 2005-C3 Class AAB | ||||
4.664% due 07/15/30 | 400 | 389 | ||
Series 2006-C4 Class A4 | ||||
5.900% due 06/15/38 | 315 | 331 | ||
Lehman Brothers Floating Rate Commercial | ||||
Mortgage Trust (Ê)(p) | ||||
Series 2006-LLF Class A1 | ||||
5.400% due 09/15/21 | 580 | 580 | ||
Lehman Mortgage Trust | ||||
Series 2005-3 Class 1A3 | ||||
5.500% due 01/25/36 | 1,155 | 1,158 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-5N Class 1A1 | ||||
5.630% due 11/25/35 | 1,160 | 1,164 | ||
Series 2005-7N Class 1A1B | ||||
5.630% due 12/25/35 | 786 | 790 | ||
Mach One Trust Commercial Mortgage-Backed (p) | ||||
Series 2004-1A Class A3 | ||||
5.220% due 05/28/40 | 1,350 | 1,318 | ||
Mastr Adjustable Rate Mortgages Trust | ||||
Series 2006-2 Class 3A1 | ||||
4.848% due 01/25/36 | 956 | 946 | ||
Mastr Alternative Loans Trust | ||||
Series 2003-4 Class B1 | ||||
5.660% due 06/25/33 | 348 | 350 | ||
Series 2004-10 Class 5A6 | ||||
5.750% due 09/25/34 | 505 | 505 | ||
Mastr Asset Securitization Trust | ||||
Series 2003-11 Class 6A8 (Ê) | ||||
5.820% due 12/25/33 | 766 | 770 | ||
Series 2003-7 Class 4A35 (Ê) | ||||
5.720% due 09/25/33 | 808 | 809 | ||
Series 2004-4 Class 2A2 (Ê) | ||||
5.770% due 04/25/34 | 324 | 324 |
130
Table of Contents
Series 2005-2 Class 1A1 | ||||
5.250% due 11/25/35 | 1,235 | 1,217 | ||
Mastr Reperforming Loan Trust (Å) | ||||
Series 2005-1 Class 1A1 | ||||
6.000% due 08/25/34 | 686 | 688 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2004-MKB Class A2 | ||||
4.353% due 02/12/42 | 820 | 804 | ||
Series 2005-LC1 Class A1 | ||||
5.017% due 01/12/44 | 1,126 | 1,123 | ||
Series 2005-LC1 Class A2 | ||||
5.202% due 01/12/44 | 1,265 | 1,267 | ||
Series 2005-MKB Class A1 | ||||
4.446% due 09/12/42 | 914 | 902 | ||
Series 2005-MKB Class A4 | ||||
5.204% due 09/12/42 | 555 | 552 | ||
Series 2006-C1 Class A4 | ||||
5.844% due 05/12/39 | 660 | 682 | ||
Merrill Lynch/Countrywide Commercial Mortgage Trust | ||||
Series 2006-3 Class A2 | ||||
5.291% due 07/12/46 | 1,400 | 1,406 | ||
MLCC Mortgage Investors, Inc. (Ê) | ||||
Series 2004-HB1 Class A2 | ||||
5.930% due 04/25/29 | 150 | 150 | ||
Morgan Stanley Capital I | ||||
Series 2004-HQ3 Class A1 | ||||
3.100% due 01/13/41 | 941 | 914 | ||
Series 2004-RR2 Class A2 (p) | ||||
5.450% due 10/28/33 | 1,370 | 1,353 | ||
Series 2005-HQ5 Class A4 | ||||
5.168% due 01/14/42 | 880 | 873 | ||
Series 2005-HQ6 Class A4A | ||||
4.989% due 08/13/42 | 530 | 519 | ||
Series 2005-IQ1 Class AAB | ||||
5.178% due 09/15/42 | 750 | 748 | ||
Series 2005-IQ9 Class A1 | ||||
3.990% due 07/15/56 | 574 | 563 | ||
Series 2005-T17 Class A5 | ||||
4.780% due 12/13/41 | 250 | 242 | ||
Series 2006-HQ8 Class A4 | ||||
5.388% due 03/12/44 | 810 | 821 | ||
Series 2006-HQ9 Class A4 | ||||
5.731% due 07/20/44 | 585 | 603 | ||
Series 2006-XLF Class A1 (Ê)(p) | ||||
5.410% due 07/15/19 | 2,774 | 2,774 | ||
Morgan Stanley Dean Witter Capital I | ||||
Series 2001-TOP Class A3 | ||||
6.200% due 07/15/33 | 317 | 319 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-11 Class 1A6 | ||||
6.231% due 08/25/36 | 650 | 667 | ||
Series 2006-3AR Class 2A3 | ||||
5.901% due 03/25/36 | 541 | 547 | ||
Mortgage Capital Funding, Inc. | ||||
Series 1998-MC2 Class A2 | ||||
6.423% due 06/18/30 | 1,679 | 1,696 | ||
Nomura Asset Securities Corp. |
131
Table of Contents
Series 1998-D6 Class A1B | ||||
6.590% due 03/15/30 | 784 | 796 | ||
Novastar Mortgage-Backed Notes (Ê) | ||||
Series 2006-MTA Class 2A1A | ||||
5.520% due 09/25/46 | 1,458 | 1,458 | ||
Novastar NIMs Trust (p) | ||||
Series 2005-N1 | ||||
4.777% due 10/26/35 | 65 | 65 | ||
Prime Mortgage Trust | ||||
Series 2004-CL1 Class 1A2 (Ê) | ||||
5.720% due 02/25/34 | 104 | 105 | ||
Series 2004-CL1 Class 2A2 (Ê) | ||||
5.730% due 02/25/19 | 25 | 25 | ||
Series 2006-DR1 Class 2A2 | ||||
6.000% due 11/25/36 | 2,300 | 2,284 | ||
Residential Accredit Loans, Inc. | ||||
Series 2004-QS5 Class A6 (Ê) | ||||
5.920% due 04/25/34 | 133 | 134 | ||
Series 2004-QS8 Class A4 (Ê) | ||||
5.720% due 06/25/34 | 662 | 665 | ||
Series 2005-QA1 Class A41 | ||||
5.725% due 09/25/35 | 837 | 841 | ||
Series 2005-QA8 Class NB3 | ||||
5.504% due 07/25/35 | 480 | 482 | ||
Series 2005-QO3 Class A1 (Ê) | ||||
5.730% due 10/25/45 | 1,432 | 1,436 | ||
Series 2006-QA1 Class A21 | ||||
6.001% due 01/25/36 | 2,662 | 2,693 | ||
Series 2006-QO7 Class 3A2 (Ê) | ||||
5.535% due 09/25/46 | 1,340 | 1,339 | ||
Series 2006-QS6 Class 1A13 | ||||
6.000% due 06/25/36 | 1,325 | 1,334 | ||
Residential Asset Securities Corp. (Ê) | ||||
Series 2003-KS4 Class AIIB | ||||
5.610% due 06/25/33 | 176 | 176 | ||
Residential Asset Securitization Trust (Ê) | ||||
Series 2003-A15 Class 1A2 | ||||
5.770% due 02/25/34 | 769 | 772 | ||
Residential Funding Mortgage Securities II (Ê) | ||||
Series 2003-S14 Class A5 | ||||
5.720% due 07/25/18 | 938 | 941 | ||
Series 2003-S20 Class 1A7 | ||||
5.820% due 12/25/33 | 243 | 244 | ||
Series 2003-S5 Class 1A2 | ||||
5.770% due 11/25/18 | 389 | 391 | ||
Salomon Brothers Mortgage Securities VII | ||||
Series 2003-UP2 Class A1 | ||||
4.000% due 12/25/18 | 440 | 415 | ||
Sequoia Mortgage Trust (Ê) | ||||
Series 2004-3 Class A | ||||
5.306% due 04/20/34 | 968 | 968 | ||
Small Business Administration | ||||
Series 1999-P10 Class 1 | ||||
7.540% due 08/10/09 | 260 | 272 | ||
Small Business Administration Participation Certificates | ||||
Series 2003-20I Class 1 | ||||
5.130% due 09/01/23 | 80 | 80 |
132
Table of Contents
Structured Adjustable Rate Mortgage Loan Trust (Ê) | ||||
Series 2005-19X Class 1A1 | ||||
5.650% due 10/25/35 | 1,091 | 1,096 | ||
Structured Asset Securities Corp. | ||||
Series 2004-21X Class 1A3 | ||||
4.440% due 12/25/34 | 1,230 | 1,213 | ||
Thornburg Mortgage Securities Trust (Ê) | ||||
Series 2006-1 Class A3 | ||||
5.500% due 01/25/36 | 2,598 | 2,594 | ||
Series 2006-3 Class A3 | ||||
5.440% due 06/25/36 | 1,953 | 1,948 | ||
Tobacco Settlement Authority of Iowa | ||||
6.500% due 06/01/23 | 100 | 100 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2003-C9 Class A1 | ||||
3.291% due 12/15/35 | 940 | 916 | ||
Series 2005-C16 Class A2 | ||||
4.380% due 10/15/41 | 1,195 | 1,171 | ||
Series 2005-C17 Class A1 | ||||
4.430% due 03/15/42 | 2,367 | 2,337 | ||
Series 2005-C22 Class A3 | ||||
5.461% due 12/15/44 | 1,865 | 1,876 | ||
Washington Mutual Alternative Mortgage | ||||
Pass-Through Certificates | ||||
Series 2005-4 Class CB11 | ||||
5.500% due 06/25/35 | 275 | 270 | ||
Washington Mutual, Inc. | ||||
Series 2003-S9 Class A2 (Ê) | ||||
5.870% due 10/25/33 | 691 | 694 | ||
Series 2004-AR1 Class A1B1 (Ê) | ||||
5.665% due 11/25/34 | 220 | 220 | ||
Series 2005-AR1 Class 1A1 | ||||
4.839% due 10/25/35 | 596 | 589 | ||
Series 2005-AR1 Class A1A1 (Ê) | ||||
5.614% due 10/25/45 | 1,411 | 1,419 | ||
Series 2005-AR1 Class A1A2 (Ê) | ||||
5.620% due 11/25/45 | 1,433 | 1,439 | ||
5.610% due 12/25/45 | 722 | 725 | ||
Series 2005-AR1 Class A1C1 (Ê) | ||||
5.510% due 12/26/45 | 263 | 263 | ||
Series 2005-AR6 Class B3 (Ê) | ||||
5.980% due 04/25/45 | 473 | 473 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2006-2 Class 2A3 | ||||
5.500% due 03/25/36 | 907 | 907 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 742 | 736 | ||
Series 2006-AR8 Class 2A3 | ||||
5.240% due 04/25/36 | 176 | 175 | ||
Zuni Mortgage Loan Trust (Ê) | ||||
Series 2006-OA1 Class A1 | ||||
5.615% due 08/25/36 | 1,690 | 1,687 | ||
787,973 | ||||
Municipal Bonds - 0.1% | ||||
Golden State Tobacco Securitization Corp. | ||||
Revenue Bonds, weekly demand | ||||
6.250% due 06/01/33 | 650 | 725 |
133
Table of Contents
State of Texas General Obligation Unlimited, | ||||
weekly demand | ||||
4.750% due 04/01/35 | 300 | 308 | ||
Tobacco Settlement Financing Corp. Revenue | ||||
Bonds, weekly demand | ||||
6.125% due 06/01/24 | 150 | 163 | ||
6.750% due 06/01/39 | 700 | 800 | ||
1,996 | ||||
Non-US Bonds - 0.2% | ||||
Bundesrepublik Deutschland | ||||
Series 04 | ||||
3.750% due 01/04/15 | EUR 790 | 1,011 | ||
Canadian Government Bond | ||||
4.000% due 12/01/31 | CAD 517 | 676 | ||
Poland Government Bond | ||||
Series 0509 | ||||
6.000% due 05/24/09 | PLN 2,400 | 814 | ||
Quebec Residual | ||||
Zero coupon due 12/01/36 | CAD 830 | 182 | ||
2,683 | ||||
United States Government Agencies - 4.6% | ||||
Fannie Mae | ||||
3.500% due 03/28/08 | 1,790 | 1,754 | ||
2.500% due 06/15/08 (Ñ) | 3,065 | 2,950 | ||
4.875% due 04/15/09 (Ñ) | 5,480 | 5,481 | ||
7.250% due 01/15/10 (Ñ) | 940 | 1,005 | ||
3.875% due 02/15/10 (Ñ) | 1,495 | 1,450 | ||
4.750% due 04/19/10 | 2,950 | 2,920 | ||
4.125% due 05/15/10 (Ñ) | 565 | 551 | ||
7.125% due 06/15/10 (Ñ) | 700 | 752 | ||
4.250% due 08/15/10 (Ñ) | 7,620 | 7,456 | ||
5.125% due 04/15/11 (Ñ) | 2,615 | 2,640 | ||
4.375% due 09/15/12 (Ñ) | 740 | 721 | ||
4.375% due 03/15/13 (Ñ) | 140 | 136 | ||
Zero coupon due 07/05/14 | 2,280 | 1,571 | ||
5.250% due 03/24/15 | 495 | 489 | ||
5.375% due 07/15/16 | 115 | 119 | ||
5.000% due 04/26/17 | 945 | 914 | ||
Zero coupon due 06/01/17 (Ñ) | 1,375 | 809 | ||
6.625% due 11/15/30 (Ñ) | 425 | 513 | ||
6.210% due 08/06/38 | 420 | 488 | ||
Federal Farm Credit Bank (Ñ) | ||||
5.125% due 08/25/16 | 740 | 751 | ||
Federal Home Loan Bank System | ||||
5.000% due 09/18/09 (Ñ) | 6,755 | 6,790 | ||
5.375% due 08/19/11 (Ñ) | 490 | 500 | ||
5.375% due 05/15/19 (Ñ) | 315 | 321 | ||
5.125% due 08/15/19 | 330 | 332 | ||
5.500% due 07/15/36 | 310 | 327 | ||
Series 567 | ||||
4.375% due 09/17/10 | 350 | 344 | ||
Series VB15 (Ñ) | ||||
5.000% due 12/21/15 | 1,500 | 1,500 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Zero coupon due 09/26/19 | 1,355 | 707 | ||
Series 1 |
134
Table of Contents
Zero coupon due 05/11/16 | 140 | 88 | ||
Series 12P | ||||
Zero coupon due 12/06/18 | 420 | 229 | ||
Series 13 | ||||
Zero coupon due 12/27/16 | 490 | 297 | ||
Series 13P | ||||
Zero coupon due 12/27/18 | 1,135 | 617 | ||
Series 16P | ||||
Zero coupon due 04/05/19 | 1,200 | 642 | ||
Series 19 | ||||
Zero coupon due 06/06/16 | 410 | 256 | ||
Series 3P | ||||
Zero coupon due 11/30/17 | 300 | 173 | ||
Series 5P | ||||
Zero coupon due 02/08/18 | 110 | 63 | ||
Series 8P | ||||
Zero coupon due 08/03/18 | 1,085 | 603 | ||
Series 9P | ||||
Zero coupon due 10/06/17 | 540 | 314 | ||
Series A-P | ||||
Zero coupon due 10/06/17 | 260 | 151 | ||
Series B-P | ||||
Zero coupon due 04/06/18 | 565 | 320 | ||
Series C-P | ||||
Zero coupon due 11/30/17 | 870 | 502 | ||
Series E-P | ||||
Zero coupon due 11/02/18 | 835 | 458 | ||
Freddie Mac | ||||
4.000% due 12/15/09 (Ñ) | 3,215 | 3,136 | ||
6.875% due 09/15/10 (Ñ) | 670 | 717 | ||
5.625% due 03/15/11 (Ñ) | 650 | 669 | ||
4.500% due 11/15/11 | 870 | 855 | ||
5.750% due 01/15/12 (Ñ) | 2,415 | 2,510 | ||
5.125% due 07/15/12 (Ñ) | 1,170 | 1,183 | ||
4.875% due 11/15/13 (Ñ) | 2,200 | 2,190 | ||
5.050% due 01/26/15 (Ñ) | 1,155 | 1,150 | ||
5.500% due 07/18/16 (Ñ) | 860 | 895 | ||
5.625% due 11/23/35 (Ñ) | 520 | 508 | ||
Tennessee Valley Authority | ||||
6.150% due 01/15/38 | 1,560 | 1,812 | ||
64,629 | ||||
United States Government Treasuries - 14.3% | ||||
United States Treasury Inflation Indexed Bonds | ||||
2.375% due 04/15/11 (Ñ) | 2,616 | 2,602 | ||
3.375% due 01/15/12 (Ñ) | 1,941 | 2,029 | ||
2.000% due 07/15/14 (Ñ) | 5,727 | 5,579 | ||
1.625% due 01/15/15 (Ñ) | 53 | 50 | ||
1.875% due 07/15/15 (Ñ) | 2,474 | 2,382 | ||
2.500% due 07/15/16 | 2,110 | 2,140 | ||
2.375% due 01/15/25 (Ñ) | 4,943 | 5,004 | ||
2.000% due 01/15/26 (Ñ) | 2,116 | 2,022 | ||
3.625% due 04/15/28 (Ñ) | 756 | 934 | ||
United States Treasury Notes | ||||
3.000% due 11/15/07 (Ñ) | 800 | 785 | ||
4.375% due 12/31/07 (Ñ) | 6,360 | 6,324 | ||
3.375% due 02/15/08 (Ñ) | 820 | 805 | ||
3.750% due 05/15/08 (Ñ) | 10,600 | 10,443 |
135
Table of Contents
3.250% due 01/15/09 (Ñ) | 14,345 | 13,927 | ||
4.000% due 06/15/09 (Ñ) | 325 | 320 | ||
3.375% due 10/15/09 | 2,690 | 2,646 | ||
3.500% due 02/15/10 (Ñ) | 9,540 | 9,224 | ||
4.000% due 03/15/10 (Ñ) | 14,010 | 13,754 | ||
4.125% due 08/15/10 (Ñ) | 455 | 448 | ||
3.875% due 09/15/10 (Ñ) | 4,200 | 4,096 | ||
4.375% due 12/15/10 (Ñ) | 2,475 | 2,456 | ||
4.875% due 04/30/11 (Ñ) | 9,635 | 9,750 | ||
14.000% due 11/15/11 (Ñ) | 1,170 | 1,174 | ||
4.375% due 08/15/12 (Ñ) | 7,140 | 7,075 | ||
4.000% due 11/15/12 (Ñ) | 4,810 | 4,667 | ||
10.375% due 11/15/12 (Ñ) | 2,090 | 2,206 | ||
4.250% due 08/15/13 (Ñ) | 3,880 | 3,805 | ||
4.250% due 11/15/13 (Ñ) | 3,775 | 3,700 | ||
4.750% due 05/15/14 (Ñ) | 3,970 | 4,010 | ||
4.250% due 11/15/14 (Ñ) | 4,550 | 4,445 | ||
4.125% due 05/15/15 (Ñ) | 8,095 | 7,827 | ||
4.250% due 08/15/15 (Ñ) | 3,070 | 2,993 | ||
5.125% due 05/15/16 (Ñ) | 2,950 | 3,067 | ||
8.750% due 05/15/17 (Ñ) | 1,885 | 2,521 | ||
8.875% due 08/15/17 (Ñ) | 695 | 940 | ||
8.125% due 08/15/19 (Ñ) | 6,230 | 8,230 | ||
8.125% due 08/15/21 (Ñ) | 8,125 | 10,965 | ||
Principal Only | ||||
Zero coupon due 11/15/21 (Ñ) | 4,835 | 2,338 | ||
7.125% due 02/15/23 (Ñ) | 8,865 | 11,159 | ||
6.000% due 02/15/26 (Ñ) | 8,010 | 9,193 | ||
6.125% due 08/15/29 (Ñ) | 1,040 | 1,231 | ||
5.375% due 02/15/31 (Ñ) | 3,835 | 4,164 | ||
4.500% due 02/15/36 (Ñ) | 9,444 | 9,115 | ||
202,545 | ||||
Total Long-Term Investments | ||||
(cost $1,452,810) | 1,455,750 | |||
Preferred Stocks - 0.2% | ||||
Auto and Transportation - 0.1% | ||||
General Motors Corp. | 13,100 | 271 | ||
Financial Services - 0.1% | ||||
DG Funding Trust (Å) | 152 | 1,618 | ||
Total Preferred Stocks | ||||
(cost $1,842) | 1,889 | |||
Notional Amount $ | ||||
Options Purchased - 0.0% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 91.75 Put (4) | 918 | — | ||
Dec 2006 92.00 Put (291) | 66,930 | 2 | ||
Dec 2006 92.50 Put (318) | 73,538 | 2 | ||
Dec 2006 92.75 Put (56) | 12,985 | — | ||
Jun 2007 91.25 Put (140) | 31,938 | 1 | ||
Jun 2007 91.75 Put (190) | 43,581 | 1 | ||
Sept 2007 90.75 Put (227) | 51,501 | 1 | ||
Dec 2007 91.25 Put (156) | 35,588 | 1 |
136
Table of Contents
Dec 2007 91.50 Put (3) | 686 | — | ||
United States Treasury Notes | ||||
10 Year Futures | ||||
Nov 2006 102.03 Call (1) | 193,859 | 1 | ||
Nov 2006 107.00 Put (6) | 642 | 1 | ||
Total Options Purchased | ||||
(cost $29) | 10 | |||
Principal Amount ($) or Shares | Market Value $ | |||
Short-Term Investments - 12.0% | ||||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 100 | 100 | ||
AT&T Wireless Services, Inc. | ||||
7.500% due 05/01/07 | 2,605 | 2,631 | ||
AT&T, Inc. (p) | ||||
4.214% due 06/05/07 | 800 | 794 | ||
Bank of Ireland Governor & Co. (ç)(ž) | ||||
5.260% due 12/05/06 | 7,100 | 7,065 | ||
Barclays Bank PLC (ž) | ||||
5.343% due 01/29/07 | 2,500 | 2,506 | ||
Barclays US Funding Corp. (ç)(ž) | ||||
5.275% due 11/21/06 | 5,300 | 5,284 | ||
Bundesobligation | ||||
Series 139 | ||||
4.000% due 02/16/07 | EUR 1,300 | 1,661 | ||
ChevronTexaco Capital Co. | ||||
3.500% due 09/17/07 | 470 | 463 | ||
CIT Group, Inc. | ||||
5.750% due 09/25/07 | 120 | 120 | ||
Countrywide Home Loans, Inc. | ||||
Series MTNK | ||||
5.500% due 02/01/07 | 100 | 100 | ||
DaimlerChrysler NA Holding Corp. (Ê) | ||||
5.640% due 03/07/07 | 2,200 | 2,201 | ||
Danske Corp. (ž) | ||||
5.240% due 01/30/07 | 2,900 | 2,876 | ||
Dexia Delaware LLC (ç)(ž) | ||||
5.265% due 11/21/06 | 600 | 599 | ||
DNB Nor Bank ASA (ž) | ||||
5.275% due 11/13/06 | 7,100 | 7,087 | ||
5.255% due 12/07/06 | 800 | 796 | ||
Duke Energy Field Services LLC | ||||
5.750% due 11/15/06 | 50 | 50 | ||
Fannie Mae (§)(ž) | ||||
Zero coupon due 06/25/07 | 430 | 416 | ||
France Treasury Bill BTF | ||||
Zero coupon due 12/21/06 | EUR 1,300 | 1,651 | ||
General Electric Capital Corp. (ž) | ||||
5.250% due 01/16/07 | 500 | 499 | ||
GMAC LLC | ||||
6.125% due 08/28/07 | 760 | 758 | ||
Golden West Financial Corp. | ||||
4.125% due 08/15/07 | 270 | 267 | ||
Government of Canada (ç)(ž) | 250 | 248 | ||
Zero coupon due 12/15/06 |
137
Table of Contents
Harrah’s Operating Co., Inc. | |||||
7.125% due 06/01/07 | 755 | 759 | |||
HBOS Treasury Services PLC (ç)(ž) | |||||
5.365% due 11/01/06 | 1,100 | 1,094 | |||
Russell Investment Company | |||||
Money Market Fund | 78,184,183 | 78,184 | |||
Skandinaviska Enskilda Banken (ç)(ž) | |||||
5.255% due 12/08/06 | 7,100 | 7,062 | |||
Societe Generale NA (ž) | |||||
5.266% due 12/21/06 (ç) | 5,300 | 5,261 | |||
5.245% due 01/08/07 | 2,600 | 2,575 | |||
Spintab Swedish Mortgage (ž) | |||||
5.270% due 11/20/06 | 7,100 | 7,080 | |||
Sprint Capital Corp. (ç) | |||||
6.000% due 01/15/07 | 975 | 975 | |||
Swedbank (ç)(ž) | |||||
5.275% due 11/09/06 | 500 | 499 | |||
TELUS Corp. | |||||
7.500% due 06/01/07 | 770 | 779 | |||
UBS Financial Del LLC (ç)(ž) | |||||
5.260% due 12/01/06 | 5,000 | 4,989 | |||
United States Treasury Bills (ž)(§) | |||||
5.092% due 11/30/06 (ç) | 255 | 254 | |||
4.898% due 12/07/06 (ç) | 200 | 199 | |||
4.987% due 12/07/06 (ç) | 100 | 100 | |||
4.937% due 12/14/06 (ç) | 1,665 | 1,655 | |||
4.943% due 02/15/07 | 35 | 34 | |||
4.964% due 02/15/07 | 50 | 49 | |||
5.034% due 02/15/07 | 160 | 158 | |||
5.131% due 02/15/07 | 75 | 74 | |||
United States Treasury Notes (Ñ) | |||||
3.500% due 11/15/06 | 440 | 440 | |||
2.875% due 11/30/06 | 8,170 | 8,154 | |||
3.000% due 12/31/06 | 1,000 | 996 | |||
4.375% due 05/15/07 | 3,630 | 3,617 | |||
6.625% due 05/15/07 | 515 | 519 | |||
4.250% due 10/31/07 | 6,150 | 6,110 | |||
Total Short-Term Investments | |||||
(cost $169,844) | 169,788 | ||||
Other Securities - 19.5% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 70,817,070 | 70,817 | |||
State Street Securities Lending Quality Trust (×) | 205,158,768 | 205,159 | |||
Total Other Securities | |||||
(cost $275,976) | 275,976 | ||||
Total Investments - 134.8% | |||||
(identified cost $1,900,501) | 1,903,413 | ||||
Other Assets and Liabilities, | |||||
Net - (34.8%) | (491,612 | ) | |||
Net Assets - 100.0% | 1,411,801 | ||||
138
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Euribor Futures | |||||
expiration date 06/07 (30) | 9,201 | (8 | ) | ||
Eurodollar Futures (CME) | |||||
expiration date 12/06 (138) | 32,649 | (212 | ) | ||
expiration date 03/07 (464) | 109,945 | (279 | ) | ||
expiration date 06/07 (383) | 90,915 | (86 | ) | ||
expiration date 09/07 (760) | 180,738 | 137 | |||
expiration date 12/07 (528) | 125,723 | 269 | |||
expiration date 03/08 (12) | 2,859 | — | |||
LIBOR Futures | |||||
expiration date 06/07 (10) | 2,256 | (3 | ) | ||
expiration date 09/07 (17) | 3,837 | (4 | ) | ||
expiration date 12/07 (27) | 6,095 | (5 | ) | ||
expiration date 03/08 (7) | 1,581 | (1 | ) | ||
expiration date 06/08 (5) | 1,130 | (1 | ) | ||
expiration date 09/08 (7) | 1,582 | (1 | ) | ||
United States Treasury Bonds | |||||
expiration date 12/06 (71) | 7,999 | 145 | |||
United States Treasury | |||||
2 Year Notes expiration date 12/06 (128) | 26,164 | 44 | |||
United States Treasury | |||||
5 Year Notes expiration date 12/06 (392) | 41,381 | 262 | |||
United States Treasury | |||||
10 Year Notes expiration date 12/06 (124) | 13,419 | 133 | |||
Short Positions | |||||
Eurodollar Futures (CME) | |||||
expiration date 03/08 (14) | 3,335 | (20 | ) | ||
United States Treasury Bonds | |||||
expiration date 12/06 (65) | 7,323 | (119 | ) | ||
United States Treasury | |||||
10 Year Notes expiration date 12/06 (236) | 25,540 | (278 | ) | ||
Total Unrealized Appreciation | |||||
(Depreciation) on Open Futures Contracts | (27 | ) | |||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (26) | 6,175 | (24 | ) | ||
Dec 2006 95.50 Put (30) | 7,162 | (65 | ) | ||
Mar 2007 94.75 Put (9) | 2,381 | (2 | ) | ||
Mar 2007 95.25 Put (10) | 2,132 | (12 | ) | ||
Federal National Mortgage Association | |||||
Nov 2006 100.40 Call (1) | 501,992 | (1 | ) | ||
United States Treasury Bonds | |||||
Nov 2006 111.00 Call (37) | 4,107 | (64 | ) | ||
Nov 2006 104.00 Put (28) | 2,912 | — | |||
Nov 2006 105.00 Put (9) | 945 | — | |||
Feb 2007 109.00 Put (18) | 1,962 | (7 | ) |
139
Table of Contents
United States Treasury Notes | |||||
2 Year Futures | |||||
Nov 2006 101.75 Put (352) | 71,632 | (11 | ) | ||
10 Year Futures | |||||
Nov 2006 105.00 Call (20) | 2,100 | (64 | ) | ||
Nov 2006 106.00 Call (15) | 1,590 | (34 | ) | ||
Nov 2006 109.00 Call (4) | 436 | (1 | ) | ||
Feb 2007 110.00 Call (11) | 1,210 | (4 | ) | ||
Nov 2006 106.00 Put (4) | 424 | — | |||
Total Liability for Options Writtenpremiums received $208) | (289 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | |||
USD 832 | AUD 1,089 | 11/07/06 | 10 | |||
USD 456 | CAD 519 | 11/07/06 | 6 | |||
USD 941 | CAD 1,063 | 11/07/06 | 5 | |||
USD 2,140 | CAD 2,380 | 11/07/06 | (21) | |||
USD 386 | CAD 439 | 11/30/06 | 6 | |||
USD 317 | CAD 356 | 02/07/07 | 2 | |||
USD 258 | CNY 1,996 | 03/19/07 | (2) | |||
USD 993 | EUR 791 | 11/07/06 | 16 | |||
USD 511 | EUR 400 | 03/23/07 | 3 | |||
USD 398 | GBP 214 | 11/30/06 | 10 | |||
USD 3,011 | JPY 342,993 | 11/15/06 | (72) | |||
USD 3,019 | JPY 342,993 | 11/15/06 | (80) | |||
USD 596 | JPY 69,000 | 12/20/06 | (2) | |||
USD 2,511 | JPY 291,900 | 12/20/06 | 3 | |||
USD 2,095 | JPY 247,044 | 02/07/07 | 46 | |||
USD 827 | PLN 2,556 | 11/07/06 | 17 | |||
USD 97 | SGD 154 | 11/27/06 | 2 | |||
USD 95 | TWD 3,080 | 11/22/06 | (3) | |||
AUD 1,089 | USD 821 | 11/07/06 | (22) | |||
CAD 2,380 | JPY 247,044 | 11/07/06 | 19 | |||
CAD 2,380 | JPY 247,044 | 11/07/06 | (23) | |||
CAD 162 | USD 145 | 11/07/06 | — | |||
CAD 356 | USD 316 | 11/07/06 | (2) | |||
CAD 1,063 | USD 935 | 11/07/06 | (12) | |||
CAD 1,063 | USD 944 | 02/07/07 | (5) | |||
EUR 222 | USD 285 | 11/07/06 | 1 | |||
EUR 569 | USD 723 | 11/07/06 | (3) | |||
EUR 623 | USD 793 | 12/08/06 | (4) | |||
EUR 1,339 | USD 1,708 | 12/08/06 | (5) | |||
EUR 791 | USD 998 | 02/07/07 | (17) | |||
JPY 247,044 | USD 2,069 | 11/07/06 | (45) | |||
JPY 64,100 | USD 555 | 12/20/06 | 4 | |||
PLN 2,556 | USD 829 | 11/07/06 | (14) | |||
PLN 2,556 | USD 829 | 02/07/07 | (18) | |||
Total Unrealized Appreciation (Depreciation) on OpenForeign Currency Exchange Contracts | (200) | |||||
140
Table of Contents
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | ||||||
Bank of America | USD 600 | 5.000% | Three Month LIBOR | 12/20/36 | (23 | ) | |||||
Barclays Bank PLC | GBP 6,200 | 5.000% | Six Month LIBOR | 06/15/07 | (11 | ) | |||||
Barclays Bank PLC | USD 10,700 | 5.000% | Three Month LIBOR | 12/20/08 | (7 | ) | |||||
BNP Paribas | EUR 1,200 | 2.090% | Consumer Price Index (France) | 10/15/10 | 16 | ||||||
Deutsche Bank AG | USD 400 | 5.000% | Three Month LIBOR | 12/20/36 | (15 | ) | |||||
Goldman Sachs | USD 300 | 5.000% | Three Month LIBOR | 12/20/36 | (11 | ) | |||||
Lehman Brothers | GBP 3,300 | 4.500% | Six Month LIBOR | 09/20/09 | (86 | ) | |||||
Lehman Brothers | USD 500 | 5.000% | Three Month LIBOR | 12/15/35 | (15 | ) | |||||
Merrill Lynch | GBP 5,700 | 4.500% | Six Month LIBOR | 09/20/09 | (148 | ) | |||||
Merrill Lynch | GBP 200 | Six Month LIBOR | 4.000% | 12/15/35 | (6 | ) | |||||
Morgan Stanley | EUR 1,300 | 6.000% | Six Month LIBOR | 06/18/34 | 301 | ||||||
Royal Bank of Scotland | USD 2,100 | 5.000% | Three Month LIBOR | 12/20/36 | (106 | ) | |||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($83) | (111 | ) | |||||||||
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Russian Federation | JP Morgan | 100 | 0.460 | % | 06/20/07 | — | |||||
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - ($0) | — | ||||||||||
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund
141
Table of Contents
Categories | % of Net Assets | ||
Asset-Backed Securities | 8.0 | ||
Corporate Bonds and Notes | 16.3 | ||
International Debt | 3.5 | ||
Loan Agreements | 0.3 | ||
Mortgage-Backed Securities | 55.8 | ||
Municipal Bonds | 0.1 | ||
Non-US Bonds | 0.2 | ||
United States Government Agencies | 4.6 | ||
United States Government Treasuries | 14.3 | ||
Preferred Stocks | 0.2 | ||
Options Purchased | — | * | |
Short-Term Investments | 12.0 | ||
Other Securities | 19.5 | ||
Total Investments | 134.8 | ||
Other Assets and Liabilities, Net | (34.8 | ) | |
100.00 | |||
Futures Contracts | — | * | |
Options Written | — | * | |
Foreign Currency Exchange Contracts | — | * | |
Interest Rate Swap Contracts | — | * | |
Credit Default Swap Contracts | — | * |
* | Less than .05% of net assets. |
142
Table of Contents
(This page intentionally left blank)
143
Table of Contents
Fixed Income III Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Fixed Income III Fund—Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.95 | % | |
5 Years | 5.11 | %§ | |
10 Years | 6.20 | %§ |
Fixed Income III Fund—Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.81 | % | |
5 Years | 4.87 | %§ | |
10 Years | 6.02 | %§ |
Fixed Income III—Class Y‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.03 | % | |
Since Inception | 2.80 | % |
Lehman Brothers Aggregate Bond Index **
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.19 | % | |
5 Years | 4.51 | %§ | |
10 Years | 6.26 | %§ |
Fixed Income III Fund
144
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide current income, and as a secondary objective, capital appreciation.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Fixed Income III Fund Class I, Class E and Class Y gained 4.95%, 4.81% and 5.03%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 5.19% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) BBB Rated Fixed Income Funds Average returned 5.33%. For the same period, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 4.61%. These returns serve as peer comparisons and are expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Corporate bonds have done well over the last four years, leaving the yield spread between corporates and Treasuries for bearing credit risk very thin. As a result, the Fund’s money managers were modestly underweight in this sector, which detracted from Fund performance as the corporate sector continued to post strong earnings and had very few defaults. Given low yields across the globe, strong demand also drove the corporate market as investors searched for any possible incremental yield. This led to continued strong market demand for corporate bonds.
As illustrated by the average actively managed mutual fund underperforming the benchmark, volatile markets over the fiscal year made it difficult for active money managers to correctly gauge the direction and magnitude of interest rate changes. While 10 year Treasuries looked to have started and ended the fiscal year with nearly the same yield, over the year, yields ranged from 4.33% to 5.24%. Further, the Federal Reserve’s aggressive rate hikes surprised the market as evidenced by futures markets that trade based on the probability of Fed rate hikes. Despite this volatility, over the fiscal year, the Fund was able to effectively offset losses from an underweight to the corporate market through modest interest rate timing and security selection.
With greater exposure to high yield and emerging market debt relative to the Index, there was value added to Fund performance from these sectors as they continued to perform strongly. Over the year the Fund’s allocation to high yield bonds ranged from 3.5% to 4.5% and the allocation to emerging market debt ranged from 1/2% to 1%. Additionally, a very small exposure to non-dollar securities in the most recent quarter detracted from performance as the U.S. dollar strengthened versus many other currencies, which was contrary to the Fund’s money managers’ views.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Overall, the Fund’s underperformance compared to its benchmark was largely due to the Fund’s operating expenses which are reflected in its performance. The benchmark returns do not include any expenses.
With a tilt to be short in duration over the year expecting interest rates to generally rise, the Fund’s money managers successfully moved their duration (a measure of a bond price’s sensitivity to a change in interest rates) exposure longer as interest rates rose and shorter when interest rates fell. A longer duration increases returns in a falling interest rate environment as longer duration bonds outperform more when interest rates fall. This duration management added modestly to the Fund’s incremental return in a volatile market.
At the money manager level, Delaware Management Company was the best performer because of its significant overweight to high yield and emerging market debt. Believing that high valuations that included a market in search of yield would lead to a continued premium for these bonds, Delaware overweighted high yield and emerging markets debt. Bear Stearns Asset Management Inc. also did well due to its overweight to corporate bonds and strong security selection within this sector.
Believing the Fed would be finished raising interest rates by year end of 2005, Pacific Investment Management Company, LLC (PIMCO) struggled early in the year by taking positions in short maturity bonds, which fell in price as short-term interest rates rose. Near the end of the fiscal period, PIMCO’s positioning was rewarded and its performance rebounded to end modestly positive for the
145
Table of Contents
year. Lastly, Morgan Stanley Investment Management Inc. lagged the benchmark due to its view that rates across the curve would rise. Morgan Stanley also struggled with security selection within the mortgage sector, believing prepayments would slow and paying a premium for high coupon securities, which subsequently prepaid at par.
Describe any changes to the Fund’s structure or the money manager line-up.
In June, Goldman Sachs Asset Management, L.P. was added as a money manager for the Fund. The goal of this addition was to further diversify the Fund as well as add a bond money manager with diversified skills in modest duration management, sector rotation, security selection within traditional and riskier sectors, and capabilities in non-dollar bond markets.
Money Managers as of October 31, 2006 | Styles | |
Bear Stearns Asset Management, Inc. | Sector Rotation | |
Delaware Management Company, a series of Delaware Management Business Trust | Sector Rotation | |
Goldman Sachs Asset Management, L.P. | Fully Discretionary | |
Morgan Stanley Investment Management, Inc. | Fully Discretionary | |
Pacific Investment Management Company, LLC | Fully Discretionary |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/ depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. | |
‡‡ | The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares are the performance of the Fund’s Class I Shares from November 1, 1996 to May 13, 1999 and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class Y Shares on June 7, 2000, closed its Class Y Shares on November 19, 2001 and reopened its Class Y Shares on June 23, 2005. The returns shown for Class Y Shares prior to June 23, 2005 are the performance of the Fund’s Class I Shares. Class Y Shares will have substantially similar annual returns (both before and after tax) as the Class I Shares because the Shares of each Class are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that the Class Y Shares do not have the same expenses as the Class I Shares. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
146
Table of Contents
Russell Investment Company
Fixed Income III Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class E | Actual Performance | Hypothetical Performance (5% return before | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,041.60 | $ | 1,020.57 | ||
Expenses Paid During Period* | $ | 4.73 | $ | 4.69 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.92% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
147
Table of Contents
Class I | Actual Performance | Hypothetical Performance (5% return before | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,041.90 | $ | 1,021.78 | ||
Expenses Paid During Period* | $ | 3.50 | $ | 3.47 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.68% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class Y | Actual Performance | Hypothetical Performance (5% return before | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,042.20 | $ | 1,022.03 | ||
Expenses Paid During Period* | $ | 3.24 | $ | 3.21 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.63% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the period since inception). |
148
Table of Contents
Russell Investment Company
Fixed Income III Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments—85.4% | ||||
Asset-Backed Securities—6.9% | ||||
Accredited Mortgage Loan Trust | ||||
Series 2004-2 Class A2 | ||||
5.620% due 07/25/34 | 113 | 113 | ||
ACE Securities Corp. | ||||
Series 2004-IN1 Class A1 | ||||
5.650% due 05/25/34 | 271 | 272 | ||
Series 2005-SD3 Class A | ||||
5.720% due 08/25/45 | 721 | 722 | ||
Series 2006-ASP Class A2A (Ê) | ||||
5.404% due 10/25/36 | 400 | 400 | ||
Aegis Asset Backed Securities Trust (Ê) | ||||
Series 2003-3 Class M2 | ||||
6.970% due 01/25/34 | 265 | 268 | ||
Series 2005-4 Class 1A1 | ||||
5.440% due 10/25/35 | 189 | 189 | ||
Alliance Capital Funding LLC (p) | ||||
Series 1998-1 Class A3 | ||||
5.840% due 02/15/10 | 2 | 2 | ||
American Airlines, Inc. | ||||
6.817% due 11/23/12 | 125 | 125 | ||
7.377% due 05/23/19 | 180 | 173 | ||
6.977% due 05/23/21 | 59 | 57 | ||
American Express Credit Account Master Trust (Ê) | ||||
Series 2002-1 Class A | ||||
5.440% due 09/15/09 | 500 | 500 | ||
Series 2002-2 Class A | ||||
5.440% due 11/16/09 | 675 | 676 | ||
Series 2002-3 Class A | ||||
5.430% due 12/15/09 | 1,075 | 1,076 | ||
Ameriquest Mort`gage Securities, Inc. | ||||
Series 2002-D Class M1 (Ê) | ||||
7.820% due 02/25/33 | 145 | 145 | ||
Series 2004-R10 Class A5 | ||||
5.710% due 11/25/34 | 112 | 112 | ||
Series 2004-R4 Class A1A (Ê)(p) | ||||
5.660% due 06/25/34 | 430 | 430 | ||
Series 2004-R8 Class A5 | ||||
5.700% due 09/25/34 | 320 | 320 | ||
Series 2006-R1 Class A2C (Ê) | ||||
5.520% due 08/01/16 | 260 | 260 | ||
Argent Securities, Inc. (Ê) | ||||
Series 2005-W5 Class A2A | ||||
5.410% due 01/25/36 | 834 | 834 | ||
Asset Backed Securities Corp. Home Equity (Ê) |
149
Table of Contents
Series 2005-HE3 Class A4 | ||||
5.520% due 04/25/35 | 684 | 684 | ||
Asset Backed Securities Corp. Home Equity Loan Trust (Ê) | ||||
Series 2004-HE6 Class A1 | ||||
5.595% due 09/25/34 | 410 | 410 | ||
Bayview Financial Acquisition Trust | ||||
Series 2006-A Class 1A3 | ||||
5.865% due 02/28/41 | 340 | 341 | ||
Bear Stearns Asset Backed Securities, Inc. | ||||
Series 2004-BO1 Class 1A1 (Ê) | ||||
5.530% due 09/25/34 | 164 | 165 | ||
Series 2005-AQ1 Class 2A1 | ||||
5.550% due 03/25/35 | 355 | 355 | ||
Series 2005-HE1 Class A1 (Ê) | ||||
5.440% due 11/25/35 | 271 | 272 | ||
Series 2005-HE8 Class A1 (Ê) | ||||
5.450% due 08/25/35 | 146 | 146 | ||
Capital Auto Receivables Asset Trust | ||||
Series 2003-3 Class A3B (Ê) | ||||
5.410% due 01/15/08 | 132 | 132 | ||
Series 2004-2 Class A2 | ||||
3.350% due 02/15/08 | 219 | 217 | ||
Carrington Mortgage Loan Trust (Ê) | ||||
Series 2005-NC4 Class A1 | ||||
5.474% due 09/25/35 | 199 | 199 | ||
Series 2006-OPT Class A1 | ||||
5.385% due 02/25/36 | 356 | 356 | ||
Chase Credit Card Master Trust (Ê) | ||||
Series 2002-1 Class A | ||||
5.430% due 06/15/09 | 1,500 | 1,501 | ||
Chase Manhattan Auto Owner Trust | ||||
Series 2006-B Class A2 | ||||
5.280% due 10/15/09 | 1,000 | 1,000 | ||
Citibank Credit Card Issuance Trust | ||||
Series 2000-A3 Class A3 | ||||
6.875% due 11/16/09 | 200 | 203 | ||
Citifinancial Mortgage Securities, Inc. (Ê) | ||||
Series 2003-4 Class AF3 | ||||
3.221% due 10/25/33 | 14 | 13 | ||
Citigroup Mortgage Loan Trust, Inc. (Ê) | ||||
Series 2004-RES Class A1 | ||||
5.620% due 11/25/34 | 303 | 304 | ||
Series 2006-NC1 Class A2A | ||||
5.394% due 08/25/36 | 689 | 689 | ||
Countrywide Asset-Backed Certificates | ||||
Series 2004-13 Class AF3 | ||||
3.989% due 02/25/31 | 172 | 170 | ||
Series 2004-BC1 Class M1 (Ê) | ||||
5.820% due 02/25/34 | 175 | 176 | ||
Series 2005-12 Class 2A2 | ||||
4.898% due 02/25/36 | 190 | 188 | ||
Series 2005-16 Class 2AF1 | ||||
5.480% due 05/25/36 | 635 | 635 | ||
Series 2005-7 Class AF2 | ||||
4.367% due 11/25/35 | 190 | 188 | ||
Series 2006-11 Class 1AF4 | ||||
6.300% due 09/25/46 | 405 | 414 |
150
Table of Contents
Series 2006-13 Class 1AF3 | ||||
5.944% due 05/25/33 | 595 | 601 | ||
Series 2006-15 Class A3 | ||||
5.689% due 10/25/46 | 230 | 231 | ||
Series 2006-17 Class 2A1 (Ê) | ||||
5.380% due 03/25/47 | 500 | 500 | ||
Series 2006-3 Class 2A2 (Ê) | ||||
5.510% due 02/25/36 | 510 | 511 | ||
Series 2006-S2 Class A2 | ||||
5.627% due 07/25/27 | 385 | 386 | ||
Series 2006-S3 Class A2 | ||||
6.085% due 06/25/21 | 445 | 451 | ||
Series 2006-S6 Class A2 | ||||
5.519% due 03/25/34 | 480 | 480 | ||
Countrywide Home Equity Loan Trust (Ê) | ||||
Series 2006-H Class 2A1B | ||||
5.476% due 11/15/36 | 2,000 | 2,001 | ||
Credit-Based Asset Servicing and Securitization LLC | ||||
Series 2005-CB1 Class AF2 | ||||
4.090% due 12/25/35 | 315 | 313 | ||
Series 2005-CB4 Class AV1 (Ê) | ||||
5.430% due 08/25/35 | 191 | 191 | ||
Series 2005-CB5 Class AV1 (Ê) | ||||
5.440% due 08/25/35 | 158 | 158 | ||
Series 2005-CB8 Class AF1B | ||||
5.451% due 12/25/35 | 207 | 206 | ||
Series 2006-CB5 Class A1 (Ê) | ||||
5.384% due 06/25/36 | 621 | 622 | ||
Series 2006-SL1 Class A2 (p) | ||||
5.556% due 09/25/36 | 410 | 410 | ||
Dunkin Securitization (p) | ||||
Series 2006-1 Class A2 | ||||
5.779% due 06/20/31 | 320 | 325 | ||
Entergy Gulf States, Inc. (Ê) | ||||
5.800% due 12/01/09 | 100 | 100 | ||
Fannie Mae Grantor Trust | ||||
Series 2003-T4 Class 2A5 | ||||
4.907% due 09/26/33 | 228 | 226 | ||
First Franklin Mortgage Loan Asset Backed | ||||
Certificates (Ê) | ||||
Series 2005-FF7 Class A2 | ||||
5.485% due 07/25/35 | 439 | 439 | ||
Series 2006-FF1 Class A2 | ||||
5.374% due 07/25/36 | 625 | 625 | ||
Fremont Home Loan Trust | ||||
Series 2005-E Class 2A1 | ||||
5.420% due 01/25/36 | 139 | 139 | ||
Series 2006-3 Class 2A1 (Ê) | ||||
5.390% due 02/27/37 | 400 | 400 | ||
GE Capital Credit Card Master Note Trust (Ê) | ||||
Series 2004-1 Class A | ||||
5.380% due 06/15/10 | 300 | 300 | ||
Series 2004-2 Class A | ||||
5.370% due 09/15/10 | 600 | 600 | ||
GE Dealer Floorplan Master Note Trust | ||||
Series 2004-2 Class A | ||||
5.400% due 07/20/09 | 625 | 625 |
151
Table of Contents
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-HE5 Class A3 | ||||
3.970% due 09/25/34 | 494 | 489 | ||
GSAA Home Equity Trust | ||||
Series 2006-4 Class 1A2 | ||||
5.977% due 03/25/36 | 524 | 526 | ||
GSAA Trust (Ê) | ||||
Series 2006-2 Class 2A3 | ||||
5.590% due 12/25/35 | 595 | 596 | ||
GSAMP Trust | ||||
Series 2003-HE2 Class M1 | ||||
5.970% due 08/25/33 | 305 | 306 | ||
Series 2004-SEA Class A2A (Ê) | ||||
5.610% due 03/25/34 | 184 | 184 | ||
Series 2005-HE4 Class A2A (Ê) | ||||
5.444% due 08/25/35 | 141 | 141 | ||
Series 2006-HE4 Class A2A (Ê) | ||||
5.394% due 06/25/36 | 683 | 683 | ||
Series 2006-S3 Class A1 | ||||
6.085% due 05/25/36 | 165 | 165 | ||
Harley-Davidson Motorcycle Trust | ||||
Series 2004-2 Class A1 | ||||
2.180% due 01/15/09 | 31 | 30 | ||
Heritage Property Investment Trust | ||||
5.125% due 04/15/14 | 300 | 293 | ||
Home Equity Asset Trust | ||||
Series 2003-5 Class M1 | ||||
6.020% due 12/25/33 | 460 | 462 | ||
Series 2005-2 Class 2A2 (Ê) | ||||
5.520% due 07/25/35 | 289 | 289 | ||
Indymac Residential Asset Backed Trust (Ê) | ||||
Series 2006-H2 Class A | ||||
5.478% due 06/28/36 | 919 | 919 | ||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||
Series 2006-WMC Class A2 | ||||
5.380% due 08/25/36 | 283 | 283 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-1 Class 2A2 | ||||
4.660% due 07/25/35 | 275 | 275 | ||
Series 2006-16N Class A1A | ||||
5.410% due 11/25/46 | 700 | 700 | ||
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.610% due 10/25/34 | 140 | 140 | ||
Series 2006-1 Class 2A1 | ||||
5.410% due 02/25/36 | 241 | 242 | ||
Mastr Asset Backed Securities Trust (Ê) | ||||
Series 2003-WMC Class M2 | ||||
6.970% due 08/25/33 | 99 | 99 | ||
MBNA Credit Card Master Note Trust (Ê) | ||||
Series 2002-A10 Class A10 | ||||
5.470% due 02/16/10 | 550 | 551 | ||
MBNA Master Credit Card Trust | ||||
Series 2000-E Class A | ||||
7.800% due 10/15/12 | 705 | 770 | ||
Merrill Lynch Mortgage Investors, Inc. | ||||
Series 2005-NCB Class A1A |
152
Table of Contents
5.451% due 07/25/36 | 69 | 69 | ||
Series 2006-AR1 Class A2C (Ê) | ||||
5.484% due 03/25/37 | 500 | 500 | ||
Mid-State Trust | ||||
Series 2003-11 Class A1 | ||||
4.864% due 07/15/38 | 55 | 53 | ||
Series 2004-1 Class A | ||||
6.005% due 08/15/37 | 56 | 56 | ||
Series 2005-1 Class A | ||||
5.745% due 01/15/40 | 76 | 76 | ||
Series 2006-1 Class A (Å) | ||||
5.787% due 10/15/40 | 560 | 560 | ||
Morgan Stanley ABS Capital I (Ê) | ||||
Series 2003-NC8 Class M3 | ||||
7.420% due 09/25/33 | 141 | 142 | ||
Series 2004-NC5 Class A2 | ||||
5.620% due 05/25/34 | 581 | 581 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-12X Class A6A | ||||
5.726% due 10/25/36 | 350 | 350 | ||
Nationstar Home Equity Loan Trust (Ê) | ||||
Series 2006-B Class AV1 | ||||
5.400% due 09/25/36 | 800 | 800 | ||
New Century Home Equity Loan Trust (Ê) | ||||
Series 2004-3 Class A6 | ||||
5.860% due 11/25/34 | 425 | 426 | ||
Series 2004-4 Class M2 | ||||
5.850% due 02/25/35 | 380 | 382 | ||
Newcastle Mortgage Securities Trust (Ê) | ||||
Series 2006-1 Class A1 | ||||
5.389% due 03/25/36 | 642 | 642 | ||
Northwest Airlines, Inc. (o) | ||||
7.041% due 04/01/22 | 98 | 98 | ||
NWA Trust (o) | ||||
Series 1995-2 Class A | ||||
9.250% due 06/21/14 | 285 | 294 | ||
Option One Mortgage Loan Trust (Ê) | ||||
Series 2003-2 Class M2 | ||||
7.020% due 04/25/33 | 114 | 115 | ||
Series 2003-3 Class M3 | ||||
7.320% due 06/25/33 | 79 | 80 | ||
Series 2003-4 Class M2 | ||||
6.970% due 07/25/33 | 208 | 210 | ||
Series 2005-4 Class A3 | ||||
5.584% due 11/25/35 | 510 | 511 | ||
Ownit Mortgage Loan Asset Backed Certificates | ||||
Series 2006-2 Class A2B | ||||
5.633% due 01/25/37 | 150 | 150 | ||
Park Place Securities, Inc. (Ê) | ||||
Series 2004-MCW Class A1 | ||||
5.642% due 10/25/34 | 2,025 | 2,021 | ||
Series 2005-WCW Class M1 | ||||
5.770% due 09/25/35 | 375 | 377 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2005-1 Class AF2 | ||||
3.914% due 05/25/35 | 105 | 105 | ||
Series 2005-6 Class A3 |
153
Table of Contents
5.680% due 01/25/36 | 415 | 415 | ||
Power Contract Financing LLC (p) | ||||
6.256% due 02/01/10 | 137 | 138 | ||
RAAC Series (Ê) | ||||
Series 2006-SP1 Class A1 | ||||
5.424% due 09/25/45 | 415 | 415 | ||
Renaissance Home Equity Loan Trust | ||||
Series 2004-4 Class AF2 | ||||
3.856% due 02/25/35 | 54 | 54 | ||
Series 2005-1 Class M1 | ||||
5.357% due 05/25/35 | 190 | 187 | ||
Series 2005-2 Class AF2 | ||||
4.361% due 08/25/35 | 315 | 312 | ||
Series 2005-2 Class AF4 | ||||
4.934% due 08/25/35 | 205 | 202 | ||
Series 2005-4 Class A2 | ||||
5.399% due 02/25/36 | 185 | 184 | ||
Series 2005-4 Class A3 | ||||
5.565% due 02/25/36 | 115 | 115 | ||
Series 2006-1 Class AF6 | ||||
5.746% due 05/25/36 | 320 | 324 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2003-RS1 Class AI6A | ||||
5.980% due 12/25/33 | 365 | 370 | ||
Series 2004-RZ2 Class AI3 | ||||
4.300% due 01/25/31 | 118 | 117 | ||
Series 2006-RZ3 Class A1 (Ê) | ||||
5.394% due 08/25/36 | 681 | 681 | ||
Series 2006-RZ4 Class A1A (Ê) | ||||
5.410% due 10/25/36 | 600 | 600 | ||
Residential Asset Securities Corp. | ||||
Series 2001-KS3 Class AII (Ê) | ||||
5.780% due 09/25/31 | 72 | 72 | ||
Series 2003-KS1 Class M2 (Ê) | ||||
7.070% due 01/25/33 | 59 | 59 | ||
Series 2003-KS2 Class MI1 | ||||
4.800% due 04/25/33 | 795 | 779 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2005-2 Class A2A | ||||
5.414% due 10/25/35 | 41 | 41 | ||
Series 2006-3 Class A1 | ||||
5.382% due 11/25/36 | 300 | 300 | ||
SBI Heloc Trust (Ê)(Å) | ||||
Series 2006-1A Class 1A2A | ||||
5.494% due 08/25/36 | 400 | 400 | ||
Securitized Asset Backed Receivables LLC Trust (Ê) | ||||
Series 2006-WM1 Class A2A | ||||
5.394% due 12/25/35 | 345 | 345 | ||
Sharps SP I, LLC | ||||
7.000% due 01/25/34 | 19 | 13 | ||
SLM Student Loan Trust (Ê) | ||||
Series 2006-3 Class A2 | ||||
5.485% due 01/25/16 | 500 | 500 | ||
Small Business Administration | ||||
Series 2000-P10 Class 1 | ||||
7.449% due 08/01/10 | 60 | 63 | ||
Small Business Administration Participation Certificates |
154
Table of Contents
7.500% due 04/01/17 | 1,504 | 1,574 | ||
Soundview Home Equity Loan Trust | ||||
Series 2006-EQ1 Class A1 (Ê) | ||||
5.380% due 10/25/36 | 500 | 500 | ||
Series 2006-WF1 Class A2 | ||||
5.645% due 10/25/36 | 695 | 695 | ||
Specialty Underwriting & Residential Finance (Ê) | ||||
Series 2005-BC2 Class A2A | ||||
5.429% due 12/25/35 | 51 | 51 | ||
Structured Asset Investment Loan Trust (Ê) | ||||
Series 2003-BC1 Class 3A | ||||
5.670% due 11/25/33 | 29 | 29 | ||
Series 2005-3 Class M2 | ||||
5.760% due 04/25/35 | 210 | 211 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2006-AR7 Class A2A | ||||
5.560% due 08/25/36 | 573 | 574 | ||
Structured Asset Securities Corp. | ||||
Series 2001-SB1 Class A2 | ||||
3.375% due 08/25/31 | 164 | 147 | ||
Series 2004-16X Class A2 | ||||
4.910% due 08/25/34 | 200 | 199 | ||
Series 2004-19X Class A2 | ||||
4.370% due 10/25/34 | 600 | 593 | ||
Series 2005-GEL Class A (Ê) | ||||
5.674% due 12/25/34 | 309 | 309 | ||
Series 2005-S2 Class A2 (Ê) | ||||
5.524% due 06/25/35 | 653 | 654 | ||
Series 2006-BC3 Class A2 (Ê) | ||||
5.370% due 10/25/36 | 600 | 600 | ||
Tenaska Alabama II Partners, LP (p) | ||||
6.125% due 03/30/23 | 151 | 154 | ||
Terwin Mortgage Trust (Ê) | ||||
Series 2005-12A Class AF1 | ||||
5.504% due 07/25/36 | 303 | 304 | ||
Series 2005-8HE Class A1 (p) | ||||
5.449% due 07/25/35 | 66 | 66 | ||
TXU Electric Delivery Transition Bond Co. | ||||
Series 2004-1 Class A2 | ||||
4.810% due 11/17/14 | 100 | 99 | ||
Washington Mutual | ||||
5.504% due 11/25/46 | 1,000 | 1,000 | ||
Washington Mutual Mortgage | ||||
Pass-Through Certificates (Ê) | ||||
Series 2006-AR6 Class 1A | ||||
5.588% due 07/25/46 | 444 | 445 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 668 | 668 | ||
World Financial Properties (p) | ||||
6.910% due 09/01/13 | 151 | 158 | ||
6.950% due 09/01/13 | 180 | 189 | ||
58,918 | ||||
Corporate Bonds and Notes - 16.1% | ||||
Abbott Laboratories | ||||
5.600% due 05/15/11 | 365 | 372 | ||
5.875% due 05/15/16 | 200 | 208 |
155
Table of Contents
Abitibi-Consolidated | ||||
Finance, LP (Ñ) | ||||
7.875% due 08/01/09 | 370 | 363 | ||
Ace Capital Trust II | ||||
9.700% due 04/01/30 | 375 | 512 | ||
AIG Matched Funding Corp. (Ê)(p) | ||||
5.390% due 06/16/08 | 400 | 400 | ||
AIG SunAmerica Global Financing VI (p) | ||||
6.300% due 05/10/11 | 375 | 392 | ||
Alamosa Delaware, Inc. | ||||
8.500% due 01/31/12 | 195 | 207 | ||
Allied Waste North America, Inc. | ||||
Series B | ||||
7.125% due 05/15/16 | 160 | 158 | ||
Altria Group, Inc. (Ñ) | ||||
7.750% due 01/15/27 | 175 | 215 | ||
American Casino & Entertainment Properties LLC | ||||
7.850% due 02/01/12 | 425 | 432 | ||
American Electric Power Co., Inc. | ||||
Series C | ||||
5.375% due 03/15/10 | 40 | 40 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.330% due 10/16/08 | 600 | 600 | ||
American Express Co. | ||||
6.800% due 09/01/66 | 210 | 223 | ||
American Express Credit Corp. (Ê) | ||||
5.380% due 03/02/09 | 600 | 600 | ||
American General Finance Corp. | ||||
4.875% due 05/15/10 | 425 | 419 | ||
Series MTNH | ||||
4.625% due 09/01/10 | 20 | 20 | ||
Series MTNI | ||||
4.625% due 05/15/09 | 70 | 69 | ||
American International Group, Inc. | ||||
5.370% due 06/16/09 (Ê)(p) | 300 | 300 | ||
4.700% due 10/01/10 | 440 | 434 | ||
5.375% due 10/18/11 | 405 | 409 | ||
5.050% due 10/01/15 (Ñ) | 415 | 405 | ||
Americo Life, Inc. (p) | ||||
7.875% due 05/01/13 | 75 | 76 | ||
Ameriprise Financial, Inc. (Ñ) | ||||
7.518% due 06/01/66 | 390 | 424 | ||
AmerisourceBergen Corp. | ||||
5.875% due 09/15/15 | 15 | 15 | ||
Series WI | ||||
5.625% due 09/15/12 | 375 | 368 | ||
AmerUs Group Co. | ||||
5.950% due 08/15/15 | 275 | 282 | ||
Anadarko Petroleum Corp. | ||||
5.950% due 09/15/16 | 165 | 168 | ||
ANZ Capital Trust (f)(p) | ||||
4.484% due 12/31/49 | 450 | 438 | ||
Arizona Public Service Co. | ||||
5.800% due 06/30/14 | 180 | 180 | ||
AT&T Corp. | ||||
7.300% due 11/15/11 | 328 | 357 |
156
Table of Contents
8.000% due 11/15/31 | 450 | 564 | ||
AT&T, Inc. | ||||
5.612% due 11/14/08 (Ê) | 1,000 | 1,003 | ||
5.100% due 09/15/14 | 110 | 107 | ||
Avista Capital Trust III | ||||
6.500% due 04/01/34 | 350 | 349 | ||
Avista Corp. | ||||
9.750% due 06/01/08 | 220 | 232 | ||
AXA Financial, Inc. | ||||
6.500% due 04/01/08 | 105 | 107 | ||
BAC Capital Trust XI | �� | |||
6.625% due 05/23/36 | 115 | 124 | ||
BAE Systems Holdings, Inc. (p) | ||||
6.400% due 12/15/11 | 920 | 954 | ||
Ball Corp. | ||||
6.625% due 03/15/18 | 370 | 363 | ||
Bank of America Corp. | ||||
5.875% due 02/15/09 | 70 | 71 | ||
5.400% due 06/19/09 (Ê) | 1,800 | 1,801 | ||
7.800% due 02/15/10 | 65 | 70 | ||
4.250% due 10/01/10 | 45 | 44 | ||
Bank of New York Co., Inc. | ||||
5.125% due 11/01/11 | 445 | 445 | ||
Bear Stearns Cos., Inc. (The) (Ê) | ||||
5.489% due 08/21/09 | 600 | 600 | ||
BellSouth Corp. | ||||
5.580% due 08/15/08 (Ê) | 600 | 600 | ||
4.200% due 09/15/09 | 160 | 156 | ||
6.550% due 06/15/34 | 85 | 88 | ||
BNP Paribas Capital Trust (f)(Å) | ||||
9.003% due 12/29/49 | 850 | 958 | ||
Boeing Capital Corp. (Ñ) | ||||
6.100% due 03/01/11 | 120 | 124 | ||
Boston Scientific Corp. | ||||
6.400% due 06/15/16 | 895 | 909 | ||
Bowater, Inc. (Ñ) | ||||
9.000% due 08/01/09 | 290 | 302 | ||
Burlington Northern Santa Fe Corp. | ||||
6.750% due 07/15/11 | 20 | 21 | ||
6.875% due 12/01/27 | 60 | 67 | ||
California Steel Industries, Inc. | ||||
6.125% due 03/15/14 | 525 | 486 | ||
Carolina Power & Light Co. | ||||
6.500% due 07/15/12 | 45 | 48 | ||
Caterpillar Financial Services Corp. | ||||
Series MTNF | ||||
3.625% due 11/15/07 | 60 | 59 | ||
Caterpillar, Inc. | ||||
6.050% due 08/15/36 | 235 | 246 | ||
CenterPoint Energy Houston | ||||
Electric LLC | ||||
Series J2 | ||||
5.700% due 03/15/13 | 135 | 136 | ||
CenterPoint Energy Resources Corp. | ||||
Series B | ||||
7.875% due 04/01/13 | 410 | 458 | ||
Centex Corp. |
157
Table of Contents
6.500% due 05/01/16 | 350 | 359 | ||
Cingular Wireless Services, Inc. | ||||
7.875% due 03/01/11 | 275 | 302 | ||
8.750% due 03/01/31 | 105 | 138 | ||
CIT Group Holdings, Inc. (Ê) | ||||
5.635% due 01/30/09 | 400 | 401 | ||
CIT Group, Inc. | ||||
3.650% due 11/23/07 | 90 | 88 | ||
5.555% due 08/15/08 (Ê) | 300 | 301 | ||
5.540% due 12/19/08 (Ê) | 100 | 100 | ||
5.500% due 06/08/09 (Ê) | 100 | 100 | ||
5.546% due 08/17/09 (Ê) | 700 | 700 | ||
6.875% due 11/01/09 | 55 | 57 | ||
4.125% due 11/03/09 | 70 | 68 | ||
5.780% due 07/28/11 (Ê) | 400 | 400 | ||
Citigroup Funding, Inc. | ||||
Zero coupon due 07/17/08 | 160 | 163 | ||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||
Series MTNM | ||||
5.430% due 03/07/08 | 700 | 700 | ||
Citigroup, Inc. | ||||
3.500% due 02/01/08 | 830 | 813 | ||
5.525% due 01/30/09 (Ê) | 1,100 | 1,100 | ||
6.500% due 01/18/11 | 425 | 447 | ||
4.700% due 05/29/15 | 170 | 163 | ||
6.125% due 08/25/36 | 680 | 706 | ||
Citizens Communications Co. | ||||
9.250% due 05/15/11 | 190 | 211 | ||
Clorox Co. | ||||
5.444% due 12/14/07 (Ê) | 225 | 225 | ||
4.200% due 01/15/10 | 155 | 151 | ||
CNA Financial Corp. | ||||
6.500% due 08/15/16 | 275 | 288 | ||
Columbus Southern Power Co. | ||||
Series C | ||||
5.500% due 03/01/13 | 75 | 75 | ||
Comcast Cable Communications Holdings, Inc. (Ñ) | ||||
9.455% due 11/15/22 | 250 | 326 | ||
Comcast Cable Communications, Inc. | ||||
6.750% due 01/30/11 | 140 | 147 | ||
Comcast Corp. | ||||
5.800% due 07/14/09 (Ê) | 715 | 716 | ||
5.900% due 03/15/16 | 75 | 75 | ||
6.500% due 11/15/35 | 195 | 199 | ||
6.450% due 03/15/37 | 150 | 152 | ||
Commonwealth Edison Co. | ||||
6.950% due 07/15/18 | 50 | 51 | ||
ConAgra Foods, Inc. | ||||
7.000% due 10/01/28 | 95 | 103 | ||
8.250% due 09/15/30 | 75 | 92 | ||
Consolidated Natural Gas Co. | ||||
Series A | ||||
5.000% due 12/01/14 | 120 | 115 | ||
Series C | ||||
6.250% due 11/01/11 | 80 | 83 | ||
Constellation Brands, Inc. | ||||
Series B |
158
Table of Contents
8.125% due 01/15/12 | 115 | 119 | ||
Consumers Energy Co. | ||||
Series F | ||||
4.000% due 05/15/10 | 50 | 48 | ||
Series H | ||||
4.800% due 02/17/09 | 115 | 114 | ||
Continental Airlines, Inc. (Ñ) | ||||
Series 01-1 | ||||
6.503% due 06/15/11 | 175 | 178 | ||
Cooper Industries, Inc. | ||||
Series WI | ||||
5.250% due 11/15/12 | 165 | 164 | ||
Corrections Corp. of America | ||||
7.500% due 05/01/11 | 155 | 158 | ||
Countrywide Home Loans, Inc. (Ñ) | ||||
3.250% due 05/21/08 | 215 | 209 | ||
COX Communications, Inc. (Ñ) | ||||
4.625% due 01/15/10 | 850 | 831 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2005-CN2 Class A1S | ||||
5.550% due 11/15/19 | 492 | 493 | ||
Credit Suisse First Boston USA, Inc. | ||||
4.875% due 08/15/10 | 130 | 129 | ||
6.500% due 01/15/12 | 70 | 74 | ||
5.500% due 08/15/13 (Ñ) | 55 | 56 | ||
Credit Suisse USA, Inc. | ||||
5.250% due 03/02/11 | 210 | 211 | ||
CVS Corp. | ||||
5.750% due 08/15/11 | 205 | 208 | ||
DaimlerChrysler NA Holding Corp. | ||||
5.820% due 03/13/09 (Ê) | 300 | 300 | ||
8.500% due 01/18/31 | 100 | 120 | ||
DaimlerChrysler North America Holding Corp. (Ê) | ||||
5.918% due 08/03/09 | 890 | 890 | ||
Delhaize America, Inc. | ||||
9.000% due 04/15/31 | 135 | 158 | ||
Detroit Edison Co. | ||||
6.125% due 10/01/10 | 95 | 98 | ||
6.350% due 10/15/32 | 130 | 137 | ||
Developers Diversified Realty Corp. | ||||
4.625% due 08/01/10 | 255 | 248 | ||
5.250% due 04/15/11 | 40 | 40 | ||
5.375% due 10/15/12 | 125 | 124 | ||
Dex Media East Finance Co. | ||||
12.125% due 11/15/12 | 70 | 78 | ||
Dominion Resources, Inc. | ||||
6.300% due 09/30/66 | 350 | 350 | ||
Series A | ||||
5.687% due 05/15/08 | 225 | 226 | ||
Series B | ||||
6.250% due 06/30/12 | 60 | 62 | ||
DPL, Inc. | ||||
6.875% due 09/01/11 | 361 | 381 | ||
Dresdner Funding Trust I (p) | ||||
8.151% due 06/30/31 | 345 | 417 | ||
Drummond Co., Inc. (p) | ||||
7.375% due 02/15/16 | 390 | 372 |
159
Table of Contents
Duke Energy Field Services LLC | ||||
6.875% due 02/01/11 | 20 | 21 | ||
E*Trade Financial Corp. | ||||
8.000% due 06/15/11 | 480 | 498 | ||
Echostar DBS Corp. | ||||
6.375% due 10/01/11 | 195 | 193 | ||
6.625% due 10/01/14 | 95 | 92 | ||
El Paso Corp. | ||||
8.050% due 10/15/30 (Ñ) | 500 | 527 | ||
Series * | ||||
9.625% due 05/15/12 | 300 | 333 | ||
6.700% due 02/15/27 | 240 | 240 | ||
El Paso Natural Gas Co. | ||||
Series A | ||||
7.625% due 08/01/10 | 250 | 258 | ||
Eli Lilly & Co. (Ñ) | ||||
6.770% due 01/01/36 | 405 | 473 | ||
Embarq Corp. | ||||
7.995% due 06/01/36 | 75 | 80 | ||
Energy Transfer Partners, LP | ||||
5.950% due 02/01/15 | 375 | 378 | ||
Entergy Gulf States, Inc. | ||||
3.600% due 06/01/08 | 80 | 78 | ||
6.140% due 12/08/08 | 195 | 195 | ||
Enterprise Products Operating, LP | ||||
4.950% due 06/01/10 | 275 | 270 | ||
8.375% due 08/01/66 | 655 | 704 | ||
Series B | ||||
4.625% due 10/15/09 | 310 | 304 | ||
Erac USA Finance Co. | ||||
7.350% due 06/15/08 (p) | 300 | 309 | ||
5.300% due 11/15/08 | 100 | 100 | ||
Farmers Exchange Capital (p) | ||||
7.050% due 07/15/28 | 970 | 1,017 | ||
Farmers Insurance Exchange (p) | ||||
6.000% due 08/01/14 | 225 | 224 | ||
8.625% due 05/01/24 | 310 | 372 | ||
FedEx Corp. | ||||
5.500% due 08/15/09 | 45 | 45 | ||
7.600% due 07/01/97 | 135 | 160 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 10P | ||||
Zero coupon due 11/30/17 | 840 | 485 | ||
Series 15P | ||||
Zero coupon due 03/07/19 | 90 | 48 | ||
Series 2P | ||||
Zero coupon due 11/30/17 | 105 | 61 | ||
Series 6P | ||||
Zero coupon due 08/03/18 | 530 | 295 | ||
First Union Institutional Capital II | ||||
7.850% due 01/01/27 | 540 | 562 | ||
FirstEnergy Corp. | ||||
Series B | ||||
6.450% due 11/15/11 | 985 | 1,031 | ||
Series C | ||||
7.375% due 11/15/31 | 325 | 380 |
160
Table of Contents
Ford Motor Co. (Ñ) | ||||
7.450% due 07/16/31 | 440 | 345 | ||
7.700% due 05/15/97 | 205 | 149 | ||
Ford Motor Credit Co. | ||||
9.875% due 08/10/11 | 1,235 | 1,276 | ||
Series 2006- (p) | ||||
9.750% due 09/15/10 | 455 | 469 | ||
FPL Group Capital, Inc. | ||||
5.625% due 09/01/11 | 285 | 289 | ||
FTI Consulting, Inc. (p) | ||||
7.750% due 10/01/16 | 380 | 389 | ||
Galaxy Entertainment Finance Co., Ltd. | ||||
10.420% due 12/15/10 | 120 | 126 | ||
General Electric Capital Corp. | ||||
5.410% due 01/05/09 (Ê) | 500 | 500 | ||
5.570% due 01/20/10 (Ê) | 500 | 501 | ||
5.500% due 04/28/11 | 265 | 269 | ||
5.568% due 01/08/16 | 100 | 100 | ||
Series mtn (Ê) | ||||
5.410% due 10/26/09 | 1,400 | 1,399 | ||
Series MTNA | ||||
4.250% due 12/01/10 (Ñ) | 55 | 53 | ||
5.875% due 02/15/12 | 60 | 62 | ||
5.450% due 01/15/13 (Ñ) | 755 | 766 | ||
General Electric Co. | ||||
5.000% due 02/01/13 | 45 | 45 | ||
General Motors Corp. (Ñ) | ||||
8.375% due 07/15/33 | 730 | 650 | ||
Georgia-Pacific Corp. | ||||
9.500% due 12/01/11 | 215 | 234 | ||
8.875% due 05/15/31 | 302 | 319 | ||
Glencore Funding LLC (p) | ||||
6.000% due 04/15/14 | 320 | 311 | ||
Glencore Nickel, Ltd. (O) | ||||
9.000% due 12/01/14 | 235 | — | ||
GMAC LLC | ||||
6.875% due 09/15/11 | 1,615 | 1,626 | ||
8.000% due 11/01/31 | 1,480 | 1,586 | ||
Goldman Sachs Group, Inc. | ||||
5.478% due 06/23/09 (Ê) | 900 | 900 | ||
6.875% due 01/15/11 | 935 | 992 | ||
5.350% due 01/15/16 | 815 | 805 | ||
6.345% due 02/15/34 | 265 | 271 | ||
Series MTNB (Ê) | ||||
5.480% due 07/29/08 | 100 | 100 | ||
5.536% due 11/10/08 | 400 | 401 | ||
5.841% due 07/23/09 | 500 | 503 | ||
Great West Life & Annuity Insurance Co. (Ñ)(Å) | ||||
7.153% due 05/16/46 | 225 | 237 | ||
Greater Bay Bancorp | ||||
Series B | ||||
5.250% due 03/31/08 | 300 | 299 | ||
Halliburton Co. | ||||
5.500% due 10/15/10 | 115 | 116 | ||
Harrah’s Operating Co., Inc. | ||||
5.500% due 07/01/10 | 200 | 192 | ||
6.500% due 06/01/16 | 710 | 625 |
161
Table of Contents
Hartford Financial Services | ||||
Group, Inc. | ||||
5.663% due 11/16/08 | 280 | 282 | ||
7.900% due 06/15/10 | 35 | 38 | ||
HCA, Inc. | ||||
5.500% due 12/01/09 | 375 | 378 | ||
Health Care Property Investors, Inc. | ||||
5.950% due 09/15/11 | 575 | 582 | ||
Healthsouth Corp. (Ñ)(p) | ||||
10.750% due 06/15/16 | 285 | 292 | ||
Hertz Corp. (p) | ||||
8.875% due 01/01/14 | 265 | 277 | ||
Hess Corp. | ||||
6.650% due 08/15/11 | 110 | 115 | ||
7.300% due 08/15/31 | 195 | 221 | ||
Hewlett-Packard Co. (Ê) | ||||
5.524% due 05/22/09 | 175 | 175 | ||
Historic TW, Inc. | ||||
8.050% due 01/15/16 | 335 | 378 | ||
HJ Heinz Co. (p) | ||||
6.428% due 12/01/08 | 100 | 102 | ||
HJ Heinz Finance Co. | ||||
6.000% due 03/15/12 | 50 | 51 | ||
Host Hotels & Resorts, LP (Å) | ||||
6.875% due 11/01/14 | 150 | 151 | ||
Host Marriott, LP | ||||
Series Q | ||||
6.750% due 06/01/16 | 520 | 506 | ||
HRPT Properties Trust (Ñ) | ||||
5.750% due 02/15/14 | 215 | 215 | ||
HSBC Finance Corp. | ||||
5.520% due 09/15/08 (Ê) | 1,900 | 1,905 | ||
5.531% due 12/05/08 (Ê) | 100 | 100 | ||
5.875% due 02/01/09 (Ñ) | 210 | 213 | ||
4.125% due 11/16/09 | 105 | 102 | ||
8.000% due 07/15/10 | 45 | 49 | ||
6.375% due 10/15/11 | 130 | 136 | ||
6.375% due 11/27/12 | 410 | 433 | ||
5.000% due 06/30/15 | 225 | 219 | ||
HSBC Financial Capital Trust IX | ||||
5.911% due 11/30/35 | 300 | 302 | ||
Huntsman International LLC | ||||
Series * | ||||
10.125% due 07/01/09 | 265 | 269 | ||
ICI Wilmington, Inc. | ||||
4.375% due 12/01/08 | 65 | 64 | ||
Innophos Investments Holdings, Inc. (Ê) | ||||
13.405% due 02/15/15 | 496 | 517 | ||
Innophos, Inc. | ||||
8.875% due 08/15/14 | 300 | 299 | ||
Insight Midwest, LP | ||||
10.500% due 11/01/10 | 110 | 114 | ||
International Business Machines Corp. (Ñ) | ||||
7.125% due 12/01/96 | 380 | 446 | ||
International Lease Finance Corp. | ||||
5.750% due 06/15/11 (Ñ) | 70 | 71 | ||
5.625% due 09/20/13 | 190 | 191 |
162
Table of Contents
International Paper Co. | ||||
6.750% due 09/01/11 | 210 | 224 | ||
5.500% due 01/15/14 | 205 | 203 | ||
International Steel Group, Inc. | ||||
6.500% due 04/15/14 | 250 | 250 | ||
Interpublic Group of Cos., Inc. | ||||
5.400% due 11/15/09 | 135 | 128 | ||
7.250% due 08/15/11 | 30 | 29 | ||
iStar Financial, Inc. (Ñ) | ||||
Series B | ||||
5.125% due 04/01/11 | 350 | 344 | ||
ITT Corp. | ||||
7.400% due 11/15/25 | 135 | 159 | ||
JC Penney Co., Inc. | ||||
7.375% due 08/15/08 | 180 | 186 | ||
JC Penney Corp., Inc. | ||||
7.625% due 03/01/97 | 85 | 89 | ||
John Deere Capital Corp. (Ê) | ||||
5.424% due 04/15/08 | 400 | 400 | ||
JP Morgan Chase Bank NA | ||||
6.000% due 08/16/10 | 499 | 462 | ||
Series EMTn | ||||
4.590% due 05/22/45 | BRL 3,445 | 2,074 | ||
JP Morgan Chase Capital XVIII | ||||
Series R | ||||
6.950% due 08/17/36 | 325 | 352 | ||
JP Morgan Chase Capital XX | ||||
Series T | ||||
6.550% due 09/29/36 | 285 | 295 | ||
JPMorgan Chase & Co. | ||||
6.000% due 02/15/09 | 35 | 36 | ||
7.000% due 11/15/09 | 10 | 10 | ||
6.750% due 02/01/11 | 70 | 74 | ||
5.600% due 06/01/11 | 150 | 153 | ||
5.150% due 10/01/15 | 385 | 377 | ||
KBC Bank Funding Trust I (f) | ||||
6.880% due 06/30/49 | EUR 600 | 815 | ||
Kellogg Co. | ||||
Series B | ||||
6.600% due 04/01/11 | 800 | 844 | ||
Kerr-McGee Corp. | ||||
6.950% due 07/01/24 | 250 | 271 | ||
Kinder Morgan Energy Partners, LP | ||||
5.125% due 11/15/14 | 50 | 48 | ||
Kinder Morgan Finance | ||||
Series WI | ||||
5.350% due 01/05/11 | 145 | 142 | ||
Kinder Morgan Finance Co. ULC | ||||
Series WI | ||||
5.700% due 01/05/16 | 190 | 176 | ||
Kraft Foods, Inc. | ||||
4.125% due 11/12/09 | 145 | 141 | ||
5.625% due 11/01/11 | 960 | 973 | ||
6.500% due 11/01/31 | 55 | 60 | ||
Kroger Co. (The) | ||||
7.250% due 06/01/09 | 175 | 183 | ||
8.000% due 09/15/29 | 55 | 63 |
163
Table of Contents
LaBranche & Co., Inc. | ||||
9.500% due 05/15/09 | 345 | 363 | ||
Lehman Brothers Holdings, Inc. | ||||
5.460% due 04/03/09 (Ê) | 800 | 801 | ||
5.493% due 08/21/09 (Ê) | 400 | 400 | ||
5.000% due 01/14/11 | 425 | 422 | ||
5.594% due 07/18/11 (Ê)(Ñ) | 300 | 300 | ||
5.500% due 04/04/16 (Ñ) | 205 | 205 | ||
Series MTNG (Ê) | ||||
5.696% due 11/10/09 | 300 | 301 | ||
Level 3 Financing, Inc. (Ñ) | ||||
12.250% due 03/15/13 | 200 | 225 | ||
Liberty Mutual Group, Inc. (Ñ)(p) | ||||
6.700% due 08/15/16 | 240 | 255 | ||
Lodgenet Entertainment Corp. | ||||
9.500% due 06/15/13 | 220 | 235 | ||
Lubrizol Corp. | ||||
4.625% due 10/01/09 | 220 | 216 | ||
M&I Marshall & Ilsley Bank | ||||
Series BKNT | ||||
3.800% due 02/08/08 | 245 | 240 | ||
Mandalay Resort Group (Ñ) | ||||
6.500% due 07/31/09 | 160 | 160 | ||
Manufacturers & Traders Trust Co. | ||||
5.585% due 12/28/20 | 129 | 129 | ||
Marsh & McLennan Cos., Inc. | ||||
5.150% due 09/15/10 | 290 | 278 | ||
May Department Stores Co. (The) (Ñ) | ||||
6.700% due 07/15/34 | 175 | 176 | ||
MBNA Corp. (Ê) | ||||
Series MTNF | ||||
5.910% due 05/05/08 | 255 | 257 | ||
Medco Health Solutions, Inc. | ||||
7.250% due 08/15/13 | 465 | 505 | ||
Merrill Lynch & Co., Inc. | ||||
5.685% due 07/25/11 (Ê) | 500 | 500 | ||
6.050% due 05/16/16 | 205 | 213 | ||
6.220% due 09/15/26 | 155 | 160 | ||
Series MTn (Ê) | ||||
5.492% due 08/14/09 | 400 | 400 | ||
Series MTNC | ||||
5.440% due 06/16/08 (Ê) | 1,100 | 1,102 | ||
4.250% due 02/08/10 | 1,045 | 1,017 | ||
Metlife, Inc. | ||||
5.000% due 06/15/15 | 185 | 179 | ||
Midamerican Energy Holdings Co. | ||||
Series WI | ||||
6.125% due 04/01/36 | 400 | 411 | ||
Midamerican Funding LLC | ||||
6.750% due 03/01/11 | 240 | 253 | ||
Miller Brewing Co. (p) | ||||
4.250% due 08/15/08 | 175 | 172 | ||
5.500% due 08/15/13 | 260 | 257 | ||
Mohawk Industries, Inc. | ||||
Series D | ||||
7.200% due 04/15/12 | 110 | 115 | ||
Monumental Global Funding II (p) |
164
Table of Contents
4.625% due 03/15/10 | 135 | 133 | ||
Morgan Stanley | ||||
5.375% due 10/15/15 | 235 | 233 | ||
6.250% due 08/09/26 | 385 | 403 | ||
Series GMTN (Ê) | ||||
5.550% due 02/09/09 | 1,400 | 1,402 | ||
Motorola, Inc. | ||||
4.608% due 11/16/07 | 155 | 154 | ||
Munich RE America Corp. | ||||
Series B | ||||
7.450% due 12/15/26 | 475 | 539 | ||
Natexis Ambs Co. LLC (f) (p) | ||||
8.440% due 12/29/49 | 185 | 194 | ||
National Rural Utilities Cooperative Finance Corp. | ||||
5.750% due 08/28/09 | 85 | 86 | ||
Nationwide Financial Services | ||||
6.250% due 11/15/11 | 265 | 276 | ||
Nationwide Mutual Insurance Co. (p) | ||||
7.875% due 04/01/33 | 290 | 345 | ||
Neiman-Marcus Group, Inc. (Ñ) | ||||
Series WI | ||||
10.375% due 10/15/15 | 365 | 399 | ||
Nelnet, Inc. | ||||
7.400% due 09/29/36 | 425 | 430 | ||
News America Holdings, Inc. | ||||
9.250% due 02/01/13 | 25 | 30 | ||
7.750% due 12/01/45 | 100 | 113 | ||
7.900% due 12/01/95 | 120 | 133 | ||
8.250% due 10/17/96 | 45 | 52 | ||
News America, Inc. | ||||
7.125% due 04/08/28 | 30 | 32 | ||
Nextel Communications, Inc. | ||||
Series E | ||||
6.875% due 10/31/13 | 310 | 317 | ||
Nisource Finance Corp. | ||||
5.968% due 11/23/09 (Ê) | 120 | 120 | ||
7.875% due 11/15/10 | 245 | 265 | ||
Norfolk Southern Corp. | ||||
7.050% due 05/01/37 | 115 | 135 | ||
7.900% due 05/15/97 | 730 | 915 | ||
6.000% due 03/15/2105 | 315 | 304 | ||
North Front Pass-Through Trust (p) | ||||
5.810% due 12/15/24 | 500 | 497 | ||
Occidental Petroleum Corp. (Ñ) | ||||
9.250% due 08/01/19 | 135 | 179 | ||
Ohio Power Co. | ||||
Series F | ||||
5.500% due 02/15/13 | 25 | 25 | ||
Series K | ||||
6.000% due 06/01/16 | 170 | 176 | ||
Oneok, Inc. | ||||
5.510% due 02/16/08 | 285 | 285 | ||
Oracle Corp. and Ozark Holding, Inc. (Ê) | ||||
Series WI | ||||
5.603% due 01/13/09 | 500 | 501 | ||
Pacific Gas & Electric Co. |
165
Table of Contents
4.200% due 03/01/11 | 275 | 264 | ||
6.050% due 03/01/34 | 115 | 117 | ||
Peabody Energy Corp. (Ñ) | ||||
7.875% due 11/01/26 | 200 | 207 | ||
Pemex Project Funding Master Trust | ||||
Series 144a (Ñ)(p) | ||||
6.625% due 06/15/35 | 310 | 313 | ||
Series WI (Ñ) | ||||
6.625% due 06/15/35 | 90 | 91 | ||
Pepco Holdings, Inc. (Ê) | ||||
5.856% due 06/01/10 | 295 | 296 | ||
Phoenix Life Insurance Co. (p) | ||||
7.150% due 12/15/34 | 275 | 297 | ||
Pilgrim’s Pride Corp. | ||||
9.625% due 09/15/11 | 55 | 58 | ||
Pinnacle Entertainment, Inc. | ||||
8.250% due 03/15/12 | 45 | 46 | ||
Plains All American Pipeline, LP | ||||
6.700% due 05/15/36 (p) | 175 | 181 | ||
6.650% due 01/15/37 (Å) | 130 | 133 | ||
Plantinum Underwriters Financial, Inc. | ||||
Series B | ||||
6.371% due 11/16/07 | 135 | 134 | ||
Platinum Underwriters Finance, Inc. (Ñ) | ||||
Series B | ||||
7.500% due 06/01/17 | 170 | 178 | ||
Popular North America Capital Trust I | ||||
6.564% due 09/15/34 | 405 | 396 | ||
Popular North America, Inc. | ||||
5.886% due 04/06/09 (Ê) | 240 | 241 | ||
Series MTNE | ||||
3.875% due 10/01/08 | 500 | 487 | ||
Pricoa Global Funding I (Ê)(p) | ||||
5.457% due 01/25/08 | 700 | 701 | ||
Progress Energy, Inc. | ||||
7.100% due 03/01/11 | 195 | 209 | ||
7.000% due 10/30/31 | 195 | 220 | ||
PSEG Energy Holdings LLC | ||||
8.625% due 02/15/08 | 43 | 45 | ||
Qwest Corp. | ||||
7.875% due 09/01/11 | 445 | 471 | ||
7.625% due 06/15/15 | 300 | 316 | ||
Rabobank Capital Funding II (f)(p) | ||||
5.260% due 12/31/49 | 295 | 290 | ||
Radiologix, Inc. | ||||
Series B | ||||
10.500% due 12/15/08 | 385 | 395 | ||
RBS Capital Trust I (f) | ||||
4.709% due 12/29/49 | 30 | 28 | ||
RBS Capital Trust III (f) | ||||
5.512% due 09/29/49 | 450 | 443 | ||
Reinsurance Group of America, Inc. | ||||
6.750% due 12/15/65 | 100 | 99 | ||
Residential Capital Corp. | ||||
6.125% due 11/21/08 | 300 | 302 | ||
7.337% due 04/17/09 (Ê)(p) | 455 | 456 | ||
6.375% due 06/30/10 | 577 | 586 |
166
Table of Contents
6.000% due 02/22/11 | 435 | 436 | ||
5.125% due 05/17/12 | 210 | 272 | ||
6.500% due 04/17/13 | 630 | 641 | ||
Series WI (Ñ) | ||||
6.875% due 06/30/15 | 605 | 633 | ||
RH Donnelley, Inc. | ||||
10.875% due 12/15/12 | 320 | 350 | ||
Rural Cellular Corp. | ||||
8.250% due 03/15/12 | 100 | 103 | ||
Safeco Capital Trust I | ||||
8.072% due 07/15/37 | 275 | 289 | ||
Safeway, Inc. | ||||
5.830% due 03/27/09 (Ê) | 380 | 380 | ||
5.800% due 08/15/12 (Ñ) | 65 | 65 | ||
7.250% due 02/01/31 (Ñ) | 15 | 16 | ||
SB Treasury Co. LLC (f)(p)(Å) | ||||
(Step Up, 10.925%, 06/30/08) 9.400% due 12/29/49 | 650 | 689 | ||
SBC Communications, Inc. (Ñ) | ||||
6.150% due 09/15/34 | 305 | 305 | ||
Sempra Energy (Ê) | ||||
5.863% due 05/21/08 | 290 | 290 | ||
Simon Property Group, LP (Ñ) | ||||
5.600% due 09/01/11 | 300 | 303 | ||
SLM Corp. | ||||
4.000% due 01/15/10 (Ñ) | 175 | 169 | ||
Series MTNA (Ê) | ||||
5.625% due 07/27/09 | 2,000 | 2,002 | ||
Southern California Edison Co. | ||||
7.625% due 01/15/10 | 90 | 96 | ||
Southern Copper Corp. | ||||
7.500% due 07/27/35 | 540 | 577 | ||
Sovereign Capital Trust VI | ||||
7.908% due 06/13/36 | 385 | 433 | ||
Sprint Capital Corp. | ||||
7.625% due 01/30/11 | 1,030 | 1,110 | ||
6.875% due 11/15/28 | 70 | 72 | ||
8.750% due 03/15/32 | 1,095 | 1,353 | ||
Suncom Wireless, Inc. (Ñ) | ||||
8.500% due 06/01/13 | 465 | 442 | ||
Sungard Data Systems, Inc. | ||||
10.250% due 08/15/15 | 336 | 352 | ||
Swiss Re Capital I, LP (f)(p) | ||||
6.854% due 05/29/49 | 275 | 287 | ||
Symetra Financial Corp. (p) | ||||
6.125% due 04/01/16 | 300 | 304 | ||
TCI Communications, Inc. | ||||
7.875% due 02/15/26 | 80 | 91 | ||
TDS Investor Corp. (Ñ)(p) | ||||
11.875% due 09/01/16 | 685 | 675 | ||
TECO Energy, Inc. | ||||
7.200% due 05/01/11 | 235 | 244 | ||
Tele-Communications-TCI Group | ||||
9.800% due 02/01/12 | 300 | 355 | ||
7.875% due 08/01/13 | 695 | 777 | ||
Texas Eastern Transmission, LP | ||||
7.000% due 07/15/32 | 95 | 107 | ||
Time Warner Entertainment Co., LP |
167
Table of Contents
Series * | ||||
8.375% due 03/15/23 | 160 | 189 | ||
Twin Reefs Pass-Through Trust (Ê)(f)(p) | ||||
6.370% due 12/10/49 | 300 | 300 | ||
Tyson Foods, Inc. | ||||
6.600% due 04/01/16 | 95 | 98 | ||
Union Pacific Corp. | ||||
6.625% due 02/01/08 | 90 | 91 | ||
3.625% due 06/01/10 | 120 | 114 | ||
6.125% due 01/15/12 | 195 | 202 | ||
Series MTNE | ||||
6.790% due 11/09/07 | 35 | 35 | ||
Union Planters Corp. | ||||
7.750% due 03/01/11 | 125 | 137 | ||
United Technologies Corp. | ||||
6.050% due 06/01/36 | 190 | 204 | ||
UnitedHealth Group, Inc. | ||||
5.250% due 03/15/11 | 185 | 185 | ||
UnumProvident Finance Co. PLC (p) | ||||
6.850% due 11/15/15 | 205 | 215 | ||
US Oncology, Inc. | ||||
9.000% due 08/15/12 | 170 | 176 | ||
USB Capital IX (f) | ||||
6.189% due 04/15/42 | 410 | 419 | ||
Valero Logistics Operations, LP | ||||
6.050% due 03/15/13 | 390 | 395 | ||
Verizon Communications, Inc. | ||||
5.550% due 02/15/16 | 240 | 239 | ||
Verizon Global Funding Corp. | ||||
7.250% due 12/01/10 | 300 | 322 | ||
5.850% due 09/15/35 | 265 | 254 | ||
Verizon, Inc. (Ñ) | ||||
6.500% due 09/15/11 | 40 | 41 | ||
Viacom, Inc. | ||||
5.741% due 06/16/09 (Ê) | 430 | 430 | ||
5.750% due 04/30/11 | 335 | 335 | ||
6.875% due 04/30/36 | 175 | 176 | ||
Visteon Corp. (Ñ) | ||||
8.250% due 08/01/10 | 350 | 334 | ||
VTB Capital SA | ||||
5.976% due 08/01/08 | 225 | 225 | ||
Wachovia Bank NA (Ê) | ||||
Series BKNT | ||||
5.358% due 06/27/08 | 400 | 400 | ||
Series DPNT | ||||
5.440% due 03/23/09 | 700 | 700 | ||
Wachovia Capital Trust III (f) | ||||
5.800% due 03/15/42 | 1,610 | 1,624 | ||
Wachovia Corp. | ||||
5.625% due 10/15/16 | 100 | 101 | ||
Washington Mutual, Inc. | ||||
8.250% due 04/01/10 | 250 | 271 | ||
WellPoint, Inc. | ||||
3.750% due 12/14/07 | 90 | 88 | ||
4.250% due 12/15/09 | 216 | 210 | ||
5.850% due 01/15/36 | 475 | 467 | ||
Wells Fargo & Co. |
168
Table of Contents
4.950% due 10/16/13 | 155 | 152 | ||
Wells Fargo Bank NA | ||||
5.750% due 05/16/16 | 190 | 195 | ||
West Corp. (Å) | ||||
9.500% due 10/15/14 | 445 | 444 | ||
Weyerhaeuser Co. (Ñ) | ||||
7.125% due 07/15/23 | 320 | 322 | ||
Willis North America, Inc. | ||||
5.125% due 07/15/10 | 255 | 248 | ||
5.625% due 07/15/15 | 250 | 239 | ||
Windstream Corp. (p) | ||||
8.125% due 08/01/13 | 200 | 213 | ||
8.625% due 08/01/16 | 295 | 318 | ||
Wisconsin Electric Power | ||||
3.500% due 12/01/07 | 65 | 64 | ||
Wyeth | ||||
6.950% due 03/15/11 | 840 | 895 | ||
5.500% due 02/01/14 | 380 | 382 | ||
Xcel Energy, Inc. | ||||
6.500% due 07/01/36 | 110 | 118 | ||
Xlliac Global Funding | ||||
4.800% due 08/10/10 | 240 | 236 | ||
Yum! Brands, Inc. | ||||
8.875% due 04/15/11 | 110 | 124 | ||
ZFS Finance USA Trust I (p) | ||||
6.450% due 12/15/65 | 740 | 739 | ||
Zurich Capital Trust I (p) | ||||
8.376% due 06/01/37 | 420 | 441 | ||
138,323 | ||||
International Debt - 5.2% | ||||
Abbey National PLC (f)(Ñ) | ||||
(Step Up, 7.570%, 06/15/08) 6.700% due 06/29/49 | 275 | 280 | ||
Abitibi-Consolidated, Inc. (Ñ) | ||||
8.850% due 08/01/30 | 105 | 87 | ||
Abu Dhabi National Energy Co. (p) | ||||
5.875% due 10/27/16 | 290 | 295 | ||
6.500% due 10/27/36 | 650 | 679 | ||
America Movil SA de CV | ||||
5.500% due 03/01/14 | 200 | 196 | ||
Amvescap PLC | ||||
4.500% due 12/15/09 | 395 | 386 | ||
ANZ National International, Ltd. (Ê)(p) | ||||
5.539% due 08/07/09 | 1,300 | 1,299 | ||
Arch Capital Group, Ltd. | ||||
7.350% due 05/01/34 | 145 | 161 | ||
Argentina Government International Bond | ||||
Series $GDP | ||||
Zero coupon due 12/15/35 | 510 | 57 | ||
Arlington Street CDO, Ltd. (p) | ||||
Series 2000-1A Class A2 | ||||
7.660% due 06/10/12 | 855 | 853 | ||
Aspen Insurance Holdings, Ltd. | ||||
6.000% due 08/15/14 | 75 | 73 | ||
AXA SA | ||||
8.600% due 12/15/30 | 85 | 112 | ||
Barclays Bank PLC (f)(Ñ)(p) | ||||
7.375% due 06/29/49 | 300 | 326 |
169
Table of Contents
Biovail Corp. | ||||
7.875% due 04/01/10 | 410 | 411 | ||
BNP Paribas (f)(p) | ||||
5.186% due 06/29/49 | 600 | 572 | ||
Bowater Canada Finance (Ñ) | ||||
7.950% due 11/15/11 | 365 | 349 | ||
Brascan Corp. | ||||
7.125% due 06/15/12 | 190 | 204 | ||
Brazilian Government International Bond | ||||
8.875% due 04/15/24 | 710 | 867 | ||
British Telecommunications PLC | ||||
(Step Up, 8.625%, 12/15/06) 8.375% due 12/15/10 | 65 | 73 | ||
8.875% due 12/15/30 | 480 | 650 | ||
Canadian Natural Resources, Ltd. | ||||
6.500% due 02/15/37 | 175 | 180 | ||
Canadian Oil Sands, Ltd. (p) | ||||
4.800% due 08/10/09 | 140 | 137 | ||
Catalyst Paper Corp. | ||||
Series D | ||||
8.625% due 06/15/11 | 520 | 520 | ||
China Development Bank | ||||
5.000% due 10/15/15 | 100 | 97 | ||
CIT Group Funding Co. of Canada | ||||
5.600% due 11/02/11 | 185 | 187 | ||
Conoco Funding Co. | ||||
6.350% due 10/15/11 | 765 | 805 | ||
Deutsche Telekom International Finance BV | ||||
5.375% due 03/23/11 (Ñ) | 125 | 125 | ||
8.250% due 06/15/30 | 325 | 404 | ||
DNB Nor Bank ASA (Ê)(Å) | ||||
5.443% due 10/13/09 | 2,000 | 1,999 | ||
Egypt Government AID Bonds | ||||
4.450% due 09/15/15 | 695 | 673 | ||
Embraer Overseas, Ltd. (Ñ)(Å) | ||||
6.375% due 01/24/17 | 100 | 100 | ||
Endurance Specialty Holdings, Ltd. (Ñ) | ||||
6.150% due 10/15/15 | 175 | 174 | ||
Export-Import Bank of China (p) | ||||
4.875% due 07/21/15 | 495 | 479 | ||
Export-Import Bank of Korea | ||||
4.125% due 02/10/09 (p) | 160 | 156 | ||
5.125% due 02/14/11 | 225 | 224 | ||
Falconbridge, Ltd. | ||||
6.000% due 10/15/15 | 330 | 332 | ||
FBG Finance, Ltd. (p) | ||||
5.125% due 06/15/15 | 190 | 181 | ||
France Telecom SA | ||||
8.500% due 03/01/31 | 185 | 246 | ||
Galaxy Entertainment Finance Co., Ltd. | ||||
9.875% due 12/15/12 | 310 | 328 | ||
Gaz Capital for Gazprom | ||||
8.625% due 04/28/34 | 155 | 197 | ||
Glitnir Banki HF (Å) | ||||
6.693% due 06/15/16 | 310 | 320 | ||
HBOS PLC (f)(p) | ||||
5.920% due 09/29/49 | 300 | 294 | ||
HBOS Treasury Services PLC (Ê)(p) |
170
Table of Contents
Series Mtn | ||||
5.414% due 07/17/09 | 600 | 600 | ||
HSBC Holdings PLC | ||||
6.500% due 05/02/36 | 115 | 125 | ||
Intelsat Subsidiary Holding Co., Ltd. (Ê) | ||||
10.484% due 01/15/12 | 335 | 340 | ||
Ispat Inland ULC | ||||
9.750% due 04/01/14 | 574 | 643 | ||
Korea Electric Power Corp. (p) | ||||
5.125% due 04/23/34 | 85 | 84 | ||
LG Electronics, Inc. (p) | ||||
5.000% due 06/17/10 | 130 | 127 | ||
Majapahit Holding BV (Å) | ||||
7.250% due 10/17/11 | 135 | 137 | ||
Mantis Reef, Ltd. (p) | ||||
4.692% due 11/14/08 | 200 | 197 | ||
Mexico Government International Bond | ||||
8.300% due 08/15/31 | 510 | 648 | ||
Mizuho Financial Group Cayman, Ltd. (p) | ||||
5.790% due 04/15/14 | 280 | 283 | ||
Montpelier Re Holdings, Ltd. | ||||
6.125% due 08/15/13 | 195 | 189 | ||
MUFG Capital Finance 1, Ltd. (f) | ||||
6.346% due 07/25/49 | 180 | 182 | ||
National Australia Bank, Ltd. (Ê)(p) | ||||
5.430% due 09/11/09 | 400 | 400 | ||
Nationwide Building Society (p) | ||||
4.250% due 02/01/10 | 255 | 248 | ||
Nexen, Inc. | ||||
5.875% due 03/10/35 | 95 | 91 | ||
Nippon Life Insurance (p) | ||||
4.875% due 08/09/10 | 295 | 290 | ||
Norske Skogindustrier ASA (p) | ||||
7.125% due 10/15/33 | 525 | 480 | ||
OAO Siberian Oil Co. | ||||
Series REGS | ||||
10.750% due 01/15/09 | 865 | 951 | ||
Petroleum Export, Ltd. (p) | ||||
5.265% due 06/15/11 | 93 | 90 | ||
Province of Quebec Canada (Ñ) | ||||
Series PJ | ||||
6.125% due 01/22/11 | 895 | 930 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. II (Å) | ||||
5.298% due 09/30/20 | 615 | 593 | ||
Ras Laffan Liquefied Natural Gas Co., Ltd. III (p) | ||||
5.832% due 09/30/16 | 380 | 384 | ||
5.838% due 09/30/27 | 660 | 640 | ||
Resona Bank, Ltd. (f)(Å) | ||||
5.850% due 09/29/49 | 930 | 911 | ||
Resona Preferred Global Securities Cayman, Ltd. (f)(Ñ)(p) | ||||
7.191% due 12/29/49 | 850 | 891 | ||
Royal Bank of Scotland Group PLC (f) | ||||
Series 1 | ||||
9.118% due 03/31/49 | 1,350 | 1,503 | ||
Royal Bank of Scotland PLC (Ê) | ||||
5.770% due 07/06/12 | 1,300 | 1,302 | ||
Russia Government International Bond (p) |
171
Table of Contents
5.000% due 03/31/30 | 765 | 857 | ||
Santander Financial Issuances | ||||
6.375% due 02/15/11 | 180 | 188 | ||
Sanwa Finance Aruba AEC | ||||
8.350% due 07/15/09 | 355 | 382 | ||
Sappi Papier Holding AG (p) | ||||
6.750% due 06/15/12 | 355 | 342 | ||
7.500% due 06/15/32 | 310 | 269 | ||
Secunda International, Ltd. (Ê) | ||||
13.507% due 09/01/12 | 220 | 228 | ||
Shinsei Finance Cayman, Ltd. (f)(p) | ||||
6.418% due 01/29/49 | 475 | 478 | ||
Siemens Financieringsmaatschappij NV (p) | ||||
5.466% due 08/14/09 (Ê) | 500 | 500 | ||
6.125% due 08/17/26 | 285 | 296 | ||
South Street CBO, Ltd. | ||||
Series 1999-1A Class A1 | ||||
7.160% due 07/01/11 | 20 | 20 | ||
Stora Enso Oyj (p) | ||||
7.250% due 04/15/36 | 245 | 257 | ||
Sumitomo Mitsui Banking Corp. (f)(p) | ||||
5.625% due 07/29/49 | 160 | 156 | ||
Systems 2001 AT LLC (p) | ||||
7.156% due 12/15/11 | 139 | 144 | ||
6.664% due 09/15/13 | 126 | 133 | ||
Telecom Italia Capital SA | ||||
4.000% due 01/15/10 | 590 | 562 | ||
4.875% due 10/01/10 | 325 | 317 | ||
6.108% due 07/18/11 (Ê) | 970 | 968 | ||
5.250% due 10/01/15 | 650 | 608 | ||
7.200% due 07/18/36 | 530 | 557 | ||
Telefonica Emisiones SAU | ||||
5.629% due 06/19/09 (Ê) | 845 | 846 | ||
5.984% due 06/20/11 (Ñ) | 175 | 179 | ||
6.421% due 06/20/16 | 120 | 124 | ||
7.045% due 06/20/36 | 105 | 113 | ||
Telefonica Europe BV | ||||
7.750% due 09/15/10 | 920 | 995 | ||
8.250% due 09/15/30 | 195 | 236 | ||
Telefonos de Mexico SA de CV | ||||
4.500% due 11/19/08 | 460 | 451 | ||
TELUS Corp. | ||||
8.000% due 06/01/11 | 640 | 706 | ||
TNK-BP Finance SA (p) | ||||
Series 144a | ||||
7.500% due 07/18/16 | 240 | 251 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 400 | 400 | ||
Tyco International Group SA | ||||
6.750% due 02/15/11 | 855 | 904 | ||
Tyumen Oil Co. | ||||
Series REGS | ||||
11.000% due 11/06/07 | 390 | 409 | ||
UFJ Finance Aruba AEC | ||||
6.750% due 07/15/13 | 120 | 129 | ||
Unicredit Luxembourg Finance SA (Ê)(Å) | ||||
5.426% due 10/24/08 | 375 | 375 |
172
Table of Contents
Vale Overseas, Ltd. | ||||
6.250% due 01/11/16 | 200 | 201 | ||
Vedanta Resources PLC (p) | ||||
6.625% due 02/22/10 | 270 | 266 | ||
Venezuela Government International Bond (Ñ) | ||||
6.000% due 12/09/20 | 405 | 368 | ||
VTB Capital SA (Ê)(Å) | ||||
5.970% due 08/01/08 | 1,545 | 1,545 | ||
45,107 | ||||
Loan Agreements - 0.8% | ||||
Avis Budget Holdings, Term Loan | ||||
6.630% due 04/19/12 | 157 | 156 | ||
AWAS, Second Lien Term Loan | ||||
11.438% due 03/21/13 | 200 | 202 | ||
Georgia-Pacific Corp., First Lien Term Loan | ||||
7.376% due 12/20/12 | 298 | 299 | ||
Georgia-Pacific Corp., Second Lien Term Loan | ||||
8.390% due 12/23/13 | 300 | 304 | ||
Healthsouth Corp., Term Loan B | ||||
8.620% due 03/10/13 | 599 | 601 | ||
La Petite Academy, Inc., Second Lien Term Loan | ||||
12.610% due 02/17/13 | 200 | 202 | ||
Lyondell Chemical Co., Term Loan | ||||
7.110% due 08/16/13 | 300 | 301 | ||
Starbound Reinsurance, Ltd., Term B II Loan | ||||
7.230% due 03/31/08 | 3,500 | 3,500 | ||
United Airlines, Inc., Term Loan | ||||
9.125% due 02/01/12 | 50 | 50 | ||
United Airlines, Inc., Term Loan B | ||||
9.250% due 02/01/12 | 348 | 352 | ||
Visteon Corp., Term Loan | ||||
8.610% due 06/13/13 | 300 | 300 | ||
Windstream Communications, Term Loan B | ||||
7.120% due 07/17/13 | 326 | 328 | ||
6,595 | ||||
Mortgage-Backed Securities - 42.4% | ||||
Adjustable Rate Mortgage Trust | ||||
Series 2005-3 Class 8A2 | ||||
5.560% due 07/25/35 | 581 | 582 | ||
American Home Mortgage Assets (Ê) | ||||
Series 2006-2 Class 2A2 | ||||
5.615% due 09/25/46 | 782 | 784 | ||
Series 2006-4 Class 1A11 | ||||
5.520% due 08/30/36 | 977 | 977 | ||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-1 Class 1A | ||||
5.735% due 04/25/44 | 162 | 162 | ||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 288 | 281 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-3 Class A3 | ||||
4.875% due 06/10/39 | 710 | 706 | ||
Series 2004-4 Class A3 | ||||
4.128% due 07/10/42 | 455 | 444 | ||
Series 2005-2 Class A4 | ||||
4.783% due 07/10/43 | 730 | 716 | ||
Series 2005-3 Class A2 |
173
Table of Contents
4.501% due 07/10/43 | 360 | 353 | ||
Series 2005-5 Class A4 | ||||
5.115% due 10/10/45 | 1,500 | 1,482 | ||
Series 2006-3 Class A4 | ||||
5.889% due 07/10/44 | 920 | 959 | ||
Series 2006-4 Class A4 | ||||
5.634% due 07/10/46 | 1,285 | 1,317 | ||
Banc of America Funding Corp. | ||||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 323 | 315 | ||
Series 2005-F Class 1A2 (Ê) | ||||
5.676% due 09/20/35 | 209 | 209 | ||
Series 2005-F Class 2A1 | ||||
5.256% due 09/20/35 | 603 | 606 | ||
Series 2006-3 Class 5A8 | ||||
5.500% due 03/25/36 | 930 | 926 | ||
Series 2006-A Class 3A2 | ||||
5.919% due 02/20/36 | 420 | 424 | ||
Series 2006-A Class 4A1 | ||||
5.567% due 02/20/36 | 925 | 925 | ||
Banc of America Mortgage Securities | ||||
Series 2003-9 Class 1A12 (Ê) | ||||
5.770% due 12/25/33 | 1,299 | 1,304 | ||
Series 2003-D Class 1A2 (Ê) | ||||
6.104% due 05/25/33 | 3 | 3 | ||
Series 2004-1 Class 5A1 | ||||
6.500% due 09/25/33 | 20 | 20 | ||
Series 2004-11 Class 2A1 | ||||
5.750% due 01/25/35 | 812 | 802 | ||
Series 2004-D Class 1A1 (Ê) | ||||
3.524% due 05/25/34 | 437 | 434 | ||
Series 2005-9 Class 2A1 | ||||
4.750% due 10/25/20 | 417 | 409 | ||
Series 2005-L Class 3A1 | ||||
5.453% due 01/25/36 | 452 | 451 | ||
Series 2006-2 Class A15 | ||||
6.000% due 07/25/36 | 811 | 817 | ||
Bank of America Alternative Loan Trust | ||||
Series 2003-10 Class 2A1 | ||||
6.000% due 12/25/33 | 209 | 209 | ||
Series 2003-10 Class 2A2 (Ê) | ||||
5.770% due 12/25/33 | 470 | 473 | ||
Series 2003-2 Class CB2 | ||||
5.820% due 04/25/33 | 210 | 212 | ||
Series 2004-10 Class 1CB1 | ||||
6.000% due 11/25/34 | 126 | 127 | ||
Series 2004-11 Class 1CB1 | ||||
6.000% due 12/25/34 | 149 | 150 | ||
Series 2004-2 Class 1A1 | ||||
6.000% due 03/25/34 | 119 | 119 | ||
Series 2005-3 Class 2A1 | ||||
5.500% due 04/25/35 | 199 | 198 | ||
Series 2005-5 Class 2CB1 | ||||
6.000% due 06/25/35 | 267 | 267 | ||
Series 2005-6 Class 7A1 | ||||
5.500% due 07/25/20 | 220 | 219 | ||
Series 2005-9 Class 5A1 |
174
Table of Contents
5.500% due 10/25/20 | 380 | 379 | ||
Series 2006-5 Class CB17 | ||||
6.000% due 06/25/36 | 593 | 594 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
(Ê) | ||||
Series 2005-10 Class A1 | ||||
4.750% due 10/25/35 | 1,450 | 1,430 | ||
Series 2005-7 Class 1A2 | ||||
4.750% due 08/25/35 | 2 | 2 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 509 | 510 | ||
Series 2006-3 Class 33A1 (Ê) | ||||
6.205% due 05/25/36 | 544 | 550 | ||
Series 2006-3 Class 34A1 | ||||
6.192% due 05/25/36 | 224 | 226 | ||
Series 2006-4 Class 23A5 | ||||
6.246% due 08/25/36 | 459 | 466 | ||
Bear Stearns Asset Backed Securities, Inc. | ||||
Series 2005-AC8 Class A5 | ||||
5.500% due 11/25/35 | 398 | 397 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 2004-ESA Class E (p) | ||||
5.064% due 05/14/16 | 265 | 265 | ||
Series 2005-PW1 Class A4 | ||||
5.405% due 12/11/40 | 1,500 | 1,512 | ||
Bear Stearns Mortgage Funding Trust | ||||
5.320% due 12/25/36 | 850 | 850 | ||
Series 2006-AR1 Class 1A2 (Ê) | ||||
5.574% due 07/25/36 | 621 | 621 | ||
Series 2006-AR2 Class 1A1 (Ê) | ||||
5.524% due 09/25/36 | 1,571 | 1,568 | ||
Series 2006-AR2 Class 2A1 (Ê) | ||||
5.554% due 10/25/36 | 999 | 999 | ||
Series 2006-AR3 Class IA1 (Ê) | ||||
5.500% due 03/25/36 | 675 | 675 | ||
Chase Mortgage Finance Corp. | ||||
Series 2003-S8 Class A2 | ||||
5.000% due 09/25/18 | 656 | 647 | ||
Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2005-11 Class A2A | ||||
4.700% due 12/25/35 | 91 | 90 | ||
Series 2006-WF1 Class A2F | ||||
5.657% due 03/01/36 | 610 | 610 | ||
Citigroup/Deutsche Bank Commercial Mortgage Trust | ||||
Series 2005-CD1 Class A4 | ||||
5.226% due 07/15/44 | 1,500 | 1,501 | ||
Series 2006-CD3 Class A5 | ||||
5.617% due 10/15/48 | 455 | 457 | ||
Citimortgage Alternative Loan Trust | ||||
Series 2006-A3 Class 1A5 | ||||
6.000% due 07/25/36 | 420 | 422 | ||
Commercial Mortgage Pass Through Certificates | ||||
Series 2001-J1A Class A2 (p) | ||||
6.457% due 02/16/34 | 221 | 230 | ||
Series 2006-C7 Class A2 | ||||
5.690% due 06/10/46 | 235 | 240 |
175
Table of Contents
Countrywide Alternative Loan Trust | ||||
5.250% due 12/25/46 | 1,300 | 1,300 | ||
Series 2004-28C Class 6A1 | ||||
6.000% due 01/25/35 | 256 | 256 | ||
Series 2004-J7 Class 1A2 | ||||
4.673% due 08/25/34 | 114 | 113 | ||
Series 2004-J8 Class 1A1 | ||||
7.000% due 09/25/34 | 236 | 241 | ||
Series 2005-51 Class 2A1 (Ê) | ||||
5.620% due 11/20/35 | 866 | 869 | ||
Series 2005-51 Class 2A2A (Ê) | ||||
5.610% due 11/20/35 | 443 | 445 | ||
Series 2005-51 Class 4A1 (Ê) | ||||
5.640% due 11/20/35 | 854 | 858 | ||
Series 2005-56 Class 2A2 (Ê) | ||||
6.472% due 11/25/35 | 778 | 794 | ||
Series 2005-58 Class A2 (Ê) | ||||
5.720% due 12/20/35 | 539 | 541 | ||
Series 2005-59 Class 1A2B (Ê) | ||||
5.586% due 11/20/35 | 441 | 442 | ||
Series 2005-63 Class 3A1 | ||||
5.892% due 11/25/35 | 446 | 447 | ||
Series 2005-76 Class 2A2 (Ê) | ||||
6.132% due 02/25/36 | 855 | 864 | ||
Series 2005-81 Class X1 | ||||
Interest Only STRIP | ||||
1.651% due 02/25/37 | 2,428 | 133 | ||
Series 2005-J13 Class 2A3 | ||||
5.500% due 11/25/35 | 312 | 311 | ||
Series 2005-J8 Class 1A3 | ||||
5.500% due 07/25/35 | 564 | 564 | ||
Series 2006-2CB Class A3 | ||||
5.500% due 03/25/36 | 333 | 334 | ||
Series 2006-33C Class M | ||||
6.000% due 11/25/36 | 180 | 178 | ||
Series 2006-9T1 Class A7 | ||||
6.000% due 05/25/36 | 323 | 327 | ||
Series 2006-J2 Class A3 | ||||
6.000% due 04/25/36 | 482 | 486 | ||
Series 2006-OA1 Class 1XP | ||||
Interest Only STRIP | ||||
0.088% due 10/25/36 | 6,575 | 348 | ||
Series 2006-OA1 Class 2X | ||||
Interest Only STRIP | ||||
1.790% due 03/20/46 | 3,581 | 178 | ||
Series 2006-OA1 Class 4A1 (Ê) | ||||
5.514% due 08/25/46 | 1,271 | 1,271 | ||
Series 2006-OA1 Class A1A (Ê) | ||||
5.380% due 09/25/46 | 721 | 721 | ||
Series 2006-OA2 Class A2A (Ê) | ||||
5.480% due 05/20/46 | 470 | 471 | ||
Series 2006-OA6 Class 1A3 (Ê) | ||||
5.600% due 04/25/36 | 509 | 511 | ||
Countrywide Home Loan Mortgage Pass Through Trust | ||||
Series 2004-16 Class 1A1 | ||||
5.720% due 09/25/34 | 727 | 730 | ||
Series 2005-11 Class 5A1 (Ê) |
176
Table of Contents
5.630% due 03/25/35 | 114 | 114 | ||
Series 2005-3 Class 1A3 (Ê) | ||||
5.570% due 04/25/35 | 276 | 277 | ||
Series 2005-HYB Class 3A2A | ||||
5.250% due 02/20/36 | 174 | 172 | ||
Series 2006-1 Class A2 | ||||
6.000% due 03/25/36 | 350 | 351 | ||
Series 2006-HYB Class 3A1A | ||||
6.124% due 05/20/36 | 503 | 516 | ||
Series 2006-OA5 Class 2A1 (Ê) | ||||
5.530% due 04/25/46 | 1,422 | 1,420 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 1998-C2 Class A2 | ||||
6.300% due 11/15/30 | 237 | 241 | ||
Series 2001-SPG Class A2 (p) | ||||
6.515% due 08/13/18 | 100 | 106 | ||
Series 2003-29 Class 5A1 | ||||
7.000% due 12/25/33 | 52 | 53 | ||
Series 2004-1 Class 3A1 | ||||
7.000% due 02/25/34 | 23 | 23 | ||
Series 2004-C1 Class A3 | ||||
4.321% due 01/15/37 | 675 | 654 | ||
Credit Suisse Mortgage Capital Certificates | ||||
Series 2006-C1 Class AAB | ||||
5.681% due 02/15/39 | 130 | 132 | ||
Crown Castle Towers LLC (p) | ||||
Series 2005-1A Class C | ||||
5.074% due 06/15/35 | 150 | 148 | ||
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | ||||
Series 2003-3 Class 2A3 | ||||
4.500% due 10/25/33 | 1 | 1 | ||
Series 2005-AR1 Class 2A3 | ||||
5.025% due 08/25/35 | 905 | 922 | ||
DLJ Commercial Mortgage Corp. | ||||
Series 1998-CF1 Class A1B | ||||
6.410% due 02/18/31 | 513 | 517 | ||
Series 1999-CG1 Class S | ||||
Interest Only STRIP | ||||
0.082% due 03/10/32 | 6,247 | 123 | ||
Downey Savings & Loan Association Mortgage Loan Trust | ||||
Series 2004-AR3 Class 1A1B (Ê) | ||||
6.910% due 07/19/44 | 246 | 248 | ||
Series 2006-AR1 Class 2A1A (Ê) | ||||
5.372% due 04/19/47 | 841 | 841 | ||
Series 2006-AR2 Class 2A1A (Ê) | ||||
5.580% due 09/19/36 | 785 | 787 | ||
Fannie Mae | ||||
5.363% due 2012 | 508 | 509 | ||
6.000% due 2016 | 29 | 29 | ||
5.000% due 2017 | 12 | 11 | ||
5.500% due 2017 | 47 | 47 | ||
6.000% due 2017 | 61 | 62 | ||
6.500% due 2017 | 121 | 123 | ||
4.000% due 2018 | 1,903 | 1,807 | ||
4.500% due 2018 | 2,652 | 2,573 | ||
5.000% due 2018 | 1,499 | 1,478 | ||
10.000% due 2018 | 44 | 48 |
177
Table of Contents
4.500% due 2019 | 975 | 944 | ||
4.500% due 2020 | 425 | 412 | ||
5.000% due 2020 | 1,070 | 1,054 | ||
5.500% due 2020 | 175 | 175 | ||
6.500% due 2024 | 1,096 | 1,122 | ||
10.000% due 2024 | 39 | 43 | ||
5.500% due 2025 | 428 | 427 | ||
6.599% due 2025 (Ê) | 30 | 30 | ||
6.664% due 2026 (Ê) | 213 | 216 | ||
7.500% due 2027 | 9 | 9 | ||
7.000% due 2028 | 29 | 31 | ||
5.500% due 2029 | 598 | 594 | ||
6.500% due 2029 | 3 | 3 | ||
7.000% due 2029 | 93 | 96 | ||
7.500% due 2029 | 101 | 106 | ||
8.000% due 2029 | 7 | 7 | ||
8.500% due 2029 | 3 | 3 | ||
7.000% due 2030 | 8 | 8 | ||
7.500% due 2030 | 71 | 75 | ||
8.500% due 2030 | 280 | 301 | ||
9.500% due 2030 | 85 | 93 | ||
7.000% due 2031 | 500 | 517 | ||
7.500% due 2031 | 220 | 230 | ||
8.000% due 2031 | 310 | 327 | ||
8.500% due 2031 | 267 | 286 | ||
6.000% due 2032 | 1,006 | 1,016 | ||
6.500% due 2032 | 3 | 4 | ||
7.000% due 2032 | 602 | 620 | ||
7.500% due 2032 | 207 | 216 | ||
8.000% due 2032 | 35 | 37 | ||
3.950% due 2033 (Ê) | 657 | 641 | ||
4.644% due 2033 (Ê) | 405 | 404 | ||
4.677% due 2033 (Ê) | 780 | 771 | ||
5.000% due 2033 | 1,254 | 1,216 | ||
5.500% due 2033 | 2,570 | 2,548 | ||
6.000% due 2033 | 334 | 337 | ||
7.000% due 2033 | 1,182 | 1,219 | ||
5.000% due 2034 | 1,489 | 1,443 | ||
5.500% due 2034 | 14,315 | 14,179 | ||
6.000% due 2034 | 611 | 616 | ||
7.000% due 2034 | 371 | 383 | ||
7.500% due 2034 | 127 | 132 | ||
4.460% due 2035 (Ê) | 1,402 | 1,389 | ||
4.836% due 2035 (Ê) | 1,500 | 1,485 | ||
5.000% due 2035 | 1,137 | 1,100 | ||
5.500% due 2035 | 13,743 | 13,591 | ||
6.000% due 2035 | 577 | 581 | ||
7.000% due 2035 | 2,926 | 3,014 | ||
7.500% due 2035 | 792 | 825 | ||
5.000% due 2036 | 7,527 | 7,273 | ||
5.500% due 2036 | 894 | 884 | ||
6.000% due 2036 | 9,100 | 9,157 | ||
6.500% due 2036 | 2,181 | 2,222 | ||
7.000% due 2036 | 345 | 355 | ||
7.500% due 2036 | 2,610 | 2,709 | ||
Series 1992-10 Class ZD | ||||
8.000% due 11/25/21 | 490 | 496 |
178
Table of Contents
Series 1996-46 Class ZA | ||||
7.500% due 11/25/26 | 86 | 89 | ||
Series 1997-281 Class 2 | ||||
Interest Only STRIP | ||||
9.000% due 11/01/26 | 40 | 10 | ||
Series 1999-56 Class Z | ||||
7.000% due 12/18/29 | 310 | 322 | ||
Series 2000-306 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 05/01/30 | 42 | 10 | ||
Series 2001-317 Class 2 | ||||
Interest Only STRIP | ||||
8.000% due 08/01/31 | 44 | 10 | ||
Series 2002-320 Class 2 | ||||
Interest Only STRIP | ||||
7.000% due 03/01/32 | 21 | 5 | ||
Series 2002-50 Class SC (Ê) | ||||
Interest Only STRIP | ||||
2.715% due 12/25/29 | 12 | — | ||
Series 2003-122 Class AJ | ||||
4.500% due 02/25/28 | 143 | 140 | ||
Series 2003-16 Class NI | ||||
Interest Only STRIP | ||||
5.000% due 02/25/15 | 217 | 8 | ||
Series 2003-25 Class IK | ||||
Interest Only STRIP | ||||
7.000% due 04/25/33 | 100 | 22 | ||
Series 2003-32 Class FH | ||||
5.720% due 11/25/22 | 699 | 704 | ||
Series 2003-32 Class UI | ||||
Interest Only STRIP | ||||
6.000% due 05/25/33 | 138 | 32 | ||
Series 2003-33 Class IA | ||||
Interest Only STRIP | ||||
6.500% due 05/25/33 | 850 | 189 | ||
Series 2003-337 Class 1 | ||||
Principal Only STRIP | ||||
Zero coupon due 07/01/33 | 754 | 555 | ||
Series 2003-343 Class 6 | ||||
Interest Only STRIP | ||||
5.000% due 10/01/33 | 743 | 165 | ||
Series 2003-35 Class IU | ||||
Interest Only STRIP | ||||
6.000% due 05/25/33 | 175 | 40 | ||
Series 2003-35 Class UI | ||||
Interest Only STRIP | ||||
6.500% due 05/25/33 | 173 | 38 | ||
Series 2003-64 Class JI | ||||
Interest Only STRIP | ||||
6.000% due 07/25/33 | 163 | 37 | ||
Series 2003-78 Class FI | ||||
5.720% due 01/25/33 | 695 | 697 | ||
Series 2003-82 Class IA | ||||
Interest Only STRIP | ||||
6.000% due 08/25/32 | 145 | 20 | ||
Series 2003-82 Class WI | ||||
Interest Only STRIP |
179
Table of Contents
6.000% due 08/25/32 | 30 | 4 | ||
Series 2004-21 Class FL | ||||
5.670% due 11/25/32 | 350 | 350 | ||
Series 2005-110 Class MB | ||||
5.500% due 09/25/35 | 625 | 630 | ||
Series 2006-28 Class 1P | ||||
Interest Only STRIP | ||||
0.901% due 03/25/36 | 4,381 | 105 | ||
15 Year TBA (Ï) | ||||
4.500% | 980 | 948 | ||
5.000% | 4,730 | 4,658 | ||
5.500% | 1,085 | 1,086 | ||
6.000% | 1,670 | 1,695 | ||
30 Year TBA (Ï) | ||||
4.500% | 1,325 | 1,243 | ||
5.000% | 6,980 | 6,738 | ||
5.500% | 45,610 | 45,065 | ||
6.000% | 2,775 | 2,791 | ||
6.500% | 7,180 | 7,317 | ||
7.000% | 2,865 | 2,947 | ||
Fannie Mae Grantor Trust | ||||
Series 2001-T8 Class A2 | ||||
9.500% due 07/25/41 | 74 | 80 | ||
Fannie Mae REMICS | ||||
Series 1993-41 Class ZQ | ||||
7.000% due 12/25/23 | 481 | 503 | ||
Series 1993-42 Class ZQ | ||||
6.750% due 04/25/23 | 547 | 566 | ||
Series 2006-5 Class 3A2 | ||||
4.677% due 05/25/35 | 100 | 99 | ||
Fannie Mae Whole Loan | ||||
Series 2003-W17 Class 1A6 | ||||
5.310% due 08/25/33 | 1,700 | 1,687 | ||
Series 2004-W11 Class 1A2 | ||||
6.500% due 05/25/44 | 211 | 216 | ||
Series 2004-W9 Class 2A1 | ||||
6.500% due 02/25/44 | 113 | 115 | ||
Federal Home Loan Mortgage Corp. Structured Pass | ||||
Through Securities | ||||
Series 2003-58 Class 2A | ||||
6.500% due 09/25/43 | 108 | 110 | ||
Series 2005-63 Class 1A1 | ||||
5.632% due 02/25/45 | 66 | 65 | ||
First Horizon Alternative Mortgage Securities | ||||
Series 2006-AA5 Class A2 (Ê) | ||||
6.626% due 09/25/36 | 473 | 485 | ||
Series 2006-FA3 Class A6 | ||||
6.000% due 07/25/36 | 515 | 521 | ||
First Horizon Asset Securities, Inc. | ||||
Series 2003-5 Class 1A17 | ||||
8.000% due 07/25/33 | 53 | 56 | ||
Series 2004-AR5 Class 4A1 (Ê) | ||||
5.679% due 10/25/34 | 139 | 139 | ||
Series 2005-AR5 Class 3A1 | ||||
5.525% due 10/25/35 | 211 | 211 | ||
First Union-Lehman Brothers-Bank of America | ||||
Series 1998-C2 Class A2 |
180
Table of Contents
6.560% due 11/18/35 | 29 | 29 | ||
Freddie Mac | ||||
8.500% due 2017 | 59 | 63 | ||
10.500% due 2017 | 24 | 28 | ||
4.500% due 2018 | 822 | 798 | ||
5.000% due 2018 | 856 | 845 | ||
4.000% due 2019 | 3,825 | 3,624 | ||
4.500% due 2019 | 178 | 173 | ||
5.000% due 2019 | 1,600 | 1,578 | ||
10.000% due 2020 | 60 | 66 | ||
7.078% due 2027 (Ê) | 43 | 44 | ||
6.593% due 2028 (Ê) | 37 | 38 | ||
7.036% due 2028 (Ê) | 39 | 40 | ||
4.235% due 2034 (Ê) | 100 | 100 | ||
4.688% due 2034 (Ê) | 468 | 469 | ||
4.924% due 2034 (Ê) | 1,041 | 1,026 | ||
Series 1991-103 Class Z | ||||
9.000% due 02/15/21 | 62 | 62 | ||
Series 1994-173 Class Z | ||||
7.000% due 05/15/24 | 117 | 123 | ||
Series 1999-212 Class SG (Ê) | ||||
Interest Only STRIP | ||||
1.625% due 06/17/27 | 481 | 18 | ||
Series 2001-229 Class KF (Ê) | ||||
5.570% due 07/25/22 | 342 | 345 | ||
Series 2001-232 Class ZQ | ||||
6.500% due 06/15/31 | 544 | 569 | ||
Series 2003-259 Class IQ | ||||
Interest Only STRIP | ||||
5.000% due 06/15/17 | 314 | 37 | ||
Series 2003-261 Class UI | ||||
Interest Only STRIP | ||||
6.500% due 05/15/33 | 116 | 26 | ||
Series 2003-262 Class AB | ||||
2.900% due 11/15/14 | 739 | 715 | ||
Series 2003-264 Class IM | ||||
Interest Only STRIP | ||||
7.000% due 07/15/33 | 148 | 34 | ||
Series 2003-266 Class MA | ||||
4.500% due 10/15/31 | 274 | 269 | ||
Series 2004-276 Class IP | ||||
Interest Only STRIP | ||||
5.500% due 07/15/23 | 630 | 31 | ||
Series 2004-277 Class UF | ||||
5.630% due 06/15/33 | 881 | 882 | ||
Series 2004-281 Class DF | ||||
5.780% due 06/15/23 | 261 | 263 | ||
Series 2004-287 Class GC | ||||
5.000% due 11/15/29 | 355 | 349 | ||
Series 2004-289 Class PC | ||||
5.000% due 07/15/30 | 640 | 629 | ||
Series 2005-291 Class KP | ||||
5.000% due 11/15/29 | 215 | 212 | ||
Series 2005-292 Class IG | ||||
Interest Only STRIP | ||||
5.000% due 04/15/23 | 345 | 52 | ||
Series 2005-294 Class FA |
181
Table of Contents
5.500% due 03/15/20 | 507 | 507 | ||
Series 2005-302 Class MB | ||||
5.000% due 12/15/28 | 200 | 198 | ||
Series 2005-306 Class PC | ||||
5.000% due 02/15/29 | 620 | 613 | ||
Series 2006-313 Class FP (Ê) | ||||
Zero coupon due 04/15/36 | 474 | 483 | ||
15 Year TBA (Ï) | ||||
5.500% | 3,325 | 3,325 | ||
30 Year TBA (Ï) | ||||
5.000% | 6,775 | 6,544 | ||
5.500% | 3,650 | 3,609 | ||
6.000% | 1,945 | 1,958 | ||
Freddie Mac Gold | ||||
6.000% due 2016 | 53 | 54 | ||
5.000% due 2018 | 103 | 102 | ||
5.500% due 2020 | 1,944 | 1,947 | ||
5.500% due 2024 | 276 | 276 | ||
8.500% due 2025 | 20 | 22 | ||
8.500% due 2027 | 100 | 108 | ||
7.000% due 2030 | 85 | 87 | ||
7.222% due 2030 (Ê) | 7 | 8 | ||
7.500% due 2030 | 213 | 223 | ||
8.000% due 2030 | 75 | 79 | ||
7.000% due 2031 | 194 | 200 | ||
7.500% due 2031 | 16 | 17 | ||
8.000% due 2031 | 19 | 20 | ||
7.500% due 2032 | 107 | 111 | ||
5.000% due 2033 | 664 | 645 | ||
7.000% due 2033 | 41 | 42 | ||
Series 1998-191 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 01/01/28 | 33 | 8 | ||
Series 1998-194 Class IO | ||||
Interest Only STRIP | ||||
6.500% due 04/01/28 | 113 | 25 | ||
Series 2001-212 Class IO | ||||
Interest Only STRIP | ||||
6.000% due 05/01/31 | 86 | 18 | ||
Series 2001-215 Class IO | ||||
Interest Only STRIP | ||||
8.000% due 06/01/31 | 63 | 15 | ||
Freddie Mac Reference REMIC | ||||
Series 2006-R00 Class AK | ||||
5.750% due 12/15/18 | 692 | 696 | ||
Freddie Mac REMICS | ||||
Series 2003-269 Class FE | ||||
5.930% due 12/15/28 | 708 | 712 | ||
Series 2004-277 Class KE | ||||
3.500% due 12/15/17 | 100 | 99 | ||
Series 2006-323 Class PA | ||||
6.000% due 03/15/26 | 695 | 705 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2002-1A Class A3 | ||||
6.269% due 12/10/35 | 305 | 320 | ||
Series 2002-3A Class A1 | ||||
4.229% due 12/10/37 | 1,370 | 1,344 |
182
Table of Contents
Ginnie Mae I | ||||
10.500% due 2016 | 23 | 26 | ||
11.000% due 2020 | 58 | 63 | ||
10.000% due 2022 | 47 | 52 | ||
7.500% due 2024 | 25 | 26 | ||
7.500% due 2032 | 31 | 32 | ||
30 Year TBA (Ï) | ||||
5.500% | 2,300 | 2,290 | ||
Ginnie Mae II (Ê) | ||||
4.750% due 2023 | 23 | 23 | ||
5.125% due 2023 | 63 | 64 | ||
4.750% due 2024 | 168 | 169 | ||
5.125% due 2024 | 172 | 173 | ||
4.750% due 2025 | 6 | 6 | ||
5.375% due 2025 | 214 | 216 | ||
5.125% due 2026 | 76 | 76 | ||
4.750% due 2027 | 110 | 111 | ||
5.125% due 2027 | 9 | 9 | ||
5.375% due 2027 | 133 | 134 | ||
5.375% due 2028 | 4 | 4 | ||
5.375% due 2030 | 255 | 257 | ||
Global Signal Trust (p) | ||||
Series 2004-2A Class A | ||||
4.232% due 12/15/14 | 225 | 220 | ||
Series 2006-1 Class B | ||||
5.588% due 02/15/36 | 125 | 125 | ||
Series 2006-1 Class C | ||||
5.707% due 02/15/36 | 190 | 191 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2005-AR2 Class 4A (Ê) | ||||
5.185% due 05/25/35 | 370 | 364 | ||
Series 2005-AR6 Class 3A1 | ||||
5.297% due 11/19/35 | 747 | 743 | ||
Series 2006-HE3 Class A2 | ||||
5.799% due 10/25/36 | 165 | 165 | ||
Government National Mortgage Association (Ê) | ||||
Series 1999-27 Class SE | ||||
Interest Only STRIP | ||||
3.270% due 08/16/29 | 163 | 15 | ||
Series 1999-40 Class FE | ||||
5.870% due 11/16/29 | 373 | 376 | ||
Series 1999-44 Class SA | ||||
Interest Only STRIP | ||||
3.220% due 12/16/29 | 174 | 17 | ||
Series 2000-29 Class S | ||||
Interest Only STRIP | ||||
3.170% due 09/20/30 | 47 | 3 | ||
Series 2002-27 Class SA | ||||
Interest Only STRIP | ||||
2.670% due 05/16/32 | 65 | 4 | ||
Greenpoint Mortgage Funding Trust | ||||
Series 2005-AR3 Class X1 | ||||
Interest Only STRIP | ||||
1.273% due 08/25/45 | 2,368 | 75 | ||
Series 2005-AR4 Class X4 | ||||
Interest Only STRIP | ||||
0.097% due 10/25/45 | 3,152 | 99 |
183
Table of Contents
Series 2006-AR2 Class 3A2 (Ê) | ||||
5.644% due 03/25/36 | 773 | 774 | ||
Greenwich Capital Commercial Funding Corp. | ||||
Series 2004-GG1 Class A7 | ||||
5.317% due 06/10/36 | 1,115 | 1,118 | ||
Series 2005-GG5 Class A41 | ||||
5.243% due 04/10/37 | 1,040 | 1,041 | ||
GS Mortgage Securities Corp. II | ||||
Series 2006-FL8 Class A1 (Ê)(p) | ||||
5.430% due 01/06/08 | 381 | 381 | ||
Series 2006-GG6 Class A4 | ||||
5.553% due 04/10/38 | 285 | 290 | ||
Series 2006-GG8 Class A4 | ||||
5.560% due 11/10/39 | 935 | 954 | ||
Series 2006-GG8 Class AAB | ||||
5.535% due 11/10/39 | 485 | 493 | ||
Series 2006-RR2 Class A1 (p) | ||||
5.816% due 01/07/36 | 305 | 309 | ||
GSMPS Mortgage Loan Trust (p) | ||||
Series 1998-3 Class A | ||||
7.750% due 09/19/27 | 54 | 57 | ||
Series 1999-3 Class A | ||||
8.000% due 08/19/29 | 90 | 95 | ||
Series 2005-RP1 Class 1A3 | ||||
8.000% due 01/25/35 | 293 | 311 | ||
Series 2005-RP1 Class 1A4 | ||||
8.500% due 01/25/35 | 158 | 167 | ||
Series 2006-RP1 Class 1A3 | ||||
8.000% due 01/25/36 | 177 | 181 | ||
GSR Mortgage Loan Trust | ||||
Series 2004-7 Class 1A1 | ||||
3.402% due 06/25/34 | 480 | 477 | ||
Series 2005-AR6 Class 2A1 (Ê) | ||||
4.540% due 09/25/35 | 1,514 | 1,496 | ||
Series 2006-OA1 Class 2A1 (Ê) | ||||
5.516% due 08/25/46 | 780 | 780 | ||
Harborview Mortgage Loan Trust | ||||
Series 2005-10 Class 2A1A (Ê) | ||||
5.630% due 11/19/35 | 774 | 776 | ||
Series 2005-10 Class 2A1B (Ê) | ||||
5.705% due 11/19/35 | 387 | 389 | ||
Series 2005-14 Class 3A1A | ||||
5.319% due 12/19/35 | 232 | 232 | ||
Series 2005-16 Class 2A1A (Ê) | ||||
5.560% due 01/19/36 | 1,241 | 1,244 | ||
Series 2005-16 Class 3A1A (Ê) | ||||
5.570% due 01/19/36 | 1,376 | 1,380 | ||
Series 2005-16 Class 3A1B (Ê) | ||||
5.665% due 01/19/36 | 573 | 575 | ||
Series 2005-16 Class X1 | ||||
Interest Only STRIP | ||||
2.080% due 01/19/36 | 2,097 | 61 | ||
Series 2005-16 Class X3 | ||||
Interest Only STRIP | ||||
1.820% due 01/19/36 | 5,980 | 161 | ||
Series 2005-2 Class 2A1A (Ê) | ||||
5.550% due 05/19/35 | 168 | 169 |
184
Table of Contents
Series 2005-2 Class X | ||||
Interest Only STRIP | ||||
1.412% due 05/19/35 | 3,578 | 87 | ||
Series 2005-3 Class X2 | ||||
Interest Only STRIP | ||||
1.112% due 06/19/35 | 3,360 | 76 | ||
Series 2005-5 Class 2A1B (Ê) | ||||
5.615% due 07/19/45 | 227 | 228 | ||
Series 2006-1 Class PO1 | ||||
Principal Only STRIP | ||||
Zero coupon due 03/19/37 | 1 | 1 | ||
Series 2006-1 Class X1 | ||||
Interest Only STRIP | ||||
2.290% due 03/19/37 | 3,418 | 161 | ||
Series 2006-12 Class 2A2A (Ê) | ||||
5.510% due 12/19/37 | 1,500 | 1,500 | ||
Series 2006-5 Class PO2 | ||||
Principal Only STRIP | ||||
Zero coupon due 07/19/47 | — | — | ||
Series 2006-5 Class X2 | ||||
Interest Only STRIP | ||||
2.193% due 07/19/47 | 2,821 | 107 | ||
Series 2006-7 Class 2A1B (Ê) | ||||
5.580% due 08/19/46 | 631 | 632 | ||
Series 2006-9 Class 2A1A (Ê) | ||||
5.540% due 08/19/46 | 849 | 849 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-3 Class 1A | ||||
5.570% due 06/25/34 | 111 | 111 | ||
Indymac Index Mortgage Loan Trust | ||||
Series 2005-AR1 Class AX2 | ||||
Interest Only STRIP | ||||
0.640% due 07/25/35 | 2,637 | 86 | ||
Series 2005-AR2 Class 1A21 | �� | |||
5.882% due 12/25/35 | 325 | 326 | ||
Series 2006-AR1 Class 4A2 | ||||
6.398% due 08/25/36 | 657 | 668 | ||
Series 2006-AR6 Class 2A1B (Ê) | ||||
5.635% due 06/25/47 | 837 | 840 | ||
Series 2006-AR7 Class 5A1 | ||||
6.159% due 03/25/36 | 345 | 350 | ||
Series 2006-FLX Class A1 (Ê) | ||||
5.536% due 11/25/36 | 475 | 475 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2002-C1 Class A3 | ||||
5.376% due 07/12/37 | 250 | 252 | ||
Series 2003-C1 Class A2 | ||||
4.985% due 01/12/37 | 390 | 385 | ||
Series 2004-LN2 Class A1 | ||||
4.475% due 07/15/41 | 562 | 548 | ||
Series 2005-LDP Class A3A1 | ||||
4.871% due 10/15/42 | 505 | 497 | ||
Series 2005-LDP Class A4 | ||||
4.918% due 10/15/42 | 250 | 244 | ||
Series 2006-CB1 Class A4 | ||||
5.817% due 05/12/45 | 525 | 534 | ||
Series 2006-LDP Class A4 |
185
Table of Contents
5.876% due 04/15/45 | 440 | 461 | ||
5.561% due 05/15/45 | 700 | 704 | ||
Series 2006-LDP Class AJ | ||||
6.066% due 04/15/45 | 370 | 385 | ||
Series 2006-RR1 Class A1 (p) | ||||
5.457% due 10/18/52 | 270 | 271 | ||
JP Morgan Mortgage Trust | ||||
Series 2005-A4 Class 1A1 | ||||
5.409% due 07/25/35 | 305 | 302 | ||
Series 2005-A6 Class 1A2 | ||||
5.151% due 09/25/35 | 475 | 477 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2002-C4 Class A5 | ||||
4.853% due 09/15/31 | 1,000 | 985 | ||
Series 2004-C4 Class A3 | ||||
5.154% due 06/15/29 | 1,055 | 1,059 | ||
Series 2006-C1 Class A4 | ||||
5.156% due 02/15/31 | 1,500 | 1,486 | ||
Series 2006-C4 Class A4 | ||||
5.900% due 06/15/38 | 255 | 268 | ||
Lehman Brothers Floating Rate Commercial | ||||
Mortgage Trust (Ê)(p) | ||||
Series 2006-LLF Class A1 | ||||
5.400% due 09/15/21 | 387 | 387 | ||
Lehman Mortgage Trust | ||||
Series 2005-2 Class 2A3 | ||||
5.500% due 12/25/35 | 355 | 354 | ||
Series 2005-3 Class 1A3 | ||||
5.500% due 01/25/36 | 1,215 | 1,218 | ||
Lehman XS Trust (Ê) | ||||
Series 2005-5N Class 3A1A | ||||
5.624% due 11/25/35 | 1,171 | 1,172 | ||
Series 2005-9N Class 1A1 | ||||
5.594% due 01/25/36 | 1,356 | 1,357 | ||
Series 2006-16N Class A4A | ||||
5.520% due 11/25/46 | 1,494 | 1,496 | ||
Luminent Mortgage Trust (Ê) | ||||
Series 2006-1 Class A1 | ||||
5.564% due 04/25/36 | 594 | 595 | ||
Series 2006-6 Class A1 | ||||
5.530% due 10/25/46 | 575 | 575 | ||
Mastr Adjustable Rate Mortgages Trust | ||||
Series 2005-6 Class 7A1 | ||||
5.375% due 06/25/35 | 191 | 189 | ||
Mastr Alternative Loans Trust | ||||
Series 2003-4 Class B1 | ||||
5.660% due 06/25/33 | 365 | 368 | ||
Series 2003-6 Class 3A1 | ||||
8.000% due 09/25/33 | 34 | 35 | ||
Series 2003-9 Class 1A1 | ||||
5.500% due 12/25/18 | 161 | 160 | ||
Series 2004-10 Class 5A6 | ||||
5.750% due 09/25/34 | 410 | 410 | ||
Series 2005-3 Class 7A1 | ||||
6.000% due 04/25/35 | 261 | 262 | ||
Mastr Asset Securitization Trust (Ê) | ||||
Series 2003-11 Class 6A8 |
186
Table of Contents
5.820% due 12/25/33 | 805 | 809 | ||
Series 2003-7 Class 4A35 | ||||
5.720% due 09/25/33 | 661 | 662 | ||
Series 2004-4 Class 2A2 | ||||
5.770% due 04/25/34 | 265 | 265 | ||
Mastr Reperforming Loan Trust (p) | ||||
Series 2005-1 Class 1A5 | ||||
8.000% due 08/25/34 | 234 | 247 | ||
Series 2005-2 Class 1A4 | ||||
8.000% due 05/25/35 | 286 | 291 | ||
Mastr Specialized Loan Trust (p) | ||||
Series 2005-2 Class A2 | ||||
5.150% due 07/25/35 | 173 | 169 | ||
Mellon Residential Funding Corp. (Ê) | ||||
Series 2000-TBC Class A1 | ||||
5.570% due 06/15/30 | 352 | 349 | ||
Merrill Lynch Mortgage Investors, Inc. (Ê) | ||||
Series 2005-A6 Class 2A1 | ||||
5.444% due 08/25/35 | 279 | 279 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2002-MW1 Class J (p) | ||||
5.695% due 07/12/34 | 185 | 179 | ||
Series 2004-MKB Class A2 | ||||
4.353% due 02/12/42 | 615 | 603 | ||
Series 2005-GGP Class E (p) | ||||
4.330% due 11/15/10 | 105 | 104 | ||
Series 2005-GGP Class F (p) | ||||
4.351% due 11/15/10 | 105 | 104 | ||
MLCC Mortgage Investors, Inc. (Ê) | ||||
Series 2004-HB1 Class A2 | ||||
5.930% due 04/25/29 | 157 | 157 | ||
Morgan Stanley Capital I | ||||
Series 1999-FNV Class G (p) | ||||
6.120% due 03/15/31 | 130 | 131 | ||
Series 2005-IQ1 Class AAB | ||||
5.178% due 09/15/42 | 810 | 808 | ||
Series 2006-HQ8 Class A4 | ||||
5.388% due 03/12/44 | 385 | 390 | ||
Series 2006-HQ9 Class A4 | ||||
5.731% due 07/20/44 | 480 | 495 | ||
Morgan Stanley Dean Witter | ||||
Capital I (p) | ||||
Series 2001-TOP Class E | ||||
7.552% due 02/15/33 | 100 | 106 | ||
Morgan Stanley Mortgage Loan Trust | ||||
Series 2006-11 Class 1A6 | ||||
6.231% due 08/25/36 | 530 | 543 | ||
Series 2006-2 Class 6A | ||||
6.500% due 02/25/36 | 222 | 225 | ||
Nomura Asset Acceptance Corp. | ||||
Series 2005-WF1 Class 2A2 | ||||
4.786% due 03/25/35 | 415 | 409 | ||
Series 2006-AF1 Class 1A2 | ||||
6.159% due 05/25/36 | 465 | 469 | ||
Prime Mortgage Trust | ||||
Series 2004-CL1 Class 1A1 | ||||
6.000% due 02/25/34 | 78 | 79 |
187
Table of Contents
Series 2004-CL1 Class 1A2 (Ê) | ||||
5.720% due 02/25/34 | 53 | 53 | ||
Series 2004-CL1 Class 2A2 (Ê) | ||||
5.730% due 02/25/19 | 26 | 26 | ||
Residential Accredit Loans, Inc. | ||||
Series 2004-QS5 Class A6 (Ê) | ||||
5.920% due 04/25/34 | 139 | 140 | ||
Series 2004-QS8 Class A4 (Ê) | ||||
5.720% due 06/25/34 | 681 | 684 | ||
Series 2005-QA1 Class A41 | ||||
5.725% due 09/25/35 | 216 | 217 | ||
Series 2005-QA8 Class NB3 | ||||
5.504% due 07/25/35 | 444 | 446 | ||
Series 2005-QS9 Class A6 | ||||
5.500% due 06/25/35 | 140 | 137 | ||
Series 2006-QO1 Class 1A1 (Ê) | ||||
5.584% due 02/25/46 | 272 | 272 | ||
Series 2006-QO1 Class 2A1 (Ê) | ||||
5.594% due 02/25/46 | 320 | 320 | ||
Series 2006-QO6 Class A2 (Ê) | ||||
5.554% due 06/25/46 | 794 | 793 | ||
Series 2006-QS6 Class 1A13 | ||||
6.000% due 06/25/36 | 1,070 | 1,078 | ||
Residential Asset Mortgage Products, Inc. | ||||
Series 2004-SL1 Class A3 | ||||
7.000% due 11/25/31 | 70 | 71 | ||
Series 2004-SL4 Class A3 | ||||
6.500% due 07/25/32 | 148 | 151 | ||
Series 2005-SL1 Class A2 | ||||
6.000% due 05/25/32 | 217 | 222 | ||
Residential Asset Securities Corp. (Ê) | ||||
Series 2003-KS4 Class AIIB | ||||
5.610% due 06/25/33 | 187 | 187 | ||
Residential Asset Securitization Trust (Ê) | ||||
Series 2003-A15 Class 1A2 | ||||
5.770% due 02/25/34 | 793 | 796 | ||
Residential Funding Mortgage Securities II | ||||
Series 2003-S14 Class A5 (Ê) | ||||
5.720% due 07/25/18 | 783 | 786 | ||
Series 2003-S20 Class 1A7 (Ê) | ||||
5.820% due 12/25/33 | 213 | 213 | ||
Series 2003-S5 Class 1A2 (Ê) | ||||
5.770% due 11/25/18 | 401 | 404 | ||
Series 2006-SA3 Class 3A1 | ||||
6.093% due 09/25/36 | 521 | 526 | ||
Series 2006-SA4 Class 2A1 | ||||
6.164% due 10/25/36 | 505 | 509 | ||
Sequoia Mortgage Trust (Ê) | ||||
Series 2004-3 Class A | ||||
5.670% due 04/20/34 | 1,032 | 1,032 | ||
Small Business Administration Participation | ||||
Certificates | ||||
Series 2005-20G Class 1 | ||||
4.750% due 07/01/25 | 1,518 | 1,476 | ||
Structured Adjustable Rate Mortgage Loan Trust | ||||
Series 2004-18 Class 5A | ||||
5.500% due 12/25/34 | 170 | 168 |
188
Table of Contents
Series 2005-22 Class 4A2 | ||||
5.382% due 12/25/35 | 57 | 56 | ||
Series 2006-5 Class 5A4 | ||||
6.413% due 06/25/36 | 116 | 115 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2006-AR1 Class 2A1 | ||||
5.560% due 02/25/36 | 1,943 | 1,946 | ||
Series 2006-AR2 Class A2 | ||||
5.640% due 02/25/36 | 553 | 554 | ||
Series 2006-AR3 Class 11A2 | ||||
5.594% due 04/25/36 | 957 | 957 | ||
Series 2006-AR3 Class 3A1 | ||||
5.514% due 02/25/36 | 418 | 419 | ||
Series 2006-AR8 Class A1A | ||||
5.520% due 03/25/36 | 1,850 | 1,850 | ||
Structured Asset Securities Corp. | ||||
Series 2002-22H Class 1A | ||||
6.973% due 11/25/32 | 34 | 35 | ||
Series 2004-12H Class 1A | ||||
6.000% due 05/25/34 | 146 | 146 | ||
Series 2004-21X Class 1A3 | ||||
4.440% due 12/25/34 | 1,105 | 1,090 | ||
Series 2005-6 Class B2 | ||||
5.344% due 05/25/35 | 98 | 94 | ||
Thornburg Mortgage Securities Trust (Ê) | ||||
Series 2006-5 Class A1 | ||||
5.450% due 08/25/36 | 2,470 | 2,465 | ||
Tobacco Settlement Authority of Iowa | ||||
6.500% due 06/01/23 | 100 | 100 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2005-C16 Class A2 | ||||
4.380% due 10/15/41 | 1,095 | 1,073 | ||
Series 2005-C21 Class A4 | ||||
5.370% due 10/15/44 | 1,500 | 1,497 | ||
Series 2006-WL7 Class A1 (Ê)(p) | ||||
5.490% due 08/11/18 | 1,600 | 1,600 | ||
Washington Mutual Alternative Mortgage | ||||
Pass-Through Certificates | ||||
Series 2005-4 Class CB11 | ||||
5.500% due 06/25/35 | 220 | 216 | ||
Series 2006-2 Class 2CB | ||||
6.500% due 03/25/36 | 309 | 313 | ||
Series 2006-5 Class 2CB3 | ||||
6.000% due 07/25/36 | 490 | 495 | ||
Series 2006-5 Class LB1 | ||||
6.000% due 07/25/36 | 224 | 224 | ||
Series 2006-AR2 Class A1A (Ê) | ||||
5.222% due 04/25/46 | 662 | 662 | ||
Series 2006-AR5 Class 3A (Ê) | ||||
5.503% due 07/25/46 | 356 | 357 | ||
Series 2006-AR7 Class A1A (Ê) | ||||
5.483% due 09/25/46 | 947 | 948 | ||
Series 2006-AR8 Class 2A (Ê) | ||||
5.413% due 09/25/46 | 997 | 994 | ||
Series 2006-AR9 Class 2A (Ê) | ||||
5.504% due 11/25/46 | 1,000 | 1,000 | ||
Washington Mutual Mortgage Pass-Through Certificates (Ê) |
189
Table of Contents
Series 2005-AR1 Class A1B3 | ||||
5.674% due 12/25/45 | 657 | 659 | ||
Washington Mutual, Inc. | ||||
Series 2003-AR4 Class A7 (Ê) | ||||
3.950% due 05/25/33 | 41 | 40 | ||
Series 2003-S9 Class A2 (Ê) | ||||
5.870% due 10/25/33 | 725 | 728 | ||
Series 2004-AR1 Class A2C (Ê) | ||||
5.698% due 07/25/44 | 78 | 78 | ||
Series 2004-AR1 Class A3 (Ê) | ||||
5.698% due 10/25/44 | 57 | 57 | ||
Series 2004-AR1 Class X | ||||
Interest Only STRIP | ||||
0.547% due 07/25/44 | 2,984 | 54 | ||
0.376% due 10/25/44 | 4,541 | 81 | ||
Series 2004-AR8 Class X | ||||
Interest Only STRIP | ||||
0.548% due 06/25/44 | 1,759 | 28 | ||
Series 2004-CB3 Class 1A | ||||
6.000% due 10/25/34 | 93 | 93 | ||
Series 2004-CB3 Class 4A | ||||
6.000% due 10/25/19 | 245 | 248 | ||
Series 2005-AR1 Class 1A1 | ||||
4.839% due 10/25/35 | 584 | 576 | ||
Series 2005-AR1 Class A1A1 | ||||
5.614% due 10/25/45 | 853 | 858 | ||
5.600% due 12/25/45 (Ê) | 803 | 805 | ||
Series 2005-AR1 Class A1B1 | ||||
5.614% due 08/25/45 | 208 | 209 | ||
5.584% due 10/25/45 | 395 | 396 | ||
5.574% due 11/25/45 (Ê) | 401 | 403 | ||
5.574% due 12/25/45 (Ê) | 351 | 352 | ||
Series 2005-AR6 Class B3 (Ê) | ||||
5.980% due 04/25/45 | 423 | 423 | ||
Series 2005-AR8 Class 2A1A (Ê) | ||||
5.610% due 07/25/45 | 876 | 879 | ||
Series 2005-AR8 Class 2AB3 (Ê) | ||||
5.684% due 07/25/45 | 350 | 352 | ||
Series 2006-AR1 Class 1A (Ê) | ||||
5.443% due 10/25/46 | 1,000 | 1,000 | ||
Series 2006-AR1 Class 1A1 | ||||
5.980% due 09/25/36 | 563 | 569 | ||
Series 2006-AR1 Class 1A4 | ||||
5.668% due 11/25/36 | 665 | 663 | ||
Series 2006-AR1 Class 3A1A (Ê) | ||||
5.352% due 09/25/46 | 996 | 996 | ||
Series 2006-AR4 Class 1A1B (Ê) | ||||
5.372% due 05/25/46 | 684 | 684 | ||
Series 2006-AR7 Class 1A (Ê) | ||||
5.543% due 07/25/46 | 299 | 299 | ||
Series 2006-AR8 Class 1A5 | ||||
5.941% due 08/25/46 | 104 | 105 | ||
Series 2006-AR8 Class 2A3 (Ê) | ||||
6.166% due 08/25/46 | 71 | 72 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2004-I Class 1A1 | ||||
3.379% due 07/25/34 | 208 | 209 |
190
Table of Contents
Series 2004-T Class A1 (Ê) | ||||
3.458% due 09/25/34 | 221 | 221 | ||
Series 2005-12 Class 1A7 | ||||
5.500% due 11/25/35 | 511 | 496 | ||
Series 2005-14 Class 2A1 | ||||
5.500% due 12/25/35 | 1,000 | 978 | ||
Series 2005-17 Class 1A1 | ||||
5.500% due 01/25/36 | 639 | 625 | ||
Series 2005-17 Class 1A2 | ||||
5.500% due 01/25/36 | 399 | 393 | ||
Series 2006-1 Class A3 | ||||
5.000% due 03/25/21 | 363 | 356 | ||
Series 2006-2 Class 2A3 | ||||
5.500% due 03/25/36 | 949 | 948 | ||
Series 2006-2 Class 3A1 | ||||
5.750% due 03/25/36 | 542 | 537 | ||
Series 2006-4 Class 1A8 | ||||
5.750% due 04/25/36 | 292 | 295 | ||
Series 2006-AR1 Class 1A2 (Ê) | ||||
6.050% due 09/25/36 | 332 | 334 | ||
Series 2006-AR1 Class 5A1 (Ê) | ||||
5.606% due 07/25/36 | 480 | 481 | ||
Series 2006-AR1 Class A7 | ||||
5.539% due 08/25/36 | 606 | 605 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 656 | 650 | ||
Series 2006-AR4 Class 1A1 (Ê) | ||||
5.868% due 04/25/36 | 656 | 656 | ||
Series 2006-AR4 Class 2A1 (Ê) | ||||
5.791% due 04/25/36 | 982 | 980 | ||
Series 2006-AR5 Class 2A1 (Ê) | ||||
5.549% due 04/25/36 | 398 | 400 | ||
Zuni Mortgage Loan Trust (Ê) | ||||
Series 2006-OA1 Class A1 | ||||
5.615% due 08/25/36 | 596 | 595 | ||
365,065 | ||||
Municipal Bonds - 0.3% | ||||
Badger TOB Asset Securitization Corp. Revenue | ||||
Bonds, weekly demand | ||||
6.375% due 06/01/32 | 800 | 869 | ||
California State University Revenue Bonds, | ||||
weekly demand (u) | ||||
5.000% due 11/01/30 | 140 | 149 | ||
City of Colorado Springs Colorado Revenue Bonds, | ||||
weekly demand | ||||
5.000% due 11/15/33 | 200 | 209 | ||
Golden State Tobacco Securitization Corp. | ||||
Revenue Bonds, weekly demand | ||||
6.250% due 06/01/33 | 435 | 485 | ||
New Jersey Economic Development Authority | ||||
Revenue Bonds, weekly demand | ||||
5.750% due 06/15/34 | 235 | 252 | ||
New York State Urban Development Corp. Revenue | ||||
Bonds, weekly demand (u) | ||||
5.250% due 03/15/34 | 180 | 195 | ||
State of California General Obligation | ||||
Unlimited, weekly demand |
191
Table of Contents
5.000% due 02/01/33 | 100 | 104 | ||
State of Illinois General Obligation Unlimited | ||||
5.100% due 06/01/33 | 150 | 145 | ||
State of Oregon General Obligation Unlimited | ||||
5.892% due 06/01/27 | 175 | 185 | ||
State of Texas General Obligation Unlimited, weekly demand | ||||
4.750% due 04/01/35 | 250 | 257 | ||
West Virginia Economic Development Authority | ||||
Revenue Bonds (u) | ||||
5.370% due 07/01/20 | 65 | 65 | ||
2,915 | ||||
Non-US Bonds - 0.9% | ||||
Argentina Government International Bond | ||||
Series dis | ||||
5.830% due 12/31/33 | ARS 500 | 207 | ||
Brazilian Government International Bond | ||||
12.500% due 01/05/16 | BRL 568 | 269 | ||
Colombia Government International Bond | ||||
12.000% due 10/22/15 | COP 1,094,000 | 559 | ||
Deutsche Bundesrepublik | ||||
Series 01 | ||||
5.000% due 07/04/11 | EUR 211 | 284 | ||
Federative Republic of Brazil | ||||
12.500% due 01/05/22 | BRL 1,011 | 476 | ||
Mexican Bonos | ||||
Series M 20 | ||||
10.000% due 12/05/24 | MXN 5,585 | 610 | ||
Poland Government Bond | ||||
Series 1015 | ||||
6.250% due 10/24/15 | PLN 376 | 133 | ||
Province of Ontario | ||||
4.500% due 03/08/15 | CAD 285 | 259 | ||
Province of Quebec Canada | ||||
5.000% due 12/01/15 | CAD 490 | 457 | ||
Quebec Residual | ||||
Zero coupon due 12/01/36 | CAD 880 | 193 | ||
Queensland Treasury Corp. | ||||
Series 15G | ||||
6.000% due 10/14/15 | AUD 912 | 710 | ||
South Africa Government Bond | ||||
Series R157 | ||||
13.500% due 09/15/15 | ZAR 1,000 | 182 | ||
Sweden Government Bond | ||||
Series 1047 | ||||
5.000% due 12/01/20 | SEK 655 | 103 | ||
Series 1048 | ||||
4.000% due 12/01/09 | SEK 2,260 | 317 | ||
Series 1049 | ||||
4.500% due 08/12/15 | SEK 1,090 | 160 | ||
United Kingdom Gilt | ||||
5.750% due 12/07/09 | GBP 900 | 1,758 | ||
8.000% due 09/27/13 | GBP 334 | 763 | ||
7,440 | ||||
United States Government Agencies - 4.8% | ||||
Fannie Mae | ||||
4.200% due 03/24/08 (Ñ) | 3,500 | 3,459 | ||
4.050% due 02/06/09 | 4,300 | 4,217 |
192
Table of Contents
4.150% due 09/10/09 (Ñ) | 4,000 | 3,924 | ||
3.875% due 02/15/10 (Ñ) | 1,075 | 1,043 | ||
4.125% due 05/12/10 | 2,800 | 2,733 | ||
4.375% due 06/21/10 | 2,500 | 2,452 | ||
5.050% due 02/07/11 | 2,200 | 2,214 | ||
Zero coupon due 10/09/19 | 695 | 345 | ||
Federal Home Loan Bank | ||||
4.800% due 05/02/08 | 5,800 | 5,789 | ||
Series 577 (Ñ) | ||||
4.500% due 09/26/08 | 5,500 | 5,460 | ||
Federal Home Loan Bank System | ||||
5.375% due 08/19/11 (Ñ) | 240 | 245 | ||
5.310% due 12/28/12 | 1,800 | 1,837 | ||
Series IY08 | ||||
3.400% due 03/18/08 | 2,000 | 1,958 | ||
Financing Corp. | ||||
Principal Only STRIP | ||||
Series 1 | ||||
Zero coupon due 05/11/16 | 130 | 81 | ||
Series 12P | ||||
Zero coupon due 12/06/18 | 445 | 243 | ||
Series 13 | ||||
Zero coupon due 12/27/16 | 450 | 273 | ||
Series 13P | ||||
Zero coupon due 12/27/18 | 1,195 | 649 | ||
Series 16P | ||||
Zero coupon due 04/05/19 | 475 | 254 | ||
Series 19 | ||||
Zero coupon due 06/06/16 | 380 | 237 | ||
Series 3P | ||||
Zero coupon due 11/30/17 | 275 | 159 | ||
Series 5P | ||||
Zero coupon due 02/08/18 | 115 | 66 | ||
Series 8P | ||||
Zero coupon due 08/03/18 | 1,030 | 573 | ||
Series 9P | ||||
Zero coupon due 10/06/17 | 495 | 288 | ||
Series C-P | ||||
Zero coupon due 11/30/17 | 570 | 329 | ||
Series E-P | ||||
Zero coupon due 11/02/18 | 240 | 132 | ||
Freddie Mac | ||||
3.450% due 03/12/08 | 2,000 | 1,959 | ||
4.750% due 01/19/16 | 100 | 98 | ||
Series * (Ñ) | ||||
2.750% due 03/15/08 | 280 | 272 | ||
41,289 | ||||
United States Government Treasuries - 8.0% | ||||
United States Treasury Inflation Indexed Bonds (Ñ) | ||||
2.375% due 04/15/11 | 746 | 742 | ||
3.375% due 01/15/12 | 2,096 | 2,191 | ||
3.000% due 07/15/12 | 1,259 | 1,298 | ||
1.875% due 07/15/13 | 333 | 322 | ||
2.000% due 01/15/14 | 331 | 323 | ||
2.000% due 07/15/14 | 4,738 | 4,615 | ||
1.875% due 07/15/15 | 2,201 | 2,119 | ||
2.000% due 01/15/16 | 719 | 699 |
193
Table of Contents
2.500% due 07/15/16 | 4,215 | 4,276 | ||
2.375% due 01/15/25 | 757 | 766 | ||
2.000% due 01/15/26 | 2,234 | 2,135 | ||
3.625% due 04/15/28 | 504 | 623 | ||
United States Treasury Notes | ||||
4.375% due 12/31/07 (Ñ) | 6,135 | 6,100 | ||
4.875% due 08/31/08 (Ñ) | 3,300 | 3,308 | ||
4.500% due 02/28/11 (Ñ) | 660 | 658 | ||
5.125% due 06/30/11 (Ñ) | 350 | 358 | ||
4.500% due 09/30/11 (Ñ) | 3,030 | 3,019 | ||
3.875% due 02/15/13 (Ñ) | 2,475 | 2,381 | ||
Principal Only STRIP | ||||
Zero coupon due 11/15/13 | 555 | 403 | ||
4.250% due 08/15/15 | 3,140 | 3,061 | ||
4.875% due 08/15/16 (Ñ) | 1,575 | 1,608 | ||
8.125% due 08/15/19 (Ñ) | 4,950 | 6,539 | ||
Principal Only STRIP | ||||
Zero coupon due 11/15/21 (Ñ) | 5,670 | 2,742 | ||
7.625% due 02/15/25 (Ñ) | 1,450 | 1,941 | ||
6.000% due 02/15/26 (Ñ) | 6,855 | 7,867 | ||
6.375% due 08/15/27 (Ñ) | 745 | 898 | ||
6.125% due 08/15/29 (Ñ) | 4,810 | 5,696 | ||
4.500% due 02/15/36 (Ñ) | 2,550 | 2,461 | ||
69,149 | ||||
Total Long-Term Investments | ||||
(cost $728,712) | 734,801 | |||
Common Stocks - 0.1% | ||||
Financial Services - 0.1% | ||||
Emerging Market Local Currency Fund (Æ) | 95,227 | 1,092 | ||
Pacific Investment Management Co. | ||||
Series High Yield Portfolio Institutional | 6,898 | 58 | ||
Total Common Stocks | ||||
(cost $1,118) | 1,150 | |||
Preferred Stocks - 0.3% | ||||
Financial Services - 0.2% | ||||
Bank of America Corp. (Æ)(Ê) | 15,000 | 375 | ||
DG Funding Trust (Ê)(Å) | 118 | 1,256 | ||
1,631 | ||||
Producer Durables - 0.0% | ||||
Nexen, Inc. | 4,055 | 104 | ||
Utilities - 0.1% | ||||
Rural Cellular Corp. (Æ) | 378 | 459 | ||
Total Preferred Stocks | ||||
(cost $2,167) | 2,194 | |||
Warrants & Rights - 0.0% | ||||
Consumer Discretionary - 0.0% | ||||
Travelcenters of America, Inc. (Æ) | ||||
2009 Warrants | 20 | — | ||
Materials and Processing - 0.0% | ||||
Solutia, Inc. (Æ)(p) | ||||
2009 Warrants | 450 | — | ||
Miscellaneous - 0.0% | ||||
Mexico Government International | ||||
Bond Value Recovery Rights (Æ) | 1,300,000 | 24 | ||
Total Warrants & Rights | ||||
(cost $40) | 24 | |||
194
Table of Contents
Notional Amount $ | ||||
Optionms Purchased - 0.1% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 91.75 Put (49) | 11,239 | — | ||
Dec 2006 92.00 Put (95) | 21,850 | 1 | ||
Dec 2006 92.25 Put (117) | 26,983 | 1 | ||
Dec 2006 92.50 Put (91) | 21,044 | 1 | ||
Dec 2006 92.75 Put (43) | 9,971 | — | ||
Mar 2007 92.00 Put (40) | 9,200 | — | ||
Mar 2007 92.25 Put (40) | 9,225 | — | ||
Jun 2007 91.25 Put (368) | 83,950 | 3 | ||
Jun 2007 94.25 Put (294) | 69,274 | 13 | ||
Jun 2007 94.50 Put (39) | 9,214 | 5 | ||
Sep 2007 90.50 Put (276) | 62,445 | 2 | ||
Sep 2007 91.00 Put (15) | 3,413 | — | ||
Sep 2007 91.25 Put (94) | 21,444 | 1 | ||
Sep 2007 91.75 Put (87) | 19,956 | 1 | ||
Dec 2007 91.25 Put (152) | 34,675 | 1 | ||
Swaptions | ||||
(Fund Pays/Fund Receives) | ||||
EUR Six Month LIBOR/EUR | ||||
3.960% | ||||
Jul 2007 0.00 Call (3) | 12,762 | 54 | ||
EUR Six Month LIBOR/EUR | ||||
4.100% | ||||
Jul 2007 0.00 Call (1) | 5,105 | 19 | ||
GBP Six Month LIBOR/GBP | ||||
5.080% | ||||
Jun 2007 0.00 Call (1) | 954 | 2 | ||
GBP Six Month LIBOR/GBP | ||||
5.10% | ||||
Jun 2007 0.00 Call (1) | 1,526 | — | ||
USD Three Month LIBOR/USD | ||||
4.800% | ||||
Dec 2006 0.00 Call (1) | 6,000 | 2 | ||
USD Three Month LIBOR/USD | ||||
5.170% | ||||
Feb 2007 0.00 Call (1) | 4,600 | 20 | ||
USD Three Month LIBOR/USD | ||||
5.000% | ||||
Mar 2007 0.00 Call (2) | 9,000 | 28 | ||
USD Three Month LIBOR/USD | ||||
5.080% | ||||
Apr 2007 0.00 Call (1) | 2,300 | 11 | ||
USD Three Month LIBOR/USD | ||||
5.200% | ||||
May 2007 0.00 Call (2) | 20,100 | 138 | ||
USD Three Month LIBOR/USD | ||||
5.250% | ||||
Jun 2007 0.00 Call (2) | 11,000 | 90 | ||
USD Three Month LIBOR/USD | ||||
5.500% | ||||
Jun 2007 0.00 Call (1) | 8,000 | 120 | ||
USD Three Month LIBOR/USD |
195
Table of Contents
5.250% | ||||
Jul 2007 0.00 Call (1) | 24,000 | 376 | ||
USD Three Month LIBOR/USD | ||||
5.370% | ||||
Jul 2007 0.00 Call (1) | 6,600 | 68 | ||
USD Six Month LIBOR/USD | ||||
4.850% | ||||
Jul 2007 0.00 Call (1) | 10,000 | 16 | ||
USD Three Month LIBOR/USD | ||||
4.900% | ||||
Oct 2007 0.00 Call (1) | 7,000 | 36 | ||
Total Options Purchased | ||||
(cost $668) | 1,009 | |||
Principal Amount ($) or Shares | Market Value $ | |||
Short-Term Investments - 24.7% | ||||
Abitibi-Consolidated, Inc. | ||||
6.950% due 12/15/06 | 138 | 138 | ||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 100 | 100 | ||
Arizona Public Service Co. | ||||
6.750% due 11/15/06 | 60 | 60 | ||
AT&T Wireless Services, Inc. | ||||
7.500% due 05/01/07 | 1,190 | 1,202 | ||
AT&T, Inc. (p) | ||||
4.214% due 06/05/07 | 600 | 595 | ||
Bank of America Corp. (ç)(ž) | ||||
5.260% due 12/18/06 | 600 | 596 | ||
Bank of Ireland Governor & Co. (ç)(ž) | ||||
5.355% due 11/03/06 | 5,000 | 4,999 | ||
Barclays Bank PLC (ž) | ||||
5.343% due 01/29/07 | 2,000 | 2,005 | ||
Barclays US Funding Corp. (ç)(ž) | ||||
5.300% due 11/15/06 | 3,500 | 3,493 | ||
Caesars Entertainment, Inc. | ||||
9.375% due 02/15/07 | 330 | 332 | ||
Caterpillar Financial Services Corp. (Ê) | ||||
Series MTNF | ||||
5.463% due 08/20/07 | 155 | 155 | ||
CC Funding Trust I | ||||
6.900% due 02/16/07 | 230 | 231 | ||
Centex Corp. (Ê) | ||||
Series MTNE | ||||
5.739% due 08/01/07 | 245 | 245 | ||
Comcast Cable Communications, Inc. | ||||
8.375% due 05/01/07 | 40 | 41 | ||
DaimlerChrysler NA Holding Corp. (Ê) | ||||
Series MTND | ||||
5.740% due 11/17/06 | 900 | 900 | ||
Danske Corp. (ž) | ||||
5.270% due 12/27/06 (ç) | 2,100 | 2,083 | ||
5.240% due 01/30/07 | 900 | 888 | ||
Dexia Delaware LLC (ç)(ž) | ||||
5.270% due 11/10/06 | 2,900 | 2,896 | ||
5.265% due 11/21/06 | 2,700 | 2,692 |
196
Table of Contents
Donohue Forest Products | ||||
7.625% due 05/15/07 | 200 | 200 | ||
Duke Energy Field Services LLC | ||||
5.750% due 11/15/06 | 40 | 40 | ||
Enterprise Products Operating, LP | ||||
Series B | ||||
4.000% due 10/15/07 | 255 | 251 | ||
FedEx Corp. | ||||
2.650% due 04/01/07 | 70 | 69 | ||
5.579% due 08/08/07 (Ê) | 400 | 401 | ||
Ford Motor Credit Co. (Ê) | ||||
6.340% due 03/21/07 | 800 | 800 | ||
France Treasury Bills BTF | ||||
Zero coupon due 11/30/06 | EUR 700 | 891 | ||
Zero coupon due 12/21/06 | EUR 250 | 318 | ||
Freddie Mac Discount Notes (ç)(ž) | ||||
Series RB | ||||
5.080% due 11/14/06 | 3,145 | 3,139 | ||
GMAC LLC (Ê) | ||||
6.407% due 01/16/07 | 200 | 200 | ||
Harrah’s Operating Co., Inc. | ||||
7.125% due 06/01/07 | 355 | 357 | ||
HBOS Treasury Services PLC (ç)(ž) | ||||
5.260% due 12/08/06 | 900 | 895 | ||
Hilton Hotels Corp. | ||||
7.950% due 04/15/07 | 110 | 111 | ||
Historic TW, Inc. | ||||
8.180% due 08/15/07 | 105 | 107 | ||
Hyatt Equities LLC (p) | ||||
6.875% due 06/15/07 | 140 | 141 | ||
International Bank for Reconstruction & | ||||
Development | ||||
Zero coupon due 08/20/07 | NZD 303 | 192 | ||
International Lease Finance Corp. | ||||
3.750% due 08/01/07 | 35 | 35 | ||
IXIS Corp. (ç)(ž) | ||||
5.270% due 11/08/06 | 700 | 699 | ||
JPMorgan Chase & Co. | ||||
5.350% due 03/01/07 | 75 | 75 | ||
Mandalay Resort Group | ||||
Series B | ||||
10.250% due 08/01/07 | 945 | 972 | ||
Marsh & McLennan Cos., Inc. | ||||
5.375% due 03/15/07 | 415 | 415 | ||
5.640% due 07/13/07 (Ê)(Ñ) | 265 | 265 | ||
MGM Mirage | ||||
9.750% due 06/01/07 | 660 | 673 | ||
Mirage Resorts, Inc. | ||||
6.750% due 08/01/07 | 205 | 206 | ||
Netherlands Government Bond | ||||
Series 1 | ||||
5.750% due 02/15/07 | EUR 145 | 186 | ||
Norfolk Southern Corp. | ||||
7.350% due 05/15/07 | 100 | 101 | ||
Northrop Grumman Corp. | ||||
4.079% due 11/16/06 | 50 | 50 | ||
Panhandle Eastern Pipe Line |
197
Table of Contents
Series B | ||||
2.750% due 03/15/07 | 45 | 45 | ||
Pepco Holdings, Inc. | ||||
5.500% due 08/15/07 | 385 | 385 | ||
Reynolds American, Inc. (p) | ||||
6.500% due 06/01/07 | 145 | 146 | ||
Russell Investment Company | ||||
Money Market Fund | 137,479,000 | 137,479 | ||
Santander US Debt SA Universal (Ê)(p) | ||||
5.400% due 09/21/07 | 900 | 901 | ||
Sempra Energy | ||||
4.621% due 05/17/07 | 255 | 254 | ||
Skandinaviska Enskilda Banken (ç)(ž) | ||||
5.255% due 12/08/06 | 5,300 | 5,271 | ||
St. Paul Travelers Cos., Inc. (The) | ||||
5.010% due 08/16/07 | 460 | 457 | ||
Starwood Hotels & Resorts Worldwide, Inc. | ||||
7.375% due 05/01/07 | 20 | 20 | ||
Swedbank (ç)(ž) | ||||
5.360% due 11/01/06 | 500 | 500 | ||
5.275% due 11/09/06 | 5,000 | 4,994 | ||
TELUS Corp. | ||||
7.500% due 06/01/07 | 650 | 657 | ||
Total SA (ç)(ž) | ||||
5.290% due 11/01/06 | 2,400 | 2,400 | ||
UBS Financial Del LLC (ž) | ||||
5.265% due 11/16/06 (ç) | 2,200 | 2,195 | ||
5.245% due 01/08/07 | 1,300 | 1,287 | ||
Unicredito Italiano Bank (Ireland) PLC (ž) | ||||
5.250% due 01/19/07 | 1,000 | 988 | ||
United States Treasury Bills (ž)(§) | ||||
4.898% due 12/07/06 (ç) | 200 | 199 | ||
4.843% due 12/14/06 (ç) | 620 | 616 | ||
4.914% due 12/14/06 (ç) | 20 | 20 | ||
4.937% due 12/14/06 (ç) | 200 | 199 | ||
5.297% due 01/11/07 | 200 | 198 | ||
4.964% due 02/15/07 | 75 | 74 | ||
5.035% due 02/15/07 | 50 | 49 | ||
5.131% due 02/15/07 | 140 | 138 | ||
United States Treasury Inflation Indexed Bonds | ||||
3.375% due 01/15/07 | 1,030 | 1,017 | ||
United States Treasury Notes (Ñ) | ||||
3.500% due 11/15/06 | 7,850 | 7,844 | ||
3.125% due 05/15/07 | 3,900 | 3,860 | ||
Westpac Banking Corp. (ž) | ||||
5.245% due 01/24/07 | 5,500 | 5,433 | ||
Total Short-Term Investments | ||||
(cost $213,115) | 213,066 | |||
Other Securities - 12.3% | ||||
Russell Investment Company | ||||
Money Market Fund (×) | 27,101,728 | 27,102 | ||
State Street Securities Lending | ||||
Quality Trust (×) | 78,514,364 | 78,514 | ||
Total Other Securities | ||||
(cost $105,616) | 105,616 | |||
Total Investments - 122.9% | ||||
(identified cost $1,051,436) | 1,057,860 |
198
Table of Contents
Other Assets and Liabilities, | |||
Net - (22.9%) | (196,942 | ) | |
Net Assets - 100.0% | 860,918 | ||
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund
199
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Australian 3 Year Bond (Australia) | |||||
expiration date 12/06 (34) | 6,763 | (15 | ) | ||
Australian 10 Year Bond (Australia) | |||||
expiration date 12/06 (18) | 10,201 | (8 | ) | ||
Euribor Futures | |||||
expiration date 06/07 (13) | 3,987 | (4 | ) | ||
Euro-Bund Futures (Germany) | |||||
expiration date 12/06 (16) | 2,406 | 10 | |||
Eurodollar Futures (CME) | |||||
expiration date 12/06 (192) | 45,425 | (282 | ) | ||
expiration date 03/07 (267) | 63,266 | (216 | ) | ||
expiration date 06/07 (371) | 88,066 | 60 | |||
expiration date 09/07 (590) | 140,309 | 261 | |||
expiration date 12/07 (426) | 101,436 | 236 | |||
expiration date 03/08 (15) | 3,573 | 2 | |||
Euro-Schatz Bond Futures | |||||
expiration date 12/06 (30) | 3,978 | (7 | ) | ||
Three Month LIBOR Futures | |||||
expiration date 09/07 (2) | 451 | (1 | ) | ||
expiration date 12/07 (14) | 3,161 | (2 | ) | ||
expiration date 03/08 (5) | 1,129 | (1 | ) | ||
expiration date 06/08 (4) | 904 | (1 | ) | ||
expiration date 09/08 (6) | 1,356 | (1 | ) | ||
Three Month Short Sterling Interest Rate Futures (UK) | |||||
expiration date 03/07 (36) | 8,121 | (6 | ) | ||
United States Treasury | |||||
2 Year Notes | |||||
expiration date 12/06 (125) | 25,551 | 32 | |||
United States Treasury | |||||
5 Year Notes | |||||
expiration date 12/06 (381) | 40,219 | 174 | |||
United States Treasury | |||||
10 Year Notes | |||||
expiration date 12/06 (432) | 46,751 | 537 | |||
expiration date 03/07 (1) | 108 | 1 | |||
United States Treasury Bonds | |||||
expiration date 12/06 (160) | 18,025 | 290 | |||
Short Positions | |||||
Bankers Acceptance Futures (Canada) | |||||
expiration date 03/07 (37) | 7,907 | 4 | |||
Euro-Bobl Futures (Germany) | |||||
expiration date 12/06 (106) | 14,843 | (1 | ) | ||
Japanese 10 Year Bond (Japan) | |||||
expiration date 12/06 (12) | 13,775 | (33 | ) | ||
Long Gilt Bond (UK) | |||||
expiration date 12/06 (2) | 420 | 46 | |||
United States Treasury | |||||
2 Year Notes | |||||
expiration date 12/06 (43) | 8,789 | (4 | ) | ||
United States Treasury | |||||
5 Year Notes | |||||
expiration date 12/06 (165) | 17,418 | (74 | ) |
200
Table of Contents
United States Treasury | |||||
10 Year Notes | |||||
expiration date 12/06 (180) | 19,479 | (169 | ) | ||
Total Unrealized Appreciation (Depreciation) on | |||||
Open Futures Contracts (å) | 828 | ||||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (21) | 4,988 | (19 | ) | ||
Mar 2007 94.75 Put (7) | 1,658 | (2 | ) | ||
Mar 2007 95.25 Put (8) | 1,905 | (10 | ) | ||
Swaptions | |||||
(Fund Receives/Fund Pays) | |||||
EUR Six Month LIBOR/EUR 4.100% | |||||
Jul 2007 0.00 Call (2) | 2,553 | (29 | ) | ||
EUR Six Month LIBOR/EUR 4.100% | |||||
Jul 2007 0.00 Call (1) | 2,553 | (32 | ) | ||
EUR Six Month LIBOR/EUR 4.230% | |||||
Jul 2007 0.00 Call (1) | 2,553 | (33 | ) | ||
GBP Six Month LIBOR/GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 191 | (2 | ) | ||
GBP Six Month LIBOR/GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 382 | (4 | ) | ||
GBP Six Month LIBOR/GBP | |||||
4.500% | |||||
Dec 2006 0.00 Put (1) | 6,295 | (53 | ) | ||
USD Three Month LIBOR/USD 4.850% | |||||
Dec 2006 0.00 Call (1) | 3,000 | (4 | ) | ||
USD Three Month LIBOR/USD 5.240% | |||||
Feb 2007 0.00 Call (1) | 2,000 | (24 | ) | ||
USD Three Month LIBOR/USD 5.040% | |||||
Mar 2007 0.00 Call (2) | 4,000 | (29 | ) | ||
USD Three Month LIBOR/USD 5.220% | |||||
Apr 2007 0.00 Call (1) | 1,000 | (13 | ) | ||
USD Three Month LIBOR/USD 5.320% | |||||
May 2007 0.00 Call (1) | 4,400 | (73 | ) | ||
USD Three Month LIBOR/USD 5.300% | |||||
May 2007 0.00 Call (1) | 4,000 | (66 | ) | ||
USD Three Month LIBOR/USD 5.330% | |||||
Jun 2007 0.00 Call (1) | 1,000 | (18 | ) | ||
USD Three Month LIBOR/USD 5.340% | |||||
Jun 2007 0.00 Call (1) | 4,000 | (77 | ) | ||
USD Three Month LIBOR/USD 5.600% | |||||
Jun 2007 0.00 Call (1) | 3,000 | — | |||
USD Three Month LIBOR/USD 5.500% | |||||
Jul 2007 0.00 Call (1) | 2,200 | (66 | ) | ||
USD Three Month LIBOR/USD 5.370% | |||||
Jul 2007 0.00 Call (1) | 10,000 | (202 | ) | ||
USD Six Month LIBOR/USD 4.950% | |||||
Jul 2007 0.00 Call (1) | 2,200 | (24 | ) | ||
USD Six Month LIBOR/USD 5.010% | |||||
Oct 2007 0.00 Call (1) | 3,000 | (40 | ) | ||
United States Treasury Bonds | |||||
Nov 2006 111.00 Call (25) | 2,775 | (43 | ) | ||
Nov 2006 104.00 Put (25) | 2,600 | — |
201
Table of Contents
United States Treasury Notes | |||||
2 Year Futures | |||||
Nov 2006 101.75 Put (297) | 60,440 | (10 | ) | ||
10 Year Futures | |||||
Nov 2006 109.00 Call (3) | 327 | — | |||
Nov 2006 106.00 Put (3) | 318 | — | |||
Total Liability for Options Written | |||||
(premiums received $654) | (873 | ) | |||
Foreign Currency Exchange Contracts
Amount | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||
USD 730 | AUD 948 | 11/02/06 | 4 | ||||
USD 820 | AUD 1,091 | 12/20/06 | 23 | ||||
USD 1,793 | AUD 2,348 | 12/20/06 | 23 | ||||
USD 2,436 | AUD 3,187 | 12/20/06 | 28 | ||||
USD 554 | CAD 624 | 11/02/06 | 2 | ||||
USD 312 | CAD 355 | 11/30/06 | 5 | ||||
USD 888 | CAD 988 | 12/20/06 | (7 | ) | |||
USD 210 | CNY 1,625 | 03/19/07 | (1 | ) | |||
USD 889 | EUR 698 | 11/01/06 | 2 | ||||
USD 54 | EUR 42 | 11/02/06 | — | ||||
USD 83 | EUR 65 | 11/02/06 | — | ||||
USD 135 | EUR 105 | 11/02/06 | (1 | ) | |||
USD 141 | EUR 110 | 11/02/06 | — | ||||
USD 141 | EUR 110 | 11/02/06 | (1 | ) | |||
USD 152 | EUR 118 | 11/02/06 | (1 | ) | |||
USD 161 | EUR 125 | 11/02/06 | (1 | ) | |||
USD 200 | EUR 155 | 11/02/06 | (2 | ) | |||
USD 201 | EUR 155 | 11/02/06 | (3 | ) | |||
USD 217 | EUR 171 | 11/02/06 | 1 | ||||
USD 245 | EUR 190 | 11/02/06 | (3 | ) | |||
USD 238 | EUR 186 | 12/06/06 | — | ||||
USD 1,777 | EUR 1,395 | 12/20/06 | 9 | ||||
USD 1,792 | EUR 1,423 | 12/20/06 | 30 | ||||
USD 243 | EUR 190 | 02/02/07 | 1 | ||||
USD 434 | EUR 340 | 03/23/07 | 3 | ||||
USD 763 | GBP 401 | 11/02/06 | 2 | ||||
USD 240 | GBP 129 | 11/30/06 | 6 | ||||
USD 888 | GBP 468 | 12/20/06 | 5 | ||||
USD 2,879 | GBP 1,534 | 12/20/06 | 49 | ||||
USD 2,902 | GBP 1,534 | 12/20/06 | 26 | ||||
USD 3 | JPY 355 | 11/02/06 | — | ||||
USD 91 | JPY 10,615 | 11/02/06 | — | ||||
USD 104 | JPY 11,930 | 11/02/06 | (2 | ) | |||
USD 167 | JPY 19,001 | 11/02/06 | (5 | ) | |||
USD 188 | JPY 21,625 | 11/02/06 | (3 | ) | |||
USD 189 | JPY 21,505 | 11/02/06 | (5 | ) | |||
USD 220 | JPY 24,898 | 11/02/06 | (7 | ) | |||
USD 241 | JPY 28,430 | 11/02/06 | 2 | ||||
USD 678 | JPY 76,721 | 11/02/06 | (22 | ) | |||
USD 1,002 | JPY 113,434 | 11/02/06 | (32 | ) | |||
USD 2,195 | JPY 250,019 | 11/15/06 | (53 | ) | |||
USD 2,201 | JPY 250,018 | 11/15/06 | (54 | ) |
202
Table of Contents
USD 2,021 | JPY 234,000 | 12/06/06 | (10 | ) | |||
USD 501 | JPY 58,000 | 12/20/06 | (2 | ) | |||
USD 889 | JPY 103,847 | 12/20/06 | 5 | ||||
USD 2,120 | JPY 246,400 | 12/20/06 | 2 | ||||
USD 247 | JPY 28,430 | 02/02/07 | — | ||||
USD 733 | JPY 84,623 | 02/02/07 | — | ||||
USD 1,015 | JPY 116,967 | 02/02/07 | (2 | ) | |||
USD 570 | NOK 3,695 | 12/20/06 | (3 | ) | |||
USD 896 | NOK 5,990 | 12/20/06 | 23 | ||||
USD 184 | NZD 275 | 11/02/06 | — | ||||
USD 888 | NZD 1,363 | 12/20/06 | 23 | ||||
USD 896 | NZD 1,361 | 12/20/06 | 14 | ||||
USD 168 | PLN 509 | 11/02/06 | — | ||||
USD 435 | SEK 3,138 | 11/02/06 | — | ||||
USD 888 | SEK 6,453 | 12/20/06 | 9 | ||||
USD 1,620 | SEK 11,729 | 12/20/06 | 11 | ||||
USD 153 | SEK 1,099 | 12/21/06 | — | ||||
USD 79 | SGD 125 | 11/27/06 | 1 | ||||
USD 77 | TWD 2,493 | 11/22/06 | (2 | ) | |||
AUD 948 | USD 725 | 11/02/06 | (10 | ) | |||
AUD 1,176 | USD 883 | 12/20/06 | (26 | ) | |||
AUD 1,193 | USD 889 | 12/20/06 | (34 | ) | |||
AUD 1,195 | USD 888 | 12/20/06 | (36 | ) | |||
AUD 948 | USD 728 | 02/02/07 | (4 | ) | |||
BRL 3,955 | USD 1,797 | 02/02/07 | (18 | ) | |||
CAD 624 | USD 553 | 11/02/06 | (2 | ) | |||
CAD 915 | USD 820 | 12/20/06 | 3 | ||||
CAD 929 | USD 841 | 12/20/06 | 12 | ||||
CAD 624 | USD 556 | 02/02/07 | (2 | ) | |||
CHF 1,130 | USD 896 | 12/20/06 | (18 | ) | |||
CHF 3,179 | USD 2,579 | 12/20/06 | 7 | ||||
EUR 105 | USD 135 | 11/02/06 | 1 | ||||
EUR 110 | USD 141 | 11/02/06 | 1 | ||||
EUR 110 | USD 141 | 11/02/06 | 1 | ||||
EUR 155 | USD 200 | 11/02/06 | 2 | ||||
EUR 155 | USD 200 | 11/02/06 | 2 | ||||
EUR 160 | USD 201 | 11/02/06 | (3 | ) | |||
EUR 171 | USD 220 | 11/02/06 | 2 | ||||
EUR 190 | USD 242 | 11/02/06 | (1 | ) | |||
EUR 190 | USD 246 | 11/02/06 | 4 | ||||
EUR 1,658 | USD 2,136 | 12/06/06 | 16 | ||||
EUR 699 | USD 891 | 12/08/06 | (3 | ) | |||
EUR 811 | USD 1,034 | 12/08/06 | (3 | ) | |||
EUR 697 | USD 888 | 12/20/06 | (4 | ) | |||
EUR 1,312 | USD 1,677 | 12/20/06 | (4 | ) | |||
EUR 1,411 | USD 1,793 | 12/20/06 | (14 | ) | |||
EUR 1,425 | USD 1,792 | 12/20/06 | (33 | ) | |||
EUR 42 | USD 54 | 02/02/07 | — | ||||
GBP 401 | USD 755 | 11/02/06 | (10 | ) | |||
GBP 482 | USD 896 | 12/20/06 | (25 | ) | |||
GBP 401 | USD 763 | 02/02/07 | (2 | ) | |||
JPY 9,810 | USD 84 | 11/02/06 | — | ||||
JPY 19,001 | USD 168 | 11/02/06 | 6 | ||||
JPY 21,505 | USD 189 | 11/02/06 | 5 | ||||
JPY 25,253 | USD 217 | 11/02/06 | 1 | ||||
JPY 28,430 | USD 244 | 11/02/06 | — | ||||
JPY 84,623 | USD 723 | 11/02/06 | — |
203
Table of Contents
JPY 139,892 | USD 1,199 | 11/02/06 | 2 | ||||
JPY 26,000 | USD 224 | 12/06/06 | — | ||||
JPY 54,300 | USD 471 | 12/20/06 | 3 | ||||
JPY 102,873 | USD 888 | 12/20/06 | 2 | ||||
JPY 215,243 | USD 1,852 | 12/20/06 | (2 | ) | |||
JPY 218,504 | USD 1,881 | 12/20/06 | — | ||||
JPY 218,504 | USD 1,882 | 12/20/06 | 1 | ||||
NOK 11,627 | USD 1,777 | 12/20/06 | (7 | ) | |||
NZD 275 | USD 170 | 11/02/06 | (15 | ) | |||
NZD 1,285 | USD 820 | 12/20/06 | (39 | ) | |||
NZD 3,829 | USD 2,462 | 12/20/06 | (98 | ) | |||
NZD 275 | USD 183 | 02/02/07 | — | ||||
PLN 19 | USD 6 | 11/01/06 | — | ||||
PLN 509 | USD 166 | 11/02/06 | (1 | ) | |||
PLN 509 | USD 168 | 02/02/07 | — | ||||
SEK 1,010 | USD 140 | 11/02/06 | — | ||||
SEK 2,128 | USD 297 | 11/02/06 | 2 | ||||
SEK 6,415 | USD 888 | 12/20/06 | (4 | ) | |||
SEK 6,562 | USD 896 | 12/20/06 | (15 | ) | |||
SEK 3,138 | USD 437 | 02/02/07 | — | ||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (273 | ) | |||||
Index Swap Contracts
Fund Receives Underlying Security | Counter Party | Notional Amount $ | Fund Pays Floating Rate | Termination Date | Unrealized Appreciation (Depreciation) $ | ||||||
CMBS AAA | 1 Month LIBOR | ||||||||||
10 Yr. Index | Citibank | 1,750 | plus 0.235% | 03/31/07 | (73 | ) | |||||
CMBS AAA | 1 Month LIBOR | ||||||||||
10 Yr. Index | Goldman Sachs | 1,250 | plus 0.030% | 09/28/07 | (52 | ) | |||||
Turkish Overnight | |||||||||||
Index Tuibon | |||||||||||
Goldman Sachs Total Return | Citibank | 5,277 | plus 0.750% | 07/17/08 | (12 | ) | |||||
Lehman Brothers | 1 Month USD LIBOR | ||||||||||
CMBS Index - AAA | Goldman Sachs | 2,240 | plus 0.050% | 02/01/07 | 33 | ||||||
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts | (104 | ) | |||||||||
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | ||||||
Bank of America | USD 5,500 | 5.600% | Three Month LIBOR | 12/21/09 | 92 | ||||||
Bank of America | USD 5,200 | 5.600% | Three Month LIBOR | 12/21/09 | 68 | ||||||
Bank of America | USD 12,100 | 5.470% | Three Month LIBOR | 06/14/11 | 382 | ||||||
Bank of America | USD 10,500 | 5.650% | Three Month LIBOR | 12/20/13 | 351 | ||||||
Bank of America | USD 4,000 | 5.500% | Three Month LIBOR | 06/14/16 | 183 | ||||||
Bank of America | USD 2,500 | 5.630% | Three Month LIBOR | 06/16/36 | 175 | ||||||
Barclays Bank PLC | EUR 7,150 | 4.250% | Six Month LIBOR | 07/20/16 | 244 | ||||||
Barclays Bank PLC | EUR 600 | 4.300% | Six Month LIBOR | 12/20/16 | 21 | ||||||
Barclays Bank PLC | EUR 800 | Six Month LIBOR | 4.300% | 12/20/16 | (27 | ) | |||||
Barclays Bank PLC | EUR 1,250 | 4.550% | Six Month LIBOR | 12/22/36 | 132 | ||||||
Barclays Bank PLC | EUR 450 | Six Month LIBOR | 4.550% Fixed | 12/22/36 | (47 | ) | |||||
Barclays Bank PLC | GBP 7,600 | 5.000% | Six Month LIBOR | 06/15/07 | (14 | ) | |||||
Barclays Bank PLC | GBP 1,350 | 5.000% | Six Month LIBOR | 12/20/16 | 20 | ||||||
Barclays Bank PLC | GBP 320 | 4.550% | Six Month LIBOR | 12/22/36 | 24 | ||||||
Barclays Bank PLC | GBP 930 | Six Month LIBOR | 4.550% Fixed | 12/22/36 | (56 | ) | |||||
Barclays Bank PLC | JPY 800,000 | Six Month LIBOR | 1.55% Fixed | 12/20/11 | 53 | ||||||
Barclays Bank PLC | JPY 220,000 | 2.100% | Six Month LIBOR | 12/20/16 | 31 | ||||||
Barclays Bank PLC | JPY 218,000 | 2.100% | Six Month LIBOR | 12/20/16 | 22 |
204
Table of Contents
Barclays Bank PLC | SEK 66,000 | Three Month LIBOR | 4.323% | 07/20/16 | (431 | ) | |||||
Barclays Bank PLC | SEK 5,600 | Three Month LIBOR | 4.350% Fixed | 12/20/16 | (8 | ) | |||||
Barclays Bank PLC | USD 8,700 | 5.000% | Three Month LIBOR | 12/20/08 | (6 | ) | |||||
Barclays Bank PLC | USD 600 | 5.000% | Three Month LIBOR | 12/20/11 | (1 | ) | |||||
BNP Paribas | EUR 900 | 2.090% | Consumer Price Index (France) | 10/15/10 | 12 | ||||||
Credit Suisse First Boston | EUR 25,270 | Six Month LIBOR | 3.959% Fixed | 11/24/08 | (42 | ) | |||||
Credit Suisse First Boston | EUR 28,050 | 4.078% | Six Month LIBOR | 11/22/11 | 329 | ||||||
Credit Suisse First Boston | EUR 650 | 4.300% | Six Month LIBOR | 12/20/16 | 22 | ||||||
Credit Suisse First Boston | EUR 8,710 | Six Month LIBOR | 4.412% Fixed | 11/22/21 | (458 | ) | |||||
Credit Suisse First Boston | EUR 600 | Six Month LIBOR | 4.550% Fixed | 12/22/36 | (63 | ) | |||||
Credit Suisse First Boston | GBP 450 | Six Month LIBOR | 5.100% | 12/20/11 | 2 | ||||||
Credit Suisse First Boston | GBP 1,583 | Six Month LIBOR | 5.000% | 12/20/16 | (23 | ) | |||||
Credit Suisse First Boston | GBP 430 | 4.550% | Six Month LIBOR | 12/22/36 | 32 | ||||||
Credit Suisse First Boston | SEK 6,000 | Three Month LIBOR | 4.350% | 12/20/16 | (16 | ) | |||||
Credit Suisse First Boston | SEK 6,000 | Three Month LIBOR | 4.350% Fixed | 12/20/16 | 18 | ||||||
Credit Suisse First Boston | USD 1,200 | 5.820% | Three Month LIBOR | 09/22/36 | 98 | ||||||
Deutsche Bank | USD 11,400 | 5.600% | Three Month LIBOR | 12/20/11 | 224 | ||||||
Deutsche Bank | USD 8,500 | 5.650% | Three Month LIBOR | 12/20/13 | 225 | ||||||
Goldman Sachs | USD 200 | 5.000% | Three Month LIBOR | 12/20/36 | (8 | ) | |||||
JP Morgan | GBP 1,700 | 4.950% | Six Month LIBOR | 12/22/08 | (23 | ) | |||||
JP Morgan | GBP 750 | Six Month LIBOR | 4.55% Fixed | 12/22/36 | (57 | ) | |||||
Lehman Brothers | EUR 800 | Six Month LIBOR | 4.300% | 12/20/16 | (28 | ) | |||||
Lehman Brothers | GBP 1,700 | Six Month LIBOR | 4.950% | 12/22/08 | (23 | ) | |||||
Lehman Brothers | GBP 4,100 | 4.500% | Six Month LIBOR | 09/20/09 | (107 | ) | |||||
Lehman Brothers | GBP 580 | 5.000% | Six Month LIBOR | 12/20/16 | 9 | ||||||
Merrill Lynch | GBP 5,600 | 4.500% | Six Month LIBOR | 09/20/09 | (146 | ) | |||||
Merrill Lynch | GBP 100 | 4.000% | Six Month LIBOR | 12/15/35 | (3 | ) | |||||
Morgan Stanley | EUR 900 | 6.000% | Six Month LIBOR | 06/18/34 | 208 | ||||||
Royal Bank of Scotland | GBP 740 | 4.550% | Six Month LIBOR | 12/22/36 | 56 | ||||||
Royal Bank of Scotland | JPY 447,000 | Six Month LIBOR | 1.850% | 12/20/13 | (55 | ) | |||||
Royal Bank of Scotland | USD 1,120 | Three Month LIBOR | 5.750% | 12/22/36 | (82 | ) | |||||
Mexico Interbank 28 | |||||||||||
Salomon Smith Barney | MXN 63,000 | 8.100% | Day Deposit Rate | 07/04/08 | 55 | ||||||
Mexico Interbank 28 | |||||||||||
Salomon Smith Barney | MXN 40,630 | 7.820% | Day Deposit Rate | 09/25/08 | 9 | ||||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $786 | 1,373 | ||||||||||
205
Table of Contents
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | |||||||
American International Group | JP Morgan | 1,100 | 0.050 | % | 12/20/07 | — | ||||||
Brazilian Government International Bond | Salomon Smith Barney | 1,500 | 1.500 | % | 8/22/11 | 20 | ||||||
Brazilian Government International Bond | Lehman Brothers | 1,400 | 1.980 | % | 3/20/16 | 20 | ||||||
Core Investment Grade Bond | Bear Stearns | 9,000 | 0.400 | % | 12/20/11 | (11 | ) | |||||
Core Investment Grade Bond | Bank of America | 9,000 | 0.650 | % | 12/20/16 | (38 | ) | |||||
Dow Jones CDX High Volatility 5 Index | Goldman Sachs | 1,000 | 0.850 | % | 12/20/10 | 7 | ||||||
Dow Jones CDX High Volatility Index | UBS | 5,000 | 0.900 | % | 6/20/10 | 43 | ||||||
Ford Motor Credit Co. | UBS | 300 | 2.500 | % | 12/20/06 | 2 | ||||||
Ford Motor Credit Co. | JP Morgan | 100 | 2.000 | % | 3/20/07 | 1 | ||||||
Mexico Government International Bond | JP Morgan | 200 | 0.920 | % | 3/20/16 | 3 | ||||||
Russia International Government Bond | Morgan Stanley | 100 | 0.460 | % | 6/20/07 | — | ||||||
SoftBank Corp. | Deutsche Bank | 16,000 | 2.300 | % | 9/20/07 | 41 | ||||||
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - ($112) | 88 | |||||||||||
206
Table of Contents
Russell Investment Company
Fixed Income III Fund
Presentation of Portfolio Holdings - October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Asset-Backed Securities | 6.9 | ||
Corporate Bonds and Notes | 16.1 | ||
International Debt | 5.2 | ||
Loan Agreements | 0.8 | ||
Mortgage-Backed Securities | 42.4 | ||
Municipal Bonds | 0.3 | ||
Non-US Bonds | 0.9 | ||
United States Government Agencies | 4.8 | ||
United States Government Treasuries | 8.0 | ||
Common Stocks | 0.1 | ||
Preferred Stocks | 0.3 | ||
Warrants & Rights | — | * | |
Options Purchased | 0.1 | ||
Short Term Investments | 24.7 | ||
Other Securities | 12.3 | ||
Total Investments | 122.9 | ||
Other Assets and Liabilities, Net | (22.9 | ) | |
100.0 | |||
Futures Contracts | 0.1 | ||
Options Written | (0.1 | ) | |
Foreign Currency Exchange Contracts | (— | *) | |
Index Swap Contracts | (— | *) | |
Interest Rate Swap Contracts | 0.1 | ||
Credit Default Swaps | — | * |
* | Less than .05% of net assets. |
207
Table of Contents
Emerging Markets Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Emerging Markets Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 33.04 | % | |
5 Years | 27.92 | %§ | |
10 Years | 7.48 | %§ |
Emerging Markets Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 32.64 | % | |
5 Years | 27.68 | %§ | |
10 Years | 7.30 | %§ |
Emerging Markets Fund - Class C ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 31.63 | % | |
5 Years | 26.80 | %§ | |
10 Years | 6.70 | %§ |
MSCI Emerging Markets Free Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 35.00 | % | |
5 Years | 28.11 | %§ | |
10 Years | N/A |
Emerging Markets Fund
208
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Emerging Markets Fund Class S, Class E and Class C Shares gained 33.04%, 32.64% and 31.63%, respectively. This compared to the MSCI Emerging Markets Free Index(SM), which gained 35.00% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Emerging Markets Funds Average returned 34.38%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s underperformance during this period was primarily driven by a weak second quarter of 2006 when three of the largest countries to which the Fund was overweight (Turkey, South Africa and Brazil) had large negative returns. More generally, over the fiscal year, the Fund’s underweight to India and China and weak stock selection in Korea and India detracted from performance.
During the year, the Fund had a relatively neutral position to the top two performing emerging market sectors, industrials and financial services. Stock selection within the financial services sector was a significant positive. Energy was the third best performing sector, which was boosted by strong oil prices throughout the year. On average the Fund had a significant overweight to energy stocks and this was a large contributor to the Fund’s performance. The Fund’s underweight to health care was also a positive contributor to performance, as this small sector, which is dominated by Teva Pharmaceuticals, significantly underperformed.
Overall sector allocation was positive. However stock selection detracted from performance, especially in consumer discretionary and telecommunications sectors. In terms of countries, the underweight to Israel, which is dominated by the health care stock, Teva Pharmaceuticals, an overweight to Indonesia, as well as good stock selection in Brazil, were the main positive contributors to Fund performance.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The market environment during the fiscal period was generally a difficult one for the investment strategies employed in the Fund. Of the four money managers that were in the Fund for the full 12 month period, only Arrowstreet Capital, L.P. produced a positive return. T. Rowe Price International, Inc. and AllianceBernstein L.P. both significantly underperformed the benchmark with Genesis Asset Managers Limited marginally underperforming. The aggregate performance of Wells Capital Management Inc., who was terminated in the second quarter of 2006, and Harding Loevner Management, L.P., the latest addition to the Fund, contributed most positively to Fund performance.
Wells Capital Management Inc. made the largest positive contribution to Fund performance, primarily driven by a strong first quarter in 2006, when its large overweight position in energy and technology stocks added to returns.
T. Rowe Price had an extremely difficult second quarter of 2006 as it was overweight in many of the countries that did well in 2005, such as Egypt, Turkey and South Africa. These were some of the markets that underperformed the most over the second quarter, with Turkey and South Africa in particular suffering from sharp depreciation in their currencies. T. Rowe Price’s performance improved after the second quarter of 2006.
Genesis Asset Managers, LLP struggled in this period because of weak stock selection in India largely due to its overweight to health care.
In the global sell-off in the second quarter, the emerging markets asset class was hit hard. Arrowstreet, a quantitative manager, held up well in this environment, but it underperformed significantly in the third quarter when there was a sell-off in the materials sector.
209
Table of Contents
Arrowstreet’s performance was fairly volatile over the fiscal year, but it finished ahead of its benchmark.
AllianceBernstein was behind its benchmark during this period. Its portfolio suffered following a very strong period of performance during the last five year period in which it had been the strongest performing money manager in the Fund.
Harding, Loevner Management, L.P. performed well since it was added to the Fund at the end of June. Its focus on companies that it believes exhibit quality fundamentals led to strong stock selection in the financial services sector.
Describe any changes to the Fund’s structure or the money manager line-up.
In June 2006, Wells Capital Management was replaced with Harding Loevner. Harding Loevner is a market-oriented money manager with a bottom-up focus that emphasizes companies it believes have high quality characteristics across a broad universe of emerging markets.
Money Managers as of October 31, 2006 | Styles | |
AllianceBernstein, L.P. | Value | |
Arrowstreet Capital, L.P. | Market-Oriented | |
Genesis Asset Managers, LLP | Market-Oriented | |
Harding Loevner Management, L.P. | Market-Oriented | |
T. Rowe Price International, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | The Morgan Stanley Capital International Emerging Markets Free Index (net) is a market capitalization-weighted Index of over 850 stocks traded in 22 world markets. | |
*** | The Morgan Stanley Capital International Emerging Markets Free Index (net) was linked to the Morgan Stanley Capital International Emerging Markets Free Index (gross) as of December 31, 1998. | |
‡‡ | The Fund first issued Class E Shares on September 22, 1998. The returns shown for Class E Shares prior to September 22, 1998 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, returns for that period would have been lower. | |
‡‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to September 21, 1998, and the performance of the Fund’s Class E Shares from September 22, 1998 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
210
Table of Contents
Russell Investment Company
Emerging Markets Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 961.00 | $ | 1,011.64 | ||
Expenses Paid During Period* | $ | 13.30 | $ | 13.64 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.69% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
211
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 964.30 | $ | 1,015.48 | ||
Expenses Paid During Period* | $ | 9.56 | $ | 9.80 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.93% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 966.10 | $ | 1,016.69 | ||
Expenses Paid During Period* | $ | 8.38 | $ | 8.59 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.69% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Russell Investment Company
Emerging Markets Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 89.1% | ||||
Austria - 0.1% | ||||
Raiffeisen International Bank Holding AG | 8,900 | 1,018 | ||
Bermuda - 0.4% | ||||
Brilliance China Automotive Holdings, Ltd. (Æ) | 338,000 | 52 | ||
Credicorp, Ltd. (Ñ) | 73,409 | 3,098 | ||
Shangri-La Asia, Ltd. | 492,000 | 1,068 | ||
4,218 | ||||
Brazil - 7.8% | ||||
All America Latina Logistica SA | 230,000 | 2,008 | ||
Banco do Brasil SA | 253,000 | 6,136 | ||
Banco Itau Holding Financeira SA - ADR | 82,700 | 2,746 | ||
Brasil Telecom Participacoes SA - ADR | 65,400 | 2,189 | ||
Centrais Eletricas Brasileiras SA | 151,505,400 | 3,191 | ||
Cia Brasileira de Distribuicao Grupo Pao de Acucar - ADR (Ñ) | 78,400 | 2,342 | ||
Cia de Bebidas das Americas - ADR | 31,400 | 1,371 | ||
Cia de Saneamento Basico do Estado de Sao Paulo | 45,960,000 | 5,526 | ||
Cia Siderurgica Nacional SA | 95,533 | 2,967 | ||
Cia Vale do Rio Doce - ADR | 402,200 | 8,736 | ||
Cia Vale do Rio Doce - ADR (Ñ) | 173,800 | 4,421 |
212
Table of Contents
Companhia de Saneamento de Minas Gerais (Æ) | 72,000 | 671 | ||
Cyrela Brazil Realty SA | 66,500 | 1,354 | ||
EDP - Energias do Brasil SA | 104,500 | 1,439 | ||
Empresa Brasileira de Aeronautica SA – ADR (Ñ) | 20,400 | 849 | ||
Gerdau SA | 7,300 | 91 | ||
Gerdau SA - ADR (Ñ) | 498,800 | 7,367 | ||
Gol Linhas Aereas Inteligentes SA - ADR (Ñ) | 69,000 | 2,149 | ||
Lojas Renner SA | 7,500 | 94 | ||
Natura Cosmeticos SA | 306,500 | 4,222 | ||
Perdigao SA | 100,309 | 1,169 | ||
Petroleo Brasileiro SA | 134,656 | 2,980 | ||
Petroleo Brasileiro SA - ADR (Æ) | 75,100 | 6,080 | ||
Petroleo Brasileiro SA - ADR (Æ)(Ñ) | 67,125 | 5,958 | ||
Souza Cruz SA | 2,400 | 37 | ||
Tele Norte Leste Participacoes SA | 42,906 | 1,278 | ||
Tele Norte Leste Participacoes SA - ADR (Ñ) | 263,000 | 3,806 | ||
Unibanco - Uniao de Bancos Brasileiros SA (Æ) | 350,300 | 2,773 | ||
Unibanco - Uniao de Bancos Brasileiros SA - ADR | 83,700 | 6,591 | ||
90,541 | ||||
Canada - 0.2% | ||||
First Quantum Minerals, Ltd. | 30,800 | 1,760 | ||
Cayman Islands - 0.8% | ||||
Agile Property Holdings, Ltd. | 998,000 | 883 | ||
ASM Pacific Technology | 268,000 | 1,391 | ||
China Resources Land, Ltd. | 396,000 | 316 | ||
Himax Technologies, Inc. - ADR (Æ) | 109,600 | 698 | ||
Hutchison Telecommunications International, Ltd. (Æ) | 727,000 | 1,400 | ||
Kingboard Chemical Holdings, Ltd. | 261,500 | 930 | ||
Luen Thai Holdings, Ltd. | 1,407,000 | 244 | ||
Semiconductor Manufacturing International Corp. (Æ) | 5,583,000 | 653 | ||
Shui On Land, Ltd. (Æ) | 818,000 | 631 | ||
Sina Corp./China (Æ)(Ñ) | 34,100 | 877 | ||
Solomon Systech International, Ltd. | 3,594,900 | 629 | ||
Tencent Holdings, Ltd. | 430,000 | 1,027 | ||
9,679 | ||||
Chile - 0.5% | ||||
Banco de Credito e Inversiones | 46,400 | 1,298 | ||
Banco Santander Chile SA - ADR | 31,500 | 1,519 | ||
Coca-Cola Embonor SA - ADR | 97,500 | 938 | ||
Embotelladora Andina SA - ADR | 62,100 | 966 | ||
Lan Airlines SA - ADR (Ñ) | 16,800 | 725 | ||
5,446 | ||||
China - 5.8% | ||||
Aluminum Corp. of China, Ltd. Class H | 1,132,000 | 790 | ||
Angang Steel Co., Ltd. Class H | 290,000 | 296 | ||
Anhui Conch Cement Co., Ltd. Class H | 820,000 | 1,824 | ||
Bank of Communications Co., Ltd. Class H | 970,000 | 728 | ||
Beijing Capital International Airport Co., Ltd. Class H | 302,000 | 194 | ||
China COSCO Holdings Co., Ltd. Class H | 2,011,000 | 936 | ||
China International Marine Containers Co., Ltd. | ||||
Class B | 350,330 | 493 | ||
China Life Insurance Co., Ltd. Class H | 1,720,000 | 3,623 | ||
China Merchants Bank Co., Ltd. (Æ) | 138,000 | 215 | ||
China Petroleum & Chemical Corp. - ADR (Ñ) | 53,160 | 3,688 | ||
China Petroleum & Chemical Corp. Class H | 13,559,254 | 9,415 | ||
China Shenhua Energy Co., Ltd. | 3,186,700 | 5,605 | ||
China Shipping Container Lines Co., Ltd. Class H | 1,309,000 | 318 |
213
Table of Contents
China Shipping Development Co., Ltd. Class H | 928,000 | 1,010 | ||
China Telecom Corp., Ltd. Class H | 9,281,000 | 3,497 | ||
Datang International Power Generation Co., Ltd. Class H | 1,782,000 | 1,510 | ||
Guangzhou R&F Properties Co., Ltd. | 662,400 | 1,082 | ||
Industrial & Commercial Bank of China (Æ) | 4,665,000 | 2,087 | ||
Jiangsu Express Class H | 2,586,400 | 1,523 | ||
Jiangxi Copper Co., Ltd. Class H | 527,000 | 573 | ||
Maanshan Iron & Steel Class H | 3,203,600 | 1,273 | ||
PetroChina Co., Ltd. - ADR | 21,663 | 2,391 | ||
PetroChina Co., Ltd. Class H | 14,067,176 | 15,501 | ||
PICC Property & Casualty Co., Ltd. Class H | 574,000 | 205 | ||
Ping An Insurance Group Co. of China, Ltd. Class H | 1,051,100 | 3,656 | ||
Shanghai Forte Land Co., Ltd. Class H | 1,970,000 | 869 | ||
Shenzhen Expressway Co., Ltd. Class H | 270,000 | 152 | ||
Sinopec Shanghai Petrochemical Co., Ltd. Class H | 2,519,000 | 1,069 | ||
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H | 628,000 | 120 | ||
Weiqiao Textile Co. Class H | 279,500 | 384 | ||
Yanzhou Coal Mining Co., Ltd. Class H | 3,008,000 | 1,973 | ||
ZTE Corp. Class H | 216,700 | 803 | ||
67,803 | ||||
Colombia - 0.6% | ||||
BanColombia SA | 309,722 | 2,306 | ||
BanColombia SA - ADR (Ñ) | 136,953 | 4,186 | ||
6,492 | ||||
Czech Republic - 0.0% | ||||
Philip Morris CR | 276 | 146 | ||
Egypt - 1.9% | ||||
Commercial International Bank | 93,384 | 848 | ||
Egyptian Co. for Mobile Services | 129,940 | 3,603 | ||
Orascom Construction Industries | 202,836 | 8,773 | ||
Orascom Construction Industries - GDR (Æ) | 37,000 | 3,230 | ||
Orascom Telecom Holding SAE | 57,340 | 3,242 | ||
Orascom Telecom Holding SAE - GDR | 46,600 | 2,623 | ||
22,319 | ||||
Hong Kong - 1.4% | ||||
Beijing Enterprises Holdings, Ltd. | 810,000 | 1,625 | ||
China Insurance International Holdings Co., Ltd. | 1,822,000 | 1,570 | ||
China Merchants Holdings International Co., Ltd. | 469,000 | 1,372 | ||
China Mobile, Ltd. | 7,500 | 61 | ||
China Mobile, Ltd. - ADR (Ñ) | 79,300 | 3,234 | ||
China Netcom Group Corp. Hong Kong, Ltd. | 1,762,000 | 3,131 | ||
China Overseas Land & Investment, Ltd. | 196,000 | 179 | ||
China Resources Enterprise | 634,000 | 1,469 | ||
Citic Pacific, Ltd. | 39,000 | 120 | ||
Guangzhou Investment Co., Ltd. | 1,616,000 | 312 | ||
Shenzhen Investment, Ltd. | 278,000 | 109 | ||
Techtronic Industries Co. | 1,340,400 | 1,899 | ||
Travelsky Technology, Ltd. Class H | 200,000 | 262 | ||
Wumart Stores, Inc. (Æ) | 635,200 | 592 | ||
15,935 | ||||
Hungary - 1.3% | ||||
Magyar Telekom Telecommunications PLC | 639,491 | 2,975 | ||
MOL Hungarian Oil and Gas PLC | 77,900 | 7,745 | ||
MOL Hungarian Oil and Gas PLC - ADR | 30,100 | 3,003 | ||
Richter Gedeon Nyrt. (Ñ) | 6,400 | 1,342 | ||
15,065 | ||||
India - 5.6% |
214
Table of Contents
Allahabad Bank | 243,535 | 504 | ||
Andhra Bank | 429,000 | 887 | ||
Arvind Mills, Ltd. | 292,400 | 403 | ||
Bajaj Auto, Ltd. | 41,500 | 2,533 | ||
Bank of Baroda | 220,000 | 1,363 | ||
Bank of India | 30,000 | 116 | ||
Bharat Heavy Electricals | 29,200 | 1,569 | ||
Bharti Tele Ventures, Ltd. (Æ) | 477,200 | 5,619 | ||
Chennai Petroleum Corp., Ltd. | 194,660 | 874 | ||
Financial Technologies India, Ltd. | 33,600 | 1,202 | ||
GAIL India, Ltd. - GDR | 63,000 | 2,120 | ||
Gateway Distriparks, Ltd. | 124,867 | 467 | ||
Genesis Indian Investment Co., Ltd. (Æ) | 635,119 | 21,664 | ||
HDFC Bank, Ltd. - ADR (Ñ) | 24,600 | 1,704 | ||
Housing Development Finance Corp. | 78,100 | 2,539 | ||
I-Flex Solutions, Ltd. | 38,900 | 1,310 | ||
ICICI Bank, Ltd. | 135,800 | 2,344 | ||
Indian Overseas Bank | 250,000 | 656 | ||
Industrial Development Bank of India, Ltd. | 471,000 | 858 | ||
Mahanagar Telephone Nigam | 12,053 | 38 | ||
Oil & Natural Gas Corp., Ltd. | 29,920 | 542 | ||
Oriental Bank of Commerce | 111,000 | 634 | ||
Petronet LNG, Ltd. (Æ) | 846,900 | 1,037 | ||
Reliance Industries, Ltd. | 50,163 | 1,366 | ||
State Bank of India, Ltd. - GDR | 79,010 | 4,978 | ||
Sun TV, Ltd. | 59,191 | 1,591 | ||
Suzlon Energy, Ltd. | 107,505 | 3,123 | ||
Union Bank of India | 118,000 | 340 | ||
Videocon Industries, Ltd. | 137,300 | 1,323 | ||
Zee Telefilms, Ltd. | 278,963 | 1,869 | ||
65,573 | ||||
Indonesia - 3.0% | ||||
Aneka Tambang Tbk PT | 3,141,646 | 2,396 | ||
Astra Agro Lestari Tbk PT | 244,789 | 262 | ||
Astra International Tbk PT | 1,005,277 | 1,478 | ||
Bank Central Asia Tbk PT | 207,500 | 106 | ||
Bank Danamon Indonesia Tbk PT | 1,441,200 | 941 | ||
Bank Mandiri Persero Tbk PT | 13,169,003 | 3,938 | ||
Bank Rakyat Indonesia | 19,357,772 | 10,409 | ||
Perusahaan Gas Negara PT | 1,364,000 | 1,707 | ||
Ramayana Lestari Sentosa Tbk PT | 5,957,500 | 549 | ||
Telekomunikasi Indonesia Tbk PT | 12,340,700 | 11,376 | ||
Telekomunikasi Indonesia Tbk PT - ADR | 55,800 | 2,040 | ||
35,202 | ||||
Israel - 1.7% | ||||
Bank Hapoalim BM | 974,800 | 4,857 | ||
Bank Leumi Le-Israel BM | 1,186,500 | 4,907 | ||
Check Point Software Technologies (Æ)(Ñ) | 233,200 | 4,832 | ||
Discount Investment Corp. | 2,511 | 65 | ||
IDB Development Corp., Ltd. | 6,641 | 206 | ||
Israel Chemicals, Ltd. | 426,600 | 2,436 | ||
Tadiran Communications, Ltd. | 13,949 | 531 | ||
Teva Pharmaceutical Industries, Ltd. - ADR | 60,000 | 1,978 | ||
19,812 | ||||
Lebanon - 0.0% | ||||
Solidere - GDR | 8,200 | 150 | ||
Luxembourg - 2.1% |
215
Table of Contents
Genesis Smaller Companies | 368,184 | 21,778 | ||
Tenaris SA | 1 | — | ||
Tenaris SA - ADR | 80,565 | 3,109 | ||
24,887 | ||||
Malaysia - 1.0% | ||||
AirAsia BHD (Æ) | 2,220,300 | 912 | ||
Bumiputra-Commerce Holdings BHD | 2,714,742 | 5,128 | ||
IOI Corp. BHD | 755,900 | 3,560 | ||
Magnum Corp. BHD | 1,948,400 | 1,211 | ||
MK Land Holdings BHD | 714,600 | 100 | ||
TAN Chong Motor Holdings BHD | 908,000 | 328 | ||
11,239 | ||||
Mexico - 5.3% | ||||
Alfa SA de CV Class A (Ñ) | 586,900 | 3,268 | ||
America Movil SA de CV | ||||
Series L | 269,800 | 11,566 | ||
Cemex SAB de CV (Ñ) | 4,163,420 | 12,833 | ||
Cemex SAB de CV - ADR | 50,000 | 1,537 | ||
Corporacion Moctezuma SA de CV | 365,800 | 850 | ||
Fomento Economico Mexicano SA de CV - ADR | 31,724 | 3,068 | ||
Grupo Aeroportuario del Pacifico SA de CV - ADR | 21,100 | 796 | ||
Grupo Aeroportuario del Sureste SAB de CV - ADR | 15,700 | 596 | ||
Grupo Financiero Banorte SA de CV Class O (Ñ) | 1,433,900 | 5,165 | ||
Grupo Mexico SAB de CV (Ñ) | 631,100 | 2,206 | ||
Grupo Modelo SA | 823,700 | 3,963 | ||
Grupo Televisa SA - ADR | 92,392 | 2,280 | ||
Organizacion Soriana SAB de CV Class B (Ñ) | 144,000 | 827 | ||
Telefonos de Mexico SA de CV Series L | 80,000 | 2,111 | ||
Urbi Desarrollos Urbanos SA de CV (Æ)(Ñ) | 1,500,600 | 4,599 | ||
Wal-Mart de Mexico SA de CV | 1,226,700 | 4,274 | ||
Wal-Mart de Mexico SA de CV - ADR (Ñ) | 64,900 | 2,246 | ||
62,185 | ||||
Netherlands - 0.5% | ||||
Pyaterochka Holding NV - GDR (Æ) | 221,463 | 4,910 | ||
Zentiva NV | 24,300 | 1,387 | ||
6,297 | ||||
Oman - 0.1% | ||||
Bank Muscat SAOG - GDR (Æ) | 147,900 | 1,693 | ||
Pakistan - 1.4% | ||||
Engro Chemical Pakistan, Ltd. | 1,187,300 | 3,551 | ||
Fauji Fertilizer Co., Ltd. | 1,895,322 | 3,654 | ||
ICI Pakistan, Ltd. | 265,200 | 525 | ||
Oil & Gas Development Co., Ltd. | 1,189,700 | 2,917 | ||
Pakistan Petroleum, Ltd. | 26,000 | 110 | ||
Pakistan State Oil Co., Ltd. | 605,500 | 2,995 | ||
Pakistan Telecommunication Co., Ltd. | 3,025,423 | 2,225 | ||
15,977 | ||||
Peru - 0.0% | ||||
Cia de Minas Buenaventura SA - ADR | 13,448 | 348 | ||
Philippines - 0.5% | ||||
Globe Telecom, Inc. | 92,090 | 2,070 | ||
Philippine Long Distance Telephone Co. | 46,000 | 2,178 | ||
Philippine Long Distance Telephone Co. – ADR (Ñ) | 41,300 | 1,966 | ||
6,214 | ||||
Poland - 0.4% | ||||
Bank Pekao SA | 22,600 | 1,525 | ||
KGHM Polska Miedz SA | 43,073 | 1,556 |
216
Table of Contents
Polski Koncern Naftowy Orlen | 104,483 | 1,655 | ||
4,736 | ||||
Russia - 7.1% | ||||
Kalina | 5,400 | 232 | ||
LUKOIL - ADR | 338,617 | 27,360 | ||
Magnit OAO (Æ) | 52,100 | 1,699 | ||
Mechel OAO - ADR (Ñ) | 86,600 | 1,923 | ||
MMC Norilsk Nickel - ADR | 35,818 | 5,292 | ||
Mobile Telesystems - ADR | 240,200 | 10,588 | ||
NovaTek OAO - GDR (Å) | 54,900 | 3,184 | ||
Novolipetsk Steel - GDR | 2,270 | 48 | ||
OAO Gazprom | 250,000 | 2,625 | ||
OAO Gazprom - ADR (Ñ) | 140,881 | 5,968 | ||
OAO Gazprom - ADR (Æ) | 242,400 | 10,268 | ||
Pipe Metallurgical Co. (Æ) | 90,400 | 539 | ||
Promstroibank St. Petersburg | 696,000 | 1,037 | ||
RBC Information Systems (Æ) | 119,459 | 1,278 | ||
Sberbank RF | 3,185 | 7,166 | ||
Seventh Continent | 69,600 | 1,827 | ||
Tatneft - ADR (Ñ) | 12,532 | 1,138 | ||
TMK OAO - GDR (Æ) | 12,800 | 323 | ||
Unified Energy System - GDR | 801 | 60 | ||
82,555 | ||||
South Africa - 8.5% | ||||
ABSA Group, Ltd. | 306,775 | 4,747 | ||
African Bank Investments, Ltd. | 428,323 | 1,598 | ||
Alexander Forbes, Ltd. (Æ) | 376,300 | 771 | ||
Anglo Platinum, Ltd. | 7,511 | 806 | ||
AngloGold Ashanti, Ltd. | 22,600 | 959 | ||
AngloGold Ashanti, Ltd. - ADR | 28,134 | 1,198 | ||
Aspen Pharmacare Holdings, Ltd. (Æ) | 497,200 | 2,262 | ||
Aveng, Ltd. | 736,400 | 3,119 | ||
Barloworld, Ltd. | 144,334 | 2,794 | ||
Bidvest Group, Ltd. | 101,500 | 1,681 | ||
Consol, Ltd. | 668,500 | 1,434 | ||
DataTec, Ltd. | 270,000 | 1,092 | ||
Edgars Consolidated Stores, Ltd. | 542,200 | 2,702 | ||
FirstRand, Ltd. | 625,851 | 1,637 | ||
Foschini, Ltd. | 230,486 | 1,658 | ||
Impala Platinum Holdings, Ltd. | 43,239 | 7,602 | ||
Investec, Ltd. | 207,730 | 2,087 | ||
JD Group, Ltd. | 175,701 | 1,830 | ||
Lewis Group, Ltd. | 20,097 | 153 | ||
Massmart Holdings, Ltd. | 96,500 | 777 | ||
Medi-Clinic Corp., Ltd. | 66,563 | 194 | ||
Metropolitan Holdings, Ltd. | 414,744 | 724 | ||
Mittal Steel South Africa, Ltd. | 35,835 | 428 | ||
MTN Group, Ltd. | 345,300 | 3,141 | ||
Murray & Roberts Holdings, Ltd. | 135,600 | 700 | ||
Nampak, Ltd. | 79,926 | 209 | ||
Naspers, Ltd. Class N | 216,208 | 3,913 | ||
Network Healthcare Holdings, Ltd. (Æ) | 1,165,000 | 1,977 | ||
Pick’n Pay Stores, Ltd. | 173,454 | 711 | ||
Pretoria Portland Cement Co., Ltd. | 31,600 | 1,630 | ||
Reunert, Ltd. | 117,668 | 1,262 | ||
Sanlam, Ltd. | 2,852,943 | 6,778 | ||
Sasol, Ltd. | 439,936 | 15,098 |
217
Table of Contents
Sasol, Ltd. - ADR (Ñ) | 12,123 | 415 | ||
Standard Bank Group, Ltd. | 1,102,072 | 12,941 | ||
Steinhoff International Holdings, Ltd. | 788,400 | 2,569 | ||
Tiger Brands, Ltd. | 154,518 | 3,209 | ||
Tongaat-Hulett Group, Ltd. (The) | 3,004 | 39 | ||
Truworths International, Ltd. | 504,128 | 1,766 | ||
98,611 | ||||
South Korea - 14.5% | ||||
Amorepacific Corp. (Æ) | 4,724 | 2,447 | ||
CJ Home Shopping | 15,703 | 1,370 | ||
Daegu Bank | 15,810 | 262 | ||
Daelim Industrial Co. | 7,688 | 588 | ||
Daewoo Engineering & Construction Co., Ltd. | 11,820 | 256 | ||
Daewoo Shipbuilding & Marine Engineering Co., Ltd. | 51,600 | 1,659 | ||
Daum Communications Corp. (Æ) | 13,918 | 824 | ||
Dongbu Insurance Co., Ltd. | 21,870 | 521 | ||
GS Engineering & Construction Corp. | 32,324 | 2,515 | ||
Hanjin Heavy Industries & Construction Co., Ltd. (Ñ) | 1,760 | 52 | ||
Hanjin Shipping Co., Ltd. (Ñ) | 104,020 | 2,815 | ||
Hankook Tire Co., Ltd. (Ñ) | 315,997 | 4,561 | ||
Hanwha Chem Corp. (Ñ) | 157,670 | 1,774 | ||
Honam Petrochemical Corp. (Ñ) | 41,100 | 2,573 | ||
Hynix Semiconductor, Inc. (Æ) | 48,900 | 1,775 | ||
Hyosung Corp. (Æ)(Ñ) | 56,900 | 1,205 | ||
Hyundai Development Co. | 31,420 | 1,584 | ||
Hyundai Heavy Industries | 13,731 | 2,018 | ||
Hyundai Mipo Dockyard | 9,434 | 1,251 | ||
Hyundai Mobis | 83,250 | 8,128 | ||
Hyundai Motor Co. (Ñ) | 49,770 | 4,046 | ||
Hyundai Steel Co. (Ñ) | 58,620 | 2,081 | ||
Industrial Bank of Korea (Ñ) | 237,400 | 4,157 | ||
KCC Corp. | 11,624 | 3,405 | ||
Kookmin Bank (Ñ) | 178,206 | 14,166 | ||
Kookmin Bank - ADR | 28,700 | 2,278 | ||
Korea Electric Power Corp. | 245,510 | 9,484 | ||
Korea Electric Power Corp. - ADR (Ñ) | 35,100 | 694 | ||
Korea Investment Holdings Co., Ltd. | 39,850 | 1,903 | ||
Korean Air Lines Co., Ltd. | 31,980 | 1,137 | ||
KT Corp. | 80,670 | 3,660 | ||
KT Corp. - ADR | 17,100 | 383 | ||
KT&G Corp. | 41,537 | 2,566 | ||
LG Household & Health Care, Ltd. | 20,740 | 1,915 | ||
LG International Corp. | 3,160 | 72 | ||
LG.Philips LCD Co., Ltd. (Æ) | 27,000 | 860 | ||
LIG Non-Life Insurance Co., Ltd. (Ñ) | 35,500 | 529 | ||
Lotte Shopping Co., Ltd. | 4,832 | 1,831 | ||
LS Cable, Ltd. | 6,300 | 265 | ||
Orion Corp. | 5,325 | 1,441 | ||
Pacific Corp. | 1,863 | 259 | ||
Poongsan Corp. | 56,600 | 1,246 | ||
POSCO (Ñ) | 33,581 | 9,320 | ||
Samsung Corp. | 123,110 | 4,109 | ||
Samsung Electronics Co., Ltd. (Ñ) | 23,827 | 15,451 | ||
Samsung Electronics Co., Ltd. - GDR (p) | 19,231 | 6,236 | ||
Samsung Electronics Co., Ltd. - GDR | 14,759 | 3,534 | ||
Samsung Fire & Marine Insurance Co., Ltd. | 27,550 | 4,269 | ||
Samsung SDI Co., Ltd. | 2,957 | 213 |
218
Table of Contents
Samsung Securities Co., Ltd. (Ñ) | 87,200 | 4,710 | ||
Shinhan Financial Group Co., Ltd. | 158,370 | 7,303 | ||
Shinsegae Co., Ltd. | 8,530 | 4,916 | ||
SK Corp. | 57,206 | 4,195 | ||
SK Telecom Co., Ltd. | 13,620 | 2,956 | ||
SK Telecom Co., Ltd. - ADR | 14,700 | 354 | ||
STX Shipbuilding Co., Ltd. | 68,300 | 1,047 | ||
Tae Young Corp. (Ñ) | 11,339 | 674 | ||
Woori Finance Holdings Co., Ltd. (Ñ) | 130,090 | 2,782 | ||
168,625 | ||||
Taiwan - 9.3% | ||||
Acer, Inc. | 1,112,514 | 2,017 | ||
Advantech Co., Ltd. | 1,072,948 | 2,987 | ||
Asia Cement Corp. | 1,385,640 | 1,131 | ||
AU Optronics Corp. | 1,845,280 | 2,485 | ||
AU Optronics Corp. - ADR | 127,617 | 1,733 | ||
Basso Industry Corp. | 19,751 | 22 | ||
Benq Corp. (Æ) | 2,016,000 | 1,000 | ||
Cathay Financial Holding Co., Ltd. | 575,245 | 1,115 | ||
Chang Hwa Commercial Bank | 468,000 | 291 | ||
China Steel Corp. | 4,324,920 | 3,823 | ||
China Steel Corp. - GDR | 39,574 | 699 | ||
Chunghwa Picture Tubes, Ltd. | 480,000 | 92 | ||
Chunghwa Telecom Co., Ltd. | 37,120 | 64 | ||
Chunghwa Telecom Co., Ltd. - ADR | 9,304 | 170 | ||
CMC Magnetics Corp. | 6,621,000 | 1,971 | ||
Compal Electronics, Inc. | 2,170,892 | 1,818 | ||
Compal Electronics, Inc. - GDR | 189,071 | 824 | ||
D-Link Corp. | 401,600 | 446 | ||
Delta Electronics, Inc. | 1,107,850 | 3,131 | ||
Elitegroup Computer Systems | 313,140 | 161 | ||
Evergreen Marine Corp. | 810,870 | 466 | ||
Far Eastern Textile Co., Ltd. | 1,348,995 | 1,022 | ||
Far EasTone Telecommunications Co., Ltd. | 924,000 | 1,056 | ||
Faraday Technology Corp. | 317,987 | 453 | ||
First Financial Holding Co., Ltd. | 3,291,300 | 2,256 | ||
Foxconn Technology Co., Ltd. | 213,900 | 2,087 | ||
Gigabyte Technology Co., Ltd. | 1,150,718 | 834 | ||
HannStar Display Corp. (Æ) | 907,000 | 136 | ||
High Tech Computer Corp. | 281,800 | 6,989 | ||
HON HAI Precision Industry Co., Ltd. | 1,596,372 | 10,343 | ||
Macronix International (Æ) | 3,242,086 | 1,092 | ||
MediaTek, Inc. | 565,200 | 5,514 | ||
Mega Financial Holding Co., Ltd. | 5,595,000 | 3,944 | ||
Micro-Star International Co., Ltd. | 85,470 | 46 | ||
Mitac International | 1,435,935 | 1,502 | ||
Nan Ya Plastics Corp. | 770,710 | 1,112 | ||
Phoenixtec Power Co., Ltd. | 565,629 | 596 | ||
POU Chen Corp. | 648,000 | 555 | ||
Powerchip Semiconductor Corp. | 1 | — | ||
Powertech Technology, Inc. | 261,000 | 751 | ||
Quanta Computer, Inc. | 741,710 | 1,099 | ||
Realtek Semiconductor Corp. | 560,000 | 744 | ||
Ritek Corp. | 2,653,161 | 634 | ||
Siliconware Precision Industries Co. | 3,310,625 | 4,200 | ||
Systex Corp. | 194,000 | 54 | ||
Taiwan Cement Corp. | 673,357 | 531 |
219
Table of Contents
Taiwan Fertilizer Co., Ltd. | 63,000 | 102 | ||
Taiwan Mobile Co., Ltd. | 2,509,520 | 2,505 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. | 10,875,984 | 19,945 | ||
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR (Ñ) | 120,222 | 1,166 | ||
Teco Electric and Machinery Co., Ltd. | 1,415,000 | 553 | ||
U-Ming Marine Transport Corp. | 715,000 | 837 | ||
Uni-President Enterprises Corp. | 2,601,000 | 2,315 | ||
United Microelectronics Corp. | 5,398,935 | 3,011 | ||
Vanguard International Semiconductor Corp. | 1,965,947 | 1,318 | ||
Wintek Corp. | 797,630 | 679 | ||
Yieh Phui Enterprise | 807,430 | 325 | ||
Yuanta Core Pacific Securities Co. | 1,508,000 | 1,056 | ||
Zyxel Communications Corp. | 856,118 | 973 | ||
108,781 | ||||
Thailand - 2.0% | ||||
Airports of Thailand PCL (Ñ) | 1,742,300 | 3,087 | ||
Bank of Ayudhya PCL | 6,588,900 | 3,430 | ||
Charoen Pokphand Foods PCL | 4,318,500 | 584 | ||
CP 7-Eleven PCL | 5,297,700 | 931 | ||
Glow Energy PCL | 942,500 | 790 | ||
Kasikornbank PCL | 898,200 | 1,689 | ||
Precious Shipping PCL | 117,300 | 139 | ||
PTT Chemical PCL | 943,579 | 1,993 | ||
PTT Exploration & Production PCL | 563,400 | 1,674 | ||
PTT PCL | 509,000 | 3,080 | ||
Rayong Refinery PCL (Æ) | 960,000 | 505 | ||
Regional Container Lines PCL | 962,600 | 601 | ||
Siam City Bank PCL | 178,400 | 104 | ||
Siam City Cement PCL | 25,000 | 168 | ||
Siam Commercial Bank PCL | 975,500 | 1,728 | ||
Thai Beverage PCL | 13,966,900 | 2,602 | ||
23,105 | ||||
Turkey - 3.1% | ||||
Akcansa Cimento AS | 75,895 | 411 | ||
Anadolu Efes Biracilik Ve Malt Sanayii AS | 186,030 | 5,106 | ||
Arcelik | 168,400 | 1,080 | ||
BIM Birlesik Magazalar AS | 9,500 | 420 | ||
Cimsa Cimento Sanayi VE Tica | 263,875 | 1,621 | ||
Eregli Demir ve Celik Fabrikalari TAS | 504,954 | 2,911 | ||
Ford Otomotiv Sanayi AS | 143,300 | 1,013 | ||
Hurriyet Gazetecilik AS | 461,300 | 1,323 | ||
Ihlas Holding AS | 816,246 | 325 | ||
Migros Turk TAS | 230,523 | 2,658 | ||
Trakya Cam Sanayi AS | 311,452 | 872 | ||
Tupras Turkiye Petrol Rafine | 294,407 | 4,889 | ||
Turk Hava Yollari (Æ) | 111,952 | 503 | ||
Turkcell Iletisim Hizmet AS | 78,249 | 422 | ||
Turkiye Garanti Bankasi AS | 726,000 | 2,665 | ||
Turkiye Is Bankasi Class C | 777,280 | 5,041 | ||
Turkiye Vakiflar Bankasi Tao Class D | 240,900 | 1,265 | ||
Vestel Elektronik Sanayi ve Ticaret AS (Æ) | 114,575 | 303 | ||
Yapi ve Kredi Bankasi (Æ) | 1,458,077 | 2,802 | ||
35,630 | ||||
United Kingdom - 1.5% | ||||
Anglo American PLC | 244,845 | 11,135 | ||
Astro All Asia Networks PLC | 870,300 | 1,187 | ||
Hikma Pharmaceuticals PLC | 176,600 | 1,359 |
220
Table of Contents
Kazakhmys PLC | 55,800 | 1,278 | ||
Old Mutual PLC | 2,300 | 7 | ||
SABMiller PLC | 111,500 | 2,169 | ||
17,135 | ||||
United States - 0.7% | ||||
CTC Media, Inc. (Æ)(Ñ) | 55,700 | 1,352 | ||
Southern Copper Corp. (Ñ) | 137,710 | 7,076 | ||
WNS Holdings, Ltd. - ADR (Æ) | 10,800 | 321 | ||
8,749 | ||||
Venezuela - 0.0% | ||||
Cia Anonima Nacional Telefonos de Venezuela - | ||||
CANTV - ADR (Ñ) | 24,542 | 477 | ||
Siderurgica Venezolana Sivensa SACA (Æ) | 1,306,495 | 44 | ||
521 | ||||
Zimbabwe - 0.0% | ||||
Delta Corp., Ltd. | 1,322,627 | 294 | ||
Total Common Stocks | ||||
(cost $727,324) | 1,038,741 | |||
Preferred Stocks - 5.3% | ||||
Brazil - 4.2% | ||||
Banco Bradesco SA | 137,900 | 4,900 | ||
Banco Itau Holding Financeira SA | 167,910 | 5,528 | ||
Braskem SA | 419,235 | 2,966 | ||
Centrais Eletricas Brasileiras SA | 212,816,500 | 4,263 | ||
Cia Brasileira de Distribuicao Grupo Pao de Acucar | 39,980,000 | 1,195 | ||
Cia de Bebidas das Americas | 950,000 | 417 | ||
Cia de Tecidos do Norte de Minas - Coteminas | 7,256,440 | 684 | ||
Cia Energetica de Sao Paulo Class Preferenc (Æ) | 97,300,000 | 950 | ||
Cia Vale do Rio Doce | 42,444 | 914 | ||
Duratex SA | 19,200 | 231 | ||
Gerdau SA | 19,400 | 284 | ||
Petroleo Brasileiro SA | 668,272 | 13,419 | ||
Tam SA | 46,000 | 1,398 | ||
Usinas Siderurgicas de Minas Gerais SA | 305,600 | 10,389 | ||
Weg SA | 180,400 | 876 | ||
48,414 | ||||
Chile - 0.0% | ||||
Embotelladora Andina SA | 205,300 | 539 | ||
Colombia - 0.0% | ||||
BanColombia SA | 7,200 | 54 | ||
Russia - 0.1% | ||||
Transneft | 770 | 1,624 | ||
South Korea - 1.0% | ||||
Hyundai Motor Co. | 36,070 | 1,704 | ||
Samsung Electronics Co., Ltd. (Ñ) | 19,629 | 9,520 | ||
11,224 | ||||
Total Preferred Stocks | ||||
(cost $39,149) | 61,855 | |||
Warrants & Rights - 0.0% | ||||
Brazil - 0.0% | ||||
Banco Bradesco SA Right (Æ) | 2,982 | 29 | ||
South Korea - 0.0% | ||||
STX Shipbuilding Co., Ltd. Right (Æ) | 6,437 | 31 | ||
Total Warrants & Rights | ||||
(cost $0) | 60 | |||
221
Table of Contents
Notional Amount $ | ||||
Options Purchased - 0.3% | ||||
(Number of Contracts) | ||||
Brazil - 0.0% | ||||
Bovespa Index Futures | ||||
Dec 2006 39,540.00 (BRL) | ||||
Call (328) | 6,056 | 64 | ||
Dec 2006 39,545.00 (BRL) | ||||
Call (152) | 2,807 | 30 | ||
94 | ||||
South Korea - 0.3% | ||||
Kospi 200 Index Futures | ||||
Dec 2006 148.41 (KRW) | ||||
Call (146) | 11,498 | 3,079 | ||
Total Options Purchased | ||||
(cost $2,822) | 3,173 | |||
Principal Amount ($) or Shares | |||||
Short-Term Investments - 5.1% | |||||
Russell Investment Company Money Market Fund | 54,402,000 | 54,402 | |||
United States Treasury Bills (ç)(z)(§) | |||||
4.898% due 12/07/06 | 4,800 | 4,777 | |||
Total Short-Term Investments | |||||
(cost $59,179) | 59,179 | ||||
Other Securities - 5.2% | |||||
Russell Investment Company Money Market Fund (×) | 15,523,804 | 15,524 | |||
State Street Securities Lending Quality Trust (×) | 44,972,837 | 44,973 | |||
Total Other Securities | |||||
(cost $60,497) | 60,497 | ||||
Total Investments - 105.0% | |||||
(identified cost $888,971) | 1,223,505 | ||||
Other Assets and Liabilities, | |||||
Net - (5.0%) | (58,583 | ) | |||
Net Assets - 100.0% | 1,164,922 | ||||
See accompanying notes which are an integral part of the financial statement.
Emerging Markets Fund
222
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Hang Seng Index (Hong Kong) expiration date 11/06 (161) | 13,759 | 117 | |||
JSE-40 Index (South Africa) expiration date 12/06 (330) | 9,653 | 791 | |||
MSCI Taiwan Index expiration date 11/06 (400) | 11,652 | (130 | ) | ||
Total Unrealized Appreciation (Depreciation) on | |||||
Open Futures Contracts | 778 | ||||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Brazil | |||||
Bovespa Index Futures | |||||
Dec 2006 39,540.00 (BRL) Put (328) | 6,056 | (46 | ) | ||
Dec 2006 39,545.00 (BRL) Put (152) | 2,807 | (21 | ) | ||
South Korea | |||||
Kospi 200 Index Futures | |||||
Dec 2006 148.41 (KRW) Put (146) | 11,498 | (775 | ) | ||
Total Liability for Options Written | |||||
(premiums received $828) | (842 | ) | |||
Foreign Currency Exchange Contracts
Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | |||||||||
USD | 171 | BRL | 365 | 11/01/06 | (1) | |||||||
USD | 40 | BRL | 85 | 12/07/06 | — | |||||||
USD | 458 | BRL | 1,000 | 12/20/06 | 4 | |||||||
USD | 1,097 | BRL | 2,400 | 12/20/06 | 12 | |||||||
USD | 2,283 | BRL | 5,000 | 12/20/06 | 29 | |||||||
USD | 5,244 | BRL | 11,500 | 12/20/06 | 73 | |||||||
USD | 42 | HKD | 330 | 11/01/06 | — | |||||||
USD | 828 | HKD | 6,439 | 11/01/06 | — | |||||||
USD | 528 | KRW | 500,000 | 12/20/06 | 3 | |||||||
USD | 530 | KRW | 500,000 | 12/20/06 | 1 | |||||||
USD | 944 | KRW | 900,000 | 12/20/06 | 13 | |||||||
USD | 1,045 | KRW | 1,000,000 | 12/20/06 | 18 | |||||||
USD | 2,931 | KRW | 2,800,000 | 12/20/06 | 44 | |||||||
USD | 8,801 | KRW | 8,400,000 | 12/20/06 | 125 | |||||||
USD | 73 | MXN | 780 | 11/01/06 | — | |||||||
USD | 32 | ZAR | 244 | 11/01/06 | 1 | |||||||
USD | 37 | ZAR | 276 | 11/02/06 | — | |||||||
USD | 72 | ZAR | 535 | 11/02/06 | — | |||||||
USD | 78 | ZAR | 581 | 11/03/06 | — | |||||||
USD | 78 | ZAR | 576 | 11/06/06 | — | |||||||
USD | 61 | ZAR | 452 | 11/07/06 | — | |||||||
USD | 231 | ZAR | 1,700 | 12/20/06 | (1) | |||||||
USD | 719 | ZAR | 5,300 | 12/20/06 | (3) |
223
Table of Contents
USD | 894 | ZAR | 7,000 | 12/20/06 | 52 | |||||||
USD | 957 | ZAR | 7,200 | 12/20/06 | 16 | |||||||
USD | 976 | ZAR | 7,000 | 12/20/06 | (30) | |||||||
USD | 7,149 | ZAR | 52,742 | 12/20/06 | (23) | |||||||
BRL | 153 | USD | 72 | 11/01/06 | — | |||||||
BRL | 90 | USD | 42 | 11/03/06 | — | |||||||
BRL | 2,000 | USD | 911 | 12/20/06 | (13) | |||||||
BRL | 2,900 | USD | 1,323 | 12/20/06 | (18) | |||||||
HKD | 51 | USD | 7 | 11/02/06 | — | |||||||
IDR | 271,610 | USD | 30 | 11/02/06 | — | |||||||
IDR | 246,278 | USD | 27 | 11/03/06 | — | |||||||
KRW | 500,000 | USD | 523 | 12/20/06 | (8) | |||||||
KRW | 3,100,000 | USD | 3,246 | 12/20/06 | (48) | |||||||
THB | 392 | USD | 11 | 11/03/06 | — | |||||||
TRY | 77 | USD | 53 | 11/02/06 | — | |||||||
ZAR | 4,797 | USD | 630 | 11/01/06 | (22) | |||||||
ZAR | 3,000 | USD | 414 | 12/20/06 | 9 | |||||||
ZAR | 6,742 | USD | 915 | 12/20/06 | 4 | |||||||
ZAR | 7,000 | USD | 947 | 12/20/06 | 1 | |||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 238 | |||||||||||
Industry Diversification (Unaudited) | % of Net Assets | Market Value $ | ||||
Auto and Transportation | 4.5 | 49,434 | ||||
Consumer Discretionary | 4.6 | 55,503 | ||||
Consumer Staples | 4.8 | 58,953 | ||||
Financial Services | 22.6 | 269,244 | ||||
Health Care | 0.9 | 10,499 | ||||
Integrated Oils | 9.4 | 109,636 | ||||
Materials and Processing | 16.4 | 189,689 | ||||
Miscellaneous | 1.0 | 12,974 | ||||
Other Energy | 4.6 | 51,493 | ||||
Producer Durables | 1.7 | 18,093 | ||||
Technology | 11.4 | 130,484 | ||||
Utilities | 12.5 | 144,594 | ||||
Warrants & Rights | — | 60 | ||||
Options Purchased | 0.3 | 3,173 | ||||
Short-Term Investments | 5.1 | 59,179 | ||||
Other Securities | 5.2 | 60,497 | ||||
Total Investments | 105.0 | 1,223,505 | ||||
Other Assets and Liabilities, Net | (5.0 | ) | (58,583 | ) | ||
Net Assets | 100.0 | 1,164,922 | ||||
Geographic Diversification (Unaudited) | % of Net Assets | Market Value $ | ||
Africa | 8.5 | 98,905 | ||
Asia | 45.9 | 534,188 | ||
Europe | 14.7 | 171,958 | ||
Latin America | 19.5 | 227,160 | ||
Middle East | 3.7 | 43,974 | ||
Other Regions | 6.0 | 69,688 | ||
United Kingdom | 1.5 | 17,135 | ||
Other Securities | 5.2 | 60,497 | ||
Total Investments | 105.0 | 1,223,505 |
224
Table of Contents
Other Assets and Liabilities, Net | (5.0 | ) | (58,583 | ) | ||
Net Assets | 100.0 | 1,164,922 | ||||
Russell Investment Company
Emerging Markets Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Austria | 0.1 | ||
Bermuda | 0.4 | ||
Brazil | 7.8 | ||
Canada | 0.2 | ||
Cayman Islands | 0.8 | ||
Chile | 0.5 | ||
China | 5.8 | ||
Columbia | 0.6 | ||
Czech Republic | — | * | |
Egypt | 1.9 | ||
Hong Kong | 1.4 | ||
Hungary | 1.3 | ||
India | 5.6 | ||
Indonesia | 3.0 | ||
Israel | 1.7 | ||
Lebanon | — | * | |
Luxembourg | 2.1 | ||
Malaysia | 1.0 | ||
Mexico | 5.3 | ||
Netherlands | 0.5 | ||
Oman | 0.1 | ||
Pakistan | 1.4 | ||
Peru | — | * | |
Philippines | 0.5 | ||
Poland | 0.4 | ||
Russia | 7.1 | ||
South Africa | 8.5 | ||
South Korea | 14.5 | ||
Taiwan | 9.3 | ||
Thailand | 2.0 | ||
Turkey | 3.1 | ||
United Kingdom | 1.5 | ||
United States | 0.7 | ||
Venezuela | — | * | |
Zimbabwe | — | * | |
Preferred Stock | 5.3 | ||
Warrants & Rights | — | * | |
Options Purchased | 0.3 | ||
Short-Term Investments | 5.1 | ||
Other Securities | 5.2 | ||
Total Investments | 105.0 | ||
Other Assets and Liabilities Net | (5.0 | ) | |
100.0 | |||
Futures Contracts | 0.1 | ||
Foreign Currency Exchange Contracts | — | * | |
Options Written | (0.1 | ) |
* | Less than .05% of net assets. |
225
Table of Contents
Real Estate Securities Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Real Estate Securities Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 38.04 | % | |
5 Years | 24.91 | %§ | |
10 Years | 16.55 | %§ |
Real Estate Securities Fund - Class E ‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 37.65 | % | |
5 Years | 24.60 | %§ | |
10 Years | 16.18 | %§ |
Real Estate Securities Fund - Class C ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 36.63 | % | |
5 Years | 23.68 | %§ | |
10 Years | 15.52 | %§ |
FTSE NAREIT Equity REIT Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 36.37 | % | |
5 Years | 24.38 | %§ | |
10 Years | 15.79 | %§ |
Real Estate Securities Fund
226
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide current income and long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Real Estate Securities Fund Class S, Class E and Class C Shares gained 38.04%, 37.65% and 36.63%, respectively. This compared to the FTSE NAREIT Equity REITs Index, which gained 36.37% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Real Estate Funds Average returned 35.69%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The money managers positioned the Fund to capitalize on improving real estate market fundamentals. The largest overweight positions were in sectors with strong earnings growth: lodging/resorts, regional malls, apartments, office and industrial. As more fully described below, sector positioning was a positive contributor to the Fund’s performance during the fiscal year.
The Fund maintained a primary focus on the larger and more liquid REITs during the fiscal year. As this segment of the market outperformed the broader REIT market, the Fund benefited from this positioning.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
AEW Management and Advisors, L.P. pursues a value-oriented style that focuses on identifying companies that it believes are mispriced relative to underlying real estate net asset value. AEW’s portfolio tends to track relatively closely to the benchmark sector weights. AEW outperformed the benchmark during the fiscal year due to strong stock selection and sector selection. Stock selection was strongest in the regional malls and office sectors. This was partially offset by weak stock selection in the specialty sector. Sector selection was also positive as overweight positions in the apartments sector and underweight positions in the specialty, health care and freestanding retail sectors boosted performance. This was partially offset by an overweight position in the underperforming mixed industrial/office sector.
INVESCO Institutional (N.A.), Inc. maintains a broadly diversified portfolio with exposure to all major property sectors. Their investment style incorporates fundamental property market research and bottom-up quantitative securities analysis. INVESCO outperformed the benchmark during the fiscal year due to contributions from stock selection and, to a lesser extent, sector selection. Stock selection was strongest in the office, specialty, diversified and regional malls sectors. Positive sector selection was driven by overweight positions in the office and industrial sectors and underweight positions in the specialty and freestanding retail sectors. An overweight position in the regional malls sector partially offset these positive effects.
RREEF America LLC’s style emphasizes a top-down approach to property sector weights based on an assessment of property market fundamentals. RREEF outperformed the benchmark during the fiscal year due to contributions from both stock selection and sector selection. Stock selection was strongest in the office, diversified and apartments sectors. This was partially offset by weak stock selection in the shopping centers sector. Sector selection was positive, driven by overweight positions in the lodging/resorts and apartments sectors and an underweight position in the specialty sector.
Heitman Real Estate Securities, LLC manages a concentrated portfolio with a bottom-up approach to stock selection focusing on companies that it believes have attractive valuations relative to growth prospects. Heitman underperformed the benchmark during the fiscal year. Overall, Heitman’s stock selection was a negative contributor to performance, particularly in the office, apartments and self storage sectors. Favorable stock selection in the specialty and regional malls sectors partially offset these adverse effects.
227
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
Heitman’s target weight was increased from 10% to 15%. Heitman is expected to be complementary to the other money managers in the Fund due to its growth-oriented style and more concentrated portfolio.
Money Managers as of October 31, 2006 | Styles | |
AEW Management and Advisors, L.P. | Value | |
Heitman Real Estate Securities, LLC | Growth | |
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund through its INVESCO Real Estate division | Market-Oriented | |
RREEF America, LLC | Market-Oriented |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | FTSE National Association of Real Estate Investment Trusts (NAREIT) Equity REIT Index is an index composed of all the data based on the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market value-weighted. The total-return calculation is based upon whether it is 1-month, 3-months or 12-months. Only those REITs listed for the entire period are used in the total return calculation. | |
‡ | The Fund first issued Class E Shares on November 4, 1996. The returns shown for Class E Shares prior to November 4, 1996 are the performance of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class E Shares from November 4, 1996 to May 17, 1998 reflect the deduction of Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date. The returns shown have not been increased to reflect the elimination of those fees. | |
‡‡ | The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares is the performance of the Fund’s Class S Shares from November 1, 1996 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
228
Table of Contents
Russell Investment Company
Real Estate Securities Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,179.20 | $ | 1,014.77 | ||
Expenses Paid During Period* | $ | 11.37 | $ | 10.51 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.07% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
229
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,183.40 | $ | 1,018.55 | ||
Expenses Paid During Period* | $ | 7.26 | $ | 6.72 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.32% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,185.20 | $ | 1,019.86 | ||
Expenses Paid During Period* | $ | 5.84 | $ | 5.40 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.06% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
230
Table of Contents
Russell Investment Company
Real Estate Securities Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 97.0% | ||||
Apartments - 19.9% | ||||
American Campus Communities, Inc. (Æ)(ö) | 93,700 | 2,495 | ||
Apartment Investment & Management Co. Class A (ö)(Ñ) | 403,475 | 23,127 | ||
Archstone-Smith Trust (ö)(Ñ) | 1,653,979 | 99,586 | ||
AvalonBay Communities, Inc. (ö) | 707,800 | 92,764 | ||
BRE Properties, Inc. Class A (ö)(Ñ) | 58,200 | 3,859 | ||
Camden Property Trust (ö)(Ñ) | 444,700 | 35,896 | ||
Equity Residential (ö)(Ñ) | 1,520,250 | 83,021 | ||
Essex Property Trust, Inc. (ö)(Ñ) | 245,250 | 32,687 | ||
GMH Communities Trust (ö)(Ñ) | 769,300 | 10,747 | ||
Home Properties, Inc. (ö) | 69,600 | 4,397 | ||
Mid-America Apartment Communities, Inc. (ö) | 122,600 | 7,804 | ||
United Dominion Realty Trust, Inc. (ö)(Ñ) | 486,000 | 15,732 | ||
412,115 | ||||
Diversified - 6.3% | ||||
Colonial Properties Trust (ö) | 153,500 | 7,735 | ||
iStar Financial, Inc. (ö) | 125,700 | 5,824 | ||
Spirit Finance Corp. (ö)(Ñ) | 814,400 | 9,699 | ||
Vornado Realty Trust (ö)(Ñ) | 897,972 | 107,083 | ||
130,341 | ||||
Free Standing Retail - 0.1% | ||||
Realty Income Corp. (ö)(Ñ) | 130,000 | 3,432 | ||
Health Care - 3.8% | ||||
Health Care Property Investors, Inc. (ö) | 380,000 | 11,932 | ||
Health Care REIT, Inc. (ö)(Ñ) | 98,200 | 4,054 | ||
Healthcare Realty Trust, Inc. (ö)(Ñ) | 185,800 | 7,525 | ||
LTC Properties, Inc. (ö)(Ñ) | 110,850 | 3,004 | ||
Nationwide Health Properties, Inc. (ö)(Ñ) | 655,550 | 18,840 | ||
Omega Healthcare Investors, Inc. (ö)(Ñ) | 309,700 | 5,228 | ||
Ventas, Inc. (ö)(Ñ) | 743,850 | 28,995 | ||
79,578 | ||||
Industrial - 7.3% | ||||
AMB Property Corp. (ö) | 553,350 | 32,321 | ||
EastGroup Properties, Inc. (ö)(Ñ) | 123,400 | 6,569 | ||
First Potomac Realty Trust (ö)(Ñ) | 132,500 | 4,099 | ||
ProLogis (ö) | 1,702,750 | 107,733 | ||
150,722 | ||||
Lodging/Resorts - 7.6% | ||||
Ashford Hospitality Trust, Inc. (ö) | 156,600 | 2,017 | ||
DiamondRock Hospitality Co. (ö)(Ñ) | 258,800 | 4,366 | ||
FelCor Lodging Trust, Inc. (ö) | 228,300 | 4,739 | ||
Hilton Hotels Corp. | 762,400 | 22,049 | ||
Hospitality Properties Trust (ö) | 67,000 | 3,247 | ||
Host Hotels & Resorts, Inc. (ö)(Ñ) | 3,472,064 | 80,066 | ||
LaSalle Hotel Properties (ö)(Ñ) | 152,520 | 6,444 |
231
Table of Contents
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 427,975 | 25,567 | ||
Strategic Hotels & Resorts, Inc. (ö)(Ñ) | 51,700 | 1,100 | ||
Sunstone Hotel Investors, Inc. (ö)(Ñ) | 247,566 | 7,293 | ||
156,888 | ||||
Manufactured Homes - 0.4% | ||||
Equity Lifestyle Properties, Inc. (ö)(Ñ) | 185,750 | 9,152 | ||
Mixed Industrial/Office - 1.7% | ||||
Duke Realty Corp. (ö)(Ñ) | 162,600 | 6,514 | ||
Liberty Property Trust (ö) | 486,900 | 23,468 | ||
PS Business Parks, Inc. (ö) | 100,000 | 6,585 | ||
36,567 | ||||
Office - 18.7% | ||||
Alexandria Real Estate Equities, Inc. (ö)(Ñ) | 211,500 | 21,087 | ||
American Financial Realty Trust (ö)(Ñ) | 350,100 | 4,086 | ||
BioMed Realty Trust, Inc. (ö)(Ñ) | 299,800 | 9,663 | ||
Boston Properties, Inc. (ö)(Ñ) | 939,550 | 100,372 | ||
Brandywine Realty Trust (ö)(Ñ) | 665,321 | 22,195 | ||
Brookfield Properties Corp. (Ñ) | 785,450 | 29,761 | ||
Corporate Office Properties Trust (ö)(Ñ) | 389,300 | 18,605 | ||
Douglas Emmett, Inc. (Æ)(ö) | 138,500 | 3,303 | ||
Equity Office Properties Trust (ö)(Ñ) | 1,897,000 | 80,622 | ||
Highwoods Properties, Inc. (ö) | 262,000 | 10,008 | ||
Kilroy Realty Corp. (ö)(Ñ) | 136,000 | 10,245 | ||
Mack-Cali Realty Corp. (ö)(Ñ) | 311,200 | 16,462 | ||
Maguire Properties, Inc. (ö) | 75,600 | 3,233 | ||
Reckson Associates Realty Corp. (ö)(Ñ) | 293,800 | 12,962 | ||
SL Green Realty Corp. (ö) | 370,100 | 44,801 | ||
387,405 | ||||
Regional Malls - 14.2% | ||||
CBL & Associates Properties, Inc. (ö)(Ñ) | 173,300 | 7,578 | ||
General Growth Properties, Inc. (ö) | 730,200 | 37,897 | ||
Macerich Co. (The) (ö) | 714,000 | 57,370 | ||
Simon Property Group, Inc. (ö)(Ñ) | 1,674,250 | 162,570 | ||
Taubman Centers, Inc. (ö)(Ñ) | 634,156 | 29,742 | ||
295,157 | ||||
Self Storage - 4.6% | ||||
Extra Space Storage, Inc. (ö)(Ñ) | 675,100 | 12,449 | ||
Public Storage, Inc. (ö)(Ñ) | 774,864 | 69,513 | ||
Sovran Self Storage, Inc. (ö) | 33,650 | 1,985 | ||
U-Store-It Trust (ö)(Ñ) | 489,500 | 10,749 | ||
94,696 | ||||
Shopping Centers - 10.6% | ||||
Acadia Realty Trust (ö)(Ñ) | 464,200 | 11,860 | ||
Developers Diversified Realty Corp. (ö) | 775,700 | 47,240 | ||
Federal Realty Investors Trust (ö)(Ñ) | 531,300 | 42,584 | ||
Kimco Realty Corp. (ö)(Ñ) | 707,438 | 31,432 | ||
Kite Realty Group Trust (ö) | 181,200 | 3,323 | ||
Regency Centers Corp. (ö) | 969,150 | 69,933 | ||
Tanger Factory Outlet Centers (ö)(Ñ) | 173,400 | 6,468 | ||
Weingarten Realty Investors (ö) | 136,900 | 6,366 | ||
219,206 | ||||
Specialty - 1.8% | ||||
Digital Realty Trust, Inc. (ö)(Ñ) | 897,980 | 29,984 | ||
Plum Creek Timber Co., Inc. (ö) | 200,000 | 7,188 | ||
37,172 | ||||
Total Common Stocks | ||||
(cost $1,193,634) | 2,012,431 | |||
232
Table of Contents
Short-Term Investments - 3.2% | |||||
Russell Investment Company | |||||
Money Market Fund | 65,334,000 | 65,334 | |||
Total Short-Term Investments | |||||
(cost $65,334) | 65,334 | ||||
Other Securities - 11.0% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 58,696,829 | 58,697 | |||
State Street Securities Lending Quality Trust | |||||
(×) | 170,046,138 | 170,046 | |||
Total Other Securities | |||||
(cost $228,743) | 228,743 | ||||
Total Investments - 111.2% | |||||
(identified cost $1,487,711) | 2,306,508 | ||||
Other Assets and Liabilities, | |||||
Net - (11.2%) | (233,088 | ) | |||
Net Assets - 100.0% | 2,073,420 | ||||
See accompanying notes which are an integral part of the financial statement.
Real Estate Securities Fund
233
Table of Contents
Russell Investment Company
Real Estate Securities Fund
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Apartments | 19.9 | ||
Diversified | 6.3 | ||
Free Standing Retail | 0.1 | ||
Health Care | 3.8 | ||
Industrial | 7.3 | ||
Lodging/Resorts | 7.6 | ||
Manufactured Homes | 0.4 | ||
Mixed Industrial/Office | 1.7 | ||
Office | 18.7 | ||
Regional Malls | 14.2 | ||
Self Storage | 4.6 | ||
Shopping Center | 10.6 | ||
Specialty | 1.8 | ||
Short-Term Investments | 3.2 | ||
Other Securities | 11.0 | ||
Total Investments | 111.2 | ||
Other Assets and Liabilities, Net | (11.2 | ) | |
100.0 | |||
234
Table of Contents
(This page intentionally left blank)
235
Table of Contents
Short Duration Bond Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Short Duration Bond Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.95 | % | |
5 Years | 2.83 | %§ | |
10 Years | 4.62 | %§ |
Short Duration Bond Fund - Class E ‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 3.69 | % | |
5 Years | 2.57 | %§ | |
10 Years | 4.42 | %§ |
Short Duration Bond Fund - Class C ‡‡‡
Periods Ended 10/31/06 | Total Return | ||
1 Year | 2.89 | % | |
5 Years | 1.80 | %§ | |
10 Years | 3.82 | %§ |
Merrill Lynch U.S. Treasuries 1-3 Year Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 4.15 | % | |
5 Years | 2.68 | %§ | |
10 Years | 4.71 | %§ |
Short Duration Bond Fund
236
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide current income and preservation of capital with a focus on short duration securities.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Short Duration Bond Fund Class S, Class E and Class C Shares gained 3.95%, 3.69% and 2.89%, respectively. This compared to the Merrill Lynch U.S. Treasuries 1-3 Year Index, which gained 4.15% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Short Investment Grade Debt Funds Average returned 4.11%. This return serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
Short-term interest rates increased over the 12 months ended October 31, 2006. Therefore, the Fund’s money managers who favored shorter-than-index duration positions should have performed better. However, given spikes in interest rate volatility throughout the year, money managers that responded more tactically by changing their duration stance relatively quickly performed better. Duration is a measure of a bond price’s sensitivity to a change in interest rates. Fund performance was helped by tactical duration decisions and yield curve positioning.
Despite the increase in short-term interest rates, shorter maturity non-Treasury sectors achieved strong benchmark relative performance. The Fund benefited from having an overweight position in non-Treasury sectors, such as corporate and mortgage-backed securities, as well as small positions in high yield corporate bonds and emerging market debt securities.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
The Fund entered the fiscal year positioned conservatively compared to other time periods. For example, the Fund held few emerging market debt and non-investment grade corporate bonds relative to other time periods. The Fund was also positioned to generate a yield advantage from non-Treasury sectors such as investment grade corporate bonds and to reflect a more conservative view on the direction of interest rates by maintaining a close to benchmark duration position. As the fiscal year progressed, shorter duration non-Treasury sectors continued to perform well, leading to less attractive valuations in those sectors. In response, the Fund’s money managers maintained their conservative investment stance by focusing on higher quality securities. While the Fund’s money managers took profits in the non-Treasury sectors, the Fund maintained a near benchmark duration stance throughout most of the fiscal year although duration positioning did vary as the Fund’s money managers made tactical investment decisions.
The key investment strategies of sector rotation, issue selection, and duration and yield curve management all contributed positively to performance. Sector rotation strategies caused the Fund’s money managers to overweight non- benchmark sectors which tended to outperform the all-Treasury security benchmark. The money managers also added value through security selection. Finally, in order to take advantage of interest rates changes, some money managers took either longer or shorter duration positions at various times resulting in positive Fund performance.
The Fund derived much of its performance by maintaining overweighted positions in the riskier sectors of the fixed income markets relative to the all-Treasury benchmark. These sectors included investment grade corporate bonds and mortgage and asset-backed securities. The allocation to these non-Treasury sectors benefited the Fund by providing a larger-than-benchmark yield and higher-than-benchmark total return. In addition, the Fund’s money managers added value through positive security selection and sector allocation decisions. In contrast, investments in government securities, such as Treasury Inflation Protected Securities (TIPS) and non-dollar denominated bonds, detracted from performance during the fiscal year.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
237
Table of Contents
Money Managers as of October 31, 2006 | Style | |
Merganser Capital Management, L.P. | Sector Rotation | |
Pacific Investment Management Company, LLC | Sector Rotation | |
STW Fixed Income Management | Sector Rotation |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Assumes initial investment on November 1, 1996. | |
** | Merrill Lynch 1-2.99 Years Treasury Index is an index composed of approximately 160 issues in the form of publicly placed, coupon-bearing US Treasury debt. Issues must carry a term to maturity of at least one year, and par amounts outstanding must be no less than $10 million at the start and at the close of the performance measurement periods. | |
‡‡ | The Fund first issued Class E Shares on February 18, 1999. The returns shown for Class E Shares prior to February 18, 1999 are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. | |
‡‡‡ | The Fund first issued Class C Shares on March 3, 1999. The returns shown for Class C Shares are the performance of the Fund’s Class S Shares from November 1, 1996 to February 17, 1999 and the performance of the Class E Shares from February 18, 1999 to March 2, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower. | |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
238
Table of Contents
Russell Investment Company
Short Duration Bond Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,021.30 | $ | 1,016.94 | ||
Expenses Paid During | ||||||
Period* | $ | 8.36 | $ | 8.34 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
239
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,025.10 | $ | 1,020.72 | ||
Expenses Paid During Period* | $ | 4.54 | $ | 4.53 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.89% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,026.40 | $ | 1,021.98 | ||
Expenses Paid During | ||||||
Period* | $ | 3.27 | $ | 3.26 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.64% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
240
Table of Contents
Russell Investment Company
Short Duration Bond Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Long-Term Investments - 68.4% | ||||
Asset-Backed Securities - 18.3% | ||||
ACE Securities Corp. (Ê) | ||||
Series 2006-HE4 Class A2A | ||||
5.384% due 10/25/36 | 1,177 | 1,177 | ||
AmeriCredit Automobile Receivables Trust | ||||
Series 2005-AX Class A3 | ||||
3.630% due 01/06/10 | 1,362 | 1,353 | ||
Series 2006-RM Class A1 | ||||
5.370% due 10/06/09 | 2,000 | 2,001 | ||
Argent Securities, Inc. (Ê) | ||||
Series 2006-M2 Class A2A | ||||
5.380% due 09/25/36 | 452 | 452 | ||
Series 2006-W4 Class A2A | ||||
5.380% due 05/25/36 | 2,670 | 2,670 | ||
Asset Backed Securities Corp. Home Equity (Ê) | ||||
Series 2002-HE1 Class M1 | ||||
6.970% due 03/15/32 | 1,108 | 1,109 | ||
Asset Backed Securities Corp. Home Equity Loan Trust (Ê) | ||||
Series 2004-HE6 Class A1 | ||||
5.595% due 09/25/34 | 731 | 730 | ||
Banc of America Securities Auto Trust | ||||
Series 2005-WF1 Class A4 | ||||
4.080% due 04/18/10 | 3,000 | 2,951 | ||
Bank One Issuance Trust | ||||
Series 2004-B2 Class B2 | ||||
4.370% due 04/15/12 | 2,000 | 1,963 | ||
Bear Stearns Asset Backed Securities, Inc. (Ê) | ||||
Series 2004-BO1 Class 1A1 | ||||
5.520% due 09/25/34 | 211 | 212 | ||
BMW Vehicle Owner Trust | ||||
Series 2004-A Class A4 | ||||
3.320% due 02/25/09 | 4,950 | 4,887 | ||
Brazos Higher Education Authority, Inc. | ||||
Series 2005-A Class A5 | ||||
4.910% due 12/01/40 | 3,250 | 3,235 | ||
California Infrastructure PG&E-1 Series 1997-1 | ||||
Class A8 | ||||
6.480% due 12/26/09 | 2,746 | 2,768 | ||
California Infrastructure SCE-1 Series 1997-1 | ||||
Class A7 | ||||
6.420% due 12/26/09 | 4,540 | 4,570 | ||
Capital Auto Receivables Asset Trust | ||||
Series 2004-1 Class A3 | ||||
2.000% due 11/15/07 | 118 | 118 | ||
Series 2004-2 Class A2 |
241
Table of Contents
3.350% due 02/15/08 | 2,185 | 2,175 | ||
Series 2006-1 Class A3 | ||||
5.030% due 10/15/09 | 2,225 | 2,219 | ||
Capital One Auto Finance Trust | ||||
Series 2005-BSS Class A3 | ||||
4.080% due 11/15/09 | 2,000 | 1,986 | ||
Capital One Master Trust | ||||
Series 2002-4A Class A | ||||
4.900% due 03/15/10 | 1,000 | 998 | ||
Capital One Prime Auto Receivables Trust | ||||
Series 2004-3 Class A4 | ||||
3.690% due 06/15/10 | 1,000 | 979 | ||
Series 2004-3 Class B | ||||
3.860% due 08/15/11 | 1,500 | 1,473 | ||
Carmax Auto Owner Trust | ||||
Series 2004-2 Class A4 | ||||
3.460% due 09/15/11 | 2,500 | 2,443 | ||
Series 2005-2 Class A4 | ||||
4.340% due 08/15/10 | 2,000 | 1,970 | ||
Caterpillar Financial Asset Trust | ||||
Series 2006-A Class A3 | ||||
5.570% due 05/25/10 | 2,000 | 2,016 | ||
Centex Home Equity | ||||
Series 2003-C Class AF4 | ||||
4.960% due 04/25/32 | 136 | 135 | ||
Chase Credit Card Master Trust (Ê) | ||||
Series 2002-1 Class A | ||||
5.420% due 06/15/09 | 2,900 | 2,901 | ||
Chase Manhattan Auto Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.830% due 09/15/10 | 1,800 | 1,761 | ||
Series 2005-A Class A4 | ||||
3.980% due 04/15/11 | 1,000 | 978 | ||
Series 2005-A Class CTFS | ||||
4.040% due 04/15/11 | 1,000 | 986 | ||
Series 2006-A Class A3 | ||||
5.340% due 07/15/10 | 3,770 | 3,784 | ||
CIT Equipment Collateral | ||||
Series 2004-VT1 Class A3 | ||||
2.200% due 03/20/08 | 240 | 238 | ||
Series 2005-VT1 Class A3 | ||||
4.120% due 08/20/08 | 1,063 | 1,056 | ||
CIT Marine Trust | ||||
Series 1999-A Class A4 | ||||
6.250% due 11/15/19 | 590 | 590 | ||
CIT Rv Trust | ||||
Series 1998-A Class A5 | ||||
6.120% due 11/15/13 | 295 | 295 | ||
Citibank Credit Card Issuance Trust | ||||
Series 2003-A3 Class A3 | ||||
3.100% due 03/10/10 | 1,000 | 973 | ||
Citigroup Mortgage Loan Trust, Inc. (Ê) | ||||
Series 2006-WFH Class A1 | ||||
5.360% due 08/25/36 | 868 | 868 | ||
Community Program Loan Trust | ||||
Series 1987-A Class A4 | ||||
4.500% due 10/01/18 | 1,955 | 1,922 |
242
Table of Contents
Countrywide Asset-Backed Certificates (Ê) | ||||
Series 2001-BC3 Class A | ||||
5.800% due 12/25/31 | 173 | 173 | ||
Series 2005-9 Class 2A1 | ||||
5.420% due 01/25/36 | 163 | 163 | ||
Series 2006-15 Class A1 | ||||
5.434% due 10/25/46 | 1,092 | 1,092 | ||
Series 2006-16 Class 2A1 | ||||
5.375% due 12/25/46 | 500 | 500 | ||
Series 2006-17 Class 2A1 | ||||
5.380% due 03/25/47 | 1,100 | 1,100 | ||
Daimler Chrysler Auto Trust | ||||
Series 2005-A Class A3 | ||||
3.490% due 12/08/08 | 1,674 | 1,662 | ||
Series 2005-A Class A4 | ||||
3.740% due 02/08/10 | 9,100 | 8,941 | ||
Discover Card Master Trust I | ||||
Series 2002-2 Class B | ||||
5.450% due 10/15/09 | 1,000 | 999 | ||
E-Trade RV and Marine Trust | ||||
Series 2004-1 Class A3 | ||||
3.620% due 10/08/18 | 1,300 | 1,253 | ||
Equity One ABS, Inc. | ||||
Series 2003-4 Class M1 | ||||
5.369% due 10/25/34 | 1,500 | 1,486 | ||
Fannie Mae Grantor Trust (Ê) | ||||
Series 2002-T10 Class A1 | ||||
5.560% due 06/25/32 | 4,433 | 4,433 | ||
Fifth Third Auto Trust | ||||
Series 2004-A Class A3 | ||||
3.190% due 02/20/08 | 310 | 310 | ||
First Franklin Mortgage Loan Asset Backed Certificates (Ê) | ||||
Series 2006-FF1 Class A3 | ||||
5.370% due 11/25/36 | 1,300 | 1,300 | ||
First NLC Trust (Ê) | ||||
Series 2005-2 Class AV1 | ||||
5.430% due 09/25/35 | 5 | 5 | ||
Ford Credit Auto Owner Trust | ||||
Series 2005-A Class A3 | ||||
3.480% due 11/15/08 | 5,527 | 5,486 | ||
Series 2005-B Class A4 | ||||
4.380% due 01/15/10 | 1,500 | 1,483 | ||
Series 2005-B Class B | ||||
4.640% due 04/15/10 | 1,250 | 1,238 | ||
Series 2005-C Class B | ||||
4.520% due 09/15/10 | 1,000 | 985 | ||
Series 2006-A Class A3 | ||||
5.050% due 03/15/10 | 535 | 534 | ||
Series 2006-B Class A3 | ||||
5.260% due 10/15/10 | 545 | 546 | ||
Franklin Auto Trust | ||||
Series 2003-1 Class A4 | ||||
2.270% due 05/20/11 | 506 | 499 | ||
GE Capital Credit Card Master Note Trust | ||||
Series 2006-1 Class A | ||||
5.080% due 09/15/12 | 1,480 | 1,484 | ||
GE Commercial Equipment Financing LLC (Ê) |
243
Table of Contents
Series 2004-1 Class B | ||||
5.520% due 12/20/15 | 468 | 469 | ||
GE Corporate Aircraft Financing LLC (Ê)(p) | ||||
Series 2004-1A Class B | ||||
6.170% due 01/25/18 | 364 | 367 | ||
GE Dealer Floorplan Master Note Trust (Ê) | ||||
Series 2004-2 Class B | ||||
5.610% due 07/20/09 | 1,000 | 1,001 | ||
GE-WMC Mortgage Securities LLC (Ê) | ||||
Series 2006-1 Class A2A | ||||
5.370% due 08/25/36 | 480 | 480 | ||
GMAC Mortgage Corp. Loan Trust | ||||
Series 2004-GH1 Class A2 | ||||
4.390% due 12/25/25 | 1,500 | 1,484 | ||
GS Auto Loan Trust | ||||
Series 2004-1 Class A3 | ||||
2.130% due 11/15/07 | 48 | 48 | ||
Series 2006-1 Class A3 | ||||
5.370% due 12/15/10 | 1,300 | 1,305 | ||
GSAMP Trust (Ê) | ||||
Series 2004-SEA Class A2A | ||||
5.610% due 03/25/34 | 551 | 551 | ||
Harley-Davidson Motorcycle Trust | ||||
Series 2006-3 Class A3 | ||||
5.240% due 01/15/12 | 4,850 | 4,866 | ||
Honda Auto Receivables Owner Trust | ||||
Series 2003-2 Class A4 | ||||
2.160% due 10/21/08 | 1,752 | 1,748 | ||
Series 2003-3 Class A4 | ||||
2.770% due 11/21/08 | 1,216 | 1,208 | ||
Series 2003-4 Class A4 | ||||
2.790% due 03/16/09 | 699 | 691 | ||
Series 2003-5 Class A4 | ||||
2.960% due 04/20/09 | 2,119 | 2,092 | ||
Series 2004-3 Class A4 | ||||
3.280% due 02/18/10 | 2,300 | 2,244 | ||
Series 2005-2 Class A4 | ||||
4.150% due 10/15/10 | 1,850 | 1,822 | ||
Series 2006-3 Class A3 | ||||
5.120% due 10/15/10 | 1,250 | 1,253 | ||
Household Automotive Trust | ||||
Series 2005-3 Class A2 | ||||
4.700% due 01/20/09 | 1,231 | 1,229 | ||
Hyundai Auto Receivables Trust | ||||
Series 2004-A Class A3 | ||||
2.970% due 05/15/09 | 555 | 548 | ||
Series 2005-A Class A3 | ||||
3.980% due 11/16/09 | 1,500 | 1,481 | ||
Illinois Power Special Purpose Trust | ||||
Series 1998-1 Class A6 | ||||
5.540% due 06/25/09 | 1,496 | 1,496 | ||
JP Morgan Mortgage Acquisition Corp. (Ê) | ||||
Series 2006-WMC Class A2 | ||||
5.380% due 08/25/36 | 565 | 565 | ||
Long Beach Auto Receivables Trust | ||||
Series 2005-B Class A3 | ||||
4.406% due 05/15/10 | 1,500 | 1,487 |
244
Table of Contents
Long Beach Mortgage Loan Trust (Ê) | ||||
Series 2004-4 Class 1A1 | ||||
5.600% due 10/25/34 | 303 | 303 | ||
Marlin Leasing Receivables LLC (p) | ||||
Series 2005-1A Class A3 | ||||
4.630% due 11/17/08 | 1,650 | 1,637 | ||
MBNA Master Credit Card Trust (Ê) | ||||
Series 2000-D Class A | ||||
5.520% due 09/15/09 | 3,460 | 3,463 | ||
Merrill Auto Trust Securitization | ||||
Series 2005-1 Class A3 | ||||
4.100% due 08/25/09 | 3,000 | 2,972 | ||
Merrill Lynch Mortgage Investors, Inc. (Ê) | ||||
Series 2006-RM5 Class A2A | ||||
5.380% due 10/25/37 | 1,900 | 1,900 | ||
Morgan Stanley Dean Witter Capital I (Ê) | ||||
Series 2002-HE1 Class A2 | ||||
5.660% due 07/25/32 | 2 | 2 | ||
National City Auto Receivables Trust | ||||
Series 2004-A Class A3 | ||||
2.110% due 07/15/08 | 204 | 204 | ||
Nelnet Education Loan Funding, Inc. | ||||
Series 2001-A Class A1 | ||||
5.760% due 07/01/12 | 1,567 | 1,575 | ||
Nissan Auto Lease Trust | ||||
Series 2005-A Class A3 | ||||
4.700% due 10/15/08 | 3,000 | 2,987 | ||
Nissan Auto Receivables Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.760% due 07/15/09 | 4,000 | 3,922 | ||
Series 2005-A Class A3 | ||||
3.540% due 10/15/08 | 1,281 | 1,271 | ||
Series 2005-B Class A3 | ||||
3.990% due 07/15/09 | 1,980 | 1,962 | ||
Onyx Acceptance Grantor Trust | ||||
Series 2005-A Class A4 | ||||
3.910% due 09/15/11 | 2,000 | 1,964 | ||
Park Place Securities, Inc. (Ê) | ||||
Series 2004-MCW Class A1 | ||||
5.642% due 10/25/34 | 3,394 | 3,387 | ||
PBG Equipment Trust (p) | ||||
Series 1998-1A Class A | ||||
6.270% due 01/20/12 | 448 | 448 | ||
Peco Energy Transition Trust | ||||
Series 1999-A Class A6 | ||||
6.050% due 03/01/09 | 801 | 802 | ||
Series 2001-A Class A1 | ||||
6.520% due 12/31/10 | 1,248 | 1,307 | ||
PG&E Energy Recovery Funding LLC | ||||
Series 2005-1 Class A2 | ||||
3.870% due 06/25/11 | 2,742 | 2,697 | ||
Series 2005-2 Class A1 | ||||
4.850% due 06/25/11 | 1,098 | 1,094 | ||
Popular ABS Mortgage Pass-Through Trust | ||||
Series 2004-5 Class AF2 | ||||
3.735% due 12/25/34 | 383 | 381 | ||
Series 2005-3 Class AF3 |
245
Table of Contents
4.437% due 07/25/35 | 2,000 | 1,972 | ||
Providian Gateway Master Trust (p) | ||||
Series 2004-FA Class A | ||||
3.650% due 11/15/11 | 1,200 | 1,180 | ||
Public Service New Hampshire Funding LLC | ||||
Series 2001-1 Class A2 | ||||
5.730% due 11/01/10 | 901 | 906 | ||
Railcar Leasing LLC (p) | ||||
Series 1997-1 Class A2 | ||||
7.125% due 01/15/13 | 950 | 993 | ||
Residential Asset Mortgage Products, Inc. (Ê) | ||||
Series 2004-RS2 Class AIIB | ||||
5.580% due 02/25/34 | 143 | 143 | ||
Series 2006-RZ4 Class A1A | ||||
5.410% due 10/25/36 | 1,200 | 1,200 | ||
Residential Asset Securities Corp. (Ê) | ||||
Series 2006-KS6 Class A1 | ||||
5.364% due 08/25/36 | 673 | 673 | ||
Series 2006-KS9 Class A11 | ||||
5.390% due 11/25/36 | 1,100 | 1,100 | ||
Saxon Asset Securities Trust (Ê) | ||||
Series 2006-3 Class A1 | ||||
5.380% due 11/25/36 | 600 | 600 | ||
SBI Heloc Trust (Ê)(Å) | ||||
Series 2006-1A Class 1A2A | ||||
5.494% due 08/25/36 | 700 | 700 | ||
SLM Student Loan Trust (p) | ||||
Series 2003-4 Class A5B | ||||
3.390% due 03/15/33 | 3,000 | 2,906 | ||
Soundview Home Equity Loan Trust (Ê) | ||||
Series 2006-EQ1 Class A1 | ||||
5.380% due 10/25/36 | 1,000 | 1,000 | ||
Structured Asset Securities Corp. (Ê) | ||||
Series 2005-WF3 Class A1 | ||||
5.420% due 07/25/35 | 390 | 390 | ||
Series 2006-BC3 Class A2 | ||||
5.370% due 10/25/36 | 1,200 | 1,200 | ||
Susquehanna Auto Lease Trust (p) | ||||
Series 2005-1 Class A3 | ||||
4.430% due 06/16/08 | 4,000 | 3,969 | ||
Series 2005-1 Class B | ||||
4.710% due 07/14/08 | 1,700 | 1,685 | ||
Series 2006-1 Class A3 | ||||
5.210% due 03/16/09 | 1,000 | 1,000 | ||
Toyota Auto Receivables Owner Trust | ||||
Series 2003-B Class A4 | ||||
2.790% due 01/15/10 | 3,912 | 3,907 | ||
Triad Auto Receivables Owner Trust | ||||
Series 2006-A Class A3 | ||||
4.770% due 01/12/11 | 2,000 | 1,989 | ||
USAA Auto Owner Trust | ||||
Series 2004-2 Class A3 | ||||
3.030% due 06/16/08 | 1,238 | 1,232 | ||
Series 2004-2 Class A4 | ||||
3.580% due 02/15/11 | 1,700 | 1,676 | ||
Series 2005-2 Class A4 | ||||
4.170% due 02/15/11 | 4,000 | 3,936 |
246
Table of Contents
Wachovia Auto Owner Trust | ||||
Series 2004-A Class A3 | ||||
3.190% due 06/20/08 | 603 | 600 | ||
Series 2004-A Class A4 | ||||
3.660% due 07/20/10 | 7,500 | 7,401 | ||
Series 2004-B Class A3 | ||||
2.910% due 04/20/09 | 2,438 | 2,409 | ||
Wells Fargo Financial Auto Owner Trust | ||||
Series 2004-A Class A4 | ||||
2.670% due 08/16/10 | 1,917 | 1,887 | ||
Wells Fargo Home Equity Trust (Ê)(Å) | ||||
Series 2005-4 Class AI1 | ||||
5.450% due 12/25/35 | 1,258 | 1,258 | ||
Whole Auto Loan Trust | ||||
Series 2003-1 Class B | ||||
2.240% due 03/15/10 | 127 | 127 | ||
World Omni Auto Receivables Trust | ||||
Series 2006-A Class A2 | ||||
5.050% due 10/15/08 | 2,611 | 2,608 | ||
211,974 | ||||
Corporate Bonds and Notes - 20.0% | ||||
Abbott Laboratories | ||||
3.500% due 02/17/09 (Ñ) | 2,000 | 1,932 | ||
5.375% due 05/15/09 | 1,500 | 1,513 | ||
Allstate Financial Global Funding (p) | ||||
2.500% due 06/20/08 | 4,080 | 3,911 | ||
Altria Group, Inc. (Ñ) | ||||
7.650% due 07/01/08 | 1,500 | 1,552 | ||
American Express Bank (Ê) | ||||
Series BKNT | ||||
5.380% due 10/20/09 | 800 | 800 | ||
American Express Centurion Bank | ||||
Series BKNT | ||||
4.375% due 07/30/09 | 3,440 | 3,383 | ||
American Honda Finance Corp. (Ê)(p) | ||||
5.450% due 03/09/09 | 1,300 | 1,301 | ||
American International Group, Inc. | ||||
4.700% due 10/01/10 | 2,695 | 2,657 | ||
Ameritech Capital Funding Corp. | ||||
6.250% due 05/18/09 | 2,000 | 2,030 | ||
Anadarko Petroleum Corp. (Ê) | ||||
5.790% due 09/15/09 | 1,200 | 1,202 | ||
ASIF Global Financing (Å) | ||||
3.850% due 11/26/07 | 2,984 | 2,938 | ||
Associates Corp. of North America | ||||
6.250% due 11/01/08 | 3,274 | 3,338 | ||
8.550% due 07/15/09 | 750 | 813 | ||
AT&T, Inc. (Ê) | ||||
5.495% due 05/15/08 | 2,600 | 2,602 | ||
Bank of America Corp. | ||||
6.375% due 02/15/08 (Ñ) | 3,000 | 3,037 | ||
7.125% due 03/01/09 (Ñ) | 1,500 | 1,564 | ||
5.400% due 06/19/09 (Ê) | 3,800 | 3,801 | ||
Bank One Corp. | ||||
2.625% due 06/30/08 | 5,675 | 5,443 | ||
Bank One NA | ||||
Series BKNT |
247
Table of Contents
3.700% due 01/15/08 | 1,470 | 1,441 | ||
Bear Stearns Cos., Inc. (The) | ||||
5.489% due 08/21/09 (Ê) | 2,300 | 2,301 | ||
Series MTNB (Ê) | ||||
5.457% due 03/30/09 | 900 | 901 | ||
BellSouth Corp. (Ê) | ||||
5.530% due 11/15/07 | 1,200 | 1,201 | ||
5.580% due 08/15/08 | 1,300 | 1,300 | ||
Capital One Financial Corp. | ||||
5.700% due 09/15/11 | 4,200 | 4,258 | ||
Caterpillar, Inc. | ||||
7.250% due 09/15/09 | 3,150 | 3,329 | ||
CIT Group, Inc. | ||||
5.000% due 11/24/08 | 7,050 | 7,027 | ||
4.250% due 02/01/10 (Ñ) | 2,325 | 2,257 | ||
Citigroup Global Markets Holdings, Inc. (Ê) | ||||
Series MTNM | ||||
5.430% due 03/07/08 | 1,600 | 1,601 | ||
Citigroup, Inc. | ||||
5.416% due 01/30/09 (Ê) | 2,200 | 2,201 | ||
6.200% due 03/15/09 | 5,700 | 5,839 | ||
Consolidated Edison Co. of New York | ||||
Series B | ||||
7.150% due 12/01/09 | 1,000 | 1,054 | ||
Credit Suisse First Boston USA, Inc. (Ê) | ||||
5.520% due 12/09/08 | 3,500 | 3,506 | ||
DaimlerChrysler North America Holding Corp. (Ê) | ||||
5.918% due 08/03/09 | 800 | 800 | ||
Deutsche Bank Financial, Inc. | ||||
7.500% due 04/25/09 | 2,000 | 2,102 | ||
Entergy Mississippi, Inc. | ||||
4.350% due 04/01/08 | 500 | 492 | ||
Exelon Generation Co. LLC | ||||
6.950% due 06/15/11 | 3,250 | 3,444 | ||
FleetBoston Financial Corp. | ||||
6.375% due 05/15/08 | 4,185 | 4,254 | ||
Ford Motor Credit Co. (Ê)(Ñ) | ||||
8.466% due 11/02/07 | 200 | 203 | ||
General Electric Capital Corp. | ||||
4.000% due 06/15/09 (Ñ) | 1,650 | 1,609 | ||
5.444% due 01/20/10 (Ê) | 900 | 901 | ||
4.875% due 10/21/10 (Ñ) | 10,050 | 9,974 | ||
5.474% due 10/21/10 (Ê) | 2,000 | 2,002 | ||
Series mtn (Ê) | ||||
5.410% due 10/26/09 | 1,400 | 1,399 | ||
General Electric Co. (Ê) | ||||
5.430% due 12/09/08 | 1,000 | 1,000 | ||
Goldman Sachs Group, Inc. | ||||
7.350% due 10/01/09 | 1,000 | 1,059 | ||
5.770% due 10/07/11 (Ê)(Ñ) | 3,000 | 3,026 | ||
Series MTNB (Ê) | ||||
5.704% due 07/23/09 | 2,000 | 2,013 | ||
Hertz Vehicle Financing LLC (p) | ||||
Series 2005-2A Class A2 | ||||
4.930% due 02/25/10 | 2,500 | 2,489 | ||
HSBC Bank USA NA (Ê) | ||||
Series BKNT |
248
Table of Contents
5.530% due 06/10/09 | 300 | 301 | ||
HSBC Finance Corp. | ||||
6.500% due 11/15/08 | 10,130 | 10,377 | ||
5.531% due 12/05/08 (Ê) | 300 | 301 | ||
International Lease Finance Corp. | ||||
6.375% due 03/15/09 | 1,500 | 1,538 | ||
4.750% due 07/01/09 | 2,680 | 2,655 | ||
John Deere Capital Corp. (Ê) | ||||
5.424% due 04/15/08 | 700 | 700 | ||
5.424% due 07/15/08 | 800 | 800 | ||
Lehman Brothers Holdings, Inc. | ||||
5.370% due 11/24/08 (Ê) | 2,400 | 2,400 | ||
5.493% due 08/21/09 (Ê) | 1,000 | 1,000 | ||
7.875% due 08/15/10 | 1,000 | 1,087 | ||
Series MTNG | ||||
3.950% due 11/10/09 | 2,800 | 2,706 | ||
5.696% due 11/10/09 (Ê) | 400 | 402 | ||
Lehman Brothers, Inc. | ||||
6.625% due 02/15/08 | 1,500 | 1,522 | ||
Merrill Lynch & Co., Inc. | ||||
4.831% due 10/27/08 | 3,925 | 3,899 | ||
5.685% due 07/25/11 (Ê) | 1,100 | 1,101 | ||
Series MTn (Ê) | ||||
5.492% due 08/14/09 | 800 | 800 | ||
Series MTNB (Ê) | ||||
5.466% due 01/30/09 | 1,100 | 1,101 | ||
Series MTNC | ||||
5.430% due 06/16/08 (Ê) | 200 | 200 | ||
5.489% due 08/22/08 (Ê) | 600 | 601 | ||
4.125% due 01/15/09 | 1,000 | 979 | ||
Metropolitan Life Global Funding I (p) | ||||
5.750% due 07/25/11 | 4,000 | 4,091 | ||
Morgan Stanley | ||||
3.625% due 04/01/08 | 3,000 | 2,931 | ||
3.875% due 01/15/09 | 2,000 | 1,949 | ||
Series GMTN (Ê) | ||||
5.550% due 02/09/09 | 700 | 701 | ||
National City Bank | ||||
Series BKNT | ||||
4.250% due 01/29/10 | 3,375 | 3,277 | ||
Northern States Power Co. | ||||
6.875% due 08/01/09 | 3,000 | 3,121 | ||
Ohio Edison Co. | ||||
4.000% due 05/01/08 | 2,035 | 1,996 | ||
Pricoa Global Funding I (Ê)(p) | ||||
5.457% due 01/25/08 | 1,400 | 1,402 | ||
Principal Life Global Funding I (Å) | ||||
3.625% due 04/30/08 | 1,250 | 1,219 | ||
Principal Life Global Funding I (p) | ||||
2.800% due 06/26/08 | 5,600 | 5,388 | ||
Prudential Financial, Inc. | ||||
3.750% due 05/01/08 | 1,475 | 1,443 | ||
SBC Communications, Inc. | ||||
4.125% due 09/15/09 | 5,330 | 5,173 | ||
SLM Corp. (Ñ) | ||||
3.625% due 03/17/08 | 7,200 | 7,032 | ||
Sprint Capital Corp. |
249
Table of Contents
7.625% due 01/30/11 | 3,775 | 4,069 | ||
US Bank NA | ||||
Series BKNT | ||||
4.125% due 03/17/08 | 1,600 | 1,575 | ||
Wachovia Bank NA | ||||
Series BKNT | ||||
4.375% due 08/15/08 | 2,250 | 2,220 | ||
Series DPNT (Ê) | ||||
5.429% due 03/23/09 | 500 | 500 | ||
Wachovia Corp. | ||||
5.625% due 12/15/08 (Ñ) | 8,200 | 8,268 | ||
5.506% due 10/15/11 (Ê) | 3,400 | 3,399 | ||
Wells Fargo & Co. | ||||
4.125% due 03/10/08 (Ñ) | 820 | 807 | ||
6.250% due 04/15/08 | 8,337 | 8,437 | ||
5.490% due 09/15/09 (Ê) | 2,900 | 2,905 | ||
4.200% due 01/15/10 | 1,600 | 1,556 | ||
5.449% due 03/23/10 (Ê) | 3,000 | 3,002 | ||
Xcel Energy, Inc. | ||||
3.400% due 07/01/08 | 925 | 897 | ||
230,628 | ||||
International Debt - 4.7% | ||||
ANZ National International, Ltd. (Ê)(p) | ||||
5.539% due 08/07/09 | 2,600 | 2,597 | ||
Diageo Capital PLC (Ê)(Ñ) | ||||
5.546% due 11/10/08 | 1,400 | 1,401 | ||
Eksportfinans A/S (Ñ) | ||||
4.750% due 12/15/08 | 7,800 | 7,771 | ||
Eli Lilly Services, Inc. (Ê)(p) | ||||
5.440% due 09/12/08 | 1,333 | 1,335 | ||
HBOS Treasury Services PLC (p) | ||||
3.500% due 11/30/07 | 2,000 | 1,964 | ||
3.750% due 09/30/08 | 1,000 | 974 | ||
Inter-American Development Bank | ||||
Series GMTN | ||||
5.250% due 06/16/08 | 2,500 | 2,512 | ||
Interstar Millennium Trust (Ê) | ||||
Series 2004-2G Class A | ||||
5.590% due 03/14/36 | 1,430 | 1,433 | ||
Kreditanstalt fuer Wiederaufbau | ||||
5.250% due 05/19/09 | 6,080 | 6,130 | ||
4.875% due 10/19/09 | 2,765 | 2,764 | ||
National Australia Bank, Ltd. (Ê)(p) | ||||
5.430% due 09/11/09 | 800 | 800 | ||
Ontario Electricity Financial Corp. | ||||
6.100% due 01/30/08 | 4,000 | 4,042 | ||
Royal Bank of Scotland PLC (Ê)(p) | ||||
5.424% due 07/21/08 | 1,500 | 1,501 | ||
Siemens Financieringsmaatschappij NV (Ê)(p) | ||||
5.466% due 08/14/09 | 3,700 | 3,698 | ||
Svensk Exportkredit AB (Ñ) | ||||
4.625% due 02/17/09 | 10,305 | 10,218 | ||
Transocean, Inc. (Ê) | ||||
5.591% due 09/05/08 | 800 | 800 | ||
Unicredit Luxembourg Finance SA (Ê)(Å) | ||||
5.426% due 10/24/08 | 3,900 | 3,899 | ||
VTB Capital SA (Ê)(Å) |
250
Table of Contents
5.970% due 08/01/08 | 700 | 700 | ||
54,539 | ||||
Mortgage-Backed Securities - 20.1% | ||||
American Home Mortgage Investment Trust (Ê) | ||||
Series 2004-3 Class 5A | ||||
4.290% due 10/25/34 | 1,898 | 1,862 | ||
Series 2004-4 Class 4A | ||||
4.390% due 02/25/45 | 634 | 617 | ||
Banc of America Commercial Mortgage, Inc. | ||||
Series 2004-2 Class A1 | ||||
2.764% due 11/10/38 | 1,565 | 1,518 | ||
Banc of America Funding Corp. | ||||
Series 2005-D Class A1 (Ê) | ||||
4.114% due 05/25/35 | 8,880 | 8,669 | ||
Series 2006-2 Class 2A18 | ||||
5.750% due 03/25/36 | 3,366 | 3,383 | ||
Banc of America Mortgage Securities | ||||
Series 2002-K Class 2A1 (Ê) | ||||
5.397% due 10/20/32 | — | — | ||
Series 2004-2 Class 2A1 | ||||
5.250% due 03/25/34 | 1,033 | 1,026 | ||
Series 2004-2 Class 5A1 | ||||
6.500% due 10/25/31 | 300 | 305 | ||
Bear Stearns Adjustable Rate Mortgage Trust | ||||
Series 2003-1 Class 5A1 | ||||
5.456% due 04/25/33 | 484 | 481 | ||
Series 2003-8 Class 2A1 (Ê) | ||||
4.797% due 01/25/34 | 434 | 429 | ||
Bear Stearns Alt-A Trust | ||||
Series 2005-4 Class 23A1 | ||||
5.393% due 05/25/35 | 1,208 | 1,211 | ||
Bear Stearns Asset Backed Securities, Inc. | ||||
Series 2003-AC3 Class A1 | ||||
4.000% due 07/25/33 | 445 | 435 | ||
Bear Stearns Commercial Mortgage Securities | ||||
Series 1998-C1 Class A1 | ||||
6.340% due 06/16/30 | 255 | 256 | ||
Series 1999-C1 Class A2 | ||||
6.020% due 02/14/31 | 2,000 | 2,031 | ||
Series 2001-TOP Class A1 | ||||
5.060% due 11/15/16 | 461 | 460 | ||
Series 2003-PWR Class A1 | ||||
3.432% due 05/11/39 | 629 | 609 | ||
Series 2003-T10 Class A1 | ||||
4.000% due 03/13/40 | 1,358 | 1,318 | ||
Series 2003-T12 Class A1 | ||||
2.960% due 08/13/39 | 776 | 755 | ||
Citigroup Commercial Mortgage Trust | ||||
5.390% due 07/15/18 | 1,600 | 1,600 | ||
Commercial Mortgage Pass Through Certificates | ||||
Series 1999-1 Class A2 | ||||
6.455% due 05/15/32 | 881 | 895 | ||
Series 2004-LB2 Class A2 | ||||
3.600% due 03/10/39 | 1,000 | 969 | ||
Countrywide Alternative Loan Trust | ||||
Series 2003-6T2 Class A1 | ||||
6.500% due 06/25/33 | 143 | 143 |
251
Table of Contents
Series 2003-J2 Class A1 | ||||
6.000% due 10/25/33 | 462 | 457 | ||
Series 2004-12C Class 1A1 | ||||
5.000% due 07/25/19 | 2,658 | 2,606 | ||
Series 2005-34C Class 1A6 | ||||
5.500% due 09/25/35 | 3,421 | 3,420 | ||
Series 2005-73C Class 1A8 | ||||
5.500% due 01/25/36 | 3,407 | 3,399 | ||
Countrywide Home Loan Mortgage Pass Through Trust (Ê) | ||||
Series 2005-HYB Class 5A1 | ||||
5.250% due 02/20/36 | 1,193 | 1,192 | ||
Countrywide Securities Corp. | ||||
5.500% due 12/25/46 | 800 | 800 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2002-P3A Class A1 (Ê)(p) | ||||
5.870% due 08/25/33 | 133 | 134 | ||
Series 2003-C4 Class A2 | ||||
3.908% due 08/15/36 | 1,000 | 978 | ||
Series 2003-CK2 Class A1 | ||||
3.006% due 03/15/36 | 702 | 686 | ||
Series 2004-C1 Class A1 | ||||
2.254% due 01/15/37 | 877 | 862 | ||
Series 2005-C5 Class A1 | ||||
5.046% due 08/15/38 | 3,350 | 3,341 | ||
Credit Suisse First Boston Mortgage Securities Corp. | ||||
Series 2002-AR2 Class 2A2 | ||||
5.756% due 10/25/32 | 14 | 14 | ||
Fannie Mae | ||||
6.000% due 2008 | 57 | 57 | ||
5.500% due 2009 | 1,413 | 1,414 | ||
6.000% due 2010 | 128 | 128 | ||
6.500% due 2010 | 116 | 118 | ||
6.000% due 2011 | 152 | 154 | ||
6.500% due 2011 | 90 | 91 | ||
4.500% due 2013 | 2,347 | 2,299 | ||
5.000% due 2013 | 2,366 | 2,350 | ||
5.500% due 2013 | 301 | 302 | ||
6.000% due 2013 | 356 | 362 | ||
6.000% due 2014 | 1,780 | 1,809 | ||
5.500% due 2016 | 1,089 | 1,092 | ||
5.000% due 2017 | 91 | 90 | ||
5.500% due 2017 | 1,739 | 1,745 | ||
6.000% due 2017 | 180 | 182 | ||
5.000% due 2018 | 3,867 | 3,818 | ||
5.000% due 2019 | 481 | 475 | ||
5.000% due 2020 | 328 | 324 | ||
5.000% due 2021 | 989 | 974 | ||
5.500% due 2022 | 1,219 | 1,217 | ||
5.500% due 2033 | 77 | 76 | ||
6.000% due 2033 | 28 | 28 | ||
5.500% due 2034 | 13,645 | 13,515 | ||
4.664% due 2035 (Ê) | 3,810 | 3,756 | ||
4.672% due 2035 (Ê) | 529 | 525 | ||
4.900% due 2035 (Ê) | 32,284 | 31,934 | ||
5.500% due 2035 | 19,884 | 19,663 | ||
5.813% due 2041 (Ê) | 961 | 968 | ||
5.763% due 2042 (Ê) | 716 | 720 |
252
Table of Contents
Fannie Mae REMICS | ||||
Series 2003-129 Class PQ | ||||
4.500% due 07/25/33 | 230 | 229 | ||
Series 2003-24 Class PU | ||||
3.500% due 11/25/15 | 247 | 238 | ||
Series 2003-46 Class PQ | ||||
3.000% due 06/25/19 | 1,686 | 1,673 | ||
Series 2003-62 Class OD | ||||
3.500% due 04/25/26 | 1,250 | 1,203 | ||
Series 2003-63 Class GU | ||||
4.000% due 07/25/33 | 1,660 | 1,629 | ||
Series 2003-67 Class TA | ||||
3.000% due 08/25/17 | 3,279 | 3,070 | ||
Series 2003-75 Class NB | ||||
3.250% due 08/25/18 | 561 | 537 | ||
Series 2004-17 Class HA | ||||
3.000% due 01/25/19 | 1,940 | 1,791 | ||
Series 2004-21 Class QA | ||||
4.000% due 11/25/17 | 1,189 | 1,179 | ||
Federal Home Loan Bank System | ||||
Series 2004- Class 1 | ||||
3.920% due 09/25/09 | 1,455 | 1,415 | ||
Series 2005-058 Class H | ||||
4.750% due 10/25/10 | 3,416 | 3,357 | ||
Federal Home Loan Mortgage Corp. Structured Pass | ||||
Through Securities (Ê) | ||||
Series 2005-63 Class 1A1 | ||||
5.763% due 02/25/45 | 1,312 | 1,310 | ||
Freddie Mac | ||||
6.000% due 2009 | 50 | 50 | ||
6.000% due 2010 | 92 | 92 | ||
8.000% due 2010 | 16 | 16 | ||
6.000% due 2011 | 163 | 166 | ||
6.000% due 2032 | 403 | 408 | ||
6.000% due 2033 | 693 | 700 | ||
4.916% due 2035 (Ê) | 871 | 861 | ||
Series 2003-263 Class YH | ||||
3.500% due 08/15/22 | 171 | 170 | ||
Freddie Mac Gold | ||||
4.000% due 2007 | 804 | 795 | ||
4.000% due 2008 | 663 | 649 | ||
4.500% due 2008 | 708 | 702 | ||
5.500% due 2008 | 68 | 68 | ||
6.500% due 2008 | 62 | 63 | ||
5.500% due 2009 | 164 | 164 | ||
6.000% due 2009 | 51 | 51 | ||
6.500% due 2009 | 236 | 238 | ||
6.000% due 2011 | 242 | 245 | ||
6.000% due 2013 | 113 | 115 | ||
5.500% due 2014 | 487 | 488 | ||
6.000% due 2014 | 118 | 120 | ||
6.000% due 2016 | 510 | 517 | ||
5.500% due 2017 | 843 | 845 | ||
5.000% due 2018 | 528 | 521 | ||
6.000% due 2028 | 114 | 116 | ||
5.500% due 2029 | 819 | 814 | ||
6.000% due 2029 | 244 | 247 |
253
Table of Contents
6.000% due 2031 | 325 | 329 | ||
Freddie Mac REMICS | ||||
Series 1993-164 Class PD | ||||
4.500% due 09/15/08 | 40 | 39 | ||
Series 2003-255 Class PB | ||||
5.500% due 08/15/30 | 30 | 30 | ||
Series 2003-258 Class NS | ||||
3.250% due 09/15/15 | 1,216 | 1,173 | ||
Series 2003-261 Class JA | ||||
3.760% due 03/15/29 | 1,216 | 1,165 | ||
Series 2003-262 Class KP | ||||
2.870% due 12/15/16 | 2,722 | 2,564 | ||
Series 2003-263 Class CD | ||||
4.000% due 10/15/26 | 1,500 | 1,455 | ||
Series 2003-268 Class MX | ||||
4.000% due 07/15/16 | 2,041 | 1,978 | ||
Series 2003-271 Class OJ | ||||
3.500% due 03/15/11 | 84 | 84 | ||
Series 2004-276 Class EA | ||||
4.500% due 04/15/13 | 1,085 | 1,075 | ||
Series 2004-276 Class NL | ||||
3.250% due 03/15/14 | 3,411 | 3,277 | ||
Series 2004-282 Class EA | ||||
4.500% due 11/15/15 | 2,820 | 2,778 | ||
Series 2004-285 Class BA | ||||
4.500% due 02/15/20 | 1,342 | 1,317 | ||
Series 2005-305 Class AP | ||||
5.500% due 01/15/27 | 2,462 | 2,469 | ||
Series 2006-314 Class LF (Ê) | ||||
5.620% due 05/15/36 | 600 | 599 | ||
GE Capital Commercial Mortgage Corp. | ||||
Series 2001-3 Class A1 | ||||
5.560% due 06/10/38 | 828 | 836 | ||
Series 2004-C3 Class A1 | ||||
3.752% due 07/10/39 | 1,927 | 1,887 | ||
Series 2005-C1 Class A1 | ||||
4.012% due 06/10/48 | 1,428 | 1,400 | ||
Ginnie Mae I | ||||
7.000% due 11/15/07 | 2 | 2 | ||
6.000% due 12/15/08 | 54 | 54 | ||
9.500% due 12/15/17 | 1 | 1 | ||
Ginnie Mae II (Ê) | ||||
4.750% due 07/20/27 | 114 | 115 | ||
5.000% due 02/20/32 | 201 | 201 | ||
Government National Mortgage Association | ||||
Series 2004-78 Class A | ||||
3.590% due 11/16/17 | 2,569 | 2,502 | ||
GSR Mortgage Loan Trust | ||||
Series 2004-7 Class 1A1 | ||||
3.393% due 06/25/34 | 1,582 | 1,574 | ||
Harborview Mortgage Loan Trust (Ê) | ||||
Series 2006-12 Class 2A11 | ||||
5.410% due 12/19/37 | 1,900 | 1,900 | ||
Impac CMB Trust (Ê) | ||||
Series 2004-2 Class A2 | ||||
5.820% due 04/25/34 | 226 | 226 | ||
Indymac Index Mortgage Loan Trust (Ê) |
254
Table of Contents
Series 2006-AR1 Class 1A1A | ||||
5.410% due 10/25/36 | 800 | 800 | ||
JP Morgan Chase Commercial Mortgage Securities Corp. | ||||
Series 2002-C2 Class A1 | ||||
4.326% due 12/12/34 | 726 | 712 | ||
Series 2005-LDP Class A1 | ||||
4.655% due 08/15/42 | 1,560 | 1,546 | ||
4.613% due 10/15/42 | 1,848 | 1,830 | ||
Series 2005-LDP Class A2 | ||||
4.790% due 10/15/42 | 2,150 | 2,123 | ||
LB-UBS Commercial Mortgage Trust | ||||
Series 2003-C1 Class A1 | ||||
2.720% due 03/15/27 | 1,038 | 1,013 | ||
Series 2003-C3 Class A1 | ||||
2.599% due 05/15/27 | 1,568 | 1,522 | ||
Lehman Brothers Floating Rate Commercial | ||||
Mortgage Trust (Ê)(p) | ||||
Series 2006-LLF Class A1 | ||||
5.400% due 09/15/21 | 870 | 870 | ||
Mellon Residential Funding Corp. (Ê) | ||||
Series 2000-TBC Class A1 | ||||
5.560% due 06/15/30 | 1,182 | 1,172 | ||
Merrill Lynch Mortgage Trust | ||||
Series 2006-C1 Class A1 | ||||
5.528% due 05/12/39 | 2,582 | 2,604 | ||
Morgan Stanley Capital I | ||||
Series 2003-T11 Class A1 | ||||
3.260% due 06/13/41 | 1,265 | 1,234 | ||
Series 2004-T13 Class A1 | ||||
2.850% due 09/13/45 | 564 | 547 | ||
Series 2005-HQ6 Class A1 | ||||
4.646% due 08/13/42 | 1,763 | 1,744 | ||
Morgan Stanley Dean Witter Capital I | ||||
Series 2002-HQ Class A2 | ||||
6.090% due 04/15/34 | 131 | 132 | ||
Prime Mortgage Trust (Ê) | ||||
Series 2004-CL1 Class 1A2 | ||||
5.730% due 02/25/34 | 212 | 213 | ||
Series 2004-CL1 Class 2A2 | ||||
5.730% due 02/25/19 | 51 | 51 | ||
Residential Accredit Loans, Inc. | ||||
Series 2003-QS1 Class A1 | ||||
5.000% due 09/25/18 | 3,463 | 3,394 | ||
Salomon Brothers Mortgage Securities VII | ||||
Series 2003-UP2 Class A1 | ||||
4.000% due 12/25/18 | 931 | 879 | ||
Structured Asset Mortgage Investments, Inc. (Ê) | ||||
Series 2002-AR3 Class A1 | ||||
5.650% due 09/19/32 | 58 | 58 | ||
Structured Asset Securities Corp. (Ê) | ||||
Series 2001-21A Class 1A1 | ||||
6.792% due 01/25/32 | 75 | 75 | ||
Vendee Mortgage Trust | ||||
Series 2001-3 Class J | ||||
6.500% due 05/15/08 | 272 | 273 | ||
Wachovia Bank Commercial Mortgage Trust | ||||
Series 2002-C2 Class A2 |
255
Table of Contents
4.043% due 11/15/34 | 1,803 | 1,759 | ||
Series 2003-C4 Class A1 | ||||
3.003% due 04/15/35 | 1,175 | 1,147 | ||
Series 2006-WL7 Class A1 (Ê)(p) | ||||
5.410% due 08/11/18 | 3,000 | 3,000 | ||
Washington Mutual, Inc. | ||||
Series 2002-AR1 Class A6 | ||||
4.816% due 10/25/32 | 515 | 512 | ||
Series 2002-AR6 Class A (Ê) | ||||
5.963% due 06/25/42 | 401 | 402 | ||
Series 2002-AR9 Class 1A (Ê) | ||||
5.963% due 08/25/42 | 810 | 811 | ||
Series 2004-AR1 Class A2A (Ê) | ||||
5.745% due 11/25/34 | 1,650 | 1,660 | ||
Series 2005-AR1 Class A1A1 (Ê) | ||||
5.620% due 10/25/45 | 368 | 370 | ||
Series 2006-AR1 Class 2A (Ê) | ||||
5.777% due 09/25/46 | 797 | 797 | ||
Wells Fargo Mortgage Backed Securities Trust | ||||
Series 2005-9 Class 1A1 | ||||
4.750% due 10/25/35 | 2,689 | 2,645 | ||
Series 2006-AR2 Class 2A1 | ||||
4.950% due 03/25/36 | 1,202 | 1,192 | ||
232,016 | ||||
Non-US Bonds - 0.0% | ||||
Landwirtschaftliche Rentenbank | ||||
0.650% due 09/30/08 | JPY 60,000 | 513 | ||
United States Government Agencies - 0.3% | ||||
Federal Home Loan Bank System | ||||
Series DE08 | ||||
5.925% due 04/09/08 | 1,600 | 1,621 | ||
Series HK10 | ||||
Zero coupon due 04/27/10 | 531 | 496 | ||
Freddie Mac | ||||
5.810% due 04/04/08 | 1,000 | 1,012 | ||
3,129 | ||||
United States Government Treasuries - 5.0% | ||||
United States Treasury Notes | ||||
3.875% due 05/15/09 | 9,500 | 9,330 | ||
4.000% due 11/15/12 | 49,803 | 48,322 | ||
57,652 | ||||
Total Long-Term Investments | ||||
(cost $796,447) | 790,451 | |||
Preferred Stocks - 0.2% | ||||
Financial Services - 0.2% | ||||
DG Funding Trust (Ê)(Å) | 219 | 2,331 | ||
Total Preferred Stocks | ||||
(cost $2,307) | 2,331 | |||
Notional Amount $ | ||||
Options Purchased - 0.1% | ||||
(Number of Contracts) | ||||
Eurodollar Futures | ||||
Dec 2006 92.25 Put (250) | 57,656 | 2 | ||
Dec 2006 92.50 Put (100) | 23,125 | 1 | ||
Dec 2006 92.75 Put (72) | 16,695 | — |
256
Table of Contents
Dec 2006 94.00 Put (149) | 35,015 | 1 | ||
Mar 2007 92.00 Put (292) | 67,160 | 2 | ||
Jun 2007 91.00 Put (201) | 45,728 | 1 | ||
Jun 2007 91.25 Put (316) | 72,088 | 2 | ||
Sep 2007 91.75 Put (60) | 13,763 | — | ||
Dec 2007 91.25 Put (777) | 177,253 | 5 | ||
Swaptions | ||||
(Fund Pays/Fund Receives) | ||||
EUR Three Month LIBOR/ | ||||
EUR 3.96% | ||||
Jul 2007 0.00 Call (1) | 3,829 | 16 | ||
GBP Six Month LIBOR/ | ||||
GBP 5.08% | ||||
Jun 2007 0.00 Call (1) | 1,908 | 4 | ||
GBP Six Month LIBOR/ | ||||
GBP 5.08% | ||||
Jun 2007 0.00 Call (1) | 3,052 | — | ||
USD Three Month LIBOR/ | ||||
USD 4.80% | ||||
Dec 2006 0.00 Call (1) | 12,000 | 5 | ||
USD Three Month LIBOR/ | ||||
USD 5.17% | ||||
Feb 2007 0.00 Call (1) | 9,500 | 41 | ||
USD Three Month LIBOR/ | ||||
USD 5.00% | ||||
Mar 2007 0.00 Call (2) | 17,000 | 54 | ||
USD Three Month LIBOR/ | ||||
USD 5.08% | ||||
Apr 2007 0.00 Call (1) | 6,900 | 33 | ||
USD Three Month LIBOR/ | ||||
USD 5.20% | ||||
May 2007 0.00 Call (1) | 20,800 | 145 | ||
USD Three Month LIBOR/ | ||||
USD 5.25% | ||||
Jun 2007 0.00 Call (1) | 18,000 | 147 | ||
USD Three Month LIBOR/ | ||||
USD 4.85% | ||||
Jul 2007 0.00 Call (1) | 20,000 | 33 | ||
USD Three Month LIBOR/ | ||||
USD 5.25% | ||||
Jul 2007 0.00 Call (1) | 18,000 | 282 | ||
Total Options Purchased | ||||
(cost $551) | 774 | |||
257
Table of Contents
Principal Amount ($) or Shares | ||||
Short-Term Investments - 31.5% | ||||
Alcoa, Inc. | ||||
4.250% due 08/15/07 | 1,175 | 1,161 | ||
American General Finance Corp. (Ê) | ||||
Series MTNG | ||||
5.429% due 03/23/07 | 200 | 200 | ||
Bank of America Corp. (ç)(ž) | ||||
5.370% due 11/01/06 | 7,600 | 7,600 | ||
Bank of Montreal | ||||
7.800% due 04/01/07 | 2,500 | 2,523 | ||
Barclays Bank PLC (ž) | ||||
5.271% due 01/29/07 | 2,700 | 2,707 | ||
Barclays US Funding Corp. (ž) | ||||
5.250% due 01/17/07 | 300 | 297 | ||
BNP Paribas Financial, Inc. (ç)(ž) | ||||
5.300% due 11/01/06 | 5,000 | 5,000 | ||
Boeing Co. | ||||
8.100% due 11/15/06 | 2,375 | 2,377 | ||
British Aerospace Finance, Inc. (p) | ||||
7.000% due 07/01/07 | 900 | 907 | ||
British Telecommunications PLC | ||||
7.000% due 05/23/07 | 1,700 | 1,712 | ||
CIT Group, Inc. (Ê)(Ñ) | ||||
5.620% due 09/20/07 | 3,800 | 3,808 | ||
Citigroup, Inc. (Ê)(Ñ) | ||||
5.451% due 06/04/07 | 1,000 | 1,001 | ||
Dexia Delaware LLC (ž) | ||||
5.240% due 01/18/07 | 10,600 | 10,480 | ||
Dominion Resources, Inc. | ||||
Series G | ||||
3.660% due 11/15/06 | 1,800 | 1,799 | ||
Fannie Mae Discount Notes (ç)(ž) | ||||
5.255% due 11/01/06 (ç) | 9,700 | 9,700 | ||
5.080% due 11/15/06 (ç) | 2,800 | 2,794 | ||
Zero coupon due 01/17/07 | 900 | 890 | ||
Federal Farm Credit Bank | ||||
12.250% due 02/01/07 | 864 | 866 | ||
FedEx Corp. (Ê) | ||||
5.579% due 08/08/07 | 800 | 801 | ||
Ford Motor Credit Co. | ||||
7.750% due 02/15/07 (Ñ) | 200 | 200 | ||
6.340% due 03/21/07 (Ê) | 2,800 | 2,799 | ||
Fortis Bank | ||||
5.265% due 04/28/08 | 1,700 | 1,699 | ||
France Treasury Bill BTF | ||||
Zero coupon due 12/21/06 | EUR 1,300 | 1,651 | ||
Freddie Mac Discount Notes (ç)(ž) | ||||
Series RB | ||||
5.133% due 11/14/06 | 3,200 | 3,194 | ||
GMAC LLC (Ê) | ||||
6.274% due 01/16/07 | 200 | 200 | ||
Goldman Sachs Group, Inc. (Ê) | ||||
5.495% due 10/05/07 | 2,000 | 2,003 | ||
HBOS Treasury Services PLC |
258
Table of Contents
5.365% due 11/01/06 (ç)(ž) | 3,000 | 3,000 | ||
5.265% due 11/22/06 (ç)(ž) | 8,500 | 8,474 | ||
5.451% due 01/12/07 (Ê)(p) | 900 | 900 | ||
HSBC Finance Corp. (Ê) | ||||
5.440% due 02/28/07 | 3,200 | 3,201 | ||
Inter-American Development Bank | ||||
6.375% due 10/22/07 | 5,305 | 5,373 | ||
International Lease Finance Corp. | ||||
5.625% due 06/01/07 | 1,600 | 1,602 | ||
Series MTNP | ||||
3.125% due 05/03/07 | 2,200 | 2,175 | ||
John Hancock Global Funding II | ||||
6.000% due 12/28/06 | 2,450 | 2,450 | ||
MBNA Corp. | ||||
6.250% due 01/17/07 | 2,000 | 2,003 | ||
MGM Mirage | ||||
9.750% due 06/01/07 | 1,200 | 1,224 | ||
National Rural Utilities Cooperative Finance | ||||
Corp. | ||||
Series MTNC | ||||
6.500% due 03/01/07 | 2,200 | 2,208 | ||
New York Life Global Funding (Ê)(p) | ||||
5.460% due 02/26/07 | 2,500 | 2,501 | ||
Nisource Finance Corp. (ç) | ||||
3.200% due 11/01/06 | 2,795 | 2,795 | ||
NiSource, Inc. (ç) | ||||
3.628% due 11/01/06 | 1,300 | 1,300 | ||
Pepco Holdings, Inc. (Ñ) | ||||
5.500% due 08/15/07 | 400 | 400 | ||
Principal Life Global Funding I (p) | ||||
5.125% due 06/28/07 | 2,000 | 1,996 | ||
Province of New Brunswick Canada (ç) | ||||
3.500% due 10/23/07 | 3,671 | 3,614 | ||
Prudential Financial, Inc. | ||||
4.104% due 11/15/06 | 500 | 500 | ||
Rabobank USA Financial Corp. (ç)(ž) | ||||
5.300% due 11/01/06 | 10,600 | 10,600 | ||
Royal Bank of Scotland (ç)(ž) | ||||
4.750% due 11/27/06 | 3,000 | 3,000 | ||
Russell Investment Company Money Market Fund | 96,765,334 | 96,765 | ||
San Paolo IMI US Financial Co. (ç)(ž) | ||||
5.265% due 11/22/06 | 500 | 498 | ||
Skandinaviska Enskilda Banken (ç)(ž) | ||||
5.271% due 10/03/07 | 2,400 | 2,399 | ||
Societe Generale NA (ž) | ||||
5.266% due 12/21/06 (ç) | 7,800 | 7,743 | ||
5.245% due 01/08/07 | 3,800 | 3,762 | ||
Texas Eastern Transmission, LP | ||||
5.250% due 07/15/07 | 2,900 | 2,889 | ||
TIAA Global Markets, Inc. (p) | ||||
5.000% due 03/01/07 | 3,625 | 3,621 | ||
UBS Financial Del LLC (ç)(ž) | ||||
5.280% due 11/01/06 | 10,500 | 10,477 | ||
5.290% due 11/01/06 | 100 | 100 | ||
5.265% due 11/16/06 | 1,100 | 1,098 | ||
United States Treasury Bills (ç)(ž)(§) | ||||
4.179% due 12/07/06 | 50 | 50 |
259
Table of Contents
4.894% due 12/07/06 | 50 | 50 | |||
4.915% due 12/14/06 | 250 | 249 | |||
4.921% due 12/14/06 | 25 | 25 | |||
4.937% due 12/14/06 | 2,095 | 2,083 | |||
United States Treasury Notes | |||||
3.125% due 05/15/07 | 17,990 | 17,806 | |||
3.625% due 06/30/07 | 82,618 | 81,853 | |||
US Bancorp | |||||
Series MTNN | |||||
5.100% due 07/15/07 | 1,650 | 1,646 | |||
Wachovia Corp. (Ê) | |||||
Series * | |||||
5.410% due 07/20/07 | 3,500 | 3,503 | |||
Total Short-Term Investments | |||||
(cost $364,698) | 364,302 | ||||
Other Securities - 1.9% | |||||
Russell Investment Company | |||||
Money Market Fund (x) | 5,623,714 | 5,624 | |||
State Street Securities Lending Quality Trust (x) | 16,292,035 | 16,292 | |||
Total Other Securities | |||||
(cost $21,916) | 21,916 | ||||
Total Investments - 102.1% | |||||
(identified cost $1,185,919) | 1,179,774 | ||||
Other Assets and Liabilities, | |||||
Net - (2.1%) | (24,188 | ) | |||
Net Assets - 100.0% | 1,155,586 | ||||
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund
260
Table of Contents
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Euribor Futures | |||||
expiration date 06/07 (34) | 10,428 | (10 | ) | ||
Eurodollar Futures (CME) | |||||
expiration date 12/06 (78) | 18,454 | (40 | ) | ||
expiration date 03/07 (524) | 124,162 | (532 | ) | ||
expiration date 06/07 (675) | 160,228 | (322 | ) | ||
expiration date 09/07 (813) | 193,342 | (32 | ) | ||
expiration date 12/07 (876) | 208,587 | 305 | |||
expiration date 03/08 (7) | 1,667 | — | |||
LIBOR Futures | |||||
expiration date 06/07 (14) | 3,159 | (4 | ) | ||
expiration date 09/07 (26) | 5,868 | (6 | ) | ||
expiration date 12/07 (16) | 3,612 | (3 | ) | ||
United States Treasury | |||||
2 Year Notes | |||||
expiration date 12/06 (186) | 38,020 | 82 | |||
Short Positions | |||||
United States Treasury Bonds | |||||
expiration date 12/06 (256) | 28,840 | (440 | ) | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | (1,002 | ) | |||
Options Written (Number of Contracts) | Notional Amount $ | Market Value $ | |||
Eurodollar Futures | |||||
Dec 2006 95.00 Put (12) | 2,850 | (11 | ) | ||
Dec 2006 95.25 Put (338) | 80,486 | (520 | ) | ||
Dec 2006 95.50 Put (40) | 9,550 | (87 | ) | ||
Mar 2007 94.75 Put (13) | 3,079 | (3 | ) | ||
Swaptions | |||||
(Fund Receives/Fund Pays) | |||||
EUR Six Month LIBOR/ | |||||
EUR 4.100% | |||||
Jul 2007 0.00 Call (1) | 1,276 | (16 | ) | ||
GBP Six Month LIBOR/ | |||||
GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 572 | (6 | ) | ||
GBP Six Month LIBOR/ | |||||
GBP 4.850% | |||||
Jun 2007 0.00 Call (1) | 954 | (9 | ) | ||
GBP 4.500%/ | |||||
GBP Six Month LIBOR | |||||
Dec 2006 0.00 Put (1) | 3,243 | (27 | ) | ||
USD Three Month LIBOR/ | |||||
USD 4.850% | |||||
Dec 2006 0.00 Call (1) | 5,000 | (7 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.240% | |||||
Feb 2007 0.00 Call (1) | 4,100 | (50 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.040% | |||||
Mar 2007 0.00 Call (2) | 7,000 | (50 | ) |
261
Table of Contents
USD Three Month LIBOR/ | |||||
USD 5.220% | |||||
Apr 2007 0.00 Call (1) | 3,000 | (40 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.315% | |||||
May 2007 0.00 Call (1) | 9,100 | (151 | ) | ||
USD Three Month LIBOR/ | |||||
USD 5.370% | |||||
Jul 2007 0.00 Call (1) | 8,000 | (161 | ) | ||
USD Three Month LIBOR/ | |||||
USD 4.950% | |||||
Jul 2007 0.00 Call (1) | 4,200 | (47 | ) | ||
Total Liability for Options Written | |||||
(premiums received $773) | (1,185 | ) | |||
Foreign Currency Exchange Contracts
Amount | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||
EUR | 1,522 | USD | 1,937 | 12/08/06 | (9 | ) | |||||
GBP | 107 | USD | 200 | 11/30/06 | (4 | ) | |||||
JPY | 15,662 | USD | 138 | 11/15/06 | 4 | ||||||
JPY | 15,663 | USD | 138 | 11/15/06 | 3 | ||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (6 | ) | |||||||||
Interest Rate Swap Contracts
Counter Party | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||
Barclays Bank PLC | GBP 2,800 | 5.000 | % | Six Month LIBOR | 06/15/07 | (14 | ) | |||||
BNP Paribas | EUR 1,200 | 2.090 | % | Consumer Price Index (France) | 10/15/10 | 16 | ||||||
Lehman Brothers | GBP 1,500 | 4.500 | % | Six Month LIBOR | 09/20/09 | (39 | ) | |||||
Merrill Lynch | GBP 1,600 | 4.500 | % | Six Month LIBOR | 09/20/09 | (41 | ) | |||||
UBS | USD 42,500 | 5.000 | % | Three Month LIBOR | 12/20/08 | (29 | ) | |||||
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($390) | (107 | ) | ||||||||||
Credit Default Swap Contracts
Reference Entity | Counter Party | Notional Amount $ | Fund Receives Fixed Rate | Termination Date | Market Value $ | ||||||
Softbank Corp. | Deutsche Bank | 30,000 | 2.300 | % | 09/20/07 | 1 | |||||
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - $0 | 1 | ||||||||||
Categories | % of Net Assets | ||
Asset-Backed Securities | 18.3 | ||
Corporate Bonds and Notes | 20.0 | ||
International Debt | 4.7 | ||
Mortgage-Backed Securities | 20.1 | ||
Non-US Bonds | — | * | |
United States Government Agencies | 0.3 | ||
United States Government Treasuries | 5.0 |
262
Table of Contents
Preferred Stocks | 0.2 | ||
Options Purchased | 0.1 | ||
Short Term Investments | 31.5 | ||
Other Securities | 1.9 | ||
Total Investments | 102.1 | ||
Other Assets and Liabilities, Net | (2.1 | ) | |
100.0 | |||
Futures Contracts | (0.1 | ) | |
Options Written | (0.1 | ) | |
Foreign Currency Exchange Contracts | — | * | |
Interest Rate Swap Contracts | — | * | |
Credit Default Swap Contracts | — | * |
* | Less than .05% of net assets. |
263
Table of Contents
(This page intentionally left blank)
264
Table of Contents
Select Growth Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Select Growth - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.48 | % | |
5 Years | 4.55 | %§ | |
Inception* | (3.03 | )%§ |
Select Growth - Class E
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.31 | % | |
5 Years | 4.31 | %§ | |
Inception* | (3.29 | )%§ |
Select Growth - Class C
Periods Ended 10/31/06 | Total Return | ||
1 Year | 5.23 | % | |
5 Years | 3.35 | %§ | |
Inception* | (4.15 | )%§ |
Select Growth - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 6.75 | % | |
5 Years | 4.70 | %§ | |
Inception* | (2.90 | )%§ |
Russell 1000(R) Growth Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 10.84 | % | |
5 Years | 4.07 | %§ | |
Inception* | (3.18 | )%§ |
Select Growth Fund
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Select Growth Fund Class I, Class S, Class E and Class C Shares gained 6.75%, 6.48%, 6.31% and 5.23%, respectively. This compared to the Russell 1000(R) Growth Index, which gained 10.84% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
265
Table of Contents
For the year ended October 31, 2006, the Lipper(R) Large-Cap Growth Funds Average returned 7.54%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s overweight in companies with higher growth rates, higher price/earnings multiples and lower dividend yields detracted significantly from the Fund’s performance in the fiscal year ended October 31, 2006. This was mainly due to the fact that during the last seven months of the fiscal year, the market rewarded slower growing and higher dividend yielding companies. Investor concern over a “hard landing” for the economy due to the Federal Reserve’s focus on containing inflation, quickly rising energy prices, weakening home sales and prices and weakened consumer confidence overshadowed the favorable earnings growth being generated by many companies during the period. Also during the last seven months of the fiscal year, the Fund’s emphasis on companies with positive earnings momentum went unrewarded due to investor skepticism over the ability of these companies to continue to grow their earnings at such attractive rates in an economic environment that was perceived to be weakening. This strong focus by the market on more defensive investments was not shared by the Fund’s money managers, which continued to expect more of a “soft landing” for the economy and kept their focus on higher growth companies.
This market environment was in stark contrast to the first five months of the fiscal year during which the market rewarded more cyclically oriented companies that were generating strong earnings growth, and the Fund was rewarded for its investments in these companies. During that period the Fund benefited from strong stock selection in the technology, financial services, materials and processing, and autos and transportation sectors.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Stock selection and sector allocations by the Fund’s money managers detracted from Fund performance during the period. Almost half of the underperformance in the Fund was due to weak stock selection in the health care sector. The Fund was underweight in many of the larger drug manufacturers, a sector which performed well during the period despite suffering from weak new product pipelines, pricing pressure and fears regarding regulation. Stock selection in the technology sector also detracted from results largely because of the Fund’s money manager stock selections in the communication technology area. The Fund’s underweight in producer durables and the more defensive consumer staples and utilities sectors, coupled with its overweight in higher growth technology stocks, detracted from Fund results.
As investor concerns over interest rates, energy prices and a potentially softening economy increased, Delaware Management Company, Ark Asset Management Co., Inc., Turner Investment Partners, Inc. and Fuller & Thaler Asset Management, Inc. each fell behind their respective style benchmarks for the final seven months of the fiscal year. In contrast, each of the money managers in the Fund, except Ark, outperformed its respective style benchmarks in the first five months of the fiscal year as the market rewarded strong earnings growth. CapitalWorks Investment Partners, LLC outperformed its benchmark for the entire period.
Delaware Management Company, the Fund’s best performer in fiscal 2005, detracted the most from returns in fiscal 2006 as its emphasis on a focused portfolio of quickly growing companies with what it deemed to be attractive long-term growth prospects was not rewarded by the market. Delaware’s stock selection in the consumer discretionary and technology sectors, particularly in the radio and TV broadcasting and computer technology, services and communications technology segments, was the largest detractor from its performance.
Select Growth Fund
Ark’s overweights and stock selection in the technology and health care sectors detracted the most from its performance as its emphasis on companies experiencing positive changes caused it to buy stocks in the communications technology and health care services areas. Stocks selected by Ark underperformed despite what it deemed to be improving earnings growth situations.
Turner’s stock selection in the health care and technology sectors detracted the most from its performance as its aggressive emphasis on companies with high earnings growth and strong earnings and price momentum was not rewarded by the market’s more defensive focus. Turner’s focus away from higher dividend paying stocks also worked against it. CapitalWorks outperformed its style benchmark by a wide margin during the overall period. CapitalWorks provides the Fund with exposure to smaller capitalization companies that are experiencing strong earnings growth. CapitalWorks contributed positively to the Fund’s performance particularly as smaller capitalization stocks outperformed the Fund’s Russell 1000 Growth Index benchmark. Strong stock selection, particularly in the technology and consumer discretionary sectors drove this outperformance.
266
Table of Contents
Fuller & Thaler trailed its style benchmark. Strong stock selection in the technology and consumer discretionary sectors was offset by weaker stock selection in the financial services and health care sectors. Fuller & Thaler contributed positively to the Fund’s overall benchmark relative performance due to its focus on small capitalization stocks which outperformed the Fund’s Russell 1000 Growth Fund benchmark.
Describe any changes to the Fund’s structure or the money manager line-up.
Sustainable Growth Advisers, L.P. was added to the Fund’s money manager line-up in September to provide a consistent growth complement to the existing managers in the Fund structure. As a result, allocations to Ark and Turner were reduced and small reductions were also made in the target allocations of CapitalWorks and Fuller & Thaler. Among other goals, these changes where made to reduce the extent of the earnings momentum and small-capitalization tilts within the Fund.
Money Managers as of October 31, 2006 | Style | |
Ark Asset Management Co., Inc. | Growth | |
CapitalWorks Investment Partners, LLC | Growth | |
Delaware Management Company, a series of | ||
Delaware | ||
Management Business Trust | Growth | |
Fuller & Thaler Asset Management, Inc. | Growth | |
Sustainable Growth Advisers, L.P. | Growth | |
Turner Investment Partners, Inc. | Growth |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Commenced operations on January 31, 2001. |
** | The Russell 1000(R) Growth Index measures the performance of those Russell 1000(R) Index companies with higher price-to-book ratios and higher forecasted growth values. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
267
Table of Contents
Russell Investment Company
Select Growth Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 976.30 | $ | 1,013.96 | ||
Expenses Paid During | ||||||
Period* | $ | 11.11 | $ | 11.32 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.23% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
268
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 982.10 | $ | 1,018.30 | ||
Expenses Paid During | ||||||
Period* | $ | 6.84 | $ | 6.97 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.37% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 984.20 | $ | 1,020.37 | ||
Expenses Paid During | ||||||
Period* | $ | 4.80 | $ | 4.89 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.96% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 982.40 | $ | 1,019.31 | ||
Expenses Paid During | ||||||
Period* | $ | 5.85 | $ | 5.96 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.17% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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. |
269
Table of Contents
Russell Investment Company
Select Growth Fund
Schedule of Investments - October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 95.8% | ||||
Auto and Transportation - 3.8% | ||||
CH Robinson Worldwide, Inc. | 12,120 | 506 | ||
Expeditors International Washington, Inc. | 32,000 | 1,517 | ||
FedEx Corp. | 10,250 | 1,174 | ||
Union Pacific Corp. | 3,600 | 326 | ||
United Parcel Service, Inc. Class B | 38,200 | 2,879 | ||
US Airways Group, Inc. (Æ)(Ñ) | 7,400 | 369 | ||
6,771 | ||||
Consumer Discretionary - 21.6% | ||||
Activision, Inc. (Æ)(Ñ) | 8,300 | 128 | ||
Alloy, Inc. (Æ)(Ñ) | 4,650 | 64 | ||
AMN Healthcare Services, Inc. (Æ)(Ñ) | 11,700 | 296 | ||
AnnTaylor Stores Corp. (Æ)(Ñ) | 2,900 | 128 | ||
Apollo Group, Inc. Class A (Æ) | 14,000 | 517 | ||
Best Buy Co., Inc. | 3,300 | 182 | ||
Bright Horizons Family Solutions, Inc. (Æ)(Ñ) | 2,000 | 77 | ||
Buca, Inc. (Æ)(Ñ) | 19,900 | 107 | ||
Buffalo Wild Wings, Inc. (Æ)(Ñ) | 2,700 | 140 | ||
Casual Male Retail Group, Inc. (Æ) | 13,700 | 203 | ||
Charlotte Russe Holding, Inc. (Æ)(Ñ) | 7,700 | 213 | ||
Christopher & Banks Corp. | 5,500 | 148 | ||
Coach, Inc. (Æ) | 29,650 | 1,175 | ||
Corrections Corp. of America (Æ)(Ñ) | 3,800 | 174 | ||
Costco Wholesale Corp. | 12,100 | 646 | ||
Crown Media Holdings, Inc. Class A (Æ)(Ñ) | 12,100 | 48 | ||
Deckers Outdoor Corp. (Æ)(Ñ) | 3,400 | 181 | ||
dELIA*s, Inc. (Æ)(Ñ) | 10,100 | 92 | ||
Design Within Reach, Inc. (Æ)(Ñ) | 14,900 | 93 | ||
DeVry, Inc. (Æ)(Ñ) | 5,000 | 122 | ||
Diamond Management & Technology Consultants, Inc. (Æ)(Ñ) | 10,800 | 117 | ||
eBay, Inc. (Æ) | 106,200 | 3,412 | ||
Electronic Arts, Inc. (Æ) | 46,440 | 2,456 | ||
Ezcorp, Inc. Class A (Æ)(Ñ) | 3,800 | 172 | ||
Gap, Inc. (The) | 16,000 | 336 | ||
Gemstar-TV Guide International, Inc. (Æ) | 31,600 | 110 | ||
Google, Inc. Class A (Æ) | 10,899 | 5,192 | ||
Gray Television, Inc. (Ñ) | 12,400 | 80 | ||
Great Wolf Resorts, Inc. (Æ)(Ñ) | 12,000 | 158 | ||
Home Depot, Inc. | 16,700 | 623 | ||
Iconix Brand Group, Inc. (Æ)(Ñ) | 4,782 | 89 | ||
Interchange Corp. (Æ)(Ñ) | 9,800 | 56 | ||
International Game Technology | 60,380 | 2,567 | ||
ITT Educational Services, Inc. (Æ)(Ñ) | 3,000 | 207 | ||
Kohl’s Corp. (Æ) | 4,700 | 332 | ||
Las Vegas Sands Corp. (Æ) | 9,080 | 692 | ||
Leapfrog Enterprises, Inc. Class A (Æ)(Ñ) | 22,200 | 214 |
270
Table of Contents
LIFE TIME FITNESS, Inc. (Æ)(Ñ) | 1,800 | 93 | ||
Lowe’s Cos., Inc. (Ñ) | 25,900 | 781 | ||
MGM Mirage (Æ) | 35,000 | 1,506 | ||
Multimedia Games, Inc. (Æ)(Ñ) | 11,100 | 104 | ||
New Frontier Media, Inc. (Æ) | 10,600 | 93 | ||
News Corp. Class A | 37,100 | 774 | ||
Omnicom Group, Inc. | 8,680 | 881 | ||
On Assignment, Inc. (Æ)(Ñ) | 7,500 | 85 | ||
Parlux Fragrances, Inc. (Æ)(Ñ) | 19,300 | 134 | ||
Revlon, Inc. Class A (Æ)(Ñ) | 75,500 | 100 | ||
SAIC, Inc. (Æ) | 3,800 | 76 | ||
Sears Holdings Corp. (Æ)(Ñ) | 2,900 | 506 | ||
Sharper Image Corp. (Æ)(Ñ) | 7,600 | 84 | ||
Staples, Inc. | 156,400 | 4,034 | ||
Starbucks Corp. (Æ)(Ñ) | 51,236 | 1,934 | ||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 9,600 | 573 | ||
Steven Madden, Ltd. (Ñ) | 5,100 | 220 | ||
TeleTech Holdings, Inc. (Æ)(Ñ) | 6,600 | 128 | ||
TJX Cos., Inc. | 17,010 | 492 | ||
Topps Co., Inc. (The) (Ñ) | 14,900 | 130 | ||
Urban Outfitters, Inc. (Æ)(Ñ) | 20,900 | 366 | ||
Valuevision Media, Inc. Class A (Æ)(Ñ) | 9,700 | 125 | ||
Viacom, Inc. Class A (Æ) | 13,000 | 506 | ||
Wal-Mart Stores, Inc. | 42,800 | 2,109 | ||
WebSideStory, Inc. (Æ)(Ñ) | 10,800 | 141 | ||
Weight Watchers International, Inc. (Ñ) | 26,000 | 1,134 | ||
38,656 | ||||
Consumer Staples - 9.2% | ||||
Altria Group, Inc. | 9,000 | 732 | ||
Boston Beer Co., Inc. Class A (Æ)(Ñ) | 2,600 | 95 | ||
Clorox Co. | 2,700 | 174 | ||
Coca-Cola Co. (The) | 29,600 | 1,383 | ||
Colgate-Palmolive Co. | 18,900 | 1,209 | ||
CVS Corp. | 7,000 | 220 | ||
PepsiCo, Inc. | 69,355 | 4,400 | ||
Procter & Gamble Co. | 73,560 | 4,663 | ||
Sysco Corp. | 36,500 | 1,277 | ||
Walgreen Co. | 41,000 | 1,791 | ||
Whole Foods Market, Inc. (Ñ) | 5,200 | 332 | ||
Wild Oats Markets, Inc. (Æ)(Ñ) | 10,200 | 183 | ||
16,459 | ||||
Financial Services - 10.4% | ||||
Advent Software, Inc. (Æ)(Ñ) | 7,000 | 259 | ||
American Express Co. | 12,200 | 705 | ||
American International Group, Inc. | 13,300 | 893 | ||
Automatic Data Processing, Inc. | 31,000 | 1,533 | ||
Charles Schwab Corp. (The) | 43,360 | 790 | ||
Chicago Mercantile Exchange Holdings, Inc. Class A | 4,920 | 2,465 | ||
Chubb Corp. | 11,810 | 628 | ||
Commerce Bancorp, Inc. (Ñ) | 8,500 | 297 | ||
Cybersource Corp. (Æ)(Ñ) | 9,400 | 96 | ||
First Data Corp. | 8,200 | 199 | ||
Goldman Sachs Group, Inc. | 5,560 | 1,055 | ||
Hartford Financial Services Group, Inc. | 2,200 | 192 | ||
HealthExtras, Inc. (Æ)(Ñ) | 4,400 | 101 | ||
Hypercom Corp. (Æ)(Ñ) | 16,700 | 108 | ||
IntercontinentalExchange, Inc. (Æ) | 16,600 | 1,401 |
271
Table of Contents
Merrill Lynch & Co., Inc. | 4,500 | 394 | ||
Moody’s Corp. | 22,000 | 1,459 | ||
Morgan Stanley | 4,600 | 352 | ||
Open Solutions, Inc. (Æ)(Ñ) | 3,400 | 127 | ||
Paychex, Inc. | 40,000 | 1,579 | ||
Pico Holdings, Inc. (Æ)(Ñ) | 3,800 | 123 | ||
State Street Corp. | 18,400 | 1,182 | ||
UBS AG | 13,120 | 785 | ||
Wells Fargo & Co. | 21,460 | 779 | ||
Western Union Co. (The) (Æ) | 53,200 | 1,173 | ||
18,675 | ||||
Health Care - 17.9% | ||||
Abbott Laboratories | 27,510 | 1,307 | ||
Albany Molecular Research, Inc. (Æ)(Ñ) | 7,900 | 94 | ||
Allergan, Inc. | 31,010 | 3,582 | ||
Amgen, Inc. (Æ)(Ñ) | 23,900 | 1,814 | ||
Analogic Corp. (Ñ) | 1,400 | 78 | ||
Applera Corp. - Celera Genomics Group (Æ)(Ñ) | 8,700 | 135 | ||
Baxter International, Inc. | 33,870 | 1,557 | ||
Bruker BioSciences Corp. (Æ) | 20,400 | 162 | ||
Cardinal Health, Inc. | 3,900 | 255 | ||
Caremark Rx, Inc. | 8,400 | 414 | ||
Celgene Corp. (Æ)(Ñ) | 17,800 | 951 | ||
Charles River Laboratories International, Inc. (Æ) | 2,500 | 107 | ||
Cholestech Corp. (Æ) | 2,600 | 40 | ||
Conor Medsystems, Inc. (Æ)(Ñ) | 4,100 | 101 | ||
Cooper Cos., Inc. (The) (Ñ) | 1,500 | 86 | ||
Covance, Inc. (Æ)(Ñ) | 900 | 53 | ||
DaVita, Inc. (Æ)(Ñ) | 5,400 | 300 | ||
Dendreon Corp. (Æ)(Ñ) | 11,900 | 60 | ||
DOV Pharmaceutical, Inc. (Æ)(Ñ) | 40,600 | 12 | ||
Eli Lilly & Co. | 3,600 | 202 | ||
Genentech, Inc. (Æ) | 28,100 | 2,341 | ||
Genzyme Corp. (Æ)(Ñ) | 21,500 | 1,451 | ||
Gilead Sciences, Inc. (Æ) | 31,185 | 2,149 | ||
GTx, Inc. (Æ)(Ñ) | 9,100 | 101 | ||
Healthcare Services Group (Ñ) | 2,500 | 68 | ||
Healthways, Inc. (Æ)(Ñ) | 1,100 | 47 | ||
Henry Schein, Inc. (Æ)(Ñ) | 3,000 | 149 | ||
Illumina, Inc. (Æ)(Ñ) | 2,400 | 106 | ||
Intralase Corp. (Æ)(Ñ) | 3,600 | 71 | ||
Inverness Medical Innovations, Inc. (Æ)(Ñ) | 2,300 | 87 | ||
Invitrogen Corp. (Æ)(Ñ) | 700 | 41 | ||
Johnson & Johnson | 21,900 | 1,476 | ||
Lifecell Corp. (Æ)(Ñ) | 3,900 | 91 | ||
Medco Health Solutions, Inc. (Æ) | 12,900 | 690 | ||
Medtronic, Inc. | 18,700 | 910 | ||
Merck & Co., Inc. | 3,800 | 173 | ||
Neopharm, Inc. (Æ)(Ñ) | 14,100 | 102 | ||
Neose Technologies, Inc. (Æ) | 16,300 | 43 | ||
Neurometrix, Inc. (Æ)(Ñ) | 5,800 | 95 | ||
Omnicell, Inc. (Æ)(Ñ) | 5,600 | 105 | ||
Oxigene, Inc. (Æ)(Ñ) | 10,400 | 41 | ||
Palatin Technologies, Inc. (Æ)(Ñ) | 18,700 | 53 | ||
Phase Forward, Inc. (Æ) | 7,700 | 107 | ||
PolyMedica Corp. (Ñ) | 2,600 | 108 | ||
PSS World Medical, Inc. (Æ) | 2,900 | 58 |
272
Table of Contents
Rita Medical Systems, Inc. (Æ)(Ñ) | 23,000 | 83 | ||
Schering-Plough Corp. | 7,500 | 166 | ||
St. Jude Medical, Inc. (Æ) | 29,700 | 1,020 | ||
Stryker Corp. | 18,000 | 941 | ||
Tercica, Inc. (Æ)(Ñ) | 17,800 | 90 | ||
Teva Pharmaceutical Industries, Ltd. - ADR | 35,100 | 1,157 | ||
UnitedHealth Group, Inc. | 45,000 | 2,195 | ||
Ventana Medical Systems, Inc. (Æ)(Ñ) | 1,900 | 77 | ||
WellPoint, Inc. (Æ) | 18,500 | 1,412 | ||
Wyeth | 28,000 | 1,429 | ||
Zimmer Holdings, Inc. (Æ) | 21,000 | 1,512 | ||
32,055 | ||||
Materials and Processing - 2.4% | ||||
Archer-Daniels-Midland Co. | 21,945 | 845 | ||
Caraustar Industries, Inc. (Æ)(Ñ) | 15,300 | 166 | ||
Harsco Corp. | 1,300 | 106 | ||
Housevalues, Inc. (Æ)(Ñ) | 20,100 | 118 | ||
Insituform Technologies, Inc. Class A (Æ) | 6,500 | 152 | ||
Monsanto Co. | 24,630 | 1,089 | ||
Praxair, Inc. | 26,000 | 1,566 | ||
Unifi, Inc. (Æ) | 27,100 | 75 | ||
Valmont Industries, Inc. | 1,600 | 89 | ||
4,206 | ||||
Miscellaneous - 3.3% | ||||
3M Co. | 3,000 | 237 | ||
Foster Wheeler, Ltd. (Æ)(Ñ) | 2,900 | 130 | ||
General Electric Co. | 152,028 | 5,338 | ||
Textron, Inc. | 2,700 | 245 | ||
5,950 | ||||
Other Energy - 1.5% | ||||
Baker Hughes, Inc. | 4,100 | 283 | ||
Cameron International Corp. (Æ) | 3,800 | 190 | ||
ENSCO International, Inc. | 2,200 | 108 | ||
Foundation Coal Holdings, Inc. (Ñ) | 2,400 | 88 | ||
Hercules Offshore, Inc. (Æ)(Ñ) | 3,100 | 110 | ||
Petroquest Energy, Inc. (Æ)(Ñ) | 11,300 | 129 | ||
Schlumberger, Ltd. | 4,600 | 290 | ||
Smith International, Inc. (Ñ) | 4,000 | 158 | ||
TGC Industries, Inc. (Æ) | 4,700 | 37 | ||
Weatherford International, Ltd. (Æ) | 16,520 | 679 | ||
XTO Energy, Inc. | 11,950 | 558 | ||
2,630 | ||||
Producer Durables - 3.8% | ||||
American Tower Corp. Class A (Æ) | 12,900 | 465 | ||
Applied Materials, Inc. | 47,677 | 829 | ||
Boeing Co. | 4,200 | 335 | ||
CalAmp Corp. (Æ)(Ñ) | 13,100 | 87 | ||
Credence Systems Corp. (Æ)(Ñ) | 32,900 | 106 | ||
Crown Castle International Corp. (Æ)(Ñ) | 2,800 | 94 | ||
Danaher Corp. | 10,460 | 751 | ||
Deere & Co. | 5,300 | 451 | ||
Entegris, Inc. (Æ)(Ñ) | 11,027 | 124 | ||
ESCO Technologies, Inc. (Æ)(Ñ) | 2,200 | 96 | ||
Flow International Corp. (Æ)(Ñ) | 8,500 | 100 | ||
General Cable Corp. (Æ)(Ñ) | 4,600 | 173 | ||
Goodrich Corp. | 5,600 | 247 | ||
Intevac, Inc. (Æ)(Ñ) | 6,922 | 143 |
273
Table of Contents
Kla-Tencor Corp. | 15,600 | 767 | ||
L-1 Identity Solutions, Inc. (Æ)(Ñ) | 5,500 | 79 | ||
Polycom, Inc. (Æ)(Ñ) | 7,000 | 192 | ||
Radyne Corp. (Æ)(Ñ) | 11,300 | 114 | ||
Rudolph Technologies, Inc. (Æ)(Ñ) | 9,500 | 168 | ||
SBA Communications Corp. Class A (Æ)(Ñ) | 6,500 | 174 | ||
Sonic Solutions, Inc. (Æ)(Ñ) | 9,600 | 155 | ||
Tektronix, Inc. | 4,100 | 124 | ||
Teradyne, Inc. (Æ)(Ñ) | 16,700 | 234 | ||
Thermo Electron Corp. (Æ)(Ñ) | 11,650 | 499 | ||
United Technologies Corp. | 3,000 | 197 | ||
Zygo Corp. (Æ) | 4,200 | 73 | ||
6,777 | ||||
Technology - 20.9% | ||||
Actuate Corp. (Æ)(Ñ) | 16,200 | 85 | ||
Agile Software Corp. (Æ)(Ñ) | 14,600 | 98 | ||
Akamai Technologies, Inc. (Æ)(Ñ) | 10,500 | 492 | ||
Amdocs, Ltd. (Æ) | 3,200 | 124 | ||
Apple Computer, Inc. (Æ) | 35,964 | 2,916 | ||
Art Technology Group, Inc. (Æ)(Ñ) | 46,100 | 115 | ||
AsiaInfo Holdings, Inc. (Æ)(Ñ) | 19,100 | 92 | ||
Aspen Technology, Inc. (Æ)(Ñ) | 3,600 | 36 | ||
Authentidate Holding Corp. (Æ)(Ñ) | 13,900 | 26 | ||
BEA Systems, Inc. (Æ)(Ñ) | 11,600 | 189 | ||
Broadcom Corp. Class A (Æ)(Ñ) | 38,950 | 1,179 | ||
Captaris, Inc. (Æ)(Ñ) | 15,100 | 89 | ||
Centillium Communications, Inc. (Æ) | 26,526 | 56 | ||
Cisco Systems, Inc. (Æ) | 121,070 | 2,921 | ||
Citrix Systems, Inc. (Æ)(Ñ) | 2,900 | 86 | ||
Cognizant Technology Solutions Corp. Class A (Æ) | 6,160 | 464 | ||
Corning, Inc. (Æ) | 45,500 | 930 | ||
Daktronics, Inc. (Ñ) | 5,000 | 118 | ||
Dell, Inc. (Æ) | 38,600 | 939 | ||
Ditech Networks, Inc. (Æ)(Ñ) | 13,000 | 103 | ||
Equinix, Inc. (Æ)(Ñ) | 1,500 | 103 | ||
Gartner, Inc. (Æ)(Ñ) | 17,400 | 324 | ||
Harmonic, Inc. (Æ) | 22,700 | 184 | ||
Integrated Device Technology, Inc. (Æ)(Ñ) | 7,300 | 116 | ||
Intuit, Inc. (Æ) | 59,690 | 2,107 | ||
Iomega Corp. (Æ)(Ñ) | 17,400 | 72 | ||
JDS Uniphase Corp. (Æ)(Ñ) | 10,849 | 158 | ||
Lawson Software, Inc. (Æ)(Ñ) | 17,400 | 133 | ||
LCC International, Inc. Class A (Æ)(Ñ) | 28,500 | 103 | ||
Microsoft Corp. | 124,600 | 3,577 | ||
Motorola, Inc. | 62,120 | 1,432 | ||
Napster, Inc. (Æ)(Ñ) | 23,400 | 111 | ||
National Semiconductor Corp. | 24,900 | 605 | ||
Network Appliance, Inc. (Æ) | 20,900 | 763 | ||
Newport Corp. (Æ)(Ñ) | 9,000 | 195 | ||
Nuance Communications, Inc. (Æ)(Ñ) | 10,000 | 115 | ||
NVE Corp. (Æ)(Ñ) | 4,600 | 204 | ||
Nvidia Corp. (Æ) | 30,550 | 1,065 | ||
Opsware, Inc. (Æ)(Ñ) | 5,200 | 47 | ||
PMC - Sierra, Inc. (Æ)(Ñ) | 17,900 | 119 | ||
Qualcomm, Inc. | 116,300 | 4,232 | ||
Redback Networks, Inc. (Æ) | 10,345 | 164 | ||
Research In Motion, Ltd. (Æ) | 8,030 | 943 |
274
Table of Contents
Safeguard Scientifics, Inc. (Æ)(Ñ) | 35,500 | 87 | |||
SanDisk Corp. (Æ)(Ñ) | 56,230 | 2,705 | |||
SAP AG - ADR | 12,000 | 596 | |||
Seachange International, Inc. (Æ)(Ñ) | 18,400 | 154 | |||
Seagate Technology (Ñ) | 75,000 | 1,693 | |||
Semtech Corp. (Æ) | 5,800 | 76 | |||
SimpleTech, Inc. (Æ)(Ñ) | 17,300 | 150 | |||
Standard Microsystems Corp. (Æ)(Ñ) | 6,100 | 188 | |||
Sun Microsystems, Inc. (Æ) | 185,600 | 1,008 | |||
Sykes Enterprises, Inc. (Æ)(Ñ) | 8,600 | 174 | |||
Texas Instruments, Inc. | 67,350 | 2,033 | |||
Transaction Systems Architects, Inc. (Æ) | 3,000 | 101 | |||
Transwitch Corp. (Æ)(Ñ) | 49,800 | 73 | |||
Ultimate Software Group, Inc. (Æ)(Ñ) | 7,000 | 173 | |||
Varian, Inc. (Æ) | 1,400 | 66 | |||
Zhone Technologies, Inc. (Æ) | 63,700 | 90 | |||
37,297 | |||||
Utilities - 1.0% | |||||
Comcast Corp. Class A (Æ) | 16,190 | 658 | |||
Leap Wireless International, Inc. (Æ)(Ñ) | 3,100 | 172 | |||
Level 3 Communications, Inc. (Æ)(Ñ) | 35,100 | 186 | |||
MDU Communications International, Inc. (Æ) | 29,200 | 21 | |||
NeuStar, Inc. Class A (Æ)(Ñ) | 2,300 | 67 | |||
NII Holdings, Inc. (Æ) | 10,820 | 704 | |||
1,808 | |||||
Total Common Stocks | |||||
(cost $149,450) | 171,284 | ||||
Short-Term Investments - 4.1% | |||||
Russell Investment Company | |||||
Money Market Fund | 6,304,000 | 6,304 | |||
United States Treasury Bills (ç)(ž)(§) | |||||
4.891% due 12/07/06 | 1,000 | 995 | |||
Total Short-Term Investments | |||||
(cost $7,299) | 7,299 | ||||
Other Securities - 17.5% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 8,034,151 | 8,034 | |||
State Street Securities Lending Quality Trust (×) | 23,275,131 | 23,275 | |||
Total Other Securities | |||||
(cost $31,309) | 31,309 | ||||
Total Investments - 117.4% | |||||
(identified cost $188,058) | 209,892 | ||||
Other Assets and Liabilities, | |||||
Net - (17.4%) | (31,152 | ) | |||
Net Assets - 100.0% | 178,740 | ||||
275
Table of Contents
Russell Investment Company
Select Growth Fund
Schedule of Investments — October 31, 2006
Amounts in thousands
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | ||
Long Positions | ||||
Nasdaq 100 Index (CME) | ||||
expiration date 12/06 (13) | 2,266 | 202 | ||
Russell 1000 Growth Index | ||||
expiration date 12/06 (11) | 2,996 | 177 | ||
S&P 500 E-Mini Index (CME) | ||||
expiration date 12/06 (11) | 761 | 40 | ||
S&P 500 Index (CME) expiration date 12/06 (4) | 1,383 | 5 | ||
Total Unrealized Appreciation | ||||
(Depreciation) on Open Futures | ||||
Contracts | 424 | |||
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | %of Net Assets | ||
Auto and Transportation | 3.8 | ||
Consumer Discretionary | 21.6 | ||
Consumer Staples | 9.2 | ||
Financial Services | 10.4 | ||
Health Care | 17.9 | ||
Materials and Processing | 2.4 | ||
Miscellaneous | 3.3 | ||
Other Energy | 1.5 | ||
Producer Durables | 3.8 | ||
Technology | 20.9 | ||
Utilities | 1.0 | ||
Short-Term Investments | 4.1 | ||
Other Securities | 17.5 | ||
Total Investments | 117.4 | ||
Other Assets and Liabilities, Net | (17.4 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
276
Table of Contents
(This page intentionally left blank)
277
Table of Contents
Select Value Fund
Portfolio Management Discussion — October 31, 2006 (Unaudited)
Select Value Fund - Class S
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.32 | % | |
5 Years | 10.49 | %§ | |
Inception* | 6.24 | %§ |
Select Value Fund - Class E
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.15 | % | |
5 Years | 10.25 | %§ | |
Inception* | 5.97 | %§ |
Select Value Fund - Class C
Periods Ended 10/31/06 | Total Return | ||
1 Year | 17.01 | % | |
5 Years | 9.26 | %§ | |
Inception* | 5.05 | %§ |
Select Value Fund - Class I
Periods Ended 10/31/06 | Total Return | ||
1 Year | 18.47 | % | |
5 Years | 10.63 | %§ | |
Inception* | 6.38 | %§ |
Russell 1000(R) Value Index**
Periods Ended 10/31/06 | Total Return | ||
1 Year | 21.46 | % | |
5 Years | 11.64 | %§ | |
Inception* | 7.38 | %§ |
Select value Fund
278
Table of Contents
What is the Fund’s investment objective?
The Fund seeks to provide long term capital growth.
How did the Fund perform relative to its benchmark for the fiscal year ended October 31, 2006?
For the fiscal year ended October 31, 2006, the Select Value Fund Class I, Class S, Class E and Class C Shares gained 18.47%, 18.32%, 18.15% and 17.01%, respectively. This compared to the Russell 1000(R) Value Index, which gained 21.46% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.
For the year ended October 31, 2006, the Lipper(R) Large-Cap Value Funds Average returned 17.65%. This result serves as a peer comparison and is expressed net of operating expenses.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
In the first nine months of the fiscal year, the Fund was negatively impacted by three of the primary market drivers. These were soaring energy prices, continued outperformance of value stocks relative to growth stocks, and investor’s preference for high yield, defensive stocks.
Given the strength in oil prices and related stocks, the money managers in the Fund believed these stocks were overvalued and took significant underweight positions. Unfortunately, oil prices continued to surge through mid-August, at which point they peaked near $80 a barrel.
Similarly, value stocks have outperformed relative to growth stocks since early 2000. The Fund’s money managers believed this trend was unsustainable. They positioned their portfolios to take advantage of attractive valuations in stocks with growth expectations that were above the Russell 1000 Value Index. However, value stocks continued to outperform through mid-August, detracting from the Fund’s performance.
Lastly, most of the Fund’s money managers believed that the economy would slow to moderate growth levels. However, in May, investors became fearful of a sharp correction in the economy which led them to seek defensive, high yield stocks. This trend continued through July, having a notable negative impact on Fund performance as the money managers had positioned the Fund to benefit from a slowing economy by underweighting the highest dividend yielding stocks.
Beginning mid-August, these trends reversed. As such, the Fund has outperformed since that time.
How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?
Value managers tend to be contrarian, buying stocks that have underperformed and are selling at attractive valuations. The strong relative performance of energy, deep value, and high yielding stocks made those stocks less fundamentally attractive to value managers. With a tilt towards owning stocks with both attractive values and good growth prospects, the Fund’s money managers focused on higher growth, less defensive, and larger capitalization stocks. As a result, the Fund had a pronounced tilt toward stocks with higher growth characteristics selling at moderate valuations. Also, the Fund’s money managers avoided stocks with high dividend yields. These tilts contributed negatively to the Fund’s performance during the fiscal year as the market rewarded defensive, high dividend yield stocks.
Poor stock and industry selection by the Fund’s money managers during the period also contributed negatively to performance. Iridian Asset Management LLC was the biggest detractor, significantly underperforming its benchmark due mainly to poor stock and industry selection but also because of the factors discussed above. Systematic Financial Management, L.P. also underperformed for the same reasons. DePrince Race & Zollo, Inc. outperformed the benchmark due to positive industry and sector selection.
At the stock selection level, overweights in Boston Scientific and Unitedhealth detracted from performance, as did underweights in BellSouth and Exxon Mobil. Overweights in China Mobile, Guidant and Allegheny Technologies contributed positively to performance.
279
Table of Contents
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
Money Managers as of October 31, 2006 | Style | |
DePrince, Race & Zollo, Inc. | Value | |
Iridian Asset Management, LLC | Value | |
MFS Institutional Advisors, Inc. | Value | |
Netols Asset Management, Inc. | Value | |
Systematic Financial Management, L.P. | Value |
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Russell Investment Company (RIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any RIC Fund.
* | Commenced operations on January 31, 2001. |
** | Russell 1000(R) Value Index measures the performance of those Russell 1000(R) Index securities with higher price-to-book ratios and higher forecasted growth values. |
§ | Annualized. |
Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
280
Table of Contents
Russell Investment Company
Select Value Fund
Shareholder Expense Example — October 31, 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 Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution (12b-1) and/or service 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 May 1, 2006 to October 31, 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.
Class C | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,046.40 | $ | 1,014.62 | ||
Expenses Paid During | ||||||
Period* | $ | 10.83 | $ | 10.66 |
* | Expenses are equal to the Fund’s annualized expense ratio of 2.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
281
Table of Contents
Class E | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,050.60 | $ | 1,018.75 | ||
Expenses Paid During | ||||||
Period* | $ | 6.62 | $ | 6.51 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.28% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class I | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,052.10 | $ | 1,020.47 | ||
Expenses Paid During | ||||||
Period* | $ | 4.86 | $ | 4.79 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.94% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
Class S | Actual Performance | Hypothetical Performance (5% return before expenses) | ||||
Beginning Account Value | ||||||
May 1, 2006 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | ||||||
October 31, 2006 | $ | 1,052.40 | $ | 1,019.76 | ||
Expenses Paid During | ||||||
Period* | $ | 5.59 | $ | 5.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.08% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
282
Table of Contents
Russell Investment Company
Select Value Fund
Schedule of Investments — October 31, 2006
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||
Common Stocks - 94.0% | ||||
Auto and Transportation - 2.1% | ||||
Airtran Holdings, Inc. (Æ)(Ñ) | 36,138 | 360 | ||
Alexander & Baldwin, Inc. (Ñ) | 9,923 | 457 | ||
Burlington Northern Santa Fe Corp. | �� | 16,110 | 1,249 | |
Con-way, Inc. | 1,720 | 81 | ||
Continental AG - ADR (Æ) | 12,600 | 1,399 | ||
CSX Corp. | 23,656 | 844 | ||
Fleetwood Enterprises, Inc. (Æ)(Ñ) | 29,985 | 214 | ||
General Maritime Corp. (Ñ) | 11,670 | 426 | ||
Keystone Automotive Industries, Inc. (Æ)(Ñ) | 14,228 | 547 | ||
Norfolk Southern Corp. | 14,760 | 776 | ||
Polaris Industries, Inc. (Ñ) | 17,700 | 758 | ||
United Parcel Service, Inc. Class B | 10,700 | 806 | ||
Visteon Corp. (Æ) | 65,667 | 485 | ||
Wabtec Corp. (Ñ) | 21,466 | 674 | ||
9,076 | ||||
Consumer Discretionary - 9.0% | ||||
99 Cents Only Stores (Æ)(Ñ) | 27,627 | 331 | ||
Accenture, Ltd. Class A (Æ) | 37,770 | 1,243 | ||
Arbitron, Inc. (Ñ) | 14,574 | 612 | ||
Casual Male Retail Group, Inc. (Æ)(Ñ) | 39,398 | 584 | ||
Corinthian Colleges, Inc. (Æ)(Ñ) | 35,031 | 429 | ||
Cost Plus, Inc. (Æ)(Ñ) | 44,565 | 533 | ||
Cox Radio, Inc. Class A (Æ)(Ñ) | 21,806 | 367 | ||
DeVry, Inc. (Æ)(Ñ) | 20,263 | 493 | ||
Diamond Management & Technology Consultants, Inc. (Æ)(Ñ) | 44,735 | 485 | ||
Family Dollar Stores, Inc. | 27,000 | 795 | ||
Federated Department Stores, Inc. | 38,120 | 1,674 | ||
Gap, Inc. (The) | 56,500 | 1,188 | ||
Hanesbrands, Inc. (Æ) | 3,271 | 77 | ||
Harrah’s Entertainment, Inc. | 28,500 | 2,118 | ||
Hasbro, Inc. (Ñ) | 66,720 | 1,729 | ||
Home Depot, Inc. | 9,760 | 364 | ||
International Flavors & Fragrances, Inc. | 15,800 | 671 | ||
Jarden Corp. (Æ)(Ñ) | 15,064 | 542 | ||
JC Penney Co., Inc. | 24,400 | 1,836 | ||
Kimberly-Clark Corp. | 30,000 | 1,996 | ||
Liberty Media Holding Corp. (Æ) | 56,000 | 1,236 | ||
Liberty Media Holding Corp.Series A (Æ) | 11,900 | 1,060 | ||
Limited Brands, Inc. | 20,900 | 616 | ||
McDonald’s Corp. | 58,100 | 2,436 | ||
MGM Mirage (Æ) | 64,900 | 2,792 | ||
New York Times Co. Class A (Ñ) | 10,660 | 258 | ||
Nike, Inc. Class B | 13,980 | 1,284 | ||
O’Charleys, Inc. (Æ)(Ñ) | 27,193 | 541 | ||
Omnicom Group, Inc. | 5,000 | 507 | ||
Reader’s Digest Association, Inc. (The) (Ñ) | 24,966 | 359 | ||
Ross Stores, Inc. | 23,900 | 703 |
283
Table of Contents
RR Donnelley & Sons Co. | 27,000 | 914 | ||
Sabre Holdings Corp. Class A | 37,700 | 958 | ||
School Specialty, Inc. (Æ)(Ñ) | 10,796 | 423 | ||
Sears Holdings Corp. (Æ)(Ñ) | 4,200 | 733 | ||
ServiceMaster Co. (The) (Ñ) | 48,500 | 550 | ||
Sturm Ruger & Co., Inc. (Æ)(Ñ) | 46,513 | 387 | ||
TJX Cos., Inc. | 54,000 | 1,563 | ||
Viacom, Inc. Class A (Æ) | 21,047 | 819 | ||
Walt Disney Co. | 52,580 | 1,654 | ||
WPP Group PLC - ADR (Æ)(Ñ) | 4,040 | 259 | ||
38,119 | ||||
Consumer Staples - 4.1% | ||||
Altria Group, Inc. | 75,600 | 6,149 | ||
Coca-Cola Co. (The) | 22,100 | 1,033 | ||
ConAgra Foods, Inc. | 26,100 | 683 | ||
Del Monte Foods Co. | 44,413 | 479 | ||
Diageo PLC - ADR | 13,020 | 970 | ||
Fomento Economico Mexicano SA de CV - ADR | 3,500 | 338 | ||
Hershey Co. (The) (Ñ) | 19,800 | 1,048 | ||
HJ Heinz Co. | 19,600 | 826 | ||
Kellogg Co. | 24,000 | 1,207 | ||
Lance, Inc. (Ñ) | 20,317 | 397 | ||
Molson Coors Brewing Co. Class B (Ñ) | 16,100 | 1,146 | ||
Nestle SA - ADR | 8,830 | 754 | ||
PepsiCo, Inc. | 7,510 | 476 | ||
Procter & Gamble Co. | 26,100 | 1,654 | ||
Tyson Foods, Inc. Class A | 13,320 | 192 | ||
17,352 | ||||
Financial Services - 25.9% | ||||
Aflac, Inc. | 4,440 | 199 | ||
AG Edwards, Inc. | 11,900 | 679 | ||
Allstate Corp. (The) | 56,940 | 3,494 | ||
American Express Co. | 17,610 | 1,018 | ||
American International Group, Inc. | 65,000 | 4,366 | ||
AmSouth Bancorporation | 29,600 | 895 | ||
Amvescap PLC - ADR (Æ)(Ñ) | 46,300 | 1,064 | ||
Annaly Capital Management, Inc. (ö) | 73,600 | 966 | ||
Assurant, Inc. | 26,800 | 1,411 | ||
Astoria Financial Corp. | 21,900 | 635 | ||
Bank of America Corp. | 234,785 | 12,648 | ||
Bank of New York Co., Inc. (The) | 35,990 | 1,237 | ||
Bear Stearns Cos., Inc. (The) | 11,400 | 1,725 | ||
Cedar Shopping Centers, Inc. (ö)(Ñ) | 26,576 | 444 | ||
Chubb Corp. | 12,240 | 651 | ||
Cigna Corp. | 17,490 | 2,046 | ||
Citigroup, Inc. | 175,810 | 8,819 | ||
Colonial BancGroup, Inc. (The) | 26,800 | 639 | ||
Countrywide Financial Corp. | 64,900 | 2,474 | ||
Douglas Emmett, Inc. (Æ)(ö) | 2,700 | 64 | ||
Dow Jones & Co., Inc. (Ñ) | 22,300 | 783 | ||
Fannie Mae | 32,520 | 1,927 | ||
Federated Investors, Inc. Class B | 33,000 | 1,132 | ||
First Horizon National Corp. (Ñ) | 17,100 | 672 | ||
First Industrial Realty Trust, Inc. (ö)(Ñ) | 11,268 | 518 | ||
First Marblehead Corp. (The) (Ñ) | 7,020 | 474 | ||
Franklin Resources, Inc. | 4,760 | 542 | ||
Freddie Mac | 6,650 | 459 |
284
Table of Contents
GATX Corp. (Ñ) | 10,066 | 439 | ||
Genworth Financial, Inc. Class A | 30,940 | 1,035 | ||
Goldman Sachs Group, Inc. | 15,810 | 3,001 | ||
H&R Block, Inc. | 31,500 | 689 | ||
Hanover Insurance Group, Inc. (The) | 9,602 | 435 | ||
Hartford Financial Services Group, Inc. | 25,070 | 2,185 | ||
Huntington Bancshares, Inc. | 49,600 | 1,211 | ||
Jones Lang LaSalle, Inc. | 15,400 | 1,417 | ||
JPMorgan Chase & Co. | 128,900 | 6,115 | ||
KeyCorp | 25,500 | 947 | ||
Kronos, Inc. (Æ)(Ñ) | 11,902 | 403 | ||
Legg Mason, Inc. | 22,300 | 2,007 | ||
Lehman Brothers Holdings, Inc. | 36,500 | 2,841 | ||
Lincoln National Corp. | 15,100 | 956 | ||
Loews Corp. | 26,200 | 1,020 | ||
MBIA, Inc. | 19,600 | 1,216 | ||
Mellon Financial Corp. | 22,690 | 880 | ||
Mercury General Corp. | 12,100 | 626 | ||
Merrill Lynch & Co., Inc. | 69,320 | 6,060 | ||
Metlife, Inc. | 51,370 | 2,935 | ||
Morgan Stanley | 11,200 | 856 | ||
New York Community Bancorp, Inc. (Ñ) | 64,300 | 1,051 | ||
PNC Financial Services Group, Inc. | 19,340 | 1,354 | ||
South Financial Group, Inc. (The) (Ñ) | 29,600 | 785 | ||
St. Paul Travelers Cos., Inc. (The) | 28,600 | 1,462 | ||
Sun Communities, Inc. (ö) | 9,645 | 338 | ||
SunTrust Banks, Inc. | 40,890 | 3,230 | ||
UBS AG | 73,710 | 4,411 | ||
US Bancorp | 101,900 | 3,448 | ||
Wachovia Corp. | 16,600 | 921 | ||
Washington Mutual, Inc. (Ñ) | 60,200 | 2,546 | ||
Westamerica Bancorporation (Ñ) | 8,360 | 417 | ||
109,218 | ||||
Health Care - 11.5% | ||||
Abbott Laboratories | 22,850 | 1,086 | ||
AmerisourceBergen Corp. | 24,300 | 1,147 | ||
Amgen, Inc. (Æ) | 51,700 | 3,925 | ||
Biogen Idec, Inc. (Æ)(Ñ) | 66,115 | 3,147 | ||
Boston Scientific Corp. (Æ) | 89,500 | 1,424 | ||
Chattem, Inc. (Æ)(Ñ) | 11,806 | 501 | ||
Diversa Corp. (Æ)(Ñ) | 28,430 | 265 | ||
Eli Lilly & Co. | 31,530 | 1,766 | ||
Gentiva Health Services, Inc. (Æ)(Ñ) | 30,432 | 565 | ||
Genzyme Corp. (Æ) | 36,800 | 2,484 | ||
Johnson & Johnson | 60,540 | 4,080 | ||
KV Pharmaceutical Co. Class A (Æ)(Ñ) | 25,151 | 561 | ||
LifePoint Hospitals, Inc. (Æ)(Ñ) | 15,573 | 553 | ||
Matria Healthcare, Inc. (Æ)(Ñ) | 21,086 | 595 | ||
McKesson Corp. | 10,700 | 536 | ||
Medco Health Solutions, Inc. (Æ) | 11,500 | 615 | ||
Medtronic, Inc. | 59,300 | 2,887 | ||
Merck & Co., Inc. | 78,890 | 3,583 | ||
Par Pharmaceutical Cos., Inc. (Æ)(Ñ) | 28,124 | 548 | ||
Pfizer, Inc. | 219,900 | 5,860 | ||
PolyMedica Corp. (Ñ) | 16,281 | 676 | ||
PSS World Medical, Inc. (Æ) | 24,925 | 502 | ||
Sunrise Senior Living, Inc. (Æ)(Ñ) | 14,759 | 461 |
285
Table of Contents
UnitedHealth Group, Inc. | 85,000 | 4,146 | ||
US Physical Therapy, Inc. (Æ) | 21,118 | 254 | ||
WellPoint, Inc. (Æ) | 55,240 | 4,216 | ||
Wyeth | 44,630 | 2,277 | ||
48,660 | ||||
Integrated Oils - 4.8% | ||||
Chevron Corp. | 69,902 | 4,697 | ||
ConocoPhillips | 54,910 | 3,308 | ||
Exxon Mobil Corp. | 129,690 | 9,262 | ||
Hess Corp. | 23,670 | 1,004 | ||
Marathon Oil Corp. | 7,600 | 657 | ||
Total SA - ADR | 17,960 | 1,224 | ||
20,152 | ||||
Materials and Processing - 7.6% | ||||
Acuity Brands, Inc. (Ñ) | 11,696 | 579 | ||
Air Products & Chemicals, Inc. | 11,120 | 775 | ||
Airgas, Inc. | 19,700 | 745 | ||
Albemarle Corp. (Æ) | 8,900 | 579 | ||
American Standard Cos., Inc. | 73,800 | 3,269 | ||
Avery Dennison Corp. (Ñ) | 12,400 | 783 | ||
Bowater, Inc. (Ñ) | 35,130 | 735 | ||
Brush Engineered Materials, Inc. (Æ)(Ñ) | 18,962 | 638 | ||
Chemtura Corp. | 51,200 | 439 | ||
Commercial Metals Co. | 18,789 | 500 | ||
Dow Chemical Co. (The) | 44,620 | 1,820 | ||
EI Du Pont de Nemours & Co. | 42,600 | 1,951 | ||
Freeport-McMoRan Copper & Gold, Inc. Class B | 17,700 | 1,070 | ||
International Paper Co. | 45,450 | 1,516 | ||
IPSCO, Inc. | 9,500 | 869 | ||
Lubrizol Corp. | 13,900 | 625 | ||
Lyondell Chemical Co. | 17,300 | 444 | ||
Masco Corp. | 67,230 | 1,859 | ||
MeadWestvaco Corp. | 31,200 | 859 | ||
Modtech Holdings, Inc. (Æ)(Ñ) | 43,809 | 223 | ||
Nalco Holding Co. (Æ) | 11,550 | 234 | ||
Packaging Corp. of America | 26,700 | 613 | ||
Phelps Dodge Corp. | 5,100 | 512 | ||
PPG Industries, Inc. | 19,410 | 1,328 | ||
Praxair, Inc. | 10,640 | 641 | ||
Precision Castparts Corp. | 42,800 | 2,913 | ||
RPM International, Inc. (Ñ) | 33,100 | 634 | ||
Sherwin-Williams Co. (The) | 10,420 | 617 | ||
Smurfit-Stone Container Corp. (Æ) | 17,360 | 185 | ||
Spartech Corp. | 20,349 | 557 | ||
Steel Dynamics, Inc. (Ñ) | 8,100 | 487 | ||
Syngenta AG - ADR | 32,590 | 1,050 | ||
Teck Cominco, Ltd. Class B | 21,600 | 1,592 | ||
Valspar Corp. | 21,500 | 576 | ||
32,217 | ||||
Miscellaneous - 2.7% | ||||
3M Co. | 26,100 | 2,058 | ||
General Electric Co. | 72,100 | 2,531 | ||
Honeywell International, Inc. | 32,300 | 1,361 | ||
Johnson Controls, Inc. | 12,990 | 1,059 | ||
Textron, Inc. | 27,900 | 2,537 | ||
Trinity Industries, Inc. (Ñ) | 49,050 | 1,769 | ||
11,315 | ||||
286
Table of Contents
Other Energy - 4.8% | ||||
Apache Corp. | 10,960 | 716 | ||
Chesapeake Energy Corp. | 111,300 | 3,611 | ||
Devon Energy Corp. | 54,850 | 3,666 | ||
Diamond Offshore Drilling, Inc. (Ñ) | 19,600 | 1,357 | ||
Encore Acquisition Co. (Æ)(Ñ) | 18,749 | 469 | ||
EOG Resources, Inc. | 35,500 | 2,362 | ||
Forest Oil Corp. (Æ) | 9,161 | 299 | ||
Global Industries, Ltd. (Æ) | 25,196 | 418 | ||
Hanover Compressor Co. (Æ)(Ñ) | 29,867 | 553 | ||
Matrix Service Co. (Æ)(Ñ) | 31,761 | 456 | ||
National-Oilwell Varco, Inc. (Æ) | 33,700 | 2,035 | ||
Noble Corp. | 5,000 | 351 | ||
Sunoco, Inc. | 6,300 | 417 | ||
Transocean, Inc. (Æ) | 22,800 | 1,654 | ||
Valero Energy Corp. | 28,100 | 1,470 | ||
Whiting Petroleum Corp. (Æ)(Ñ) | 10,420 | 465 | ||
20,299 | ||||
Producer Durables - 7.4% | ||||
Agilent Technologies, Inc. (Æ) | 104,900 | 3,734 | ||
Applied Signal Technology, Inc. (Ñ) | 20,993 | 311 | ||
BE Aerospace, Inc. (Æ) | 21,356 | 540 | ||
Boeing Co. | 50,500 | 4,033 | ||
C&D Technologies, Inc. (Ñ) | 76,191 | 378 | ||
Champion Enterprises, Inc. (Æ)(Ñ) | 49,685 | 460 | ||
Cooper Industries, Ltd. Class A | 4,440 | 397 | ||
Crane Co. | 10,578 | 412 | ||
Deere & Co. | 27,670 | 2,356 | ||
Esterline Technologies Corp. (Æ)(Ñ) | 11,199 | 422 | ||
Federal Signal Corp. (Ñ) | 35,412 | 540 | ||
General Cable Corp. (Æ) | 18,635 | 701 | ||
Goodrich Corp. | 41,200 | 1,816 | ||
IDEX Corp. | 8,608 | 404 | ||
Illinois Tool Works, Inc. | 4,220 | 202 | ||
Lam Research Corp. (Æ) | 16,800 | 831 | ||
Lockheed Martin Corp. | 42,420 | 3,688 | ||
Nokia OYJ - ADR | 66,300 | 1,318 | ||
Northrop Grumman Corp. | 32,500 | 2,158 | ||
Pentair, Inc. (Ñ) | 26,000 | 856 | ||
Robbins & Myers, Inc. | 18,240 | 702 | ||
Terex Corp. (Æ) | 22,600 | 1,170 | ||
United Technologies Corp. | 41,010 | 2,695 | ||
Varian Semiconductor Equipment Associates, Inc. (Æ) | 7,641 | 279 | ||
WW Grainger, Inc. | 9,330 | 679 | ||
31,082 | ||||
Technology - 5.3% | ||||
Advanced Micro Devices, Inc. (Æ)(Ñ) | 13,000 | 276 | ||
American Science & Engineering, Inc. (Æ)(Ñ) | 8,338 | 439 | ||
Analog Devices, Inc. | 32,370 | 1,030 | ||
Avid Technology, Inc. (Æ)(Ñ) | 6,020 | 217 | ||
Broadcom Corp. Class A (Æ) | 17,800 | 539 | ||
CACI International, Inc. Class A (Æ)(Ñ) | 8,338 | 480 | ||
Cisco Systems, Inc. (Æ) | 45,300 | 1,093 | ||
General Dynamics Corp. | 41,900 | 2,979 | ||
Harris Corp. | 18,400 | 784 |
287
Table of Contents
Hewlett-Packard Co. | 130,760 | 5,066 | ||
Intel Corp. | 144,730 | 3,089 | ||
International Business Machines Corp. | 8,400 | 776 | ||
Linear Technology Corp. | 20,500 | 638 | ||
LSI Logic Corp. (Æ) | 41,400 | 416 | ||
Mantech International Corp. Class A (Æ)(Ñ) | 15,480 | 527 | ||
Oracle Corp. (Æ) | 53,120 | 981 | ||
Rockwell Automation, Inc. | 6,940 | 430 | ||
Seagate Technology, Inc. (Æ) | 1,900 | — | ||
Sybase, Inc. (Æ) | 17,594 | 428 | ||
Symantec Corp. (Æ) | 38,000 | 754 | ||
Synopsys, Inc. (Æ) | 23,000 | 518 | ||
Trimble Navigation, Ltd. (Æ) | 9,900 | 458 | ||
Varian, Inc. (Æ)(Ñ) | 8,520 | 399 | ||
22,317 | ||||
Utilities - 8.8% | ||||
Alaska Communications Systems Group, Inc. (Ñ) | 40,912 | 589 | ||
Alltel Corp. | 65,200 | 3,476 | ||
Ameren Corp. (Ñ) | 5,600 | 303 | ||
America Movil SA de CV Series L | 49,400 | 2,118 | ||
American Electric Power Co., Inc. | 18,500 | 766 | ||
Aqua America, Inc. (Ñ) | 26,900 | 652 | ||
AT&T, Inc. | 86,600 | 2,966 | ||
Atmos Energy Corp. | 13,600 | 418 | ||
BellSouth Corp. | 12,100 | 546 | ||
China Mobile, Ltd. - ADR (Ñ) | 63,100 | 2,573 | ||
Citizens Communications Co. | 59,200 | 868 | ||
Comcast Corp. Class A (Æ) | 43,800 | 1,781 | ||
Consolidated Edison, Inc. (Ñ) | 6,600 | 319 | ||
Dominion Resources, Inc. | 33,820 | 2,739 | ||
Embarq Corp. (Æ) | 9,857 | 477 | ||
Entergy Corp. | 7,420 | 637 | ||
Exelon Corp. | 25,400 | 1,574 | ||
FPL Group, Inc. (Ñ) | 52,090 | 2,657 | ||
Level 3 Communications, Inc. (Æ)(Ñ) | 65,000 | 344 | ||
NiSource, Inc. | 25,900 | 603 | ||
Oneok, Inc. | 13,200 | 549 | ||
PPL Corp. | 54,870 | 1,894 | ||
Progress Energy, Inc. - CVO | 1,300 | — | ||
Public Service Enterprise Group, Inc. | 3,370 | 206 | ||
Rogers Communications, Inc. Class B (Æ) | 10,700 | 640 | ||
SCANA Corp. | 7,200 | 288 | ||
Sprint Nextel Corp. | 77,790 | 1,454 | ||
TECO Energy, Inc. | 23,500 | 387 | ||
TELUS Corp. Class A (Æ) | 3,800 | 218 | ||
TXU Corp. | 8,880 | 561 | ||
Verizon Communications, Inc. | 62,540 | 2,314 | ||
Vodafone Group PLC - ADR (Æ) | 63,143 | 1,632 | ||
Windstream Corp. (Æ) | 45,400 | 623 | ||
37,172 | ||||
Total Common Stocks | ||||
(cost $327,004) | 396,979 | |||
Short-Term Investments - 6.3% | ||||
Russell Investment Company Money Market Fund | 25,543,000 | 25,543 | ||
United States Treasury Bills (ç)(ž)(§) 4.891% due 12/07/06 | 1,000 | 995 | ||
288
Table of Contents
Total Short-Term Investments | |||||
(cost $26,538) | 26,538 | ||||
Other Securities - 10.9% | |||||
Russell Investment Company | |||||
Money Market Fund (×) | 11,791,608 | 11,792 | |||
State Street Securities Lending Quality Trust (×) | 34,160,573 | 34,161 | |||
Total Other Securities | |||||
(cost $45,953) | 45,953 | ||||
Total Investments - 111.2% | |||||
(identified cost $399,495) | 469,470 | ||||
Other Assets and Liabilities, | |||||
Net - (11.2%) | (47,351 | ) | |||
Net Assets - 100.0% | 422,119 | ||||
Futures Contracts (Number of Contracts) | Notional Amount $ | Unrealized Appreciation (Depreciation) $ | |||
Long Positions | |||||
Russell 1000 Value Index expiration date 12/06 (29) | 11,424 | 593 | |||
S&P 500 E-Mini Index (CME) expiration date 12/06 (51) | 3,527 | 186 | |||
S&P 500 Index (CME) expiration date 12/06 (24) | 8,299 | 127 | |||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts | 906 | ||||
See accompanying notes which are an integral part of the financial statement.
289
Table of Contents
Presentation of Portfolio Holdings — October 31, 2006 (Unaudited)
Categories | % of Net Assets | ||
Auto and Transportation | 2.1 | ||
Consumer Discretionary | 9.0 | ||
Consumer Staples | 4.1 | ||
Financial Services | 25.9 | ||
Health Care | 11.5 | ||
Integrated Oils | 4.8 | ||
Materials and Processing | 7.6 | ||
Miscellaneous | 2.7 | ||
Other Energy | 4.8 | ||
Producer Durables | 7.4 | ||
Technology | 5.3 | ||
Utilities | 8.8 | ||
Short-Term Investments | 6.3 | ||
Other Securities | 10.9 | ||
Total Investments | 111.2 | ||
Other Assets and Liabilities, Net | (11.2 | ) | |
100.0 | |||
Futures Contracts | 0.2 |
290
Table of Contents
Institutional Funds
Notes to Schedules of Investments — October 31, 2006
Footnotes:
(Æ) | Non-income producing. |
(Ï) | Forward commitment. |
(Ê) | 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. |
(ö) | Real Estate Investment Trust (REIT). |
(u) | Bond is insured by a guarantor. |
(B) | Illiquid security. |
(O) | In default. |
(ç) | At amortized cost, which approximates market. |
(ž) | Rate noted is yield-to-maturity from date of acquisition. |
(æ) | 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. |
(Ñ) | 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. |
(Å) | Illiquid and restricted security. |
(å) | Currency balances were held in connection with futures contracts purchased (sold), options written, or swaps entered into by the Fund. See Note 2. |
(Û) | All or a portion of the shares of this security are held as collateral in connection with securities sold short. |
Abbreviations:
ADR - American Depositary Receipt
ADS - American Depositary Share
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
291
Table of Contents
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
GDR - Global Depositary Receipt
GDS - Global Depositary Share
FDIC - Federal Deposit Insurance Company
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:
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 | IEP - Irish pundt | RUB - Russian ruble | ||
CHF - Swiss franc | ILS - Israeli shekel | SEK - Swedish krona | ||
CLP - Chilean peso | INR - Indian rupee | 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 - Vietnam dong | ||
GBP - British pound sterling | PEN - Peruvian nouveau sol | ZAR - South African rand |
292
Table of Contents
Institutional Funds
Statement of Assets and Liabilities — October 31, 2006
Amounts in thousands | Equity I Fund | Equity II Fund | Equity Q Fund | International Fund | ||||||||
Assets | ||||||||||||
Investments, at identified cost | $ | 1,539,427 | $ | 766,815 | $ | 1,501,072 | $ | 1,748,754 | ||||
Investments, at market*** | 1,769,094 | 849,214 | 1,774,749 | 2,121,115 | ||||||||
Cash | — | — | — | 1,473 | ||||||||
Cash (restricted) | — | — | — | 3,630 | ||||||||
Foreign currency holdings* | — | — | — | 7,363 | ||||||||
Unrealized appreciation on foreign currency exchange contracts | — | — | — | 3,504 | ||||||||
Receivables: | ||||||||||||
Dividends and interest | 1,136 | 243 | 1,399 | 1,910 | ||||||||
Dividends from affiliated money market funds | 437 | 101 | 162 | 544 | ||||||||
Investments sold | 12,207 | 3,180 | 22,382 | 18,103 | ||||||||
Fund shares sold | 2,071 | 555 | 2,477 | 2,165 | ||||||||
Foreign taxes recoverable | — | — | — | 149 | ||||||||
From Advisor | 32 | 17 | 13 | 52 | ||||||||
Daily variation margin on futures contracts | — | — | — | — | ||||||||
Prepaid expenses | — | — | — | — | ||||||||
Unrealized appreciation on index swap contracts | — | — | — | — | ||||||||
Interest rate swap contracts, at market value***** | — | — | — | — | ||||||||
Credit default swap contracts, at market value**** | — | — | — | — | ||||||||
Total assets | 1,784,977 | 853,310 | 1,801,182 | 2,160,008 | ||||||||
Liabilities | ||||||||||||
Payables: | ||||||||||||
Due to Custodian | — | — | 9 | — | ||||||||
Investments purchased | 14,401 | 4,802 | 28,121 | 17,889 | ||||||||
Fund shares redeemed | 1,178 | 739 | 1,146 | 469 | ||||||||
Accrued fees to affiliates | 953 | 477 | 982 | 1,271 | ||||||||
Other accrued expenses | 111 | 62 | 141 | 297 | ||||||||
Dividends for securities sold short | — | — | 20 | — | ||||||||
Daily variation margin on futures contracts | 104 | 90 | 64 | 281 | ||||||||
Deferred tax liability | — | — | — | 11 | ||||||||
Unrealized depreciation on foreign currency exchange contracts | — | — | — | 3,282 | ||||||||
Options written, at market value** | — | — | — | 983 | ||||||||
Securities sold short, at market value****** | — | — | 70,972 | — | ||||||||
Payable upon return of securities loaned | 124,220 | 223,803 | 47,888 | 285,294 | ||||||||
Unrealized depreciation on index swap contracts | — | — | — | 38 | ||||||||
Interest rate swap contracts, at market value***** | — | — | — | — | ||||||||
Credit default swap contracts, at market value**** | — | — | — | — | ||||||||
Total liabilities | 140,967 | 229,973 | 149,343 | 309,815 | ||||||||
Net Assets | $ | 1,644,010 | $ | 623,337 | $ | 1,651,839 | $ | 1,850,193 | ||||
See accompanying notes which are an integral part of the financial statements.
293
Table of Contents
Fixed Income I Fund | Fixed Income III Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | Select Growth Fund | Select Value Fund | |||||||||||||
$ | 1,900,501 | $ | 1,051,436 | $ | 888,971 | $ | 1,487,711 | $ | 1,185,919 | $ | 188,058 | $ | 399,495 | ||||||
1,903,413 | 1,057,860 | 1,223,505 | 2,306,508 | 1,179,774 | 209,892 | 469,470 | |||||||||||||
2,604 | 1,456 | 612 | — | — | — | — | |||||||||||||
— | 105 | — | — | — | — | — | |||||||||||||
607 | 366 | 5,092 | — | 666 | — | — | |||||||||||||
150 | 382 | 405 | — | 7 | — | — | |||||||||||||
10,490 | 6,295 | 1,544 | 296 | 8,219 | 58 | 304 | |||||||||||||
421 | 567 | 236 | 286 | 353 | 28 | 104 | |||||||||||||
73,047 | 76,487 | 2,316 | 15,974 | 9,732 | 1,196 | 3,474 | |||||||||||||
1,818 | 7,394 | 1,538 | 2,800 | 550 | 720 | 649 | |||||||||||||
— | — | 1 | — | — | — | — | |||||||||||||
45 | 42 | 16 | 26 | 19 | 176 | 8 | |||||||||||||
488 | 976 | 188 | — | 351 | 13 | — | |||||||||||||
— | — | 4 | 6 | 6 | — | — | |||||||||||||
— | 33 | — | — | — | — | — | |||||||||||||
317 | 3,097 | — | — | 16 | — | — | |||||||||||||
— | 137 | — | — | 1 | — | — | |||||||||||||
1,993,400 | 1,155,197 | 1,235,457 | 2,325,896 | 1,199,694 | 212,083 | 474,009 | |||||||||||||
— | — | — | — | 34 | 53 | — | |||||||||||||
302,713 | 184,150 | 4,865 | 18,643 | 18,490 | 1,443 | 4,439 | |||||||||||||
1,269 | 407 | 970 | 2,827 | 1,550 | 322 | 1,012 | |||||||||||||
422 | 505 | 1,567 | 2,166 | 697 | 174 | 419 | |||||||||||||
151 | 110 | 324 | 97 | 100 | 42 | 54 | |||||||||||||
— | — | — | — | — | — | — | |||||||||||||
1 | 53 | — | — | — | — | 13 | |||||||||||||
— | — | 1,303 | — | — | — | — | |||||||||||||
350 | 655 | 167 | — | 13 | — | — | |||||||||||||
289 | 873 | 842 | — | 1,185 | — | — | |||||||||||||
— | — | — | — | — | — | — | |||||||||||||
275,976 | 105,616 | 60,497 | 228,743 | 21,916 | 31,309 | 45,953 | |||||||||||||
— | 137 | — | — | — | — | — | |||||||||||||
428 | 1,724 | — | — | 123 | — | — | |||||||||||||
— | 49 | — | — | — | — | — | |||||||||||||
581,599 | 294,279 | 70,535 | 252,476 | 44,108 | 33,343 | 51,890 | |||||||||||||
$ | 1,411,801 | $ | 860,918 | $ | 1,164,922 | $ | 2,073,420 | $ | 1,155,586 | $ | 178,740 | $ | 422,119 | ||||||
294
Table of Contents
(This page intentionally left blank)
295
Table of Contents
Russell Investment Company
Institutional Funds
Statement of Assets and Liabilities, continued — October 31, 2006
Amounts in thousands | Equity I Fund | Equity II Fund | Equity Q Fund | International Fund | ||||||||||
Net Assets Consist of: | ||||||||||||||
Undistributed (overdistributed) net investment income | $ | 941 | $ | 581 | $ | 1,181 | $ | 39,576 | ||||||
Accumulated net realized gain (loss) | 54,331 | 117,737 | 107,941 | 181,209 | ||||||||||
Unrealized appreciation (depreciation) on: | ||||||||||||||
Investments (Emerging Markets Fund and International | ||||||||||||||
Fund - net of foreign capital gains taxes) | 229,667 | 82,399 | 273,677 | 372,350 | ||||||||||
Futures contracts | 4,095 | 1,162 | 1,452 | 2,028 | ||||||||||
Options written | — | — | — | (15 | ) | |||||||||
Credit default swaps | — | — | — | — | ||||||||||
Index swap contracts | — | — | — | (38 | ) | |||||||||
Interest rate swap contracts | — | — | — | — | ||||||||||
Securities sold short | — | — | (3,955 | ) | — | |||||||||
Foreign currency-related transactions | — | — | — | 320 | ||||||||||
Shares of beneficial interest | 491 | 182 | 420 | 366 | ||||||||||
Additional paid-in capital | 1,354,485 | 421,276 | 1,271,123 | 1,254,397 | ||||||||||
Net Assets | $ | 1,644,010 | $ | 623,337 | $ | 1,651,839 | $ | 1,850,193 | ||||||
Net Asset Value, offering and redemption price per share: | ||||||||||||||
Net asset value per share: Class C******* | $ | — | $ | — | $ | — | $ | — | ||||||
Class C — Net assets | $ | — | $ | — | $ | — | $ | — | ||||||
Class C — Shares outstanding ($.01 par value) | — | — | — | — | ||||||||||
Net asset value per share: Class E******* | $ | 33.51 | $ | 34.16 | $ | 39.35 | $ | 50.51 | ||||||
Class E — Net assets | $ | 43,910,546 | $ | 39,986,900 | $ | 56,703,389 | $ | 51,470,256 | ||||||
Class E — Shares outstanding ($.01 par value) | 1,310,259 | 1,170,426 | 1,441,100 | 1,018,975 | ||||||||||
Net asset value per share: Class I******* | $ | 33.49 | $ | 34.31 | $ | 39.36 | $ | 50.55 | ||||||
Class I — Net assets | $ | 1,095,930,553 | $ | 471,744,680 | $ | 1,201,844,102 | $ | 1,420,217,834 | ||||||
Class I — Shares outstanding ($.01 par value) | 32,724,884 | 13,750,013 | 30,537,468 | 28,093,066 | ||||||||||
Net asset value per share: Class S******* | $ | — | $ | — | $ | — | $ | — | ||||||
Class S — Net assets | $ | — | $ | — | $ | — | $ | — | ||||||
Class S — Shares outstanding ($.01 par value) | — | — | — | — | ||||||||||
Net asset value per share: Class Y******* | $ | 33.49 | $ | 34.32 | $ | 39.36 | $ | 50.56 | ||||||
Class Y — Net assets | $ | 504,168,460 | $ | 111,605,593 | $ | 393,291,021 | $ | 378,505,137 | ||||||
Class Y — Shares outstanding ($.01 par value) | 15,056,004 | 3,252,117 | 9,992,933 | 7,485,993 | ||||||||||
Amounts in thousands | ||||||||||||||
* Foreign currency holdings - cost | $ | — | $ | — | $ | — | $ | 7,284 | ||||||
** Premiums received on options written | $ | — | $ | — | $ | — | $ | 968 | ||||||
*** Securities on loan included in investments | $ | 120,550 | $ | 217,070 | $ | 46,692 | $ | 274,050 | ||||||
**** Credit default swap contracts - premiums paid | ||||||||||||||
(received) | $ | — | $ | — | $ | — | $ | — | ||||||
***** Interest rate swap contracts - premiums paid | ||||||||||||||
(received) | $ | — | $ | — | $ | — | $ | — | ||||||
****** Proceeds on securities sold short | $ | — | $ | — | $ | 67,017 | $ | — | ||||||
******* Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
296
Table of Contents
Fixed Income I Fund | Fixed Income III Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | Select Growth Fund | Select Value Fund | ||||||||||||||||||
$ | 5,612 | $ | 3,798 | $ | (7,191 | ) | $ | 1,960 | $ | 4,238 | $ | 1 | $ | 69 | ||||||||||
(19,703 | ) | (6,941 | ) | 157,008 | 166,739 | (16,442 | ) | (11,537 | ) | 15,749 | ||||||||||||||
2,912 | 6,424 | 333,231 | 818,797 | (6,145 | ) | 21,834 | 69,975 | |||||||||||||||||
(27 | ) | 828 | 778 | — | (1,002 | ) | 424 | 906 | ||||||||||||||||
(81 | ) | (219 | ) | (14 | ) | — | (412 | ) | — | — | ||||||||||||||
— | 200 | — | — | 1 | — | — | ||||||||||||||||||
— | (104 | ) | — | — | — | — | — | |||||||||||||||||
(28 | ) | 587 | — | — | 283 | — | — | |||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||
(196 | ) | (284 | ) | 268 | — | — | — | — | ||||||||||||||||
678 | 823 | 532 | 361 | 618 | 214 | 333 | ||||||||||||||||||
1,422,634 | 855,806 | 680,310 | 1,085,563 | 1,174,447 | 167,804 | 335,087 | ||||||||||||||||||
$ | 1,411,801 | $ | 860,918 | $ | 1,164,922 | $ | 2,073,420 | $ | 1,155,586 | $ | 178,740 | $ | 422,119 | |||||||||||
$ | — | $ | — | $ | 21.17 | $ | 56.11 | $ | 18.66 | $ | 7.84 | $ | 12.44 | |||||||||||
$ | — | $ | — | $ | 44,977,040 | $ | 110,287,180 | $ | 21,839,992 | $ | 9,763,685 | $ | 26,167,854 | |||||||||||
— | — | 2,124,522 | 1,965,708 | 1,170,230 | 1,244,795 | 2,102,714 | ||||||||||||||||||
$ | 20.82 | $ | 10.48 | $ | 21.89 | $ | 56.95 | $ | 18.73 | $ | 8.25 | $ | 12.66 | |||||||||||
$ | 31,504,400 | $ | 15,119,405 | $ | 27,861,556 | $ | 59,768,271 | $ | 26,799,482 | $ | 6,590,057 | $ | 10,871,152 | |||||||||||
1,512,846 | 1,443,074 | 1,272,592 | 1,049,440 | 1,431,052 | 798,980 | 858,868 | ||||||||||||||||||
$ | 20.82 | $ | 10.46 | $ | — | $ | — | $ | — | $ | 8.44 | $ | 12.69 | |||||||||||
$ | 829,913,956 | $ | 744,559,241 | $ | — | $ | — | $ | — | $ | 90,953,635 | $ | 131,493,682 | |||||||||||
39,863,382 | 71,203,820 | — | — | — | 10,781,078 | 10,359,400 | ||||||||||||||||||
$ | — | $ | — | $ | 21.91 | $ | 57.53 | $ | 18.70 | $ | 8.38 | $ | 12.67 | |||||||||||
$ | — | $ | — | $ | 1,092,083,632 | $ | 1,903,364,431 | $ | 1,106,946,034 | $ | 71,432,767 | $ | 253,586,676 | |||||||||||
— | — | 49,852,578 | 33,087,167 | 59,192,512 | 8,527,655 | 20,020,606 | ||||||||||||||||||
$ | 20.83 | $ | 10.46 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
$ | 550,382,422 | $ | 101,239,725 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
26,425,276 | 9,678,359 | — | — | — | — | — | ||||||||||||||||||
$ | 606 | $ | 363 | $ | 5,088 | $ | — | $ | 659 | $ | — | $ | — | |||||||||||
$ | 208 | $ | 654 | $ | 828 | $ | — | $ | 773 | $ | — | $ | — | |||||||||||
$ | 271,133 | $ | 103,829 | $ | 58,893 | $ | 223,316 | $ | 21,445 | $ | 30,374 | $ | 44,732 | |||||||||||
$ | — | $ | (112 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
$ | (83 | ) | $ | 786 | $ | — | $ | — | $ | (390 | ) | $ | — | $ | — | |||||||||
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
297
Table of Contents
Institutional Funds
Statement of Operations — For the Fiscal Year Ended October 31, 2006
Amounts in thousands | Equity I Fund | Equity II Fund | Equity Q Fund | International Fund | ||||||||||||
Investment Income | ||||||||||||||||
Dividends | $ | 20,054 | $ | 5,678 | $ | 26,832 | $ | 50,068 | ||||||||
Dividends from affiliated money market funds | 3,977 | 1,477 | 1,913 | 5,798 | ||||||||||||
Interest | 263 | 88 | 136 | 471 | ||||||||||||
Securities lending income | 156 | 454 | 45 | 1,813 | ||||||||||||
Less foreign taxes withheld | — | — | — | (3,496 | ) | |||||||||||
Total investment income | 24,450 | 7,697 | 28,926 | 54,654 | ||||||||||||
Expenses | ||||||||||||||||
Advisory fees | 7,838 | 4,547 | 8,473 | 12,724 | ||||||||||||
Administrative fees | 713 | 325 | 770 | 909 | ||||||||||||
Custodian fees | 468 | 413 | 443 | 2,086 | ||||||||||||
Distribution fees - Class C | — | — | — | — | ||||||||||||
Transfer agent fees | — | — | — | — | ||||||||||||
Transfer agent fees - Class C | — | — | — | — | ||||||||||||
Transfer agent fees - Class E | 20 | 18 | 26 | 24 | ||||||||||||
Transfer agent fees - Class I | 714 | 476 | 631 | 602 | ||||||||||||
Transfer agent fees - Class S | — | — | — | — | ||||||||||||
Transfer agent fees - Class Y | 19 | 5 | 17 | 21 | ||||||||||||
Professional fees | 94 | 62 | 95 | 139 | ||||||||||||
Registration fees | 139 | 63 | 95 | 116 | ||||||||||||
Shareholder servicing fees - Class C | — | — | — | — | ||||||||||||
Shareholder servicing fees - Class E | 102 | 95 | 128 | 119 | ||||||||||||
Trustees’ fees | 35 | 15 | 37 | 45 | ||||||||||||
Printing fees | 57 | 21 | 59 | 75 | ||||||||||||
Dividends from securities sold short | — | — | 121 | — | ||||||||||||
Interest expense from securities sold short | — | — | 71 | — | ||||||||||||
Miscellaneous | 24 | 14 | 29 | 37 | ||||||||||||
Expenses before reductions | 10,223 | 6,054 | 10,995 | 16,897 | ||||||||||||
Expense reductions | (323 | ) | (151 | ) | (324 | ) | (420 | ) | ||||||||
Net expenses | 9,900 | 5,903 | 10,671 | 16,477 | ||||||||||||
Net investment income (loss) | 14,550 | 1,794 | 18,255 | 38,177 | ||||||||||||
Net Realized and Unrealized Gain (Loss) | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments (Emerging Markets Fund and International Fund - net of foreign capital gains taxes) | 62,982 | 125,256 | 119,617 | 305,627 | ||||||||||||
Futures contracts | 3,117 | 3,178 | 1,013 | 18,089 | ||||||||||||
Options written | — | — | — | (801 | ) | |||||||||||
Credit default swap contracts | — | — | — | — | ||||||||||||
Index swap contracts | — | — | — | 2,741 | ||||||||||||
Interest rate swap contracts | — | — | — | — | ||||||||||||
Securities sold short | — | — | (1,577 | ) | — | |||||||||||
Foreign currency-related transactions | — | (1 | ) | — | (2,023 | ) | ||||||||||
Net realized gain (loss) | 66,099 | 128,433 | 119,053 | 323,633 | ||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments (Emerging Markets Fund and International Fund - net of deferred tax liability for foreign capital gains taxes) | 104,359 | (25,487 | ) | 88,961 | 74,693 |
298
Table of Contents
Futures contracts | 4,766 | 1,978 | 1,590 | (719 | ) | ||||||||||
Options written | — | — | — | 7 | |||||||||||
Credit default swap contracts | — | — | — | — | |||||||||||
Index swap contracts | — | — | — | (368 | ) | ||||||||||
Interest rate swap contracts | — | — | — | — | |||||||||||
Securities sold short | — | — | (3,955 | ) | — | ||||||||||
Foreign currency-related transactions | — | — | — | 3,361 | |||||||||||
Net change in unrealized appreciation (depreciation) | 109,125 | (23,509 | ) | 86,596 | 76,974 | ||||||||||
Net realized and unrealized gain (loss) | 175,224 | 104,924 | 205,649 | 400,607 | |||||||||||
Net Increase (Decrease) in Net Assets from Operations | $ | 189,774 | $ | 106,718 | $ | 223,904 | $ | 438,784 | |||||||
Fixed Income I Fund | Fixed Income III Fund | Emerging Markets Fund | Real Estate Securities Fund | Short Duration Bond Fund | Select Growth Fund | Select Value Fund | ||||||||||||||||||||
$ | 99 | $ | 125 | $ | 28,371 | $ | 42,134 | $ | 189 | $ | 1,342 | $ | 7,328 | |||||||||||||
4,667 | 4,939 | 2,301 | 2,293 | 2,456 | 480 | 922 | ||||||||||||||||||||
62,938 | 32,349 | 212 | — | 47,651 | 44 | 46 | ||||||||||||||||||||
216 | 169 | 182 | 197 | 14 | 43 | 57 | ||||||||||||||||||||
— | — | (2,641 | ) | — | — | — | — | |||||||||||||||||||
67,920 | 37,582 | 28,425 | 44,624 | 50,310 | 1,909 | 8,353 | ||||||||||||||||||||
3,328 | 3,608 | 11,961 | 14,117 | 5,172 | 1,495 | 2,675 | ||||||||||||||||||||
666 | 361 | 522 | 883 | 576 | 93 | 191 | ||||||||||||||||||||
658 | 571 | 2,260 | 402 | 363 | 170 | 212 | ||||||||||||||||||||
— | — | 322 | 714 | 187 | 70 | 181 | ||||||||||||||||||||
— | — | 2,383 | 3,215 | 1,200 | — | — | ||||||||||||||||||||
— | — | — | — | — | 24 | 62 | ||||||||||||||||||||
14 | 5 | — | — | — | 8 | 17 | ||||||||||||||||||||
394 | 464 | — | — | — | 123 | 118 | ||||||||||||||||||||
— | — | — | — | — | 132 | 556 | ||||||||||||||||||||
23 | 2 | — | — | — | — | — | ||||||||||||||||||||
107 | 56 | 164 | 65 | 78 | 47 | 46 | ||||||||||||||||||||
93 | 87 | 84 | 102 | 44 | 64 | 73 | ||||||||||||||||||||
— | — | 107 | 238 | 62 | 23 | 60 | ||||||||||||||||||||
77 | 25 | 63 | 121 | 64 | 13 | 24 | ||||||||||||||||||||
32 | 17 | 25 | 42 | 27 | 5 | 10 | ||||||||||||||||||||
52 | 24 | 37 | 68 | 47 | 10 | 15 | ||||||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||
24 | 12 | 20 | 36 | 20 | 18 | 10 | ||||||||||||||||||||
5,468 | 5,232 | 17,948 | 20,003 | 7,840 | 2,295 | 4,250 | ||||||||||||||||||||
(352 | ) | (227 | ) | (33 | ) | (32 | ) | (56 | ) | (239 | ) | (9 | ) | |||||||||||||
5,116 | 5,005 | 17,915 | 19,971 | 7,784 | 2,056 | 4,241 | ||||||||||||||||||||
62,804 | 32,577 | 10,510 | 24,653 | 42,526 | (147 | ) | 4,112 | |||||||||||||||||||
(12,239 | ) | (4,773 | ) | 150,099 | 169,551 | (4,680 | ) | 6,679 | 28,103 | |||||||||||||||||
(3,125 | ) | (946 | ) | 7,046 | — | (2,060 | ) | 75 | 1,054 | |||||||||||||||||
494 | 473 | 3,286 | — | 343 | — | — | ||||||||||||||||||||
— | (28 | ) | — | — | — | — | — | |||||||||||||||||||
— | (45 | ) | — | — | — | — | — | |||||||||||||||||||
(290 | ) | (489 | ) | — | — | (780 | ) | — | — | |||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||
(279 | ) | (935 | ) | (177 | ) | — | (29 | ) | — | — | ||||||||||||||||
(15,439 | ) | (6,743 | ) | 160,254 | 169,551 | (7,206 | ) | 6,754 | 29,157 | |||||||||||||||||
17,626 | 9,368 | 112,845 | 380,628 | 8,237 | 3,029 | 29,741 | ||||||||||||||||||||
1,291 | 1,592 | 477 | — | 63 | 506 | 1,259 | ||||||||||||||||||||
(13 | ) | (234 | ) | 124 | — | (469 | ) | — | — | |||||||||||||||||
— | 195 | — | — | 1 | — | — | ||||||||||||||||||||
— | (84 | ) | — | — | — | — | — |
299
Table of Contents
142 | 602 | — | — | 739 | — | — | ||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||
(64 | ) | (204 | ) | 514 | — | (20 | ) | — | — | |||||||||||||
18,982 | 11,235 | 113,960 | 380,628 | 8,551 | 3,535 | 31,000 | ||||||||||||||||
3,543 | 4,492 | 274,214 | 550,179 | 1,345 | 10,289 | 60,157 | ||||||||||||||||
$ | 66,347 | $ | 37,069 | $ | 284,724 | $ | 574,832 | $ | 43,871 | $ | 10,142 | $ | 64,269 | |||||||||
See accompanying notes which are an integral part of the financial statements.
300
Table of Contents
Institutional Funds
Statements of Changes in Net Assets — For the Fiscal Years Ended October 31,
Amounts in thousands | Equity I Fund | Equity II Fund | ||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Increase (Decrease) in Net Assets | ||||||||||||||||
Operations | ||||||||||||||||
Net investment income (loss) | $ | 14,550 | $ | 10,607 | $ | 1,794 | $ | 944 | ||||||||
Net realized gain (loss) | 66,099 | 76,037 | 128,433 | 160,177 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 109,125 | 29,516 | (23,509 | ) | (50,968 | ) | ||||||||||
Net increase (decrease) in net assets from operations | 189,774 | 116,160 | 106,718 | 110,153 | ||||||||||||
Distributions | ||||||||||||||||
From net investment income | ||||||||||||||||
Class C | — | — | — | — | ||||||||||||
Class E | (307 | ) | (293 | ) | — | (114 | ) | |||||||||
Class I | (9,461 | ) | (8,027 | ) | (979 | ) | (2,033 | ) | ||||||||
Class S | — | — | — | — | ||||||||||||
Class Y | (4,443 | ) | (2,220 | ) | (358 | ) | (635 | ) | ||||||||
From net realized gain | ||||||||||||||||
Class C | — | — | — | — | ||||||||||||
Class E | (1,542 | ) | — | (8,757 | ) | (10,499 | ) | |||||||||
Class I | (34,548 | ) | — | (120,739 | ) | (87,641 | ) | |||||||||
Class S | — | — | — | — | ||||||||||||
Class Y | (13,971 | ) | — | (28,930 | ) | (20,999 | ) | |||||||||
Net decrease in net assets from distributions | (64,272 | ) | (10,540 | ) | (159,763 | ) | (121,921 | ) | ||||||||
Share Transactions | ||||||||||||||||
Net increase (decrease) in net assets from share transactions | 314,376 | 263,392 | 32,192 | (258,684 | ) | |||||||||||
Total Net Increase (Decrease) in Net Assets | 439,878 | 369,012 | (20,853 | ) | (270,452 | ) | ||||||||||
Net Assets | ||||||||||||||||
Beginning of period | 1,204,132 | 835,120 | 644,190 | 914,642 | ||||||||||||
End of period | $ | 1,644,010 | $ | 1,204,132 | $ | 623,337 | $ | 644,190 | ||||||||
Undistributed (over distributed) net investment income included in net assets | $ | 941 | $ | 603 | $ | 581 | $ | 125 |
301
Table of Contents
Equity Q Fund | International Fund | Fixed Income I Fund | Fixed Income III Fund | |||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||
$ | 18,255 | $ | 18,044 | $ | 38,177 | $ | 28,592 | $ | 62,804 | $ | 43,832 | $ | 32,577 | $ | 18,995 | |||||||||||||||
119,053 | 121,712 | 323,633 | 151,503 | (15,439 | ) | (1,233 | ) | (6,743 | ) | 2,429 | ||||||||||||||||||||
86,596 | 919 | 76,974 | 76,185 | 18,982 | (32,571 | ) | 11,235 | (13,873 | ) | |||||||||||||||||||||
223,904 | 140,675 | 438,784 | 256,280 | 66,347 | 10,028 | 37,069 | 7,551 | |||||||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
(474 | ) | (492 | ) | (687 | ) | (681 | ) | (1,333 | ) | (1,004 | ) | (398 | ) | (255 | ) | |||||||||||||||
(12,725 | ) | (13,322 | ) | (21,365 | ) | (20,055 | ) | (36,219 | ) | (28,735 | ) | (28,003 | ) | (16,744 | ) | |||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
(4,668 | ) | (4,330 | ) | (12,155 | ) | (10,709 | ) | (23,717 | ) | (12,901 | ) | (2,633 | ) | (720 | ) | |||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
(1,148 | ) | — | — | — | — | (691 | ) | (27 | ) | (62 | ) | |||||||||||||||||||
(25,033 | ) | — | — | — | — | (18,576 | ) | (1,689 | ) | (3,882 | ) | |||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||
(8,385 | ) | — | — | — | — | (7,263 | ) | (129 | ) | — | ||||||||||||||||||||
(52,433 | ) | (18,144 | ) | (34,207 | ) | (31,445 | ) | (61,269 | ) | (69,170 | ) | (32,879 | ) | (21,663 | ) | |||||||||||||||
86,706 | (132,081 | ) | (310,853 | ) | 88,868 | 189,401 | 211,492 | 246,305 | 155,080 | |||||||||||||||||||||
258,177 | (9,550 | ) | 93,724 | 313,703 | 194,479 | 152,350 | 250,495 | 140,968 | ||||||||||||||||||||||
1,393,662 | 1,403,212 | 1,756,469 | 1,442,766 | 1,217,322 | 1,064,972 | 610,423 | 469,455 | |||||||||||||||||||||||
$ | 1,651,839 | $ | 1,393,662 | $ | 1,850,193 | $ | 1,756,469 | $ | 1,411,801 | $ | 1,217,322 | $ | 860,918 | $ | 610,423 | |||||||||||||||
$ | 1,181 | $ | 790 | $ | 39,576 | $ | 21,985 | $ | 5,612 | $ | 3,940 | $ | 3,798 | $ | 2,438 |
See accompanying notes which are an integral part of the financial statements.
302
Table of Contents
Russell Investment Company
Institutional Funds
Statements of Changes in Net Assets — For the Fiscal Years Ended October 31,
Amounts in thousands | Emerging Markets Fund | |||||||
2006 | 2005 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 10,510 | $ | 9,257 | ||||
Net realized gain (loss) | 160,254 | 102,118 | ||||||
Net change in unrealized appreciation (depreciation) | 113,960 | 102,396 | ||||||
Net increase (decrease) in net assets from operations | 284,724 | 213,771 | ||||||
Distributions | ||||||||
From net investment income | ||||||||
Class C | (580 | ) | (83 | ) | ||||
Class E | (442 | ) | (194 | ) | ||||
Class I | — | — | ||||||
Class S | (20,081 | ) | (9,858 | ) | ||||
Class Y | — | — | ||||||
From net realized gain | ||||||||
Class C | (887 | ) | — | |||||
Class E | (487 | ) | — | |||||
Class I | — | — | ||||||
Class S | (20,087 | ) | — | |||||
Class Y | — | — | ||||||
Net decrease in net assets from distributions | (42,564 | ) | (10,135 | ) | ||||
Share Transactions | ||||||||
Net increase (decrease)in net assets from share transactions | 75,860 | 59,004 | ||||||
Total Net Increase | ||||||||
(Decrease) in Net Assets | 318,020 | 262,640 | ||||||
Net Assets | ||||||||
Beginning of period | 846,902 | 584,262 | ||||||
End of period | $ | 1,164,922 | $ | 846,902 | ||||
Undistributed (overdistributed) net investment income included in net assets | $ | (7,191 | ) | $ | 4,215 |
303
Table of Contents
Real Estate Securities Fund | Short Duration Bond Fund | Select Growth Fund | Select Value Fund | ||||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||||||||
$ | 24,653 | $ | 27,104 | $ | 42,526 | $ | 31,923 | $ | (147 | ) | $ | 43 | $ | 4,112 | $ | 3,268 | |||||||||||||
169,551 | 149,115 | (7,206 | ) | (8,752 | ) | 6,754 | 7,903 | 29,157 | 25,574 | ||||||||||||||||||||
380,628 | 62,485 | 8,551 | (17,447 | ) | 3,535 | 6,530 | 31,000 | 9,493 | |||||||||||||||||||||
574,832 | 238,704 | 43,871 | 5,724 | 10,142 | 14,476 | 64,269 | 38,335 | ||||||||||||||||||||||
(699 | ) | (700 | ) | (655 | ) | (523 | ) | — | — | (49 | ) | (18 | ) | ||||||||||||||||
(630 | ) | (596 | ) | (882 | ) | (558 | ) | — | — | (88 | ) | (72 | ) | ||||||||||||||||
— | — | — | — | (44 | ) | — | (1,579 | ) | (1,393 | ) | |||||||||||||||||||
(24,741 | ) | (25,047 | ) | (40,141 | ) | (29,494 | ) | — | — | (2,401 | ) | (1,866 | ) | ||||||||||||||||
— | — | — | — | — | — | — | — | ||||||||||||||||||||||
(8,834 | ) | (5,310 | ) | — | (24 | ) | — | — | (1,230 | ) | (14 | ) | |||||||||||||||||
(4,267 | ) | (2,607 | ) | — | (16 | ) | — | — | (494 | ) | (8 | ) | |||||||||||||||||
— | — | — | — | — | — | (7,528 | ) | (83 | ) | ||||||||||||||||||||
(150,805 | ) | (98,198 | ) | — | (767 | ) | — | — | (11,306 | ) | (145 | ) | |||||||||||||||||
— | — | — | — | — | — | — | — | ||||||||||||||||||||||
(189,976 | ) | (132,458 | ) | (41,678 | ) | (31,382 | ) | (44 | ) | — | (24,675 | ) | (3,599 | ) | |||||||||||||||
132,283 | 187,997 | (60,187 | ) | 42,298 | (13,198 | ) | 44,098 | 18,217 | 27,540 | ||||||||||||||||||||
517,139 | 294,243 | (57,994 | ) | 16,640 | (3,100 | ) | 58,574 | 57,811 | 62,276 | ||||||||||||||||||||
1,556,281 | 1,262,038 | 1,213,580 | 1,196,940 | 181,840 | 123,266 | 364,308 | 302,032 | ||||||||||||||||||||||
$ | 2,073,420 | $ | 1,556,281 | $ | 1,155,586 | $ | 1,213,580 | $ | 178,740 | $ | 181,840 | $ | 422,119 | $ | 364,308 | ||||||||||||||
$ | 1,960 | $ | 1,374 | $ | 4,238 | $ | 3,335 | $ | 1 | $ | 43 | $ | 69 | $ | 74 |
304
Table of Contents
Institutional Funds
Financial Highlights — For the Fiscal Years Ended
For a Share Outstanding Throughout Each Period.
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | |||||||||
Equity I Fund | |||||||||||||||
Class E | |||||||||||||||
October 31, 2006 | 30.81 | .25 | 3.96 | 4.21 | (.24) | (1.27 | ) | — | |||||||
October 31, 2005 | 27.56 | .25 | 3.24 | 3.49 | (.24) | — | — | ||||||||
October 31, 2004 | 25.75 | .16 | 1.82 | 1.98 | (.17) | — | — | ||||||||
October 31, 2003 | 21.46 | .15 | 4.28 | 4.43 | (.14) | — | — | ||||||||
October 31, 2002 | 25.25 | .12 | (3.69) | (3.57) | (.16) | — | (0.06) | ||||||||
Class I | |||||||||||||||
October 31, 2006 | 30.79 | .32 | 3.96 | 4.28 | (.31) | (1.27 | ) | — | |||||||
October 31, 2005 | 27.54 | .32 | 3.24 | 3.56 | (.31) | — | — | ||||||||
October 31, 2004 | 25.72 | .23 | 1.82 | 2.05 | (.23) | — | — | ||||||||
October 31, 2003 | 21.44 | .21 | 4.26 | 4.47 | (.19) | — | — | ||||||||
October 31, 2002 | 25.23 | .19 | (3.70) | (3.51) | (.20) | — | (0.08) | ||||||||
Class Y | |||||||||||||||
October 31, 2006 | 30.77 | .34 | 3.98 | 4.32 | (.33) | (1.27 | ) | — | |||||||
October 31, 2005 | 27.53 | .31 | 3.26 | 3.57 | (.33) | — | — | ||||||||
October 31, 2004 | 25.72 | .25 | 1.81 | 2.06 | (.25) | — | — | ||||||||
October 31, 2003 | 21.43 | .23 | 4.27 | 4.50 | (.21) | — | — | ||||||||
October 31, 2002 | 25.24 | .20 | (3.71) | (3.51) | (.22) | — | (0.08) | ||||||||
Equity II Fund | |||||||||||||||
Class E | |||||||||||||||
October 31, 2006 | 38.43 | .02 | 5.76 | 5.78 | — | (10.05 | ) | — | |||||||
October 31, 2005 | 39.28 | (.04) | 4.44 | 4.40 | (.06) | (5.19 | ) | — | |||||||
October 31, 2004 | 36.12 | .04 | 3.12 | 3.16 | — | — | — | ||||||||
October 31, 2003 | 25.54 | .01 | 10.65 | 10.66 | (.08) | — | — | ||||||||
October 31, 2002 | 28.24 | .02 | (2.65) | (2.63) | (.07) | — | — | ||||||||
Class I | |||||||||||||||
October 31, 2006 | 38.57 | .09 | 5.79 | 5.88 | (.09) | (10.05 | ) | — | |||||||
October 31, 2005 | 39.39 | .04 | 4.45 | 4.49 | (.12) | (5.19 | ) | — | |||||||
October 31, 2004 | 36.19 | .10 | 3.15 | 3.25 | (.05) | — | — | ||||||||
October 31, 2003 | 25.59 | .06 | 10.66 | 10.72 | (.12) | — | — | ||||||||
October 31, 2002 | 28.29 | .08 | (2.65) | (2.57) | (.13) | — | — | ||||||||
Class Y | |||||||||||||||
October 31, 2006 | 38.58 | .12 | 5.79 | 5.91 | (.12) | (10.05 | ) | — | |||||||
October 31, 2005 | 39.41 | .07 | 4.45 | 4.52 | (.16) | (5.19 | ) | — | |||||||
October 31, 2004 | 36.22 | .14 | 3.14 | 3.28 | (.09) | — | — | ||||||||
October 31, 2003 | 25.61 | .10 | 10.67 | 10.77 | (.16) | — | — | ||||||||
October 31, 2002 | 28.32 | .12 | (2.65) | (2.53) | (.18) | — | — |
305
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(1.51) | 33.51 | 14.07 | 43,911 | .93 | .96 | .78 | 98.17 | |||||||
(.24) | 30.81 | 12.70 | 37,666 | .92 | .96 | .83 | 109.71 | |||||||
(.17) | 27.56 | 7.69 | 33,143 | .94 | .96 | .61 | 129.94 | |||||||
(.14) | 25.75 | 20.79 | 32,632 | .99 | .99 | .68 | 115.73 | |||||||
(.22) | 21.46 | (14.26) | 19,476 | .98 | .98 | .49 | 130.46 | |||||||
(1.58) | 33.49 | 14.34 | 1,095,931 | .71 | .73 | 1.01 | 98.17 | |||||||
(.31) | 30.79 | 12.97 | 825,172 | .69 | .73 | 1.06 | 109.71 | |||||||
(.23) | 27.54 | 7.99 | 697,537 | .71 | .72 | .84 | 129.94 | |||||||
(.19) | 25.72 | 21.02 | 580,055 | .75 | .75 | .92 | 115.73 | |||||||
(.28) | 21.44 | (14.04) | 588,901 | .74 | .74 | .74 | 130.46 | |||||||
(1.60) | 33.49 | 14.48 | 504,168 | .64 | .66 | 1.07 | 98.17 | |||||||
(.33) | 30.77 | 13.00 | 341,294 | .65 | .67 | 1.03 | 109.71 | |||||||
(.25) | 27.53 | 8.07 | 104,440 | .63 | .65 | .92 | 129.94 | |||||||
(.21) | 25.72 | 21.09 | 89,546 | .66 | .66 | 1.00 | 115.73 | |||||||
(.30) | 21.43 | (13.96) | 57,147 | .64 | .64 | .85 | 130.46 | |||||||
(10.05) | 34.16 | 17.91 | 39,987 | 1.11 | 1.14 | .07 | 154.76 | |||||||
(5.25) | 38.43 | 11.53 | 34,849 | 1.08 | 1.11 | (.09) | 156.39 | |||||||
— | 39.28 | 8.72 | 80,542 | 1.09 | 1.09 | .09 | 125.94 | |||||||
(.08) | 36.12 | 41.88 | 46,901 | 1.12 | 1.12 | .04 | 132.27 | |||||||
(.07) | 25.54 | (9.37) | 25,874 | 1.12 | 1.12 | .07 | 126.57 | |||||||
(10.14) | 34.31 | 18.17 | 471,745 | .91 | .94 | .27 | 154.76 | |||||||
(5.31) | 38.57 | 11.77 | 496,716 | .87 | .91 | .12 | 156.39 | |||||||
(.05) | 39.39 | 8.98 | 674,280 | .90 | .90 | .27 | 125.94 | |||||||
(.12) | 36.19 | 42.08 | 606,333 | .94 | .94 | .22 | 132.27 | |||||||
(.13) | 25.59 | (9.17) | 464,113 | .92 | .92 | .27 | 126.57 | |||||||
(10.17) | 34.32 | 18.31 | 111,605 | .82 | .85 | .36 | 154.76 | |||||||
(5.35) | 38.58 | 11.85 | 112,625 | .81 | .83 | .18 | 156.39 | |||||||
(.09) | 39.41 | 9.05 | 159,820 | .79 | .79 | .37 | 125.94 | |||||||
(.16) | 36.22 | 42.34 | 190,066 | .81 | .81 | .36 | 132.27 | |||||||
(.18) | 25.61 | (9.07) | 147,610 | .79 | .79 | .41 | 126.57 |
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||
Equity Q Fund | ||||||||||||||
Class E | ||||||||||||||
October 31, 2006 | 35.20 | .35 | 5.02 | 5.37 | (.35) | (.87) | — | |||||||
October 31, 2005 | 32.32 | .35 | 2.88 | 3.23 | (.35) | — | — | |||||||
October 31, 2004 | 30.10 | .23 | 2.24 | 2.47 | (.25) | — | — | |||||||
October 31, 2003 | 24.90 | .22 | 5.18 | 5.40 | (.20) | — | — | |||||||
October 31, 2002 | 29.75 | .17 | (4.81) | (4.64) | (.21) | — | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 35.20 | .44 | 5.03 | 5.47 | (.44) | (.87) | — | |||||||
October 31, 2005 | 32.32 | .44 | 2.88 | 3.32 | (.44) | — | — | |||||||
October 31, 2004 | 30.10 | .30 | 2.24 | 2.54 | (.32) | — | — | |||||||
October 31, 2003 | 24.89 | .27 | 5.19 | 5.46 | (.25) | — | — | |||||||
October 31, 2002 | 29.75 | .24 | (4.82) | (4.58) | (.28) | — | — | |||||||
Class Y | ||||||||||||||
October 31, 2006 | 35.20 | .46 | 5.02 | 5.48 | (.45) | (.87) | — | |||||||
October 31, 2005 | 32.32 | .45 | 2.88 | 3.33 | (.45) | — | — | |||||||
October 31, 2004 | 30.09 | .32 | 2.25 | 2.57 | (.34) | — | — | |||||||
October 31, 2003 | 24.89 | .30 | 5.17 | 5.47 | (.27) | — | — | |||||||
October 31, 2002 | 29.75 | .27 | (4.82) | (4.55) | (.31) | — | — | |||||||
International Fund | ||||||||||||||
Class E | ||||||||||||||
October 31, 2006 | 40.45 | .87 | 9.87 | 10.74 | (.68) | — | — | |||||||
October 31, 2005 | 35.15 | .57 | 5.41 | 5.98 | (.68) | — | — | |||||||
October 31, 2004 | 31.22 | .38 | 4.29 | 4.67 | (.74) | — | — | |||||||
October 31, 2003 | 24.71 | .30 | 6.59 | 6.89 | (.38) | — | — | |||||||
October 31, 2002 | 28.34 | .16 | (3.75) | (3.59) | (.04) | — | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 40.47 | 1.00 | 9.86 | 10.86 | (.78) | — | — | |||||||
October 31, 2005 | 35.16 | .68 | 5.39 | 6.07 | (.76) | — | — | |||||||
October 31, 2004 | 31.20 | .46 | 4.29 | 4.75 | (.79) | — | — | |||||||
October 31, 2003 | 24.74 | .36 | 6.53 | 6.89 | (.43) | — | — | |||||||
October 31, 2002 | 28.38 | .26 | (3.78) | (3.52) | (.12) | — | — | |||||||
Class Y | ||||||||||||||
October 31, 2006 | 40.47 | .92 | 9.96 | 10.88 | (.79) | — | — | |||||||
October 31, 2005 | 35.17 | .68 | 5.40 | 6.08 | (.78) | — | — | |||||||
October 31, 2004 | 31.21 | .45 | 4.33 | 4.78 | (.82) | — | — | |||||||
October 31, 2003 | 24.75 | .38 | 6.54 | 6.92 | (.46) | — | — | |||||||
October 31, 2002 | 28.42 | .32 | (3.83) | (3.51) | (.16) | — | — |
306
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(1.22) | 39.35 | 15.56 | 56,703 | .94(f) | .96 | 0.93 | 106.45 | |||||||
(.35) | 35.20 | 10.03 | 46,352 | .91 | .93 | 1.01 | 117.34 | |||||||
(.25) | 32.32 | 8.22 | 47,570 | .92 | .93 | .71 | 102.51 | |||||||
(.20) | 30.10 | 21.76 | 40,924 | .94 | .94 | .80 | 114.72 | |||||||
(.21) | 24.90 | (15.70) | 17,503 | .94 | .94 | .58 | 71.16 | |||||||
(1.31) | 39.36 | 15.87 | 1,201,844 | .70(g) | .72 | 1.18 | 106.45 | |||||||
(.44) | 35.20 | 10.30 | 1,009,002 | .66 | .69 | 1.26 | 117.34 | |||||||
(.32) | 32.32 | 8.46 | 1,018,806 | .69 | .69 | .94 | 102.51 | |||||||
(.25) | 30.10 | 22.04 | 822,548 | .72 | .72 | 1.02 | 114.72 | |||||||
(.28) | 24.89 | (15.50) | 854,495 | .70 | .70 | .82 | 71.16 | |||||||
(1.32) | 39.36 | 15.93 | 393,292 | .64(h) | .67 | 1.23 | 106.45 | |||||||
(.45) | 35.20 | 10.34 | 338,308 | .63 | .65 | 1.30 | 117.34 | |||||||
(.34) | 32.32 | 8.58 | 336,836 | .61 | .61 | 1.05 | 102.51 | |||||||
(.27) | 30.09 | 22.13 | 674,326 | .63 | .63 | 1.10 | 114.72 | |||||||
(.31) | 24.89 | (15.41) | 514,589 | .60 | .60 | .93 | 71.16 | |||||||
(.68) | 50.51 | 26.84 | 51,470 | 1.17 | 1.19 | 1.88 | 83.09 | |||||||
(.68) | 40.45 | 17.19 | 41,415 | 1.15 | 1.18 | 1.49 | 80.36 | |||||||
(.74) | 35.15 | 15.20 | 35,442 | 1.19 | 1.20 | 1.13 | 81.19 | |||||||
(.38) | 31.22 | 28.33 | 24,163 | 1.26 | 1.26 | 1.14 | 79.40 | |||||||
(.04) | 24.71 | (12.68) | 11,965 | 1.31 | 1.32 | .57 | 87.84 | |||||||
(.78) | 50.55 | 27.17 | 1,420,218 | .91 | .93 | 2.15 | 83.09 | |||||||
(.76) | 40.47 | 17.48 | 1,127,303 | .90 | .93 | 1.76 | 80.36 | |||||||
(.79) | 35.16 | 15.47 | 915,469 | .95 | .96 | 1.36 | 81.19 | |||||||
(.43) | 31.20 | 28.37 | 597,650 | 1.06 | 1.06 | 1.38 | 79.40 | |||||||
(.12) | 24.74 | (12.46) | 527,791 | 1.07 | 1.07 | .92 | 87.84 | |||||||
(.79) | 50.56 | 27.24 | 378,505 | .86 | .89 | 1.99 | 83.09 | |||||||
(.78) | 40.47 | 17.53 | 587,751 | .86 | .89 | 1.76 | 80.36 | |||||||
(.82) | 35.17 | 15.54 | 491,855 | .87 | .88 | 1.35 | 81.19 | |||||||
(.46) | 31.21 | 28.51 | 567,878 | .96 | .96 | 1.45 | 79.40 | |||||||
(.16) | 24.75 | (12.42) | 395,955 | .97 | .97 | 1.12 | 87.84 |
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||
Fixed Income I Fund | ||||||||||||||
Class E | ||||||||||||||
October 31, 2006 | 20.75 | .92 | .04 | .96 | (.89) | — | — | |||||||
October 31, 2005 | 21.88 | .74 | (.61) | .13 | (.73) | (.53) | — | |||||||
October 31, 2004 | 22.12 | .63 | .48 | 1.11 | (.69) | (.66) | — | |||||||
October 31, 2003 | 22.15 | .72 | .36 | 1.08 | (.67) | (.44) | — | |||||||
October 31, 2002 | 22.32 | .90 | .17 | 1.07 | (.97) | (.27) | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 20.75 | .97 | .05 | 1.02 | (.95) | — | — | |||||||
October 31, 2005 | 21.87 | .80 | (.61) | .19 | (.78) | (.53) | — | |||||||
October 31, 2004 | 22.11 | .68 | .49 | 1.17 | (.75) | (.66) | — | |||||||
October 31, 2003 | 22.15 | .78 | .35 | 1.13 | (.73) | (.44) | — | |||||||
October 31, 2002 | 22.32 | .96 | .17 | 1.13 | (1.03) | (.27) | — | |||||||
Class Y | ||||||||||||||
October 31, 2006 | 20.76 | .99 | .04 | 1.03 | (.96) | — | — | |||||||
October 31, 2005 | 21.88 | .80 | (.61) | .19 | (.78) | (.53) | — | |||||||
October 31, 2004 | 22.12 | .70 | .48 | 1.18 | (.76) | (.66) | — | |||||||
October 31, 2003 | 22.16 | .79 | .36 | 1.15 | (.75) | (.44) | — | |||||||
October 31, 2002 | 22.32 | .98 | .18 | 1.16 | (1.05) | (.27) | — | |||||||
Fixed Income III Fund | ||||||||||||||
Class E | ||||||||||||||
October 31, 2006 | 10.44 | .45 | .04 | .49 | (.42) | (.03) | — | |||||||
October 31, 2005 | 10.70 | .35 | (.21) | .14 | (.32) | (.08) | — | |||||||
October 31, 2004 | 10.67 | .28 | .31 | .59 | (.38) | (.18) | — | |||||||
October 31, 2003 | 10.11 | .38 | .52 | .90 | (.34) | — | — | |||||||
October 31, 2002 | 10.37 | .40 | (.05) | .35 | (.61) | — | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 10.43 | .47 | .03 | .50 | (.44) | (.03) | — | |||||||
October 31, 2005 | 10.69 | .38 | (.22) | .16 | (.34) | (.08) | — | |||||||
October 31, 2004 | 10.65 | .30 | .32 | .62 | (.40) | (.18) | — | |||||||
October 31, 2003 | 10.09 | .40 | .52 | .92 | (.36) | — | — | |||||||
October 31, 2002 | 10.36 | .42 | (.06) | .36 | (.63) | — | — | |||||||
Class Y | ||||||||||||||
October 31, 2006 | 10.43 | .64 | (.13) | .51 | (.45) | (.03) | — | |||||||
October 31, 2005 (1) | 10.74 | .14 | (.26) | (.12) | (.19) | — | — |
307
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(.89) | 20.82 | 4.79 | 31,504 | .64 | .67 | 4.45 | 125.38 | |||||||
(1.26) | 20.75 | .60 | 29,632 | .65 | .68 | 3.49 | 201.90 | |||||||
(1.35) | 21.88 | 5.22 | 27,515 | .65 | .66 | 2.88 | 153.79 | |||||||
(1.11) | 22.12 | 5.01 | 27,009 | .67 | .67 | 3.25 | 184.29 | |||||||
(1.24) | 22.15 | 5.10 | 27,576 | .64 | .66 | 4.17 | 165.28 | |||||||
(.95) | 20.82 | 5.06 | 829,914 | .40 | .42 | 4.70 | 125.38 | |||||||
(1.31) | 20.75 | .88 | 788,808 | .38 | .40 | 3.76 | 201.90 | |||||||
(1.41) | 21.87 | 5.52 | 752,229 | .39 | .40 | 3.15 | 153.79 | |||||||
(1.17) | 22.11 | 5.26 | 639,846 | .41 | .41 | 3.50 | 184.29 | |||||||
(1.30) | 22.15 | 5.38 | 713,210 | .38 | .38 | 4.42 | 165.28 | |||||||
(.96) | 20.83 | 5.11 | 550,383 | .35 | .38 | 4.77 | 125.38 | |||||||
(1.31) | 20.76 | .91 | 398,882 | .35 | .37 | 3.81 | 201.90 | |||||||
(1.42) | 21.88 | 5.58 | 285,228 | .33 | .34 | 3.18 | 153.79 | |||||||
(1.19) | 22.12 | 5.33 | 399,601 | .35 | .35 | 3.53 | 184.29 | |||||||
(1.32) | 22.16 | 5.50 | 506,495 | .31 | .31 | 4.45 | 165.28 | |||||||
(.45) | 10.48 | 4.81 | 15,119 | .92 | .96 | 4.27 | 270.24 | |||||||
(.40) | 10.44 | 1.37 | 9,268 | .93 | .95 | 3.32 | 197.66 | |||||||
(.56) | 10.70 | 5.65 | 7,489 | .96 | .96 | 2.64 | 195.68 | |||||||
(.34) | 10.67 | 9.05 | 6,481 | 1.00 | 1.00 | 3.61 | 266.11 | |||||||
(.61) | 10.11 | 3.61 | 5,912 | .97 | .98 | 4.00 | 231.09 | |||||||
(.47) | 10.46 | 4.95 | 744,559 | .70 | .73 | 4.51 | 270.24 | |||||||
(.42) | 10.43 | 1.65 | 560,896 | .69 | .71 | 3.55 | 197.66 | |||||||
(.58) | 10.69 | 5.99 | 461,966 | .72 | .72 | 2.85 | 195.68 | |||||||
(.36) | 10.65 | 9.27 | 297,726 | .78 | .78 | 3.83 | 266.11 | |||||||
(.63) | 10.09 | 3.84 | 306,550 | .76 | .76 | 4.22 | 231.09 | |||||||
(.48) | 10.46 | 5.03 | 101,240 | .63 | .67 | 4.60 | 270.24 | |||||||
(.19) | 10.43 | (1.15) | 40,259 | .64 | .67 | 3.74 | 197.66 |
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||
Emerging Markets Fund | ||||||||||||||
Class C | ||||||||||||||
October 31, 2006 | 16.73 | .01 | 5.14 | 5.15 | (.28) | (.43) | — | |||||||
October 31, 2005 | 12.52 | .04 | 4.22 | 4.26 | (.05) | — | — | |||||||
October 31, 2004 | 10.68 | —(d) | 2.08 | 2.08 | (.24) | — | — | |||||||
October 31, 2003 | 7.22 | .02 | 3.44 | 3.46 | — | — | — | |||||||
October 31, 2002 | 6.89 | (.09) | .42 | .33 | — | — | — | |||||||
Class E | ||||||||||||||
October 31, 2006 | 17.25 | .17 | 5.29 | 5.46 | (.39) | (.43) | — | |||||||
October 31, 2005 | 12.93 | .16 | 4.34 | 4.50 | (.18) | — | — | |||||||
October 31, 2004 | 10.98 | .09 | 2.15 | 2.24 | (.29) | — | — | |||||||
October 31, 2003 | 7.41 | .09 | 3.49 | 3.58 | (.01) | — | — | |||||||
October 31, 2002 | 7.01 | (.02) | .42 | .40 | — | — | — | |||||||
Class S | ||||||||||||||
October 31, 2006 | 17.25 | .21 | 5.31 | 5.52 | (.43) | (.43) | — | |||||||
October 31, 2005 | 12.94 | .20 | 4.34 | 4.54 | (.23) | — | — | |||||||
October 31, 2004 | 10.98 | .12 | 2.15 | 2.27 | (.31) | — | — | |||||||
October 31, 2003 | 7.43 | .11 | 3.48 | 3.59 | (.04) | — | — | |||||||
October 31, 2002 | 7.05 | —(d) | .40 | .40 | (.02) | — | — | |||||||
Real Estate Securities Fund | ||||||||||||||
Class C | ||||||||||||||
October 31, 2006 | 46.08 | .22 | 15.14 | 15.36 | (.35) | (4.98) | — | |||||||
October 31, 2005 | 43.10 | .42 | 6.66 | 7.08 | (.43) | (3.67) | — | |||||||
October 31, 2004 | 33.94 | .46 | 9.92 | 10.38 | (1.21) | (.01) | — | |||||||
October 31, 2003 | 26.52 | 1.11 | 7.53 | 8.64 | (1.11) | (.11) | — | |||||||
October 31, 2002 | 26.97 | 1.07 | (.01) | 1.06 | (1.51) | — | — | |||||||
Class E | ||||||||||||||
October 31, 2006 | 46.62 | .59 | 15.36 | 15.95 | (.64) | (4.98) | — |
308
Table of Contents
October 31, 2005 | 43.55 | .76 | 6.74 | 7.50 | (.76) | (3.67) | — | |||||||
October 31, 2004 | 34.24 | .75 | 10.04 | 10.79 | (1.47) | (.01) | — | |||||||
October 31, 2003 | 26.72 | 1.34 | 7.60 | 8.94 | (1.31) | (.11) | — | |||||||
October 31, 2002 | 27.14 | 1.32 | (.06) | 1.26 | (1.68) | — | — | |||||||
Class S | ||||||||||||||
October 31, 2006 | 47.03 | .73 | 15.51 | 16.24 | (.76) | (4.98) | — | |||||||
October 31, 2005 | 43.90 | .88 | 6.79 | 7.67 | (.87) | (3.67) | — | |||||||
October 31, 2004 | 34.51 | .87 | 10.09 | 10.96 | (1.56) | (.01) | — | |||||||
October 31, 2003 | 26.89 | 1.42 | 7.67 | 9.09 | (1.36) | (.11) | — | |||||||
October 31, 2002 | 27.31 | 1.41 | (.06) | 1.35 | (1.77) | — | — |
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(.71) | 21.17 | 31.63 | 44,977 | 2.68 | 2.68 | .07 | 68.52 | |||||||
(.05) | 16.73 | 33.98 | 33,961 | 2.74 | 2.76 | .29 | 71.86 | |||||||
(.24) | 12.52 | 20.04 | 20,467 | 2.83 | 2.87 | .02 | 82.02 | |||||||
— | 10.68 | 47.58 | 12,306 | 3.09 | 3.09 | .19 | 95.13 | |||||||
— | 7.22 | 4.94 | 5,194 | 3.12 | 3.12 | (1.08) | 90.21 | |||||||
(.82) | 21.89 | 32.64 | 27,862 | 1.93 | 1.93 | .83 | 68.52 | |||||||
(.18) | 17.25 | 34.94 | 18,855 | 1.99 | 2.01 | 1.02 | 71.86 | |||||||
(.29) | 12.93 | 20.88 | 14,169 | 2.07 | 2.12 | .75 | 82.02 | |||||||
(.01) | 10.98 | 48.39 | 9,598 | 2.36 | 2.37 | 1.02 | 95.13 | |||||||
— | 7.41 | 5.71 | 6,478 | 2.38 | 2.38 | (.29) | 90.21 | |||||||
(.86) | 21.91 | 33.04 | 1,092,083 | 1.68 | 1.68 | 1.06 | 68.52 | |||||||
(.23) | 17.25 | 35.27 | 794,086 | 1.73 | 1.76 | 1.30 | 71.86 | |||||||
(.31) | 12.94 | 21.22 | 549,626 | 1.83 | 1.87 | 1.00 | 82.02 | |||||||
(.04) | 10.98 | 48.27 | 386,560 | 2.11 | 2.11 | 1.30 | 95.13 | |||||||
(.02) | 7.43 | 5.91 | 263,563 | 2.14 | 2.14 | (.02) | 90.21 | |||||||
(5.33) | 56.11 | 36.63 | 110,287 | 2.07 | 2.08 | .45 | 48.64 | |||||||
(4.10) | 46.08 | 17.22 | 81,876 | 2.10 | 2.10 | .95 | 63.95 | |||||||
(1.22) | 43.10 | 30.97 | 61,089 | 2.12 | 2.12 | 1.20 | 38.04 | |||||||
(1.22) | 33.94 | 33.23 | 32,784 | 2.20 | 2.30 | 3.67 | 46.09 | |||||||
(1.51) | 26.52 | 3.56 | 15,712 | 2.19 | 2.59 | 3.74 | 67.70 | |||||||
(5.62) | 56.95 | 37.65 | 59,768 | 1.32 | 1.32 | 1.19 | 48.64 | |||||||
(4.43) | 46.62 | 18.09 | 40,296 | 1.35 | 1.35 | 1.71 | 63.95 | |||||||
(1.48) | 43.55 | 32.00 | 29,436 | 1.37 | 1.37 | 1.95 | 38.04 | |||||||
(1.42) | 34.24 | 34.21 | 16,651 | 1.43 | 1.62 | 4.46 | 46.09 | |||||||
(1.68) | 26.72 | 4.27 | 10,661 | 1.46 | 1.82 | 4.54 | 67.70 | |||||||
(5.74) | 57.53 | 38.04 | 1,903,365 | 1.07 | 1.07 | 1.46 | 48.64 | |||||||
(4.54) | 47.03 | 18.35 | 1,434,109 | 1.10 | 1.10 | 1.95 | 63.95 | |||||||
(1.57) | 43.90 | 32.30 | 1,171,513 | 1.11 | 1.11 | 2.23 | 38.04 | |||||||
(1.47) | 34.51 | 34.58 | 830,448 | 1.18 | 1.18 | 4.66 | 46.09 | |||||||
(1.77) | 26.89 | 4.55 | 598,133 | 1.19 | 1.19 | 4.82 | 67.70 |
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||
Short Duration Bond Fund | ||||||||||||||
Class C | ||||||||||||||
October 31, 2006 | 18.63 | .50 | .03 | .53 | (.50) | — | — | |||||||
October 31, 2005 | 19.04 | .31 | (.40) | (.09) | (.31) | (.01) | — | |||||||
October 31, 2004 | 19.01 | .19 | (.01) | .18 | (.15) | — | — | |||||||
October 31, 2003 | 18.98 | .31 | .06 | .37 | (.34) | — | — | |||||||
October 31, 2002 | 19.01 | .56 | .13 | .69 | (.72) | — | — | |||||||
Class E | ||||||||||||||
October 31, 2006 | 18.70 | .65 | .03 | .68 | (.65) | — | — | |||||||
October 31, 2005 | 19.10 | .46 | (.41) | .05 | (.44) | (.01) | — | |||||||
October 31, 2004 | 19.08 | .34 | (.01) | .33 | (.31) | — | — | |||||||
October 31, 2003 | 19.04 | .48 | .03 | .51 | (.47) | — | — | |||||||
October 31, 2002 | 19.02 | .77 | .06 | .83 | (.81) | — | — | |||||||
Class S | ||||||||||||||
October 31, 2006 | 18.67 | .69 | .03 | .72 | (.69) | — | — | |||||||
October 31, 2005 | 19.07 | .51 | (.41) | .10 | (.49) | (.01) | — | |||||||
October 31, 2004 | 19.05 | .38 | (.01) | .37 | (.35) | — | — | |||||||
October 31, 2003 | 19.01 | .52 | .03 | .55 | (.51) | — | — | |||||||
October 31, 2002 | 18.99 | .80 | .08 | .88 | (.86) | — | — | |||||||
Select Growth Fund | ||||||||||||||
Class C | ||||||||||||||
October 31, 2006 | 7.45 | (.09) | .48 | .39 | — | — | — | |||||||
October 31, 2005 | 6.85 | (.08) | .68 | .60 | — | — | — |
309
Table of Contents
October 31, 2004 | 6.85 | (.11) | .11 | — | — | — | — | |||||||
October 31, 2003 | 5.23 | (.09) | 1.71 | 1.62 | — | — | — | |||||||
October 31, 2002 | 6.65 | (.10) | (1.32) | (1.42) | — | — | — | |||||||
Class E | ||||||||||||||
October 31, 2006 | 7.76 | (.03) | .52 | .49 | — | — | — | |||||||
October 31, 2005 | 7.08 | (.01) | .69 | .68 | — | — | — | |||||||
October 31, 2004 | 7.03 | (.05) | .10 | .05 | — | — | — | |||||||
October 31, 2003 | 5.31 | (.04) | 1.76 | 1.72 | — | — | — | |||||||
October 31, 2002 | 6.68 | (.04) | (1.33) | (1.37) | — | — | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 7.91 | .01 | .52 | .53 | —(d) | — | — | |||||||
October 31, 2005 | 7.19 | .01 | .71 | .72 | — | — | — | |||||||
October 31, 2004 | 7.10 | (.02) | .11 | .09 | — | — | — | |||||||
October 31, 2003 | 5.35 | (.02) | 1.77 | 1.75 | — | — | — | |||||||
October 31, 2002 | 6.71 | (.02) | (1.34) | (1.36) | — | — | — | |||||||
Class S | ||||||||||||||
October 31, 2006 | 7.87 | (.01) | .52 | .51 | — | — | — | |||||||
October 31, 2005 | 7.15 | —(d) | .72 | .72 | — | — | — | |||||||
October 31, 2004 | 7.08 | (.03) | .10 | .07 | — | — | — | |||||||
October 31, 2003 | 5.34 | (.02) | 1.76 | 1.74 | — | — | — | |||||||
October 31, 2002 | 6.71 | (.02) | (1.35) | (1.37) | — | — | — |
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(.50) | 18.66 | 2.89 | 21,840 | 1.65 | 1.66 | 2.71 | 111.57 | |||||||
(.32) | 18.63 | (.50) | 30,290 | 1.65 | 1.66 | 1.65 | 202.53 | |||||||
(.15) | 19.04 | .97 | 38,427 | 1.63 | 1.66 | 1.00 | 131.57 | |||||||
(.34) | 19.01 | 1.97 | 41,644 | 1.56 | 1.72 | 1.63 | 187.92 | |||||||
(.72) | 18.98 | 3.73 | 16,294 | 1.52 | 1.70 | 3.08 | 163.86 | |||||||
(.65) | 18.73 | 3.69 | 26,800 | .90 | .91 | 3.49 | 111.57 | |||||||
(.45) | 18.70 | .25 | 24,851 | .90 | .91 | 2.43 | 202.53 | |||||||
(.31) | 19.10 | 1.74 | 23,181 | .88 | .91 | 1.76 | 131.57 | |||||||
(.47) | 19.08 | 2.70 | 20,274 | .80 | .97 | 2.52 | 187.92 | |||||||
(.81) | 19.04 | 4.53 | 17,516 | .77 | .96 | 4.04 | 163.86 | |||||||
(.69) | 18.70 | 3.95 | 1,106,946 | .65 | .65 | 3.73 | 111.57 | |||||||
(.50) | 18.67 | .51 | 1,158,439 | .65 | .66 | 2.67 | 202.53 | |||||||
(.35) | 19.07 | 1.98 | 1,135,332 | .63 | .66 | 2.01 | 131.57 | |||||||
(.51) | 19.05 | 2.95 | 958,064 | .56 | .72 | 2.70 | 187.92 | |||||||
(.86) | 19.01 | 4.81 | 599,795 | .52 | .71 | 4.26 | 163.86 | |||||||
— | 7.84 | 5.23 | 9,764 | 2.22 | 2.27 | (1.20) | 148.35 | |||||||
— | 7.45 | 8.76 | 8,149 | 2.23 | 2.32 | (1.15) | 127.68 | |||||||
— | 6.85 | (.15) | 5,942 | 2.25 | 2.50 | (1.53) | 134.00 | |||||||
— | 6.85 | 31.17 | 3,265 | 2.20 | 2.74 | (1.57) | 149.76 | |||||||
— | 5.23 | (21.35) | 1,341 | 2.11 | 2.82 | (1.53) | 212.37 | |||||||
— | 8.25 | 6.31 | 6,590 | 1.36 | 1.42 | (.34) | 148.35 | |||||||
— | 7.76 | 9.60 | 4,255 | 1.28 | 1.40 | (.15) | 127.68 | |||||||
— | 7.08 | .71 | 5,749 | 1.36 | 1.54 | (.65) | 134.00 | |||||||
— | 7.03 | 32.39 | 4,865 | 1.26 | 1.79 | (.62) | 149.76 | |||||||
— | 5.31 | (20.51) | 2,814 | 1.16 | 1.87 | (.58) | 212.37 | |||||||
— | 8.44 | 6.75 | 90,953 | .95 | 1.13 | .07 | 148.35 | |||||||
— | 7.91 | 10.17 | 112,112 | .92 | 1.08 | .12 | 127.68 | |||||||
— | 7.19 | 1.13 | 60,006 | .95 | 1.20 | (.23) | 134.00 | |||||||
— | 7.10 | 32.71 | 32,003 | .93 | 1.58 | (.31) | 149.76 | |||||||
— | 5.35 | (20.27) | 18,150 | .89 | 1.65 | (.31) | 212.37 | |||||||
— | 8.38 | 6.48 | 71,433 | 1.15 | 1.21 | (.13) | 148.35 | |||||||
— | 7.87 | 10.07 | 57,324 | 1.06 | 1.18 | .04 | 127.68 | |||||||
— | 7.15 | .99 | 51,569 | 1.09 | 1.27 | (.38) | 134.00 | |||||||
— | 7.08 | 32.58 | 42,421 | 1.03 | 1.56 | (.40) | 149.76 | |||||||
— | 5.34 | (20.42) | 24,389 | .97 | 1.68 | (.39) | 212.37 |
310
Table of Contents
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||
Select Value Fund | ||||||||||||||
Class C | ||||||||||||||
October 31, 2006 | 11.27 | .01 | 1.83 | 1.84 | (.03) | (.64) | — | |||||||
October 31, 2005 | 10.15 | (.02) | 1.16 | 1.14 | (.01) | (.01) | — | |||||||
October 31, 2004 | 8.97 | (.03) | 1.22 | 1.19 | (.01) | — | — | |||||||
October 31, 2003 | 7.41 | (.01) | 1.58 | 1.57 | (.01) | — | — | |||||||
October 31, 2002 | 8.51 | (.02) | (1.07) | (1.09) | (.01) | — | — | |||||||
Class E | ||||||||||||||
October 31, 2006 | 11.43 | .11 | 1.87 | 1.98 | (.11) | (.64) | — | |||||||
October 31, 2005 | 10.28 | .09 | 1.16 | 1.25 | (.09) | (.01) | — | |||||||
October 31, 2004 | 9.05 | .05 | 1.23 | 1.28 | (.05) | — | — | |||||||
October 31, 2003 | 7.46 | .06 | 1.58 | 1.64 | (.05) | — | — | |||||||
October 31, 2002 | 8.53 | .06 | (1.07) | (1.01) | (.06) | — | — | |||||||
Class I | ||||||||||||||
October 31, 2006 | 11.46 | .15 | 1.87 | 2.02 | (.15) | (.64) | — | |||||||
October 31, 2005 | 10.30 | .13 | 1.17 | 1.30 | (.13) | (.01) | — | |||||||
October 31, 2004 | 9.07 | .10 | 1.22 | 1.32 | (.09) | — | — | |||||||
October 31, 2003 | 7.46 | .08 | 1.61 | 1.69 | (.08) | — | — | |||||||
October 31, 2002 | 8.54 | .08 | (1.07) | (.99) | (.09) | — | — | |||||||
Class S | ||||||||||||||
October 31, 2006 | 11.44 | .13 | 1.87 | 2.00 | (.13) | (.64) | — | |||||||
October 31, 2005 | 10.29 | .11 | 1.16 | 1.27 | (.11) | (.01) | — | |||||||
October 31, 2004 | 9.05 | .08 | 1.24 | 1.32 | (.08) | — | — | |||||||
October 31, 2003 | 7.45 | .07 | 1.60 | 1.67 | (.07) | — | — | |||||||
October 31, 2002 | 8.53 | .07 | (1.07) | (1.00) | (.08) | — | — |
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return (%)(b) | $ Net Assets, End of Period (000) | % Ratio to Average Net Assets, Net(c)(e) | % Ratio of Expenses to Average Net Assets, Gross(c) | % Ratio of Net Investment Income to Average Net Assets(c)(e) | % Portfolio Turnover Rate(b) | |||||||
(.67) | 12.44 | 17.01 | 26,168 | 2.11 | 2.11 | .08 | 86.60 | |||||||
(.02) | 11.27 | 11.23 | 21,228 | 2.18 | 2.20 | (.18) | 84.74 | |||||||
(.01) | 10.15 | 13.24 | 16,834 | 2.25 | 2.32 | (.31) | 96.07 | |||||||
(.01) | 8.97 | 21.19 | 9,972 | 2.15 | 2.42 | (.12) | 105.71 | |||||||
(.01) | 7.41 | (12.82) | 2,061 | 2.00 | 2.40 | (.27) | 92.95 | |||||||
(.75) | 12.66 | 18.15 | 10,871 | 1.27 | 1.27 | .91 | 86.60 | |||||||
(.10) | 11.43 | 12.14 | 8,770 | 1.25 | 1.30 | .78 | 84.74 | |||||||
(.05) | 10.28 | 14.31 | 9,167 | 1.39 | 1.39 | .55 | 96.07 | |||||||
(.05) | 9.05 | 22.01 | 7,778 | 1.21 | 1.48 | .77 | 105.71 | |||||||
(.06) | 7.46 | (11.86) | 3,314 | 1.04 | 1.43 | .70 | 92.95 | |||||||
(.79) | 12.69 | 18.47 | 131,494 | .94 | .94 | 1.26 | 86.60 | |||||||
(.14) | 11.46 | 12.63 | 135,759 | .86 | .91 | 1.14 | 84.74 | |||||||
(.09) | 10.30 | 14.77 | 102,396 | .95 | .95 | 1.00 | 96.07 | |||||||
(.08) | 9.07 | 22.60 | 74,600 | .90 | 1.23 | 1.12 | 105.71 | |||||||
(.09) | 7.46 | (11.72) | 35,169 | .79 | 1.22 | .95 | 92.95 | |||||||
(.77) | 12.67 | 18.32 | 253,586 | 1.09 | 1.10 | 1.09 | 86.60 | |||||||
(.12) | 11.44 | 12.36 | 198,550 | 1.07 | 1.10 | .95 | 84.74 | |||||||
(.08) | 10.29 | 14.61 | 173,635 | 1.10 | 1.10 | .84 | 96.07 | |||||||
(.07) | 9.05 | 22.53 | 128,383 | 1.01 | 1.28 | 1.03 | 105.71 | |||||||
(.08) | 7.45 | (11.78) | 31,806 | .87 | 1.27 | .86 | 92.95 |
See accompanying notes which are an integral part of the financial statements.
311
Table of Contents
Institutional Funds
Notes to Financial Highlights — October 31, 2006
(1) | For the period June 23, 2005 (commencement of operations) to October 31, 2005. |
(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 RIMCo as the investment adviser and transfer agent, and for certain funds custody credit arrangements. |
(f) | The annualized net expense ratio is .93% not including the dividends from securities sold short as contractually agreed by the Adviser. |
(g) | The annualized net expense ratio is .69% not including the dividends from securities sold short as contractually agreed by the Adviser. |
(h) | The annualized net expense ratio is .63% not including the dividends from securities sold short as contractually agreed by the Adviser. |
312
Table of Contents
Institutional Funds
Notes to Financial Statements — October 31, 2006
1. Organization
Russell Investment Company (the “Investment Company” or “RIC”) is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on eleven of these Funds. 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 an amended and restated master trust agreement dated August 19, 2002. 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.
On July 1, 2006, Frank Russell Investment Company changed its name to Russell Investment Company and Frank Russell Investment Management Company changed its name to Russell Investment Management Company (“RIMCo”).
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. Money market fund securities are priced using the amortized cost method of valuation, as are debt obligation securities maturing within 60 days at the time of purchase, 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 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 New York Stock Exchange, 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. |
313
Table of Contents
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 Fund’s 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 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. RIC 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. RIC 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. RIC 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Funds financial statement disclosure.
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. 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.
314
Table of Contents
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 or excise tax provision was required for the Funds.
In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund’s net assets and results of operations.
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 according to the following schedule:
Declared | Payable | Funds | ||
Quarterly | April, July, October and December | Equity I, | ||
Equity Q, | ||||
Real Estate Securities, | ||||
Short Duration Bond, | ||||
Fixed Income I, | ||||
Fixed Income III and Select Value Funds International, | ||||
Annually | Mid-December | Emerging Markets, | ||
Equity II and Select Growth Funds | ||||
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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by Russell Investment Management Company (“RIMCo” or “Adviser”). 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.
Class Allocation
The Funds presented herein offer the following classes of shares: Class C, Class E, Class I, Class S and Class Y. All share classes have identical voting, dividend, liquidation and other rights and the same terms and conditions. The separate classes of shares differ principally in the applicable distribution fees and shareholder servicing fees. Shareholders of each class bear certain expenses that pertain to that particular class. Realized and unrealized gains (losses), net investment income, and expenses with the exception of class level expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class.
315
Table of Contents
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 Funds’ 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 International Fund and Emerging Markets Fund may be subject to capital gains taxes and repatriation taxes imposed by certain countries in which they invest. The Funds have recorded a deferred tax liability in respect of the unrealized appreciation on foreign securities for potential capital gains and repatriation taxes at October 31, 2006. The accrual for capital gains and repatriation taxes is included in net unrealized appreciation (depreciation) on investments in the Statement of Asset and Liabilities for the Funds. The amounts related to capital gains taxes are included in net realized gain (loss) on investments in the Statements of Operations for the Funds.
Funds | Deferred Tax Liability | Capital Gains Taxes | ||||
International | $ | 10,672 | $ | 11,909 | ||
Emerging Markets | 1,303,228 | 1,117,018 |
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.
316
Table of Contents
Foreign Currency Exchange Contracts
In connection with portfolio purchases and sales of securities denominated in a foreign currency, certain Funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“contracts”). The International Fund may enter into foreign currency forward overlays on liquidity reserve balances. Additionally, from time to time the International, Emerging Markets, Short Duration Bond, Fixed Income I and Fixed Income III 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 October 31, 2006, are presented on the Schedule of Investments for the applicable 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 Fixed Income I Fund and Fixed Income III 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. At the period ended October 31, 2006, there were no unfunded loan commitments in the Fixed Income I Fund or Fixed Income III 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 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.
317
Table of Contents
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.
Futures Contracts
The Funds presented herein 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. As of October 31, 2006, included in the Statement of Assets and Liabilities, the International Fund had cash collateral balances of $3,630,264 and Fixed Income III Fund had cash collateral balances of $104,806 in connection with futures contracts purchased (sold).
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 Short Duration Bond, Fixed Income I, Fixed Income III and International Funds 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 a Fund engages in a swap, it exchanges its obligations to pay or rights to receive payments for the obligations or rights to receive payments of another party (i.e., an exchange of floating rate payments for fixed rate payments).
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 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 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 Fund’s custodian. To the extent that the Fund enters into swaps on other than a net basis,
318
Table of Contents
the amount maintained in a segregated account will be the full amount of the 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 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.
Short Sales
The Equity Q Fund may enter into short sale transactions. In a short sale, the seller sells a security that it does not own, typically a security borrowed from a broker or dealer. Because the seller remains liable to return the underlying security that it borrowed from the broker or dealer, the seller must purchase the security prior to the date on which delivery to the broker or dealer is required. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. The making of short sales exposes the Fund to the risk of liability for the market value of the security that is sold (the amount of which liability increases as the market value of the underlying security increases), in addition to the costs associated with establishing, maintaining and closing out the short position.
Although the Fund’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. The proceeds of the short sale will be retained as collateral in a segregated account for the broker’s benefit at the Fund’s custodian, to the extent necessary to meet margin requirements, until the short position is closed out. Until a Fund replaces a borrowed security in connection with a short sale, the Fund will: (a) maintain daily a segregated account, containing cash, cash equivalents, or liquid marketable securities, at such a level that the amount deposited in the segregated account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; or (b) otherwise cover its short position in accordance with positions taken by the staff of the SEC (e.g., taking an offsetting long position in the security sold short). As of October 31, 2006, $212,825,024 was held as collateral.
Investments in Emerging Markets
Investing in emerging markets may involve special risks and considerations for the Emerging Markets Fund and International 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 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.
Mortgage-Related and Other Asset-Backed Securities
The Fund may invest in mortgage or other asset-backed securities. Theses securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of some mortgage or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
319
Table of Contents
One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). Payments received for the IOs are included in interest income on the Statement of Operations. Because principal will not be received at the maturity of an IO, adjustments are made to the book value of the security on a daily basis until maturity. These adjustments are included in interest income on the Statement of Operations. Payments received for POs are treated as reductions to the cost and par value of the securities.
Inflation-Indexed Bonds
The Fund may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity.
3. Investment Transactions
Securities
During the period ended October 31, 2006, purchases and sales of investment securities (excluding US Government and Agency obligations, short-term investments, options, futures and repurchase agreements) were as follows:
Funds | Purchases | Sales | ||||
Equity I | $ | 1,544,730,298 | $ | 1,306,908,564 | ||
Equity II | 953,048,065 | 1,064,533,669 | ||||
Equity Q | 1,663,689,464 | 1,606,816,070 | ||||
International | 1,392,806,011 | 1,685,944,148 | ||||
Fixed Income I | 1,121,651,721 | 903,462,758 | ||||
Fixed Income III | 1,341,687,273 | 1,067,657,848 | ||||
Emerging Markets | $ | 708,055,661 | $ | 669,426,536 | ||
Real Estate Securities | 836,281,515 | 857,200,817 | ||||
Short Duration Bond | 559,999,439 | 621,526,376 | ||||
Select Growth | 256,873,072 | 266,151,384 | ||||
Select Value | 313,994,264 | 312,353,848 |
Purchases and sales of US Government and Agency obligations (excluding short-term investments, options, futures and repurchase agreements) were as follows:
Funds | Purchases | Sales | ||||
Fixed Income I | $ | 768,687,647 | $ | 749,593,487 | ||
Fixed Income III | 549,930,550 | 594,655,403 | ||||
Short Duration Bond | 395,895,466 | 434,294,615 |
Written Options Contracts
Transactions in written options contracts for the period ended October 31, 2006 for the following Funds were as follows:
International Fund | Fixed Income I Fund | |||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||
Outstanding October 31, 2005 | 21 | $ | 81,235 | 272 | $ | 121,622 | ||||||||
Opened | 1,165 | 5,681,901 | 1,662 | 665,037 | ||||||||||
Closed | (960 | ) | (4,721,170 | ) | (804 | ) | (404,891 | ) | ||||||
Expired | (12 | ) | (73,905 | ) | (556 | ) | (173,588 | ) | ||||||
Outstanding October 31, 2006 | 214 | $ | 968,061 | 574 | $ | 208,180 | ||||||||
320
Table of Contents
Fixed Income III Fund | Emerging Markets Fund | |||||||||||||
Number of Contracts | Premiums Received | Number of Contracts | Premiums Received | |||||||||||
Outstanding October 31, 2005 | 182 | $ | 174,564 | 286 | $ | 723,862 | ||||||||
Opened | 1,203 | 1,002,423 | 3,764 | 4,942,625 | ||||||||||
Closed | (556 | ) | (324,689 | ) | (3,424 | ) | (4,838,058 | ) | ||||||
Expired | (419 | ) | (197,989 | ) | — | — | ||||||||
Outstanding October 31, 2006 | 410 | $ | 654,309 | 626 | $ | 828,429 | ||||||||
Short Duration Bond Fund | |||||||
Number of Contracts | Premiums Received | ||||||
Outstanding October 31, 2005 | 160 | $ | 321,656 | ||||
Opened | 267 | 795,465 | |||||
Closed | (4 | ) | (69,050 | ) | |||
Expired | (8 | ) | (274,756 | ) | |||
Outstanding October 31, 2006 | 415 | $ | 773,315 | ||||
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 Bank and Trust Company (“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 Schedules 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 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 October 31, 2006, the non-cash collateral received for the securities on loan in the following funds was:
Funds | Non-Cash Collateral Value | Non-Cash Collateral Holding | |||
International | $ | 2,170,942 | Pool of US Government Securities |
4. Related Parties
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment Company. RIMCo is a wholly-owned subsidiary of Russell Investment Group (a subsidiary of The Northwestern Mutual Life Insurance Company). Russell Investment Group provides money manager evaluation services to RIMCo.
The Funds are permitted to invest their cash reserves (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses), and also may invest a portion of the collateral received from the Investment Company’s securities lending program in the Investment Company’s Money Market Fund (one of the Funds of the Investment Company not presented herein). As of October 31, 2006, $735,165,704 of the Money Market Fund’s net assets represents investment by the Funds presented herein, and $1,303,089,403 represents investment of other RIC Funds not presented herein.
321
Table of Contents
Effective August 1, 2006, the funds adopted new rules under the Investment Company Act of 1940 that addresses the ability of an investment company (“fund”) to acquire shares of another fund. As of this date, the Adviser has agreed to rebate back to the Funds, fees in the amount that was permitted to invest their cash reserves (cash awaiting investment and collateral received from the Securities Lending Program). The amounts are as follows:
Funds | Amount | ||
Equity I | $ | 32,418 | |
Equity II | 17,102 | ||
Equity Q | 13,030 | ||
International | 52,062 | ||
Fixed Income I | 44,599 | ||
Fixed Income III | 41,600 | ||
Emerging Markets | $ | 16,143 | |
Real Estate Securities | 26,316 | ||
Short Duration Bond | 19,010 | ||
Select Growth | 3,933 | ||
Select Value | 7,879 |
The advisory and administrative fees are based upon the average daily net assets of each Fund and the rates specified in the table below. The advisory and administrative fees are payable monthly and total $75,938,495 and $6,008,085.13 respectively, for the period ended October 31, 2006.
Funds | Annual Rate | |||||
Adviser | Administrator | |||||
Equity I | .55 | % | .05 | % | ||
Equity II | .70 | .05 | ||||
Equity Q | .55 | .05 | ||||
International | .70 | .05 | ||||
Fixed Income I | .25 | .05 | ||||
Fixed Income III | .50 | .05 | ||||
Emerging Markets | 1.15 | % | .05 | % | ||
Real Estate Securities | .80 | .05 | ||||
Short Duration Bond | .45 | .05 | ||||
Select Growth | .80 | .05 | ||||
Select Value | .70 | .05 |
For the Equity I, Equity II, Equity Q, International, Fixed Income I and Fixed Income III Funds, RIMCo has contractually agreed to waive 0.02% of its administrative fees. The total amount of the waiver for the period ended October 31, 2006 was $1,497,117.
For the Select Growth Fund, RIMCo has contractually agreed to waive, at least until February 28, 2007, up to the full amount of its transfer agency fees, administrative fees, and advisory fees to the extent that expenses for Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory or administrative fees is required for any class of shares of the Fund, advisory or administrative fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expense for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively. The total amount of the waiver for the period ended October 31, 2006 was $234,128. There were no contractual reimbursements for the period ended October 31, 2006
For the Select Value Fund, RIMCo has contractually agreed to waive, at least until February 28, 2007, up to the full amount of its transfer agency fees, administrative fees, and advisory fees to the extent that expenses for Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%, respectively, of the average daily net assets of each such class on an annual basis. If a waiver of advisory or administrative fees is required for any class of shares of the Fund, advisory or administrative fees will be waived equally across all classes of the Fund. This may result in a waiver amount that is greater than what is required to reduce total net operating expense for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%, respectively. There were no waivers or contractual reimbursements for the period ended October 31, 2006.
322
Table of Contents
The Adviser does not have the ability to recover amounts waived or reimbursed from previous periods.
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 Fund’s expenses. During the period ended October 31, 2006, the Fund’s custodian fees were reduced by the following amounts under these arrangements which are included in expense reductions on the Statement of Operations:
Funds | Amount Paid | ||
Equity I | $ | 5,383 | |
Equity II | 4,080 | ||
Equity Q | 3,240 | ||
International | 4,693 | ||
Fixed Income I | 40,990 | ||
Fixed Income III | 40,796 | ||
Emerging Markets | $ | 16,797 | |
Real Estate Securities | 5,727 | ||
Short Duration Bond | 37,100 | ||
Select Growth | 1,274 | ||
Select Value | 913 |
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment Company. For this service, RIMCo is paid a fee for transfer agency and dividend disbursing services provided to the Fund. RIMCo retains a portion of this fee for its services provided to the Fund and pays the balance to unaffiliated agents who assist in providing these services. Total fees for the Funds presented herein for the period ended October 31, 2006 were $11,314,245.
Distributor and Shareholder Servicing
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the “Plan”) under the 1940 Act. Under this Plan, the Investment Company is authorized to make payments to Russell Fund Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, or any Selling Agents, as defined in the Plan, for sales support services provided and related expenses incurred which were primarily intended to result in the sale of the Class C shares subject to the Distribution Plan. The 12b-1 distribution payments shall not exceed 0.75% of the average daily net assets of a Fund’s Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan (the “Services Plan”) under which the Funds may make payments to the Distributor or any Servicing Agent for any activities or expenses primarily intended to assist, support or service the Servicing Agents’ clients who beneficially own Class C or Class E shares of the Funds. The shareholder servicing payments shall not exceed 0.25% of the average daily net assets of a Fund’s Class C and Class E shares on an annual basis.
Pursuant to the rules of the National Association of Securities Dealers, Inc. (“NASD��), the asset-based sales charges on Shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed at the class level of each Fund rather than on a per shareholder basis. Therefore, long-term shareholders may pay more than the economic equivalent of the maximum sales charges permitted by the NASD.
Brokerage Commissions
The Funds will effect transactions through Russell Implementation Services, Inc. (“RIS”) and its global network of unaffiliated correspondent brokers. RIS is a registered broker and investment adviser and an affiliate of RIMCo. Trades placed through RIS and its correspondents are used (i) to obtain research services for RIMCo 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
323
Table of Contents
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 RIS and LJR (as defined and described more fully below). During the transition, some of these trades may continue to be executed through RIS. For purposes of trading to obtain research services for RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through RIS and its correspondents or other brokers only to the extent that the Funds will receive competitive execution, price and commissions. In addition, RIMCo recommends targets for the amount of trading that money managers allocate through RIS based upon asset class, investment style and other factors. Research services provided to RIMCo by RIS 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 RIMCo 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 RIMCo 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 RIMCo. Trades placed through LJR and its correspondents are used (i) to obtain research services for RIMCo 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 RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through LJR and its correspondents or other brokers only to the extent that the Funds will receive competitive execution, price and commissions. In addition, RIMCo 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 RIMCo by LJR or other brokers include performance measurement statistics, fund analytics systems and market monitoring systems. Research services will be generally obtained from unaffiliated third parties at market rates. Research provided to RIMCo 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 RIMCo or its affiliates. Similarly, the Funds may benefit from research provided with respect to trading by those other funds and clients.
RIS, LJR or other brokers also may rebate to the Funds a portion of commissions earned on certain trading by the Funds through RIS, 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 RIMCo’s research budget has been met, as determined annually in the Soft Dollar Committee budgeting process.
Amounts retained by RIS for the period ended October 31, 2006 were as follows:
Funds | Amount | ||
Equity I | $ | 9,682 | |
Equity II | 4,272 | ||
Equity Q | 1,006 | ||
Emerging Markets | 3,174 | ||
International | $ | 9,334 | |
Real Estate Securities | 1,587 | ||
Select Growth | 944 | ||
Select Value | 2,601 |
Additionally, the Fund paid brokerage commissions to non-affiliated brokers who provided brokerage and research services to the Adviser.
Accrued fees payable to affiliates as of October 31, 2006 were as follows:
Equity I | Equity II | Equity Q | International | Fixed Income I | Fixed Income III | Emerging Markets | |||||||||||||||
Advisory fees | $ | 758,500 | $ | 368,824 | $ | 770,976 | $ | 1,084,897 | $ | 300,941 | $ | 356,227 | $ | 1,106,525 | |||||||
Administration fees | 41,372 | 15,804 | 42,040 | 46,473 | 36,080 | 21,373 | 48,111 | ||||||||||||||
Distribution fees | — | — | — | — | — | — | 28,093 |
324
Table of Contents
Shareholder servicing fees | 9,153 | 8,352 | 11,781 | 11,809 | 6,545 | 2,111 | 15,071 | ||||||||||||||
Transfer agent fees | 139,589 | 82,348 | 152,887 | 122,334 | 74,843 | 123,471 | 366,102 | ||||||||||||||
Trustee fees | 3,903 | 2,001 | 4,389 | 5,381 | 3,774 | 1,911 | 2,959 | ||||||||||||||
$ | 952,517 | $ | 477,329 | $ | 982,073 | $ | 1,270,894 | $ | 422,183 | $ | 505,093 | $ | 1,566,861 | ||||||||
Real Estate Securities | Short Duration Bond | Select Growth | Select Value | |||||||||
Advisory fees | $ | 1,374,607 | $ | 433,288 | $ | 118,708 | $ | 253,189 | ||||
Administration fees | 85,913 | 48,143 | 7,278 | 17,674 | ||||||||
Distribution fees | 69,000 | 13,854 | 6,181 | 16,753 | ||||||||
Shareholder servicing fees | 34,998 | 10,198 | 3,448 | 7,842 | ||||||||
Transfer agent fees | 597,174 | 187,876 | 37,674 | 122,534 | ||||||||
Trustee fees | 4,774 | 3,443 | 563 | 1,083 | ||||||||
$ | 2,166,466 | $ | 696,802 | $ | 173,852 | $ | 419,075 | |||||
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 34 Funds, and Russell Investment Funds (“RIF”), which has five Funds. Each of the Trustees is a Trustee for both RIC 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, 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 chair person of the Board receives additional annual compensation of $52,000.
5. Federal Income Taxes
At October 31, 2006, 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:
Funds | 10/31/07 | 10/31/08 | 10/31/09 | 10/31/10 | ||||||||
Fixed I | $ | — | $ | — | $ | — | $ | — | ||||
Fixed III | — | — | — | — | ||||||||
Short Duration Bond | — | — | — | — | ||||||||
Select Growth | — | — | — | 9,306,293 | ||||||||
Select Value | 3,596,153 | 451,724 | 2,362,680 | 362,611 |
Funds | 10/31/11 | 10/31/12 | 10/31/13 | 10/31/14 | Totals | ||||||||||
Fixed I | $ | — | $ | — | $ | 3,855,225 | $ | 14,386,926 | $ | 18,242,151 | |||||
Fixed III | — | — | — | 5,108,237 | 5,108,237 | ||||||||||
Short Duration Bond | — | — | 10,268,501 | 7,439,440 | 17,707,941 | ||||||||||
Select Growth | 263,497 | — | — | — | 9,569,790 | ||||||||||
Select Value | — | — | — | — | 6,773,168 |
Select Value Fund had a capital loss carryforward of $6,773,168 that it acquired from the Equity Income Fund and Equity III Fund of which $3,596,153, $451,724, $2,362,680, and $362,611 will expire on October 31 of the years 2007, 2008, 2009 and 2010, respectively. This capital loss carryforward can be utilized at a pace of up to $5,101,116 each year with any unused capital loss annual limitation carried over to each succeeding year or until its respective expiration dates, whichever occurs first.
325
Table of Contents
At October 31, 2006, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Equity I | Equity II | Equity Q | ||||||||||
Cost of Investments | $ | 1,554,821,868 | $ | 771,623,246 | $ | 1,510,402,848 | ||||||
Unrealized Appreciation | $ | 232,406,005 | $ | 91,820,799 | $ | 277,255,474 | ||||||
Unrealized Depreciation | (18,134,092 | ) | (14,230,493 | ) | (12,909,198 | ) | ||||||
Net Unrealized Appreciation (Depreciation) | $ | 214,271,913 | $ | 77,590,306 | $ | 264,346,276 | ||||||
Undistributed Ordinary Income | $ | 15,009,026 | $ | 30,883,979 | $ | 20,059,421 | ||||||
Undistributed Long-Term Capital Gains (Capital Loss Carryforward) | $ | 59,754,675 | $ | 93,205,974 | $ | 99,844,953 | ||||||
Tax Composition of Distributions: | ||||||||||||
Ordinary Income | $ | 17,825,827 | $ | 33,618,594 | $ | 17,864,386 | ||||||
Long-Term Capital Gains | $ | 46,446,332 | $ | 126,144,248 | $ | 34,568,605 |
International | Fixed Income I | Fixed Income III | Emerging Markets | |||||||||||||
Cost of Investments | $ | 1,768,943,664 | $ | 1,902,643,611 | $ | 1,052,451,595 | $ | 923,845,118 | ||||||||
Unrealized Appreciation | $ | 366,816,453 | $ | 3,558,603 | $ | 11,256,803 | $ | 313,736,516 | ||||||||
Unrealized Depreciation | (14,644,809 | ) | (2,788,957 | ) | (5,848,887 | ) | (14,076,728 | ) | ||||||||
Net Unrealized Appreciation (Depreciation) | $ | 352,171,644 | $ | 769,646 | $ | 5,407,916 | $ | 299,659,788 | ||||||||
Undistributed Ordinary Income | $ | 108,251,298 | $ | 5,978,144 | $ | 4,073,037 | $ | 63,170,225 | ||||||||
Undistributed Long-Term Capital Gains (Capital Loss Carryforward) | $ | 132,749,055 | $ | (18,242,151 | ) | $ | (5,108,237 | ) | $ | 121,612,014 | ||||||
Tax Composition of Distributions: | ||||||||||||||||
Ordinary Income | $ | 34,206,634 | $ | 61,268,682 | $ | 32,064,991 | $ | 21,103,981 | ||||||||
Long-Term Capital Gains | $ | — | $ | — | $ | 814,029 | $ | 21,459,465 |
326
Table of Contents
Real Estate Securities | Short Duration Bond | Select Growth | Select Value | |||||||||||||
Cost of Investments | $ | 1,489,793,978 | $ | 1,185,944,875 | $ | 189,600,717 | $ | 401,096,721 | ||||||||
Unrealized Appreciation | $ | 817,208,344 | $ | 2,681,451 | $ | 23,189,835 | $ | 73,765,657 | ||||||||
Unrealized Depreciation | (494,429 | ) | (8,852,770 | ) | (2,898,908 | ) | (5,392,208 | ) | ||||||||
Net Unrealized Appreciation (Depreciation) | $ | 816,713,915 | $ | (6,171,319 | ) | $ | 20,290,927 | $ | 68,373,449 | |||||||
Undistributed Ordinary Income | $ | 42,496,827 | $ | 4,129,419 | — | $ | 4,542,778 | |||||||||
Undistributed Long-Term Capital Gains (Capital Loss Carryforward) | $ | 128,286,813 | $ | (17,707,941 | ) | $ | (9,569,790 | ) | $ | 20,555,040 | ||||||
Tax Composition of Distributions: | ||||||||||||||||
Ordinary Income | $ | 66,623,117 | $ | 41,678,386 | $ | 43,635 | $ | 10,510,791 | ||||||||
Long-Term Capital Gains | $ | 123,352,626 | $ | — | $ | — | $ | 14,164,436 |
6. Fund Share Transactions (amounts in thousands)
Share transactions for the periods ended October 31, 2006 and October 31, 2005 were as follows:
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Equity I | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 263 | 221 | $ | 8,376 | $ | 6,621 | ||||||||
Proceeds from reinvestment of distributions | 55 | 9 | 1,712 | 273 | ||||||||||
Payments for shares redeemed | (231 | ) | (210 | ) | (7,368 | ) | (6,297 | ) | ||||||
Net increase (decrease) | 87 | 20 | 2,720 | 597 | ||||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 9,825 | 8,645 | 312,190 | 259,820 | ||||||||||
Proceeds from reinvestment of distributions | 1,281 | 245 | 39,812 | 7,308 | ||||||||||
Payments for shares redeemed | (5,185 | ) | (7,415 | ) | (165,203 | ) | (222,656 | ) | ||||||
Net increase (decrease) | 5,921 | 1,475 | 186,799 | 44,472 | ||||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 5,080 | 7,895 | 161,090 | 236,439 | ||||||||||
Proceeds from reinvestment of distributions | 587 | 74 | 18,254 | 2,220 | ||||||||||
Payments for shares redeemed | (1,702 | ) | (672 | ) | (54,487 | ) | (20,336 | ) | ||||||
Net increase (decrease) | 3,965 | 7,297 | 124,857 | 218,323 | ||||||||||
Total increase (decrease) | 9,973 | 8,792 | $ | 314,376 | $ | 263,392 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Equity II | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 255 | 393 | $ | 8,418 | $ | 14,775 | ||||||||
Proceeds from reinvestment of distributions | 276 | 280 | 8,487 | 10,503 | ||||||||||
Payments for shares redeemed | (267 | ) | (1,816 | ) | (9,140 | ) | (70,496 | ) | ||||||
Net increase (decrease) | 264 | (1,143 | ) | 7,765 | (45,218 | ) | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 3,370 | 2,746 | 111,637 | 103,743 | ||||||||||
Proceeds from reinvestment of distributions | 3,732 | 2,231 | 115,212 | 83,814 | ||||||||||
Payments for shares redeemed | (6,231 | ) | (9,217 | ) | (212,586 | ) | (354,333 | ) | ||||||
Net increase (decrease) | 871 | (4,240 | ) | 14,263 | (166,776 | ) | ||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 703 | 279 | 23,138 | 10,549 | ||||||||||
Proceeds from reinvestment of distributions | 949 | 576 | 29,288 | 21,634 | ||||||||||
Payments for shares redeemed | (1,319 | ) | (1,991 | ) | (42,262 | ) | (78,873 | ) | ||||||
Net increase (decrease) | 333 | (1,136 | ) | 10,164 | (46,690 | ) | ||||||||
Total increase (decrease) | 1,468 | (6,519 | ) | $ | 32,192 | $ | (258,684 | ) | ||||||
327
Table of Contents
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Equity Q | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 279 | 261 | $ | 10,343 | $ | 9,027 | ||||||||
Proceeds from reinvestment of distributions | 42 | 13 | 1,520 | 465 | ||||||||||
Payments for shares redeemed | (197 | ) | (429 | ) | (7,316 | ) | (14,801 | ) | ||||||
Net increase (decrease) | 124 | (155 | ) | 4,547 | (5,309 | ) | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 7,699 | 7,174 | 285,272 | 247,602 | ||||||||||
Proceeds from reinvestment of distributions | 956 | 347 | 34,689 | 11,995 | ||||||||||
Payments for shares redeemed | (6,781 | ) | (10,375 | ) | (250,417 | ) | (359,044 | ) | ||||||
Net increase (decrease) | 1,874 | (2,854 | ) | 69,544 | (99,447 | ) | ||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 2,560 | 3,055 | 94,502 | 105,804 | ||||||||||
Proceeds from reinvestment of distributions | 359 | 123 | 13,053 | 4,261 | ||||||||||
Payments for shares redeemed | (2,536 | ) | (3,990 | ) | (94,940 | ) | (137,390 | ) | ||||||
Net increase (decrease) | 383 | (812 | ) | 12,615 | (27,325 | ) | ||||||||
Total increase (decrease) | 2,381 | (3,821 | ) | $ | 86,706 | $ | (132,081 | ) | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
International | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 222 | 224 | $ | 10,312 | $ | 8,539 | ||||||||
Proceeds from reinvestment of distributions | 15 | 18 | 660 | 661 | ||||||||||
Payments for shares redeemed | (242 | ) | (226 | ) | (11,388 | ) | (8,801 | ) | ||||||
Net increase (decrease) | (5 | ) | 16 | (416 | ) | 399 | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 6,444 | 7,381 | 299,460 | 282,241 | ||||||||||
Proceeds from reinvestment of distributions | 448 | 492 | 19,185 | 18,116 | ||||||||||
Payments for shares redeemed | (6,655 | ) | (6,054 | ) | (306,159 | ) | (232,553 | ) | ||||||
Net increase (decrease) | 237 | 1,819 | 12,486 | 67,804 | ||||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 2,403 | 1,984 | 104,918 | 76,142 | ||||||||||
Proceeds from reinvestment of distributions | 241 | 231 | 10,306 | 8,518 | ||||||||||
Payments for shares redeemed | (9,682 | ) | (1,677 | ) | (438,147 | ) | (63,995 | ) | ||||||
Net increase (decrease) | (7,038 | ) | 538 | (322,923 | ) | 20,665 | ||||||||
Total increase (decrease) | (6,806 | ) | 2,373 | $ | (310,853 | ) | $ | 88,868 | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Fixed Income I | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 357 | 402 | $ | 7,369 | $ | 8,595 | ||||||||
Proceeds from reinvestment of distributions | 61 | 75 | 1,240 | 1,577 | ||||||||||
Payments for shares redeemed | (333 | ) | (307 | ) | (6,851 | ) | (6,532 | ) | ||||||
Net increase (decrease) | 85 | 170 | 1,758 | 3,640 | ||||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 10,020 | 10,527 | 206,675 | 223,287 | ||||||||||
Proceeds from reinvestment of distributions | 1,534 | 1,952 | 31,405 | 41,098 | ||||||||||
Payments for shares redeemed | (9,708 | ) | (8,864 | ) | (200,070 | ) | (188,125 | ) | ||||||
Net increase (decrease) | 1,846 | 3,615 | 38,010 | 76,260 | ||||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 11,112 | 6,643 | 230,209 | 141,569 | ||||||||||
Proceeds from reinvestment of distributions | 1,159 | 932 | 23,717 | 19,628 |
328
Table of Contents
Payments for shares redeemed | (5,062 | ) | (1,398 | ) | (104,293 | ) | (29,605 | ) | ||||||
Net increase (decrease) | 7,209 | 6,177 | 149,633 | 131,592 | ||||||||||
Total increase (decrease) | 9,140 | 9,962 | $ | 189,401 | $ | 211,492 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Fixed Income III | ||||||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 762 | 306 | $ | 7,952 | $ | 3,272 | ||||||||
Proceeds from reinvestment of distributions | 35 | 24 | 357 | 252 | ||||||||||
Payments for shares redeemed | (241 | ) | (143 | ) | (2,496 | ) | (1,522 | ) | ||||||
Net increase (decrease) | 556 | 187 | 5,813 | 2,002 | ||||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 30,479 | 22,321 | 315,658 | 236,687 | ||||||||||
Proceeds from reinvestment of distributions | 2,658 | 1,827 | 27,355 | 19,196 | ||||||||||
Payments for shares redeemed | (15,729 | ) | (13,578 | ) | (162,997 | ) | (144,251 | ) | ||||||
Net increase (decrease) | 17,408 | 10,570 | 180,016 | 111,632 | ||||||||||
Class Y | ||||||||||||||
Proceeds from shares sold | 6,022 | 3,827 | 62,563 | 41,100 | ||||||||||
Proceeds from reinvestment of distributions | 268 | 68 | 2,762 | 720 | ||||||||||
Payments for shares redeemed | (471 | ) | (35 | ) | (4,849 | ) | (374 | ) | ||||||
Net increase (decrease) | 5,819 | 3,860 | 60,476 | 41,446 | ||||||||||
Total increase (decrease) | 23,783 | 14,617 | $ | 246,305 | $ | 155,080 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Emerging Markets | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 600 | 720 | $ | 11,923 | $ | 10,819 | ||||||||
Proceeds from reinvestment of distributions | 79 | 6 | 1,405 | 79 | ||||||||||
Payments for shares redeemed | (585 | ) | (330 | ) | (11,516 | ) | (4,983 | ) | ||||||
Net increase (decrease) | 94 | 396 | 1,812 | 5,915 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 483 | 368 | 9,842 | 5,846 | ||||||||||
Proceeds from reinvestment of distributions | 50 | 13 | 907 | 190 | ||||||||||
Payments for shares redeemed | (354 | ) | (384 | ) | (7,160 | ) | (6,138 | ) | ||||||
Net increase (decrease) | 179 | (3 | ) | 3,589 | (102 | ) | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 13,204 | 9,775 | 265,826 | 151,220 | ||||||||||
Proceeds from reinvestment of distributions | 2,101 | 632 | 38,232 | 9,268 | ||||||||||
Payments for shares redeemed | (11,478 | ) | (6,853 | ) | (233,599 | ) | (107,297 | ) | ||||||
Net increase (decrease) | 3,827 | 3,554 | 70,459 | 53,191 | ||||||||||
Total increase (decrease) | 4,100 | 3,947 | $ | 75,860 | $ | 59,004 | ||||||||
329
Table of Contents
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Real Estate Securities | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 360 | 529 | $ | 17,358 | $ | 23,052 | ||||||||
Proceeds from reinvestment of distributions | 209 | 135 | 9,190 | 5,811 | ||||||||||
Payments for shares redeemed | (380 | ) | (304 | ) | (18,551 | ) | (13,369 | ) | ||||||
Net increase (decrease) | 189 | 360 | 7,997 | 15,494 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 334 | 398 | 16,642 | 17,861 | ||||||||||
Proceeds from reinvestment of distributions | 109 | 73 | 4,891 | 3,199 | ||||||||||
Payments for shares redeemed | (258 | ) | (283 | ) | (12,859 | ) | (12,674 | ) | ||||||
Net increase (decrease) | 185 | 188 | 8,674 | 8,386 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 6,471 | 8,037 | 317,576 | 355,555 | ||||||||||
Proceeds from reinvestment of distributions | 3,663 | 1,955 | 166,170 | 85,775 | ||||||||||
Payments for shares redeemed | (7,539 | ) | (6,187 | ) | (368,134 | ) | (277,213 | ) | ||||||
Net increase (decrease) | 2,595 | 3,805 | 115,612 | 164,117 | ||||||||||
Total increase (decrease) | 2,969 | 4,353 | $ | 132,283 | $ | 187,997 | ||||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Short Duration Bond | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 287 | 617 | $ | 5,330 | $ | 11,614 | ||||||||
Proceeds from reinvestment of distributions | 32 | 27 | 599 | 502 | ||||||||||
Payments for shares redeemed | (774 | ) | (1,036 | ) | (14,409 | ) | (19,514 | ) | ||||||
Net increase (decrease) | (455 | ) | (392 | ) | (8,480 | ) | (7,398 | ) | ||||||
Class E | ||||||||||||||
Proceeds from shares sold | 363 | 320 | 6,787 | 6,052 | ||||||||||
Proceeds from reinvestment of distributions | 44 | 27 | 821 | 521 | ||||||||||
Payments for shares redeemed | (306 | ) | (232 | ) | (5,701 | ) | (4,389 | ) | ||||||
Net increase (decrease) | 101 | 115 | 1,907 | 2,184 | ||||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 14,343 | 16,712 | 267,444 | 315,510 | ||||||||||
Proceeds from reinvestment of distributions | 2,054 | 1,504 | 38,127 | 28,236 | ||||||||||
Payments for shares redeemed | (19,246 | ) | (15,698 | ) | (359,185 | ) | (296,234 | ) | ||||||
Net increase (decrease) | (2,849 | ) | 2,518 | (53,614 | ) | 47,512 | ||||||||
Total increase (decrease) | (3,203 | ) | 2,241 | $ | (60,187 | ) | $ | 42,298 | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Select Growth | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 403 | 527 | $ | 3,166 | $ | 3,803 | ||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (253 | ) | (300 | ) | (1,970 | ) | (2,175 | ) | ||||||
Net increase (decrease) | 150 | 227 | 1,196 | 1,628 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 322 | 110 | 2,672 | 810 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (71 | ) | (375 | ) | (575 | ) | (2,825 | ) | ||||||
Net increase (decrease) | 251 | (265 | ) | 2,097 | (2,015 | ) | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 3,901 | 7,135 | 32,598 | 54,091 | ||||||||||
Proceeds from reinvestment of distributions | 5 | — | 41 |
330
Table of Contents
Payments for shares redeemed | (7,298 | ) | (1,314 | ) | (59,655 | ) | (9,983 | ) | ||||||
Net increase (decrease) | (3,392 | ) | 5,821 | (27,016 | ) | 44,108 | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 4,481 | 3,690 | 36,926 | 27,958 | ||||||||||
Proceeds from reinvestment of distributions | — | — | — | — | ||||||||||
Payments for shares redeemed | (3,241 | ) | (3,612 | ) | (26,401 | ) | (27,581 | ) | ||||||
Net increase (decrease) | 1,240 | 78 | 10,525 | 377 | ||||||||||
Total increase (decrease) | (1,751 | ) | 5,861 | $ | (13,198 | ) | $ | 44,098 | ||||||
Shares | Dollars | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||
Select Value | ||||||||||||||
Class C | ||||||||||||||
Proceeds from shares sold | 407 | 599 | $ | 4,719 | $ | 6,615 | ||||||||
Proceeds from reinvestment of distributions | 110 | 3 | 1,226 | 31 | ||||||||||
Payments for shares redeemed | (298 | ) | (375 | ) | (3,508 | ) | (4,176 | ) | ||||||
Net increase (decrease) | 219 | 227 | 2,437 | 2,470 | ||||||||||
Class E | ||||||||||||||
Proceeds from shares sold | 219 | 195 | 2,586 | 2,201 | ||||||||||
Proceeds from reinvestment of distributions | 51 | 7 | 582 | 79 | ||||||||||
Payments for shares redeemed | (179 | ) | (326 | ) | (2,117 | ) | (3,702 | ) | ||||||
Net increase (decrease) | 91 | (124 | ) | 1,051 | (1,422 | ) | ||||||||
Class I | ||||||||||||||
Proceeds from shares sold | 2,050 | 3,950 | 24,190 | 44,387 | ||||||||||
Proceeds from reinvestment of distributions | 766 | 123 | 8,716 | 1,384 | ||||||||||
Payments for shares redeemed | (4,301 | ) | (2,165 | ) | (49,514 | ) | (24,171 | ) | ||||||
Net increase (decrease) | (1,485 | ) | 1,908 | (16,608 | ) | 21,600 | ||||||||
Class S | ||||||||||||||
Proceeds from shares sold | 5,847 | 5,202 | 69,086 | 58,345 | ||||||||||
Proceeds from reinvestment of distributions | 1,143 | 168 | 12,991 | 1,876 | ||||||||||
Payments for shares redeemed | (4,328 | ) | (4,888 | ) | (50,740 | ) | (55,329 | ) | ||||||
Net increase (decrease) | 2,662 | 482 | 31,337 | 4,892 | ||||||||||
Total increase (decrease) | 1,487 | 2,493 | $ | 18,217 | $ | 27,540 | ||||||||
7. Line of Credit
The Investment Company has a $75 million revolving credit facility for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Investment Company is charged an annual commitment fee of .125% on the average daily unused amount of the aggregate commitment, which is allocated among each of the Funds. Interest is calculated at the Federal Fund Rate plus .50% annually. The Investment Company’s Funds may borrow up to a maximum of 33.33% of the value of their net assets under the agreement. The agreement will expire December 20, 2006 and will not be renewed at that time. The Funds did not have any drawdowns for the period ended October 31, 2006.
8. Interfund Lending Program
The Investment Company Funds have been granted permission from the Securities and Exchange Commission to participate in a joint lending and borrowing facility (the “Credit Facility”). Portfolios of the Funds may borrow money from the RIC Money Market Fund for Temporary purposes. All such borrowing and lending will be subject to a participating fund’s fundamental investment limitations. The RIC Money Market Fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves. The Investment Company Funds will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. A participating fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the RIC Money Market Fund could result in a lost investment opportunity of additional borrowing costs. Miscellaneous expense on the Statement of Operations for Select Growth Fund includes $12,164 paid under the Interfund Lending Program for the period ending October 31, 2006.
331
Table of Contents
9. Record Ownership
As of October 31, 2006, the following table includes shareholders of record with greater than 10% of the total outstanding shares of each respective Fund:
Fund | # of Shareholders | % | ||
Equity I | 1 | 32.4 | ||
Equity II | 1 | 33.8 | ||
Equity Q | 1 | 35.3 | ||
International | 1 | 36.5 | ||
Fixed Income I | 1 | 17.9 | ||
Fixed Income III | 1 | 46.7 | ||
Emerging Markets | 3 | 48.1 | ||
Real Estate Securities | 2 | 31.2 | ||
Short Duration Bond | 3 | 66.0 | ||
Select Growth | 1 | 34.3 | ||
Select Value | 1 | 30.5 |
10. Restricted Securities
Restricted securities are subject to contractual limitations on resale, are often issued in private placement transactions, and are not registered under the Securities Act of 1933 (the “Act”). The most common types of restricted securities are those sold under Rule 144A of the Act and commercial paper sold under Section 4(2) of the Act.
A Fund may invest a portion of its net assets not to exceed 15% in securities that are illiquid. Illiquid securities are securities that may not be readily marketable, and that cannot be sold within seven days in the ordinary course of business at the approximate amount at which the Fund has valued the securities. Restricted securities are generally considered to be illiquid.
The following table lists restricted securities held by a Fund that are illiquid. The following table does not include (1) securities deemed liquid by RIMCo or a money manager pursuant to Board approved policies and procedures or (2) illiquid securities that are not restricted securities as designated on the Fund’s Schedule of Investments.
Fund - % of Net Assets Securities | Acquisition Date | Principal Amount ($) or Shares | Cost per Unit $ | Cost (000) $ | Market Value (000) $ | |||||
Fixed Income I Fund - 1.3% | ||||||||||
Aames Mortgage Investment Trust | 09/08/05 | 919,365 | 99.98 | 919 | 920 | |||||
Aiful Corp. | 08/03/05 | 300,000 | 98.81 | 296 | 292 | |||||
ASIF Global Financing | 05/18/05 | 50,000 | 99.78 | 50 | 49 | |||||
Citigroup Mortgage Loan Trust, Inc. | 10/18/06 | 2,100,000 | 99.92 | 2,098 | 2,100 | |||||
Corp. Nacional del Cobre de Chile | 10/19/06 | 100,000 | 99.30 | 99 | 102 | |||||
Countrywide Home Loan Mortgage Pass Through Trust | 09/21/05 | 1,323,073 | 100.00 | 1,323 | 1,330 | |||||
DG Funding Trust | 11/04/03 | 152 | 10,575.58 | 1,607 | 1,618 | |||||
Glitnir Banki HF | 06/12/06 | 450,000 | 99.92 | 450 | 464 | |||||
Glitnir Banki HF | 07/21/06 | 270,000 | 100.00 | 270 | 278 | |||||
ILFC E-Capital Trust II | 09/12/06 | 290,000 | 99.55 | 289 | 294 | |||||
Kaupthing Bank Hf | 10/03/06 | 100,000 | 99.48 | 99 | 100 | |||||
Kaupthing Bank Hf | 05/12/06 | 1,250,000 | 99.49 | 1,244 | 1,332 | |||||
Mastr Reperforming Loan Trust | 03/09/05 | 686,114 | 102.31 | 702 | 688 | |||||
Owens Corning, Inc. | 10/26/06 | 725,000 | 99.73 | 723 | 737 | |||||
RAAC Series | 05/08/06 | 1,267,287 | 100.00 | 1,267 | 1,269 | |||||
Rabobank Capital Funding II | 05/23/05 | 20,000 | 101.80 | 20 | 20 | |||||
Rabobank Capital Funding Trust | 05/19/05 | 40,000 | 100.77 | 40 | 39 | |||||
Resona Preferred Global Securities Cayman, Ltd. | 07/20/05 | 300,000 | 100.90 | 303 | 315 | |||||
Shinsei Finance Cayman, Ltd. | 02/16/06 | 400,000 | 100.00 | 400 | 402 | |||||
Sigma Finance, Inc. | 07/26/06 | 690,000 | 100.00 | 690 | 690 |
332
Table of Contents
TNK-BP Finance SA | 07/13/06 | 400,000 | 99.82 | 399 | 419 | |||||
Truman Capital Mortgage Loan Trust | 07/27/06 | 1,844,656 | 100.00 | 1,845 | 1,845 | |||||
WEA Finance LLC/WCI Finance LLC | 09/21/06 | 1,820,000 | 99.77 | 1,816 | 1,823 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 838,742 | 100.04 | 839 | 839 | |||||
17,965 | ||||||||||
Fixed Income III Fund - 1.1% | ||||||||||
BNP Paribas Capital Trust | 10/24/00 | 850,000 | 112.22 | 954 | 958 | |||||
DG Funding Trust | 11/04/03 | 118 | 10,587.51 | 1,249 | 1,256 | |||||
DNB Nor Bank ASA | 10/05/06 | 2,000,000 | 100.00 | 2,000 | 1,999 | |||||
Embraer Overseas, Ltd. | 10/20/06 | 100,000 | 99.29 | 99 | 100 | |||||
Glitnir Banki HF | 06/12/06 | 310,000 | 100.00 | 310 | 320 | |||||
Great West Life & Annuity Insurance Co. | 09/29/06 | 225,000 | 103.80 | 234 | 237 | |||||
Host Hotels & Resorts, LP | 10/27/06 | 150,000 | 99.25 | 149 | 151 | |||||
Majapahit Holding BV | 10/11/06 | 135,000 | 99.39 | 134 | 137 | |||||
Mid-State Trust | 10/27/06 | 560,000 | 100.00 | 560 | 560 | |||||
Plains All American Pipeline, LP/PAA Finance Corp. | 10/23/06 | 130,000 | 99.17 | 129 | 133 | |||||
Ras Laffan Liquefied Natural Gas Co., Ltd. II | 08/04/05 | 615,000 | 98.12 | 603 | 593 | |||||
Resona Bank, Ltd. | 09/08/05 | 930,000 | 99.25 | 923 | 911 | |||||
SB Treasury Co. LLC | 02/06/98 | 650,000 | 106.82 | 694 | 689 | |||||
SBI Heloc Trust | 09/28/06 | 400,000 | 100.00 | 400 | 400 | |||||
Unicredit Luxembourg Finance SA | 10/17/06 | 375,000 | 100.00 | 375 | 375 | |||||
VTB Capital SA | 10/27/06 | 1,545,000 | 100.00 | 1,545 | 1,545 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 668,309 | 100.04 | 669 | 668 | |||||
West Corp. | 10/16/06 | 445,000 | 99.90 | 445 | 444 | |||||
11,476 | ||||||||||
Emerging Markets Fund - 0.3% | ||||||||||
NovaTek OAO | 07/21/05 | 54,900 | 22.13 | 1,215 | 3,184 | |||||
3,184 | ||||||||||
Short Duration Fund - 1.1% | ||||||||||
ASIF Global Financing | 10/25/06 | 2,984,000 | 98.46 | 2,938 | 2,938 | |||||
DG Funding Trust | 11/04/03 | 219 | 10,537.12 | 2,308 | 2,331 | |||||
Principal Life Global Funding I | 10/25/06 | 1,250,000 | 97.62 | 1,220 | 1,219 | |||||
SBI Heloc Trust | 09/28/06 | 700,000 | 100.00 | 700 | 700 | |||||
Unicredit Luxembourg Finance SA | 10/17/06 | 3,900,000 | 100.00 | 3,900 | 3,899 | |||||
VTB Capital SA | 10/27/06 | 700,000 | 100.00 | 700 | 700 | |||||
Wells Fargo Home Equity Trust | 09/28/06 | 1,258,112 | 100.04 | 1,259 | 1,258 | |||||
13,045 | ||||||||||
Illiquid securities and restricted securities may be priced by the Funds using fair value procedures approved by the Board of Trustees.
333
Table of Contents
11. Dividends
On December 12, 2006, the Board of Trustees of Russell Investment Company declared the following dividends from net investment income and capital gains, respectively, payable on December 15, 2006 to shareholders on record December 13, 2006
Funds | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | ||||||
Equity I-Class E | $ | 0.1096 | $ | 0.2926 | $ | 1.2125 | |||
Equity I-Class I | 0.1285 | 0.2926 | 1.2125 | ||||||
Equity I-Class Y | 0.1351 | 0.2926 | 1.2125 | ||||||
Equity II-Class E | — | 1.7266 | 5.2801 | ||||||
Equity II-Class I | 0.0408 | 1.7266 | 5.2801 | ||||||
Equity II-Class Y | 0.0746 | 1.7266 | 5.2801 | ||||||
Equity Q-Class E | 0.1339 | 0.4560 | 2.3883 | ||||||
Equity Q-Class I | 0.1620 | 0.4560 | 2.3883 | ||||||
Equity Q-Class Y | 0.1637 | 0.4560 | 2.3883 | ||||||
International-Class E | 1.4068 | 1.5427 | 3.5200 | ||||||
International-Class I | 1.5303 | 1.5427 | 3.5200 | ||||||
International-Class Y | 1.5500 | 1.5427 | 3.5200 | ||||||
Fixed Income I-Class E | 0.2695 | — | — | ||||||
Fixed Income I-Class I | 0.2826 | — | — | ||||||
Fixed Income I-Class Y | 0.2850 | — | — | ||||||
Fixed Income III-Class E | 0.1311 | — | — | ||||||
Fixed Income III-Class I | 0.1371 | — | — | ||||||
Fixed Income III-Class Y | 0.1378 | — | — | ||||||
Emerging Markets-Class C | 0.2532 | 0.7332 | 2.3047 | ||||||
Emerging Markets-Class E | 0.4103 | 0.7332 | 2.3047 | ||||||
Emerging Markets-Class S | 0.4634 | 0.7332 | 2.3047 | ||||||
Real Estate Securities-Class C | — | 1.1244 | 3.6969 | ||||||
Real Estate Securities-Class E | 0.0248 | 1.1244 | 3.6969 | ||||||
Real Estate Securities-Class S | 0.0608 | 1.1244 | 3.6969 | ||||||
Short Duration Bond-Class C | 0.1629 | — | — | ||||||
Short Duration Bond-Class E | 0.1997 | — | — | ||||||
Short Duration Bond-Class S | 0.2116 | — | — | ||||||
Select Value-Class C | 0.0158 | 0.1337 | 0.6117 | ||||||
Select Value-Class E | 0.0421 | 0.1337 | 0.6117 | ||||||
Select Value-Class I | 0.0533 | 0.1337 | 0.6117 | ||||||
Select Value-Class S | 0.0473 | 0.1337 | 0.6117 |
12. In-Kind Redemptions
The following Funds incurred a shareholder redemption substantially in-kind for the period ended October 31, 2006:
Fund | Date of Redemption | Realized Gain (Loss) | Market Value | |||
Equity II | 8/7/06 | 6,351,240 | 31,017,972 | |||
International | 1/23/06 | 90,264,436 | 266,583,660 | |||
International | 8/7/06 | 28,530,174 | 82,921,093 |
334
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Company (formerly Frank Russell Investment Company):
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Equity I Fund, Equity II Fund, Equity Q Fund, International Fund, Fixed Income I Fund, Fixed Income II Fund, Emerging Markets Fund, Real Estate Securities Fund, Short Duration Bond Fund, Select Growth Fund and Select Value Fund (eleven of the portfolios constituting Russell Investment Company, hereafter collectively referred to as the “Funds”) at October 31, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodians, brokers and transfer agents, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
December 22, 2006
335
Table of Contents
Institutional Funds
Tax Information — October 31, 2006 (Unaudited)
For the tax year ended October 31, 2006, the Funds hereby designate 100% or the maximum amount allowable, of its net taxable income as qualified dividends taxed at individual net capital gain rates.
For the tax year ended October 31, 2006, the Funds hereby designate under Section 871(k)(2)(c) of the Code, the maximum amount allowable as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(l)(A) of the Code. This applies to nonresident alien shareholders only.
The Form 1099 mailed to you in January 2007 will show the tax status of all distributions paid to your account in calendar year 2006.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate shareholders as follows:
Equity I | 76.8 | % | |
Equity II | 11.8 | % | |
Equity Q | 75.1 | % | |
International | 0.0 | % | |
Fixed I | 0.0 | % | |
Fixed III | 0.0 | % | |
Emerging Markets | 0.0 | % | |
Real Estate Securities | 0.0 | % | |
Short Duration Bond | 0.0 | % | |
Select Value | 75.4 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain dividends for their taxable year ended October 31, 2006:
Equity I | $ | 46,446,332 | |
Equity II | 126,144,248 | ||
Equity Q | 34,568,605 | ||
Fixed Income III | 814,029 | ||
Emerging Markets | 21,459,465 | ||
Real Estate Securities | 123,352,626 | ||
Select Value | 14,164,436 |
Please consult a tax adviser for any questions about federal or state income tax laws.
The Emerging Markets Fund and International Fund paid foreign taxes of $3,400,832 and $3,497,789 and recognized $23,117,721 and $47,770,496 of foreign source income, respectively, during the taxable year ended October 31, 2006. Pursuant to Section 853 of the Internal Revenue Code, the Emerging Markets Fund and International Fund designates $0.0639 and $0.0956 per share of foreign taxes paid and $0.4341 and $1.3053 of gross income earned from foreign sources, respectively, in the taxable year ended October 31, 2006.
336
Table of Contents
Institutional Funds
Basis for Approval of Investment Advisory Contracts (Unaudited)
Approval of Investment Advisory Agreement
The Board of Trustees, including all of the Independent Trustees, last considered and approved the continuation of the advisory agreement with RIMCo (the “RIMCo Agreement”) and the portfolio management contract with each Money Manager of the Funds (collectively, the “portfolio management contracts”) at a meeting held 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 RIMCo. 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 RIMCo relating to the services provided by RIMCo (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 RIMCo 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 RIMCo (the “RIMCo Analysis” and, with the other information requested by the Independent Trustees or provided by RIMCo 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 RIMCo 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 RIMCo 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 RIMCo 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. RIMCo has engaged multiple Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible under the RIMCo Agreement for determining, implementing and maintaining the investment program for each Fund. Assets of each Fund have been allocated among the multiple Money Managers selected by RIMCo, subject to Board approval, for that Fund. RIMCo 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 RIMCo 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. RIMCo may also directly manage portions of a Fund during transitions between money managers.
RIMCo 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 RIMCo in accordance with the Fund’s applicable investment objective, policies and restrictions (each, a “segment”). RIMCo is responsible for communicating performance expectations to each Money Manager; supervising compliance by each Money Manager with each Fund’s investment objective and policies; authorizing Money Managers to engage in certain investment strategies for a Fund; and recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board the restructuring of Fund segments and additions of new Money Managers or replacements of existing Money Managers at any time when, based on RIMCo’s research and analysis, such actions are appropriate. RIMCo may develop specific constraints from time to
337
Table of Contents
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, RIMCo’s selection of Money Managers is made not only on the basis of performance considerations but anticipated compatibility with other Money Managers in the same Fund. The performance of individual Money Managers for a Fund may reflect the roles assigned to them by RIMCo in the Fund’s investment activities and any constraints placed by RIMCo upon their selection of portfolio securities. In light of the foregoing, the overall performance of each Fund over appropriate periods reflects in great part the performance of RIMCo 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.
The Board also considered that the prospectuses for the Funds and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for each Fund, rather than the investment 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 RIMCo 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 RIMCo 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 RIMCo Agreement, including the following:
1. | The nature, scope and quality of the services provided to the Fund by RIMCo; |
2. | The advisory fee paid by the Fund to RIMCo and the fact that it encompasses all investment advisory fees paid by the Fund, including the fees for any Money Managers of such Fund; |
3. | Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund, including any administrative, transfer agent, cash management and securities lending fees, soft dollar arrangements and commissions in connection with portfolio securities transactions; |
4. | Information provided by RIMCo as to expenses incurred by the Fund; and |
5. | Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from each Fund. |
At the April 18 Board meeting, RIMCo and management reviewed the reasonableness of the Funds’ investment advisory fees. In discussing whether the Funds’ performance supported these fees, RIMCo 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 RIMCo, these strategies may be expected to result, and for certain Funds during the periods covered by the Third-Party Information did result, in lower relative performance than that of some of their respective Comparable Funds. RIMCo 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 that its Comparable Funds may experience over time.
On the basis of the Agreement Renewal Information, including the RIMCo Analysis, and other information previously received by the Board from RIMCo during the course of the year or presented at the Board meeting by RIMCo, at the April 18 Board meeting, the Board, in respect of each Fund, found the advisory fee charged by RIMCo 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; RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; and RIMCo’s profitability with respect to each Fund was not excessive in light of the nature, scope and quality of the services provided by RIMCo.
338
Table of Contents
At the April 18 Board meeting, the Board concluded that the performance of the Funds supported continuation of the RIMCo Agreement, again based upon the Agreement Renewal Information, including the RIMCo Analysis, and other information previously received by the Board from RIMCo during the course of the year or presented at the Board meeting by RIMCo. 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 RIMCo’s investment strategy of managing the Funds in a risk aware manner.
At the April 18 Board meeting, 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 investment advisory 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 RIMCo, 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 RIMCo 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. RIMCo 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 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.
At the April 18 Board meeting, in voting to approve the continuation of the RIMCo 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 RIMCo Agreement was in the best interests of the Funds and their respective shareholders.
At the April 18 Board meeting, with respect to the evaluation of the terms of portfolio management contracts with Money Managers, the Board received and considered information from RIMCo reporting for each Money Manager, among other things, the Money Manager’s performance over various periods; RIMCo’s assessment of the performance of each Money Manager; any significant business relationships between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the Funds’ underwriter; and RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate or to terminate the Money Manager. RIMCo recommended that each Money Manager be retained at its current fee rate. RIMCo has advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo is aware of the fees charged by Money Managers to other clients; and RIMCo believes that the fees agreed upon with Money Managers are reasonable in light of the anticipated quality of investment advisory services to be rendered. The Board accepted RIMCo’s explanation in light of the Board’s findings as to the aggregate investment advisory fees paid by each Fund and the fact that each Money Manager’s fee is paid by RIMCo.
Based substantially upon RIMCo’s recommendations together with the information received from RIMCo in support of its recommendations, at the April 18 meeting, 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.
During 2005 and 2006, the Trustees received proposals from RIMCo to manage directly approximately up to 10% of the assets of the Equity I Fund, the Equity Q Fund and the International Fund (each a “Participating Fund”) utilizing a “select holdings strategy” pursuant to the terms of the RIMCo Agreement, the actual allocation to be determined by each Participating Fund’s RIMCo portfolio manager. Under this strategy, RIMCo analyzes the holdings of a Participating Fund’s Money Managers in their Fund segments to identify particular stocks that have been selected by multiple Money Managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo 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 y 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 RIMCo’s proposals, the Trustees received and considered information from RIMCo regarding the potential enhancements to the Participating Fund’s performance based upon RIMCo’s experience in employing the same strategy for other types of investment accounts under its management. The Trustees also considered that RIMCo 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 RIMCo generally and from the
339
Table of Contents
Participating Fund consequently may increase incrementally. The Board, however, considered RIMCo’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 RIMCo pursuant to the select holdings strategy; the fact that the aggregate investment advisory fees paid by the Participating Fund would not increase as a result of the implementation of the select holdings strategy. At the April 18, 2006 meeting, RIMCo advised the Board that the select holdings strategy has been implemented for the Equity I and Equity Q Funds, although a reasonable period of time is needed to evaluate fairly its impact on those Participating Funds’ performance. Based upon the information received from RIMCo 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 investment advisory fees paid to RIMCo by each such Fund under the RIMCo Agreement in connection with the select holdings strategy continue to be reasonable in light of the nature and anticipated quality of the investment advisory services to be rendered by RIMCo.
In their deliberations, the Trustees did not identify any particular information as to the RIMCo Agreement or, other than RIMCo’s recommendation, the portfolio management 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.
Also, at the meeting held on April 18, 2006, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Equity II Fund. At a meeting held on May 23, 2006, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Fixed Income III Fund. At that same meeting, the Board of Trustees received a proposal from RIMCo to effect a money manager change for the Equity I Fund resulting from a change of control of one of this Fund’s Money Managers. 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 RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of profitability to the evaluation of portfolio management contracts with money managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’s belief that the proposed investment advisory fees would be reasonable in light of the anticipated quality of investment advisory services to be rendered. The Trustees also considered their findings at their April 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 RIMCo.
At a meeting held on December 4, 2006, RIMCo advised the Board that the select holdings strategy was implemented in the International Fund in the third quarter of 2006.
340
Table of Contents
Institutional Funds
Shareholder Requests for Additional Information — October 31, 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 fiscal year. These reports are available (i) free of charge, upon request, by calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the Securities and Exchange Commission’s website at www.sec.gov, and (iv) at the Securities and Exchange Commission’s public reference room.
The Board has delegated to RIMCo, as RIC’s investment adviser, the primary responsibility for monitoring, evaluating and voting proxies solicited by or with respect to issuers of securities in which assets of the Funds may be invested. RIMCo has established a proxy voting committee (“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, (ii) on the Securities and Exchange Commission’s website at www.sec.gov.
To reduce expenses, we may mail only one copy of the Fund’s prospectus and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call us at (800) 787-7354 or contact your financial institution and we will begin sending you individual copies thirty days after receiving your request.
If you wish to receive the Fund’s prospectus and each annual and semi-annual report electronically, please call us at (800) 787-7354 or contact your financial institution.
341
Table of Contents
Institutional Funds
Disclosure of Information about Fund Directors — October 31, 2006 (Unaudited)
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 34 funds, and Russell Investment Funds (“RIF”), which has five funds. Each of the trustees is a trustee of both RIC 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.
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | |||||
INTERESTED TRUSTEES | ||||||||||
*Michael J.A. Born January 20,
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Chairman of the Board, FRC
• 1990-2003, President, FRC
• 1993-2003, CEO, FRC
• Trustee, RIC and RIF
• Director, RTC; Russell Investments (Suisse) S.A. (global investment services); Russell Investments Limited (consultant to institutional investors in Europe and the UK)
• Chairman of the Board and President, Russell 20-20 Association; and Russell Investments Delaware Inc. (general partner in various limited partnerships (“RIDI”)) | 39 | None | |||||
INDEPENDENT TRUSTEES | ||||||||||
Thaddas L. Alston, Born April 7, 1945
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2006 | Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. | 39 | None | |||||
Paul E. Anderson, Born October 15,
909 A Street Tacoma, Washington 98402-1616 | Trustee since 1984
Chairman of the Nominating and Governance Committee since 2006 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • President, Anderson Management Group LLC (private investments • consulting)
• February 2002 to June 2005, Lead Trustee, RIC and RIF | 39 | None | |||||
Kristianne Blake, Born January 22,
909 A Street Tacoma, Washington 98402-1616 | Trustee since
Chairperson | Appointed until successor is duly elected and qualified
Annual | • President, Kristianne Gates Blake, P.S. (accounting services)
• Director and Chairman of the Audit Committee, Avista Corp.
• Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds
• February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF | 39 | • Trustee WM
• Director, | |||||
Daniel P. Connealy Born June 6, 1946
909 A Street Tacoma, Washington 98402-1616 | Trustee since
Chairman of | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc.
• 2003, Retired
• 2001-2003, Vice President and Chief Financial Officer, Janus Capital Group Inc.
• 1979-2001, Audit and Accounting Partner, PricewaterhouseCoopers LLP | 39 | None | |||||
Jonathan Fine Born July 8, 1954
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 39 | None |
342
Table of Contents
Raymond P. Born December 21,
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2000 | Appointed until successor is duly elected and qualified | • President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 39 | None | |||||
Jack Thompson, Born March 21, 1949
909 A Street Tacoma, Washington 98402-1616 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to present, Independent Board Chair and Chairman of the Audit Committee, Sparx Japan Fund
• May 1999 to May 2003, President, Chief Executive Officer and Director, Berger Financial Group, LLC
• May 1999 to May 2003, President and Trustee, Berger Funds | 39 | Director, Sparx Japan Fund | |||||
Julie W. Weston, Born October 2,
909 A Street Tacoma, Washington 98402-1616 | Trustee since
Chairperson of | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • Retired since 2000
• 1987 to 2002, Director, Smith Barney Fundamental Value Fund | 39 | None | |||||
TRUSTEES EMERITUS | ||||||||||
*George F. Russell, Born July 3, 1932
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo
• Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non- depository trust company (“RTC”))
• Chairman, Sunshine Management Services, LLC (investment adviser) | 39 | None | |||||
Paul Anton, Ph.D., Born December 1,
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2003 | Five year term | • Retired since 1997
• Trustee of RIC and RIF until 2002 | 39 | None | |||||
William E. Baxter, Born June 8, 1925
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1986
• Trustee of RIC and RIF until 2004 | 39 | None | |||||
Lee C. Gingrich, Born October 6,
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2006 | Five year term | • Retired since 1995
• Trustee of RIC and RIF until 2005
• Chairman of the Nominating and Governance Committee 2001-2005 | 39 | None | |||||
Eleanor W. Palmer, Born May 5, 1926
909 A Street Tacoma, Washington 98402-1616 | Trustee Emeritus since 2004 | Five year term | • Retired since 1981
• Trustee of RIC and RIF until 2004 | 39 | None |
* | Mr. Philips is also an officer and/or director of one more affiliates of RIC and RTF and is therefore an interested trustee. |
343
Table of Contents
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | |||
OFFICERS | ||||||
Cheryl Wichers Born December 16, 1966
909 A Street Tacoma, Washington 98402-1616 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | • Chief Compliance Officer, RIC
• Chief Compliance Officer, RIF
• Chief Compliance Officer, RIMCo
• April 2002-May 2005, Manager, Global Regulatory Policy
• 1998-2002, Compliance Supervisor, Russell Investment Group | |||
Greg J. Stark, Born May 3, 1968
909 A Street Tacoma, Washington 98402-1616 | President and Chief Executive Officer since 2004 | Until successor is chosen and qualified by Trustees | • President and CEO, RIC and RIF
• Chairman of the Board, President and CEO, RIMCo
• Chairman of the Board, President and CEO, RFD
• Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”))
• Until 2004, Managing Director of Individual Investor Services, FRC
• 2000 to 2004, Managing Director, Sales and Client Service, RIMCo | |||
Mark E. Swanson, Born November 26, 1963
909 A Street Tacoma, Washington 98402-1616 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | • Treasurer, Chief Accounting Officer and CFO, RIC and RIF
• Director, Funds Administration, RIMCo, RTC and RFD
• Treasurer and Principal Accounting Officer, SSgA Funds | |||
Thomas F. Hanly, Born November 17, 1964
909 A Street Tacoma, Washington 98402-1616 | Chief Investment Officer since 2004 | Until removed by Trustees | • Chief Investment Officer, RIC, RIF, FRC, RTC
• Director and Chief Investment Officer, RIMCo and RFD
• 1999 to 2003, Chief Financial Officer, FRC, RIC and RIF | |||
Karl J. Ege, Born October 8, 1941
909 A Street Tacoma, Washington 98402-1616 | Secretary since 1994 | Until successor is chosen and qualified by Trustees | • General Counsel and Managing Director of Law and Government Affairs, Secretary, FRC |
* | Mr. Philips is also an officer and/or director of one more affiliates of RIC and RTF and is therefore an interested trustee. |
344
Table of Contents
Institutional Funds
Russell Investment Company
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
Advisor, Administrator, Transfer and Dividend Disbursing Agent
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
Custodian
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
Office of Shareholder Inquiries
909 A Street
Tacoma, WA 98402
(800) 787-7354
Legal Counsel
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
345
Table of Contents
Distributor
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
1420 5th Avenue
Suite 1900
Seattle, WA 98101
Money Managers as of October 31, 2006
Equity I Fund
AllianceBernstein, L.P., New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Montag & Caldwell, Inc., Atlanta, GA
Schneider Capital Management, Wayne, PA
Suffolk Capital Management, LLC, New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Equity II Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners, LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
PanAgora Asset Management, Inc., Boston, MA
Tygh Capital Management, Inc., Portland, OR
Equity Q Fund
Aronson+Johnson+Ortiz, L.P., Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
International Fund
AllianceBernstein, L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
Axiom International Investors, LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
346
Table of Contents
Emerging Markets Fund
AllianceBernstein, L.P., New York, NY
Arrowstreet Capital, L.P., Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Somerville, NJ
T. Rowe Price International, Inc., Baltimore, MD
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities, LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund through its INVESCO Real Estate division, Dallas, TX
RREEF America, LLC, Chicago, IL
Short Duration Bond Fund
Merganser Capital Management, L.P., Boston, MA
Pacific Investment Management Company, LLC, Newport Beach, CA
STW Fixed Income Management, Carpinteria, CA
Fixed Income I Fund
Bear Stearns Asset Management, Inc., New York, NY
Lehman Brothers Asset Management, LLC, Chicago, IL
Pacific Investment Management Company, LLC, Newport Beach, CA
Western Asset Management, Pasadena, CA
Western Asset Management Company Ltd., London England
Fixed Income III Fund
Bear Stearns Asset Management, Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust, Philadelphia, PA
Goldman Sachs Asset Management, L.P., New York, NY
Morgan Stanley Investment Management, Inc., West Conshohocken, PA
Pacific Investment Management Company, LLC, Newport Beach, CA
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
CapitalWorks Investment Partners, LLC, San Diego, CA
Delaware Management Company, a series of Delaware Management Business Trust, Philadelphia, PA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
Sustainable Growth Advisers, L.P., Stamford, CT
Turner Investment Partners, Inc., Berwyn, PA
Select Value Fund
DePrince, Race & Zollo, Inc., Orlando, FL
Iridian Asset Management, LLC, Westport, CT
MFS Institutional Advisors, Inc., Boston, MA
Netols Asset Management, Inc., Mequon, WI
Systematic Financial Management, L.P., Teaneck, NJ
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 Company. Such offering is made only by Prospectus, which includes details as to offering price and other material information.
347
Table of Contents
Russell Investment Company Semi-Annual Report dated April 30, 2007
[To be filed by amendment]
Table of Contents
Russell Funds: Classes A, C, E and S
Institutional Funds: Classes E and I and Class Y
LifePoints Funds, Target Portfolio Series: Classes A, C, E, R1, R2, R3 and S
LifePoints Funds, Target Date Series: Classes A, E, R1, R2, R3 and S
Tax-Managed Global Equity Fund: Classes C, E and S
RUSSELL INVESTMENT COMPANY
Supplement dated May 24, 2007 to
PROSPECTUSES DATED MARCH 1, 2007
I. | Diversified Bond Fund: The following information relates to the proposed reorganization of the Diversified Bond Fund into the Fixed Income I Fund and supplements the Russell Funds Prospectus listed above: |
In connection with the potential reorganization involving the Diversified Bond Fund, Russell Investment Company will file a proxy statement/prospectus with the Securities and Exchange Commission (“SEC”). All shareholders are advised to read the proxy statement/prospectus in its entirety when it becomes available because it will contain important information regarding the proposal, the persons soliciting proxies in connection with the proposal and the interests of these persons in the proposal and related matters. The proxy statement/prospectus will be mailed to record date shareholders once it is effective. Shareholders may obtain a free copy of the proxy statement/prospectus, when available, and other documents filed with the SEC at the SEC’s website at WWW.SEC.GOV. Copies of such documents will also be available, once they are filed with the SEC, at no charge by contacting Russell Investment Company at 909 A Street, Tacoma, WA 98402, or by calling 1-800-787-7354.
At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment Company, upon the recommendation of Russell Investment Management Company (“RIMCo”), approved, subject to shareholder approval, an Agreement and Plan of Reorganization (the “Plan”) to reorganize the Diversified Bond Fund into the Fixed Income I Fund (the “Reorganization”).
The Reorganization can be consummated only if, among other things, it is approved by shareholders of the Diversified Bond Fund. A Special Meeting of the shareholders of the Diversified Bond Fund is expected to be held on or about October 3, 2007 and shareholders will be given the opportunity to vote on the Plan. It is currently anticipated that on or about July 23, 2007, proxy materials regarding the Reorganization will be distributed to shareholders of record as of July 9, 2007. It is expected that effective at the close of business on July 9, 2007, the Diversified Bond Fund will be closed to new shareholders.
The Plan provides that (i) the Diversified Bond Fund would transfer to the Fixed Income I Fund all of its assets in exchange solely for voting shares of the Fixed Income I Fund and the assumption by the Fixed Income I Fund of the Diversified Bond Fund’s liabilities, (ii) such shares of the Fixed Income I Fund would be distributed to shareholders of the Diversified Bond Fund in liquidation of the Diversified Bond Fund and (iii) the Diversified Bond Fund would be subsequently dissolved.
If the Plan is approved by shareholders, shareholders of the Diversified Bond Fund will receive Class C, Class E or Class S shares of the Fixed Income I Fund with an aggregate value equal at the time of the completion of the Reorganization to the aggregate value of their Diversified Bond Fund Class C, Class E, or Class S Shares, respectively.
Table of Contents
As of April 30, 2007, the Diversified Bond Fund had assets of approximately $402 million. Assets of the Diversified Bond Fund have recently decreased significantly and assets are expected to continue to decline. Therefore, the Diversified Bond Fund is unlikely to achieve sufficient asset growth in the near future to assure its viability. The number of money managers used by the Fund depends, in part, upon the Fund’s asset level. Therefore, as a result of the declining assets, one or more money managers of the Fund may be terminated. However, RIMCo currently anticipates that the Diversified Bond Fund will be able to continue to pursue its investment objective pursuant to the investment strategies described in the Prospectus pending the Reorganization.
Shareholders of the Diversified Bond Fund should benefit from the Reorganization because the Fixed Income I Fund would have a larger asset base which should provide greater opportunities for diversifying investments and realizing economies of scale. After the Reorganization, as shareholders of the Fixed Income I Fund, the current shareholders of the Diversified Bond Fund should bear lower operating expenses than those they currently bear as shareholder of the Diversified Bond Fund. However, there can be no assurance that operational savings will be realized.
If the Reorganization is not approved by shareholders, the Diversified Bond Fund will continue to operate and the Trustees will consider what further action, if any, is in the best interests of the Diversified Bond Fund and its shareholders, including the possible liquidation of the Diversified Bond Fund. The Board has also approved, subject to approval by shareholders, an amendment to RIC’s Amended and Restated Master Trust Agreement which would allow the liquidation or reorganization of any Fund, including the Diversified Bond Fund, without the approval of the shareholders of such Fund.
II. | Real Estate Securities Fund: The following information relates to a proposed change in status of the Real Estate Securities Fund from a “diversified company” to a “non-diversified company” and supplements the Russell Funds, LifePoints Target Portfolio Series and LifePoints Target Date Series Prospectuses listed above: |
In connection with the proposed change in classification of the Real Estate Securities Fund, Russell Investment Company will file a proxy statement with the Securities and Exchange Commission (“SEC”). All shareholders are advised to read the proxy statement in its entirety when it becomes available because it will contain important information regarding the proposal, the persons soliciting proxies in connection with the proposal and the interests of these persons in the proposal and related matters. The proxy statement will be mailed to record date shareholders after it has been filed with the SEC. Shareholders may obtain a free copy of the proxy statement, when available, and other documents filed with the SEC at the SEC’s website at WWW.SEC.GOV. Copies of such documents will also be available, once they are filed with the SEC, at no charge by contacting Russell Investment Company at 909 A Street, Tacoma, WA 98402, or by calling 1-800-787-7354.
The Real Estate Securities Fund is currently classified as a “diversified company” under the Investment Company Act. This means that as to 75% of its assets, no individual security can represent more than 5% of the Fund’s total assets, and the Fund cannot own more than 10% of any one issuer’s outstanding voting securities. Government securities and securities of other investment companies are excluded from this restriction. The Fund’s diversification policy is a fundamental policy that can be changed only by a shareholder vote.
At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment Company, upon the recommendation of Russell Investment Management Company, approved, subject to shareholder approval, the change in status of the Real Estate Securities Fund from a “diversified company” to a “non-diversified company.” The proposed change from diversified to non-diversified status is intended to provide the Fund with greater investment flexibility to respond to consolidation in the Real Estate Investment Trust (“REIT”) industry and to take larger positions in one or more issuers in the REIT industry. As a non-diversified fund, the Fund will be subject to additional risk. To the extent the Fund invests a relatively high percentage of its assets in the securities of a single issuer or group of issuers, the Fund’s performance will be more vulnerable to changes in the market value of the single issuer or group of issuers, and more susceptible to risks associated with a single economic, political or regulatory occurrence, than it would be had the Fund continued to operate as a diversified fund.
Table of Contents
The change in status can be effected only if, among other things, it is approved by the shareholders of the Real Estate Securities Fund. A Special Meeting (the “Meeting”) of the shareholders of the Fund is expected to be held on or about October 3, 2007 and shareholders will be given the opportunity to vote on the change in status.
It is currently anticipated that on or about July 23, 2007, proxy materials regarding the change in status will be distributed to shareholders of record as of July 9, 2007.
III. | Conservative Strategy Fund: The following information corrects the average annual total returns for the periods ended December 31, 2006 and the inception date footnote for the Class R1 Shares of the Conservative Strategy Fund in the section entitled “Performance” in the LifePoints Target Portfolio Series Prospectus: |
Average annual total returns for | 1 Year | 5 Years | Since Inception | ||||||
Return Before Taxes, Class R1# | 6.60 | % | 4.91 | % | 5.41 | % |
# The Fund first issued Class R1 Shares on December 29, 2006. The returns shown for Class R1 Shares prior to this date are the returns of the Fund’s Class E Shares from November 7, 1997 to February 13, 2000 and the Fund’s Class S Shares from February 14, 2000 to December 28, 2006.
IV. | Moderate Strategy Fund: The following information corrects the inception date footnote for the Class R1 Shares of the Moderate Strategy Fund in the section entitled “Performance” in the LifePoints Target Portfolio Series Prospectus: |
# The Fund first issued Class R1 Shares on October 3, 2006. The returns shown for Class R1 Shares prior to this date are the returns of the Fund’s Class E Shares from October 2, 1997 to January 31, 2000, and the Fund’s Class S Shares from February 1, 2000 to October 2, 2006.
V. | 2010 Strategy Fund: The following information corrects the average annual total returns for the periods ended December 31, 2006 and the inception date footnote for the Class R2 Shares of the 2010 Strategy Fund in the section entitled “Performance” in the LifePoints Target Date Series Prospectus: |
Average annual total returns for | 1 Year | Since Inception | ||||
Return Before Taxes, Class R2**** | 9.93 | % | 7.46 | % |
**** The Fund first issued Class R2 Shares on November 10, 2006. The returns shown for Class R2 Shares prior to November 10, 2006 are the returns of Class E Shares.
VI. | Multistrategy Bond Fund: The following information corrects the average annual total returns for the periods ended December 31, 2006 and the footnote for the Class A Shares of the Multistrategy Bond Fund in the section entitled “Performance” in the Russell Funds Prospectus: |
Average annual total returns for | 1 Year | 5 Years | 10 Years | ||||||
Return Before Taxes, Class A* | (0.24 | )% | 4.15 | % | 5.22 | % |
* No Class A Shares were outstanding during the periods shown. The returns shown for Class A Shares are the returns of Class E Shares from January 1, 1997 to September 10, 1998 and do not reflect deduction of Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares are the returns of Class E Shares from September 11, 1998 to December 31, 2006. The performance shown has been adjusted to reflect deduction of the maximum Class A sales charge of 3.75%.
Table of Contents
VII. | Short Duration Bond Fund: The following information corrects the average annual total returns for the periods ended December 31, 2006 and the footnote for the Class A Shares of the Short Duration Bond Fund in the section entitled “Performance” in the Russell Funds Prospectus: |
Average annual total returns for | 1 Year | 5 Years | 10 Years | ||||
Return Before Taxes, Class A* | (0.40 | )% | 1.98% | 3.99% |
* No Class A Shares were outstanding during the periods shown. The returns shown for Class A Shares are the returns of Class S Shares from January 1, 1997 to February 17, 1999 and do not reflect deduction of Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares are the returns of Class E Shares from February 18, 1999 to December 31, 2006. The performance shown has been adjusted to reflect deduction of the maximum Class A sales charge of 3.75%.
VIII. | Money Market Fund: The following information corrects the effective 7-day yields as of December 31, 2006 for the Money Market Fund in the section entitled “Performance” in the Russell Funds Prospectus: |
7-Day Yields as of December 31, 2006 | Effective | |
Money Market Fund Class A | 5.29% | |
Money Market Fund Class S | 5.40% |
IX. | All Russell Funds: The following information corrects the Shareholder Fees table in the section entitled “Fees and Expenses” in the Russell Funds Prospectus: |
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases | Maximum Sales Charge (Load) Imposed on Reinvested Dividends | Maximum Deferred Sales Charge (Load) | Redemption Fees** | Exchange Fees | |||||||
Class A, except Money Market Fund, Multistrategy Bond Fund and Short Duration Bond Fund | 5.75% | None | 1.00% | * | None | None | |||||
Class A, Multistrategy Bond Fund and Short Duration Bond Fund | 3.75% | None | 1.00% | * | None | None | |||||
Class A, Money Market Fund | None | None | None | None | None | ||||||
Class C, E, S | None | None | None | None | None |
* | There is a 1.00% deferred sales charge on redemptions of Class A Shares (except Class A of the Money Market Fund) made within 12 months of a purchase of $1 million or more on which no front-end sales charge was paid and your Financial Intermediary was paid a commission by the Funds’ Distributor. |
** | Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. For more information, please refer to the section “Payment of Redemption Proceeds.” |
X. | Select Growth Fund: The following information is added to the ** footnote of the Annual Fund Operating Expenses table in the section entitled “Fees and Expenses” in the Institutional Funds Class E and I Shares Prospectus: |
For the Class I Shares of the Select Growth Fund, RIMCo, as transfer agent to RIC, has contractually agreed to waive, at least until February 29, 2008, its transfer agency fees for Class I Shares to the extent that those fees for that class exceed 0.01% of the average daily net assets of the Class I Shares.
Table of Contents
XI. | All Target Date Series Funds: The following information is added to the ** footnote of the Annual Fund Operating Expenses table in the section entitled “Fees and Expenses” in the Target Date Series Prospectus: |
“Other Expenses” includes a shareholder services fee of 0.25% of average daily net assets for Class E and an administrative fee of 0.05% of average daily net assets for all Classes of Shares.
XII. | All Funds: The following language is added to the section entitled “How To Purchase Shares” in each of the Russell Investment Company Prospectuses listed above: |
Except for the Money Market Fund, Class E, I and S Shares of each Fund may only be purchased by:
(1) | clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for their services for the shareholder account in which the Class E, I or S Shares are held; |
(2) | employee benefit and other plans, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing plans, money purchase plans, defined benefit plans and non-qualified deferred compensation plans; |
(3) | clients of Financial Intermediaries who are members of Russell Investment Group; |
(4) | Russell employee investment programs; or |
(5) | current and retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell such Class E, I or S Shares. |
The Funds generally do not have the ability to enforce these limitations on access to Class E, I and S Shares. It is the sole responsibility of each Financial Intermediary to ensure that it only makes Class E, I and S Shares available to those categories of investors listed above that qualify for access to Class E, I and S Shares. However, the Funds will not knowingly sell Class E, I or S Shares to any investor not meeting one of the foregoing criteria.
XIII. | All Funds: The following language is added to the section entitled “Right to Reject or Restrict Purchase and Exchange Orders” in each of the Russell Investment Company Prospectuses listed above: |
The Funds may be unable to compel Financial Intermediaries to apply the steps described in the Funds’ Prospectus in the section entitled “Right to Reject or Restrict Purchase and Exchange Orders” to curtail frequent trading in Fund shares. The Funds reserve the right, in their sole discretion, to allow Financial Intermediaries to apply alternative frequent trading policies and trading restrictions reasonably designed to reduce incentives to engage in frequent trading. The Funds will use reasonable diligence to confirm that such intermediaries are applying the Funds’ frequent trading policy or an acceptable alternative.
XIV. | The following replaces the information in the section entitled “Money Manager Information” for the Emerging Markets Fund in the Tax-Managed Global Equity Prospectus: |
Emerging Markets Fund
AllianceBernstein L.P., 1345 Avenue of the Americas, 35th Floor, New York, NY 10105.
Arrowstreet Capital, Limited Partnership, 44 Brattle Street, 5th Floor, Cambridge MA 02138.
Genesis Asset Managers, LLP, P.O. Box 466 Barclays Court, Les Echelons, St. Peter Port, Guernsey, GY1 6AW Channel Islands.
Harding, Loevner Management, L.P., 50 Division Street, Suite 401, Somerville, NJ 08876.
T. Rowe Price International, Inc., 100 East Pratt Street, Baltimore, MD 21202-1009.
Table of Contents
XV. | The following replaces the information in the section entitled “Money Manager Information” for the Special Growth Fund, Equity II Fund, Select Growth Fund and Tax-Managed Large Cap Fund in each of the Russell Investment Company Prospectuses listed above, as applicable: |
Equity II and Special Growth Fund
Berkeley Capital Management LLC, One Bush Street, 12th Floor, San Francisco, CA 94104.
ClariVest Asset Management LLC, 11452 El Camino Real, Suite 250, San Diego, CA 92130.
David J. Greene and Company, LLC, 599 Lexington Avenue, New York, NY 10022-6067.
Delphi Management, Inc., 50 Rowes Wharf, Suite 540, Boston, MA 02110.
Gould Investment Partners LLC, 1235 Westlakes Drive, Suite 280, Berwyn, PA 19312-2412.
Jacobs Levy Equity Management, Inc., 100 Campus Drive, P.O. Box 650, Florham Park, NJ 07932-0650.
PanAgora Asset Management, Inc., 260 Franklin Street, 22nd Floor, Boston, MA 02110.
Tygh Capital Management, Inc., 1211 S.W. Fifth Avenue, Suite 2100 Portland, OR 97204.
Select Growth Fund
Ark Asset Management Co., Inc., 125 Broad Street, New York, NY 10004.
Berkeley Capital Management LLC, One Bush Street, 12th Floor, San Francisco, CA 94104.
Delaware Management Company, a series of Delaware Management Business Trust, 2005 Market Street, Philadelphia, PA 19103-3682.
Fuller & Thaler Asset Management, Inc. 411 Borel Avenue, Suite 300, San Mateo, CA 94402.
Sustainable Growth Advisers, LP, 3 Stamford Plaza, 301 Tresser Blvd, Suite 1310, Stamford, CT 06901
Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.
Tax-Managed Large Cap Fund
Armstrong Shaw Associates Inc., 45 Grove Street, New Canaan, CT 06840.
J.P. Morgan Investment Management Inc., 245 Park Avenue 3rd Floor, New York, NY 10167.
Palisades Investment Partners, LLC, 1453 Third Street Promenade, Suite 310, Santa Monica, CA 90401.
Sands Capital Management, Inc., 1100 Wilson Boulevard, Suite 3050, Arlington, VA 22209.
Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.
XVI. | Short Duration Bond Fund: The following information restates the ticker for the Class A Shares of the Short Duration Bond Fund in the section entitled “Tickers and CUSIPs of the Funds” in the Russell Funds Prospectus: |
Class A Shares | Class A Shares Ticker | |
Short Duration Bond Fund | RSBTX |
Table of Contents
36-08-170 (1 05/07) and 539784
Table of Contents
May 24, 2007
Dear Financial Professional:
As you know, Russell changed the asset allocation of the underlying funds in which the LifePoints Funds invest as well as its Model Strategies on March 1, 2007 to remove the Diversified Bond Fund from the allocation. As a result, the Diversified Bond Fund’s assets under management have declined significantly and are expected to continue to decline as financial intermediaries implement changes to their model strategies to remove the Diversified Bond Fund as an investment in their asset allocation. The Diversified Bond Fund is unlikely to achieve sufficient asset growth in the near future to assure its viability and we proposed to the Russell Investment Company (RIC) Fund Board the merger of the Diversified Bond Fund into the Fixed Income I Fund. The RIC board approved the merger of the Diversified Bond Fund into the Fixed Income I Fund, subject to approval by the shareholders of the Diversified Bond Fund. The proposed merger will be reflected in a May 24, 2007 prospectus supplement.
Shareholders of the Diversified Bond Fund may benefit from the reorganization because the Fixed Income I Fund would have a larger asset base which should provide greater opportunities for diversifying investments and realizing economies of scale. After the reorganization, as shareholders of the Fixed Income I Fund, the current shareholders of the Diversified Bond Fund should bear lower operating expenses than they currently do. However, there can be no assurance that operational savings will be realized.
Consummation of the merger requires shareholder approval. The record date for the shareholder vote is July 9, 2007. Proxy statements will be sent to all Diversified Bond Fund shareholders who own shares on the record date and the RIC Board will be soliciting the votes of those shareholders on the merger. If your current investors no longer hold shares as of July 9, they will not be solicited for their vote on the merger.
The Diversified Bond Fund will close to new shareholders at the close of business on July 9. It is expected that existing shareholders may make additional contributions until October 15 or reinvest dividends until October 17. Should the merger be approved by shareholders, investors who maintain positions should be aware that the dividend payment schedule will change from monthly for Diversified Bond to quarterly for Fixed Income I.
This is just one proposed change to Russell Funds that your clients may inquire about based on the May 24 prospectus update. Based on a proposal by Russell, the RIC Board of Trustees has also approved the liquidation of the Tax Free Money Market Fund and the US Government Money Market Fund, subject to shareholder approval. These money market funds are not part of Russell’s core product line and are not used in our asset-allocated strategies or funds. This change is also subject to shareholder approval and will necessitate a proxy solicitation.
The two money market funds will close to new shareholders at the close of business on May 31 and close to existing shareholders on October 3. Shareholders of the funds may exchange their shares for shares of the same class of another Russell fund. Please note that there may be tax implications as a result of an exchange. The RIC Money Market Fund continues to be our primary cash-equivalent option. It is not a tax-exempt fund but may be a viable solution for your clients.
Shareholders who do not exchange or liquidate positions in the Diversified Bond Fund or the two money market funds by the July 9 record date will receive the proxy statements in late July or early August. The shareholder meeting is on October 3.
Also submitted to shareholder vote will be the re-classification of the Real Estate Securities Fund from “diversified” to “non-diversified.” The proposed change is intended to provide the Real Estate Securities Fund with greater investment flexibility to respond to consolidation in the Real Estate Investment Trust (“REIT”) industry and to take larger positions in one or more issuers in the REIT industry. As a non-diversified fund, the fund may be subject to additional risk.
Table of Contents
Please be proactive with clients who hold positions in the Diversified Bond Fund and either of the money market funds proposed for liquidation discussing their options and interest in participating in the proxy voting process.
Should you have any questions about upcoming proxy voting or communicating these issues to your clients, please contact your Russell sales and service team at 800-787-7354.
We appreciate your business and look forward to delivering capital markets insight, intelligent portfolio design and effective practice management to help your practice thrive.
Regards,
Russell Investment Management Company
In connection with the potential reorganization involving the Diversified Bond and Fixed Income I Funds, Russell Investment Company will file a proxy statement/prospectus with the Securities and Exchange Commission (“SEC”). In connection with the potential liquidations of the US Government Money Market and Tax Free Money Market Funds and other proposals, Russell Investment Company will file a proxy statement with the SEC. All shareholders are advised to read the proxy statement/prospectus and the proxy statement in their entirety when they become available because they will contain important information regarding the proposals, the persons soliciting proxies in connection with the proposals, and the interests of these persons in the proposals and related matters. The proxy statement/prospectus and the proxy statement will be mailed to record date shareholders once they are effective. Shareholders may obtain a free copy of the proxy statement/prospectus and the proxy statement, when available, and other documents filed with the SEC at the SEC’s website at WWW.SEC.GOV. Copies of such documents will also be available, once they are filed with the SEC, at no charge by contacting Russell Investment Company at 909 A Street, Tacoma, WA 98402, or by calling 1-800-787-7354.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information can be obtained by calling (800) 787-7354 or visiting www.russell.com. Please read the prospectus carefully before investing.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Effective July 1, 2006 Frank Russell Investment Company changed its name to Russell Investment Company (RIC). RIC Funds are distributed by Russell Fund Distributors, Inc., and advised by Russell Investment Management Company (RIMCo). Effective July 1, 2006 RIMCo changed its name from Frank Russell Investment Management Company.
Securities distributed through Russell Fund Distributors, Inc. member NASD, part of Russell Investment Group.
First used: May 2007. RFD 07-6752.
THIS MATERIAL IS FOR FINANCIAL PROFESSIONAL USE ONLY
AND NOT FOR DISTRIBUTION TO CURRENT OR POTENTIAL INVESTORS.
Table of Contents
PART C
OTHER INFORMATION
Item 15. | Indemnification is provided to officers and Trustees of the Registrant pursuant to Section 6.4 of Article VI of Registrant’s Amended and Restated Master Trust Agreement, which reads as follows: |
Section 6.4 Indemnification of Trustees, Trustees Emeritus, Officers, etc. The Trust shall indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of its Trustees, Trustees Emeritus and officers (including persons who serve at the Trust’s request as directors, officers, trustees or trustees emeritus of another organization in which the Trust has any interest as a shareholder, creditor or otherwise (hereinafter referred to as a “Covered Person”) against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and expenses, including reasonable accountants’ and counsel fees, incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee, Trustee Emeritus or officer, director, trustee or trustee emeritus, except with respect to any matter as to which it has been determined that such Covered Person (i) did not act in good faith in the reasonable belief that such Covered Person’s action was in or not opposed to the best interests of the Trust or (ii) had acted with willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person’s office (either and both of the conduct described in (i) and (ii) being referred to hereafter as “Disabling Conduct”). A determination that the Covered Person is entitled to indemnification may be made by (i) a final decision on the merits by a court or other body before whom the proceeding was brought that the person to be indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a court action or an administrative proceeding against a Covered Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable determination, based upon a review of the facts, that the Covered Person was not liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are neither “interested persons” of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent legal counsel in a written opinion. Expenses, including accountants’ and counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), may be paid from time to time by the Sub-Trust in question in advance of the final disposition of any such action, suit or proceeding, provided that the Covered Person shall have undertaken to repay the amounts so paid to the Sub-Trust in question if it is ultimately determined that indemnification of such expenses is not authorized under this Article VI and (i) the Covered Person shall have provided security for such undertaking, (ii) the Trust shall be insured against losses arising by reason of any lawful advances, or (iii) a majority of a quorum of the disinterested Trustees who are not a party to the proceeding, or an independent legal counsel in a written opinion, shall have determined, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification.
Insurance is provided to officers and Trustees of the Registrant pursuant to Section I.A of Registrant’s Mutual Fund and Directors and Officers Errors and Omissions Professional Liability Insurance policy, which reads as follows:
Section I.A. Insurance Agreements.
The Insurer will pay on behalf of the Individual Insured(s) in accordance with the terms hereof all Loss in excess of the Deductible set forth in Item 4 of the Declarations up to the available Limit of Liability set forth in Item 3 thereof, which is incurred by the Individual Insured(s) as a result of any Claim first made against them during the Policy Period or the Extended Discovery Period, if purchased, except such Loss which the Company or Investment Fund(s) pays as indemnification.
The term “Insured(s)” shall mean any persons who were, now are, or shall be directors, officers, partners, trustees, employees, general partners, or members of the Company or an Investment Fund while acting in their capacities or within the scope of their duties as such, or any person contracted to perform duties or services on behalf of the Company or an Investment Fund while under the supervision of the Company or Investment Fund (herein after also known as “Individual Insured(s)”).
Table of Contents
The term “Investment Fund” means an entity which is created or established by the Insured(s) consisting of a sum of money whose principal is invested, or to be invested, pursuant to the objectives set forth in such entity’s private placement memorandum, prospectus, or similar document; provided, however, that a newly created Investment Fund and its Individual Insured(s) shall be Insured(s) under this Policy, but only with respect to Wrongful Acts taking place after such creation.
The term “Loss” shall mean:
1) | compensatory damages, judgments, settlements, costs, charges and expenses or other sums the Insured(s) shall legally become obligated to pay as damages resulting from any Claim or Claim(s) and Defense Costs; |
2) | costs, charges and expenses or other damages incurred in connection with any investigation by any governmental body or self regulatory organization (SRO); provided, however, Loss shall not include: |
(i) | fines or penalties imposed by law; or |
(ii) | taxes; or |
(iii) | salaries, commissions, regular or overtime wages or fees of Individual Insured(s); or |
(iv) | administration or overhead charges, or charges of any kind or character whatsoever, attributable to any in-house counsel of the Company or any Investment Fund; or |
(v) | matters which are uninsurable under the law pursuant to which this Policy shall be construed; provided that punitive or exemplary damages shall be deemed insurable under this Policy if such damages are insurable under the law of the jurisdiction that is most favorable to the insurability of such damages and is where: |
a) such damages were awarded or imposed;
b) any Wrongful Act took place for which such damages were awarded or imposed;
c) any Company is incorporated or has its principal place of business; or
d) the Insurer is incorporated or has its principal place of business; or
(vi) | loss of actual money, securities, property or other items of value in the custody or control of the Insured (s); or diminution in value of money, securities, property or any other item of value unless caused by a Wrongful Act of the Insured(s). |
The term “Claim(s)” shall mean:
1) | a civil proceeding commenced by the service of a complaint or similar pleading, or |
2) | any investigation into possible violations of law or regulation initiated by any governmental body or self regulatory organization (SRO), or any proceeding commenced by the filing of a notice of charges, or formal investigative order or similar document, or |
Table of Contents
3) | a written demand |
against any Insured(s) for any Wrongful Act, including any appeal therefrom.
The term “Policy Period” means that period from the inception date set forth in Item 2 of the Declarations to the expiration date set forth therein, or to any earlier cancellation date pursuant to Section XIV hereof.
Item 16. | Exhibits |
(1) 1.1 Amended and Restated Master Trust Agreement dated August 19, 2002 (incorporated by reference from Post-Effective Amendment No. 61 dated December 16, 2002 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.2 Amendment No. 1 to Amended and Restated Master Trust Agreement dated October 8, 2002 (incorporated by reference from Post-Effective Amendment No. 61 dated December 16, 2002 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.3 Amendment No. 2 to Amended and Restated Master Trust Agreement dated November 25, 2002 (incorporated by reference from Post-Effective Amendment No. 61 dated December 16, 2002 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.4 Amendment No. 3 to Amended and Restated Master Trust Agreement dated May 20, 2003 (incorporated by reference to Post-Effective Amendment No. 69 dated March 1, 2004 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.5 Amendment No. 4 to Amended and Restated Master Trust Agreement dated May 25, 2004 (incorporated by reference to Post-Effective Amendment No. 73 dated December 3, 2004 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.6 Amendment No. 5 to Amended and Restated Master Trust Agreement dated August 24, 2004 (incorporated by reference to Post-Effective Amendment No. 73 dated December 3, 2004 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.7 Amendment No. 6 to Amended and Restated Master Trust Agreement dated February 23, 2005 (incorporated by reference to Post-Effective Amendment No. 78 dated April 19, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.8 Amendment No. 7 to Amended and Restated Master Trust Agreement dated May 17, 2005 (incorporated by reference to Post-Effective Amendment No. 80 dated June 29, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.9 Amendment No. 8 to Amended and Restated Master Trust Agreement dated August 23, 2005 (incorporated by reference to Post-Effective Amendment No. 81 dated December 7, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.10 Amendment No. 9 to Amended and Restated Master Trust Agreement dated November 15, 2005 (incorporated by reference to Post-Effective Amendment No. 81 dated December 7, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
Table of Contents
1.11 Amendment No. 10 to Amended and Restated Master Trust Agreement dated November 15, 2005 (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.12 Amendment No. 11 to Amended and Restated Master Trust Agreement dated November 15, 2005 (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
1.13 Form of Amendment No. 12 to Amended and Restated Master Trust Agreement dated November 15, 2005 (incorporated by reference to Post-Effective Amendment No. 86 dated November 13, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
(2) | 2.1 Amended By-Laws of Frank Russell Investment Company dated August 23, 2005 (incorporated by reference to Post-Effective Amendment No. 81 dated December 7, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
(3) | Not applicable. |
(4) | 4.1 Form of Agreement and Plan of Reorganization of the Diversified Bond Fund (included as Exhibit A to the Prospectus/Proxy Statement which is part of this Registration Statement on Form N-14) |
(5) | 5.1 Form of Shares of Beneficial Interest for the Diversified Bond Fund (incorporated by reference to Item 24(b)(4)(a) filed under Post-Effective Amendment No. 39 dated April 28, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
(6) | 6.1 Advisory Agreement with Frank Russell Investment Management Company dated January 1, 1999 (incorporated by reference to Item 23(4)(a)(1) filed under Post-Effective Amendment No. 42 dated February 28, 1999 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
6.2 Amendment to Advisory Agreement dated January 1, 2005 (incorporated by reference to Post-Effective Amendment No. 83 dated February 28, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
6.3 Amendment to the Advisory Agreement dated May 1, 2006 (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
6.4 Form of Portfolio Management Contract with Money Managers and Frank Russell Investment Company (incorporated by reference from Post-Effective Amendment No. 89 dated December 8, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
(7) | 7.1 Distribution Agreement with Russell Fund Distributors, Inc. dated January 1, 1999 due to change in control (incorporated by reference to Item 23(5)(a)(16) filed under Post-Effective Amendment No. 42 dated February 18, 1999 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
7.2 Form of Letter Agreements regarding fee waivers and reimbursements (incorporated by reference from Post-Effective Amendment No. 96 dated February 28, 2007 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
7.3 Letter Agreements regarding administrative fee and direct expenses of the Funds of Funds waivers & reimbursements (incorporated by reference from Post-Effective Amendment No. 96 dated February 28, 2007 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
(8) | 8.1 Bonus or Profit Sharing Plans (none) |
(9) | 9.1 Custodian Contract with State Street Bank and Trust Company dated October 31, 1988 (incorporated by reference to Item 24(b)(8)(a) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
Table of Contents
9.2 Amendment No. 1 to Custodian Contract dated January 31, 1994 with State Street Bank and Trust Company amending Section 3.5 of the Agreement (incorporated by reference to Item 24(b)(8)(e) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.3 Form of Amendment to Custodian Contract with State Street Bank and Trust Company amending Sections 2.2 and 2.7 of the Agreement (incorporated by reference to Item 24(b)(8)(f) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.4 Amendment dated October 31, 1998 to the Custodian Contract with State Street Bank amending Section 2.7 of the Agreement (incorporated by reference to Item 24(b)(8)(g) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.5 Amendment to the Fee Schedule of the Custodian Contract with State Street Bank and Trust Company (incorporated by reference to Item 24(b)(8)(h) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.6 Amendment to the Custodian Contract dated August 11, 1995 with State Street Bank and Trust Company for addition of Omnibus accounts (incorporated by reference to Item 24(b)(8)(i) filed under Post-Effective Amendment No. 32 dated May 1, 1996 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.7 Amendment to the Custodian Contract dated April 18, 1994 with State Street Bank and Trust Company amending Section 7 of the Fee Schedule for all Funds except the Emerging Markets Fund (incorporated by reference to Item 24(b)(8)(j) filed under Post-Effective Amendment No. 32 dated May 1, 1996 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.8 Amendment to the Custodian Contract dated August 7, 1995 with State Street Bank and Trust Company amending Section 7 of the Fee Schedule for the Emerging Markets Fund (incorporated by reference to Item 24(b)(8)(k) filed under Post-Effective Amendment No. 32 dated May 1, 1996 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.9 Amendment to Custodian Contract between FRIC and State Street Bank and Trust Company (“Custodian”) dated July 2, 2001 (incorporated by reference from Post-Effective Amendment No. 53 dated October 10, 2001 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.10 Custodian Contract Fee Schedule dated as of February 1, 2004 (incorporated by reference to Post-Effective Amendment No. 77 dated February 28, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.11 Amendment to the Custodian Contract between RIC and the custodian dated January 20, 2006 (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
9.12 Custodian Contract Fee Schedule dated as of February 1, 2006 (incorporated by reference to Post-Effective Amendment No. 89 dated December 8, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
Table of Contents
(10) | 10.1 Form of Rule 12b-1 Distribution Plan (incorporated by reference to Post-Effective Amendment No. 86 dated November 13, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
10.2 Multiple Class Plan Pursuant to Rule 18f-3 (incorporated by reference from Post-Effective Amendment No. 86 dated November 13, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
(11) | 11.1 Opinion and Consent of Counsel (filed herewith) |
(12) | 12.1 Opinion and Consent of Dechert LLP regarding tax matters (to be filed by amendment within a reasonable time after the closing of the Reorganization) |
(13) | 13.1 Amended and Restated Administrative Agreement with Frank Russell Investment Management Company dated May 25, 2004 (incorporated by reference to Post-Effective Amendment No. 77 dated February 28, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153)) |
13.2 Yield Calculation Services Agreement dated August 2, 1988 with State Street Bank and Trust Company (incorporated by reference from Post-Effective Amendment No. 46 dated April 27, 2000 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.3 Letter Agreement to the Yield Calculation Services Agreement dated January 26, 1999 redesignating Class C Shares as Class E Shares and the existing shares of Institutional Funds to Class I Shares (incorporated by reference to Item 23(4)(b)(9) filed under Post-Effective Amendment No. 42 dated February 18, 1999 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.4 Letter Agreement to the Yield Calculation Services Agreement dated January 26, 1999 redesignating Premier Adviser Class Shares as Premier Class Shares and Premier Institutional Class Shares as Class E Shares (incorporated by reference to Item 23(4)(b)(10) filed under Post-Effective Amendment No. 42 dated February 18, 1999 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.5 Form of Amended and Restated Yield Calculation Services Agreement with State Street Bank and Trust Company (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.6 General forms of Frank Russell Investment Management Company’s Asset Management Services Agreements with Bank Trust Departments and other clients (incorporated by reference to Item 24(b)(9)(b) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.7 General forms of Frank Russell Investment Management Company’s Asset Management Services Agreement with its clients (incorporated by reference to Item 24(b)(9)(c) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.8 General form of Frank Russell Investment Management Company’s Asset Management Services Agreement with Private Investment Consulting clients of Frank Russell Company (incorporated by reference to Item 24(b)(9)(c) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
Table of Contents
13.9 General Form of Frank Russell Investment Management Company Asset Management Services Agreement with non-compete clause customers (incorporated by reference to Item 24(b)(9)(f) filed under Post-Effective Amendment No. 38 dated February 24, 1998 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.10 Letter Agreements regarding fee waivers & reimbursements (incorporated by reference to Post-Effective Amendment No. 66 dated February 28, 2003 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.11 Credit Agreement dated as of December 30, 1999 among Frank Russell Investment Company, Bank of America, N.A., State Street Bank and Trust Company and Other Banks (incorporated by reference from Post-Effective Amendment No. 46 dated April 27, 2000 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.12 First Amendment to Credit Agreement dated as of December 28, 2000 among Frank Russell Investment Company, Bank of America, N.A., State Street Bank and Trust Company and Other Banks (incorporated by reference from Post-Effective Amendment No. 53 dated October 10, 2001 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.13 Second Amendment to Credit Agreement dated as of December 27, 2001 among Frank Russell Investment Company, Bank of America, N.A., State Street Bank and Trust Company (incorporated by reference from Post-Effective Amendment No. 56 dated March 1, 2002 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.14 Form of Third Amendment to Credit Agreement dated as of December 26, 2002 among Frank Russell Investment Company, Bank of America, N.A., State Street Bank and Trust Company (incorporated by reference from Post-Effective Amendment No. 64 dated January 15, 2003 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.15 Form of Fourth Amendment to Credit Agreement dated as of December 24, 2003 (incorporated by reference to Post-Effective Amendment No. 69 dated March 1, 2004 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.16 Fifth Amendment to Credit Agreement dated as of December 22, 2004 (incorporated by reference to Post-Effective Amendment No. 77 dated February 28, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.17 Form of Sixth Amendment to Credit Agreement dated as of March 1, 2005 (incorporated by reference to Post-Effective Amendment No. 77 dated February 28, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.18 Seventh Amendment to Credit Agreement dated as of December 21, 2005 (incorporated by reference to Post-Effective Amendment No. 83 dated February 28, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.19 Eighth Amendment to Credit Agreement dated as of May 23, 2006 (incorporated by reference to Post-Effective Amendment No. 84 dated August 24, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.20 Form of Shareholder Services Plan (incorporated by reference to Post-Effective Amendment No. 86 dated November 13, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
Table of Contents
13.21 Form of Special Servicing Agreement with Fund of Funds, Underlying Funds and Frank Russell Investment Management Company (incorporated by reference to Post-Effective Amendment No. 52 dated March 1, 2001 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.22 Form of Side Letter relating to Special Servicing Agreement with the Fund of Funds, Underlying Funds and Frank Russell Investment Management Company (incorporated by reference to Post-Effective Amendment No. 66 dated February 28, 2003 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.23 Second Amended and Restated Joint Insurance Agreement dated November 29, 2006 (incorporated by reference to Post-Effective Amendment No. 89 dated December 8, 2006 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
13.24 Transfer Agency and Service Agreement dated July 1, 2005 with Frank Russell Investment Company and Frank Russell Investment Management Company (incorporated by reference to Post-Effective Amendment No. 81 dated December 7, 2005 to the Registrant’s Registration Statement on Form N-1A (SEC File Nos. 2-71299/811-3153))
(14) | 14.1 Other Consents - Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm of the registrant (filed herewith) |
(15) | 15.1 Omitted Financial Statements - None |
(16) | 16.1 Powers of Attorney – (filed herewith) |
(17) | 17.1 Forms of proxy related to the Special Meeting of Shareholders of Diversified Bond Fund (filed herewith) |
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CRF 203.145c], the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an opinion of counsel or a copy of a ruling of the Internal Revenue Service supporting the tax consequences of the proposed reorganization within a reasonable time after the closing.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, Russell Investment Company, has duly caused this Registration Statement on Form N-14 to be signed on its behalf by the undersigned thereto duly authorized, in the City of Tacoma, and State of Washington, on this 22nd day of May, 2007.
RUSSELL INVESTMENT COMPANY Registrant | ||
By: | /s/ Greg J. Stark | |
Greg J. Stark, President and | ||
Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on May 22, 2007.
Signatures | Signatures | |
/s/ Greg J. Stark | /s/ Mark E. Swanson | |
Greg J. Stark, President and | Mark E. Swanson, Treasurer, in his capacity as | |
Chief Executive Officer | Chief Accounting Officer | |
/s/ Thaddas A. Alston | /s/ Kristianne Blake | |
Thaddas A. Alston, Trustee | Kristianne Blake, Trustee | |
/s/ Daniel P. Connealy | /s/ Jonathan Fine | |
Daniel P. Connealy, Trustee | Jonathan Fine, Trustee | |
/s/ Raymond P. Tennison, Jr. | /s/ Jack R. Thompson | |
Raymond P. Tennison, Jr., Trustee | Jack R. Thompson, Trustee | |
/s/ Julie W. Weston | ||
Julie W. Weston, Trustee |
Table of Contents
Exhibit Index
Exhibit Number | Exhibit Title | |
11.1 | Opinion and Consent of Counsel | |
14.1 | Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm | |
16.1 | Powers of Attorney | |
17.1 | Form of Proxy Related to the Special Meeting |