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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-05371
Russell Investment Funds
(Exact name of registrant as specified in charter)
1301 2nd Avenue 18th Floor, Seattle Washington 98101
(Address of principal executive offices) (Zip code)
Mary Beth R. Albaneze, Secretary and Chief Legal Officer
Russell Investment Funds
1301 2nd Avenue
18th Floor
Seattle, Washington 98101
206-505-4846
______________________________________________
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-787-7354
Date of fiscal year end: December 31
Date of reporting period: January 1, 2015 to December 31, 2015
Item 1. Reports to Stockholders
Russell Investment Funds
Russell Investment Funds is
a series investment company
with nine different investment
portfolios referred to as Funds.
These financial statements report
on five of these Funds.
Russell Investment Funds
Annual Report
December 31, 2015
Table of Contents
Page | |
To Our Shareholders | 3 |
Market Summary | 4 |
Multi-Style Equity Fund | 10 |
Aggressive Equity Fund | 26 |
Non-U.S. Fund | 44 |
Core Bond Fund | 64 |
Global Real Estate Securities Fund | 100 |
Notes to Schedules of Investments | 118 |
Notes to Financial Highlights | 120 |
Notes to Financial Statements | 121 |
Report of Independent Registered Public Accounting Firm | 141 |
Tax Information | 142 |
Affiliated Brokerage Transactions | 143 |
Basis for Approval of Investment Advisory Contracts | 144 |
Shareholder Requests for Additional Information | 156 |
Disclosure of Information about Fund Trustees and Officers | 157 |
Adviser, Money Managers and Service Providers | 164 |
Russell Investment Funds
Copyright © Russell Investments 2016. All rights reserved.
Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is part
of London Stock Exchange Group.
Fund objectives, risks, charges and expenses should be carefully considered before in-
vesting. A prospectus containing this and other important information must precede or
accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Financial Services, Inc., member FINRA and part of Russell
Investments.
Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance,
are not a guarantee of future performance, and are not indicative of any specific investment. Index return
information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its
affiliates.
Russell Investments is the owner of the trademarks, service marks, and copyrights related to its respective indexes.
Performance quoted represents past performance and does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance data quoted.
To Our Shareholders
Fellow Shareholder,
The redeeming aspect of the market volatility in 2015 is its underscoring the importance of shareholders having solid,
long-term financial plans, realistic goals, and regular check-ins with personal financial advisors to collaborate on how best
to achieve the outcomes that matter most to shareholders. Understanding these outcomes and the tools we need to reach
them remains a central focus at Russell Investments.
Staying steady in stormy markets is vital – we see more volatility ahead.
After strong U.S. equity performance in 2014, markets experienced muted returns in 2015. The broad-based Russell
3000® Index was up 0.48% for the year ended December 31, 2015.
Markets collectively sought guidance from a cautious U.S. Federal Reserve (the “Fed”) regarding the timing of the initial
interest rate increase. It’s hard to believe the last time the Fed increased the Fed Funds rate was June 2006 – more than
nine years ago. Trying to anticipate the initial rate increase and related market impacts was a primary driver of both equity
and fixed income returns, not only in the U.S., but globally as well.
The ‘abundance of caution’ evidenced by the Fed mirrored central bank sentiment worldwide to protect the fragility of the
hard fought, lengthy, and mainly tepid recovery from the global financial crisis.
The European Central Bank expanded their Quantitative Easing (QE) Program throughout the year as they maintained
their contribution to positive economic growth. This stimulus coupled with the anticipation of increasing interest rates in
the U.S. contributed to the strengthening U.S. dollar. And in August, China made an unexpected devaluation of its currency
to project recalibrated and more modest growth expectations.
U.S. unemployment decreased throughout the year, from 5.6% at the end of December 2014 to 5.0% at the end of December
2015 and the annual inflation rate was 0.7% as of December 2015. The U.S. economy has led the world out of the recession;
as it approaches a more mature stage in its economic cycle, our belief in the primacy of global diversification deepens.
The following pages provide additional insights on the markets and the performance of Russell Investment Funds (RIF) for
the fiscal year ending December 31, 2015.
Thank you for your continued trust. All of us at Russell Investments appreciate our duties to help you achieve financial
security.
CEO, U.S. Private Client Services
To Our Shareholders 3
Russell Investment Funds
Market Summary as of December 31, 2015 (Unaudited)
U.S. Equity Markets
Broadly measured the Russell 3000® Index, U.S. stocks returned 0.48% for the one year period which is the seventh
straight fiscal year ending December 31st that the Russell 3000® Index has finished with a positive absolute return. The
Russell 3000® Index finished with a positive return in six of the fiscal year’s twelve months.
Within U.S. capitalization stocks, the Russell 1000® Growth Index outperformed the Russell 1000® Value Index by 9.50%
over the fiscal year, as stocks with lower valuations (lower price-to-book, price-to-earnings and price-to-cash flow ratios)
lagged significantly. In addition, high dividend yield stocks trailed the broader market. Factors that were rewarded during
the fiscal year included lower earnings variability and high forecasted growth. From a sector perspective, consumer staples
outperformed the Russell 1000® Index by over 7% and energy trailed the Russell 1000® Index by over 23%. The utilities
sector also trailed for the year, specifically electric utilities, which lost approximately 6% relative to the Russell 1000®
Index. Similarly, within U.S. small capitalization stocks, the Russell 2000® Growth Index outperformed the Russell 2000®
Value Index. The fiscal year was led by larger capitalization stocks as the Russell Top 200® Index returned 2.36% compared
with the Russell Midcap® Index and the Russell 2000® Index, which returned -2.44% and -4.41%, respectively. Defensive
stocks outperformed dynamic stocks across all market capitalization tiers.
In January 2015, U.S. equities got off to a rocky start with lackluster corporate earnings, mixed economic data and volatile
oil prices weighing on investor sentiment. One of the more disappointing pieces of macro-economic data was fourth-quarter
gross domestic product (“GDP”) growth coming in at an annualized rate of 2.2%, which marked both a big drop from the
third-quarter figure (5.0%) and was a shortfall on consensus forecasts. Considering all data inputs, investors sought areas of
the market with more perceived safety and yield, causing interest rate sensitive stocks, specifically real estate investment
trusts (“REITs”) and utilities, to be significantly bid up in January. In February, there was an unwinding of some of those
same interest rate sensitive valuations in the market, most notably within electric utilities. The information about January
non-farm payroll growth, which was released in early February, helped to spur a risk-on equity rally as the Russell 3000®
Index finished up 5.79% in February. While the word “patient” with regard to the normalization of U.S. monetary policy
was removed from Fed chair Yellen’s statement in March, Yellen declared that this did not mean that the central bank was
becoming “impatient.” The central bank chair emphasized that any interest-rate decision remained dependent on “further
improvement in the labor market” and on the committee becoming “reasonably confident” of increases in inflation toward
its 2.0% target.
The Russell 3000® Index edged up 0.14% from April through June, with a sell-off at the end of the period reversing most
of April and May’s gains. Severe winter weather and labor disruptions at major ports had caused a pause in U.S. economic
activity in the early part of 2015, however the contraction was less severe than originally reported with the final first-
quarter GDP estimate upwardly revised to -0.2% annualized from -0.7% annualized due to better personal consumption
figures. The period ended with uncertainty over another potential Greek bailout dominating the headlines which in part,
contributed to the selloff in equities in June.
During the third quarter, the Russell 3000® Index declined 7.25%. The severe selloff in U.S. and global equity markets
was driven in part by China’s currency devaluation and concerns over slowing global economic growth. Heightened
levels of market volatility led defensive stocks to outperform dynamic stocks at all market capitalization levels. In the
Fed’s September meeting, a decision was made to keep interest rates unchanged. Chair Yellen stated that, despite recent
international developments, domestically “the economy has been performing well, and we expect it to continue to do
so.” At the time, second-quarter GDP growth had been revised upwards to 3.7%, and was later revised higher to 3.9%.
Unemployment declined to 5.1% for August, its lowest level in seven years, assisted by a decline in the participation rate.
However, non-farm payroll growth missed expectations at +173,000 in August, following upwardly revised readings for
June (+245,000) and July (+223,000).
The Russell 3000® Index closed out 2015 on a strong note returning 6.27% for the fourth quarter. Most of the positive
return for the quarter came in October with the Russell 3000® Index returning 7.90%. In early November, non-farm payroll
4 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
growth for October was reported significantly above consensus at +271,000. This caused certain industries that may benefit
from rising interest rates to react favorably, most notably banks, which outperformed the Russell 3000® Index by over
3.60% in November. Leveraged industries that are seen as bond substitutes due to high dividend yields, such as electric
utilities and REITs, underperformed the Russell 3000® Index by 2.15% and 0.75%, respectively. In mid-December the
Fed raised short term interest rates for the first time since the financial crisis signalling the beginning of the end for the
central bank’s stimulus program. There was not a significant market reaction in December when the Fed raised rates
because the increase was mostly priced in by the market once the positive non-farm payroll growth report was released
in November signally a high probability of a raise in December. Fed officials emphasized that they intend to raise rates
gradually, and only if economic growth continues. Chair Yellen stated that, despite recent international developments,
domestically “the economy has been performing well, and we expect it to continue to do so.”
Non-U.S. Developed Equity Markets
For the fiscal year ended December 31, 2015, the non-U.S. equity market, as measured by the Russell Developed ex-U.S.
Large Cap Index (the “Index”), was down 2.6%.
After a relatively strong first half of the period, which saw the Index return 4.5%, the second half the period experienced a
large sell-off during which the Index dropped by 6.7%.
The major market drivers for non-U.S. markets for most of the fiscal year were the economic weakness and market sell-off in
China and the uncertainty around the Federal Reserve (“Fed”) interest rate hike. In August 2015, the Chinese government
and the People’s Bank of China attempted to stem equity market losses and shore up confidence in the economy by
devaluing the Renminbi. This action could not contain the market turmoil, which in turn drove major emerging markets
and currencies lower. Uncertainty around the Fed’s interest rate hike drove non-U.S. market volatility through much of
the fiscal year, however, in December, the Fed determined to raise interest rates for the first time in almost a decade. This
action was widely anticipated by non-U.S. markets and had little market impact upon announcement. In December, the
European Central Bank extended its bond repurchase program by six months to March 2017, continuing the purchases at
a rate of €60 billion a month. After the announcement, European stocks fell sharply as markets were expecting an increase
in bond purchases.
Japan was the stand out market over the period, while Europe ex-UK was almost flat for the year. Both Japan and Europe
benefited from accommodative policies and cheaper valuations. Slightly better than expected earnings results in Europe,
coupled with the European Central Bank’s willingness to continue with quantitative easing and the renewed bailout deal
with Greece during the second part of the fiscal year, brought a degree of harmony in Europe. High levels of central
bank liquidity leading to ultra-low returns on bonds pushed investors towards equities in Japan. Broadly, performance in
commodity heavy economies like Canada and Australia lagged significantly due to a demand slowdown, particularly from
China.
Commodity driven sectors, particularly energy and materials, were the worst hit in the fiscal year ended December 31,
2015 as oil prices tumbled to the lowest levels since 2009 and a demand slowdown in emerging markets caused commodity
prices to plunge significantly. Defensive sectors, led by consumer staples and healthcare, held up well as uncertainty about
global economic growth prevailed throughout the fiscal year.
In terms of factor returns, growth significantly outperformed value and small/mid-capitalization stocks modestly
outperformed large capitalization stocks during the fiscal year. Stocks with lower leverage and high momentum held up
well amid the market volatility.
Market Summary 5
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
Emerging Markets
The Russell Emerging Markets Index, as measured in U.S. dollar terms (the “Index”) lost 12.8% over the fiscal year ended
December 31, 2015. In what was a difficult year for the emerging markets asset class, macroeconomic events continued to
impact emerging market equities against a backdrop of interest rate uncertainty and geopolitical headwinds.
In the first quarter of 2015, emerging markets made a positive start to the year, with the Index returning 2.1%. The prospect
of sustained loose central bank policy outside the U.S. was a tailwind to emerging markets. In addition, the U.S. Federal
Reserve’s increased flexibility regarding the timing of an interest rate rise helped sustain a lower rate outlook in the U.S.
which, in turn, helped to increase investor appetite for riskier emerging markets investments. In contrast, dollar strength
negatively impacted several countries’ returns, with considerable disparity between them. Asia was the best-performing
region. Chinese markets had another strong quarter, ending 5.6% higher as measured by the Index. India was up 5.3%
for the quarter despite slipping in March. Buoyed by the country’s improving prospects, including cheaper oil improving
the country’s balance of payments, India’s central bank twice unexpectedly cut interest rates. Rate-cutting also helped
South Korea’s market outperform (5.0%), while Taiwan (4.0%), Thailand (2.1%) and Indonesia (1.3%) also ended in
positive territory. Meanwhile, Russia went from being the Index’s worst-performer in the fourth quarter of 2014 to the best-
performing country. The market climbed 20.6%, predominantly driven by a rebound in the rouble, while less volatility in
oil prices and a ceasefire agreement in Ukraine also aided market sentiment. In contrast, Greece slumped 21.5% over a
volatile quarter. Debt repayment negotiations between the newly-elected Syriza government and “troika” of the European
Union, the European Central Bank and the International Monetary Fund wildly fluctuated. Brazil maintained its slide with
a further 15.2% fall as the real continued to plummet. Within the Index, the health care sector recorded the highest gains.
The energy sector rebounded, while utilities ended behind its sector counterparts.
In the second quarter of 2015, the Index returned 1.7%. A weakening of the U.S. dollar and the sustained equity rally
in China drove a significantly strong start. However, the Chinese equity surge sharply reversed towards the end of the
quarter which weighed on the broader Index. Additionally, positive U.S. economic data and Federal Reserve statements
strengthened the case for at least one U.S. interest rate rise later this year, which dampened investor appetite for riskier
emerging markets investments. China (8.1%) remained one of the strongest performing regions over the quarter despite
experiencing erratic movements in the latter part of the period. The increase was a contrast to the country’s disappointing
economic data. Notably, urban investment, retail sales and industrial output data was weak while consumer price inflation
moved further away from the central bank’s target. Russia (8.0%), Brazil (6.3%), Greece (6.0%) and Colombia (3.6%) were
other notable countries that outperformed despite also experiencing sharp sell-offs during the quarter. The rouble, real
and euro all appreciated against the U.S. dollar. Select Asian markets were the worst performers over the quarter, with
Indonesia being the worst performing country within the Index (-14.1%) despite gaining ground in June. In Indonesia,
exports continued to disappoint while first-quarter gross domestic product (“GDP”) also missed estimates. Malaysia slipped
7.2% as exports contracted more steeply than expected. Thailand declined 3.4% as the country remained in deflation.
Meanwhile in India (-3.1%), the central bank cut its lending rate as expected to 7.25% in an effort to increase investment.
South Korea marginally underperformed the Index return (-0.3%) as trade numbers remained negative. Taiwan finished flat
with the benchmark (0.1%). Within the Index, the energy and health care sectors outperformed. Technology was the only
sector to decline over the quarter.
In the third quarter of 2015, the Index slumped 18.1% in the worst quarter for emerging markets equities in four years.
China’s growth slowdown caused significant volatility, while the strong U.S. dollar and instability in commodity markets
weighed on investor sentiment. The market sell-off slowed in September, however, as emerging markets edged slightly
higher following the U.S. Federal Reserve’s decision to keep interest rates steady. China (-23.9%) dragged down the Index
return despite attempts by the government and central bank to stem the sliding bear market. The PBoC twice unexpectedly
lowered its currency fix against the U.S. dollar, which caused nearly all emerging markets currencies to depreciate. Investors
remained concerned about a “hard landing” for the economy. Industrial production, urban investments, house prices and
retail sales figures confirmed that the domestic economy continued to slow. In addition, Brazil was the weakest-performing
6 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
country over the quarter, slumping 33.6% with the real falling 21.5%, as a result of factors such as the commodity sell-off,
a struggling economy and political corruption. Investors were increasingly concerned about Brazil’s economic ties to China.
Elsewhere in Latin America, oil exporter Colombia slipped 22.5% and metal exporter Peru declined 26.4%. Countries with
large current account deficits sold-off over the quarter, including Turkey (-19.5%), South Africa (-18.3%) and, to a lesser
extent, Indonesia (-24.8%). Mexico ended 10.9% lower. Russia (-13.2%) outperformed the broader Index return despite a
15.7% depreciation of the ruble over the period. In South Korea (-11.8%), second-quarter GDP slowed over the previous
quarter. In Thailand (-15.9%), inflation continued to decline. In Taiwan (-16.5%), a growth slowdown and weak price
pressures forced the central bank to unexpectedly cut interest rates to 1.75%. Malaysia decreased 17.5% as the ringgit
depreciated 14.6% against the U.S. dollar. Eastern Europe was the best-performing region, including the Czech Republic
(-2.7%), Hungary (-3.6%) and Poland (-9.4%). All sectors declined in absolute terms. On a relative basis, financials and
energy lagged behind, while safer haven sectors including consumer staples outperformed.
The fourth quarter of 2015 was positive for emerging markets with the Index up 2.6%. Nevertheless, it was quite volatile
with the Index up 7.9% in October before giving back most of its gains in November and December. The sell-off in the third
quarter, driven by China concerns, reversed course in October. China’s economy reported an expansion as services grew and
GDP came in slightly higher than expected. Emerging markets flows turned positive as well. U.S. interest rates appeared
stable, which added stability to the asset class. However, fortunes reversed as the U.S. Federal Reserve hiked interest rates
later in the quarter which contributed to a downturn in emerging markets as investors’ risk appetite decreased. In addition,
the price of oil slumped. Brent crude ended the year at $37, down from $48. This had a negative impact on oil-exporting
countries such as Russia, which experienced a sizeable sell-off. Brazil was also highly volatile during the quarter, as it
seemed to be in recovery for much of the quarter only to experience a steep drop in December. Fitch downgraded Brazil’s
credit rating to junk and finance minister Joaquim Levy resigned his office. Currency was also a headwind for emerging
markets over the quarter, as the ruble and rand depreciated by more than 10% relative to the dollar.
U.S./Global Fixed Income Markets
The fiscal year ended December 31, 2015 was characterized by slowing global growth and commodity price weakness.
Overall, this was modestly positive for fixed income assets, as yields fell, particularly among sovereign bonds. On the other
hand, credit sectors, primarily within the U.S., were challenged in this environment. Corporate bonds saw some of the
largest drawdowns as sharply reduced commodity prices (oil in particular), weakening earnings growth and elevated new
issuance weighed on returns. A key indicator of global fixed income performance, the Barclays Global Aggregate Index,
returned 1.02% for the fiscal year, in U.S. dollar -hedged terms, as yields fell and spreads widened modestly during a fiscal
year where growth fell somewhat short of expectations.
Regionally, Europe outperformed the U.S., bolstered by the launch, and subsequent increase, of a relatively aggressive
quantitative easing program and generally lower exposure to commodity-related sectors, particularly energy. The Barclays
Pan-European Aggregate Index returned 1.04% during the period (in U.S. dollar -hedged terms), led by Swiss and northern
European sovereigns, reflecting more accommodative central bank policy, pervasive low inflation/deflation in the region
and the economies’ “safe haven” status. The U.S., in comparison, returned 0.55% during the fiscal year, as measured by
the Barclays Aggregate Index, as U.S. Treasury yields fell less sharply and U.S. corporate credit underperformed European
corporate credit, largely due to greater exposure to falling commodity prices. Canadian and Asian sovereign bonds were
the strongest performers over the year, as declining energy prices, a slowdown in Asia and a return to recession in Japan
pushed yields lower.
In the U.S., economic data remained broadly positive, with solid nonfarm payroll gains and a steady decline in the
unemployment rate to just above 5% even by fiscal year-end, a level near long-term lows. Gross domestic product growth
slowed modestly from earlier in the recovery, but held in around the 1.50%-2.50% range, on average, during the fiscal
year. Inflation and wage growth were positive, albeit somewhat weak, driven partially by sharply lower commodity prices
(including a 58% drop in oil prices during the first quarter of the fiscal year). Combined with global growth headwinds,
Market Summary 7
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
these were significant contributors to the U.S. Federal Reserve’s decisions, in successive meetings, not to raise interest
rates, and pushing out of rate hike timing expectations drove yields lower during the period, bolstering U.S. Treasury
returns. It took until December for the Fed to finally begin tightening, which was increasingly anticipated by the market
through the fourth quarter and resulted in a partial upward reversal in yields and a flatter curve by fiscal year-end.
The story was quite different in Europe, where uncertainty over the future of Greece’s debt position and potential bailout
captured headline risk and drove market volatility early in the fiscal year. This, combined with the European Central
Bank’s (“ECB”) launch of an unexpectedly aggressive quantitative easing program, saw yields among “core” European
sovereign bonds fall markedly. Peripheral spreads also tightened later on as a Greek bailout agreement was eventually
reached and as the ECB ramped-up their stimulus later in the year. Emerging markets experienced a meaningful, and
relatively broad-based, slowdown in growth during the fiscal year, contributing to the sharp decline in commodity prices.
China and Brazil were most notable. A slowdown in China’s manufacturing and trade sectors rattled markets despite
successive moves to ease monetary policy and credit conditions. Attempts by China to manage the transition to lower
growth and a more open currency market exacerbated the market’s uncertainty surrounding future growth. In Brazil, growth
continued to disappoint, as it has for the past few years, contracting by 2.60% in the second calendar quarter of 2015,
alongside a quickly deteriorating fiscal position, accelerating inflation and political scandal surrounding Petrobras, the
state-owned energy giant.
Strong new issuance volumes characterized most credit sectors, particularly in the U.S., over the fiscal year, in both
corporate and securitized markets. Overall, corporate credit detracted modestly (the Barclays Global Aggregate Corporate
Index returned 0.05% below equivalent-duration Treasuries). Industrials underperformed significantly, particularly
commodity-related industries, which have greater representation within the U.S. Performance among securitized
assets (as measured by the Barclays Global Aggregate Securitized Index) was more mixed, with residential mortgages
underperforming equivalent-duration U.S. Treasuries by 0.05% and commercial mortgages underperforming equivalent-
duration U.S. Treasuries by 0.28%. Asset-backed securities, in contrast, outperformed equivalent-duration U.S. Treasuries
by 0.44%.High yield corporate credit was among the worst-performing segments of the market (the Barclays Global High
Yield Index returned 1.89% below equivalent-duration U.S. Treasuries), due in large part to the strong sell-off among U.S.
energy companies as the price of oil fell sharply and stayed low, significantly raising the likelihood of defaults across the
sector. Rising illiquidity concerns also drove losses, exacerbated by the distress of a handful of particularly aggressive
asset managers in the space.
Emerging market (EM) debt underperformed developed markets (the Barclays EM Hard Currency Aggregate Index,
returned 0.18%) given the slowdown among EM countries and particular concern surrounding China and Brazil. However,
following years spent worrying about the impact of Fed tightening on EM growth, the market took the December hike
in stride, likely breathing a collective sigh of relief that it had not been under worse circumstances. Local currency EM
bonds (those issued in the issuing country’s own currency), in contrast, saw much larger declines (the Barclays EM Local
Currency Government Index returned -10.38%) as currencies in particular were hit by both the slowdown in emerging
market growth and the broader U.S. Dollar rally that occurred during the fiscal year.
8 Market Summary
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Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Multi-Style Equity Fund | Russell 1000® Index** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 1.11 | % | 1 Year | 0.92 | % | ||
5 Years | 11.32 | %§ | 5 Years | 12.44 | %§ | ||
10 Years | 6.82 | %§ | 10 Years | 7.40 | %§ |
10 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Multi-Style Equity Fund (the “Fund”) employs a multi- | The Fund’s stock selection within the energy sector (underweights |
manager approach whereby portions of the Fund are allocated to | to Kinder Morgan, Inc. and Conoco Phillips) was beneficial. The |
different money manager strategies. Fund assets not allocated | Fund’s underweight to the utilities sector and overweight to the |
to money managers are managed by Russell Investment | health care sector also contributed positively to benchmark- |
Management Company (“RIMCo”), the Fund’s advisor. RIMCo | relative performance. Factor exposures were mixed, as an |
may change the allocation of the Fund’s assets among money | overweight to stocks with the lowest valuation ratios detracted, |
managers at any time. An exemptive order from the Securities | while an underweight to mid cap stocks was rewarded. |
and Exchange Commission (“SEC”) permits RIMCo to engage | The Fund employs discretionary money managers. The Fund’s |
or terminate a money manager at any time, subject to approval | discretionary money managers select the individual portfolio |
by the Fund’s Board, without a shareholder vote. Pursuant to the | securities for the assets assigned to them. Fund assets not |
terms of the exemptive order, the Fund is required to notify its | allocated to discretionary money managers include the Fund’s |
shareholders within 90 days of when a money manager begins | liquidity reserves and assets which may be managed directly |
providing services. As of December 31, 2015, the Fund had six | by RIMCo to effect the Fund’s investment strategies and/or to |
money managers. | actively manage the Fund’s overall exposures by investing in |
What is the Fund’s investment objective? | securities or other instruments that RIMCo believes will achieve |
The Fund seeks to provide long term capital growth. | the desired risk/return profile for the Fund. |
With respect to certain of the Fund’s money managers, Sustainable | |
How did the Fund perform relative to its benchmark for the | Growth Advisers, LP (“Sustainable”) was the best performing |
fiscal year ended December 31, 2015? | manager for the period and outperformed the Russell 1000® |
For the fiscal year ended December 31, 2015, the Fund gained | Growth Index. Stock selection was the primary source of positive |
1.11%. This is compared to the Fund’s benchmark, the Russell | benchmark-relative return, specifically within the consumer |
1000® Index, which gained 0.92% during the same period. The | discretionary sector (an overweight to Amazon, Inc. and Starbucks |
Fund’s performance includes operating expenses, whereas index | Corporation was beneficial). Sustainable’s tilt toward stocks with |
returns are unmanaged and do not include expenses of any kind. | high forecasted growth and away from stocks with high earnings |
For the fiscal year ended December 31, 2015, the Morningstar | variability was rewarded. An overweight to the energy sector held |
Insurance Large blend, a group of funds that Morningstar | back relative performance as energy trailed during the fiscal year. |
considers to have investment strategies similar to those of the | Columbus Circle Investors (“Columbus Circle”) did not add |
Fund, lost 0.50%. This result serves as a peer comparison and is | value relative to its benchmark, slightly underperforming the |
expressed net of operating expenses. | Russell 1000® Growth Index. Stock selection within the financial |
RIMCo may assign a money manager a specific style or | services sector (an overweight to Morgan Stanley and Discover |
capitalization benchmark other than the Fund’s index. However, | Financial Services) and within the materials & processing sector |
the Fund’s primary index remains the benchmark for the Fund | (an overweight to PPG Industries, Inc.) held back benchmark- |
and is representative of the aggregate of each money manager’s | relative performance. Factor exposures were mixed, specifically a |
benchmark index. | tilt toward high earnings variability detracted, while a tilt toward |
stocks with high forecasted growth was beneficial. An overweight | |
How did the market conditions described in the Market | to the consumer discretionary sector and an underweight to the |
Summary report affect the Fund’s performance? | producer durables sector were beneficial. |
During the fiscal year, the U.S. large capitalization equity market | |
produced a slightly positive return. Relevant Fund exposures | RIMCo manages a positioning strategy for the Fund that is a |
included a tilt toward stocks with the lowest valuation ratios | replication of the Russell Top 200® Defensive™ Index. The |
(lowest price-to-book ratios) and away from mid cap and electric | Russell Top 200® Defensive™ Index consists of the largest |
utility stocks. Growth stocks significantly outperformed value | Russell 1000® Defensive Index stocks. The strategy is designed to |
stocks within the Russell 1000® Index, detracting from the Fund’s | help control the Fund’s above-benchmark beta (beta is a measure |
benchmark-relative performance. However, the Fund’s tilt toward | of a portfolio’s volatility and its sensitivity to the direction of |
health care stocks and tilts away from mid cap and electric utility | the market) and volatility exposures that may come from the |
stocks were beneficial. | money managers’ portfolios. The positioning strategy’s targeted |
exposures were rewarded over the period, with the Russell Top | |
How did the investment strategies and techniques employed | 200® Defensive™ Index outperforming the Russell 1000® Index. |
by the Fund and its money managers affect its benchmark- | |
relative performance? |
Multi-Style Equity Fund 11
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
During the period, RIMCo used index futures contracts to equitize | The views expressed in this report reflect those of the portfolio | |
the Fund’s cash. The decision to equitize the Fund’s cash was | managers only through the end of the period covered by | |
moderately beneficial to Fund performance for the fiscal year as | the report. These views do not necessarily represent the | |
the market had a slightly positive absolute return. | views of RIMCo, or any other person in RIMCo or any other | |
affiliated organization. These views are subject to change | ||
Describe any changes to the Fund’s structure or the money | at any time based upon market conditions or other events, | |
manager line-up. | and RIMCo disclaims any responsibility to update the views | |
contained herein. These views should not be relied on | ||
In December 2015 a portion of the Fund assets was transitioned | as investment advice and, because investment decisions | |
in anticipation of a money manager change in early January 2016. | for a Russell Investment Funds (“RIF”) Fund are based on | |
numerous factors, should not be relied on as an indication | ||
Money Managers as of December 31, | of investment decisions of any RIF Fund. | |
2015 | Styles | |
Columbus Circle Investors | Growth | |
Institutional Capital LLC | Value | |
Jacobs Levy Equity Management, Inc. | Value | |
Mar Vista Investment Partners, LLC | Market-Oriented | |
Suffolk Capital Management LLC | Market-Oriented | |
Sustainable Growth Advisers, LP | Growth |
* Assumes initial investment on January 1, 2006.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
12 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 986.60 | $ | 1,021.02 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 4.16 | $ | 4.23 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.83% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Multi-Style Equity Fund 13
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Common Stocks - 95.0% | Sysco Corp. | 23,100 | 947 | ||||
Consumer Discretionary - 12.9% | Unilever NV | 59,134 | 2,562 | ||||
Advance Auto Parts, Inc. | 8,014 | 1,206 | Whole Foods Market, Inc. | 46,110 | 1,545 | ||
Amazon.com, Inc.(Æ) | 8,185 | 5,533 | 26,936 | ||||
Carnival Corp. | 26,100 | 1,422 | |||||
CBS Corp. Class B | 13,008 | 613 | Energy - 6.2% | ||||
Comcast Corp. Class A(Æ) | 25,148 | 1,419 | Anadarko Petroleum Corp. | 8,502 | 413 | ||
Costco Wholesale Corp. | 1,042 | 168 | BP PLC - ADR | 26,850 | 839 | ||
Delphi Automotive PLC | 10,328 | 885 | Chevron Corp. | 4,467 | 402 | ||
DISH Network Corp. Class A(Æ) | 7,800 | 446 | Concho Resources, Inc.(Æ) | 6,080 | 565 | ||
Estee Lauder Cos., Inc. (The) Class A | 376 | 33 | ConocoPhillips | 23,855 | 1,114 | ||
Ford Motor Co. | 120,300 | 1,695 | Core Laboratories NV | 30,304 | 3,295 | ||
Gap, Inc. (The) | 36,630 | 905 | EOG Resources, Inc. | 5,917 | 419 | ||
General Motors Co. | 55,700 | 1,894 | Exxon Mobil Corp. | 79,525 | 6,198 | ||
Hilton Worldwide Holdings, Inc. | 24,654 | 528 | FMC Technologies, Inc.(Æ) | 9,100 | 264 | ||
Home Depot, Inc. | 3,075 | 407 | HollyFrontier Corp. | 12,700 | 507 | ||
L Brands, Inc.(Æ) | 8,170 | 783 | Marathon Petroleum Corp. | 26,900 | 1,394 | ||
Lennar Corp. Class A | 28,120 | 1,375 | Newfield Exploration Co.(Æ) | 12,860 | 419 | ||
Liberty Global PLC Class C(Æ) | 36,391 | 1,484 | Occidental Petroleum Corp. | 20,450 | 1,383 | ||
Liberty Global PLC LiLAC(Æ) | 22,276 | 958 | PBF Energy, Inc. Class A | 6,100 | 225 | ||
Lowe's Cos., Inc. | 27,757 | 2,111 | Phillips 66(Æ) | 39,750 | 3,251 | ||
McDonald's Corp. | 5,034 | 594 | Schlumberger, Ltd. | 68,021 | 4,745 | ||
Netflix, Inc.(Æ) | 3,396 | 388 | Spectra Energy Corp. | 78 | 2 | ||
Newell Rubbermaid, Inc. | 19,987 | 881 | Tesoro Corp. | 7,700 | 811 | ||
News Corp. Class A | 47,200 | 631 | Valero Energy Corp. | 26,300 | 1,860 | ||
Nike, Inc. Class B | 54,828 | 3,427 | 28,106 | ||||
O'Reilly Automotive, Inc.(Æ) | 4,441 | 1,125 | |||||
Priceline Group, Inc. (The)(Æ) | 2,344 | 2,988 | Financial Services - 21.6% | ||||
PVH Corp. | 9,488 | 699 | ACE, Ltd. | 769 | 90 | ||
Royal Caribbean Cruises, Ltd. | 26,796 | 2,712 | Aflac, Inc. | 6,346 | 380 | ||
Starbucks Corp. | 66,525 | 3,993 | Allstate Corp. (The) | 22,219 | 1,380 | ||
Target Corp. | 46,501 | 3,377 | Ally Financial, Inc.(Æ) | 37,400 | 697 | ||
Time Warner, Inc. | 34,239 | 2,215 | American Express Co. | 50,371 | 3,504 | ||
TJX Cos., Inc. | 55,229 | 3,916 | American Tower Corp.(ö) | 43,487 | 4,216 | ||
Ulta Salon Cosmetics & Fragrance, Inc.(Æ) | 6,185 | 1,144 | Ameriprise Financial, Inc. | 6,910 | 735 | ||
Under Armour, Inc. Class A(Æ) | 6,422 | 518 | Arch Capital Group, Ltd.(Æ) | 12,700 | 886 | ||
VF Corp. | 801 | 50 | Bank of America Corp. | 241,481 | 4,063 | ||
Viacom, Inc. Class B | 106 | 4 | Bank of New York Mellon Corp. (The) | 41,636 | 1,717 | ||
Wal-Mart Stores, Inc. | 52,759 | 3,234 | BB&T Corp. | 1,617 | 61 | ||
Walt Disney Co. (The) | 18,910 | 1,987 | Berkshire Hathaway, Inc. Class B(Æ) | 37,797 | 4,990 | ||
Whirlpool Corp. | 4,550 | 668 | BlackRock, Inc. Class A | 4,238 | 1,443 | ||
Yum! Brands, Inc. | 315 | 23 | Boston Properties, Inc.(ö) | 5,650 | 721 | ||
58,439 | Capital One Financial Corp. | 40,706 | 2,938 | ||||
Charles Schwab Corp. (The) | 19,300 | 636 | |||||
Consumer Staples - 5.9% | Chubb Corp. (The) | 550 | 73 | ||||
Altria Group, Inc. | 45,423 | 2,644 | Citigroup, Inc. | 54,338 | 2,812 | ||
Archer-Daniels-Midland Co. | 90 | 3 | Citizens Financial Group, Inc. | 48,400 | 1,268 | ||
Bunge, Ltd. | 10,900 | 744 | Comerica, Inc. | 23,800 | 996 | ||
Coca-Cola Co. (The) | 9,315 | 400 | Discover Financial Services | 41,384 | 2,219 | ||
Colgate-Palmolive Co. | 28,948 | 1,929 | E*Trade Financial Corp.(Æ) | 19,000 | 563 | ||
Constellation Brands, Inc. Class A | 5,462 | 778 | Equinix, Inc.(ö) | 5,679 | 1,717 | ||
CVS Health Corp. | 2,663 | 260 | Equity Residential(ö) | 364 | 30 | ||
General Mills, Inc. | 1,393 | 80 | FleetCor Technologies, Inc.(Æ) | 16,538 | 2,363 | ||
Kimberly-Clark Corp. | 858 | 109 | Four Corners Property Trust, Inc.(Æ) | 5,366 | 130 | ||
Kroger Co. (The) | 1,692 | 71 | Franklin Resources, Inc. | 15,206 | 560 | ||
Molson Coors Brewing Co. Class B | 4,396 | 413 | Hartford Financial Services Group, Inc. | 13,878 | 603 | ||
Mondelez International, Inc. Class A | 153,598 | 6,888 | Intercontinental Exchange, Inc. | 3,910 | 1,002 | ||
PepsiCo, Inc. | 34,042 | 3,401 | JPMorgan Chase & Co. | 54,353 | 3,589 | ||
Philip Morris International, Inc. | 31,860 | 2,801 | KeyCorp | 143,130 | 1,888 | ||
Procter & Gamble Co. (The) | 15,999 | 1,271 | Lincoln National Corp. | 14,500 | 729 | ||
Reynolds American, Inc. | 1,959 | 90 | Loews Corp. | 47,490 | 1,824 |
See accompanying notes which are an integral part of the financial statements.
14 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Markel Corp.(Æ) | 4,000 | 3,533 | Regeneron Pharmaceuticals, Inc.(Æ) | 2,488 | 1,351 | ||
Marsh & McLennan Cos., Inc. | 1,284 | 71 | St. Jude Medical, Inc. | 24,686 | 1,525 | ||
MasterCard, Inc. Class A | 24,811 | 2,415 | Stryker Corp. | 13,209 | 1,227 | ||
McGraw Hill Financial, Inc. | 6,674 | 658 | Thermo Fisher Scientific, Inc. | 8,573 | 1,216 | ||
Northern Trust Corp. | 17,900 | 1,290 | UnitedHealth Group, Inc. | 14,553 | 1,712 | ||
PayPal Holdings, Inc.(Æ) | 10,800 | 391 | Valeant Pharmaceuticals International, Inc. | ||||
PNC Financial Services Group, Inc. (The) | 25,831 | 2,461 | (Æ) | 8,527 | 867 | ||
Principal Financial Group, Inc. | 23,400 | 1,053 | Zimmer Biomet Holdings, Inc. | 15,699 | 1,611 | ||
Prudential Financial, Inc. | 30,201 | 2,458 | 67,273 | ||||
Public Storage(ö) | 342 | 85 | |||||
Raymond James Financial, Inc. | 12,500 | 725 | Materials and Processing - 3.5% | ||||
Regions Financial Corp. | 204,769 | 1,966 | Air Products & Chemicals, Inc. | 381 | 50 | ||
Reinsurance Group of America, Inc. Class A | 8,834 | 756 | CRH PLC - ADR | 64,790 | 1,867 | ||
Santander Consumer USA Holdings, Inc.(Æ) | 10,600 | 168 | Dow Chemical Co. (The) | 31,593 | 1,626 | ||
Signature Bank(Æ) | 2,560 | 393 | Ecolab, Inc. | 39,999 | 4,576 | ||
Simon Property Group, Inc.(ö) | 586 | 114 | Hexcel Corp. | 13,592 | 631 | ||
State Street Corp. | 68,690 | 4,559 | International Paper Co. | 22,590 | 852 | ||
SunTrust Banks, Inc. | 31,400 | 1,345 | Masco Corp. | 18,000 | 509 | ||
Synchrony Financial(Æ) | 62,994 | 1,916 | Monsanto Co. | 12,957 | 1,277 | ||
TD Ameritrade Holding Corp. | 10,700 | 371 | PPG Industries, Inc. | 14,360 | 1,419 | ||
Thomson Reuters Corp. | 727 | 28 | Praxair, Inc. | 13,013 | 1,332 | ||
Travelers Cos., Inc. (The) | 14,973 | 1,690 | Precision Castparts Corp. | 6,180 | 1,434 | ||
US Bancorp | 79,263 | 3,382 | Rio Tinto PLC - ADR | 14,490 | 422 | ||
Visa, Inc. Class A | 73,799 | 5,723 | 15,995 | ||||
Voya Financial, Inc. | 27,300 | 1,008 | |||||
Wells Fargo & Co. | 159,511 | 8,669 | Producer Durables - 10.2% | ||||
Western Alliance Bancorp(Æ) | 7,200 | 258 | 3M Co. | 1,509 | 227 | ||
98,309 | Accenture PLC Class A | 1,479 | 155 | ||||
Automatic Data Processing, Inc. | 22,129 | 1,874 | |||||
Health Care - 14.8% | B/E Aerospace, Inc. | 33,325 | 1,412 | ||||
Abbott Laboratories | 47,335 | 2,126 | Boeing Co. (The) | 753 | 109 | ||
Aetna, Inc. | 13,960 | 1,509 | CSX Corp. | 35,056 | 910 | ||
Alexion Pharmaceuticals, Inc.(Æ) | 3,361 | 641 | Cummins, Inc. | 339 | 30 | ||
Allergan PLC(Æ) | 17,535 | 5,479 | Danaher Corp. | 1,421 | 132 | ||
AmerisourceBergen Corp. Class A | 4,323 | 448 | Deere & Co. | 135 | 10 | ||
Amgen, Inc. | 14,994 | 2,434 | Delta Air Lines, Inc. | 19,320 | 979 | ||
Anthem, Inc. | 10,066 | 1,404 | Emerson Electric Co. | 1,190 | 57 | ||
Baxalta, Inc. | 1,272 | 50 | FedEx Corp. | 14,894 | 2,220 | ||
Baxter International, Inc. | 1,272 | 49 | General Dynamics Corp. | 9,026 | 1,240 | ||
Becton Dickinson and Co. | 388 | 60 | General Electric Co. | 68,694 | 2,140 | ||
Biogen, Inc.(Æ) | 115 | 35 | Honeywell International, Inc. | 53,034 | 5,492 | ||
Bristol-Myers Squibb Co. | 23,550 | 1,620 | Illinois Tool Works, Inc. | 701 | 65 | ||
Cardinal Health, Inc. | 31,756 | 2,835 | Kansas City Southern | 27,685 | 2,067 | ||
Celgene Corp.(Æ) | 6,360 | 762 | KBR, Inc. | 27,000 | 457 | ||
Cerner Corp.(Æ) | 29,510 | 1,776 | Lexmark International, Inc. Class A | 8,628 | 280 | ||
Cigna Corp. | 6,389 | 934 | Lockheed Martin Corp. | 7,198 | 1,564 | ||
DexCom, Inc.(Æ) | 4,331 | 355 | Mettler-Toledo International, Inc.(Æ) | 9,291 | 3,151 | ||
Edwards Lifesciences Corp.(Æ) | 10,840 | 856 | Norfolk Southern Corp. | 9,825 | 832 | ||
Eli Lilly & Co. | 10,318 | 870 | Northrop Grumman Corp. | 9,613 | 1,815 | ||
Express Scripts Holding Co.(Æ) | 1,348 | 117 | Raytheon Co. | 42,432 | 5,284 | ||
Gilead Sciences, Inc. | 17,313 | 1,752 | Sensata Technologies Holding NV(Æ) | 35,464 | 1,633 | ||
HCA Holdings, Inc.(Æ) | 13,000 | 879 | Southwest Airlines Co. | 44,120 | 1,900 | ||
Intuitive Surgical, Inc.(Æ) | 907 | 495 | Stanley Black & Decker, Inc. | 22,194 | 2,369 | ||
Johnson & Johnson | 96,880 | 9,951 | Textron, Inc. | 26,100 | 1,096 | ||
McKesson Corp. | 4,606 | 908 | TransDigm Group, Inc.(Æ) | 12,320 | 2,815 | ||
Medtronic PLC | 51,475 | 3,960 | Union Pacific Corp. | 2,069 | 162 | ||
Merck & Co., Inc. | 105,271 | 5,561 | United Continental Holdings, Inc.(Æ) | 15,365 | 880 | ||
Mylan NV(Æ) | 19,779 | 1,069 | United Parcel Service, Inc. Class B | 1,670 | 161 | ||
Pfizer, Inc. | 239,416 | 7,729 | United Technologies Corp. | 10,168 | 976 | ||
Qiagen NV(Æ) | 39,800 | 1,100 | Verisk Analytics, Inc. Class A(Æ) | 13,400 | 1,030 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 15
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) or | Value | Amount ($) or | Value | ||||||
Shares | $ | Shares | $ | ||||||
Waste Management, Inc. | 471 | 25 | Sempra Energy | 12,620 | 1,186 | ||||
Xylem, Inc. | 25,683 | 937 | Southern Co. (The) | 1,765 | 83 | ||||
46,486 | Verizon Communications, Inc. | 72,814 | 3,365 | ||||||
18,547 | |||||||||
Technology - 15.8% | |||||||||
Activision Blizzard, Inc. | 16,067 | 622 | Total Common Stocks | ||||||
Adobe Systems, Inc.(Æ) | 26,793 | 2,517 | (cost $374,532) | 431,633 | |||||
Alibaba Group Holding, Ltd. - ADR(Æ) | 12,379 | 1,006 | |||||||
Alphabet, Inc. Class A(Æ) | 3,327 | 2,588 | Short-Term Investments - 4.2% | ||||||
Alphabet, Inc. Class C(Æ) | 8,296 | 6,295 | Russell U.S. Cash Management Fund | 19,042,819 | (8) | 19,043 | |||
Apple, Inc. | 70,253 | 7,395 | Total Short-Term Investments | ||||||
ARM Holdings PLC - ADR | 38,856 | 1,758 | (cost $19,043) | 19,043 | |||||
Arrow Electronics, Inc.(Æ) | 3,000 | 163 | |||||||
Avago Technologies, Ltd. Class A | 9,706 | 1,409 | Total Investments 99.2% | ||||||
Avnet, Inc. | 13,580 | 582 | (identified cost $393,575) | 450,676 | |||||
Cisco Systems, Inc. | 109,341 | 2,969 | |||||||
Cognizant Technology Solutions Corp. Class | Other Assets and Liabilities, Net | ||||||||
A(Æ) | 662 | 40 | - 0.8% | 3,665 | |||||
Facebook, Inc. Class A(Æ) | 46,282 | 4,843 | Net Assets - 100.0% | 454,341 | |||||
Harris Corp. | 10,595 | 921 | |||||||
Hewlett Packard Enterprise Co.(Æ) | 65,793 | 1,000 | |||||||
Ingram Micro, Inc. Class A | 22,000 | 668 | |||||||
Intel Corp. | 169,026 | 5,823 | |||||||
International Business Machines Corp. | 12,249 | 1,686 | |||||||
Intuit, Inc. | 21,456 | 2,071 | |||||||
Juniper Networks, Inc. | 38,500 | 1,063 | |||||||
Lam Research Corp. | 7,717 | 613 | |||||||
LinkedIn Corp. Class A(Æ) | 2,360 | 531 | |||||||
Marvell Technology Group, Ltd. | 75,600 | 667 | |||||||
Microsoft Corp. | 106,579 | 5,913 | |||||||
NetApp, Inc. | 24,100 | 639 | |||||||
NETGEAR, Inc.(Æ) | 5,500 | 231 | |||||||
NXP Semiconductors NV(Æ) | 19,849 | 1,672 | |||||||
ON Semiconductor Corp.(Æ) | 14,100 | 138 | |||||||
Oracle Corp. | 132,770 | 4,849 | |||||||
Palo Alto Networks, Inc.(Æ) | 2,927 | 516 | |||||||
Polycom, Inc.(Æ) | 13,100 | 165 | |||||||
QUALCOMM, Inc. | 12,059 | 603 | |||||||
Red Hat, Inc.(Æ) | 24,515 | 2,030 | |||||||
Salesforce.com, Inc.(Æ) | 18,086 | 1,418 | |||||||
SAP SE - ADR | 12,948 | 1,024 | |||||||
ServiceNow, Inc.(Æ) | 7,707 | 667 | |||||||
Splunk, Inc.(Æ) | 6,857 | 403 | |||||||
Symantec Corp. | 57,000 | 1,197 | |||||||
Synopsys, Inc.(Æ) | 23,900 | 1,090 | |||||||
Tableau Software, Inc. Class A(Æ) | 4,861 | 458 | |||||||
Texas Instruments, Inc. | 2,462 | 135 | |||||||
Western Digital Corp. | 13,200 | 793 | |||||||
Zynga, Inc. Class A(Æ) | 138,400 | 371 | |||||||
71,542 | |||||||||
Utilities - 4.1% | |||||||||
American Electric Power Co., Inc. | 25,454 | 1,484 | |||||||
AT&T, Inc. | 176,028 | 6,056 | |||||||
Dominion Resources, Inc. | 437 | 30 | |||||||
Duke Energy Corp. | 1,411 | 101 | |||||||
Entergy Corp. | 34,780 | 2,377 | |||||||
Exelon Corp. | 36,784 | 1,022 | |||||||
NextEra Energy, Inc. | 16,446 | 1,708 | |||||||
PG&E Corp. | 21,330 | 1,135 |
See accompanying notes which are an integral part of the financial statements.
16 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||||||
Amounts in thousands (except contract amounts) | |||||||||||
Unrealized | |||||||||||
Appreciation | |||||||||||
Number of | Notional | Expiration | (Depreciation) | ||||||||
Contracts | Amount | Date | $ | ||||||||
Long Positions | |||||||||||
Russell 1000 Mini Index Futures | 123 | USD | 13,887 | 03/16 | 119 | ||||||
S&P 500 E-Mini Index Futures | 90 | USD | 9,159 | 03/16 | 7 | ||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 126 | ||||||||||
Presentation of Portfolio Holdings | |||||||||||
Amounts in thousands | |||||||||||
Fair Value | |||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||
Common Stocks | |||||||||||
Consumer Discretionary | $ | 58,439 | $ | — | $ | — | $ | 58,439 | 12.9 | ||
Consumer Staples | 26,936 | — | — | 26,936 | 5.9 | ||||||
Energy | 28,106 | — | — | 28,106 | 6.2 | ||||||
Financial Services | 98,309 | — | — | 98,309 | 21.6 | ||||||
Health Care | 67,273 | — | — | 67,273 | 14.8 | ||||||
Materials and Processing | 15,995 | — | — | 15,995 | 3.5 | ||||||
Producer Durables | 46,486 | — | — | 46,486 | 10.2 | ||||||
Technology | 71,542 | — | — | 71,542 | 15.8 | ||||||
Utilities | 18,547 | — | — | 18,547 | 4.1 | ||||||
Short-Term Investments | — | 19,043 | — | 19,043 | 4.2 | ||||||
Total Investments | 431,633 | 19,043 | — | 450,676 | 99.2 | ||||||
Other Assets and Liabilities, Net | 0.8 | ||||||||||
100.0 | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | 126 | — | — | 126 | —* | ||||||
Total Other Financial Instruments** | $ | 126 | $ | — | $ | — | $ | 126 |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 17
Russell Investment Funds
Multi-Style Equity Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Equity | |||
Derivatives not accounted for as hedging instruments | Contracts | ||
Location: Statement of Assets and Liabilities - Assets | |||
Variation margin on futures contracts* | $ | 126 | |
Equity | |||
Derivatives not accounted for as hedging instruments | Contracts | ||
Location: Statement of Operations - Net realized gain (loss) | |||
Futures contracts | $ | (328 | ) |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||
Futures contracts | $ | (208 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
18 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 203 | $ | — $ | 203 | |||
Total Financial and Derivative Liabilities | 203 | — | 203 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (203) | — | (203 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | — | $ | — $ | — |
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 19
Russell Investment Funds
Multi-Style Equity Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 393,575 |
Investments, at fair value(>) | 450,676 | |
Cash (restricted)(a) | 1,320 | |
Receivables: | ||
Dividends and interest | 598 | |
Dividends from affiliated Russell funds | 3 | |
Investments sold | 36,400 | |
Fund shares sold | 39 | |
Total assets | 489,036 | |
Liabilities | ||
Payables: | ||
Investments purchased | 33,784 | |
Fund shares redeemed | 314 | |
Accrued fees to affiliates | 308 | |
Other accrued expenses | 86 | |
Variation margin on futures contracts | 203 | |
Total liabilities | 34,695 | |
Net Assets | $ | 454,341 |
i | ||
Net Assets Consist of: | ||
Undistributed (overdistributed) net investment income | $ | 1,016 |
Accumulated net realized gain (loss) | 3,318 | |
Unrealized appreciation (depreciation) on: | ||
Investments | 57,101 | |
Futures contracts | 126 | |
Shares of beneficial interest | 273 | |
Additional paid-in capital | 392,507 | |
Net Assets | $ | 454,341 |
Net Asset Value, offering and redemption price per share: | ||
Net asset value per share:(#) | $ | 16.64 |
Net assets | $ | 454,341,002 |
Shares outstanding ($.01 par value) | 27,297,936 | |
Amounts in thousands | ||
(>) Investments in affiliates, Russell U.S. Cash Management Fund | $ | 19,043 |
(a) Cash Collateral for Futures | $ | 1,320 |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
20 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 7,981 | |
Dividends from affiliated Russell funds | 23 | ||
Securities lending income | 20 | ||
Total investment income | 8,024 | ||
Expenses | |||
Advisory fees | 3,497 | ||
Administrative fees | 240 | ||
Custodian fees | 98 | ||
Transfer agent fees | 21 | ||
Professional fees | 68 | ||
Trustees’ fees | 12 | ||
Printing fees | 54 | ||
Miscellaneous | 20 | ||
Total expenses | 4,010 | ||
Net investment income (loss) | 4,014 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 34,740 | ||
Futures contracts | (328 | ) | |
Net realized gain (loss) | 34,412 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (32,187 | ) | |
Futures contracts | (208 | ) | |
Net change in unrealized appreciation (depreciation) | (32,395 | ) | |
Net realized and unrealized gain (loss) | 2,017 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 6,031 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 21
Russell Investment Funds
Multi-Style Equity Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||||||||||
Amounts in thousands | 2015 | 2014 | ||||||||||||
Increase (Decrease) in Net Assets | ||||||||||||||
Operations | ||||||||||||||
Net investment income (loss) | $ | 4,014 | $ | 5,406 | ||||||||||
Net realized gain (loss) | 34,412 | 67,188 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (32,395 | ) | (19,921 | ) | ||||||||||
Net increase (decrease) in net assets from operations | 6,031 | 52,673 | ||||||||||||
Distributions | ||||||||||||||
From net investment income | (3,910 | ) | (5,536 | ) | ||||||||||
From net realized gain | (39,327 | ) | (64,480 | ) | ||||||||||
Net decrease in net assets from distributions | (43,237 | ) | (70,016 | ) | ||||||||||
Share Transactions* | ||||||||||||||
Net increase (decrease) in net assets from share transactions | 3,016 | 30,774 | ||||||||||||
Total Net Increase (Decrease) in Net Assets | (34,190 | ) | 13,431 | |||||||||||
Net Assets | ||||||||||||||
Beginning of period | 488,531 | 475,100 | ||||||||||||
End of period | $ | 454,341 | $ | 488,531 | ||||||||||
Undistributed (overdistributed) net investment income included in net assets | $ | 1,016 | $ | 912 | ||||||||||
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||||
2015 | 2014 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Proceeds from shares sold | 1,477 | $ | 26,296 | 646 | $ | 12,251 | ||||||||
Proceeds from reinvestment of distributions | 2,546 | 43,237 | 3,818 | 70,016 | ||||||||||
Payments for shares redeemed | (3,700 | ) | (66,517 | ) | (2,691 | ) | (51,493 | ) | ||||||
Total increase (decrease) | 323 | $ | 3,016 | 1,773 | $ | 30,774 |
See accompanying notes which are an integral part of the financial statements.
22 Multi-Style Equity Fund
(This page intentionally left blank)
Russell Investment Funds
Multi-Style Equity Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 18.11 | .15 | .05 | .20 | (.15 | ) | (1.52 | ) | ||||||||
December 31, 2014 | 18.85 | .22 | 1.94 | 2.16 | (.22 | ) | (2.68 | ) | ||||||||
December 31, 2013 | 15.15 | .19 | 4.75 | 4.94 | (.22 | ) | (1.02 | ) | ||||||||
December 31, 2012 | 13.24 | .19 | 1.88 | 2.07 | (.16 | ) | — | |||||||||
December 31, 2011 | 13.58 | .14 | (.35 | ) | (.21 | ) | (.13 | ) | — | |||||||
See accompanying notes which are an integral part of the financial statements.
24 Multi-Style Equity Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||||
(1.67 | ) | 16.64 | 1.11 | 454,341 | .84 | .84 | .84 | 99 | |||||||||
(2.90 | ) | 18.11 | 11.70 | 488,531 | .86 | .86 | 1.13 | 101 | |||||||||
(1.24 | ) | 18.85 | 32.92 | 475,100 | .84 | .84 | 1.07 | 86 | |||||||||
(.16 | ) | 15.15 | 15.69 | 390,549 | .87 | .87 | 1.28 | 109 | |||||||||
(.13 | ) | 13.24 | (1.55 | ) | 373,392 | .85 | .85 | 1.03 | 133 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 25
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Aggressive Equity Fund | Aggressive Equity Linked Benchmark*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (7.19 | )% | 1 Year | (4.41 | )% | ||
5 Years | 7.93 | %§ | 5 Years | 9.81 | %§ | ||
10 Years | 5.00 | %§ | 10 Years | 7.30 | %§ | ||
Russell 2000® Index** | |||||||
Total | |||||||
Return | �� | ||||||
1 Year | (4.41 | )% | |||||
5 Years | 9.19 | %§ | |||||
10 Years | 6.80 | %§ |
26 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Aggressive Equity Fund (the “Fund”) employs a multi- | well as companies with higher quality characteristics such as |
manager approach whereby Russell Investment Management | lower financial leverage and higher returns-on-equity. Within |
Company (“RIMCo”) manages a portion of the Fund's assets | the U.S. small cap market, larger cap growth stocks significantly |
based upon model portfolios provided by multiple non- | outperformed smaller cap value stocks which negatively impacted |
discretionary money managers. The Fund’s money managers | Fund performance. However, the Fund’s quality positioning was |
have non-discretionary asset management assignments pursuant | a positive contributor as companies with high financial leverage |
to which they provide a model portfolio to RIMCo representing | lagged. |
their investment recommendations, based upon which RIMCo | From a sector standpoint, the expectation for a continued |
purchases and sells securities for the Fund. RIMCo also manages | domestic economic recovery led to the Fund’s overweight |
the portion of the Fund’s assets that RIMCo determines not to | in several sectors such as consumer discretionary, producer |
manage based upon model portfolios provided by the Fund's | durables, and energy. The Fund remained underweight the |
money managers. RIMCo may change the allocation of the Fund's | highly volatile biotechnology industry as well as sectors that are |
assets at any time. An exemptive order from the Securities and | traditionally considered to be interest rate sensitive such as real |
Exchange Commission (“SEC”) permits RIMCo to engage or | estate investment trusts (“REITs”) and utilities. The impact of |
terminate a money manager at any time, subject to approval by | this sector positioning on performance was negative with energy |
the Fund’s Board, without a shareholder vote. Pursuant to the | as the largest underperforming sector during the 2015 fiscal year, |
terms of the exemptive order, the Fund is required to notify its | while biotechnology continued to outperform. Offsetting positive |
shareholders within 90 days of when a money manager begins | impacts included a benefit from the underweight to REITs and |
providing services. As of December 31, 2015, the Fund had five | strong stock selection within the financial services sectors. |
money managers. | |
What is the Fund’s investment objective? | How did the investment strategies and techniques employed |
by the Fund and its money managers affect its benchmark- | |
The Fund seeks to provide long term capital growth. | relative performance? |
How did the Fund perform relative to its benchmark for the | The Fund’s money managers have non-discretionary asset |
fiscal year ended December 31, 2015? | management assignments pursuant to which they provide |
For the fiscal year ended December 31, 2015, the Fund lost | a model portfolio to RIMCo representing their investment |
7.19%. This is compared to the Fund’s benchmark, the Russell | recommendations, based upon which RIMCo purchases and |
2000® Index, which lost 4.41% during the same period. The | sells securities for the Fund. With respect to this portion of the |
Fund’s performance includes operating expenses, whereas index | Fund, RIMCo manages the Fund’s assets based upon the model |
returns are unmanaged and do not include expenses of any kind. | portfolios provided by the Fund’s money managers. RIMCo also |
manages the portion of the Fund's assets that RIMCo determines | |
For the fiscal year ended December 31, 2015, the Morningstar® | not to manage based upon model portfolios provided by the |
Insurance Small Blend, a group of funds that Morningstar | Fund's money managers. This includes assets managed directly |
considers to have investment strategies similar to those of the | by RIMCo to effect the Fund's investment strategies and/or to |
Fund, lost 5.22%. This result serves as a peer comparison and is | actively manage the Fund's overall exposures to seek to achieve |
expressed net of operating expenses. | the desired risk/return profile for the Fund. RIMCo also manages |
RIMCo may assign a money manager a specific style or | the Fund’s liquidity reserves. |
capitalization benchmark other than the Fund’s index. However, | With respect to certain of the Fund’s money managers, Ranger |
the Fund’s primary index remains the benchmark for the Fund | Investment Management, L.P. was the strongest performing |
and is representative of the aggregate of each money manager’s | money manager for the portion of the fiscal year in which it was a |
benchmark index. | money manager in the Fund and outperformed the Russell 2000® |
How did the market conditions described in the Market | Growth Index. The manager’s preference for consistent earnings |
Summary report affect the Fund’s performance? | growth stocks within the health care and financial services sectors |
The fiscal year ended December 31, 2015 saw the Fund | was the primary driver of outperformance. |
underperform the Russell 2000® Index. The beginning of 2015, | DePrince, Race & Zollo, Inc. faced the strongest headwinds |
although initially negative, introduced a pick-up in performance | over the fiscal year and underperformed the Russell 2000® |
which eventually reversed towards the end of the 2015 fiscal year. | Value Index. The manager’s sector allocations were the leading |
Over the period, the Fund maintained exposure to small and | detractors to performance with overweights in cyclical sectors |
micro capitalization stocks trading at discounted valuations as | such as energy, materials, and producer durables. Additionally, |
Aggressive Equity Fund 27
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
stock selection within the consumer discretionary and technology | Ranger Investment Management, L.P., and Jacobs Levy Equity | |
sectors detracted. | Management, Inc. and the hiring of Timpani Capital Management, | |
During the period, RIMCo utilized a strategy to control Fund- | LLC, Snow Capital Management L.P., and Monarch Partners | |
level exposures and risks through the purchase of a stock | Asset Management, LLC as non-discretionary money managers. | |
portfolio. Using the output from a quantitative model, the strategy | Additionally, RIMCo changed the mandates for DePrince and | |
seeks to position the portfolio to meet RIMCo’s overall preferred | RBC from discretionary to non-discretionary, such that all money | |
positioning with respect to Fund exposures. Over the period, the | managers in the Fund would have non-discretionary assignments. | |
strategy was designed to provide lower capitalization and higher | Money Managers as of December 31, | |
value and quality exposure relative to the Fund’s benchmark in | 2015 | Styles |
order to seek to manage Fund-level risk. | DePrince, Race & Zollo, Inc. | Small Cap Value |
The strategy outperformed the Russell 2000® Index for the fiscal | Monarch Partners Asset Management, LLC. | Small Cap Core |
year. An underweight to REITs and utilities was a tailwind to | RBC Global Asset Management (U.S.) Inc. | Microcap/Small Cap |
Snow Capital Management L.P. | Small Cap Value | |
performance. An overweight to stocks with higher quality metrics | Timpani Capital Management, LLC | Small Cap Growth |
(i.e., lower financial leverage and higher returns-on-equity) and | The views expressed in this report reflect those of the portfolio | |
higher price momentum added further value. | managers only through the end of the period covered by | |
During the period, RIMCo equitized the Fund’s cash using index | the report. These views do not necessarily represent the | |
futures contracts to provide the Fund with full market exposure. | views of RIMCo, or any other person in RIMCo or any other | |
This had a negative impact on the Fund’s performance. | affiliated organization. These views are subject to change | |
at any time based upon market conditions or other events, | ||
Describe any changes to the Fund’s structure or the money | and RIMCo disclaims any responsibility to update the views | |
manager line-up. | contained herein. These views should not be relied on | |
In September, RIMCo made changes to the Fund’s money | as investment advice and, because investment decisions | |
manager line-up to reflect RIMCo’s highest conviction managers | for a Russell Investment Funds (“RIF”) Fund are based on | |
and align the Fund with RIMCo’s preferred positioning. This | numerous factors, should not be relied on as an indication | |
resulted in the termination of Conestoga Capital Advisors, LLC, | of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2006.
** Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000®
Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a
combination of their market cap and current index membership. The Russell 2000® Index is constructed to provide a comprehensive and unbiased small-cap
opportunity barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap
opportunity set.
*** The Aggressive Equity Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes into account
historical changes in the Fund’s primary benchmark. The Aggressive Equity Linked Benchmark represents the returns of the Russell 2500TM Index through
April 30, 2012 and the returns of the Russell 2000® Index thereafter.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
28 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 887.20 | $ | 1,019.76 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 5.14 | $ | 5.50 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 1.08% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Aggressive Equity Fund 29
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Common Stocks - 94.3% | Scientific Games Corp. Class A(Æ) | 15,417 | 138 | ||||
Consumer Discretionary - 13.9% | Sinclair Broadcast Group, Inc. Class A(Æ)(Ñ) | 9,636 | 314 | ||||
Abercrombie & Fitch Co. Class A(Ñ) | 46,739 | 1,261 | Skechers U.S.A., Inc. Class A(Æ) | 23,672 | 715 | ||
American Eagle Outfitters, Inc.(Ñ) | 18,635 | 289 | Smith & Wesson Holding Corp.(Æ) | 24,914 | 548 | ||
American Woodmark Corp.(Æ) | 5,833 | 467 | SodaStream International, Ltd.(Æ)(Ñ) | 24,411 | 398 | ||
Asbury Automotive Group, Inc.(Æ) | 2,329 | 157 | Sonic Corp. | 11,164 | 361 | ||
Big Lots, Inc. | 10,187 | 393 | Sportsman's Warehouse Holdings, Inc.(Æ) | 25,544 | 330 | ||
BJ's Restaurants, Inc.(Æ) | 3,822 | 166 | Stamps.com, Inc.(Æ) | 7,819 | 857 | ||
Blue Nile, Inc.(Æ) | 2,434 | 90 | Steven Madden, Ltd.(Æ) | 8,809 | 266 | ||
Bridgepoint Education, Inc.(Æ) | 24,234 | 184 | Superior Uniform Group, Inc. | 8,600 | 146 | ||
Bright Horizons Family Solutions, Inc.(Æ) | 15,691 | 1,047 | Tandy Leather Factory, Inc.(Æ) | 49,955 | 367 | ||
Brinker International, Inc. | 1,818 | 87 | Tenneco, Inc.(Æ) | 4,941 | 227 | ||
Buckle, Inc. (The)(Ñ) | 9,994 | 308 | Tile Shop Holdings, Inc.(Æ)(Ñ) | 35,893 | 589 | ||
CalAtlantic Group, Inc. | 9,497 | 360 | TRI Pointe Group, Inc.(Æ) | 10,934 | 139 | ||
Caleres, Inc. | 15,284 | 410 | TubeMogul, Inc.(Æ)(Ñ) | 43,314 | 589 | ||
Carmike Cinemas, Inc.(Æ) | 8,776 | 201 | Tuesday Morning Corp.(Æ) | 12,905 | 84 | ||
Cato Corp. (The) Class A | 7,582 | 279 | Universal Electronics, Inc.(Æ) | 30,760 | 1,579 | ||
Century Communities, Inc.(Æ) | 19,214 | 340 | Vera Bradley, Inc.(Æ) | 4,875 | 77 | ||
Chico's FAS, Inc. | 56,476 | 603 | VOXX International Corp. Class A(Æ) | 41,289 | 217 | ||
Children's Place, Inc. (The) | 5,447 | 301 | Wayfair, Inc. Class A(Æ)(Ñ) | 6,562 | 312 | ||
Chuy's Holdings, Inc.(Æ) | 20,867 | 654 | Weight Watchers International, Inc.(Æ)(Ñ) | 5,905 | 135 | ||
ClubCorp Holdings, Inc. | 25,141 | 459 | Winmark Corp. | 208 | 19 | ||
Cooper Tire & Rubber Co. | 8,434 | 319 | ZAGG, Inc.(Æ) | 44,522 | 487 | ||
Dana Holding Corp. | 18,520 | 256 | 30,348 | ||||
Delta Apparel, Inc.(Æ) | 10,181 | 143 | |||||
Denny's Corp.(Æ) | 15,515 | 153 | Consumer Staples - 3.4% | ||||
Destination Maternity Corp. | 8,633 | 75 | Amplify Snack Brands, Inc.(Æ)(Ñ) | 17,441 | 201 | ||
Destination XL Group, Inc.(Æ) | 80,399 | 444 | Andersons, Inc. (The) | 38,686 | 1,224 | ||
DineEquity, Inc. | 2,979 | 252 | Boston Beer Co., Inc. Class A(Æ) | 1,011 | 204 | ||
Drew Industries, Inc. | 2,795 | 170 | Boulder Brands, Inc.(Æ) | 27,726 | 304 | ||
Expedia, Inc. | 2,747 | 341 | Calavo Growers, Inc.(Æ) | 1,581 | 77 | ||
Fox Factory Holding Corp.(Æ) | 17,515 | 290 | Coca-Cola Bottling Co.(Æ) | 1,315 | 240 | ||
Genesco, Inc.(Æ) | 5,889 | 335 | Core-Mark Holding Co., Inc. | 1,681 | 138 | ||
G-III Apparel Group, Ltd.(Æ) | 3,823 | 169 | Freshpet, Inc.(Æ)(Ñ) | 19,163 | 163 | ||
Grand Canyon Education, Inc.(Æ) | 11,919 | 478 | J&J Snack Foods Corp. | 8,424 | 983 | ||
Gray Television, Inc.(Æ) | 46,981 | 766 | John B Sanfilippo & Son, Inc.(Æ) | 25,842 | 1,396 | ||
Helen of Troy, Ltd.(Æ) | 2,404 | 227 | Natural Health Trends Corp. | 6,115 | 205 | ||
Isle of Capri Casinos, Inc.(Æ) | 20,451 | 285 | Nature's Sunshine Products, Inc. | 2,379 | 24 | ||
Jack in the Box, Inc. | 2,230 | 171 | Omega Protein Corp.(Æ) | 15,906 | 353 | ||
Jamba, Inc.(Æ)(Ñ) | 4,834 | 65 | Snyders-Lance, Inc. | 7,322 | 251 | ||
Kona Grill, Inc.(Æ) | 17,478 | 277 | SpartanNash Co. | 5,253 | 114 | ||
LGI Homes, Inc.(Æ) | 11,557 | 281 | TreeHouse Foods, Inc.(Æ) | 12,728 | 999 | ||
Libbey, Inc. | 24,691 | 526 | USANA Health Sciences, Inc.(Æ) | 824 | 105 | ||
Lithia Motors, Inc. Class A | 8,114 | 866 | Vector Group, Ltd. | 3,989 | 94 | ||
Malibu Boats, Inc. Class A(Æ) | 16,489 | 270 | Village Super Market, Inc. Class A | 4,856 | 128 | ||
MarineMax, Inc.(Æ) | 23,766 | 438 | Weis Markets, Inc. | 3,800 | 168 | ||
Marriott Vacations Worldwide Corp. | 2,655 | 151 | 7,371 | ||||
MCBC Holdings, Inc.(Æ) | 14,720 | 202 | |||||
Men's Wearhouse, Inc. (The) | 32,711 | 480 | Energy - 3.0% | ||||
Meredith Corp. | 11,579 | 501 | Callon Petroleum Co.(Æ) | 69,454 | 579 | ||
Monro Muffler Brake, Inc. | 8,650 | 573 | Canadian Solar, Inc.(Æ) | 7,189 | 208 | ||
Motorcar Parts of America, Inc.(Æ) | 23,297 | 788 | CARBO Ceramics, Inc.(Ñ) | 56,665 | 975 | ||
Nautilus, Inc.(Æ) | 49,938 | 835 | Delek US Holdings, Inc. | 8,617 | 212 | ||
Nexstar Broadcasting Group, Inc. Class A | 7,757 | 455 | Green Plains, Inc. | 27,292 | 625 | ||
Papa Murphy's Holdings, Inc.(Æ)(Ñ) | 19,445 | 219 | Gulfport Energy Corp.(Æ) | 9,488 | 233 | ||
Performance Sports Group, Ltd.(Æ) | 21,907 | 211 | Parsley Energy, Inc. Class A(Æ) | 28,013 | 517 | ||
Popeyes Louisiana Kitchen, Inc.(Æ) | 5,445 | 319 | Patterson-UTI Energy, Inc. | 64,571 | 974 | ||
Reading International, Inc. Class A(Æ) | 9,381 | 123 | PBF Energy, Inc. Class A | 24,473 | 901 | ||
Red Lion Hotels Corp.(Æ) | 77,503 | 543 | Ring Energy, Inc.(Æ) | 32,232 | 227 | ||
Red Robin Gourmet Burgers, Inc.(Æ) | 4,152 | 256 | Stone Energy Corp.(Æ) | 63,082 | 271 | ||
Salem Media Group, Inc. Class A | 29,083 | 145 | Superior Energy Services, Inc. | 26,512 | 357 |
See accompanying notes which are an integral part of the financial statements.
30 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Synergy Resources Corp.(Æ) | 27,634 | 235 | First Niagara Financial Group, Inc. | 68,735 | 746 | ||
Vivint Solar, Inc.(Æ) | 17,251 | 165 | FNB Corp. | 113,305 | 1,511 | ||
6,479 | Franklin Street Properties Corp.(ö) | 27,670 | 286 | ||||
GEO Group, Inc. (The)(ö) | 16,738 | 484 | |||||
Financial Services - 24.9% | German American Bancorp, Inc. | 2,556 | 85 | ||||
Agree Realty Corp.(ö) | 10,080 | 343 | Getty Realty Corp.(ö) | 17,846 | 306 | ||
Allied World Assurance Co. Holdings AG | 22,119 | 823 | Government Properties Income Trust(ö) | 989 | 16 | ||
Altisource Residential Corp.(ö) | 783 | 10 | Gramercy Property Trust(Æ)(ö) | 112,280 | 867 | ||
American Capital Mortgage Investment Corp. | Green Dot Corp. Class A(Æ) | 67,293 | 1,105 | ||||
(ö) | 18,697 | 261 | Greenhill & Co., Inc. | 17,466 | 500 | ||
American Equity Investment Life Holding | Hancock Holding Co. | 24,324 | 612 | ||||
Co.(Æ) | 5,640 | 136 | Hanover Insurance Group, Inc. (The) | 10,125 | 824 | ||
Ameris Bancorp | 14,425 | 490 | Hatteras Financial Corp.(ö) | 1,343 | 18 | ||
Amerisafe, Inc. | 34,880 | 1,775 | Heartland Payment Systems, Inc. | 3,754 | 356 | ||
Anchor BanCorp Wisconsin, Inc.(Æ) | 4,616 | 201 | Heritage Financial Corp. | 11,381 | 214 | ||
Apollo Commercial Real Estate Finance, | Highwoods Properties, Inc.(ö) | 14,486 | 632 | ||||
Inc.(ö) | 811 | 14 | Home BancShares, Inc. | 11,824 | 479 | ||
ARMOUR Residential REIT, Inc.(ö) | 11,350 | 247 | Hudson Pacific Properties, Inc.(ö) | 7,933 | 223 | ||
Asta Funding, Inc.(Æ) | 10,234 | 81 | Iberiabank Corp. | 13,544 | 746 | ||
Atlas Financial Holdings, Inc.(Æ) | 21,588 | 430 | Independence Realty Trust, Inc.(Ñ)(ö) | 34,007 | 255 | ||
BancFirst Corp. | 838 | 49 | Infinity Property & Casualty Corp. | 1,960 | 161 | ||
Bancorp, Inc. (The)(Æ) | 55,316 | 352 | Invesco Mortgage Capital, Inc.(ö) | 13,990 | 173 | ||
Bank of the Ozarks, Inc. | 10,225 | 506 | JER Investment Trust, Inc.(Å)(Æ) | 1,771 | — | ||
BankUnited, Inc. | 17,649 | 636 | Kearny Financial Corp.(Æ) | 37,626 | 477 | ||
Berkshire Hills Bancorp, Inc. | 14,884 | 433 | Ladder Capital Corp. Class A(ö) | 35,003 | 435 | ||
Blackhawk Network Holdings, Inc. Class | LaSalle Hotel Properties(ö) | 4,683 | 118 | ||||
A(Æ) | 5,994 | 265 | LendingTree, Inc.(Æ) | 21,404 | 1,912 | ||
Boston Private Financial Holdings, Inc. | 9,403 | 107 | Manning & Napier, Inc. Class A | 19,640 | 167 | ||
Brookline Bancorp, Inc. | 27,186 | 313 | Medical Properties Trust, Inc.(ö) | 25,152 | 289 | ||
Capstead Mortgage Corp.(ö) | 14,096 | 123 | Mercantile Bank Corp. | 9,915 | 243 | ||
CatchMark Timber Trust, Inc. Class A(ö) | 13,172 | 149 | Meridian Bancorp, Inc. | 52,404 | 739 | ||
Chemical Financial Corp. | 21,602 | 740 | Monmouth Real Estate Investment Corp.(ö) | 23,737 | 248 | ||
Clifton Bancorp, Inc. | 3,952 | 57 | National Bank Holdings Corp. Class A | 30,349 | 649 | ||
CoBiz Financial, Inc. | 26,476 | 355 | National General Holdings Corp. | 51,680 | 1,130 | ||
Cohen & Steers, Inc. | 13,042 | 398 | New Residential Investment Corp.(ö) | 76,241 | 927 | ||
Colony Capital, Inc. Class A(ö) | 1,326 | 26 | Northfield Bancorp, Inc. | 15,365 | 245 | ||
Colony Starwood Homes(Æ)(ö) | 12,228 | 277 | Northrim BanCorp, Inc. | 15,426 | 410 | ||
Columbia Banking System, Inc. | 29,712 | 966 | Northwest Bancshares, Inc. | 40,093 | 537 | ||
Community Bank System, Inc. | 2,677 | 107 | OFG Bancorp(Ñ) | 133,802 | 979 | ||
ConnectOne Bancorp, Inc. | 7,826 | 146 | Old National Bancorp | 56,902 | 772 | ||
CoreSite Realty Corp. Class A(ö) | 5,546 | 315 | Pacific Premier Bancorp, Inc.(Æ) | 13,431 | 285 | ||
Corporate Office Properties Trust(ö) | 34,548 | 754 | PennyMac Mortgage Investment Trust(ö) | 1,034 | 16 | ||
Cowen Group, Inc. Class A(Æ) | 9,996 | 38 | Physicians Realty Trust(ö) | 29,980 | 505 | ||
CYS Investments, Inc.(ö) | 39,863 | 284 | Potlatch Corp.(ö) | 17,793 | 538 | ||
East West Bancorp, Inc. | 825 | 34 | Preferred Bank | 7,925 | 262 | ||
Easterly Government Properties, Inc.(Æ)(ö) | 4,945 | 85 | ProAssurance Corp. | 16,671 | 809 | ||
Education Realty Trust, Inc.(ö) | 13,282 | 503 | Prosperity Bancshares, Inc. | 23,264 | 1,113 | ||
EPR Properties(ö) | 1,642 | 96 | Provident Financial Services, Inc. | 17,609 | 355 | ||
Equity Commonwealth(Æ)(ö) | 15,482 | 429 | QTS Realty Trust, Inc. Class A(ö) | 6,905 | 311 | ||
Essent Group, Ltd.(Æ) | 1,103 | 24 | Radian Group, Inc. | 23,148 | 310 | ||
Euronet Worldwide, Inc.(Æ) | 14,328 | 1,038 | Real Industry, Inc.(Æ) | 27,468 | 221 | ||
Evercore Partners, Inc. Class A | 7,758 | 419 | Redwood Trust, Inc.(ö) | 1,162 | 15 | ||
FBL Financial Group, Inc. Class A | 4,839 | 308 | Renasant Corp. | 23,064 | 794 | ||
FBR & Co. | 11,446 | 228 | RLJ Lodging Trust(ö) | 3,349 | 72 | ||
FCB Financial Holdings, Inc. Class A(Æ) | 17,564 | 629 | RMR Group, Inc. (The) Class A(Æ) | 25 | — | ||
First American Financial Corp. | 5,163 | 185 | Safeguard Scientifics, Inc.(Æ) | 13,290 | 193 | ||
First Bancorp | 8,809 | 165 | Select Income REIT(ö) | 866 | 17 | ||
First Commonwealth Financial Corp. | 48,284 | 438 | Selective Insurance Group, Inc. | 10,051 | 338 | ||
First Financial Bancorp | 17,626 | 319 | South State Corp. | 4,165 | 300 | ||
First Merchants Corp. | 11,443 | 291 | Sovran Self Storage, Inc.(ö) | 9,024 | 968 | ||
First Midwest Bancorp, Inc. | 23,331 | 430 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 31
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
State Bank Financial Corp. | 10,908 | 229 | Ligand Pharmaceuticals, Inc. Class B(Æ) | 14,243 | 1,543 | ||
Sterling Bancorp | 32,024 | 519 | Myriad Genetics, Inc.(Æ) | 2,311 | 100 | ||
Summit Hotel Properties, Inc.(ö) | 31,102 | 372 | National HealthCare Corp. | 3,464 | 214 | ||
Synovus Financial Corp. | 13,645 | 442 | Neurocrine Biosciences, Inc.(Æ) | 1,078 | 61 | ||
Tanger Factory Outlet Centers, Inc.(ö) | 11,713 | 383 | Owens & Minor, Inc. | 2,514 | 90 | ||
TCF Financial Corp. | 29,847 | 421 | PDL BioPharma, Inc.(Ñ) | 46,870 | 166 | ||
Terreno Realty Corp.(ö) | 32,018 | 724 | Prestige Brands Holdings, Inc.(Æ) | 18,906 | 973 | ||
TrustCo Bank Corp. | 19,580 | 120 | Sagent Pharmaceuticals, Inc.(Æ) | 11,676 | 186 | ||
UMB Financial Corp. | 12,369 | 576 | Spectrum Pharmaceuticals, Inc.(Æ)(Ñ) | 9,060 | 55 | ||
Union Bankshares Corp. | 18,610 | 470 | STERIS PLC(Æ) | 18,512 | 1,395 | ||
Urstadt Biddle Properties, Inc. Class A(ö) | 12,340 | 237 | SurModics, Inc.(Æ) | 9,193 | 186 | ||
Waddell & Reed Financial, Inc. Class A | 12,416 | 356 | US Physical Therapy, Inc. | 11,457 | 615 | ||
Webster Financial Corp. | 15,196 | 565 | Vascular Solutions, Inc.(Æ) | 6,134 | 211 | ||
WesBanco, Inc. | 11,228 | 337 | 23,322 | ||||
Westamerica Bancorporation(Ñ) | 18,115 | 847 | |||||
Western Alliance Bancorp(Æ) | 37,275 | 1,337 | Materials and Processing - 6.4% | ||||
Whitestone REIT Class B(ö) | 8,999 | 108 | Aceto Corp. | 38,571 | 1,041 | ||
54,169 | American Vanguard Corp. | 13,341 | 187 | ||||
Axiall Corp. | 26,039 | 401 | |||||
Health Care - 10.7% | Cabot Corp. | 28,576 | 1,168 | ||||
Acadia Healthcare Co., Inc.(Æ) | 14,186 | 886 | Compass Minerals International, Inc. | 11,182 | 842 | ||
Acorda Therapeutics, Inc.(Æ) | 6,916 | 296 | Continental Building Products, Inc.(Æ) | 20,035 | 350 | ||
Adamas Pharmaceuticals, Inc.(Æ) | 10,026 | 284 | Energy Focus, Inc.(Æ)(Ñ) | 47,769 | 657 | ||
Adeptus Health, Inc. Class A(Æ)(Ñ) | 8,195 | 447 | FutureFuel Corp. | 10,711 | 145 | ||
AMAG Pharmaceuticals, Inc.(Æ) | 3,178 | 96 | Graphic Packaging Holding Co. | 30,839 | 396 | ||
AMN Healthcare Services, Inc.(Æ) | 20,869 | 648 | Greif, Inc. Class A | 9,648 | 297 | ||
Amsurg Corp. Class A(Æ) | 5,345 | 406 | Haynes International, Inc. | 11,589 | 425 | ||
Anacor Pharmaceuticals, Inc.(Æ) | 226 | 26 | Headwaters, Inc.(Æ) | 19,696 | 332 | ||
Analogic Corp. | 10,441 | 862 | Insteel Industries, Inc. | 25,141 | 526 | ||
ARIAD Pharmaceuticals, Inc.(Æ) | 30,069 | 188 | Interface, Inc. Class A | 18,113 | 347 | ||
Avinger, Inc.(Æ)(Ñ) | 13,150 | 299 | Koppers Holdings, Inc.(Æ) | 12,172 | 222 | ||
BioDelivery Sciences International, Inc.(Æ) | Kronos Worldwide, Inc.(Ñ) | 53,777 | 303 | ||||
(Ñ) | 27,918 | 134 | Landec Corp.(Æ) | 19,085 | 226 | ||
BioScrip, Inc.(Æ)(Ñ) | 43,816 | 77 | LB Foster Co. Class A | 31,149 | 425 | ||
BioSpecifics Technologies Corp.(Æ) | 3,792 | 163 | LSB Industries, Inc.(Æ) | 36,349 | 264 | ||
BioTelemetry, Inc.(Æ) | 43,562 | 509 | Mueller Industries, Inc. | 15,066 | 408 | ||
Cambrex Corp.(Æ) | 15,481 | 729 | NN, Inc. | 23,342 | 372 | ||
Cantel Medical Corp. | 11,347 | 705 | Omnova Solutions, Inc.(Æ) | 57,464 | 352 | ||
Charles River Laboratories International, | Patrick Industries, Inc.(Æ) | 16,075 | 699 | ||||
Inc.(Æ) | 10,266 | 825 | PGT, Inc.(Æ) | 30,565 | 348 | ||
Community Health Systems, Inc.(Æ) | 33,829 | 897 | Summit Materials, Inc. Class A(Æ) | 48,292 | 968 | ||
Computer Programs & Systems, Inc.(Ñ) | 3,588 | 179 | Unifi, Inc.(Æ) | 3,048 | 86 | ||
Cross Country Healthcare, Inc.(Æ) | 39,923 | 654 | United States Steel Corp. | 14,588 | 116 | ||
Cynosure, Inc. Class A(Æ) | 9,619 | 430 | Universal Stainless & Alloy Products, Inc.(Æ) | 18,959 | 176 | ||
Dipexium Pharmaceuticals, Inc.(Æ) | 23,440 | 263 | US Concrete, Inc.(Æ) | 24,482 | 1,289 | ||
Eagle Pharmaceuticals, Inc.(Æ)(Ñ) | 5,347 | 474 | US Silica Holdings, Inc.(Ñ) | 31,484 | 590 | ||
Emergent BioSolutions, Inc.(Æ) | 6,471 | 259 | 13,958 | ||||
Enanta Pharmaceuticals, Inc.(Æ)(Ñ) | 4,663 | 154 | |||||
Exactech, Inc.(Æ) | 16,251 | 295 | Producer Durables - 14.3% | ||||
Genomic Health, Inc.(Æ) | 7,385 | 260 | ABM Industries, Inc. | 16,347 | 465 | ||
Greatbatch, Inc.(Æ) | 5,483 | 288 | ACCO Brands Corp.(Æ) | 142,917 | 1,019 | ||
Hanger, Inc.(Æ) | 2,991 | 49 | Actuant Corp. Class A(Æ) | 12,060 | 289 | ||
Heska Corp.(Æ) | 20,135 | 779 | Advisory Board Co. (The)(Æ) | 9,788 | 486 | ||
ICU Medical, Inc.(Æ) | 4,861 | 548 | Air Transport Services Group, Inc.(Æ) | 54,149 | 546 | ||
INC Research Holdings, Inc. Class A(Æ) | 31,146 | 1,511 | Allegiant Travel Co. Class A | 1,162 | 195 | ||
Inogen, Inc.(Æ) | 6,671 | 267 | Argan, Inc.(Æ) | 8,415 | 273 | ||
Insmed, Inc.(Æ) | 11,369 | 206 | Astec Industries, Inc. | 13,047 | 531 | ||
Integra LifeSciences Holdings Corp.(Æ) | 16,763 | 1,136 | Atlas Air Worldwide Holdings, Inc.(Æ) | 18,797 | 777 | ||
iRadimed Corp.(Æ) | 22,158 | 621 | AZZ, Inc. | 15,260 | 848 | ||
Kindred Healthcare, Inc. | 29,481 | 351 | Clarcor, Inc. | 893 | 44 | ||
LeMaitre Vascular, Inc. | 18,902 | 326 |
See accompanying notes which are an integral part of the financial statements.
32 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Columbus McKinnon Corp. | 32,815 | 620 | CSG Systems International, Inc. | 9,112 | 328 | ||
Compass Diversified Holdings | 53,194 | 845 | Cvent, Inc.(Æ) | 13,689 | 478 | ||
Convergys Corp. | 26,112 | 650 | Cypress Semiconductor Corp.(Æ) | 72,892 | 715 | ||
CoStar Group, Inc.(Æ) | 4,461 | 922 | CYREN, Ltd.(Æ) | 77,523 | 132 | ||
Crane Co. | 28,559 | 1,367 | Datalink Corp.(Æ) | 19,666 | 134 | ||
CUI Global, Inc.(Æ)(Ñ) | 16,931 | 119 | Diebold, Inc. | 37,541 | 1,130 | ||
Deluxe Corp. | 11,428 | 623 | Digi International, Inc.(Æ) | 25,601 | 291 | ||
DHI Group, Inc.(Æ) | 32,511 | 298 | DSP Group, Inc.(Æ) | 5,548 | 52 | ||
Ducommun, Inc.(Æ) | 10,194 | 165 | EMCORE Corp.(Æ) | 23,819 | 146 | ||
DXP Enterprises, Inc.(Æ) | 11,215 | 256 | EPAM Systems, Inc.(Æ) | 9,193 | 723 | ||
Dycom Industries, Inc.(Æ) | 7,376 | 516 | ePlus, Inc.(Æ) | 3,265 | 304 | ||
Ennis, Inc. | 21,314 | 410 | Fabrinet(Æ) | 25,675 | 612 | ||
Forrester Research, Inc. | 5,336 | 152 | Fleetmatics Group PLC(Æ) | 7,044 | 358 | ||
GP Strategies Corp.(Æ) | 11,678 | 293 | Globant SA(Æ) | 19,915 | 747 | ||
Granite Construction, Inc. | 33,265 | 1,428 | Glu Mobile, Inc.(Æ)(Ñ) | 91,785 | 223 | ||
Greenbrier Cos., Inc.(Ñ) | 12,736 | 415 | GSI Group, Inc.(Æ) | 33,210 | 452 | ||
Hudson Technologies, Inc.(Æ) | 83,869 | 249 | GTT Communications, Inc.(Æ) | 40,278 | 687 | ||
Hyster-Yale Materials Handling, Inc. | 5,909 | 310 | HubSpot, Inc.(Æ) | 16,161 | 910 | ||
KBR, Inc. | 62,675 | 1,060 | Imperva, Inc.(Æ) | 13,520 | 856 | ||
Keysight Technologies, Inc.(Æ) | 4,350 | 123 | Ingram Micro, Inc. Class A | 18,912 | 575 | ||
Kforce, Inc. | 18,314 | 463 | Insight Enterprises, Inc.(Æ) | 7,942 | 200 | ||
Knoll, Inc. | 37,095 | 697 | Interactive Intelligence Group, Inc.(Æ) | 14,904 | 468 | ||
Littelfuse, Inc. | 6,402 | 685 | KEYW Holding Corp. (The)(Æ)(Ñ) | 23,192 | 140 | ||
Lydall, Inc.(Æ) | 4,114 | 146 | Luxoft Holding, Inc. Class A(Æ) | 7,079 | 546 | ||
Marten Transport, Ltd. | 10,637 | 188 | Manhattan Associates, Inc.(Æ) | 6,057 | 401 | ||
McGrath RentCorp | 14,555 | 367 | Microsemi Corp.(Æ) | 19,978 | 651 | ||
Middleby Corp.(Æ) | 4,706 | 508 | Monolithic Power Systems, Inc. | 3,400 | 217 | ||
MSA Safety, Inc. | 17,406 | 757 | NCR Corp.(Æ) | 11,313 | 277 | ||
Old Dominion Freight Line, Inc.(Æ) | 3,829 | 226 | NETGEAR, Inc.(Æ) | 5,663 | 237 | ||
Oshkosh Corp.(Ñ) | 13,762 | 537 | NetScout Systems, Inc.(Æ) | 19,163 | 588 | ||
OSI Systems, Inc.(Æ) | 13,141 | 1,165 | Open Text Corp. | 13,349 | 640 | ||
PFSweb, Inc.(Æ) | 33,091 | 426 | Orbotech, Ltd.(Æ) | 26,408 | 584 | ||
Primoris Services Corp. | 30,800 | 679 | Paycom Software, Inc.(Æ) | 22,563 | 849 | ||
Radiant Logistics, Inc.(Æ) | 92,132 | 316 | PC Connection, Inc.(Æ) | 4,747 | 107 | ||
Regal Beloit Corp. | 14,251 | 834 | Perficient, Inc.(Æ) | 24,152 | 413 | ||
Standex International Corp. | 7,359 | 612 | Plantronics, Inc. | 4,855 | 230 | ||
Sun Hydraulics Corp. | 6,227 | 198 | Proofpoint, Inc.(Æ) | 12,266 | 797 | ||
Sykes Enterprises, Inc.(Æ) | 11,777 | 362 | Q2 Holdings, Inc.(Æ) | 24,194 | 638 | ||
Tetra Tech, Inc. | 26,084 | 679 | QLogic Corp.(Æ) | 3,919 | 48 | ||
Tidewater, Inc.(Ñ) | 93,255 | 649 | Rubicon Project, Inc. (The)(Æ) | 37,652 | 619 | ||
Titan Machinery, Inc.(Æ)(Ñ) | 26,971 | 295 | Sapiens International Corp. NV | 33,836 | 345 | ||
TransDigm Group, Inc.(Æ) | 3,121 | 713 | Science Applications International Corp. | 4,652 | 213 | ||
Triumph Group, Inc. | 30,531 | 1,214 | Silicon Graphics International Corp.(Æ)(Ñ) | 85,698 | 506 | ||
Vishay Precision Group, Inc.(Æ) | 14,904 | 169 | Sparton Corp.(Æ) | 23,201 | 464 | ||
Wesco Aircraft Holdings, Inc.(Æ) | 89,310 | 1,069 | Streamline Health Solutions, Inc.(Æ) | 44,115 | 62 | ||
WNS Holdings, Ltd. - ADR(Æ) | 32,446 | 1,012 | Synaptics, Inc.(Æ) | 4,752 | 382 | ||
31,260 | Synchronoss Technologies, Inc.(Æ) | 8,506 | 300 | ||||
Syntel, Inc.(Æ) | 6,103 | 276 | |||||
Technology - 14.2% | Tangoe, Inc.(Æ) | 17,784 | 149 | ||||
Acacia Research Corp. | 189,075 | 811 | TESSCO Technologies, Inc. | 19,050 | 371 | ||
ADTRAN, Inc. | 65,515 | 1,128 | Tyler Technologies, Inc.(Æ) | 13,123 | 2,288 | ||
Attunity, Ltd.(Æ) | 36,974 | 409 | Ultimate Software Group, Inc.(Æ) | 5,180 | 1,013 | ||
Autobytel, Inc.(Æ) | 33,373 | 753 | Workiva, Inc.(Æ) | 15,860 | 279 | ||
Benefitfocus, Inc.(Æ)(Ñ) | 13,036 | 474 | Xplore Technologies Corp.(Æ) | 41,484 | 212 | ||
Black Box Corp. | 31,003 | 295 | Zix Corp.(Æ) | 43,865 | 223 | ||
CACI International, Inc. Class A(Æ) | 3,573 | 332 | 31,008 | ||||
Callidus Software, Inc.(Æ) | 24,615 | 457 | |||||
CEVA, Inc.(Æ) | 12,205 | 285 | Utilities - 3.5% | ||||
Cohu, Inc. | 29,489 | 356 | American States Water Co. | 2,780 | 117 | ||
comScore, Inc.(Æ) | 2,968 | 122 | Artesian Resources Corp. Class A | 4,198 | 116 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 33
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts)
Principal | Fair | ||||||
Amount ($) or | Value | ||||||
Shares | $ | ||||||
Boingo Wireless, Inc.(Æ) | 61,611 | 408 | |||||
California Water Service Group | 25,131 | 585 | |||||
Chesapeake Utilities Corp. | 12,877 | 731 | |||||
Cleco Corp. | 6,120 | 320 | |||||
Cogent Communications Holdings, Inc. | 16,646 | 577 | |||||
Connecticut Water Service, Inc. | 5,643 | 214 | |||||
inContact, Inc.(Æ) | 43,807 | 418 | |||||
j2 Global, Inc. | 10,934 | 900 | |||||
Laclede Group, Inc. (The) | 5,809 | 345 | |||||
Middlesex Water Co. | 4,511 | 120 | |||||
NorthWestern Corp. | 17,482 | 949 | |||||
ONE Gas, Inc. | 1,071 | 54 | |||||
Piedmont Natural Gas Co., Inc. | 3,942 | 225 | |||||
PNM Resources, Inc. | 16,697 | 510 | |||||
South Jersey Industries, Inc. | 2,440 | 57 | |||||
Talen Energy Corp.(Æ) | 31,816 | 198 | |||||
Towerstream Corp.(Æ) | 86,883 | 33 | |||||
Unitil Corp. | 20,662 | 741 | |||||
7,618 | |||||||
Total Common Stocks | |||||||
(cost $202,846) | 205,533 | ||||||
Short | -Term Investments - 5.6% | ||||||
Russell U.S. Cash Management Fund | 12,216,394 | (8) | 12,216 | ||||
Total Short-Term Investments | |||||||
(cost $12,216) | 12,216 | ||||||
Other Securities - 6.1% | |||||||
Russell U.S. Cash Collateral Fund(×) | 13,403,810 | (8) | 13,404 | ||||
Total Other Securities | |||||||
(cost $13,404) | 13,404 | ||||||
Total Investments 106.0% | |||||||
(identified cost $228,466) | 231,153 | ||||||
Other Assets and Liabilities, Net | |||||||
- | (6.0%) | (13,090 | ) | ||||
Net Assets - 100.0% | 218,063 |
See accompanying notes which are an integral part of the financial statements.
34 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2015
Restricted Securities
Amounts in thousands (except share and cost per unit amounts)
Principal | Cost per | Cost | Fair Value | |||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000 | ) | (000 | ) | |||||
Securities | Date | or shares | $ | $ | $ | |||||||
0.0% | ||||||||||||
JER Investment Trust, Inc. | 05/27/04 | 1,771 | 82.03 | 145 | — | |||||||
— | ||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. |
Futures Contracts | ||||||
Amounts in thousands (except contract amounts) | ||||||
Unrealized | ||||||
Appreciation | ||||||
Number of | Notional | Expiration | (Depreciation) | |||
Contracts | Amount | Date | $ | |||
Long Positions | ||||||
Russell 2000 Mini Index Futures | 107 | USD | 12,107 | 03/16 | 31 | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 31 |
Presentation of Portfolio Holdings | ||||||||||||
Amounts in thousands | ||||||||||||
Fair Value | ||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||
Common Stocks | ||||||||||||
Consumer Discretionary | $ | 30,348 | $ | — | $ | — | $ | 30,348 | 13.9 | |||
Consumer Staples | 7,371 | — | — | 7,371 | 3.4 | |||||||
Energy | 6,479 | — | — | 6,479 | 3.0 | |||||||
Financial Services | 54,169 | — | — | 54,169 | 24.9 | |||||||
Health Care | 23,322 | — | — | 23,322 | 10.7 | |||||||
Materials and Processing | 13,958 | — | — | 13,958 | 6.4 | |||||||
Producer Durables | 31,260 | — | — | 31,260 | 14.3 | |||||||
Technology | 31,008 | — | — | 31,008 | 14.2 | |||||||
Utilities | 7,618 | — | — | 7,618 | 3.5 | |||||||
Short-Term Investments | — | 12,216 | — | 12,216 | 5.6 | |||||||
Other Securities | — | 13,404 | — | 13,404 | 6.1 | |||||||
Total Investments | 205,533 | 25,620 | — | 231,153 | 106.0 | |||||||
Other Assets and Liabilities, Net | (6.0 | ) | ||||||||||
100.0 | ||||||||||||
Other Financial Instruments | ||||||||||||
Futures Contracts | 31 | — | — | 31 | —* | |||||||
Total Other Financial Instruments** | $ | 31 | $ | — | $ | — | $ | 31 |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 35
Russell Investment Funds
Aggressive Equity Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Equity | ||||||
Derivatives not accounted for as hedging instruments | Contracts | |||||
Location: Statement of Assets and Liabilities - Assets | ||||||
Variation margin on futures contracts* | $ | 31 | ||||
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | ||||||
Futures contracts | $ | 480 | $ | — | ||
Foreign currency-related transactions** | — | (2 | ) | |||
Total | $ | 480 | $ | (2 | ) | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||
Futures contracts | $ | (376 | ) | $ | — |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
36 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | ||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||
Gross | Net Amounts | |||||||
Amounts | of Assets | |||||||
Gross | Offset in the | Presented in | ||||||
Amounts of | Statement of | the Statement | ||||||
Recognized | Assets and | of Assets and | ||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||
Securities on Loan* | Investments, at fair value | $ | 12,946 | $ | — $ | 12,946 | ||
Total Financial and Derivative Assets | 12,946 | — | 12,946 | |||||
Financial and Derivative Assets not subject to a netting agreement | — | — | — | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 12,946 | $ | — $ | 12,946 | |||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | ||||||||
Gross Amounts Not Offset in | ||||||||
the Statement of Assets and | ||||||||
Liabilities |
Net Amounts | ||||||||||
of Assets | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | ||||||
Barclays | $ | 400 | $ | — | $ | 400 | $ | — | ||
Citigroup | 436 | — | 436 | — | ||||||
Deutsche Bank | 948 | — | 948 | — | ||||||
Fidelity | 2,509 | — | 2,509 | — | ||||||
Goldman Sachs | 398 | — | 398 | — | ||||||
JPMorgan Chase | 3,420 | — | 3,420 | — | ||||||
Merrill Lynch | 1,072 | — | 1,072 | — | ||||||
Morgan Stanley | 3,763 | — | 3,763 | — | ||||||
Total | $ | 12,946 | $ | — | $ | 12,946 | $ | — |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 37
Russell Investment Funds
Aggressive Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 123 | $ | — $ | 123 | |||
Total Financial and Derivative Liabilities | 123 | — | 123 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (123) | — | (123 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | — | $ | — $ | — |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
38 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | |||
Assets | |||
Investments, at identified cost | $ | 228,466 | |
Investments, at fair value(*)(>) | 231,153 | ||
Cash (restricted)(a) | 645 | ||
Receivables: | |||
Dividends and interest | 320 | ||
Dividends from affiliated Russell funds | 2 | ||
Investments sold | 485 | ||
Fund shares sold | 53 | ||
Total assets | 232,658 | ||
Liabilities | |||
Payables: | |||
Investments purchased | 700 | ||
Fund shares redeemed | 136 | ||
Accrued fees to affiliates | 180 | ||
Other accrued expenses | 52 | ||
Variation margin on futures contracts | 123 | ||
Payable upon return of securities loaned | 13,404 | ||
Total liabilities | 14,595 | ||
Net Assets | $ | 218,063 | |
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 203 | |
Accumulated net realized gain (loss) | (7,297 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 2,687 | ||
Futures contracts | 31 | ||
Shares of beneficial interest | 169 | ||
Additional paid-in capital | 222,270 | ||
Net Assets | $ | 218,063 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 12.93 | |
Net assets | $ | 218,063,423 | |
Shares outstanding ($.01 par value) | 16,862,845 | ||
Amounts in thousands | |||
(*) Securities on loan included in investments | $ | 12,946 | |
(>) Investments in affiliates, Russell U.S. Cash Management Fund and Russell U.S. Cash Collateral Fund | $ | 25,620 | |
(a) Cash Collateral for Futures | $ | 645 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 39
Russell Investment Funds
Aggressive Equity Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 3,608 | |
Dividends from affiliated Russell funds | 11 | ||
Securities lending income | 363 | ||
Total investment income | 3,982 | ||
Expenses | |||
Advisory fees | 2,171 | ||
Administrative fees | 121 | ||
Custodian fees | 133 | ||
Transfer agent fees . | 11 | ||
Professional fees | 64 | ||
Trustees’ fees | 6 | ||
Printing fees | 32 | ||
Miscellaneous | 17 | ||
Expenses before reductions | 2,555 | ||
Expense reductions | (41 | ) | |
Net expenses | 2,514 | ||
Net investment income (loss) | 1,468 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 12,262 | ||
Futures contracts | 480 | ||
Foreign currency-related transactions | (3 | ) | |
Net realized gain (loss) | 12,739 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (30,415 | ) | |
Futures contracts | (376 | ) | |
Net change in unrealized appreciation (depreciation) | (30,791 | ) | |
Net realized and unrealized gain (loss) | (18,052 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (16,584 | ) |
See accompanying notes which are an integral part of the financial statements.
40 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||||||||||
Amounts in thousands | 2015 | 2014 | ||||||||||||
Increase (Decrease) in Net Assets | ||||||||||||||
Operations | ||||||||||||||
Net investment income (loss) | $ | 1,468 | $ | 856 | ||||||||||
Net realized gain (loss) | 12,739 | 17,994 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (30,791 | ) | (14,560 | ) | ||||||||||
Net increase (decrease) in net assets from operations | (16,584 | ) | 4,290 | |||||||||||
Distributions | ||||||||||||||
From net investment income | (1,595 | ) | (618 | ) | ||||||||||
From net realized gain | (21,431 | ) | (23,723 | ) | ||||||||||
Net decrease in net assets from distributions | (23,026 | ) | (24,341 | ) | ||||||||||
Share Transactions* | ||||||||||||||
Net increase (decrease) in net assets from share transactions | 3,870 | 36,026 | ||||||||||||
Total Net Increase (Decrease) in Net Assets | (35,740 | ) | 15,975 | |||||||||||
Net Assets | ||||||||||||||
Beginning of period | 253,803 | 237,828 | ||||||||||||
End of period | $ | 218,063 | $ | 253,803 | ||||||||||
Undistributed (overdistributed) net investment income included in net assets | $ | 203 | $ | 328 | ||||||||||
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||||
2015 | 2014 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Proceeds from shares sold | 759 | $ | 11,186 | 2,528 | $ | 40,528 | ||||||||
Proceeds from reinvestment of distributions | 1,733 | 23,025 | 1,557 | 24,341 | ||||||||||
Payments for shares redeemed | (1,990 | ) | (30,341 | ) | (1,813 | ) | (28,843 | ) | ||||||
Total increase (decrease) | 502 | $ | 3,870 | 2,272 | $ | 36,026 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 41
Russell Investment Funds
Aggressive Equity Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period. | ||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 15.51 | .09 | (1.19 | ) | (1.10 | ) | (.10 | ) | (1.38 | ) | ||||||
December 31, 2014 | 16.88 | .06 | .18 | .24 | (.04 | ) | (1.57 | ) | ||||||||
December 31, 2013 | 13.02 | .08 | 5.11 | 5.19 | (.07 | ) | (1.26 | ) | ||||||||
December 31, 2012 | 11.36 | .13 | 1.67 | 1.80 | (.14 | ) | — | |||||||||
December 31, 2011 | 11.92 | .04 | (.54 | ) | (.50 | ) | (.06 | ) | — | |||||||
See accompanying notes which are an integral part of the financial statements.
42 Aggressive Equity Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||||
(1.48 | ) | 12.93 | (7.19 | ) | 218,063 | 1.06 | 1.04 | .61 | 138 | ||||||||
(1.61 | ) | 15.51 | 1.56 | 253,803 | 1.06 | 1.01 | .35 | 80 | |||||||||
(1.33 | ) | 16.88 | 40.00 | 237,828 | 1.05 | 1.00 | .50 | 77 | |||||||||
(.14 | ) | 13.02 | 15.84 | 185,902 | 1.09 | 1.04 | 1.08 | 150 | |||||||||
(.06 | ) | 11.36 | (4.20 | ) | 177,035 | 1.08 | 1.02 | .37 | 105 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 43
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Non-U.S. Fund | International Developed Markets Linked Benchmark*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (1.31 | )% | 1 Year | (2.56 | )% | ||
5 Years | 3.71 | %§ | 5 Years | 3.09 | %§ | ||
10 Years | 2.86 | %§ | 10 Years | 2.78 | %§ | ||
Russell Developed ex-U.S. Large Cap® Index Net** | |||||||
Total | |||||||
Return | |||||||
1 Year | (2.56 | )% | |||||
5 Years | 3.09 | %§ | |||||
10 Years | 3.25 | %§ |
44 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Non-U.S. Fund (the “Fund”) employs a multi-manager | Pacific ex-Japan and Canada were favorable. Underweights to |
approach whereby portions of the Fund are allocated to different | materials and energy paid off as these sectors were the worst hit |
money manager strategies. Fund assets not allocated to money | in the period, as did an overweight to information technology. The |
managers are managed by Russell Investment Management | Fund’s overweight to higher quality was favorable in the period, |
Company (“RIMCo”), the Fund’s advisor. RIMCo may change | partially offset by an underweight to mid cap equities, which |
the allocation of the Fund’s assets among money managers at | detracted as mid cap equities broadly outperformed large cap |
any time. An exemptive order from the Securities and Exchange | equities. |
Commission (“SEC”) permits RIMCo to engage or terminate a | The Fund employs discretionary money managers. The Fund’s |
money manager at any time, subject to approval by the Fund’s | discretionary money managers select the individual portfolio |
Board, without a shareholder vote. Pursuant to the terms of the | securities for the assets assigned to them. Fund assets not |
exemptive order, the Fund is required to notify its shareholders | allocated to discretionary money managers include the Fund’s |
within 90 days of when a money manager begins providing | liquidity reserves and assets which may be managed directly |
services. As of December 31, 2015, the Fund had four money | by RIMCo to effect the Fund’s investment strategies and/or to |
managers. | actively manage the Fund’s overall exposures by investing in |
What is the Fund’s investment objective? | securities or other instruments that RIMCo believes will achieve |
The Fund seeks to provide long term capital growth. | the desired risk/return profile for the Fund. |
With respect to certain of the Fund’s money managers, William | |
How did the Fund perform relative to its benchmark for the | Blair Investment Management, LLC was the best performing |
fiscal year ended December 31, 2015? | money manager in the period and outperformed the Fund’s |
For the fiscal year ended December 31, 2015, the Fund lost | benchmark. The manager’s high growth tilt versus the benchmark |
1.31%. This is compared to the Fund’s benchmark, the Russell | was favorable, as was the manager’s exposure to higher momentum |
Developed ex-U.S. Large Cap Index (Net), which lost 2.56% | stocks. |
during the same period. The Fund’s performance includes | |
operating expenses, whereas index returns are unmanaged and | Barrow, Hanley, Mewhinney & Strauss, LLC was the worst |
do not include expenses of any kind. | performing money manager in the period and underperformed |
the Fund’s benchmark. The manager’s overweight to value, | |
For the fiscal year ended December 31, 2015, the Morningstar | underweight to Japan and underweight to consumer discretionary |
Insurance Foreign Large blend, a group of funds that Morningstar | were the key detractors. This was partially offset by a favorable |
considers to have investment strategies similar to those of the | underweight to Canada and Asia Pacific ex-Japan. |
Fund, lost 1.70%. This result serves as a peer comparison and is | |
expressed net of operating expenses. | During the period, RIMCo utilized a positioning strategy to control |
Fund-level exposures and risks through the purchase of a stock | |
How did the market conditions described in the Market | portfolio. Using the output from a quantitative model, the strategy |
Summary report affect the Fund’s performance? | seeks to position the portfolio to meet RIMCo’s overall preferred |
The Russell Developed ex-U.S. Large Cap Index (Net) lost | positioning with respect to Fund exposures. Until September |
2.56% in the fiscal year ended December 31, 2015. Commodity | 2015, the strategy was designed to increase the Fund’s exposure |
heavy economies like Canada and Australia lagged significantly | to large cap defensive stocks. In September 2015, RIMCo |
during the fiscal year due to a demand slowdown, particularly | increased the Fund’s allocation to the strategy and introduced |
from China. Energy and materials were the worst hit sectors as | a multi-factor approach designed to express RIMCo’s preferred |
oil prices tumbled to the lowest levels since 2009 and a demand | Fund positioning across multiple factors and sectors, specifically |
slowdown in emerging markets caused commodity prices to plunge | increasing the Fund’s value exposure while moderating the Fund’s |
significantly. Defensive sectors held up well amid the volatility. | volatility exposure. The positioning strategy’s benchmark-relative |
Value underperformed growth, small and mid-cap stocks broadly | performance was slightly positive for the period, mainly driven by |
outperformed large cap stocks and higher momentum stocks held | the strategy’s defensive focus. |
up well in the period. | In addition, RIMCo utilized equity futures and currency forward |
How did the investment strategies and techniques employed | contracts in order to position the portfolio to meet RIMCo’s |
by the Fund and its money managers affect its benchmark- | overall preferred positioning with respect to country and currency |
relative performance? | exposures. This strategy generated positive performance during |
The Fund outperformed its benchmark during the one year period | the fiscal year ended December 31, 2015. |
ending December 31, 2015. The Fund’s underweights to Asia |
Non-U.S. Fund 45
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
During the period, RIMCo equitized the Fund’s cash using index | Money Managers as of December 31, | |
futures contracts to provide the Fund with full market exposure. | 2015 | Styles |
This did not have a material impact on the Fund’s performance | ||
Barrow, Hanley, Mewhinney & Strauss, LLC | Value | |
for the period. | MFS Institutional Advisors Inc. | Growth |
Fair value pricing adjustments on the last business day of | Pzena Investment Management LLC | Value |
the period detracted from the Fund’s benchmark-relative | William Blair & Company, LLC | Growth |
performance because the Fund’s index does not use fair value | The views expressed in this report reflect those of the | |
pricing adjustments. | portfolio managers only through the end of the period | |
covered by the report. These views do not necessarily | ||
Describe any changes to the Fund’s structure or the money | represent the views of RIMCo or any other person in RIMCo | |
manager line-up. | or any other affiliated organization. These views are | |
In September 2015, RIMCo implemented the changes to the | subject to change at any time based upon market conditions | |
positioning strategy described above. | 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 Funds (“RIF”) Fund are | ||
based on numerous factors, should not be relied on as an | ||
indication of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2006.
** The Russell Developed ex-U.S. Large Cap® Index Net is an index which offers investors access to the large-cap segment of the global equity market, excluding
companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely
reconstituted annually to accurately reflect the changes in the market over time and is net of tax on dividends from foreign holdings.
*** The International Developed Markets Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes
into account historical changes in the Fund’s primary benchmark. The International Developed Markets Linked Benchmark represents the returns of the MSCI
EAFE Index (net of tax on dividends from foreign holdings) through December 31, 2010 and the returns of the Russell Developed ex-U.S. Large Cap® Index Net
thereafter.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
46 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 927.50 | $ | 1,019.91 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 5.10 | $ | 5.35 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 1.05% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Non-U.S. Fund 47
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Common Stocks - 92.5% | NetEase, Inc. - ADR | 5,688 | 1,030 | |||||||
Australia - 1.1% | Tencent Holdings, Ltd. | 41,300 | 806 | |||||||
Australia & New Zealand Banking | 3,466 | |||||||||
Group, Ltd. - ADR | 8,107 | 164 | ||||||||
Commonwealth Bank of Australia - ADR | 5,014 | 310 | Czech Republic - 0.2% | |||||||
CSL, Ltd. | 1,026 | 78 | CEZ AS | 49,075 | 876 | |||||
Macquarie Group, Ltd. | 22,086 | 1,320 | ||||||||
National Australia Bank, Ltd. - ADR | 7,486 | 163 | Denmark - 1.8% | |||||||
Orica, Ltd. | 26,356 | 295 | Carlsberg A/S Class B | 5,414 | 479 | |||||
Qantas Airways, Ltd.(Æ) | 192,943 | 572 | Danske Bank A/S | 132,724 | 3,546 | |||||
Rio Tinto, Ltd. - ADR | 14,872 | 480 | Genmab A/S(Æ) | 433 | 57 | |||||
Suncorp Group, Ltd. | 3,695 | 32 | Novo Nordisk A/S Class B | 25,785 | 1,482 | |||||
Tabcorp Holdings, Ltd. | 75,367 | 257 | TDC A/S | 161,296 | 800 | |||||
Telstra Corp., Ltd. | 12,601 | 51 | 6,364 | |||||||
Wesfarmers, Ltd. | 3,342 | 101 | ||||||||
Westfield Corp.(ö) | 5,574 | 38 | Finland - 0.5% | |||||||
Westpac Banking Corp. | 9,150 | 222 | Fortum OYJ | 32,681 | 490 | |||||
4,083 | Sampo OYJ Class A | 23,413 | 1,187 | |||||||
1,677 | ||||||||||
Austria - 0.7% | ||||||||||
Erste Group Bank AG(Æ) | 79,816 | 2,495 | France - 9.8% | |||||||
Air Liquide SA Class A | 11,904 | 1,337 | ||||||||
Belgium - 1.0% | Airbus Group SE | 33,100 | 2,222 | |||||||
Anheuser-Busch InBev SA | 12,156 | 1,502 | AXA SA | 4,758 | 130 | |||||
Groupe Bruxelles Lambert SA | 6,447 | 551 | Bouygues SA - ADR | 56,560 | 2,241 | |||||
KBC Groep NV | 22,340 | 1,397 | Bureau Veritas SA | 16,736 | 333 | |||||
3,450 | Capital Gemini SA | 16,864 | 1,561 | |||||||
Casino Guichard Perrachon SA | 10,600 | 487 | ||||||||
Brazil - 0.5% | Christian Dior SE | 148 | 25 | |||||||
Ambev SA - ADR | 64,865 | 289 | Credit Agricole SA | 84,828 | 999 | |||||
Embraer SA - ADR | 56,000 | 1,655 | Danone SA | 21,633 | 1,460 | |||||
1,944 | Dassault Systemes SA | 6,014 | 481 | |||||||
Engie SA | 54,703 | 968 | ||||||||
Canada - 2.5% | Faurecia | 28,368 | 1,137 | |||||||
Alimentation Couche-Tard, Inc. Class B | 27,087 | 1,192 | Hermes International | 398 | 134 | |||||
BCE, Inc. | 1,200 | 46 | JCDecaux SA | 16,471 | 630 | |||||
Brookfield Asset Management, Inc. | Legrand SA - ADR | 13,433 | 758 | |||||||
Class A | 40,375 | 1,274 | L'Oreal SA | 2,507 | 422 | |||||
Canadian Imperial Bank of Commerce | 1,200 | 79 | LVMH Moet Hennessy Louis Vuitton | |||||||
Canadian National Railway Co. | 21,344 | 1,193 | SE - ADR | 8,705 | 1,361 | |||||
Choice Properties Real Estate | Natixis SA | 66,883 | 378 | |||||||
Investment Trust(ö) | 60,800 | 518 | Numericable-SFR SAS(Æ) | 10,705 | 389 | |||||
Element Financial Corp.(Æ) | 37,435 | 452 | Pernod Ricard SA | 15,629 | 1,777 | |||||
Encana Corp. | 60,571 | 308 | Publicis Groupe SA - ADR | 23,112 | 1,533 | |||||
First Quantum Minerals, Ltd. | 64,967 | 243 | Rallye SA(Ñ) | 26,700 | 415 | |||||
Kinross Gold Corp.(Æ) | 185,526 | 337 | Renault SA | 6,276 | 629 | |||||
Loblaw Cos., Ltd. | 9,602 | 453 | Safran SA | 12,045 | 825 | |||||
MEG Energy Corp. Class A(Æ) | 41,162 | 239 | Sanofi - ADR | 44,807 | 3,822 | |||||
Rogers Communications, Inc. Class B | 1,100 | 38 | Schneider Electric SE | 52,920 | 3,013 | |||||
Royal Bank of Canada - GDR | 4,300 | 230 | Technip SA | 18,600 | 919 | |||||
SNC-Lavalin Group, Inc. | 17,306 | 514 | Thales SA | 1,978 | 148 | |||||
Sun Life Financial, Inc. | 1,400 | 44 | Total SA | 62,740 | 2,795 | |||||
Suncor Energy, Inc. | 47,155 | 1,217 | Unibail-Rodamco SE(ö) | 282 | 72 | |||||
Toronto Dominion Bank | 6,100 | 239 | Valeo SA | 5,928 | 915 | |||||
Yamana Gold, Inc. | 165,797 | 308 | Vallourec SA(Ñ) | 67,732 | 629 | |||||
8,924 | Vinci SA | 2,092 | 134 | |||||||
Vivendi SA - ADR | 3,413 | 73 | ||||||||
China - 1.0% | 35,152 | |||||||||
Alibaba Group Holding, Ltd. - ADR(Æ) | 4,158 | 338 | Germany - 5.9% | |||||||
Baidu, Inc. - ADR(Æ) | 3,537 | 669 | Adidas AG | 424 | 41 | |||||
Lenovo Group, Ltd. | 618,000 | 623 | Allianz SE | 4,566 | 809 |
See accompanying notes which are an integral part of the financial statements.
48 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||||
Principal | Fair | Principal | Fair | ||||||||
Amount ($) | Value | Amount ($) | Value | ||||||||
or Shares | $ | or Shares | $ | ||||||||
BASF SE | 2,695 | 206 | Teva Pharmaceutical Industries, Ltd. | 4,277 | 281 | ||||||
Bayer AG | 17,907 | 2,246 | 5,357 | ||||||||
Bayerische Motoren Werke AG | 12,495 | 1,316 | |||||||||
Beiersdorf AG | 13,843 | 1,259 | Italy - 2.3% | ||||||||
Continental AG | 8,777 | 2,130 | Enel SpA | 392,875 | 1,643 | ||||||
Daimler AG | 15,689 | 1,309 | ENI SpA - ADR | 224,007 | 3,320 | ||||||
Deutsche Boerse AG | 52,042 | 4,604 | Intesa Sanpaolo SpA | 411,428 | 1,371 | ||||||
Deutsche Post AG | 2,795 | 79 | Luxottica Group SpA | 434 | 28 | ||||||
Fresenius Medical Care AG & Co. KGaA | 624 | 53 | Snam Rete Gas SpA | 110,749 | 579 | ||||||
Fresenius SE & Co. KGaA | 1,103 | 79 | Telecom Italia SpA(Æ) | 937,355 | 1,181 | ||||||
Hannover Rueck SE | 5,030 | 577 | 8,122 | ||||||||
Henkel AG & Co. KGaA | 302 | 29 | |||||||||
Linde AG | 8,295 | 1,205 | Japan - 15.5% | ||||||||
Merck KGaA | 6,418 | 623 | Asahi Group Holdings, Ltd. | 1,100 | 34 | ||||||
MTU Aero Engines AG | 3,075 | 300 | Astellas Pharma, Inc. | 64,900 | 922 | ||||||
ProSiebenSat.1 Media SE | 10,474 | 529 | Bridgestone Corp. | 16,500 | 565 | ||||||
Rational AG | 965 | 439 | Canon, Inc. | 72,300 | 2,191 | ||||||
Rhoen Klinikum AG | 3,272 | 98 | Daihatsu Motor Co., Ltd. | 98,500 | 1,327 | ||||||
SAP SE - ADR | 16,555 | 1,319 | Dai-ichi Life Insurance Co., Ltd. (The) | 47,450 | 788 | ||||||
Siemens AG | 20,274 | 1,967 | Daiichi Sankyo Co., Ltd. | 1,700 | 35 | ||||||
21,217 | Daikin Industries, Ltd. | 13,300 | 968 | ||||||||
Denso Corp. | 32,100 | 1,531 | |||||||||
Hong Kong - 2.2% | East Japan Railway Co. | 800 | 75 | ||||||||
AIA Group, Ltd. | 430,800 | 2,565 | FANUC Corp. | 8,700 | 1,499 | ||||||
China Mobile, Ltd. | 92,000 | 1,031 | Fuji Electric Co., Ltd. | 482,000 | 2,021 | ||||||
China Overseas Land & Investment, Ltd. | 298,000 | 1,035 | Fuji Heavy Industries, Ltd. | 31,800 | 1,307 | ||||||
Global Brands Group Holding, Ltd.(Æ) | 1,936,000 | 366 | Fujitsu, Ltd. | 462,000 | 2,300 | ||||||
Guangdong Investment, Ltd. | 583,100 | 825 | Hachijuni Bank, Ltd. (The) | 52,000 | 319 | ||||||
Li & Fung, Ltd. | 646,000 | 436 | Hitachi, Ltd. | 292,000 | 1,652 | ||||||
Link (ö) | 96,500 | 576 | Honda Motor Co., Ltd. | 124,100 | 3,976 | ||||||
Power Assets Holdings, Ltd. | 21,000 | 193 | Hoya Corp. | 74,200 | 3,026 | ||||||
Wharf Holdings, Ltd. (The) | 92,000 | 508 | IHI Corp. | 469,000 | 1,289 | ||||||
Wheelock & Co., Ltd. | 113,000 | 474 | Iida Group Holdings Co., Ltd. | 60,300 | 1,117 | ||||||
8,009 | Inpex Corp. | 70,800 | 699 | ||||||||
ITOCHU Corp. | 134,100 | 1,581 | |||||||||
Hungary - 0.2% | Japan Tobacco, Inc. | 26,500 | 973 | ||||||||
OTP Bank PLC | 40,825 | 842 | Kansai Electric Power Co., Inc. (The)(Æ) | 37,700 | 451 | ||||||
Kao Corp. | 17,500 | 898 | |||||||||
India - 1.0% | KDDI Corp. | 43,900 | 1,136 | ||||||||
HDFC Bank, Ltd. - ADR | 25,776 | 1,589 | Keyence Corp. | 1,700 | 933 | ||||||
Housing Development Finance Corp., | Kyocera Corp. | 17,600 | 816 | ||||||||
Ltd. | 41,711 | 792 | Mabuchi Motor Co., Ltd. | 13,400 | 724 | ||||||
Tata Consultancy Services, Ltd. | 9,539 | 350 | Makita Corp. | 12,900 | 741 | ||||||
Tata Motors, Ltd. - ADR(Æ) | 25,257 | 744 | Mitsubishi UFJ Financial Group, Inc. | 152,100 | 941 | ||||||
3,475 | MS&AD Insurance Group Holdings, Inc. | 32,100 | 939 | ||||||||
Murata Manufacturing Co., Ltd. | 6,100 | 876 | |||||||||
Indonesia - 0.1% | Nippon Telegraph & Telephone Corp. | 2,300 | 91 | ||||||||
Telekomunikasi Indonesia Persero Tbk | Nippon Yusen KK | 160,000 | 388 | ||||||||
PT | 1,653,100 | 371 | Nitori Holdings Co., Ltd. | 8,700 | 731 | ||||||
Ireland - 1.4% | NTT DOCOMO, Inc. | 33,000 | 676 | ||||||||
CRH PLC | 95,488 | 2,772 | Ono Pharmaceutical Co., Ltd. | 300 | 53 | ||||||
Kerry Group PLC Class A | 437 | 36 | ORIX Corp. | 107,500 | 1,508 | ||||||
Ryanair Holdings PLC - ADR(Æ) | 15,633 | 1,352 | Otsuka Holdings Co., Ltd. | 1,200 | 42 | ||||||
XL Group PLC Class A | 26,200 | 1,026 | Secom Co., Ltd. | 600 | 41 | ||||||
5,186 | Sekisui House, Ltd. | 17,200 | 289 | ||||||||
Seven & i Holdings Co., Ltd. | 2,400 | 109 | |||||||||
Israel - 1.5% | Shimano, Inc. | 6,300 | 965 | ||||||||
Check Point Software Technologies, Ltd. | Shin-Etsu Chemical Co., Ltd. | 7,000 | 380 | ||||||||
(Æ) | 6,705 | 545 | Shionogi & Co., Ltd. | 1,100 | 50 | ||||||
Teva Pharmaceutical Industries, Ltd. | SMC Corp. | 1,800 | 467 | ||||||||
- ADR | 69,025 | 4,531 | Sompo Japan Nipponkoa Holdings, Inc. | 14,700 | 481 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 49
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Sony Corp. | 21,400 | 524 | POSCO | 2,850 | 405 | |||||
Sumitomo Corp. | 139,500 | 1,421 | Samsung Electronics Co., Ltd. | 2,335 | 2,494 | |||||
Sumitomo Mitsui Financial Group, Inc. | 57,000 | 2,150 | Shinhan Financial Group Co., Ltd.(Æ) | 29,171 | 982 | |||||
Sumitomo Osaka Cement Co., Ltd. | 152,000 | 558 | 5,602 | |||||||
Takeda Pharmaceutical Co., Ltd. | 2,100 | 105 | ||||||||
Terumo Corp. | 35,600 | 1,102 | Spain - 1.7% | |||||||
Tokyo Electric Power Co., Inc.(Æ) | 81,100 | 466 | Aena SA(Æ)(Þ) | 4,570 | 521 | |||||
Tokyo Gas Co., Ltd. | 6,000 | 28 | Amadeus IT Holding SA Class A | 46,698 | 2,056 | |||||
Toyota Motor Corp. | 26,400 | 1,621 | Banco de Sabadell SA - ADR | 863,900 | 1,530 | |||||
Trend Micro, Inc.(Æ) | 27,600 | 1,120 | Banco Santander SA - ADR | 317,423 | 1,559 | |||||
West Japan Railway Co. | 8,500 | 586 | Iberdrola SA | 15,353 | 109 | |||||
Yamaguchi Financial Group, Inc. | 43,000 | 510 | Indra Sistemas SA(Æ)(Ñ) | 40,975 | 385 | |||||
Yamaha Corp. | 20,200 | 488 | Industria de Diseno Textil SA | 2,490 | 85 | |||||
55,600 | 6,245 | |||||||||
Luxembourg - 0.1% | Sweden - 0.8% | |||||||||
ArcelorMittal(Ñ) | 73,067 | 305 | Atlas Copco AB Class A | 27,948 | 681 | |||||
Fastighets AB Balder Class B(Æ) | 14,746 | 363 | ||||||||
Netherlands - 5.3% | Hennes & Mauritz AB Class B | 22,882 | 815 | |||||||
Aegon NV | 138,500 | 782 | Hexagon AB Class B | 20,621 | 764 | |||||
Akzo Nobel NV | 15,998 | 1,069 | Nordea Bank AB | 6,552 | 71 | |||||
Altice NV Class A(Æ) | 9,709 | 139 | Svenska Cellulosa AB SCA Class B | 1,856 | 54 | |||||
Altice NV Class B(Æ) | 8,495 | 123 | Svenska Handelsbanken AB Class A | 4,164 | 55 | |||||
Delta Lloyd NV | 65,200 | 383 | TeliaSonera AB | 7,427 | 37 | |||||
Heineken NV | 6,404 | 547 | 2,840 | |||||||
ING Groep NV | 423,315 | 5,697 | ||||||||
Koninklijke Ahold NV | 2,378 | 50 | Switzerland - 9.0% | |||||||
Koninklijke KPN NV | 518,752 | 1,959 | ABB, Ltd.(Æ) | 103,850 | 1,843 | |||||
Koninklijke Philips NV | 65,700 | 1,670 | ABB, Ltd. - ADR(Æ) | 27,600 | 489 | |||||
NN Group NV | 23,391 | 823 | ACE, Ltd. | 7,925 | 926 | |||||
NXP Semiconductors NV(Æ) | 14,064 | 1,185 | Actelion, Ltd.(Æ) | 9,176 | 1,262 | |||||
Randstad Holding NV | 19,581 | 1,218 | Basellandschaftliche Kantonalbank | 41 | 36 | |||||
Royal Dutch Shell PLC Class A | 121,964 | 2,794 | Basler Kantonalbank | 1,574 | 108 | |||||
Royal Dutch Shell PLC Class B | 7,247 | 165 | Credit Suisse Group AG(Æ) | 156,262 | 3,378 | |||||
TNT Express NV | 42,149 | 357 | GAM Holding AG | 25,726 | 427 | |||||
18,961 | Givaudan SA(Æ) | 28 | 50 | |||||||
Helvetia Holding AG | 800 | 450 | ||||||||
Norway - 0.4% | Julius Baer Group, Ltd.(Æ) | 15,452 | 741 | |||||||
Orkla ASA | 172,600 | 1,362 | Kuehne & Nagel International AG | 2,359 | 323 | |||||
Nestle SA | 57,623 | 4,273 | ||||||||
Russia - 0.3% | Novartis AG | 53,242 | 4,551 | |||||||
Gazprom PAO - ADR | 243,440 | 902 | OC Oerlikon Corp. AG(Æ) | 89,600 | 794 | |||||
Gazprom PAO - ADR | 44,425 | 163 | Partners Group Holding AG | 2,875 | 1,032 | |||||
1,065 | Roche Holding AG | 14,419 | 3,975 | |||||||
Sonova Holding AG | 2,459 | 312 | ||||||||
Singapore - 1.5% | STMicroelectronics NV | 151,025 | 1,007 | |||||||
DBS Group Holdings, Ltd. | 103,000 | 1,206 | Swiss Life Holding AG(Æ) | 3,700 | 993 | |||||
Jardine Cycle & Carriage, Ltd. | 69,600 | 1,699 | Swisscom AG | 73 | 36 | |||||
Oversea-Chinese Banking Corp., Ltd. | 8,800 | 54 | Transocean, Ltd.(Ñ) | 34,542 | 430 | |||||
Singapore Telecommunications, Ltd. | 107,000 | 275 | UBS Group AG | 177,733 | 3,420 | |||||
United Overseas Bank, Ltd. | 139,100 | 1,915 | Wolseley PLC - ADR | 21,073 | 1,146 | |||||
Wilmar International, Ltd. | 27,900 | 57 | Zurich Insurance Group AG(Æ) | 1,043 | 266 | |||||
5,206 | 32,268 | |||||||||
South Africa - 0.2% | Taiwan - 1.5% | |||||||||
Bidvest Group, Ltd. (The) | 27,108 | 575 | Compal Electronics, Inc. | 1,318,000 | 738 | |||||
Discovery Holdings, Ltd. | 34,763 | 298 | Hon Hai Precision Industry Co., Ltd.(Æ) | 259,273 | 634 | |||||
873 | Taiwan Semiconductor Manufacturing | |||||||||
South Korea - 1.6% | Co., Ltd. | 312,000 | 1,346 | |||||||
Hana Financial Group, Inc. | 39,715 | 795 | Taiwan Semiconductor Manufacturing | |||||||
Hankook Tire Co., Ltd.(Æ) | 23,200 | 926 | Co., Ltd. - ADR | 67,368 | 1,533 |
See accompanying notes which are an integral part of the financial statements.
50 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||||
Principal | Fair | Principal | Fair | ||||||||
Amount ($) | Value | Amount ($) | Value | ||||||||
or Shares | $ | or Shares | $ | ||||||||
Teco Electric and Machinery Co., Ltd. | 1,419,600 | 1,129 | WPP PLC | 238,963 | 5,501 | ||||||
5,380 | 68,637 | ||||||||||
Thailand - 0.4% | United States - 1.4% | ||||||||||
Bangkok Bank PCL | 60,900 | 260 | Horizon Pharma PLC(Æ)(Ñ) | 14,843 | 322 | ||||||
Charoen Pokphand Foods PCL | 2,122,500 | 1,074 | Joy Global, Inc.(Ñ) | 7,800 | 98 | ||||||
1,334 | News Corp. Class A | 104,450 | 1,396 | ||||||||
News Corp. Class B | 32,285 | 450 | |||||||||
United Kingdom - 19.1% | �� | Philip Morris International, Inc. | 10,500 | 923 | |||||||
Amec Foster Wheeler PLC - GDR | 36,900 | 233 | Valeant Pharmaceuticals International, | ||||||||
ARM Holdings PLC | 33,536 | 506 | Inc.(Æ) | 4,408 | 448 | ||||||
Associated British Foods PLC | 1,093 | 54 | Yum! Brands, Inc. | 16,405 | 1,199 | ||||||
Aviva PLC | 156,536 | 1,183 | 4,836 | ||||||||
Barclays PLC | 641,600 | 2,077 | |||||||||
Barratt Developments PLC | 54,905 | 503 | Total Common Stocks | ||||||||
Berkeley Group Holdings PLC | 10,146 | 551 | (cost $303,794) | 331,524 | |||||||
BG Group PLC | 30,401 | 441 | |||||||||
BP PLC | 553,247 | 2,883 | Preferred Stocks - 0.8% | ||||||||
BP PLC - ADR | 27,000 | 844 | Brazil - 0.0% | ||||||||
British American Tobacco PLC | 2,963 | 165 | Usinas Siderurgicas de Minas Gerais SA | 332,575 | 129 | ||||||
British Land Co. PLC (The)(ö) | 2,953 | 34 | |||||||||
Capital & Counties Properties PLC | 80,236 | 521 | Germany - 0.7% | ||||||||
CNH Industrial NV | 189,200 | 1,290 | Bayerische Motoren Werke AG | 3,565 | 299 | ||||||
CNH Industrial NV(Ñ) | 47,200 | 323 | Henkel AG & Co. KGaA | 517 | 58 | ||||||
Compass Group PLC | 215,302 | 3,726 | Porsche Automobil Holding SE | 7,868 | 426 | ||||||
Dairy Crest Group PLC | 175,109 | 1,755 | Volkswagen AG | 10,792 | 1,563 | ||||||
Delphi Automotive PLC | 5,086 | 436 | 2,346 | ||||||||
Diageo PLC | 60,730 | 1,657 | |||||||||
DS Smith PLC Class F | 557,970 | 3,254 | Sweden - 0.1% | ||||||||
Fiat Chrysler Automobiles NV | 14,483 | 199 | Fastighets AB Balder(Æ) | 7,266 | 268 | ||||||
GlaxoSmithKline PLC - ADR | 151,066 | 3,050 | |||||||||
HSBC Holdings PLC | 411,876 | 3,250 | Total Preferred Stocks | ||||||||
IG Group Holdings PLC | 59,594 | 702 | (cost $3,591) | 2,743 | |||||||
Imperial Tobacco Group PLC | 116,436 | 6,123 | |||||||||
InterContinental Hotels Group PLC | 20,581 | 799 | Short-Term Investments - 4.8% | ||||||||
Intermediate Capital Group PLC | 56,540 | 522 | United States - 4.8% | ||||||||
Kingfisher PLC | 451,405 | 2,186 | Russell U.S. Cash Management Fund | 17,236,025 | (8) | 17,236 | |||||
Land Securities Group PLC(ö) | 30,707 | 532 | Total Short-Term Investments | ||||||||
Legal & General Group PLC | 16,453 | 65 | (cost $17,236) | 17,236 | |||||||
National Grid PLC | 168,191 | 2,313 | |||||||||
Next PLC | 454 | 49 | Other Securities - 0.8% | ||||||||
Prudential PLC | 73,282 | 1,641 | Russell U.S. Cash Collateral Fund(×) | 2,761,054 | (8) | 2,761 | |||||
Reckitt Benckiser Group PLC | 28,524 | 2,626 | Total Other Securities | ||||||||
RELX NV | 2,766 | 47 | (cost $2,761) | 2,761 | |||||||
RELX PLC | 73,589 | 1,290 | |||||||||
Rio Tinto PLC | 31,868 | 928 | Total Investments 98.9% | ||||||||
Rolls-Royce Holdings PLC(Æ) | 193,859 | 1,641 | (identified cost $327,382) | 354,264 | |||||||
Royal Bank of Scotland Group PLC(Æ) | 252,470 | 1,117 | |||||||||
Royal Mail PLC | 48,653 | 317 | Other Assets and Liabilities, Net | ||||||||
RSA Insurance Group PLC | 195,656 | 1,229 | - 1.1% | 3,861 | |||||||
Sky PLC | 87,641 | 1,434 | Net Assets - 100.0% | 358,125 | |||||||
Smith & Nephew PLC | 2,719 | 48 | |||||||||
Smiths Group PLC | 39,910 | 552 | |||||||||
St. James's Place PLC | 51,872 | 765 | |||||||||
Standard Chartered PLC | 31,973 | 265 | |||||||||
Travis Perkins PLC | 55,375 | 1,600 | |||||||||
Unilever NV | 23,638 | 1,024 | |||||||||
Unilever PLC | 3,891 | 167 | |||||||||
Vodafone Group PLC | 861,365 | 2,786 | |||||||||
Whitbread PLC | 527 | 34 | |||||||||
Willis Group Holdings PLC | 28,800 | 1,399 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 51
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||||
Amounts in thousands (except contract amounts) | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Number of | Notional | Expiration | (Depreciation) | ||||||
Contracts | Amount | Date | $ | ||||||
Long Positions | |||||||||
CAC40 Index Futures | 52 | EUR | 2,412 | 01/16 | 36 | ||||
Dow Jones Index Futures | 8 | EUR | 2,154 | 03/16 | 65 | ||||
EURO STOXX 50 Index Futures | 190 | EUR | 6,236 | 03/16 | 119 | ||||
FTSE 100 Index Futures | 44 | GBP | 2,727 | 03/16 | 165 | ||||
Hang Seng Index Futures | 5 | HKD | 5,478 | 01/16 | (5 | ) | |||
S&P/TSX 60 Index Futures | 108 | CAD | 16,435 | 03/16 | 170 | ||||
SPI 200 Index Futures | 121 | AUD | 15,902 | 03/16 | 843 | ||||
TOPIX Index Futures | 138 | JPY | 2,135,550 | 03/16 | (257 | ) | |||
Short Positions | |||||||||
FTSE 100 Index Futures | 98 | GBP | 6,074 | 03/16 | (368 | ) | |||
Hang Seng Index Futures | 17 | HKD | 18,624 | 01/16 | 16 | ||||
MSCI Emerging Markets Mini Index Futures | 297 | USD | 11,694 | 03/16 | (92 | ) | |||
S&P 500 E-Mini Index Futures | 119 | USD | 12,110 | 03/16 | 32 | ||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 724 | ||||||||
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of America | USD | 537 | AUD | 750 | 03/16/16 | 8 | |||
Bank of America | USD | 655 | CAD | 900 | 03/16/16 | (5 | ) | ||
Bank of America | USD | 3,939 | EUR | 3,600 | 03/16/16 | (20 | ) | ||
Bank of America | USD | 222 | GBP | 150 | 03/16/16 | (1 | ) | ||
Bank of America | USD | 1,504 | GBP | 1,000 | 03/16/16 | (29 | ) | ||
Bank of America | USD | 323 | HKD | 2,500 | 03/16/16 | — | |||
Bank of America | USD | 29 | JPY | 3,547 | 01/04/16 | — | |||
Bank of America | USD | 19 | JPY | 2,231 | 01/05/16 | — | |||
Bank of America | USD | 11 | JPY | 1,339 | 01/06/16 | — | |||
Bank of America | USD | 1,894 | JPY | 230,000 | 03/16/16 | 23 | |||
Bank of America | AUD | 170 | USD | 123 | 03/16/16 | (1 | ) | ||
Bank of America | AUD | 400 | USD | 287 | 03/16/16 | (4 | ) | ||
Bank of America | AUD | 500 | USD | 363 | 03/16/16 | — | |||
Bank of America | CAD | 250 | USD | 180 | 03/16/16 | (1 | ) | ||
Bank of America | EUR | 200 | USD | 218 | 03/16/16 | — | |||
Bank of America | EUR | 1,000 | USD | 1,100 | 03/16/16 | 11 | |||
Bank of America | GBP | 400 | USD | 595 | 03/16/16 | 5 | |||
Bank of America | HKD | 800 | USD | 103 | 03/16/16 | — | |||
Bank of America | JPY | 80,000 | USD | 666 | 03/16/16 | (1 | ) | ||
Bank of New York | CAD | 39 | USD | 28 | 01/04/16 | — | |||
BNP Paribas | USD | 326 | AUD | 460 | 03/16/16 | 8 | |||
BNP Paribas | USD | 220 | EUR | 200 | 03/16/16 | (3 | ) | ||
BNP Paribas | USD | 91 | GBP | 60 | 03/16/16 | (2 | ) | ||
BNP Paribas | USD | 166 | JPY | 20,000 | 03/16/16 | 1 | |||
BNP Paribas | AUD | 250 | USD | 180 | 03/16/16 | (2 | ) | ||
BNP Paribas | CAD | 195 | USD | 140 | 03/16/16 | (1 | ) | ||
BNP Paribas | CAD | 300 | USD | 217 | 03/16/16 | 1 | |||
BNP Paribas | EUR | 300 | USD | 325 | 03/16/16 | (2 | ) | ||
BNP Paribas | EUR | 1,100 | USD | 1,202 | 03/16/16 | 4 | |||
BNP Paribas | GBP | 350 | USD | 525 | 03/16/16 | 9 | |||
BNP Paribas | HKD | 1,000 | USD | 129 | 03/16/16 | — | |||
BNP Paribas | JPY | 90,000 | USD | 738 | 03/16/16 | (12 | ) | ||
Citigroup | USD | 5 | GBP | 3 | 01/04/16 | — | |||
Citigroup | CAD | 11 | USD | 8 | 01/05/16 | — | |||
Citigroup | EUR | 11 | USD | 12 | 01/04/16 | — | |||
Deutsche Bank | AUD | 100 | USD | 72 | 03/16/16 | (1 | ) | ||
Deutsche Bank | EUR | 500 | USD | 546 | 03/16/16 | 2 | |||
Deutsche Bank | JPY | 20,000 | USD | 163 | 03/16/16 | (4 | ) | ||
HSBC | USD | 145 | AUD | 200 | 03/16/16 | — |
See accompanying notes which are an integral part of the financial statements.
52 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
HSBC | USD | 502 | AUD | 701 | 03/16/16 | 7 | |
HSBC | USD | 181 | CAD | 250 | 03/16/16 | — | |
HSBC | USD | 649 | CAD | 882 | 03/16/16 | (11 | ) |
HSBC | USD | 1,096 | EUR | 1,000 | 03/16/16 | (7 | ) |
HSBC | USD | 3,935 | EUR | 3,602 | 03/16/16 | (14 | ) |
HSBC | USD | 445 | GBP | 300 | 03/16/16 | (3 | ) |
HSBC | USD | 1,484 | GBP | 989 | 03/16/16 | (25 | ) |
HSBC | USD | 129 | HKD | 1,000 | 03/16/16 | — | |
HSBC | USD | 524 | HKD | 4,058 | 03/16/16 | — | |
HSBC | USD | 499 | JPY | 60,000 | 03/16/16 | 1 | |
HSBC | USD | 1,695 | JPY | 207,843 | 03/16/16 | 36 | |
HSBC | HKD | 18,500 | USD | 2,388 | 03/16/16 | — | |
Royal Bank of Canada | USD | 503 | AUD | 701 | 03/16/16 | 6 | |
Royal Bank of Canada | USD | 3,084 | AUD | 4,300 | 03/16/16 | 39 | |
Royal Bank of Canada | USD | 649 | CAD | 882 | 03/16/16 | (11 | ) |
Royal Bank of Canada | USD | 3,311 | CAD | 4,500 | 03/16/16 | (58 | ) |
Royal Bank of Canada | USD | 657 | EUR | 600 | 03/16/16 | (4 | ) |
Royal Bank of Canada | USD | 3,930 | EUR | 3,602 | 03/16/16 | (9 | ) |
Royal Bank of Canada | USD | 1,484 | GBP | 989 | 03/16/16 | (26 | ) |
Royal Bank of Canada | USD | 3,260 | GBP | 2,150 | 03/16/16 | (91 | ) |
Royal Bank of Canada | USD | 1,694 | JPY | 207,843 | 03/16/16 | 38 | |
Royal Bank of Canada | AUD | 477 | USD | 341 | 03/16/16 | (5 | ) |
Royal Bank of Canada | EUR | 15,000 | USD | 16,521 | 03/16/16 | 189 | |
Royal Bank of Canada | HKD | 1,000 | USD | 129 | 03/16/16 | — | |
Royal Bank of Canada | JPY | 400,000 | USD | 3,297 | 03/16/16 | (36 | ) |
State Street | USD | 9,977 | AUD | 13,900 | 03/16/16 | 116 | |
State Street | USD | 9,980 | CAD | 13,570 | 03/16/16 | (171 | ) |
State Street | USD | 8 | EUR | 7 | 01/04/16 | — | |
State Street | USD | 137 | EUR | 125 | 01/04/16 | (1 | ) |
State Street | USD | 51 | EUR | 47 | 01/05/16 | — | |
State Street | USD | 109 | EUR | 100 | 03/16/16 | — | |
State Street | USD | 1,855 | EUR | 1,700 | 03/16/16 | (5 | ) |
State Street | USD | 179 | GBP | 120 | 03/16/16 | (2 | ) |
State Street | USD | 248 | JPY | 30,000 | 03/16/16 | 2 | |
State Street | USD | 13,379 | JPY | 1,640,773 | 03/16/16 | 294 | |
State Street | CAD | 23 | USD | 16 | 01/04/16 | — | |
State Street | CAD | 120 | USD | 88 | 03/16/16 | 2 | |
State Street | GBP | 15 | USD | 23 | 01/04/16 | — | |
State Street | GBP | 33 | USD | 49 | 01/04/16 | — | |
State Street | GBP | 160 | USD | 243 | 03/16/16 | 7 | |
State Street | GBP | 5,700 | USD | 8,553 | 03/16/16 | 149 | |
State Street | JPY | 20,000 | USD | 166 | 03/16/16 | — | |
UBS | USD | 73 | CAD | 100 | 03/16/16 | (1 | ) |
UBS | USD | 152 | GBP | 100 | 03/16/16 | (4 | ) |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 385 |
Presentation of Portfolio Holdings | |||||||||||
Amounts in thousands | |||||||||||
Fair Value | |||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||
Common Stocks | |||||||||||
Australia | $ | — | $ | 4,083 | $ | — | $ | 4,083 | 1.1 | ||
Austria | — | 2,495 | — | 2,495 | 0.7 | ||||||
Belgium | — | 3,450 | — | 3,450 | 1.0 | ||||||
Brazil | 1,944 | — | — | 1,944 | 0.5 | ||||||
Canada | 8,924 | — | — | 8,924 | 2.5 | ||||||
China | 2,037 | 1,429 | — | 3,466 | 1.0 | ||||||
Czech Republic | — | 876 | — | 876 | 0.2 | ||||||
Denmark | — | 6,364 | — | 6,364 | 1.8 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 53
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | |||||||||||
Amounts in thousands | |||||||||||
Fair Value | |||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||
Finland | — | 1,677 | — | 1,677 | 0.5 | ||||||
France | — | 35,152 | — | 35,152 | 9.8 | ||||||
Germany | — | 21,217 | — | 21,217 | 5.9 | ||||||
Hong Kong | — | 8,009 | — | 8,009 | 2.2 | ||||||
Hungary | — | 842 | — | 842 | 0.2 | ||||||
India | 2,333 | 1,142 | — | 3,475 | 1.0 | ||||||
Indonesia | — | 371 | — | 371 | 0.1 | ||||||
Ireland | 2,378 | 2,808 | — | 5,186 | 1.4 | ||||||
Israel | 5,076 | 281 | — | 5,357 | 1.5 | ||||||
Italy | — | 8,122 | — | 8,122 | 2.3 | ||||||
Japan | — | 55,600 | — | 55,600 | 15.5 | ||||||
Luxembourg | — | 305 | — | 305 | 0.1 | ||||||
Netherlands | 1,185 | 17,776 | — | 18,961 | 5.3 | ||||||
Norway | — | 1,362 | — | 1,362 | 0.4 | ||||||
Russia | 163 | 902 | — | 1,065 | 0.3 | ||||||
Singapore | — | 5,206 | — | 5,206 | 1.5 | ||||||
South Africa | — | 873 | — | 873 | 0.2 | ||||||
South Korea | — | 5,602 | — | 5,602 | 1.6 | ||||||
Spain | — | 6,245 | — | 6,245 | 1.7 | ||||||
Sweden | — | 2,840 | — | 2,840 | 0.8 | ||||||
Switzerland | 1,415 | 30,853 | — | 32,268 | 9.0 | ||||||
Taiwan | 1,533 | 3,847 | — | 5,380 | 1.5 | ||||||
Thailand | — | 1,334 | — | 1,334 | 0.4 | ||||||
United Kingdom | 3,002 | 65,635 | — | 68,637 | 19.1 | ||||||
United States | 4,836 | — | — | 4,836 | 1.4 | ||||||
Preferred Stocks | — | 2,743 | — | 2,743 | 0.8 | ||||||
Short-Term Investments | — | 17,236 | — | 17,236 | 4.8 | ||||||
Other Securities | — | 2,761 | — | 2,761 | 0.8 | ||||||
Total Investments | 34,826 | 319,438 | — | 354,264 | 98.9 | ||||||
Other Assets and Liabilities, Net | 1.1 | ||||||||||
100.0 | |||||||||||
Other Financial Instruments | |||||||||||
Futures Contracts | 724 | — | — | 724 | 0.2 | ||||||
Foreign Currency Exchange Contracts | — | 385 | — | 385 | 0.1 | ||||||
Total Other Financial Instruments* | $ | 724 | $ | 385 | $ | — | $ | 1,109 |
* Futures and foreign currency exchange contract values reflect the unrealized appreciation/depreciation on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
54 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | |||||
Equity | Currency | ||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||
Location: Statement of Assets and Liabilities - Assets | |||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 958 | |
Variation margin on futures contracts* | 1,446 | — | |||
Total | $ | 1,446 | $ | 958 | |
Location: Statement of Assets and Liabilities - Liabilities | |||||
Variation margin on futures contracts* | $ | 722 | $ | — | |
Unrealized depreciation on foreign currency exchange contracts | — | 573 | |||
Total | $ | 722 | $ | 573 | |
Foreign | |||||
Equity | Currency | ||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | |||||
Futures contracts | $ | 3,197 | $ | — | |
Foreign currency-related transactions** | — | (1,474 | ) | ||
Total | $ | 3,197 | $ | (1,474 | ) |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||
Futures contracts | $ | 460 | $ | — | |
Foreign currency-related transactions*** | — | 654 | |||
Total | $ | 460 | $ | 654 |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
*** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 55
Russell Investment Funds
Non-U.S. Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | |||||||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||||||
Gross | Net Amounts | ||||||||||||
Amounts | of Assets | ||||||||||||
Gross | Offset in the | Presented in | |||||||||||
Amounts of | Statement of | the Statement | |||||||||||
Recognized | Assets and | of Assets and | |||||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||||||
Securities on Loan* | Investments, at fair value | $ | 2,566 | $ | — | $ | 2,566 | ||||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 958 | — | 958 | |||||||||
Futures Contracts | Variation margin on futures contracts | 187 | — | 187 | |||||||||
Total Financial and Derivative Assets | 3,711 | — | 3,711 | ||||||||||
Financial and Derivative Assets not subject to a netting agreement | (187) | — | (187 | ) | |||||||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 3,524 | $ | — | $ | 3,524 | |||||||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||||||
Gross Amounts Not Offset in | |||||||||||||
the Statement of Assets and | |||||||||||||
Liabilities | |||||||||||||
Net Amounts | |||||||||||||
of Assets | |||||||||||||
Presented in | |||||||||||||
the Statement | Financial and | ||||||||||||
of Assets and | Derivative | Collateral | |||||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||||||
Bank of America | $ | 47 | $ | 47 | $ | — | $ | — | |||||
BNP Paribas | 24 | 22 | — | 2 | |||||||||
Citigroup | 398 | — | 398 | — | |||||||||
Credit Suisse | 708 | — | 708 | — | |||||||||
Deutsche Bank | 596 | 2 | 594 | — | |||||||||
Fidelity | 68 | — | 68 | — | |||||||||
HSBC | 45 | 45 | — | — | |||||||||
JPMorgan Chase | 250 | — | 250 | — | |||||||||
Merrill Lynch | 137 | — | 137 | — | |||||||||
Morgan Stanley | 410 | — | 410 | — | |||||||||
Royal Bank of Canada | 272 | 240 | — | 32 | |||||||||
State Street | 569 | 177 | — | 392 | |||||||||
Total | $ | 3,524 | $ | 533 | $ | 2,565 | $ | 426 |
See accompanying notes which are an integral part of the financial statements.
56 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||||
Gross | Net Amounts | ||||||||||
Amounts | of Liabilities | ||||||||||
Gross | Offset in the | Presented in | |||||||||
Amounts of | Statement of | the Statement | |||||||||
Recognized | Assets and | of Assets and | |||||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||||
Futures Contracts | Variation margin on futures contracts | $ | 234 | $ | — | $ | 234 | ||||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 573 | — | 573 | |||||||
Total Financial and Derivative Liabilities | 807 | — | 807 | ||||||||
Financial and Derivative Liabilities not subject to a netting agreement | (235) | — | (235 | ) | |||||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 572 | $ | — | $ | 572 | |||||
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||||
Gross Amounts Not Offset in | |||||||||||
the Statement of Assets and | |||||||||||
Liabilities | |||||||||||
Net Amounts | |||||||||||
of Liabilities | |||||||||||
Presented in | |||||||||||
the Statement | Financial and | ||||||||||
of Assets and | Derivative | Collateral | |||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||||
Bank of America | $ | 63 | $ | 47 | $ | — | $ | 16 | |||
BNP Paribas | 22 | 22 | — | — | |||||||
Deutsche Bank | 4 | 2 | — | 2 | |||||||
HSBC | 61 | 45 | — | 16 | |||||||
Royal Bank of Canada | 240 | 240 | — | — | |||||||
State Street | 177 | 177 | — | — | |||||||
UBS | 5 | — | — | 5 | |||||||
Total | $ | 572 | $ | 533 | $ | — | $ | 39 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 57
Russell Investment Funds
Non-U.S. Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | |||
Assets | |||
Investments, at identified cost | $ | 327,382 | |
Investments, at fair value(*)(>) | 354,264 | ||
Cash | 10 | ||
Cash (restricted)(a) | 5,600 | ||
Foreign currency holdings(^) | 389 | ||
Unrealized appreciation on foreign currency exchange contracts | 958 | ||
Receivables: | |||
Dividends and interest | 384 | ||
Dividends from affiliated Russell funds | 2 | ||
Investments sold | 203 | ||
Fund shares sold | 66 | ||
Foreign capital gains taxes recoverable | 434 | ||
Variation margin on futures contracts | 187 | ||
Total assets | 362,497 | ||
Liabilities | |||
Payables: | |||
Investments purchased | 311 | ||
Fund shares redeemed | 89 | ||
Accrued fees to affiliates | 294 | ||
Other accrued expenses | 110 | ||
Variation margin on futures contracts | 234 | ||
Unrealized depreciation on foreign currency exchange contracts | 573 | ||
Payable upon return of securities loaned | 2,761 | ||
Total liabilities | 4,372 | ||
Net Assets | $ | 358,125 | |
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 3,346 | |
Accumulated net realized gain (loss) | (38,270 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 26,882 | ||
Futures contracts | 724 | ||
Foreign currency-related transactions | 340 | ||
Shares of beneficial interest | 318 | ||
Additional paid-in capital | 364,785 | ||
Net Assets | $ | 358,125 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 11.26 | |
Net assets | $ | 358,125,170 | |
Shares outstanding ($.01 par value) | 31,793,237 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 391 | |
(*) Securities on loan included in investments | $ | 2,566 | |
(>) Investments in affiliates, Russell U.S. Cash Management Fund and Russell U.S. Cash Collateral Fund | $ | 19,997 | |
(a) Cash Collateral for Futures | $ | 5,600 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
58 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 10,748 | |
Dividends from affiliated Russell funds | 17 | ||
Securities lending income | 175 | ||
Less foreign taxes withheld | (876 | ) | |
Total investment income | 10,064 | ||
Expenses | |||
Advisory fees | 3,433 | ||
Administrative fees | 191 | ||
Custodian fees | 222 | ||
Transfer agent fees | 17 | ||
Professional fees | 100 | ||
Trustees’ fees | 10 | ||
Printing fees | 39 | ||
Miscellaneous | 15 | ||
Expenses before reductions | 4,027 | ||
Expense reductions | (64 | ) | |
Net expenses | 3,963 | ||
Net investment income (loss) | 6,101 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 10,484 | ||
Futures contracts | 3,197 | ||
Foreign currency-related transactions | (1,648 | ) | |
Net realized gain (loss) | 12,033 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (22,397 | ) | |
Futures contracts | 460 | ||
Foreign currency-related transactions | 650 | ||
Net change in unrealized appreciation (depreciation) | (21,287 | ) | |
Net realized and unrealized gain (loss) | (9,254 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (3,153 | ) |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 59
Russell Investment Funds
Non-U.S. Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||||||||||
Amounts in thousands | 2015 | 2014 | ||||||||||||
Increase (Decrease) in Net Assets | ||||||||||||||
Operations | ||||||||||||||
Net investment income (loss) | $ | 6,101 | $ | 8,571 | ||||||||||
Net realized gain (loss) | 12,033 | 18,292 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (21,287 | ) | (44,306 | ) | ||||||||||
Net increase (decrease) in net assets from operations | (3,153 | ) | (17,443 | ) | ||||||||||
Distributions | ||||||||||||||
From net investment income | (4,414 | ) | (7,880 | ) | ||||||||||
Net decrease in net assets from distributions | (4,414 | ) | (7,880 | ) | ||||||||||
Share Transactions* | ||||||||||||||
Net increase (decrease) in net assets from share transactions | (13,983 | ) | (23,519 | ) | ||||||||||
Total Net Increase (Decrease) in Net Assets | (21,550 | ) | (48,842 | ) | ||||||||||
Net Assets | ||||||||||||||
Beginning of period | 379,675 | 428,517 | ||||||||||||
End of period | $ | 358,125 | $ | 379,675 | ||||||||||
Undistributed (overdistributed) net investment income included in net assets | $ | 3,346 | $ | 2,394 | ||||||||||
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||||
2015 | 2014 | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Proceeds from shares sold | 1,896 | $ | 22,297 | 1,560 | $ | 18,824 | ||||||||
Proceeds from reinvestment of distributions | 371 | 4,414 | 660 | 7,880 | ||||||||||
Payments for shares redeemed | (3,384 | ) | (40,694 | ) | (4,102 | ) | (50,223 | ) | ||||||
Total increase (decrease) | (1,117 | ) | $ | (13,983 | ) | (1,882 | ) | $ | (23,519 | ) |
See accompanying notes which are an integral part of the financial statements.
60 Non-U.S. Fund
(This page intentionally left blank)
Russell Investment Funds
Non-U.S. Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period. | |||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | |||||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | $ | ||||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Total Distributions | ||||||||||||
December 31, 2015 | 11.54 | .19 | (.33 | ) | (.14 | ) | (.14 | ) | (.14 | ) | |||||||
December 31, 2014 | 12.32 | .26 | (.80 | ) | (.54 | ) | (.24 | ) | (.24 | ) | |||||||
December 31, 2013 | 10.31 | .18 | 2.05 | 2.23 | (.22 | ) | (.22 | ) | |||||||||
December 31, 2012 | 8.75 | .18 | 1.55 | 1.73 | (.17 | ) | (.17 | ) | |||||||||
December 31, 2011 | 10.21 | .17 | (1.46 | ) | (1.29 | ) | (.17 | ) | (.17 | ) | |||||||
See accompanying notes which are an integral part of the financial statements.
62 Non-U.S. Fund
% | % | % | ||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | ||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | ||||||||
End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||
Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||
11.26 | (1.31 | ) | 358,125 | 1.06 | 1.04 | 1.60 | 35 | |||||||
11.54 | (4.45 | ) | 379,675 | 1.08 | 1.03 | 2.13 | 32 | |||||||
12.32 | 21.91 | 428,517 | 1.04 | .99 | 1.76 | 36 | ||||||||
10.31 | 19.81 | 356,856 | 1.07 | 1.01 | 1.94 | 47 | ||||||||
8.75 | (12.88 | ) | 329,578 | 1.10 | 1.04 | 1.74 | 49 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 63
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Core Bond Fund | Barclays U.S. Aggregate Bond Index** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (0.14 | )% | 1 Year | 0.55 | % | ||
5 Years | 3.32 | %§ | 5 Years | 3.25 | %§ | ||
10 Years | 4.87 | %§ | 10 Years | 4.51 | %§ |
64 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Core Bond Fund (the “Fund”) employs a multi-manager | How did the investment strategies and techniques employed |
approach whereby portions of the Fund are allocated to different | by the Fund and its money managers affect its benchmark |
money manager strategies. Fund assets not allocated to money | relative performance? |
managers are managed by Russell Investment Management | The Fund employs discretionary money managers. The Fund’s |
Company (“RIMCo”), the Fund’s advisor. RIMCo may change | discretionary money managers select the individual portfolio |
the allocation of the Fund’s assets among money managers at | securities for the assets assigned to them. Fund assets not |
any time. An exemptive order from the Securities and Exchange | allocated to discretionary money managers include the Fund’s |
Commission (“SEC”) permits RIMCo to engage or terminate a | liquidity reserves and assets which may be managed directly |
money manager at any time, subject to approval by the Fund’s | by RIMCo to effect the Fund’s investment strategies and/or to |
Board, without a shareholder vote. Pursuant to the terms of the | actively manage the Fund’s overall exposures by investing in |
exemptive order, the Fund is required to notify its shareholders | securities or other instruments that RIMCo believes will achieve |
within 90 days of when a money manager begins providing | the desired risk/return profile for the Fund. |
services. As of December 31, 2015, the Fund had five money | |
managers. | With respect to certain of the Fund’s money managers, Macro |
Currency Group, a currency specialist within the Fund, was the | |
What is the Fund’s investment objective? | largest positive contributor during the year and outperformed the |
The Fund seeks to provide current income, and as a secondary | Fund’s benchmark. Key contributors to outperformance included |
objective, capital appreciation. | a long position to the U.S. dollar, short position to the euro, and |
management of the New Zealand dollar (in particular, a short | |
How did the Fund perform relative to its benchmark for the | position early in the year and long position in the fourth quarter). |
fiscal year ended December 31, 2015 | |
For the fiscal year ended December 31, 2015, the Fund lost | Colchester Global Investors Limited, a global rates and currency |
0.14%. This is compared to the Fund’s benchmark, the Barclays | specialist within the Fund, was the largest detractor during the |
U.S. Aggregate Bond Index, which gained 0.55% during the same | year and underperformed the Fund’s benchmark. A number of |
period. The Fund’s performance includes operating expenses, | long emerging market currency positions, including the South |
whereas index returns are unmanaged and do not include | African rand and Brazilian real, against shorts to the New Zealand |
expenses of any kind. | dollar and Norwegian krone, were key detractors during the year. |
Long duration positions to Brazilian and South African bonds and | |
For the fiscal year ended December 31, 2015, the Morningstar | short positions to Europe and the UK also detracted. |
Insurance Intermediate-Term Bond, a group of funds that | |
Morningstar considers to have investment strategies similar | During the period, RIMCo utilized futures and swaps to seek to |
to those of the Fund, lost 0.30%. This result serves as a peer | achieve the Fund benchmark’s duration exposures with respect to |
comparison and is expressed net of operating expenses. | the portion of the Fund allocated to cash reserves. This performed |
as intended and was a positive in terms of benchmark-relative | |
How did the market conditions described in the Market | performance. |
Summary report affect the Fund’s performance? | RIMCo also managed a three-pronged strategy to seek to generate |
The underperformance of credit, particularly high yield corporate | active returns through currency positioning by supplementing the |
credit, negatively impacted the Fund’s performance, given its | Fund’s existing active currency mandate with a more mechanistic |
strategic overweight to credit risk. This was the largest detractor | strategy and to further reduce the Fund’s reliance on traditional |
from benchmark-relative performance during the year. | fixed income market risks. This approach incorporates a currency |
From a sector perspective, the Fund’s overweight to corporate | overlay, an index replication and an enhanced cash strategy. |
credit versus securitized assets (particularly agency mortgages) | The currency overlay utilizes currency forward contracts to take |
also detracted, as commodity prices impacted a large number | long and short positions in global foreign exchange markets. |
of corporate issuers and illiquidity concerns saw spreads move | Because the currency overlay is an out-of-benchmark position, |
wider across the corporate market, particularly for high yield | RIMCo managed an index replication strategy in connection |
corporate bonds. Within corporate, industrials underperformed | with the currency overlay to provide benchmark-like exposure to |
significantly, given the inclusion of oil and commodity-related | its overall strategy. The enhanced cash strategy is designed to |
issuers. The Fund’s overweight to financials versus industrials | provide for modest returns on the cash held in connection with the |
contributed positively in this environment. | currency overlay and index replication strategies. For the fiscal |
year, the currency overlay strategy was positive for the Fund’s |
Core Bond Fund 65
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
benchmark-relative performance, as was the underlying index | Money Managers as of December 31, | |
replication strategy. | 2015 | Styles |
RIMCo also implemented tactical ‘tilts’ based on its judgments | Colchester Global Investors Limited | Fully discretionary |
regarding shorter-term opportunities to seek to generate returns | Logan Circle Partners, L.P. | Fully discretionary |
and/or mitigate risk by purchasing and shorting U.S. Treasury | Macro Currency Group – an investment | |
futures, credit derivative instruments and currency forward | group within Principal Global Investors | |
contracts. These tilts had a modestly negative impact on overall | LLC* | Sector Specialist |
Metropolitan West Asset Management, LLC | Fully discretionary | |
Fund performance during the year as futures positions detracted, | Scout Investments, Inc. | Fully discretionary |
though credit positions were positive and helped to partially offset | ||
this. | ||
RIMCo’s tactical weighting decisions among the Fund’s strategies | * Principal Global Investors LLC is the asset management arm of the Principal | |
Financial Group® (The Principal®), which includes various member companies | ||
had a mixed impact on performance over the year. Marginal tilts | including Principal Global Investors LLC, Principal Global Investors (Europe) | |
toward credit-focused managers (Logan Circle Partners, L.P. in | Limited, and others. The Macro Currency Group is the specialist currency | |
particular) detracted, and a tilt toward outperforming currency | investment group within Principal Global Investors. Where used herein, Macro | |
Currency Group means Principal Global Investors LLC. | ||
strategies (namely Macro Currency Group) added value. | ||
The views expressed in this report reflect those of the portfolio | ||
Describe any changes to the Fund’s structure or the money | managers only through the end of the period covered by | |
manager line-up. | the report. These views do not necessarily represent the | |
In mid- November, RIMCo expanded its currency overlay to | views of RIMCo, or any other person in RIMCo or any other | |
include emerging market currencies and expanded the universe | affiliated organization. These views are subject to change | |
of eligible developed market currencies. | 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 Funds (“RIF”) Fund are based on | ||
numerous factors, should not be relied on as an indication | ||
of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2006.
** The Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment-grade
corporate debt securities and mortgage-backed securities.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
66 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | |||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | |||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | |||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | |||||
useful in comparing ongoing costs only, and will not help you | ||||||
Example | determine the relative total costs of owning different funds. In | |||||
As a shareholder of the Fund, you costs: (1) transaction costs, | addition, if these transactional costs were included, your costs | |||||
and (2) ongoing costs, including advisory and administrative | would have been higher. The fees and expenses shown in this on | |||||
fees and other Fund expenses. The Example is intended to help | do not reflect any Insurance Company Separate Account Policy | |||||
you understand your ongoing costs (in dollars) of investing in | Charges. | |||||
the Fund and to compare these costs with the ongoing costs of | Hypothetical | |||||
investing in other mutual funds. The Example is based on an | Performance (5% | |||||
investment of $1,000 invested at the beginning of the period and | Actual | return before | ||||
held for the entire period indicated, which for this Fund is from | Performance | expenses) | ||||
Beginning Account Value | ||||||
July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | |
Ending Account Value | ||||||
Actual Expenses | December 31, 2015 | $ | 998.60 | $ | 1,021.98 | |
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 3.22 | $ | 3.26 | |
Performance” provides information about actual account values | ||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.64% | |||||
(representing the six month period annualized), multiplied by the average | ||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | |||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | |||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | |||||
= 8.6), then multiply the result by the number in the first column | ||||||
in the row entitled “Expenses Paid During Period” to estimate | ||||||
the expenses you paid on your account during this period. | ||||||
Hypothetical Example for Comparison Purposes | ||||||
The information in the table under the heading “Hypothetical | ||||||
Performance (5% return before expenses)” provides information | ||||||
about hypothetical account values and hypothetical expenses | ||||||
based on the Fund’s actual expense ratio and an assumed rate of | ||||||
return of 5% per year before expenses, which is not the Fund’s | ||||||
actual return. The hypothetical account values and expenses | ||||||
may not be used to estimate the actual ending account balance or | ||||||
expenses you paid for the period. You may use this information | ||||||
to compare the ongoing costs of investing in the Fund and other | ||||||
funds. To do so, compare this 5% hypothetical example with the | ||||||
5% hypothetical examples that appear in the shareholder reports | ||||||
of other funds. |
Core Bond Fund 67
Russell Investment Funds
Core Bond Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Long-Term Investments - 80.2% | Series 2013-1 Class A2 | ||||||
Asset-Backed Securities - 6.4% | 1.050% due 08/14/20 (Þ) | 125 | 125 | ||||
Series 2014-1 Class A2 | |||||||
Access Group, Inc. | 1.060% due 11/15/21 (Þ) | 249 | 248 | ||||
Series 2003-A Class A2 | |||||||
1.225% due 07/01/38 (Ê) | 296 | 292 | Chase Issuance Trust | ||||
Series 2007-A2 Class A2 | |||||||
Series 2006-1 Class B | 0.217% due 04/15/19 (Ê) | 540 | 538 | ||||
0.683% due 08/25/37 (Ê) | 84 | 75 | |||||
Series 2014-A8 Class A8 | |||||||
Series 2015-1 Class A | 0.436% due 11/15/18 (Ê) | 500 | 500 | ||||
0.887% due 07/25/56 (Ê)(Þ) | 791 | 791 | |||||
Ally Auto Receivables Trust | Chesapeake Funding LLC | ||||||
Series 2014-1A Class C | |||||||
Series 2013-1 Class A3 | 1.368% due 03/07/26 (Ê)(Þ) | 500 | 500 | ||||
0.630% due 05/15/17 | 102 | 102 | |||||
Series 2014-2 Class A2 | CIT Education Loan Trust | ||||||
0.680% due 07/17/17 | 278 | 278 | Series 2007-1 Class A | ||||
0.371% due 03/25/42 (Ê)(Þ) | 334 | 308 | |||||
Ally Master Owner Trust | |||||||
Series 2013-1 Class A2 | Citibank Credit Card Issuance Trust | ||||||
1.000% due 02/15/18 | 835 | 835 | Series 2006-A7 Class A7 | ||||
AmeriCredit Automobile Receivables | 0.301% due 12/17/18 (Ê) | 1,295 | 1,292 | ||||
Trust | Series 2014-A3 Class A3 | ||||||
Series 2013-1 Class B | 0.367% due 05/09/18 (Ê) | 540 | 540 | ||||
1.070% due 03/08/18 | 861 | 860 | Citigroup Mortgage Loan Trust, Inc. | ||||
Series 2014-2 Class A2A | Series 2007-WFH1 Class A3 | ||||||
0.540% due 10/10/17 | 66 | 66 | 0.337% due 01/25/37 (Ê) | 437 | 431 | ||
Series 2014-2 Class A2B | Series 2007-WFH1 Class A4 | ||||||
0.448% due 10/10/17 (Ê) | 188 | 188 | 0.370% due 01/25/37 (Ê) | 934 | 873 | ||
Ameriquest Mortgage Securities, | CNH Equipment Trust | ||||||
Inc. Asset Backed Pass-Through | Series 2012-D Class A3 | ||||||
Certificates | 0.650% due 04/16/18 | 18 | 18 | ||||
Series 2005-R5 Class M1 | Countrywide Asset-Backed Certificates | ||||||
0.600% due 07/25/35 (Ê) | 439 | 439 | Series 2007-4 Class A2 | ||||
Asset Backed Securities Corp. Home | 5.529% due 04/25/47 | 105 | 114 | ||||
Equity Loan Trust | DRB Prime Student Loan Trust | ||||||
Series 2005-HE5 Class M3 | Series 2015-D Class A2 | ||||||
0.890% due 06/25/35 (Ê) | 1,050 | 989 | 3.200% due 01/25/40 (Þ) | 1,455 | 1,414 | ||
Series 2006-HE5 Class A5 | Education Loan Asset-Backed Trust I | ||||||
0.395% due 07/25/36 (Ê) | 1,200 | 1,001 | Series 2013-1 Class B1 | ||||
BA Credit Card Trust | 1.169% due 11/25/33 (Ê)(Þ) | 928 | 867 | ||||
Series 2007-A1 Class A1 | Educational Funding of the South, Inc. | ||||||
5.170% due 06/15/19 | 1,500 | 1,560 | Series 2011-1 Class A2 | ||||
Bank of The West Auto Trust | 0.970% due 04/25/35 (Ê) | 375 | 366 | ||||
Series 2014-1 Class A3 | EFS Volunteer LLC | ||||||
1.090% due 03/15/19 (Þ) | 1,130 | 1,126 | Series 2010-1 Class A2 | ||||
Bayview Financial Acquisition Trust | 1.084% due 10/25/35 (Ê)(Þ) | 500 | 486 | ||||
Series 2006-A Class 1A3 | Exeter Automobile Receivables Trust | ||||||
5.865% due 02/28/41 | 173 | 182 | Series 2014-1A Class A | ||||
Bear Stearns Asset-Backed Securities | 1.290% due 05/15/18 (Þ) | 137 | 136 | ||||
I Trust | Fannie Mae Grantor Trust | ||||||
Series 2005-FR1 Class M1 | Series 2003-T4 Class 2A5 | ||||||
0.670% due 06/25/35 (Ê) | 365 | 362 | 5.224% due 09/26/33 | 45 | 49 | ||
BMW Vehicle Owner Trust | Federal Home Loan Mortgage Corp. | ||||||
Series 2013-A Class A3 | Structured Pass-Through Securities | ||||||
0.670% due 11/27/17 | 837 | 836 | Series 2000-30 Class A5 | ||||
Brazos Higher Education Authority, Inc. | 7.572% due 12/25/30 | 30 | 31 | ||||
Series 2010-1 Class A2 | Ford Credit Auto Owner Trust | ||||||
1.482% due 02/25/35 (Ê) | 500 | 490 | Series 2012-D Class A3 | ||||
Series 2011-2 Class A3 | 0.510% due 04/15/17 | 2 | 2 | ||||
1.234% due 10/27/36 (Ê) | 410 | 395 | Series 2013-A Class A3 | ||||
CarFinance Capital Auto Trust | 0.550% due 07/15/17 | 68 | 68 | ||||
Series 2014-1A Class A | Series 2013-C Class A3 | ||||||
1.460% due 12/17/18 (Þ) | 315 | 315 | 0.820% due 12/15/17 | 297 | 297 | ||
CarMax Auto Owner Trust | Series 2014-A Class A3 | ||||||
Series 2013-1 Class A3 | 0.790% due 05/15/18 | 638 | 638 | ||||
0.600% due 10/16/17 | 335 | 335 | GM Financial Automobile Leasing Trust | ||||
CCG Receivables Trust | Series 2015-3 Class A3 | ||||||
1.690% due 03/20/19 | 565 | 561 |
See accompanying notes which are an integral part of the financial statements.
68 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Green Tree | Series 2014-3 Class A | ||||||
Series 2008-MH1 Class A2 | 0.786% due 03/25/43 (Ê) | 872 | 828 | ||||
8.970% due 04/25/38 (Þ) | 209 | 213 | Series 2014-4 Class A | ||||
Hertz Vehicle Financing LLC | 0.786% due 03/25/43 (Ê) | 740 | 710 | ||||
Series 2013-1A Class A1 | Nelnet Student Loan Trust | ||||||
1.120% due 08/25/17 (Þ) | 720 | 718 | Series 2014-4A Class A2 | ||||
Series 2015-2A Class A | 1.119% due 11/25/43 (Ê)(Þ) | 470 | 430 | ||||
2.020% due 09/25/19 (Þ) | 920 | 907 | Series 2015-2A Class A2 | ||||
Higher Education Funding I | 0.821% due 09/25/42 (Ê)(Þ) | 950 | 922 | ||||
Series 2014-1 Class A | Nissan Auto Receivables Owner Trust | ||||||
1.283% due 05/25/34 (Ê)(Þ) | 429 | 423 | Series 2013-C Class A3 | ||||
Honda Auto Receivables Owner Trust | 0.670% due 08/15/18 | 332 | 331 | ||||
Series 2013-2 Class A3 | Series 2014-A Class A3 | ||||||
0.530% due 02/16/17 | 283 | 283 | 0.720% due 08/15/18 | 207 | 206 | ||
Series 2014-2 Class A3 | Northstar Education Finance, Inc. | ||||||
0.770% due 03/19/18 | 245 | 244 | Series 2007-1 Class A1 | ||||
Series 2015-3 Class A2 | 0.333% due 04/28/30 (Ê) | 475 | 431 | ||||
0.920% due 11/20/17 | 155 | 155 | Popular ABS Mortgage Pass-Through | ||||
Hyundai Auto Receivables Trust | Trust | ||||||
Series 2013-A Class A3 | Series 2006-C Class A4 | ||||||
0.560% due 07/17/17 | 224 | 224 | 0.420% due 07/25/36 (Ê) | 1,380 | 1,307 | ||
Series 2013-C Class A3 | Series 2006-D Class A3 | ||||||
1.010% due 02/15/18 | 1,595 | 1,593 | 0.481% due 11/25/46 (Ê) | 1,500 | 1,311 | ||
Series 2014-A Class A3 | Prestige Auto Receivables Trust | ||||||
0.790% due 07/16/18 | 412 | 411 | Series 2014-1A Class A3 | ||||
JGWPT XXX LLC | 1.520% due 04/15/20 (Þ) | 403 | 402 | ||||
Series 2013-3A Class A | Purchasing Power Funding LLC | ||||||
4.080% due 01/17/73 (Þ) | 279 | 290 | Series 2015-A Class A1 | ||||
JGWPT XXXII LLC | 3.500% due 12/15/19 | 565 | 564 | ||||
Series 2014-2A Class A | RAMP Trust | ||||||
3.610% due 01/17/73 (Þ) | 379 | 380 | Series 2003-RS9 Class AI6A | ||||
JPMorgan Mortgage Acquisition Corp. | 5.982% due 10/25/33 | 240 | 253 | ||||
Series 2007-HE1 Class AF6 | Series 2003-RS11 Class AI6A | ||||||
4.148% due 03/25/47 | 1,334 | 1,005 | 5.980% due 12/25/33 | 92 | 100 | ||
Lehman XS Trust | RASC Trust | ||||||
Series 2006-9 Class A1B | Series 2003-KS4 Class AIIB | ||||||
0.330% due 05/25/46 (Ê) | 91 | 78 | 0.767% due 06/25/33 (Ê) | 22 | 18 | ||
Series 2006-13 Class 1A2 | Renaissance Home Equity Loan Trust | ||||||
0.340% due 09/25/36 (Ê) | 95 | 85 | Series 2005-2 Class AF4 | ||||
Series 2006-19 Class A2 | 4.934% due 08/25/35 | 85 | 85 | ||||
0.340% due 12/25/36 (Ê) | 96 | 81 | Series 2006-1 Class AF3 | ||||
Long Beach Mortgage Loan Trust | 5.608% due 05/25/36 | 22 | 15 | ||||
Series 2004-4 Class M1 | Series 2006-1 Class AF6 | ||||||
1.070% due 10/25/34 (Ê) | 1,200 | 1,085 | 5.746% due 05/25/36 | 112 | 77 | ||
Mercedes-Benz Auto Receivables Trust | Series 2007-1 Class AF2 | ||||||
Series 2014-1 Class A2 | 5.512% due 04/25/37 | 506 | 259 | ||||
0.430% due 02/15/17 | 413 | 413 | Santander Drive Auto Receivables Trust | ||||
Merrill Lynch First Franklin Mortgage | Series 2013-1 Class B | ||||||
Loan Trust | 1.160% due 01/15/19 | 317 | 317 | ||||
Series 2007-1 Class A2B | Series 2014-2 Class A3 | ||||||
0.351% due 04/25/37 (Ê) | 99 | 57 | 0.800% due 04/16/18 | 453 | 453 | ||
Series 2007-4 Class 2A2 | Series 2014-4 Class B | ||||||
0.290% due 07/25/37 (Ê) | 697 | 426 | 1.820% due 05/15/19 | 420 | 420 | ||
Montana Higher Education Student | Series 2015-4 Class A3 | ||||||
Assistance Corp. | 1.580% due 09/16/19 | 535 | 532 | ||||
Series 2012-1 Class A3 | SLC Student Loan Trust | ||||||
1.216% due 07/20/43 (Ê) | 650 | 625 | Series 2006-1 Class A6 | ||||
MSCC Heloc Trust | 0.446% due 12/15/38 (Ê) | 780 | 668 | ||||
Series 2007-1 Class A | SLM Private Education Loan Trust | ||||||
0.270% due 12/25/31 (Ê) | 278 | 270 | Series 2010-A Class 2A | ||||
Navient Student Loan Trust | 3.436% due 05/16/44 (Ê)(Þ) | 1,355 | 1,399 | ||||
Series 2014-2 Class A | SLM Student Loan Trust | ||||||
0.806% due 03/25/43 (Ê) | 866 | 815 | Series 2003-11 Class A6 | ||||
1.262% due 12/15/25 (Ê)(Þ) | 350 | 338 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 69
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series 2004-8 Class B | 2.875% due 11/03/22 | 400 | 397 | ||||
0.694% due 01/25/40 (Ê) | 118 | 101 | Advanced Micro Devices, Inc. | ||||
Series 2006-2 Class A6 | 6.750% due 03/01/19 | 135 | 98 | ||||
0.404% due 01/25/41 (Ê) | 570 | 498 | AIG Global Funding | ||||
Series 2006-8 Class A6 | 1.650% due 12/15/17 (Þ) | 355 | 353 | ||||
0.394% due 01/25/41 (Ê) | 570 | 503 | Albemarle Corp. | ||||
Series 2007-6 Class B | 4.150% due 12/01/24 | 280 | 268 | ||||
1.084% due 04/27/43 (Ê) | 175 | 151 | Series 30YR | ||||
Series 2008-2 Class B | 5.450% due 12/01/44 | 720 | 696 | ||||
1.434% due 01/25/29 (Ê) | 205 | 168 | Ally Financial, Inc. | ||||
Series 2008-3 Class B | 5.500% due 02/15/17 | 520 | 536 | ||||
1.434% due 04/25/29 (Ê) | 205 | 168 | 3.600% due 05/21/18 | 880 | 880 | ||
Series 2008-4 Class A4 | 3.250% due 11/05/18 | 530 | 520 | ||||
1.927% due 07/25/22 (Ê) | 1,400 | 1,409 | Altice US Finance I Corp. | ||||
Series 2008-4 Class B | 5.375% due 07/15/23 (Þ) | 210 | 211 | ||||
2.084% due 04/25/29 (Ê) | 205 | 186 | Altria Group, Inc. | ||||
Series 2008-5 Class B | 9.950% due 11/10/38 | 50 | 80 | ||||
2.170% due 07/25/29 (Ê) | 205 | 190 | 10.200% due 02/06/39 | 392 | 643 | ||
Series 2008-6 Class B | Amazon.com, Inc. | ||||||
2.084% due 07/25/29 (Ê) | 205 | 189 | 4.950% due 12/05/44 | 435 | 463 | ||
Series 2008-7 Class B | American Airlines Pass-Through Trust | ||||||
2.084% due 07/25/29 (Ê) | 205 | 179 | Series 2011-1 Class A | ||||
Series 2008-8 Class B | 5.250% due 01/31/21 | 245 | 259 | ||||
2.484% due 10/25/29 (Ê) | 205 | 195 | Series 2013-1 Class A | ||||
Series 2008-9 Class A | 4.000% due 07/15/25 | 405 | 409 | ||||
1.820% due 04/25/23 (Ê) | 811 | 812 | Series 2013-2 Class A | ||||
Series 2008-9 Class B | 4.950% due 01/15/23 | 412 | 435 | ||||
2.570% due 10/25/29 (Ê) | 205 | 193 | Series 2014-1 Class B | ||||
Series 2012-7 Class A3 | 4.375% due 10/01/22 | 336 | 335 | ||||
0.820% due 05/26/26 (Ê) | 475 | 460 | American Express Credit Corp. | ||||
Series 2013-4 Class A | Series F | ||||||
0.720% due 06/25/27 (Ê) | 334 | 323 | 2.600% due 09/14/20 | 1,490 | 1,493 | ||
SMART ABS Trust | American International Group, Inc. | ||||||
Series 2012-1USA Class A4A | 6.400% due 12/15/20 | 920 | 1,061 | ||||
2.010% due 12/14/17 (Þ) | 522 | 523 | 4.375% due 01/15/55 | 575 | 494 | ||
SMB Private Education Loan Trust | Ameriprise Financial, Inc. | ||||||
Series 2015-A Class A3 | 7.518% due 06/01/66 | 435 | 425 | ||||
1.000% due 02/17/32 (Ê)(Þ) | 1,100 | 1,074 | Anadarko Petroleum Corp. | ||||
SoFi Professional Loan Program LLC | 6.375% due 09/15/17 | 390 | 409 | ||||
Series 2014-B Class A2 | 6.450% due 09/15/36 | 1,502 | 1,448 | ||||
2.550% due 08/27/29 (Þ) | 695 | 689 | 4.500% due 07/15/44 | 440 | 337 | ||
Soundview Home Equity Loan Trust | Anheuser-Busch InBev Finance, Inc. | ||||||
Series 2005-OPT3 Class A4 | 0.513% due 01/27/17 (Ê) | 500 | 499 | ||||
0.470% due 11/25/35 (Ê) | 27 | 27 | 0.729% due 02/01/19 (Ê) | 350 | 344 | ||
South Carolina Student Loan Corp. | Apache Corp. | ||||||
Series 2015-A Class A | 4.750% due 04/15/43 | 1,080 | 903 | ||||
1.697% due 01/25/36 (Ê) | 555 | 505 | 4.250% due 01/15/44 | 315 | 247 | ||
Toyota Auto Receivables Owner Trust | |||||||
Series 2013-A Class A3 | Apollo Management Holdings, LP | ||||||
0.550% due 01/17/17 | 68 | 67 | 4.000% due 05/30/24 (Þ) | 482 | 476 | ||
Series 2015-B Class A2B | Apple, Inc. | ||||||
0.398% due 11/15/17 (Ê) | 515 | 515 | 0.584% due 05/03/18 (Ê) | 1,180 | 1,178 | ||
Wachovia Student Loan Trust | Assurant, Inc. | ||||||
Series 2006-1 Class A6 | 2.500% due 03/15/18 | 820 | 819 | ||||
0.447% due 04/25/40 (Ê)(Þ) | 770 | 684 | AT&T, Inc. | ||||
1.700% due 06/01/17 | 620 | 622 | |||||
54,885 | 4.750% due 05/15/46 | 585 | 536 | ||||
Corporate Bonds and Notes - 20.4% | AutoNation, Inc. | ||||||
21st Century Fox America, Inc. | 4.500% due 10/01/25 | 920 | 933 | ||||
8.250% due 10/17/96 | 20 | 25 | |||||
Avaya, Inc. | |||||||
AbbVie, Inc. | 9.000% due 04/01/19 (Þ) | 860 | 660 | ||||
4.500% due 05/14/35 | 395 | 387 | |||||
Axiall Corp. | |||||||
ACE INA Holdings, Inc. | 4.875% due 05/15/23 | 785 | 707 | ||||
2.300% due 11/03/20 | 540 | 536 | |||||
Bank of America Corp. |
See accompanying notes which are an integral part of the financial statements.
70 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
5.750% due 12/01/17 | 140 | 150 | 2.875% due 08/15/20 | 750 | 744 | ||
2.625% due 10/19/20 | 310 | 306 | 3.875% due 08/15/25 | 325 | 324 | ||
3.300% due 01/11/23 | 200 | 197 | CenterPoint Energy Resources Corp. | ||||
4.000% due 01/22/25 | 825 | 808 | 6.125% due 11/01/17 | 50 | 54 | ||
Series GMTN | Chase Capital III | ||||||
6.400% due 08/28/17 | 200 | 214 | Series C | ||||
Series L | 0.964% due 03/01/27 (Æ)(Ê) | 295 | 252 | ||||
4.750% due 04/21/45 | 105 | 101 | Chesapeake Energy Corp. | ||||
Bank of America NA | 3.571% due 04/15/19 (Ê) | 690 | 193 | ||||
Series BKNT | 5.375% due 06/15/21 | 275 | 74 | ||||
5.300% due 03/15/17 | 450 | 468 | 4.875% due 04/15/22 | 480 | 133 | ||
0.764% due 05/08/17 (Ê) | 300 | 299 | CHS/Community Health Systems, Inc. | ||||
6.100% due 06/15/17 | 775 | 819 | 5.125% due 08/15/18 | 105 | 106 | ||
1.650% due 03/26/18 | 430 | 427 | CIT Group, Inc. | ||||
1.750% due 06/05/18 | 1,105 | 1,098 | 6.625% due 04/01/18 (Þ) | 390 | 411 | ||
2.050% due 12/07/18 | 315 | 314 | Citigroup, Inc. | ||||
Bank of Montreal | 1.850% due 11/24/17 | 815 | 814 | ||||
Series YCD | 1.800% due 02/05/18 | 1,180 | 1,175 | ||||
1.012% due 12/08/17 (~) | 275 | 275 | 2.150% due 07/30/18 | 1,300 | 1,299 | ||
Bear Stearns Cos. LLC (The) | 4.450% due 09/29/27 | 1,220 | 1,212 | ||||
5.550% due 01/22/17 | 525 | 546 | 4.650% due 07/30/45 | 515 | 523 | ||
7.250% due 02/01/18 | 195 | 215 | Series Q | ||||
Bellsouth Capital Funding Corp. | 5.950% due 12/31/49 (ƒ) | 1,125 | 1,121 | ||||
7.875% due 02/15/30 | 555 | 659 | Commonwealth Edison Co. | ||||
Berkshire Hathaway Energy Co. | 5.800% due 03/15/18 | 290 | 314 | ||||
Series WI | Compass Bank | ||||||
4.500% due 02/01/45 | 320 | 307 | Series BKNT | ||||
Berkshire Hathaway Finance Corp. | 6.400% due 10/01/17 | 890 | 941 | ||||
4.400% due 05/15/42 | 275 | 272 | ConocoPhillips Co. | ||||
Biogen, Inc. | 4.300% due 11/15/44 | 315 | 262 | ||||
2.900% due 09/15/20 | 1,115 | 1,112 | Continental Airlines Pass-Through Trust | ||||
5.200% due 09/15/45 | 900 | 900 | Series 1999-1 Class A | ||||
Blue Cube Spinco, Inc. | 6.545% due 02/02/19 | 127 | 135 | ||||
10.000% due 10/15/25 (Þ) | 800 | 880 | Series 2000-1 Class A-1 | ||||
BMW US Capital LLC | 8.048% due 11/01/20 | 200 | 224 | ||||
0.756% due 06/02/17 (Ê) | 1,200 | 1,190 | Series 2007-1 Class A | ||||
Boardwalk Pipelines, LP | 5.983% due 04/19/22 | 119 | 131 | ||||
4.950% due 12/15/24 | 500 | 435 | Continental Resources, Inc. | ||||
Boston Properties, LP | 4.900% due 06/01/44 | 125 | 75 | ||||
3.700% due 11/15/18 | 300 | 311 | Crown Castle Towers LLC | ||||
Branch Banking & Trust Co. | 4.174% due 08/15/17 (Þ) | 705 | 721 | ||||
Series BKNT | 3.222% due 05/15/22 (Þ) | 650 | 641 | ||||
1.350% due 10/01/17 | 630 | 629 | CVS Health Corp. | ||||
Burlington Northern Santa Fe LLC | 2.800% due 07/20/20 | 635 | 638 | ||||
3.400% due 09/01/24 | 1,410 | 1,411 | 3.875% due 07/20/25 | 895 | 913 | ||
6.875% due 12/01/27 | 25 | 31 | 5.125% due 07/20/45 | 1,250 | 1,317 | ||
6.750% due 03/15/29 | 10 | 12 | Daimler Finance NA LLC | ||||
4.150% due 04/01/45 | 325 | 295 | 2.000% due 08/03/18 (Þ) | 980 | 973 | ||
Capital One NA | DaVita HealthCare Partners, Inc. | ||||||
2.350% due 08/17/18 | 610 | 611 | 5.000% due 05/01/25 | 220 | 212 | ||
Series BKNT | DCP Midstream Operating, LP | ||||||
1.650% due 02/05/18 | 645 | 639 | 2.500% due 12/01/17 | 115 | 103 | ||
Cargill, Inc. | Delta Air Lines Pass-Through Trust | ||||||
6.000% due 11/27/17 (Þ) | 750 | 805 | Series 2002-1 Class G-1 | ||||
CCO Holdings LLC / CCO Holdings | 6.718% due 01/02/23 | 96 | 109 | ||||
Capital Corp. | Series 2007-1 Class A | ||||||
5.125% due 05/01/23 (Þ) | 425 | 425 | 6.821% due 08/10/22 | 434 | 500 | ||
CCO Safari II LLC | Devon Energy Corp. | ||||||
4.464% due 07/23/22 (Þ) | 1,070 | 1,066 | 5.850% due 12/15/25 | 1,609 | 1,565 | ||
4.908% due 07/23/25 (Þ) | 1,030 | 1,029 | 5.600% due 07/15/41 | 665 | 503 | ||
6.384% due 10/23/35 (Þ) | 595 | 601 | 5.000% due 06/15/45 | 900 | 682 | ||
6.484% due 10/23/45 (Þ) | 400 | 401 | DIRECTV Holdings LLC / DIRECTV | ||||
Celgene Corp. | Financing Co., Inc. |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 71
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Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
4.450% due 04/01/24 | 400 | 411 | General Electric Capital Corp. | ||||
Discover Bank | 0.532% due 02/15/17 (Ê) | 560 | 559 | ||||
2.000% due 02/21/18 | 500 | 497 | 0.714% due 05/05/26 (Ê) | 525 | 487 | ||
DISH DBS Corp. | Series GMTN | ||||||
6.750% due 06/01/21 | 105 | 106 | 6.875% due 01/10/39 | 101 | 138 | ||
Dominion Gas Holdings LLC | General Electric Co. | ||||||
2.800% due 11/15/20 | 430 | 431 | 5.250% due 12/06/17 | 340 | 363 | ||
Duke Energy Carolinas LLC | 4.500% due 03/11/44 | 610 | 628 | ||||
4.000% due 09/30/42 | 600 | 578 | General Motors Co. | ||||
Duke Energy Progress LLC | 3.500% due 10/02/18 | 425 | 429 | ||||
4.100% due 03/15/43 | 310 | 301 | 4.875% due 10/02/23 | 2,000 | 2,046 | ||
Duquesne Light Holdings, Inc. | Georgia-Pacific LLC | ||||||
6.400% due 09/15/20 (Þ) | 500 | 566 | 8.875% due 05/15/31 | 610 | 854 | ||
eBay, Inc. | Gilead Sciences, Inc. | ||||||
0.523% due 07/28/17 (Ê) | 830 | 820 | 2.550% due 09/01/20 | 1,220 | 1,220 | ||
0.809% due 08/01/19 (Ê) | 370 | 357 | 3.650% due 03/01/26 | 1,145 | 1,154 | ||
El Paso Natural Gas Co. LLC | Goldman Sachs Capital I | ||||||
7.500% due 11/15/26 | 100 | 99 | 6.345% due 02/15/34 (Æ) | 520 | 608 | ||
Enbridge Energy Partners, LP | Goldman Sachs Group, Inc. (The) | ||||||
5.875% due 10/15/25 | 125 | 120 | 6.150% due 04/01/18 | 400 | 434 | ||
Energy Transfer Partners, LP | 2.012% due 11/29/23 (Ê) | 540 | 545 | ||||
4.050% due 03/15/25 | 1,050 | 862 | 4.250% due 10/21/25 | 485 | 481 | ||
6.050% due 06/01/41 | 375 | 293 | 6.750% due 10/01/37 | 425 | 497 | ||
3.346% due 11/01/66 (Ê) | 1,380 | 869 | 4.750% due 10/21/45 | 345 | 343 | ||
Enterprise Products Operating LLC | Series 1 | ||||||
3.700% due 02/15/26 | 890 | 798 | 1.522% due 04/30/18 (Ê) | 1,000 | 1,005 | ||
Series B | Series D | ||||||
7.034% due 01/15/68 | 370 | 376 | 6.000% due 06/15/20 | 150 | 170 | ||
Exelon Corp. | Series GMTN | ||||||
2.850% due 06/15/20 | 725 | 721 | 7.500% due 02/15/19 | 600 | 687 | ||
Exxon Mobil Corp. | Series M | ||||||
0.552% due 03/15/17 (Ê) | 1,200 | 1,198 | 5.375% due 12/31/49 (Æ)(ƒ) | 610 | 606 | ||
3.567% due 03/06/45 | 210 | 197 | Great Plains Energy, Inc. | ||||
Farmers Exchange Capital | 5.292% due 06/15/22 | 620 | 678 | ||||
7.200% due 07/15/48 (Þ) | 300 | 372 | Halliburton Co. | ||||
Farmers Exchange Capital II | 3.800% due 11/15/25 | 280 | 273 | ||||
6.151% due 11/01/53 (Þ) | 630 | 676 | 5.000% due 11/15/45 | 420 | 415 | ||
Farmers Exchange Capital III | Hartford Financial Services Group, Inc. | ||||||
5.454% due 10/15/54 (Þ) | 600 | 583 | (The) | ||||
Fifth Third Bank | 5.375% due 03/15/17 | 200 | 209 | ||||
Series BKNT | HCA, Inc. | ||||||
2.875% due 10/01/21 | 700 | 697 | 6.500% due 02/15/20 | 200 | 218 | ||
First Data Corp. | 4.750% due 05/01/23 | 200 | 198 | ||||
5.000% due 01/15/24 (Þ) | 210 | 209 | HCP, Inc. | ||||
FirstEnergy Transmission LLC | 4.250% due 11/15/23 | 845 | 846 | ||||
5.450% due 07/15/44 (Þ) | 250 | 252 | Series 7YR | ||||
Ford Motor Credit Co. LLC | 4.000% due 12/01/22 | 200 | 199 | ||||
4.250% due 02/03/17 | 660 | 674 | Hewlett Packard Enterprise Co. | ||||
5.000% due 05/15/18 | 2,200 | 2,312 | 2.450% due 10/05/17 (Þ) | 1,650 | 1,649 | ||
2.240% due 06/15/18 | 1,895 | 1,878 | 4.400% due 10/15/22 (Þ) | 1,920 | 1,913 | ||
2.551% due 10/05/18 | 1,320 | 1,311 | 4.900% due 10/15/25 (Þ) | 1,120 | 1,098 | ||
3.200% due 01/15/21 | 695 | 690 | 6.200% due 10/15/35 (Þ) | 1,135 | 1,094 | ||
Series FXD | Highwoods Realty, LP | ||||||
2.145% due 01/09/18 | 3,125 | 3,114 | 5.850% due 03/15/17 | 500 | 521 | ||
Forest Laboratories LLC | HP, Inc. | ||||||
5.000% due 12/15/21 (Þ) | 715 | 777 | 4.375% due 09/15/21 | 910 | 895 | ||
FPL Energy Wind Funding LLC | HSBC Bank USA NA | ||||||
6.876% due 06/27/17 (Þ) | 36 | 35 | Series BKNT | ||||
Freeport-McMoRan, Inc. | 5.875% due 11/01/34 | 475 | 550 | ||||
3.550% due 03/01/22 | 190 | 110 | HSBC USA, Inc. | ||||
3.875% due 03/15/23 | 435 | 248 | 2.000% due 08/07/18 | 645 | 645 | ||
Frontier Communications Corp. | Indiantown Cogeneration, LP | ||||||
11.000% due 09/15/25 (Þ) | 1,030 | 1,020 |
See accompanying notes which are an integral part of the financial statements.
72 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series A-10 | 3.600% due 11/13/25 | 650 | 655 | ||||
9.770% due 12/15/20 (Å) | 91 | 102 | 10.750% due 08/01/39 | 900 | 1,410 | ||
Intel Corp. | Metropolitan Life Global Funding I | ||||||
3.700% due 07/29/25 | 490 | 507 | 1.875% due 06/22/18 (Þ) | 750 | 750 | ||
4.900% due 07/29/45 | 365 | 386 | Microsoft Corp. | ||||
IPALCO Enterprises, Inc. | 3.125% due 11/03/25 | 630 | 633 | ||||
5.000% due 05/01/18 | 500 | 524 | 3.750% due 02/12/45 | 325 | 299 | ||
Jackson National Life Global Funding | Monongahela Power Co. | ||||||
2.600% due 12/09/20 (Þ) | 315 | 313 | 4.100% due 04/15/24 (Þ) | 375 | 389 | ||
Janus Capital Group, Inc. | 5.400% due 12/15/43 (Þ) | 255 | 284 | ||||
4.875% due 08/01/25 | 640 | 657 | Morgan Stanley | ||||
Jersey Central Power & Light Co. | 5.550% due 04/27/17 | 425 | 446 | ||||
6.150% due 06/01/37 | 200 | 213 | 6.250% due 08/28/17 | 500 | 535 | ||
JPMorgan Chase & Co. | 5.625% due 09/23/19 | 275 | 303 | ||||
2.750% due 06/23/20 | 440 | 442 | 4.300% due 01/27/45 | 840 | 801 | ||
4.250% due 10/15/20 | 300 | 318 | Series GMTN | ||||
2.550% due 10/29/20 | 100 | 99 | 4.000% due 07/23/25 | 255 | 263 | ||
4.250% due 10/01/27 | 465 | 464 | Mutual of Omaha Insurance Co. | ||||
4.950% due 06/01/45 | 135 | 135 | 4.297% due 07/15/54 (Þ) | 590 | 582 | ||
JPMorgan Chase Bank NA | Mylan, Inc. | ||||||
Series BKNT | 2.550% due 03/28/19 | 700 | 691 | ||||
6.000% due 10/01/17 | 945 | 1,011 | National City Bank | ||||
JPMorgan Chase Capital XIII | Series BKNT | ||||||
Series M | 0.822% due 06/07/17 (Ê) | 500 | 497 | ||||
1.553% due 09/30/34 (Æ)(Ê) | 480 | 403 | Nationwide Mutual Insurance Co. | ||||
JPMorgan Chase Capital XXI | 2.802% due 12/15/24 (Ê)(Þ) | 500 | 484 | ||||
Series U | Neptune Finco Corp. | ||||||
1.279% due 02/02/37 (Æ)(Ê) | 335 | 264 | 6.625% due 10/15/25 (Þ) | 220 | 229 | ||
JPMorgan Chase Capital XXIII | New York Life Global Funding | ||||||
1.362% due 05/15/47 (Æ)(Ê) | 545 | 410 | 1.450% due 12/15/17 (Þ) | 885 | 883 | ||
Kansas City Power & Light Co. | NiSource Finance Corp. | ||||||
3.650% due 08/15/25 | 550 | 554 | 6.400% due 03/15/18 | 58 | 63 | ||
KKR Group Finance Co. II LLC | Noble Energy, Inc. | ||||||
5.500% due 02/01/43 (Þ) | 35 | 36 | 3.900% due 11/15/24 | 150 | 134 | ||
KKR Group Finance Co. III LLC | Novartis Capital Corp. | ||||||
5.125% due 06/01/44 (Þ) | 1,090 | 1,067 | 4.000% due 11/20/45 | 225 | 220 | ||
Kohl's Corp. | NVR, Inc. | ||||||
4.250% due 07/17/25 | 1,205 | 1,175 | 3.950% due 09/15/22 | 445 | 449 | ||
5.550% due 07/17/45 | 575 | 535 | Oncor Electric Delivery Co. LLC | ||||
Kraft Heinz Foods Co. | 6.800% due 09/01/18 | 550 | 611 | ||||
1.600% due 06/30/17 (Þ) | 320 | 319 | PACCAR Financial Corp. | ||||
4.875% due 02/15/25 (Þ) | 1,580 | 1,680 | 0.642% due 06/06/17 (Ê) | 625 | 623 | ||
Lockheed Martin Corp. | Panhandle Eastern Pipe Line Co., LP | ||||||
2.500% due 11/23/20 | 560 | 557 | 8.125% due 06/01/19 | 450 | 475 | ||
Manufacturers & Traders Trust Co. | Pfizer, Inc. | ||||||
1.637% due 12/28/20 (Ê) | 84 | 84 | 0.512% due 05/15/17 (Ê) | 1,460 | 1,457 | ||
Series BKNT | 5.800% due 08/12/23 | 260 | 304 | ||||
1.400% due 07/25/17 | 780 | 776 | Platform Specialty Products Corp. | ||||
Marathon Oil Corp. | 10.375% due 05/01/21 (Þ) | 560 | 559 | ||||
3.850% due 06/01/25 | 1,565 | 1,260 | PNC Bank NA | ||||
5.200% due 06/01/45 | 1,245 | 886 | Series BKNT | ||||
McDonald's Corp. | 1.850% due 07/20/18 | 910 | 908 | ||||
2.100% due 12/07/18 | 470 | 470 | Pricoa Global Funding I | ||||
3.700% due 01/30/26 | 850 | 849 | 2.550% due 11/24/20 (Þ) | 415 | 413 | ||
4.875% due 12/09/45 | 320 | 322 | Procter & Gamble Co. (The) | ||||
McGraw Hill Financial, Inc. | 0.599% due 11/01/19 (Ê) | 300 | 299 | ||||
Series WI | Protective Life Global Funding | ||||||
3.300% due 08/14/20 | 1,105 | 1,114 | 2.700% due 11/25/20 (Þ) | 310 | 310 | ||
Medco Health Solutions, Inc. | Public Service Co. of New Mexico | ||||||
4.125% due 09/15/20 | 535 | 561 | 7.950% due 05/15/18 | 260 | 291 | ||
Merck & Co., Inc. | 3.850% due 08/01/25 | 300 | 297 | ||||
0.724% due 05/18/18 (Ê) | 1,520 | 1,521 | QVC, Inc. | ||||
MetLife, Inc. | 4.375% due 03/15/23 | 930 | 883 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 73
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series WI | Valero Energy Corp. | ||||||
5.450% due 08/15/34 | 320 | 277 | 4.900% due 03/15/45 | 80 | 67 | ||
Rayonier AM Products, Inc. | Verizon Communications, Inc. | ||||||
5.500% due 06/01/24 (Þ) | 560 | 442 | 2.252% due 09/14/18 (Ê) | 100 | 102 | ||
Reliance Standard Life Global Funding | 3.000% due 11/01/21 | 700 | 698 | ||||
II | 5.050% due 03/15/34 | 1,083 | 1,079 | ||||
2.150% due 10/15/18 (Þ) | 435 | 432 | Series WI | ||||
2.500% due 01/15/20 (Þ) | 475 | 471 | 4.862% due 08/21/46 | 250 | 237 | ||
Reynolds American, Inc. | 4.672% due 03/15/55 | 644 | 559 | ||||
5.850% due 08/15/45 | 965 | 1,073 | Viacom, Inc. | ||||
Reynolds Group Issuer, Inc. / Reynolds | 5.850% due 09/01/43 | 1,030 | 925 | ||||
Group Issuer LLC | Wachovia Capital Trust III | ||||||
5.750% due 10/15/20 | 435 | 442 | 5.570% due 03/29/49 (Ê) | 550 | 530 | ||
SABMiller Holdings, Inc. | Wachovia Corp. | ||||||
3.750% due 01/15/22 (Þ) | 905 | 931 | 0.782% due 06/15/17 (Ê) | 865 | 862 | ||
Samsung Electronics America, Inc. | Wal-Mart Stores, Inc. | ||||||
1.750% due 04/10/17 (Þ) | 305 | 304 | 4.750% due 10/02/43 | 225 | 242 | ||
Schlumberger Holdings Corp. | Wells Fargo & Co. | ||||||
4.000% due 12/21/25 (Þ) | 420 | 414 | 1.400% due 09/08/17 | 400 | 400 | ||
SL Green Realty Corp. | Series GMTN | ||||||
7.750% due 03/15/20 | 325 | 379 | 2.600% due 07/22/20 | 880 | 878 | ||
Sprint Capital Corp. | 4.300% due 07/22/27 | 545 | 557 | ||||
8.750% due 03/15/32 | 1,255 | 941 | |||||
Welltower, Inc. | |||||||
Sprint Communications, Inc. | 4.950% due 01/15/21 | 365 | 391 | ||||
9.000% due 11/15/18 (Þ) | 290 | 305 | 5.250% due 01/15/22 | 200 | 216 | ||
Stryker Corp. | |||||||
3.375% due 11/01/25 | 480 | 474 | Whole Foods Market, Inc. | ||||
Sysco Corp. | 5.200% due 12/03/25 (Þ) | 435 | 434 | ||||
2.600% due 10/01/20 | 930 | 931 | Williams Cos., Inc. (The) | ||||
3.750% due 10/01/25 | 450 | 456 | 7.875% due 09/01/21 | 161 | 145 | ||
Williams Partners, LP | |||||||
Tenet Healthcare Corp. | 5.100% due 09/15/45 | 720 | 474 | ||||
4.012% due 06/15/20 (Ê)(Þ) | 215 | 210 | Williams Partners, LP / Williams | ||||
Tennessee Gas Pipeline Co. LLC | Partners Finance Corp. | ||||||
8.375% due 06/15/32 | 200 | 194 | 7.250% due 02/01/17 | 235 | 240 | ||
Toyota Motor Credit Corp. | ZFS Finance USA Trust II | ||||||
0.562% due 05/16/17 (Ê) | 250 | 249 | 6.450% due 12/15/65 (Þ) | 550 | 556 | ||
1.450% due 01/12/18 | 320 | 319 | ZFS Finance USA Trust V | ||||
Series MTn | 6.500% due 05/09/37 (Þ) | 680 | 694 | ||||
0.872% due 03/12/20 (Ê) | 1,485 | 1,463 | |||||
Union Pacific Railroad Co. Pass-Through | 174,348 | ||||||
Trust | International Debt - 6.0% | ||||||
Series 06-1 | Actavis Funding SCS | ||||||
5.866% due 07/02/30 | 148 | 169 | 3.800% due 03/15/25 | 780 | 776 | ||
UnitedHealth Group, Inc. | 4.750% due 03/15/45 | 375 | 366 | ||||
6.000% due 06/15/17 | 3 | 3 | AerCap Ireland Capital, Ltd. / AerCap | ||||
1.450% due 07/17/17 | 460 | 460 | Global Aviation Trust | ||||
4.625% due 07/01/22 | 735 | 743 | |||||
1.900% due 07/16/18 | 560 | 562 | AMMC CLO XIV, Ltd. | ||||
2.700% due 07/15/20 | 560 | 566 | Series 2014-14A Class A1L | ||||
4.625% due 07/15/35 | 325 | 337 | 1.770% due 07/27/26 (µ)(Ê)(Þ) | 500 | 495 | ||
Univision Communications, Inc. | ArcelorMittal | ||||||
5.125% due 05/15/23 (Þ) | 100 | 96 | 6.125% due 06/01/18 | 445 | 407 | ||
US Airways Pass-Through Trust | 6.125% due 06/01/25 | 1,035 | 753 | ||||
Series 2011-1 Class A | AstraZeneca PLC | ||||||
7.125% due 10/22/23 | 357 | 410 | 2.375% due 11/16/20 | 385 | 382 | ||
Series 2012-1 Class A | Avago Technologies Cayman, Ltd. Term | ||||||
5.900% due 10/01/24 | 573 | 633 | Loan | ||||
Series 2013-1 Class A | 3.750% due 05/06/21 (Ê) | 428 | 427 | ||||
3.950% due 11/15/25 | 407 | 410 | Avago Technologies Cayman, Ltd. Term | ||||
US Bank NA | Loan B | ||||||
Series BKNT | 1.000% due 11/06/22 (v) | 475 | 469 | ||||
0.692% due 09/11/17 (Ê) | 500 | 499 | Babson CLO, Ltd. | ||||
1.375% due 09/11/17 | 275 | 275 | Series 2014-IA Class A1 | ||||
USF&G Capital III | 1.720% due 07/20/25 (Ê)(Þ) | 470 | 466 | ||||
8.312% due 07/01/46 (Þ) | 350 | 504 |
See accompanying notes which are an integral part of the financial statements.
74 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series 2014-IIA Class A | Intesa Sanpaolo SpA | ||||||
1.656% due 10/17/26 (Ê)(Þ) | 130 | 129 | 2.375% due 01/13/17 | 520 | 522 | ||
Barclays PLC | 5.017% due 06/26/24 (Þ) | 455 | 448 | ||||
2.000% due 03/16/18 | 650 | 646 | Korea Electric Power Corp. | ||||
2.750% due 11/08/19 | 515 | 513 | 5.125% due 04/23/34 (Þ) | 60 | 67 | ||
3.650% due 03/16/25 | 225 | 216 | LBG Capital No.1 PLC | ||||
Barrick Gold Corp. | 8.000% due 12/29/49 (ƒ)(Þ) | 1,470 | 1,527 | ||||
4.100% due 05/01/23 | 465 | 399 | Limerock CLO II, Ltd. | ||||
BHP Billiton Finance USA, Ltd. | Series 2014-2A Class A | ||||||
6.750% due 10/19/75 (Þ) | 990 | 955 | 1.775% due 04/18/26 (Ê)(Þ) | 540 | 535 | ||
BP Capital Markets PLC | Lloyds Banking Group PLC | ||||||
3.506% due 03/17/25 | 250 | 242 | 7.500% due 06/27/24 (Æ)(ƒ) | 685 | 730 | ||
Braskem Finance, Ltd. | Macquarie Bank, Ltd. | ||||||
6.450% due 02/03/24 | 425 | 366 | 0.953% due 10/27/17 (Ê)(Þ) | 375 | 373 | ||
Caisse Centrale Desjardins | Magnetite XII, Ltd. | ||||||
1.003% due 03/27/17 (Ê)(Þ) | 1,095 | 1,093 | Series 2015-12A Class A | ||||
CDP Financial, Inc. | 1.821% due 04/15/27 (Ê)(Þ) | 190 | 189 | ||||
5.600% due 11/25/39 (Þ) | 465 | 548 | Marfrig Overseas, Ltd. | ||||
Commonwealth Bank of Australia | 9.500% due 05/04/20 (Þ) | 685 | 671 | ||||
4.500% due 12/09/25 (Þ) | 455 | 451 | Mylan NV | ||||
Cooperatieve Centrale Raiffeisen- | 3.000% due 12/15/18 (Þ) | 545 | 544 | ||||
Boerenleenbank BA | 3.750% due 12/15/20 (Þ) | 545 | 546 | ||||
0.653% due 04/28/17 (Ê) | 400 | 400 | National Bank of Canada | ||||
5.250% due 08/04/45 | 535 | 561 | Series BKNT | ||||
11.000% due 06/29/49 (ƒ)(Þ) | 782 | 965 | 1.342% due 12/14/18 (Ê) | 500 | 500 | ||
Credit Suisse AG | Noble Holding International, Ltd. | ||||||
1.750% due 01/29/18 | 755 | 753 | 3.950% due 03/15/22 | 220 | 146 | ||
6.000% due 02/15/18 | 385 | 414 | 5.950% due 04/01/25 | 210 | 145 | ||
Series GMTN | Nokia OYJ | ||||||
0.897% due 05/26/17 (Ê) | 300 | 299 | 6.625% due 05/15/39 | 770 | 788 | ||
1.375% due 05/26/17 | 805 | 801 | Perrigo Co. PLC | ||||
Credit Suisse Group Funding Guernsey, | 2.300% due 11/08/18 | 595 | 587 | ||||
Ltd. | Petrobras Global Finance BV | ||||||
3.125% due 12/10/20 (Þ) | 1,225 | 1,219 | 6.250% due 03/17/24 | 1,620 | 1,162 | ||
Deutsche Bank AG | Petroleos de Venezuela SA | ||||||
1.875% due 02/13/18 | 645 | 640 | 5.375% due 04/12/27 | 295 | 107 | ||
Deutsche Telekom International Finance | Series REGS | ||||||
BV | 6.000% due 11/15/26 | 2,360 | 867 | ||||
2.250% due 03/06/17 (Þ) | 920 | 926 | Petroleos Mexicanos | ||||
Dryden 37 Senior Loan Fund | 4.500% due 01/23/26 (Þ) | 415 | 365 | ||||
Series 2015-37A Class A | 5.500% due 06/27/44 | 370 | 278 | ||||
1.821% due 04/15/27 (Ê)(Þ) | 540 | 536 | 5.625% due 01/23/46 (Þ) | 795 | 608 | ||
Eaton Vance CLO, Ltd. | Rio Tinto Finance USA, Ltd. | ||||||
Series 2014-1A Class A | 3.750% due 06/15/25 | 427 | 388 | ||||
1.685% due 07/15/26 (Ê)(Þ) | 150 | 149 | Royal Bank of Scotland Group PLC | ||||
Ensco PLC | 1.875% due 03/31/17 | 350 | 349 | ||||
4.700% due 03/15/21 | 960 | 773 | 6.400% due 10/21/19 | 180 | 200 | ||
5.750% due 10/01/44 | 515 | 339 | Santander Issuances SAU | ||||
GE Capital International Funding Co. | 5.179% due 11/19/25 | 600 | 591 | ||||
4.418% due 11/15/35 (Þ) | 355 | 362 | Seagate HDD Cayman | ||||
Global SC Finance II SRL | 5.750% due 12/01/34 (Þ) | 660 | 462 | ||||
Series 2014-1A Class A2 | |||||||
3.090% due 07/17/29 (Þ) | 352 | 343 | Shell International Finance BV | ||||
3.250% due 05/11/25 | 1,030 | 1,005 | |||||
Grupo Televisa SAB | 4.375% due 05/11/45 | 300 | 283 | ||||
6.125% due 01/31/46 | 480 | 477 | |||||
Sirius International Group, Ltd. | |||||||
HBOS PLC | 7.506% due 05/29/49 (ƒ)(Þ) | 365 | 369 | ||||
Series GMTN | |||||||
6.750% due 05/21/18 (Þ) | 825 | 900 | Sky PLC | ||||
HSBC Bank PLC | 6.100% due 02/15/18 (Þ) | 685 | 738 | ||||
7.650% due 05/01/25 | 185 | 235 | SMART Trust | ||||
Series 2015-3US Class A3A | |||||||
ING Bank NV | 1.660% due 08/14/19 | 660 | 655 | ||||
3.750% due 03/07/17 (Þ) | 1,500 | 1,536 | |||||
Suncor Energy, Inc. | |||||||
Intelsat Jackson Holdings SA | 5.950% due 12/01/34 | 551 | 552 | ||||
7.250% due 04/01/19 | 1,100 | 1,009 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 75
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||
Principal | Fair | Principal | Fair | |||||
Amount ($) | Value | Amount ($) | Value | |||||
or Shares | $ | or Shares | $ | |||||
Teck Resources, Ltd. | American Home Mortgage Investment | |||||||
4.750% due 01/15/22 | 345 | 167 | Trust | |||||
3.750% due 02/01/23 | 1,570 | 726 | Series 2004-4 Class 4A | |||||
Toronto-Dominion Bank (The) | 2.549% due 02/25/45 (Ê) | 37 | 37 | |||||
Series GMTN | Series 2007-4 Class A2 | |||||||
2.500% due 12/14/20 | 775 | 775 | 0.360% due 08/25/37 (Ê) | 34 | 34 | |||
Total Capital SA | Banc of America Commercial Mortgage | |||||||
2.125% due 08/10/18 | 510 | 511 | Trust | |||||
Trade MAPS 1, Ltd. | Series 2007-2 Class AM | |||||||
Series 2013-1A Class A | 5.623% due 04/10/49 | 585 | 604 | |||||
0.866% due 12/10/18 (Ê)(Þ) | 640 | 636 | Banc of America Funding Trust | |||||
Transocean, Inc. | Series 2006-3 Class 5A3 | |||||||
3.000% due 10/15/17 | 1,434 | 1,272 | 5.500% due 03/25/36 | 502 | 469 | |||
4.300% due 10/15/22 | 1,200 | 636 | Series 2006-3 Class 5A8 | |||||
5.500% due 03/25/36 | 135 | 127 | ||||||
6.800% due 03/15/38 | 270 | 145 | Banc of America Merrill Lynch | |||||
Tyco Electronics Group SA | Commercial Mortgage, Inc. | |||||||
6.550% due 10/01/17 | 450 | 485 | Series 2005-5 Class B | |||||
UBS AG | 5.243% due 10/10/45 | 290 | 291 | |||||
1.375% due 06/01/17 | 590 | 587 | Series 2006-2 Class A4 | |||||
1.800% due 03/26/18 | 1,390 | 1,388 | 5.727% due 05/10/45 | 71 | 72 | |||
Vale Overseas, Ltd. | Series 2008-1 Class A4 | |||||||
6.875% due 11/21/36 | 290 | 203 | 6.215% due 02/10/51 | 458 | 485 | |||
Valeant Pharmaceuticals International, | Banc of America Mortgage Securities, | |||||||
Inc. | Inc. | |||||||
5.875% due 05/15/23 (Þ) | 110 | 98 | Series 2004-1 Class 5A1 | |||||
1st Lien Term Loan E | 6.500% due 09/25/33 | 2 | 2 | |||||
3.750% due 08/05/20 (Ê) | 208 | 200 | Series 2004-11 Class 2A1 | |||||
Validus Holdings, Ltd. | 5.750% due 01/25/35 | 39 | 40 | |||||
8.875% due 01/26/40 | 355 | 444 | Series 2005-H Class 2A5 | |||||
Voya CLO, Ltd. | 2.691% due 09/25/35 (Ê) | 115 | 106 | |||||
Series 2014-4A Class A1 | Banc of America Re-REMIC Trust | |||||||
1.733% due 10/14/26 (Ê)(Þ) | 310 | 308 | Series 2010-UB5 Class A4A | |||||
Weatherford International, Ltd. | 5.649% due 02/17/51 (Þ) | 547 | 553 | |||||
5.125% due 09/15/20 | 660 | 535 | BCAP LLC Trust | |||||
4.500% due 04/15/22 | 345 | 248 | Series 2009-RR11 Class 7A1 | |||||
51,140 | 2.551% due 02/26/36 (Ê)(Þ) | 156 | 156 | |||||
Loan Agreements - 0.4% | Series 2010-RR7 Class 3A1 | |||||||
Chrysler Group LLC Term Loan B | 2.538% due 08/26/35 (Ê)(Þ) | 323 | 321 | |||||
3.500% due 05/24/17 (Ê) | 560 | 557 | Series 2011-R11 Class 15A1 | |||||
First Data Corp. Term Loan | 2.589% due 10/26/33 (Ê)(Þ) | 247 | 251 | |||||
3.918% due 03/24/18 (Ê) | 575 | 567 | Series 2011-R11 Class 20A5 | |||||
MacDermid, Inc. 1st Lien Term Loan | 2.601% due 03/26/35 (Ê)(Þ) | 156 | 157 | |||||
5.500% due 06/07/20 (Ê) | 604 | 584 | Bear Stearns Adjustable Rate Mortgage | |||||
Numericable US LLC 1st Lien Term | Trust | |||||||
Loan B1 | Series 2003-8 Class 4A1 | |||||||
4.500% due 05/21/20 (Ê) | 292 | 281 | 2.833% due 01/25/34 (Ê) | 96 | 96 | |||
Numericable US LLC Term Loan B2 | Series 2004-5 Class 2A | |||||||
4.500% due 05/21/20 (Ê) | 253 | 243 | 2.957% due 07/25/34 (Ê) | 393 | 393 | |||
Sungard Availability Services Capital, | Series 2004-9 Class 22A1 | |||||||
Inc. Term Loan B | 3.225% due 11/25/34 (Ê) | 18 | 18 | |||||
6.000% due 03/31/19 (Ê) | 397 | 343 | Series 2005-2 Class A1 | |||||
T-Mobile USA, Inc. Term Loan B | 2.680% due 03/25/35 (Ê) | 265 | 265 | |||||
3.500% due 11/09/22 (Ê) | 475 | 474 | Bear Stearns Commercial Mortgage | |||||
TWCC Holding Corp. 2nd Lien | Securities Trust | |||||||
Covenant-Lite Term Loan | Series 2002-TOP6 Class G | |||||||
7.000% due 06/26/20 (Ê) | 765 | 762 | 6.000% due 10/15/36 (Þ) | 70 | 70 | |||
3,811 | BHMS Mortgage Trust | |||||||
Mortgage-Backed Securities - 22.7% | Series 2014-ATLS Class AFL | |||||||
1211 Avenue of the Americas Trust | 1.671% due 07/05/33 (Ê)(Þ) | 180 | 180 | |||||
Series 2015-1211 Class A1A2 | Series 2014-ATLS Class BFX | |||||||
3.901% due 08/10/35 (Þ) | 1,120 | 1,158 | 4.241% due 07/05/33 (Þ) | 500 | 495 | |||
Adjustable Rate Mortgage Trust | CD Mortgage Trust | |||||||
Series 2007-1 Class 1A1 | Series 2006-CD2 Class AM | |||||||
2.709% due 03/25/37 (Ê) | 624 | 514 | 5.592% due 01/15/46 | 219 | 218 |
See accompanying notes which are an integral part of the financial statements.
76 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||
Principal | Fair | Principal | Fair | |||||
Amount ($) | Value | Amount ($) | Value | |||||
or Shares | $ | or Shares | $ | |||||
CFCRE Commercial Mortgage Trust | Series 2014-USA Class A2 | |||||||
Series 2011-C2 Class C | 3.953% due 09/15/37 (Þ) | 545 | 560 | |||||
5.760% due 12/15/47 (Þ) | 195 | 213 | DBCCRE Mortgage Trust | |||||
CHL Mortgage Pass-Through Trust | Series 2014-ARCP Class C | |||||||
Series 2004-22 Class A3 | 4.935% due 01/10/34 (Þ) | 575 | 594 | |||||
2.643% due 11/25/34 (Ê) | 71 | 67 | DBRR Trust | |||||
Series 2004-HYB9 Class 1A1 | Series 2011-LC2 Class A4A | |||||||
2.600% due 02/20/35 (Ê) | 101 | 101 | 4.537% due 07/12/44 (Þ) | 340 | 367 | |||
Citicorp Mortgage Securities Trust | DBUBS Mortgage Trust | |||||||
Series 2006-3 Class 1A9 | �� | Series 2011-LC1A Class A1 | ||||||
5.750% due 06/25/36 | 130 | 134 | 3.742% due 11/10/46 (Þ) | 181 | 181 | |||
Citigroup Commercial Mortgage Trust | Series 2011-LC2A Class A2 | |||||||
Series 2009-RR1 Class MA4A | 3.386% due 07/10/44 (Þ) | 658 | 660 | |||||
5.485% due 03/17/51 (Þ) | 300 | 309 | Fannie Mae | |||||
Citigroup Mortgage Loan Trust, Inc. | 3.584% due 2020 | 547 | 571 | |||||
Series 2005-11 Class A2A | 3.619% due 2020 | 673 | 710 | |||||
2.730% due 10/25/35 (Ê) | 19 | 19 | 3.665% due 2020 | 690 | 732 | |||
Series 2007-AR8 Class 2A1A | 3.766% due 2020 | 1,541 | 1,635 | |||||
2.685% due 07/25/37 (Ê) | 320 | 300 | 3.950% due 2020 | 405 | 434 | |||
Citigroup/Deutsche Bank Commercial | 5.500% due 2020 | 12 | 13 | |||||
Mortgage Trust | 4.250% due 2021 | 395 | 430 | |||||
Series 2005-CD1 Class C | ||||||||
5.226% due 07/15/44 | 19 | 19 | 4.298% due 2021 | 631 | 685 | |||
Commercial Mortgage Pass-Through | 5.500% due 2022 | 64 | 67 | |||||
Certificates | 2.500% due 2024 | 890 | 907 | |||||
Series 2015-CR27 Class B | 4.000% due 2025 | 314 | 333 | |||||
4.510% due 10/10/48 | 250 | 256 | 4.500% due 2025 | 652 | 700 | |||
Commercial Mortgage Trust | 4.000% due 2026 | 369 | 392 | |||||
Series 2001-J2A Class E | 6.000% due 2026 | 78 | 89 | |||||
6.922% due 07/16/34 (Þ) | 345 | 354 | 2.966% due 2027 | 721 | 714 | |||
Series 2005-LP5 Class D | 6.000% due 2027 | 47 | 53 | |||||
4.776% due 05/10/43 | 331 | 331 | 3.500% due 2030 | 664 | 697 | |||
Series 2012-CR2 Class A1 | 3.500% due 2032 | 721 | 754 | |||||
0.824% due 08/15/45 | 29 | 29 | 6.000% due 2032 | 53 | 60 | |||
Series 2013-CR7 Class A1 | 3.000% due 2033 | 1,652 | 1,696 | |||||
0.716% due 03/10/46 | 431 | 428 | 3.500% due 2033 | 1,373 | 1,436 | |||
Series 2013-CR13 Class A1 | 5.000% due 2033 | 12 | 13 | |||||
1.259% due 11/10/18 | 669 | 664 | ||||||
Series 2014-UBS4 Class A1 | 6.150% due 2033(Ê) | 77 | 86 | |||||
1.309% due 08/10/47 | 263 | 260 | 3.500% due 2034 | 291 | 304 | |||
Countrywide Home Loan Mortgage Pass- | 5.000% due 2034 | 17 | 19 | |||||
Through Trust | 5.500% due 2034 | 41 | 46 | |||||
Series 2005-3 Class 1A2 | 5.500% due 2037 | 340 | 378 | |||||
0.511% due 04/25/35 (Ê) | 14 | 12 | 5.500% due 2038 | 1,047 | 1,177 | |||
Series 2007-HY5 Class 1A1 | 6.000% due 2039 | 111 | 125 | |||||
2.646% due 09/25/47 (Ê) | 916 | 810 | 4.000% due 2040 | 483 | 517 | |||
Credit Suisse Commercial Mortgage | 5.500% due 2040 | 118 | 132 | |||||
Trust | 6.000% due 2040 | 313 | 354 | |||||
Series 2006-C5 Class A1A | 4.000% due 2041 | 883 | 941 | |||||
5.297% due 12/15/39 | 1,138 | 1,164 | 6.000% due 2041 | 345 | 390 | |||
Series 2007-C1 Class A3 | 3.500% due 2043 | 1,707 | 1,764 | |||||
5.383% due 02/15/40 | 78 | 79 | ||||||
Credit Suisse First Boston Mortgage | 4.000% due 2044 | 1,576 | 1,688 | |||||
Securities Corp. | 3.500% due 2045 | 2,413 | 2,494 | |||||
Series 2005-9 Class 2A1 | 4.000% due 2045 | 3,020 | 3,203 | |||||
5.500% due 10/25/35 | 151 | 143 | 15 Year TBA(Ï) | |||||
Series 2005-C3 Class AJ | 2.500% | 1,995 | 2,011 | |||||
4.771% due 07/15/37 | 2 | 2 | 3.500% | 1,445 | 1,513 | |||
CSMC Mortgage-Backed Trust | 30 Year TBA(Ï) | |||||||
Series 2007-2 Class 3A4 | 3.000% | 8,825 | 8,826 | |||||
5.500% due 03/25/37 | 458 | 424 | 3.500% | 22,810 | 23,535 | |||
Series 2007-5 Class 8A2 | 4.000% | 6,060 | 6,412 | |||||
6.000% due 10/25/24 | 868 | 906 | 4.500% | 7,810 | 8,435 | |||
Series 2011-4R Class 5A1 | 5.000% | 2,585 | 2,842 | |||||
2.615% due 05/27/36 (Þ) | 190 | 189 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 77
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
6.000% | 425 | 480 | Series 2015-M7 Class ASQ2 | ||||
Series 2003-343 Class 6 | 1.550% due 04/25/18 | 465 | 465 | ||||
Interest Only STRIP | Series 2015-M11 Class A1 | ||||||
5.000% due 10/25/33 | 38 | 8 | 2.097% due 04/25/25 | 755 | 752 | ||
Series 2003-345 Class 18 | Series 2015-M15 Class ASQ1 | ||||||
Interest Only STRIP | 0.849% due 01/25/19 | 1,964 | 1,959 | ||||
4.500% due 12/25/18 | 38 | 2 | FDIC Trust | ||||
Series 2003-345 Class 19 | Series 2010-R1 Class A | ||||||
Interest Only STRIP | 2.184% due 05/25/50 (Þ) | 684 | 689 | ||||
4.500% due 01/25/19 | 41 | 2 | Series 2011-R1 Class A | ||||
Series 2005-365 Class 12 | 2.672% due 07/25/26 (Þ) | 273 | 277 | ||||
Interest Only STRIP | Federal Home Loan Mortgage Corp. | ||||||
5.500% due 12/25/35 | 105 | 19 | Multifamily Structured Pass-Through | ||||
Series 2006-369 Class 8 | Certificates | ||||||
Interest Only STRIP | Series 2010-KSCT Class A2 | ||||||
5.500% due 04/25/36 | 17 | 3 | 4.285% due 01/25/20 | 295 | 319 | ||
Fannie Mae Grantor Trust | Series 2011-K702 Class X1 | ||||||
Series 2001-T4 Class A1 | Interest Only STRIP | ||||||
7.500% due 07/25/41 | 356 | 429 | 1.617% due 02/25/18 | 5,999 | 162 | ||
Fannie Mae REMIC Trust | Series 2015-KF12 Class A | ||||||
Series 2004-W5 Class A1 | 0.900% due 09/25/22 (Ê) | 905 | 902 | ||||
6.000% due 02/25/47 | 262 | 293 | Series 2015-KS03 Class A4 | ||||
Fannie Mae REMICS | 3.161% due 05/25/25 | 210 | 212 | ||||
Series 1999-56 Class Z | Federal Home Loan Mortgage Corp. | ||||||
7.000% due 12/18/29 | 19 | 22 | Structured Pass-Through Securities | ||||
Series 2003-35 Class FY | Series 2003-56 Class A5 | ||||||
0.570% due 05/25/18 (Ê) | 21 | 21 | 5.231% due 05/25/43 | 291 | 318 | ||
Series 2005-24 Class ZE | First Horizon Mortgage Pass-Through | ||||||
5.000% due 04/25/35 | 422 | 466 | Trust | ||||
Series 2005-110 Class MB | Series 2005-AR4 Class 2A1 | ||||||
5.500% due 09/25/35 | 51 | 54 | 2.562% due 10/25/35 (Ê) | 584 | 508 | ||
Series 2009-39 Class LB | Series 2006-2 Class 1A3 | ||||||
4.500% due 06/25/29 | 277 | 299 | 6.000% due 08/25/36 | 496 | 472 | ||
Series 2009-96 Class DB | Freddie Mac | ||||||
4.000% due 11/25/29 | 336 | 356 | 2.500% due 2030 | 1,285 | 1,298 | ||
Series 2010-95 Class S | 3.000% due 2030 | 539 | 556 | ||||
Interest Only STRIP | 3.500% due 2030 | 206 | 216 | ||||
6.413% due 09/25/40 (Ê) | 952 | 139 | 5.500% due 2037 | 197 | 214 | ||
Series 2012-55 Class PC | 5.500% due 2038 | 675 | 767 | ||||
3.500% due 05/25/42 | 700 | 722 | 6.000% due 2038 | 181 | 204 | ||
Series 2013-111 Class PL | 5.000% due 2040 | 481 | 528 | ||||
2.000% due 12/25/42 | 570 | 512 | 4.000% due 2041 | 2,098 | 2,242 | ||
Fannie Mae-Aces | 4.500% due 2041 | 487 | 530 | ||||
Series 2012-M8 Class ASQ2 | 5.500% due 2041 | 497 | 555 | ||||
1.520% due 12/25/19 | 1,178 | 1,181 | 3.000% due 2042 | 277 | 277 | ||
Series 2013-M4 Class ASQ2 | 5.000% due 2042 | 695 | 763 | ||||
1.451% due 02/25/18 | 520 | 519 | 3.500% due 2043 | 825 | 855 | ||
Series 2014-M1 Class A1 | 3.500% due 2044 | 1,200 | 1,240 | ||||
2.325% due 07/25/23 | 260 | 265 | 4.000% due 2044 | 1,015 | 1,080 | ||
Series 2014-M8 Class FA | 3.000% due 2045 | 1,598 | 1,597 | ||||
0.416% due 05/25/18 (Ê) | 729 | 726 | 3.500% due 2045 | 5,502 | 5,672 | ||
Series 2014-M13 Class A2 | 4.000% due 2045 | 5,519 | 5,842 | ||||
3.021% due 08/25/24 | 430 | 435 | Freddie Mac Reference REMIC | ||||
Series 2014-M13 Class AB2 | Series 2006-R006 Class ZA | ||||||
2.951% due 08/25/24 | 510 | 521 | 6.000% due 04/15/36 | 616 | 699 | ||
Series 2014-M13 Class ASQ2 | Series 2006-R007 Class ZA | ||||||
1.637% due 11/25/17 | 2,297 | 2,304 | 6.000% due 05/15/36 | 524 | 588 | ||
Series 2015-M1 Class ASQ1 | Freddie Mac REMICS | ||||||
0.782% due 02/25/18 | 977 | 974 | Series 2003-2624 Class QH | ||||
Series 2015-M1 Class ASQ2 | 5.000% due 06/15/33 | 166 | 184 | ||||
1.626% due 02/25/18 | 1,360 | 1,364 | Series 2007-3335 Class FT | ||||
Series 2015-M7 Class ASQ1 | 0.347% due 08/15/19 (Ê) | 35 | 35 | ||||
0.882% due 04/25/18 | 781 | 778 |
See accompanying notes which are an integral part of the financial statements.
78 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series 2009-3569 Class NY | 4.683% due 2064 | 680 | 713 | ||||
5.000% due 08/15/39 | 1,400 | 1,555 | 4.793% due 2064 | 385 | 404 | ||
Series 2010-3653 Class B | 30 Year TBA(Ï) | ||||||
4.500% due 04/15/30 | 489 | 525 | 3.500% | 1,520 | 1,585 | ||
Series 2010-3704 Class DC | 4.500% | 495 | 532 | ||||
4.000% due 11/15/36 | 328 | 344 | GMACM Mortgage Loan Trust | ||||
Series 2012-4010 Class KM | Series 2005-AR2 Class 4A | ||||||
3.000% due 01/15/42 | 262 | 267 | 3.174% due 05/25/35 (Ê) | 160 | 151 | ||
Series 2013-4233 Class MD | GS Mortgage Securities Corp. II | ||||||
1.750% due 03/15/25 | 439 | 441 | Series 2011-GC5 Class A4 | ||||
Freddie Mac Strips | 3.707% due 08/10/44 | 735 | 771 | ||||
Series 2012-271 Class 30 | Series 2012-ALOH Class A | ||||||
3.000% due 08/15/42 | 1,409 | 1,383 | 3.551% due 04/10/34 (Þ) | 345 | 355 | ||
FREMF Mortgage Trust | Series 2013-GC10 Class A1 | ||||||
Series 2010-K7 Class B | 0.696% due 02/10/46 | 4 | 4 | ||||
5.441% due 04/25/20 (Þ) | 510 | 554 | GS Mortgage Securities Trust | ||||
Series 2012-K705 Class B | Series 2013-GC12 Class A1 | ||||||
4.161% due 09/25/44 (Þ) | 217 | 223 | 0.742% due 06/10/46 | 155 | 154 | ||
Series 2013-K24 Class B | Series 2013-GC16 Class A1 | ||||||
3.502% due 11/25/45 (Þ) | 360 | 352 | 1.264% due 11/10/46 | 178 | 177 | ||
Series 2015-K721 Class B | Series 2014-GC26 Class C | ||||||
3.681% due 11/25/47 (Þ) | 755 | 664 | 4.511% due 11/10/47 | 240 | 234 | ||
GAHR Commericial Mortgage Trust | Series 2015-GC28 Class A5 | ||||||
Series 2015-NRF Class AFX | 3.396% due 02/10/48 | 295 | 294 | ||||
3.235% due 12/15/19 (Þ) | 455 | 462 | GSMPS Mortgage Loan Trust | ||||
GE Capital Commercial Mortgage Corp. | Series 2006-RP1 Class 1A2 | ||||||
Series 2005-C3 Class H | 7.500% due 01/25/36 (Þ) | 327 | 342 | ||||
5.439% due 07/10/45 (Þ) | 740 | 739 | GSR Mortgage Loan Trust | ||||
Ginnie Mae | Series 2005-AR7 Class 6A1 | ||||||
Series 2007-26 Class SD | 2.842% due 11/25/35 (Ê) | 40 | 38 | ||||
Interest Only STRIP | HarborView Mortgage Loan Trust | ||||||
6.613% due 05/16/37 (Ê) | 944 | 189 | Series 2005-4 Class 3A1 | ||||
Series 2010-H03 Class HI | 2.744% due 07/19/35 (Ê) | 72 | 63 | ||||
Interest Only STRIP | IndyMac INDX Mortgage Loan Trust | ||||||
1.474% due 03/20/60 | 8,448 | 355 | Series 2006-AR41 Class A3 | ||||
Series 2010-H04 Class BI | 0.350% due 02/25/37 (Ê) | 820 | 572 | ||||
Interest Only STRIP | JPMBB Commercial Mortgage Securities | ||||||
1.390% due 04/20/60 | 1,247 | 59 | Trust | ||||
Series 2010-H12 Class PT | Series 2014-C26 Class C | ||||||
5.470% due 11/20/59 | 355 | 367 | 4.427% due 01/15/48 | 480 | 461 | ||
Series 2010-H22 Class JI | Series 2015-C29 Class A4 | ||||||
Interest Only STRIP | 3.611% due 05/15/48 | 350 | 353 | ||||
2.499% due 11/20/60 | 2,108 | 154 | JPMorgan Alternative Loan Trust | ||||
Series 2011-H02 Class BI | Series 2006-A2 Class 3A1 | ||||||
Interest Only STRIP | 2.585% due 05/25/36 (Ê) | 852 | 692 | ||||
0.412% due 02/20/61 | 8,790 | 115 | JPMorgan Chase Commercial Mortgage | ||||
Ginnie Mae I | Securities Trust | ||||||
2.140% due 2023 | 613 | 614 | Series 2004-LN2 Class B | ||||
4.564% due 2062 | 1,191 | 1,271 | 5.201% due 07/15/41 | 150 | 149 | ||
Ginnie Mae II | Series 2005-CB12 Class AJ | ||||||
3.500% due 2040(Ê) | 127 | 131 | 4.987% due 09/12/37 | 323 | 323 | ||
4.000% due 2040(Ê) | 493 | 513 | Series 2007-LD11 Class AM | ||||
5.500% due 2043 | 805 | 889 | 5.787% due 06/15/49 | 180 | 183 | ||
3.000% due 2045 | 2,828 | 2,871 | Series 2007-LDPX Class A3 | ||||
3.500% due 2045 | 1,968 | 2,055 | 5.420% due 01/15/49 | 634 | 647 | ||
4.000% due 2045 | 1,188 | 1,263 | Series 2007-LDPX Class AM | ||||
5.294% due 2060 | 464 | 489 | 5.464% due 01/15/49 | 780 | 795 | ||
Series 2011-C3 Class A2 | |||||||
4.810% due 2061 | 1,024 | 1,072 | 3.673% due 02/15/46 (Þ) | 96 | 97 | ||
5.245% due 2061 | 568 | 608 | Series 2014-FBLU Class A | ||||
4.626% due 2062 | 353 | 374 | 1.146% due 12/15/28 (Ê)(Þ) | 100 | 100 | ||
4.652% due 2063 | 88 | 95 | Series 2014-FBLU Class C | ||||
4.661% due 2063 | 27 | 29 | 2.161% due 12/15/28 (Ê)(Þ) | 285 | 285 | ||
4.732% due 2063 | 192 | 204 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 79
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series 2015-SGP Class C | Series 2011-C3 Class A4 | ||||||
3.694% due 07/15/36 (Ê)(Þ) | 880 | 879 | 4.118% due 07/15/49 | 115 | 122 | ||
JPMorgan Mortgage Trust | Mortgage Pass-Through Certificates | ||||||
Series 2004-A2 Class 3A1 | Series 2001-CIB2 Class D | ||||||
2.470% due 05/25/34 (Ê) | 25 | 24 | 6.802% due 04/15/35 | 30 | 30 | ||
Series 2005-A1 Class 6T1 | Motel 6 Trust | ||||||
2.701% due 02/25/35 (Ê) | 10 | 10 | Series 2015-MTL6 Class A2A2 | ||||
Series 2005-A5 Class TA1 | 2.605% due 02/05/30 (Þ) | 580 | 575 | ||||
5.172% due 08/25/35 (Ê) | 63 | 63 | MSBAM Commercial Mortgage | ||||
Series 2005-A8 Class 1A1 | Securities Trust | ||||||
5.003% due 11/25/35 (Ê) | 554 | 524 | Series 2012-CKSV Class A2 | ||||
Series 2005-S3 Class 1A2 | 3.277% due 10/15/30 (Þ) | 190 | 187 | ||||
5.750% due 01/25/36 | 28 | 24 | MSCG Trust | ||||
Series 2006-A6 Class 1A2 | Series 2015-ALDR Class A2 | ||||||
2.565% due 10/25/36 (Ê) | 103 | 92 | 3.577% due 06/07/35 (Þ) | 255 | 255 | ||
Series 2006-A7 Class 2A4R | Prime Mortgage Trust | ||||||
2.695% due 01/25/37 (Ê) | 787 | 691 | Series 2004-CL1 Class 1A2 | ||||
LB Commercial Mortgage Trust | 0.621% due 02/25/34 (Ê) | 6 | 5 | ||||
Series 2007-C3 Class AM | RBSCF Trust | ||||||
6.097% due 07/15/44 | 920 | 966 | Series 2010-RR3 Class MSCA | ||||
LB-UBS Commercial Mortgage Trust | 6.114% due 06/16/49 (Þ) | 77 | 79 | ||||
Series 2005-C7 Class F | Series 2010-RR4 Class CMLA | ||||||
5.350% due 11/15/40 | 465 | 456 | 6.040% due 12/16/49 (Þ) | 136 | 140 | ||
Mastr Adjustable Rate Mortgages Trust | RBSSP Resecuritization Trust | ||||||
Series 2006-2 Class 4A1 | Series 2010-3 Class 9A1 | ||||||
2.674% due 02/25/36 (Ê) | 57 | 56 | 5.500% due 02/26/35 (Þ) | 227 | 231 | ||
Series 2007-HF2 Class A1 | Residential Asset Securitization Trust | ||||||
0.480% due 09/25/37 (Ê) | 358 | 324 | Series 2003-A15 Class 1A2 | ||||
Mastr Alternative Loan Trust | 0.620% due 02/25/34 (Ê) | 40 | 37 | ||||
Series 2003-4 Class B1 | RFMSI Trust | ||||||
5.941% due 06/25/33 | 53 | 49 | Series 2006-SA4 Class 2A1 | ||||
Series 2004-10 Class 5A6 | 3.459% due 11/25/36 (Ê) | 159 | 138 | ||||
5.750% due 09/25/34 | 39 | 40 | Rialto Capital Management LLC | ||||
Merrill Lynch Mortgage Trust | Series 2014-LT5 Class A | ||||||
Series 2005-A10 Class A | 2.850% due 05/15/24 (Þ) | 28 | 28 | ||||
0.431% due 02/25/36 (Ê) | 48 | 44 | RREF LLC | ||||
Series 2006-C2 Class AM | Series 2014-LT6 Class A | ||||||
5.782% due 08/12/43 | 500 | 509 | 2.750% due 09/15/24 (Þ) | 45 | 45 | ||
Series 2008-C1 Class A4 | Series 2015-LT7 Class A | ||||||
5.690% due 02/12/51 | 249 | 261 | 3.000% due 12/25/32 (Þ) | 726 | 726 | ||
Morgan Stanley Bank of America Merrill | Structured Adjustable Rate Mortgage | ||||||
Lynch Trust | Loan Trust | ||||||
Series 2013-C7 Class A1 | Series 2004-12 Class 2A | ||||||
0.738% due 02/15/46 | 99 | 98 | 2.421% due 09/25/34 (Ê) | 686 | 680 | ||
Structured Asset Mortgage Investments | |||||||
Series 2015-C24 Class A4 | II Trust | ||||||
3.732% due 05/15/48 | 835 | 851 | Series 2004-AR8 Class A1 | ||||
Series 2015-C24 Class C | 0.844% due 05/19/35 (Ê) | 203 | 197 | ||||
4.500% due 08/15/47 | 75 | 70 | Structured Asset Securities Corp. | ||||
Series 2015-C26 Class A3 | Mortgage Pass-Through Certificates | ||||||
3.211% due 11/15/48 | 875 | 869 | Series 2003-34A Class 5A4 | ||||
Series 2015-C27 Class A4 | 2.455% due 11/25/33 (Ê) | 373 | 378 | ||||
3.753% due 12/15/47 | 540 | 549 | UBS Commercial Mortgage Trust | ||||
Morgan Stanley Capital I Trust | Series 2012-C1 Class A3 | ||||||
Series 2005-IQ10 Class B | 3.400% due 05/10/45 | 1,025 | 1,044 | ||||
5.519% due 09/15/42 | 43 | 43 | UBS-Barclays Commercial Mortgage | ||||
Series 2006-IQ12 Class AM | Trust | ||||||
5.370% due 12/15/43 | 180 | 183 | Series 2012-C4 Class A5 | ||||
Series 2007-IQ14 Class A1A | 2.850% due 12/10/45 | 975 | 957 | ||||
5.665% due 04/15/49 | 323 | 335 | Wachovia Bank Commercial Mortgage | ||||
Series 2011-C1 Class A3 | Trust | ||||||
4.700% due 09/15/47 (Þ) | 995 | 1,054 | Series 2006-C26 Class AM | ||||
Series 2011-C3 Class A2 | 5.969% due 06/15/45 | 725 | 736 | ||||
3.224% due 07/15/49 | 148 | 149 | Series 2007-C31 Class AM | ||||
5.591% due 04/15/47 | 500 | 518 |
See accompanying notes which are an integral part of the financial statements.
80 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Washington Mutual Mortgage Pass- | Brazil Notas do Tesouro Nacional Serie B | |||||||||
Through Certificates Trust | Series NTNB | |||||||||
Series 2003-AR7 Class A7 | 6.000% due 05/15/45 | BRL | 974 | 582 | ||||||
2.299% due 08/25/33 (Ê) | 157 | 157 | 6.000% due 08/15/50 | BRL | 1,415 | 864 | ||||
Series 2005-AR13 Class A1A1 | Brazil Notas do Tesouro Nacional Serie F | |||||||||
0.511% due 10/25/45 (Ê) | 16 | 14 | Series NTNF | |||||||
Series 2007-HY2 Class 2A3 | 10.000% due 01/01/17 | BRL | 1,110 | 267 | ||||||
1.755% due 04/25/37 (Ê) | 590 | 437 | 10.000% due 01/01/21 | BRL | 2,160 | 435 | ||||
Wells Fargo Mortgage Backed Securities | 10.000% due 01/01/23 | BRL | 3,135 | 595 | ||||||
Trust | 10.000% due 01/01/25 | BRL | 5,370 | 971 | ||||||
Series 2004-P Class 2A1 | ||||||||||
2.626% due 09/25/34 (Ê) | 198 | 199 | Colombian TES | |||||||
Series B | ||||||||||
Series 2006-2 Class 2A3 | 10.000% due 07/24/24 | COP | 6,724,900 | 2,337 | ||||||
5.500% due 03/25/36 | 62 | 60 | 6.000% due 04/28/28 | COP | 584,600 | 144 | ||||
Series 2006-AR2 Class 2A1 | ||||||||||
2.698% due 03/25/36 | 91 | 90 | Ireland Government Bond | |||||||
Series 2006-AR6 Class (Ê) 7A1 | 5.400% due 03/13/25 | EUR | 1,220 | 1,814 | ||||||
5.015% due 03/25/36 | 281 | 278 | Malaysia Government Bond | |||||||
Series 0111 | ||||||||||
Series 2006-AR10 Class 4A1 | 4.160% due 07/15/21 | MYR | 190 | 45 | ||||||
2.610% due 07/25/36 (Ê) | 25 | 24 | ||||||||
Series 0114 | ||||||||||
Series 2006-AR17 Class A1 | 4.181% due 07/15/24 | MYR | 1,560 | 362 | ||||||
2.611% due 10/25/36 (Ê) | 433 | 410 | ||||||||
Series 0115 | ||||||||||
Series 2007-8 Class 1A16 | 3.955% due 09/15/25 | MYR | 1,070 | 244 | ||||||
6.000% due 07/25/37 | 66 | 65 | ||||||||
Series 0214 | ||||||||||
WF-RBS Commercial Mortgage Trust | 3.394% due 03/15/17 | MYR | 520 | 122 | ||||||
Series 2011-C5 Class A4 | ||||||||||
3.667% due 11/15/44 | 545 | 566 | Series 0215 | |||||||
3.795% due 09/30/22 | MYR | 670 | 154 | |||||||
Series 2012-C9 Class A1 | 52 | 52 | Series 0314 | |||||||
0.673% due 11/15/45 | 4.048% due 09/30/21 | MYR | 780 | 183 | ||||||
Series 2013-C14 Class A1 | 180 | 178 | Series 0315 | |||||||
0.836% due 06/15/46 | 3.659% due 10/15/20 | MYR | 714 | 168 | ||||||
Series 2014-C19 Class A3 | 500 | 516 | Series 0414 | |||||||
3.660% due 03/15/47 | 3.654% due 10/31/19 | MYR | 1,350 | 317 | ||||||
193,938 | Series 0512 | |||||||||
Municipal Bonds - 0.7% | 3.314% due 10/31/17 | MYR | 780 | 184 | ||||||
City of New York New York General | ||||||||||
Obligation Unlimited | Mexican Bonos | |||||||||
5.047% due 10/01/24 | 375 | 429 | Series M 10 | |||||||
8.500% due 12/13/18 | MXN | 13,110 | 837 | |||||||
6.646% due 12/01/31 | 250 | 290 | Series M 20 | |||||||
6.246% due 06/01/35 | 1,100 | 1,236 | 7.500% due 06/03/27 | MXN | 13,652 | 860 | ||||
Municipal Electric Authority of Georgia | ||||||||||
Revenue Bonds | Series M 30 | |||||||||
6.637% due 04/01/57 | 1,310 | 1,571 | 10.000% due 11/20/36 | MXN | 21,549 | 1,672 | ||||
7.055% due 04/01/57 | 600 | 671 | Series M | |||||||
New York City New York Water & Sewer | 8.000% due 06/11/20 | MXN | 13,960 | 891 | ||||||
System Revenue Bonds | 7.750% due 11/13/42 | MXN | 19,250 | 1,220 | ||||||
5.375% due 06/15/43 | 525 | 608 | New Zealand Government Bond | |||||||
State of California General Obligation | 2.000% due 09/20/25 | NZD | 340 | 236 | ||||||
Unlimited | Series 0427 | |||||||||
6.650% due 03/01/22 | 200 | 241 | 4.500% due 04/15/27 | NZD | 1,320 | 978 | ||||
7.500% due 04/01/34 | 100 | 140 | Series 423 | |||||||
University of California Revenue Bonds | 5.500% due 04/15/23 | NZD | 1,500 | 1,176 | ||||||
6.270% due 05/15/31 | 400 | 444 | Series 521 | |||||||
5,630 | 6.000% due 05/15/21 | NZD | 2,840 | 2,227 | ||||||
Non-US Bonds - 3.5% | Norway Government Bond | |||||||||
Australia Government Bond | Series 472 | |||||||||
Series 120 | 4.250% due 05/19/17 (Þ) | NOK | 10,990 | 1,302 | ||||||
6.000% due 02/15/17 | AUD | 324 | 246 | Series 476 | ||||||
Series 126 | 3.000% due 03/14/24 (Þ) | NOK | 2,650 | 337 | ||||||
4.500% due 04/15/20 | AUD | 1,950 | 1,557 | Series 477 | ||||||
Series 133 | 1.750% due 03/13/25 (Þ) | NOK | 3,620 | 419 | ||||||
5.500% due 04/21/23 | AUD | 780 | 676 | Peru Government Bond | ||||||
Series 140 | 5.700% due 08/12/24 | PEN | 3,690 | 981 | ||||||
4.500% due 04/21/33 | AUD | 1,370 | 1,156 | 6.900% due 08/12/37 | PEN | 2,840 | 752 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 81
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Queensland Treasury Corp. | ||||||||||
Series 21 | Technology - 0.1% | |||||||||
5.500% due 06/21/21 | AUD | 2,068 | 1,715 | Verizon Communications, Inc. | 32,300 | 892 | ||||
South Africa Government Bond | ||||||||||
Series R203 | Total Preferred Stocks | |||||||||
8.250% due 09/15/17 | ZAR | 4,960 | 320 | (cost $1,395) | 1,449 | |||||
Series R209 | ||||||||||
6.250% due 03/31/36 | ZAR | 7,450 | 322 | |||||||
Series R214 | Options Purchased - 0.0% | |||||||||
6.500% due 02/28/41 | ZAR | 17,150 | 734 | (Number of Contracts) | ||||||
30,402 | Swaptions | |||||||||
United States Government Agencies - 0.4% | (Fund Receives/Fund Pays) | |||||||||
Federal Home Loan Banks | USD 5.000%/USD Three Month LIBOR | |||||||||
3.150% due 06/28/17 | 1,080 | 1,078 | Jan 2019 0.00 Put (1) | 1,095 | (ÿ) | 27 | ||||
Federal National Mortgage Association | Total Options Purchased | |||||||||
Series 2 | (cost $74) | 27 | ||||||||
0.422% due 07/20/17 (Ê) | 2,175 | 2,172 | ||||||||
3,250 | Short-Term Investments - 25.1% | |||||||||
United States Government Treasuries - 19.7% | ||||||||||
United States Treasury Inflation Indexed | ABN AMRO Bank NV | |||||||||
Bonds | 1.123% due 10/28/16 (Ê)(Þ) | 300 | 301 | |||||||
0.125% due 04/15/17 (Æ) | 932 | 930 | Adam Aircraft Industries Term Loan | |||||||
0.125% due 07/15/24 (Æ) | 1,898 | 1,803 | 15.130% due 05/23/16 (Å) | 49 | — | |||||
0.250% due 01/15/25 (Æ) | 2,541 | 2,425 | Ally Auto Receivables Trust | |||||||
0.375% due 07/15/25 (Æ) | 130 | 126 | Series 2015-1 Class A1 | |||||||
0.625% due 02/15/43 (Æ) | 621 | 525 | 0.390% due 08/15/16 | 253 | 253 | |||||
1.375% due 02/15/44 (Æ) | 2,776 | 2,825 | American Express Credit Corp. | |||||||
0.750% due 02/15/45 (Æ) | 1,545 | 1,348 | 1.000% due 01/19/16 (ç)(~) | 500 | 500 | |||||
United States Treasury Notes | AmeriCredit Automobile Receivables | |||||||||
0.750% due 10/31/17 | 6,700 | 6,664 | Trust | |||||||
0.875% due 11/30/17 (§) | 12,950 | 12,913 | Series 2015-3 Class A1 | |||||||
1.000% due 12/31/17 | 3,160 | 3,156 | 0.500% due 08/08/16 | 1,051 | 1,051 | |||||
1.250% due 11/15/18 | 3,715 | 3,709 | Anheuser-Busch InBev Worldwide, Inc. | |||||||
1.375% due 09/30/20 | 26,610 | 26,150 | 2.875% due 02/15/16 | 240 | 240 | |||||
1.375% due 10/31/20 | 5,340 | 5,246 | AT&T, Inc. | |||||||
1.625% due 11/30/20 | 2,750 | 2,734 | ||||||||
1.750% due 12/31/20 | 6,755 | 5,359 | 2.950% due 05/15/16 | 605 | 609 | |||||
2.000% due 11/30/22 | 2,800 | 2,785 | Series FRN | |||||||
1.750% due 12/31/22 | 12,265 | 12,022 | 0.741% due 02/12/16 (Ê) | 557 | 557 | |||||
2.000% due 02/15/25 | 1,685 | 1,647 | Bank of America Corp. | |||||||
2.000% due 08/15/25 | 5,540 | 5,402 | 1.406% due 03/22/16 (Ê) | 650 | 650 | |||||
2.250% due 11/15/25 | 45,520 | 45,418 | Bank of America NA | |||||||
Zero coupon due 11/15/27 | 1,360 | 996 | Series BKNT | |||||||
2.750% due 08/15/42 | 935 | 894 | 0.792% due 06/15/16 (Ê) | 200 | 200 | |||||
3.750% due 11/15/43 | 745 | 858 | Bank of Montreal | |||||||
2.875% due 08/15/45 | 8,450 | 8,206 | Series YCD | |||||||
3.000% due 11/15/45 | 15,025 | 14,980 | 0.573% due 11/10/16 (Ê)(~) | 750 | 750 | |||||
169,121 | Bank of Nova Scotia | |||||||||
Total Long-Term Investments | Series YCD | |||||||||
(cost $699,094) | 686,525 | 0.524% due 11/07/16 (Ê)(~) | 730 | 730 | ||||||
Barclays Bank PLC | ||||||||||
1.017% due 12/09/16 (Ê) | 975 | 973 | ||||||||
Common Stocks - 0.0% | BPCE SA | |||||||||
Financial Services - 0.0% | 0.934% due 11/18/16 (Ê) | 300 | 300 | |||||||
Escrow GM Corp.(Å) | 80,000 | — | Citigroup, Inc. | |||||||
Total Common Stocks | 1.402% due 04/01/16 (Ê) | 600 | 600 | |||||||
(cost $—) | — | 5.850% due 08/02/16 | 220 | 226 | ||||||
Commonwealth Bank of Australia | ||||||||||
Preferred Stocks - 0.2% | 0.622% due 06/03/16 (Ê)(Þ) | 1,120 | 1,119 | |||||||
Financial Services - 0.1% | Continental Airlines Pass-Through Trust | |||||||||
XLIT, Ltd. | 700 | 557 | Series 2009-1 |
See accompanying notes which are an integral part of the financial statements.
82 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
9.000% due 07/08/16 | 171 | 176 | Kellogg Co. | ||||||
Cooperatieve Centrale Raiffeisen- | 1.875% due 11/17/16 | 1,200 | 1,207 | ||||||
Boerenleenbank BA | Manhattan Asset Funding Co. LLC | ||||||||
Series FRN | 1.000% due 01/13/16 (ç)(~) | 750 | 750 | ||||||
1.013% due 03/18/16 (Ê) | 200 | 200 | Mercedes-Benz Auto Receivables Trust | ||||||
Series YCD | Series 2015-1 Class A1 | ||||||||
0.583% due 03/22/16 (Ê)(~) | 750 | 750 | 0.390% due 08/15/16 | 603 | 603 | ||||
CPPIB Capital, Inc. | Merck & Co., Inc. | ||||||||
0.540% due 02/17/16 (ç)(Þ)(~) | 1,250 | 1,249 | 0.554% due 05/18/16 (Ê) | 350 | 350 | ||||
Drive Auto Receivables Trust | Nissan Auto Receivables Owner Trust | ||||||||
Series 2015-DA Class A1 | Series 2015-B Class A1 | ||||||||
0.520% due 10/17/16 (Þ) | 332 | 332 | 0.380% due 08/15/16 | 670 | 670 | ||||
ENI Finance USA, Inc. | Nomura Holdings Inc. | ||||||||
0.790% due 01/04/16 (ç)(Þ)(~) | 500 | 500 | 2.000% due 09/13/16 | 835 | 838 | ||||
Fannie Mae | PACCAR Financial Corp. | ||||||||
5.432% due 02/01/16 | 70 | 70 | 0.614% due 02/08/16 (Ê) | 125 | 125 | ||||
Federal Home Loan Mortgage Corp. | Procter & Gamble Co. (The) | ||||||||
2.000% due 08/25/16 | 675 | 680 | 0.414% due 11/04/16 (Ê) | 1,000 | 1,000 | ||||
Federal Home Loan Mortgage Corp. | Progress Energy, Inc. | ||||||||
Multifamily Structured Pass-Through | 5.625% due 01/15/16 | 40 | 40 | ||||||
Certificates | |||||||||
Series 2012-K501 Class X1A | Regency Markets No.1 LLC | ||||||||
Interest Only STRIP | 0.400% due 01/15/16 (ç)(Þ)(~) | 500 | 500 | ||||||
1.702% due 08/25/16 | 3,540 | 18 | Royal Bank of Canada | ||||||
Ford Motor Credit Co. LLC | Series ycd | ||||||||
1.700% due 05/09/16 | 700 | 701 | 0.530% due 03/18/16 (Ê)(~) | 300 | 300 | ||||
GE Capital International Funding Co. | Russell U.S. Cash Management Fund | 153,873,954 | (8) | 153,874 | |||||
0.964% due 04/15/16 (Þ) | 632 | 632 | Sabine Pass LNG, LP | ||||||
General Mills, Inc. | 7.500% due 11/30/16 | 175 | 174 | ||||||
0.523% due 01/28/16 (Ê) | 435 | 435 | 7.500% due 11/30/16 (Þ) | 380 | 378 | ||||
Series FRN | Sanofi | ||||||||
0.624% due 01/29/16 (Ê) | 1,065 | 1,065 | 2.625% due 03/29/16 | 1,400 | 1,406 | ||||
Gotham Funding Corp. | Santander Drive Auto Receivables Trust | ||||||||
0.460% due 01/12/16 (ç)(Þ)(~) | 1,000 | 1,000 | Series 2015-4 Class A1 | ||||||
Historic TW, Inc. | 0.500% due 09/15/16 | 253 | 253 | ||||||
8.050% due 01/15/16 | 195 | 195 | Sheffield Receivables Co. LLC | ||||||
Huntington Auto Trust | 0.400% due 01/04/16 (ç)(Þ)(~) | 500 | 500 | ||||||
Series 2015-1 Class A1 | Shell International Finance BV | ||||||||
0.350% due 06/15/16 | 6 | 6 | 0.572% due 11/15/16 (Ê) | 1,455 | 1,454 | ||||
Hyundai Auto Receivables Trust | Tennessee Gas Pipeline Co. LLC | ||||||||
Series 2015-C Class A1 | 8.000% due 02/01/16 | 200 | 201 | ||||||
0.390% due 09/15/16 | 617 | 617 | Toronto-Dominion Bank (The) | ||||||
International Business Machines Corp. | 0.937% due 09/09/16 (Ê) | 1,250 | 1,251 | ||||||
0.404% due 02/05/16 (Ê) | 1,200 | 1,200 | Total Capital International SA | ||||||
International Lease Finance Corp. | 0.707% due 08/12/16 (ç)(~) | 1,180 | 1,180 | ||||||
6.750% due 09/01/16 (Þ) | 800 | 822 | UAL Pass-Through Trust | ||||||
Japan Treasury Discount Bill | Series 09-1 | ||||||||
Series 575 | 10.400% due 11/01/16 | 21 | 22 | ||||||
0.010% due 06/10/16 | JPY | 140,000 | 1,165 | United States Treasury Bills | |||||
JetBlue Airways Pass-Through Trust | 0.049% due 01/07/16 | 75 | 75 | ||||||
Series 04-2 Class G-2 | 0.073% due 01/07/16 | 15 | 15 | ||||||
0.812% due 11/15/16 (Ê) | 750 | 744 | Zero coupon due 01/07/16 (ç)(~) | 65 | 65 | ||||
Johnson & Johnson | Zero coupon due 01/14/16 (ç)(~) | 1,940 | 1,940 | ||||||
0.482% due 11/28/16 (Ê) | 1,000 | 1,000 | 0.147% due 02/11/16 (§) | 4,350 | 4,349 | ||||
JPMorgan Chase & Co. | |||||||||
1.125% due 02/26/16 | 750 | 750 | 0.183% due 02/18/16 | 4,600 | 4,599 | ||||
JPMorgan Chase Bank NA | 0.190% due 02/25/16 (ç)(~) | 3,085 | 3,084 | ||||||
Series BKNT | 0.233% due 04/07/16 (~) | 6,240 | 6,238 | ||||||
5.875% due 06/13/16 | 70 | 71 | Verizon Communications, Inc. |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 83
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts)
Principal | Fair | |||
Amount ($) | Value | |||
or Shares | $ | |||
Series FRN | ||||
2.042% due 09/15/16 (Ê) | 1,320 | 1,328 | ||
Victory Receivables Corp. | ||||
0.294% due 01/05/16 (ç)(Þ)(~) | 1,000 | 1,000 | ||
Vodafone Group PLC | ||||
Series FRN | ||||
0.752% due 02/19/16 (Ê) | 1,000 | 999 | ||
Wells Fargo & Co. | ||||
1.250% due 07/20/16 | 700 | 701 | ||
Willis Group Holdings PLC | ||||
4.125% due 03/15/16 | 210 | 211 | ||
Total Short-Term Investments | ||||
(cost $215,110) | 215,117 | |||
Total Investments 105.5% | ||||
(identified cost $915,673) | 903,118 | |||
Other Assets and Liabilities, | ||||
Net - (5.5%) | (47,209 | ) | ||
Net Assets - 100.0% | 855,909 |
See accompanying notes which are an integral part of the financial statements.
84 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Restricted Securities | |||||||||||||||||||
Amounts in thousands (except share and cost per unit amounts) | |||||||||||||||||||
Principal | Cost per | Cost | Fair Value | ||||||||||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000) | (000 | ) | |||||||||||||
Securities | Date | or shares | $ | $ | $ | ||||||||||||||
0.0% | |||||||||||||||||||
Adam Aircraft Industries Term Loan | 05/22/07 | 48,786 | 114.22 | 56 | — | ||||||||||||||
Escrow GM Corp. | 04/21/11 | 80,000 | — | — | — | ||||||||||||||
Indiantown Cogeneration, LP | 07/08/09 | 90,896 | 95.33 | 87 | 102 | ||||||||||||||
102 | |||||||||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. | |||||||||||||||||||
Futures Contracts | |||||||||||||||||||
Amounts in thousands (except contract amounts) | |||||||||||||||||||
Unrealized | |||||||||||||||||||
Appreciation | |||||||||||||||||||
Number of | Notional | Expiration | (Depreciation) | ||||||||||||||||
Contracts | Amount | Date | $ | ||||||||||||||||
Long Positions | |||||||||||||||||||
United States 2 Year Treasury Note Futures | 123 | USD | 26,720 | 03/16 | (44 | ) | |||||||||||||
United States 5 Year Treasury Note Futures | 330 | USD | 39,045 | 03/16 | (96 | ) | |||||||||||||
United States 10 Year Treasury Note Futures | 181 | USD | 22,789 | 03/16 | (94 | ) | |||||||||||||
United States Long Bond Futures | 94 | USD | 14,453 | 03/16 | 12 | ||||||||||||||
United States Ultra Bond Futures | 13 | USD | 2,063 | 03/16 | 10 | ||||||||||||||
Short Positions | |||||||||||||||||||
Euro-Bobl Futures | 37 | EUR | 4,835 | 03/16 | (9 | ) | |||||||||||||
Euro-BTP Futures | 19 | EUR | 2,620 | 03/16 | (25 | ) | |||||||||||||
Euro-OAT Futures | 18 | EUR | 2,701 | 03/16 | (12 | ) | |||||||||||||
Japan Government 10 Year Bond Futures | 4 | JPY | 596,159 | 03/16 | (18 | ) | |||||||||||||
Long Gilt Futures | 28 | GBP | 3,270 | 03/16 | 21 | ||||||||||||||
United States 5 Year Treasury Note Futures | 27 | USD | 3,195 | 03/16 | 8 | ||||||||||||||
United States 10 Year Treasury Note Futures | 36 | USD | 4,533 | 03/16 | 25 | ||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (222 | ) | |||||||||||||||||
Options Written | |||||||||||||||||||
Amounts in thousands (except contract amounts) | |||||||||||||||||||
Number of | Strike | Notional | Expiration | Fair Value | |||||||||||||||
Call/Put | Contracts | Price | Amount | Date | $ | ||||||||||||||
Swaptions | |||||||||||||||||||
(Fund Receives/Fund Pays) | |||||||||||||||||||
USD 5.000%/USD 3 Month LIBOR | Put | 1 | 5.00 | USD | 4,135 | 01/14/19 | (29 | ) | |||||||||||
Total Liability for Options Written (premiums received $107) | (29 | ) | |||||||||||||||||
Transactions in options written contracts for the period ended December 31, 2015 were as follows: | |||||||||||||||||||
Number of | Premiums | ||||||||||||||||||
Contracts | Received | ||||||||||||||||||
Outstanding December 31, 2014 | 2 | $ | 116 | ||||||||||||||||
Opened | — | — | |||||||||||||||||
Closed | (1 | ) | (9 | ) | |||||||||||||||
Expired | — | — | |||||||||||||||||
Outstanding December 31, 2015 | 1 | $ | 107 | ||||||||||||||||
Foreign Currency Exchange Contracts | |||||||||||||||||||
Amounts in thousands | |||||||||||||||||||
Unrealized | |||||||||||||||||||
Appreciation | |||||||||||||||||||
Amount | Amount | (Depreciation) | |||||||||||||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||||||||||||
Australia and New Zealand Banking Group | EUR | 1,396 | USD | 1,517 | 01/28/16 | (1 | ) | ||||||||||||
Bank of America | USD | 36 | BRL | 141 | 02/19/16 | — | |||||||||||||
Bank of America | USD | 981 | BRL | 3,871 | 02/19/16 | (17 | ) | ||||||||||||
Bank of America | USD | 3,860 | CAD | 5,316 | 01/21/16 | (18 | ) |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 85
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Bank of America | USD | 11 | CZK | 262 | 02/19/16 | — | |
Bank of America | USD | 37 | IDR | 532,340 | 02/19/16 | 1 | |
Bank of America | USD | 977 | IDR | 13,895,077 | 02/19/16 | 13 | |
Bank of America | USD | 71 | KRW | 83,190 | 02/19/16 | — | |
Bank of America | USD | 2,263 | KRW | 2,661,904 | 02/19/16 | (1 | ) |
Bank of America | USD | 29 | PEN | 100 | 02/19/16 | — | |
Bank of America | USD | 1,002 | PEN | 3,394 | 02/19/16 | (15 | ) |
Bank of America | USD | 49 | PLN | 195 | 02/19/16 | 1 | |
Bank of America | USD | 67 | RUB | 4,805 | 02/19/16 | (2 | ) |
Bank of America | USD | 985 | RUB | 67,369 | 02/19/16 | (72 | ) |
Bank of America | USD | 17 | SGD | 24 | 02/19/16 | — | |
Bank of America | USD | 49 | TRY | 149 | 02/19/16 | 1 | |
Bank of America | USD | 111 | TRY | 334 | 02/19/16 | 2 | |
Bank of America | AUD | 2,399 | USD | 1,744 | 01/29/16 | (2 | ) |
Bank of America | CZK | 590 | USD | 24 | 02/19/16 | — | |
Bank of America | HKD | 100 | USD | 13 | 02/19/16 | — | |
Bank of America | HUF | 2,822 | USD | 10 | 02/19/16 | — | |
Bank of America | IDR | 1,197,766 | USD | 84 | 02/19/16 | (2 | ) |
Bank of America | IDR | 31,263,924 | USD | 2,199 | 02/19/16 | (28 | ) |
Bank of America | INR | 2,958 | USD | 44 | 02/19/16 | (1 | ) |
Bank of America | INR | 152,671 | USD | 2,279 | 02/19/16 | (13 | ) |
Bank of America | PHP | 1,917 | USD | 40 | 02/19/16 | (1 | ) |
Bank of America | PHP | 108,021 | USD | 2,273 | 02/19/16 | (19 | ) |
Bank of America | PLN | 87 | USD | 22 | 02/19/16 | — | |
Bank of America | RUB | 10,812 | USD | 151 | 02/19/16 | 5 | |
Bank of America | RUB | 151,581 | USD | 2,217 | 02/19/16 | 161 | |
Bank of America | SEK | 14,619 | USD | 1,720 | 01/21/16 | (13 | ) |
Bank of America | TWD | 551 | USD | 17 | 02/19/16 | — | |
Bank of America | TWD | 33,389 | USD | 1,015 | 02/19/16 | 3 | |
Barclays | USD | 3,232 | JPY | 390,294 | 01/28/16 | 17 | |
Barclays | JPY | 140,000 | USD | 1,146 | 06/10/16 | (25 | ) |
BNP Paribas | USD | 3,860 | EUR | 3,527 | 01/21/16 | (25 | ) |
BNP Paribas | USD | 3,858 | JPY | 469,288 | 01/21/16 | 47 | |
BNP Paribas | USD | 6,002 | JPY | 730,003 | 01/21/16 | 74 | |
BNP Paribas | USD | 1,714 | NOK | 14,990 | 01/21/16 | (21 | ) |
BNP Paribas | USD | 1,732 | NZD | 2,567 | 01/21/16 | 22 | |
BNP Paribas | CHF | 1,696 | USD | 1,722 | 01/21/16 | 28 | |
BNP Paribas | CHF | 3,815 | USD | 3,875 | 01/21/16 | 63 | |
BNP Paribas | NOK | 52,464 | USD | 5,999 | 01/21/16 | 73 | |
BNP Paribas | NZD | 8,986 | USD | 6,064 | 01/21/16 | (76 | ) |
Goldman Sachs | USD | 3,648 | JPY | 442,202 | 01/28/16 | 33 | |
Goldman Sachs | USD | 2,687 | NZD | 3,998 | 01/28/16 | 44 | |
Goldman Sachs | AUD | 1,195 | CAD | 1,185 | 01/28/16 | (26 | ) |
Goldman Sachs | AUD | 9,677 | USD | 6,968 | 01/28/16 | (75 | ) |
Goldman Sachs | NZD | 1,259 | AUD | 1,184 | 01/28/16 | 4 | |
HSBC | HKD | 7,917 | USD | 1,022 | 02/19/16 | — | |
JPMorgan Chase | USD | 1,672 | AUD | 2,350 | 01/11/16 | 40 | |
JPMorgan Chase | USD | 3,322 | CAD | 4,370 | 01/08/16 | (163 | ) |
JPMorgan Chase | USD | 4,285 | CAD | 5,566 | 01/15/16 | (263 | ) |
JPMorgan Chase | USD | 1,054 | CLP | 726,903 | 01/15/16 | (29 | ) |
JPMorgan Chase | USD | 179 | EUR | 164 | 02/17/16 | (1 | ) |
JPMorgan Chase | USD | 2,626 | JPY | 321,456 | 02/17/16 | 51 | |
JPMorgan Chase | USD | 4,783 | MXN | 82,500 | 06/10/16 | (48 | ) |
JPMorgan Chase | USD | 870 | MYR | 3,824 | 01/15/16 | 16 | |
JPMorgan Chase | USD | 1,469 | MYR | 6,488 | 01/15/16 | 35 | |
JPMorgan Chase | USD | 3,108 | NOK | 25,204 | 01/15/16 | (261 | ) |
JPMorgan Chase | USD | 2,150 | NZD | 3,174 | 02/17/16 | 15 | |
JPMorgan Chase | USD | 1,348 | PLN | 5,032 | 01/15/16 | (65 | ) |
JPMorgan Chase | USD | 2,933 | SEK | 23,885 | 01/15/16 | (103 | ) |
JPMorgan Chase | USD | 445 | ZAR | 6,828 | 01/15/16 | (4 | ) |
JPMorgan Chase | AUD | 2,350 | USD | 1,710 | 01/11/16 | (2 | ) |
JPMorgan Chase | AUD | 7,881 | USD | 5,655 | 02/17/16 | (76 | ) |
JPMorgan Chase | BRL | 374 | USD | 94 | 01/15/16 | — |
See accompanying notes which are an integral part of the financial statements.
86 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
JPMorgan Chase | BRL | 1,470 | USD | 370 | 01/15/16 | — | ||
JPMorgan Chase | BRL | 1,855 | USD | 468 | 01/15/16 | 1 | ||
JPMorgan Chase | BRL | 7,153 | USD | 1,763 | 01/15/16 | (38 | ) | |
JPMorgan Chase | CHF | 4,141 | USD | 4,319 | 01/15/16 | 183 | ||
JPMorgan Chase | COP | 8,856,586 | USD | 2,939 | 01/15/16 | 152 | ||
JPMorgan Chase | CZK | 33,283 | USD | 1,396 | 01/15/16 | 58 | ||
JPMorgan Chase | GBP | 2,418 | USD | 3,643 | 02/17/16 | 78 | ||
JPMorgan Chase | IDR | 11,975,390 | USD | 851 | 01/15/16 | (14 | ) | |
JPMorgan Chase | IDR | 28,792,681 | USD | 1,897 | 01/15/16 | (182 | ) | |
JPMorgan Chase | MXN | 46,090 | USD | 2,785 | 01/15/16 | 113 | ||
JPMorgan Chase | NZD | 16,472 | USD | 10,849 | 02/17/16 | (389 | ) | |
JPMorgan Chase | PEN | 14,291 | USD | 4,305 | 01/15/16 | 126 | ||
JPMorgan Chase | SGD | 3,116 | USD | 2,231 | 01/15/16 | 34 | ||
JPMorgan Chase | TRY | 5,488 | USD | 1,839 | 01/15/16 | (37 | ) | |
JPMorgan Chase | ZAR | 322 | USD | 24 | 01/15/16 | 3 | ||
Royal Bank of Canada | USD | 1,721 | AUD | 2,392 | 01/21/16 | 21 | ||
Royal Bank of Canada | USD | 2,299 | CZK | 57,775 | 02/19/16 | 28 | ||
Royal Bank of Canada | USD | 5,991 | ILS | 23,216 | 01/21/16 | (23 | ) | |
Royal Bank of Canada | USD | 2,277 | PLN | 9,042 | 02/19/16 | 26 | ||
Royal Bank of Canada | USD | 2,288 | SGD | 3,265 | 02/19/16 | 11 | ||
Royal Bank of Canada | USD | 991 | TRY | 2,928 | 02/19/16 | — | ||
Royal Bank of Canada | USD | 2,229 | TRY | 6,589 | 02/19/16 | 1 | ||
Royal Bank of Canada | AUD | 5,382 | USD | 3,873 | 01/21/16 | (46 | ) | |
Royal Bank of Canada | AUD | 8,372 | USD | 6,024 | 01/21/16 | (73 | ) | |
Royal Bank of Canada | CZK | 25,678 | USD | 1,022 | 02/19/16 | (12 | ) | |
Royal Bank of Canada | DKK | 11,697 | USD | 1,716 | 01/21/16 | 11 | ||
Royal Bank of Canada | DKK | 26,318 | USD | 3,860 | 01/21/16 | 26 | ||
Royal Bank of Canada | EUR | 1,550 | USD | 1,700 | 01/28/16 | 15 | ||
Royal Bank of Canada | HUF | 296,236 | USD | 1,017 | 02/19/16 | (3 | ) | |
Royal Bank of Canada | PLN | 4,019 | USD | 1,012 | 02/19/16 | (12 | ) | |
Standard Chartered | USD | 2,503 | NZD | 3,730 | 01/28/16 | 44 | ||
Standard Chartered | AUD | 9,244 | USD | 6,652 | 01/28/16 | (76 | ) | |
UBS | AUD | 1,181 | CAD | 1,172 | 01/28/16 | (25 | ) | |
UBS | EUR | 4,808 | USD | 5,275 | 01/28/16 | 47 | ||
UBS | GBP | 3,400 | USD | 5,158 | 01/28/16 | 145 | ||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (526 | ) | ||||||
Total Return Swap Contracts (*) | ||||||||
Amounts in thousands | ||||||||
Fund Receives/(Pays) | Notional | Termination | Fair Value | |||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||||
Long Reference Entity | ||||||||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 18,870 | 04/29/16 | (8 | ) | ||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 20,856 | 04/29/16 | (8 | ) | ||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 22,647 | 06/30/16 | (8 | ) | ||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 12,582 | 06/30/16 | (4 | ) | ||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 10,937 | 09/30/16 | (2 | ) | ||
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 16,903 | 09/30/16 | (2 | ) | ||
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (32 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fees were all based
on the 1 Month LIBOR rate with a fee ranging from -0.08% to 0.19%.
Interest Rate Swap Contracts | ||||||||||
Amounts in thousands | ||||||||||
Termination | Fair Value | |||||||||
Counterparty | Notional Amount | Fund Receives | Fund Pays | Date | $ | |||||
Barclays | USD | 425 | Three Month LIBOR | 2.412 | % | 11/15/27 | (28 | ) | ||
Barclays | USD | 425 | Three Month LIBOR | 2.481 | % | 11/15/27 | (32 | ) |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 87
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Interest Rate Swap Contracts | ||||||||||
Amounts in thousands | ||||||||||
Termination | Fair Value | |||||||||
Counterparty | Notional Amount | Fund Receives | Fund Pays | Date | $ | |||||
Citigroup | USD | 850 | Three Month LIBOR | 2.714 | % | 08/15/42 | (28 | ) | ||
Citigroup | USD | 685 | Three Month LIBOR | 3.676 | % | 11/15/43 | (157 | ) | ||
JPMorgan Chase | DKK | 15,600 | Six Month CIBOR | 0.943 | % | 05/05/25 | 50 | |||
JPMorgan Chase | HKD | 17,800 | Three Month HIBOR | 2.160 | % | 05/14/25 | (56 | ) | ||
JPMorgan Chase | CZK | 55,601 | Six Month PRIBOR | 1.280 | % | 06/19/25 | (77 | ) | ||
Total Fair Value on Open Interest Rate Swap Contracts Premiums Paid (Received) - $— (å) | (328 | ) |
Credit Default Swap Contracts | |||||||||
Amounts in thousands | |||||||||
Credit Indices | |||||||||
Fund (Pays)/ | |||||||||
Receives | Termination | Fair Value | |||||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||||
CDX NA High Yield Index | Goldman Sachs | USD | 3,140 | 5.000 | % | 12/20/20 | 42 | ||
CDX NA High Yield Index | Goldman Sachs | USD | 6,680 | 1.000 | % | 06/20/20 | 38 | ||
CDX NA High Yield Index | Morgan Stanley | USD | 6,000 | 5.000 | % | 12/20/20 | 81 | ||
iTraxx Europe Crossover Index | Goldman Sachs | EUR | 5,000 | (5.000 | %) | 12/20/20 | (445 | ) | |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - ($380) | (284 | ) |
Presentation of Portfolio Holdings | ||||||||||||||
Amounts in thousands | ||||||||||||||
Fair Value | ||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||||
Long-Term Investments | ||||||||||||||
Asset-Backed Securities | $ | — | $ | 54,321 | $ | 564 | $ | 54,885 | 6.4 | |||||
Corporate Bonds and Notes | — | 174,348 | — | 174,348 | 20.4 | |||||||||
International Debt | — | 51,140 | — | 51,140 | 6.0 | |||||||||
Loan Agreements | — | 3,811 | — | 3,811 | 0.4 | |||||||||
Mortgage-Backed Securities | — | 193,255 | 683 | 193,938 | 22.7 | |||||||||
Municipal Bonds | — | 5,630 | — | 5,630 | 0.7 | |||||||||
Non-US Bonds | — | 30,402 | — | 30,402 | 3.5 | |||||||||
United States Government Agencies | — | 3,250 | — | 3,250 | 0.4 | |||||||||
United States Government Treasuries | — | 169,121 | — | 169,121 | 19.7 | |||||||||
Common Stocks | — | — | — | — | — | |||||||||
Preferred Stocks | 892 | 557 | — | 1,449 | 0.2 | |||||||||
Options Purchased | — | 27 | — | 27 | —* | |||||||||
Short-Term Investments | — | 215,117 | — | 215,117 | 25.1 | |||||||||
Total Investments | 892 | 900,979 | 1,247 | 903,118 | 105.5 | |||||||||
Other Assets and Liabilities, Net | (5.5 | ) | ||||||||||||
100.0 | ||||||||||||||
Other Financial Instruments | ||||||||||||||
Futures Contracts | (222 | ) | — | — | (222 | ) | (—)* | |||||||
Options Written | — | (29 | ) | — | (29 | ) | (—)* | |||||||
Foreign Currency Exchange Contracts | — | (526 | ) | — | (526 | ) | (0.1 | ) | ||||||
Total Return Swap Contracts | — | (32 | ) | — | (32 | ) | (—)* | |||||||
Interest Rate Swap Contracts | — | (328 | ) | — | (328 | ) | (—)* | |||||||
Credit Default Swap Contracts | — | (284 | ) | — | (284 | ) | (—)* | |||||||
Total Other Financial Instruments** | $ | (222 | ) | $ | (1,199 | ) | $ | — | $ | (1,421 | ) |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
See accompanying notes which are an integral part of the financial statements.
88 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | ||||||
Amounts in thousands | ||||||
Fair Value | ||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets |
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
Investments in which significant unobservable inputs (Levels 3) were used in determining a fair value for the period ended December
31, 2015 were less than 1% of net assets.
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 89
Russell Investment Funds
Core Bond Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||||
Credit | Currency | Interest Rate | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | |||||
Location: Statement of Assets and Liabilities - Assets | ||||||||
Investments, at fair value* | $ | — | $ | — | $ | 27 | ||
Unrealized appreciation on foreign currency exchange contracts | — | 1,872 | — | |||||
Variation margin on futures contracts** | — | — | 76 | |||||
Interest rate swap contracts, at fair value | — | — | 50 | |||||
Credit default swap contracts, at fair value | 161 | — | — | |||||
Total | $ | 161 | $ | 1,872 | $ | 153 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||
Variation margin on futures contracts** | $ | — | $ | — | $ | 298 | ||
Unrealized depreciation on foreign currency exchange contracts | — | 2,398 | — | |||||
Options written, at fair value | — | — | 29 | |||||
Total return swap contracts, at fair value | — | — | 32 | |||||
Interest rate swap contracts, at fair value | — | — | 378 | |||||
Credit default swap contracts, at fair value | 445 | — | — | |||||
Total | $ | 445 | $ | 2,398 | $ | 737 | ||
Foreign | ||||||||
Credit | Currency | Interest Rate | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | |||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||
Investments*** | $ | — | $ | — | $ | 208 | ||
Futures contracts | — | — | 2,220 | |||||
Options written | — | — | 9 | |||||
Total return swap contracts | — | — | 45 | |||||
Interest rate swap contracts | — | — | (280 | ) | ||||
Credit default swap contracts | 598 | — | — | |||||
Foreign currency-related transactions**** | — | 8,601 | — | |||||
Total | $ | 598 | $ | 8,601 | $ | 2,202 | ||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||
Investments***** | $ | — | $ | — | $ | 173 | ||
Futures contracts | — | — | (920 | ) | ||||
Options written | — | — | 7 | |||||
Total return swap contracts | — | — | (67 | ) | ||||
Interest rate swap contracts | — | — | 6 | |||||
Credit default swap contracts | 103 | — | — | |||||
Foreign currency-related transactions****** | — | (2,467 | ) | — | ||||
Total | $ | 103 | $ | (2,467 | ) | $ | (801 | ) |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions
reported within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-
related transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
90 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 27 | $ | — $ | 27 | |||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 1,872 | — | 1,872 | |||||
Futures Contracts | Variation margin on futures contracts | 775 | — | 775 | |||||
Interest Rate Swap Contracts | Interest rate swap contracts, at fair value | 50 | — | 50 | |||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 161 | — | 161 | |||||
Total Financial and Derivative Assets | 2,885 | — | 2,885 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (936) | — | (936 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 1,949 | $ | — $ | 1,949 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 187 | $ | 187 | $ | — | $ | — | |
Barclays | 44 | 42 | — | 2 | |||||
BNP Paribas | 308 | 123 | — | 185 | |||||
Goldman Sachs | 81 | 81 | — | — | |||||
JPMorgan Chase | 954 | 954 | — | — | |||||
Royal Bank of Canada | 139 | 124 | — | 15 | |||||
Standard Chartered | 44 | 44 | — | — | |||||
UBS | 192 | 25 | — | 167 | |||||
Total | $ | 1,949 | $ | 1,580 | $ | — | $ | 369 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 91
Russell Investment Funds
Core Bond Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 4 | $ | — $ | 4 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 2,398 | — | 2,398 | |||||
Options Written Contracts | Options written, at fair value | 29 | — | 29 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 32 | — | 32 | |||||
Interest Rate Swap Contracts | Interest rate swap contracts, at fair value | 378 | — | 378 | |||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 445 | — | 445 | |||||
Total Financial and Derivative Liabilities | 3,286 | — | 3,286 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (450) | — | (450 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 2,836 | $ | — $ | 2,836 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ Net Amount | |||||||
Australia and New Zealand Banking Group | $ | 1 | $ | — | $ | — | $ | 1 | ||
Bank of America | 204 | 187 | — | 17 | ||||||
Barclays | 146 | 42 | 104 | — | ||||||
BNP Paribas | 123 | 123 | — | — | ||||||
Citigroup | 184 | — | — | 184 | ||||||
Goldman Sachs | 101 | 81 | — | 20 | ||||||
JPMorgan Chase | 1,807 | 954 | 830 | 23 | ||||||
Royal Bank of Canada | 169 | 124 | — | 45 | ||||||
Standard Chartered | 76 | 44 | — | 32 | ||||||
UBS | 25 | 25 | — | — | ||||||
Total | $ | 2,836 | $ | 1,580 | $ | 934 | $ | 322 |
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
92 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 915,673 |
Investments, at fair value(>) | 903,118 | |
Cash | 4,034 | |
Cash (restricted)(a)(b) | 3,844 | |
Foreign currency holdings(^) | 1,234 | |
Unrealized appreciation on foreign currency exchange contracts | 1,872 | |
Receivables: | ||
Dividends and interest | 4,130 | |
Dividends from affiliated Russell funds | 26 | |
Investments sold | 7,155 | |
Fund shares sold | 126 | |
Variation margin on futures contracts | 775 | |
Interest rate swap contracts, at fair value(•) | 50 | |
Credit default swap contracts, at fair value(+) | 161 | |
Total assets | 926,525 | |
Liabilities | ||
Payables: | ||
Due to broker (c)(d) | 136 | |
Investments purchased | 66,421 | |
Fund shares redeemed | 205 | |
Accrued fees to affiliates | 429 | |
Other accrued expenses | 139 | |
Variation margin on futures contracts | 4 | |
Unrealized depreciation on foreign currency exchange contracts | 2,398 | |
Options written, at fair value(x) | 29 | |
Total return swap contracts, at fair value(8) | 32 | |
Interest rate swap contracts, at fair value(•) | 378 | |
Credit default swap contracts, at fair value(+) | 445 | |
Total liabilities | 70,616 | |
Net Assets | $ | 855,909 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 93
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities, continued — December 31, 2015
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 672 | |
Accumulated net realized gain (loss) | (3,630 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | (12,555 | ) | |
Futures contracts | (222 | ) | |
Options written | 78 | ||
Total return swap contracts | (32 | ) | |
Interest rate swap contracts | (328 | ) | |
Credit default swap contracts | 96 | ||
Foreign currency-related transactions | (598 | ) | |
Shares of beneficial interest | 833 | ||
Additional paid-in capital | 871,595 | ||
Net Assets | $ | 855,909 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 10.27 | |
Net assets | $ | 855,908,978 | |
Shares outstanding ($.01 par value) | 83,319,163 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 1,278 | |
(x) Premiums received on options written | $ | 107 | |
(+) Credit default swap contracts - premiums paid (received) | $ | (380 | ) |
(>) Investments in affiliates, Russell U.S. Cash Management Fund | $ | 153,874 | |
(•) Interest rate swap contracts - premiums paid (received) | $ | ||
(8) Total return swap contracts - premiums paid (received) | $ | ||
(a) Cash Collateral for Futures | $ | 1,987 | |
(b) Cash Collateral for Swaps | $ | 1,857 | |
(c) Due to Broker for Futures | $ | 118 | |
(d) Due to Broker for Swaps | $ | 18 | |
(#) Net asset value per share equals class level net assets divided by class level shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
94 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 63 | |
Dividends from affiliated Russell funds | 181 | ||
Interest | 18,168 | ||
Total investment income | 18,412 | ||
Expenses | |||
Advisory fees | 4,757 | ||
Administrative fees | 432 | ||
Custodian fees | 269 | ||
Transfer agent fees . | 38 | ||
Professional fees | 101 | ||
Trustees’ fees | 22 | ||
Printing fees | 91 | ||
Miscellaneous | 43 | ||
Expenses before reductions | 5,753 | ||
Expense reductions | (258 | ) | |
Net expenses | 5,495 | ||
Net investment income (loss) | 12,917 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | (146 | ) | |
Futures contracts | 2,220 | ||
Options written | 9 | ||
Total return swap contracts | 45 | ||
Interest rate swap contracts | (280 | ) | |
Credit default swap contracts | 598 | ||
Foreign currency-related transactions | 8,030 | ||
Net realized gain (loss) | 10,476 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (21,281 | ) | |
Futures contracts | (920 | ) | |
Options written | 7 | ||
Total return swap contracts | (67 | ) | |
Interest rate swap contracts | 6 | ||
Credit default swap contracts | 103 | ||
Foreign currency-related transactions | (2,466 | ) | |
Net change in unrealized appreciation (depreciation) | (24,618 | ) | |
Net realized and unrealized gain (loss) | (14,142 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (1,225 | ) |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 95
Russell Investment Funds
Core Bond Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 12,917 | $ | 11,343 | ||
Net realized gain (loss) | 10,476 | 23,868 | ||||
Net change in unrealized appreciation (depreciation) | (24,618 | ) | 7,026 | |||
Net increase (decrease) in net assets from operations | (1,225 | ) | 42,237 | |||
Distributions | ||||||
From net investment income | (20,648 | ) | (12,125 | ) | ||
From net realized gain | (9,978 | ) | (16,153 | ) | ||
Net decrease in net assets from distributions | (30,626 | ) | (28,278 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 48,302 | 61,598 | ||||
Total Net Increase (Decrease) in Net Assets | 16,451 | 75,557 | ||||
Net Assets | ||||||
Beginning of period | 839,458 | 763,901 | ||||
End of period | $ | 855,909 | $ | 839,458 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 672 | $ | 1,983 |
Statements of Changes in Net Assets, continued | ||||||||||||
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 6,871 | $ | 72,808 | 9,002 | $ | 96,140 | ||||||
Proceeds from reinvestment of distributions | 2,929 | 30,626 | 2,658 | 28,278 | ||||||||
Payments for shares redeemed | (5,219 | ) | (55,132 | ) | (5,920 | ) | (62,820 | ) | ||||
Total increase (decrease) | 4,581 | $ | 48,302 | 5,740 | $ | 61,598 |
See accompanying notes which are an integral part of the financial statements.
96 Core Bond Fund
(This page intentionally left blank)
Russell Investment Funds
Core Bond Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 10.66 | .16 | (.17 | ) | (.01 | ) | (.26 | ) | (.12 | ) | ||||||
December 31, 2014 | 10.46 | .15 | .43 | .58 | (.17 | ) | (.21 | ) | ||||||||
December 31, 2013 | 10.81 | .18 | (.35 | ) | (.17 | ) | (.15 | ) | (.03 | ) | ||||||
December 31, 2012 | 10.47 | .25 | .61 | .86 | (.25 | ) | (.27 | ) | ||||||||
December 31, 2011 | 10.51 | .35 | .14 | .49 | (.34 | ) | (.19 | ) | ||||||||
See accompanying notes which are an integral part of the financial statements.
98 Core Bond Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||||
(.38 | ) | 10.27 | (.14 | ) | 855,909 | .67 | .64 | 1.49 | 225 | ||||||||
(.38 | ) | 10.66 | 5.55 | 839,458 | .69 | .64 | 1.44 | 173 | |||||||||
(.18 | ) | 10.46 | (1.55 | ) | 763,901 | .67 | .62 | 1.73 | 133 | ||||||||
(.52 | ) | 10.81 | 8.38 | 676,018 | .72 | .66 | 2.32 | 192 | |||||||||
(.53 | ) | 10.47 | 4.68 | 545,608 | .72 | .65 | 3.29 | 203 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 99
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Global Real Estate Securities Fund | Russell Developed Index (Net) *** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 0.25 | % | 1 Year | (0.80 | )% | ||
5 Years | 7.17 | %§ | 5 Years | 7.63 | %§ | ||
10 Years | 4.95 | %§ | 10 Years | 5.18 | %§ | ||
FTSE EPRA/NAREIT Developed Index (Net)** | Global Real Estate Linked Benchmark**** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (0.79 | )% | 1 Year | (0.79 | )% | ||
5 Years | 7.17 | %§ | 5 Years | 7.17 | %§ | ||
10 Years | 4.67 | %§ | 10 Years | 4.94 | %§ |
100 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Global Real Estate Securities Fund (the “Fund”) employs | to smaller companies. With respect to geography, Europe’s |
a multi-manager approach whereby portions of the Fund are | strongly positive returns were significantly ahead of the negative |
allocated to different money manager strategies. Fund assets not | Asia-Pacific region, while North America posted moderately |
allocated to money managers are managed by Russell Investment | positive results, ahead of the index average. With respect to |
Management Company (“RIMCo”), the Fund’s advisor. RIMCo | property sectors, the shorter lease duration categories, including |
may change the allocation of the Fund’s assets among money | self storage and residential, generally delivered the strongest |
managers at any time. An exemptive order from the Securities | performance, while the lower-growth, yield-oriented health |
and Exchange Commission (“SEC”) permits RIMCo to engage | care and net lease sectors were among the weakest-performing |
or terminate a money manager at any time, subject to approval | property types. The single notable exception to this trend was the |
by the Fund’s Board, without a shareholder vote. Pursuant to the | lodging sector, which underperformed most other property types |
terms of the exemptive order, the Fund is required to notify its | in spite of shorter lease terms. |
shareholders within 90 days of when a money manager begins | |
providing services. As of December 31, 2015, the Fund had three | How did the investment strategies and techniques employed |
money managers. | by the Fund and its money managers affect its benchmark- |
relative performance? | |
What is the Fund’s investment objective? | The Fund employs discretionary money managers. The Fund’s |
The Fund seeks to provide current income and long term capital | discretionary money managers select the individual portfolio |
growth. | securities for the assets assigned to them. Fund assets not |
How did the Fund perform relative to its benchmark for the | allocated to discretionary money managers include the Fund’s |
fiscal year ended December 31, 2015? | liquidity reserves and assets which may be managed directly |
by RIMCo to effect the Fund’s investment strategies and/or to | |
For the fiscal year ended December 31, 2015, the Fund gained | actively manage the Fund’s overall exposures by investing in |
0.25%. This is compared to the Fund’s benchmark, the FTSE | securities or other instruments that RIMCo believes will achieve |
EPRA/NAREIT Developed Index (Net), which lost 0.79% during | the desired risk/return profile for the Fund. |
the same period. The Fund’s performance includes operating | |
expenses, whereas index returns are unmanaged and do not | Cohen & Steers Capital Management, Inc. (“Cohen”) outperformed |
include expenses of any kind. | the Fund’s benchmark for the fiscal year. Cohen seeks to generate |
excess returns through a combination of bottom-up stock selection | |
For the fiscal year ended December 31, 2015, the Morningstar | and top-down regional allocation decisions. The key driver |
Insurance Global Real Estate, a group of funds that Morningstar | of performance was property sector allocation within the U.S. |
considers to have investment strategies similar to those of the | Overweight positions in the self-storage and residential sectors |
Fund, lost 0.71%. This result serves as a peer comparison and is | were beneficial. Overweight positioning in Asia detracted from |
expressed net of operating expenses. | performance. |
How did the market conditions described in the Market | INVESCO Advisers, Inc. (“Invesco”) outperformed the Fund’s |
Summary report affect the Fund’s performance? | benchmark for the fiscal year. Invesco manages a broadly |
For the fiscal year ended December 31, 2015, the global listed | diversified portfolio with a focus on companies that operate in |
property market, as measured by the FTSE EPRA/NAREIT | attractive markets, own top-tier assets, have strong management |
Developed Index (Net), delivered a negative 0.79% return. The | teams, and maintain sound balance sheets. This focus on asset |
sector began the year with strong gains in January, as long-term | and balance sheet strength was beneficial during the fiscal year, |
bond yields declined and U.S. real estate investment trusts | as overweight positioning in the highest-quality U.S. retail and |
(“REITs”) rallied. This was followed by five consecutive months | residential REITs drove outperformance. An underweight to the |
of negative index returns through mid-2015, as macroeconomic | health care sector was also a modest contributor to performance, |
concerns in Europe and China overwhelmed generally positive | while an underweight to Continental Europe detracted. |
real estate fundamental growth. The period then ended on a | Morgan Stanley Investment Management, Inc., Morgan Stanley |
positive note, as global equities rebounded in the fourth quarter, | Investment Management Limited and Morgan Stanley Investment |
and property stocks recovered to finish the fiscal year with a | Management Company (together, “Morgan Stanley”) outperformed |
modestly negative total return. | the Fund’s benchmark for the fiscal year. Overweight positions |
Within the global property securities market, companies with | in the U.S. residential sector and larger capitalization office |
stronger balance sheets tended to outperform more highly levered | REITs drove outperformance for the fiscal year. However, as a |
stocks, while larger capitalization stocks outperformed relative | result of Morgan Stanley’s value-oriented process, the portfolio |
Global Real Estate Securities Fund 101
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
was overweight to Hong Kong and China, which detracted from | Money Managers as of December 31, | ||
performance. | 2015 | Styles | |
During the period, RIMCo continued to utilize a strategy to | Cohen & Steers Capital Management, Inc. | Market-Oriented | |
implement regional tilting through the direct purchase of real | INVESCO Advisers, Inc. which acts as a | ||
estate stocks. Using the output from a quantitative model, the | money manager to the Fund | ||
strategy seeks to position the portfolio to meet RIMCo’s overall | through its INVESCO Real Estate division | Market-Oriented | |
preferred positioning with respect to regional exposures, while | Morgan Stanley Investment Management | ||
Inc., Morgan Stanley Investment | |||
optimizing the portfolio to minimize tracking error relative to the | Management Limited and Morgan Stanley | ||
Fund’s money manager portfolios. The strategy outperformed | Investment Management Company | Value | |
relative to the Fund’s benchmark as a result of underweight | The views expressed in this report reflect those of the | ||
positions in Canada, Singapore and the U.S. health care sector. | portfolio managers only through the end of the period | ||
During the period, the Fund used index futures and swap contracts | covered by the report. These views do not necessarily | ||
to equitize the Fund’s cash. The use of these derivatives had | represent the views of RIMCo or any other person in RIMCo | ||
a modestly negative impact on performance, as equity markets | or any other affiliated organization. These views are | ||
delivered negative returns, underperforming cash. | subject to change at any time based upon market conditions | ||
or other events, and RIMCo disclaims any responsibility to | |||
Describe any changes to the Fund’s structure or the money | update the views contained herein. These views should not | ||
manager line-up. | be relied on as investment advice and, because investment | ||
There were no changes to the Fund’s structure or money manager | decisions for a Russell Investment Funds (“RIF”) Fund are | ||
line up during the fiscal year. | based on numerous factors, should not be relied on as an | ||
indication of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2006.
** The FTSE EPRA/NAREIT Developed Index (Net) is an unmanaged market-weighted total return index, which consists of publicly traded equity REITs and
listed property companies from developed markets whose floats are larger than $100 million and derive more than half of their revenue from property-related
activities and is net of tax on dividends from foreign holdings.
*** The Russell Developed Index (Net) measures the performance of the investable securities in developed countries globally and is net of tax on dividends from
foreign holdings.
**** The Global Real Estate Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes into account
historical changes in the Fund’s primary benchmark. The Global Real Estate Linked Benchmark represents the returns of the FTSE NAREIT Equity REITs
Index through September 30, 2010 and the returns of the FTSE EPRA/NAREIT Developed Index (Net) thereafter. The FTSE NAREIT Equity REITs Index is an
unmanaged, market-capitalization-weighted index of all publicly traded U.S. REITs that invest predominantly in the equity ownership of real estate, excluding
timber and infrastructure. The index is designed to reflect the performance of all U.S. publicly traded equity REITs as a whole.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
102 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 1,022.30 | $ | 1,020.47 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 4.79 | $ | 4.79 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.94% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Global Real Estate Securities Fund 103
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Global Real Estate Securities Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||||
Principal | Fair | Principal | Fair | ||||||||
Amount ($) | Value | Amount ($) | Value | ||||||||
or Shares | $ | or Shares | $ | ||||||||
Common Stocks - 96.6% | Mercialys SA(ö) | 55,590 | 1,125 | ||||||||
Australia - 5.0% | Unibail-Rodamco SE(ö) | 36,103 | 9,182 | ||||||||
BGP Holdings PLC(Æ)(Å) | 926,311 | — | 26,608 | ||||||||
Dexus Property Group(ö) | 749,092 | 4,063 | |||||||||
Goodman Group(ö) | 833,558 | 3,774 | Germany - 2.8% | ||||||||
GPT Group (The)(ö) | 387,097 | 1,338 | ADO Properties SA(Æ)(Þ) | 12,398 | 358 | ||||||
Investa Office Fund(ö) | 104,342 | 302 | alstria office REIT-AG(Æ)(ö) | 197,178 | 2,630 | ||||||
Mirvac Group(ö) | 1,290,905 | 1,847 | Deutsche EuroShop AG | 5,828 | 256 | ||||||
Scentre Group(ö) | 3,357,028 | 10,173 | Deutsche Wohnen AG | 286,510 | 7,976 | ||||||
Shopping Centres Australasia Property | Icad, Inc.(ö) | 38,443 | 2,581 | ||||||||
Group(ö) | 66,003 | 102 | LEG Immobilien AG(Æ) | 46,005 | 3,776 | ||||||
Stockland(ö) | 1,037,370 | 3,080 | Vonovia SE | 152,214 | 4,714 | ||||||
Vicinity Centres(Æ)(ö) | 3,953,867 | 8,012 | 22,291 | ||||||||
Westfield Corp.(ö) | 926,972 | 6,377 | |||||||||
39,068 | Hong Kong - 8.7% | ||||||||||
Champion REIT(Æ)(ö) | 501,593 | 250 | |||||||||
Austria - 0.0% | Cheung Kong Property Holdings, Ltd. | 1,334,000 | 8,607 | ||||||||
Atrium European Real Estate, Ltd. | 73,489 | 284 | Hang Lung Properties, Ltd. - ADR | 218,000 | 494 | ||||||
Henderson Land Development Co., Ltd. | 830,822 | 5,058 | |||||||||
Belgium - 0.0% | Hongkong Land Holdings, Ltd. | 1,660,401 | 11,579 | ||||||||
Befimmo(ö) | 630 | 38 | Hysan Development Co., Ltd. | 622,000 | 2,538 | ||||||
Kerry Properties, Ltd. | 159,500 | 435 | |||||||||
Brazil - 0.1% | Link(ö) | 1,638,000 | 9,772 | ||||||||
BR Malls Participacoes SA | 96,800 | 270 | New World Development Co., Ltd. | 2,886,155 | 2,832 | ||||||
BR Properties SA | 82,800 | 176 | Sino Land Co., Ltd. | 266,000 | 388 | ||||||
Iguatemi Empresa de Shopping Centers | Sun Hung Kai Properties, Ltd. | 1,444,125 | 17,330 | ||||||||
SA | 60,000 | 286 | Swire Properties, Ltd. | 1,749,068 | 5,027 | ||||||
732 | Wharf Holdings, Ltd. (The) | 554,000 | 3,058 | ||||||||
Canada - 1.3% | 67,368 | ||||||||||
Allied Properties Real Estate Investment | Ireland - 0.3% | ||||||||||
Trust(ö) | 89,041 | 2,031 | Green REIT PLC(ö) | 918,578 | 1,588 | ||||||
Boardwalk Real Estate Investment | Hibernia REIT PLC(ö) | 289,793 | 444 | ||||||||
Trust(Ñ)(ö) | 24,997 | 857 | 2,032 | ||||||||
Brookfield Canada Office Properties(ö) | 23,501 | 443 | |||||||||
Canadian Real Estate Investment | Italy - 0.3% | ||||||||||
Trust(ö) | 46,802 | 1,423 | Beni Stabili SpA SIIQ(ö) | 3,414,475 | 2,576 | ||||||
Crombie Real Estate Investment Trust(ö) | 36,853 | 341 | |||||||||
Dream Office Real Estate Investment | Japan - 10.5% | ||||||||||
Trust(Ñ)(ö) | 24,310 | 305 | Activia Properties, Inc.(ö) | 789 | 3,350 | ||||||
First Capital Realty, Inc. Class A | 118,055 | 1,565 | Advance Residence Investment Corp.(ö) | 250 | 550 | ||||||
H&R Real Estate Investment Trust(Ñ)(ö) | 91,810 | 1,331 | Aeon Mall Co., Ltd. | 122,100 | 2,096 | ||||||
RioCan Real Estate Investment Trust(Ñ) | Daiwa House REIT Investment Corp.(ö) | 28 | 109 | ||||||||
(ö) | 109,871 | 1,881 | Daiwa Office Investment Corp.(ö) | 55 | 298 | ||||||
Smart Real Estate Investment Trust(ö) | 11,384 | 248 | Frontier Real Estate Investment Corp.(ö) | 26 | 104 | ||||||
10,425 | GLP J-Reit(ö) | 2,288 | 2,213 | ||||||||
Hulic Co., Ltd. | 45,000 | 395 | |||||||||
China - 0.1% | Hulic Reit, Inc.(ö) | 2,378 | 3,319 | ||||||||
China Overseas Land & Investment, Ltd. | 48,000 | 167 | Japan Hotel REIT Investment Corp. | ||||||||
China Resources Land, Ltd. | 24,000 | 69 | (Æ)(ö) | 2,499 | 1,847 | ||||||
Dalian Wanda Commercial Properties | Japan Logistics Fund, Inc.(ö) | 131 | 254 | ||||||||
Co., Ltd. Class H(Þ) | 33,200 | 192 | Japan Prime Realty Investment Corp.(ö) | 456 | 1,560 | ||||||
428 | Japan Real Estate Investment Corp.(ö) | 918 | 4,465 | ||||||||
Japan Retail Fund Investment Corp.(ö) | 2,280 | 4,379 | |||||||||
Finland - 0.2% | Kenedix Office Investment Corp. Class | ||||||||||
Citycon OYJ(Æ) | 427,976 | 1,110 | A(ö) | 30 | 140 | ||||||
Sponda OYJ | 128,093 | 541 | |||||||||
1,651 | Kenedix Retail REIT Corp.(ö) | 305 | 646 | ||||||||
Mitsubishi Estate Co., Ltd. | 1,039,000 | 21,534 | |||||||||
France - 3.4% | Mitsui Fudosan Co., Ltd. | 883,129 | 22,128 | ||||||||
Fonciere Des Regions(ö) | 36,732 | 3,288 | Mori Hills REIT Investment Corp. Class | ||||||||
Gecina SA(ö) | 7,569 | 918 | A(ö) | 393 | 504 | ||||||
Klepierre - GDR(ö) | 272,748 | 12,095 | Nippon Building Fund, Inc.(ö) | 308 | 1,471 |
See accompanying notes which are an integral part of the financial statements.
104 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Nippon Prologis REIT, Inc.(ö) | 578 | 1,045 | Derwent London PLC(ö) | 98,627 | 5,328 | |||||
Nomura Real Estate Master Fund, Inc. | Great Portland Estates PLC(ö) | 391,029 | 4,767 | |||||||
(Æ)(ö) | 1,086 | 1,345 | Hammerson PLC(ö) | 905,648 | 8,005 | |||||
NTT Urban Development Corp. | 32,000 | 308 | Intu Properties PLC Class H(ö) | 276,753 | 1,294 | |||||
Orix JREIT, Inc.(ö) | 365 | 472 | Kennedy Wilson Europe Real Estate | |||||||
Premier Investment Corp.(ö) | 65 | 66 | PLC | 67,911 | 1,206 | |||||
Sumitomo Realty & Development Co., | Land Securities Group PLC(ö) | 820,803 | 14,230 | |||||||
Ltd. | 120,000 | 3,419 | LXB Retail Properties PLC(Æ) | 377,103 | 533 | |||||
Tokyo Tatemono Co., Ltd. | 61,200 | 666 | Segro PLC(ö) | 169,766 | 1,072 | |||||
Tokyu Fudosan Holdings Corp. | 181,100 | 1,134 | Shaftesbury PLC(ö) | 46,600 | 624 | |||||
Tokyu REIT, Inc.(ö) | 56 | 71 | St. Modwen Properties PLC | 63,633 | 388 | |||||
United Urban Investment Corp.(ö) | 1,081 | 1,466 | UNITE Group PLC (The) | 187,265 | 1,808 | |||||
81,354 | Urban & Civic PLC | 134,634 | 560 | |||||||
Workspace Group PLC(ö) | 27,605 | 389 | ||||||||
Netherlands - 1.6% | 48,786 | |||||||||
Eurocommercial Properties NV(Æ) | 19,760 | 852 | ||||||||
NSI NV(ö) | 582,098 | 2,512 | United States – 52.7% | |||||||
Wereldhave NV(ö) | 165,527 | 9,281 | Acadia Realty Trust(ö) | 12,549 | 416 | |||||
12,645 | American Campus Communities, Inc.(ö) | 75,827 | 3,135 | |||||||
American Homes 4 Rent Class A(ö) | 82,562 | 1,375 | ||||||||
Norway - 0.1% | Apartment Investment & Management | |||||||||
Entra ASA(Þ) | 105,950 | 850 | Co. Class A(ö) | 187,167 | 7,492 | |||||
Norwegian Property ASA(Æ) | 88,880 | 91 | AvalonBay Communities, Inc.(ö) | 108,483 | 19,974 | |||||
941 | Boston Properties, Inc.(ö) | 105,934 | 13,511 | |||||||
Brandywine Realty Trust(ö) | 74,863 | 1,023 | ||||||||
Singapore - 1.6% | Brixmor Property Group, Inc.(ö) | 315,846 | 8,154 | |||||||
Ascendas Real Estate Investment | Brookdale Senior Living, Inc. Class | |||||||||
Trust(Æ)(ö) | 1,102,400 | 1,765 | A(Æ) | 95,375 | 1,761 | |||||
CapitaLand Commercial Trust, Ltd.(Æ) | Camden Property Trust(ö) | 78,306 | 6,011 | |||||||
(ö) | 243,400 | 231 | Care Capital Properties, Inc.(Æ)(ö) | 69,489 | 2,124 | |||||
CapitaLand Mall Trust Class A(Æ)(ö) | 382,200 | 518 | Chesapeake Lodging Trust(ö) | 61,167 | 1,539 | |||||
CapitaLand, Ltd. | 2,113,800 | 4,961 | Colony Starwood Homes(Æ)(ö) | 71,530 | 1,619 | |||||
Global Logistic Properties, Ltd. | 2,107,551 | 3,173 | Corporate Office Properties Trust(ö) | 47,149 | 1,029 | |||||
Mapletree Industrial Trust(Æ)(ö) | 1,164,800 | 1,248 | Cousins Properties, Inc.(ö) | 384,874 | 3,630 | |||||
UOL Group, Ltd. | 116,400 | 511 | CubeSmart(ö) | 16,581 | 508 | |||||
12,407 | CyrusOne, Inc.(ö) | 122,376 | 4,583 | |||||||
Spain - 0.5% | DDR Corp.(ö) | 405,023 | 6,820 | |||||||
Hispania Activos Inmobiliarios SA(Æ) | 121,478 | 1,721 | DiamondRock Hospitality Co.(ö) | 224,845 | 2,170 | |||||
Inmobiliaria Colonial SA | 1,449,904 | 1,007 | Douglas Emmett, Inc.(ö) | 180,965 | 5,643 | |||||
Merlin Properties Socimi SA(Æ)(ö) | 83,188 | 1,038 | Duke Realty Corp.(ö) | 64,274 | 1,351 | |||||
3,766 | Education Realty Trust, Inc.(ö) | 72,699 | 2,754 | |||||||
Empire State Realty Trust, Inc. Class | ||||||||||
Sweden - 0.8% | A(ö) | 274,415 | 4,959 | |||||||
Atrium Ljungberg AB Class B | 24,301 | 383 | Equinix, Inc.(ö) | 7,748 | 2,343 | |||||
Castellum AB | 105,509 | 1,495 | Equity LifeStyle Properties, Inc. Class | |||||||
Fabege AB | 97,925 | 1,610 | A(ö) | 34,566 | 2,305 | |||||
Hufvudstaden AB Class A | 73,465 | 1,040 | Equity Residential(ö) | 274,508 | 22,397 | |||||
Wihlborgs Fastigheter AB | 76,904 | 1,552 | Essex Property Trust, Inc.(ö) | 14,673 | 3,513 | |||||
6,080 | Extra Space Storage, Inc.(ö) | 114,374 | 10,089 | |||||||
Federal Realty Investment Trust(ö) | 27,671 | 4,043 | ||||||||
Switzerland - 0.3% | First Industrial Realty Trust, Inc.(ö) | 87,843 | 1,944 | |||||||
Mobimo Holding AG(Æ) | 409 | 91 | Four Corners Property Trust, Inc.(Æ) | 13,940 | 337 | |||||
PSP Swiss Property AG(Æ) | 19,883 | 1,741 | General Growth Properties, Inc.(ö) | 402,347 | 10,947 | |||||
Swiss Prime Site AG Class A(Æ) | 3,580 | 280 | HCP, Inc.(ö) | 255,438 | 9,768 | |||||
2,112 | Healthcare Realty Trust, Inc.(ö) | 182,900 | 5,180 | |||||||
Healthcare Trust of America, Inc. Class | ||||||||||
United Kingdom - 6.3% | A(ö) | 175,012 | 4,720 | |||||||
Big Yellow Group PLC(ö) | 367,347 | 4,358 | Hilton Worldwide Holdings, Inc. | 290,552 | 6,218 | |||||
British Land Co. PLC (The)(ö) | 290,955 | 3,349 | Host Hotels & Resorts, Inc.(ö) | 656,466 | 10,071 | |||||
Capital & Counties Properties PLC | 68,682 | 445 | Hudson Pacific Properties, Inc.(ö) | 177,978 | 5,008 | |||||
Capital & Regional PLC(ö) | 450,495 | 430 | InfraREIT, Inc.(ö) | 50,400 | 932 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 105
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2015
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||||
Principal | Fair | Principal | Fair | |||||||||
Amount ($) | Value | Amount ($) | Value | |||||||||
or Shares | $ | or Shares | $ | |||||||||
Kilroy Realty Corp.(ö) | 117,436 | 7,432 | (cost $20,350) | 20,350 | ||||||||
Kimco Realty Corp.(ö) | 146,437 | 3,874 | ||||||||||
La Quinta Holdings, Inc.(Æ) | 23,028 | 313 | Other Securities - 1.1% | |||||||||
LaSalle Hotel Properties(ö) | 116,194 | 2,923 | Russell U.S. Cash Collateral Fund(×) | 8,222,965 | (8) | 8,223 | ||||||
Liberty Property Trust(ö) | 50,884 | 1,580 | Total Other Securities | |||||||||
Macerich Co. (The)(ö) | 62,590 | 5,051 | (cost $8,223) | 8,223 | ||||||||
Mack-Cali Realty Corp.(ö) | 45,568 | 1,064 | ||||||||||
Mid-America Apartment Communities, | Total Investments 100.3% | |||||||||||
Inc.(ö) | 76,217 | 6,921 | ||||||||||
National Retail Properties, Inc.(ö) | 45,933 | 1,839 | (identified cost $693,960) | 780,183 | ||||||||
Omega Healthcare Investors, Inc.(ö) | 182,102 | 6,369 | ||||||||||
Paramount Group, Inc.(ö) | 46,069 | 834 | Other Assets and Liabilities, Net | |||||||||
Prologis, Inc.(ö) | 199,013 | 8,542 | - | (0.3%) | (2,092 | ) | ||||||
Public Storage(ö) | 85,589 | 21,201 | Net Assets - 100.0% | 778,091 | ||||||||
QTS Realty Trust, Inc. Class A(ö) | 84,327 | 3,803 | ||||||||||
Realty Income Corp.(Ñ)(ö) | 66,922 | 3,455 | ||||||||||
Regency Centers Corp.(ö) | 156,222 | 10,642 | ||||||||||
Retail Opportunity Investments Corp.(ö) | 150,011 | 2,685 | ||||||||||
Rexford Industrial Realty, Inc.(ö) | 132,524 | 2,168 | ||||||||||
RLJ Lodging Trust(ö) | 23,654 | 512 | ||||||||||
RMR Group, Inc. (The) Class A(Æ) | 833 | 12 | ||||||||||
Senior Housing Properties Trust(ö) | 75,179 | 1,116 | ||||||||||
Simon Property Group, Inc.(ö) | 240,395 | 46,744 | ||||||||||
SL Green Realty Corp.(ö) | 34,090 | 3,851 | ||||||||||
Sovran Self Storage, Inc.(ö) | 10,475 | 1,124 | ||||||||||
Spirit Realty Capital, Inc.(ö) | 275,132 | 2,757 | ||||||||||
Starwood Hotels & Resorts Worldwide, | ||||||||||||
Inc. | 31,211 | 2,162 | ||||||||||
STORE Capital Corp.(ö) | 63,991 | 1,485 | ||||||||||
Sun Communities, Inc.(ö) | 67,437 | 4,622 | ||||||||||
Sunstone Hotel Investors, Inc.(ö) | 184,994 | 2,311 | ||||||||||
Tanger Factory Outlet Centers, Inc.(ö) | 84,824 | 2,774 | ||||||||||
Terreno Realty Corp.(ö) | 6,586 | 149 | ||||||||||
UDR, Inc.(ö) | 178,297 | 6,698 | ||||||||||
Ventas, Inc.(ö) | 57,574 | 3,249 | ||||||||||
Vornado Realty Trust(ö) | 235,238 | 23,514 | ||||||||||
Washington Real Estate Investment | ||||||||||||
Trust(Ñ)(ö) | 76,300 | 2,065 | ||||||||||
Weingarten Realty Investors(ö) | 107,892 | 3,731 | ||||||||||
Welltower, Inc.(Æ)(ö) | 99,335 | 6,758 | ||||||||||
WP GLIMCHER, Inc.(ö) | 149,730 | 1,589 | ||||||||||
Xenia Hotels & Resorts, Inc.(ö) | 45,793 | 702 | ||||||||||
410,017 | ||||||||||||
Total Common Stocks | ||||||||||||
(cost $665,387) | 751,609 | |||||||||||
Warrants & Rights - 0.0% | ||||||||||||
United States - 0.0% | ||||||||||||
Ascendas Real Estate Investment | ||||||||||||
Trust(Æ) | ||||||||||||
2016 Rights | 41,339 | 1 | ||||||||||
Total Warrants & Rights | ||||||||||||
(cost $—) | 1 | |||||||||||
Short-Term Investments - 2.6% | ||||||||||||
United States - 2.6% | ||||||||||||
Russell U.S. Cash Management Fund | 20,349,680 | (8) | 20,350 | |||||||||
Total Short-Term Investments |
See accompanying notes which are an integral part of the financial statements.
106 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2015
Restricted Securities | ||||||||||||
Amounts in thousands (except share and cost per unit amounts) | ||||||||||||
Principal | Cost per | Cost | Fair Value | |||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000 | ) | (000 | ) | |||||
Securities | Date | or shares | $ | $ | $ | |||||||
0.0% | ||||||||||||
BGP Holdings PLC | 08/06/09 | AUD | 926,311 | — | — | — | ||||||
— | ||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. |
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Dow Jones U.S. Real Estate Index Futures | 342 | USD | 10,058 | 03/16 | 256 | ||
FTSE/EPRA Europe Index Futures | 306 | EUR | 6,821 | 03/16 | 137 | ||
Hang Seng Index Futures | 10 | HKD | 10,955 | 01/16 | (10 | ) | |
iShares MSCI Sing IX Index | 16 | SGD | 518 | 01/16 | 1 | ||
S&P/TSX 60 Index Futures | 5 | CAD | 761 | 03/16 | 6 | ||
SPI 200 Index Futures | 11 | AUD | 1,446 | 03/16 | 66 | ||
TOPIX Index Futures | 15 | JPY | 232,124 | 03/16 | (22 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 434 |
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Bank of America | USD | 435 | EUR | 400 | 03/16/16 | — | ||
Bank of America | USD | 29 | JPY | 3,487 | 01/05/16 | — | ||
Bank of America | CAD | 9 | USD | 6 | 01/05/16 | — | ||
Bank of America | EUR | 1,000 | USD | 1,086 | 03/16/16 | (3 | ) | |
Bank of America | HKD | 411 | USD | 53 | 01/04/16 | — | ||
Bank of America | HKD | 2,623 | USD | 338 | 01/04/16 | — | ||
Bank of America | JPY | 155 | USD | 1 | 01/05/16 | — | ||
Bank of America | JPY | 15,580 | USD | 129 | 01/05/16 | — | ||
Bank of New York | CAD | 28 | USD | 20 | 01/04/16 | — | ||
BNP Paribas | EUR | 400 | USD | 439 | 03/16/16 | 3 | ||
HSBC | USD | 510 | AUD | 712 | 03/16/16 | 7 | ||
HSBC | USD | 243 | CAD | 330 | 03/16/16 | (4 | ) | |
HSBC | USD | 4,446 | EUR | 4,070 | 03/16/16 | (16 | ) | |
HSBC | USD | 129 | HKD | 1,000 | 03/16/16 | — | ||
HSBC | USD | 1,539 | HKD | 11,922 | 03/16/16 | — | ||
HSBC | USD | 125 | JPY | 15,000 | 03/16/16 | — | ||
HSBC | USD | 989 | JPY | 121,249 | 03/16/16 | 21 | ||
HSBC | USD | 355 | SGD | 502 | 03/16/16 | (2 | ) | |
HSBC | CAD | 70 | USD | 50 | 03/16/16 | — | ||
HSBC | EUR | 100 | USD | 108 | 03/16/16 | — | ||
HSBC | HKD | 900 | USD | 116 | 03/16/16 | — | ||
HSBC | SGD | 60 | USD | 42 | 03/16/16 | — | ||
Morgan Stanley | USD | 109 | AUD | 150 | 03/16/16 | — | ||
Morgan Stanley | USD | 72 | CAD | 100 | 03/16/16 | — | ||
Morgan Stanley | USD | 547 | EUR | 500 | 03/16/16 | (2 | ) | |
Morgan Stanley | USD | 129 | HKD | 1,000 | 03/16/16 | — | ||
Morgan Stanley | USD | 125 | JPY | 15,000 | 03/16/16 | — | ||
Morgan Stanley | USD | 71 | SGD | 100 | 03/16/16 | — | ||
Royal Bank of Canada | USD | 511 | AUD | 712 | 03/16/16 | 6 | ||
Royal Bank of Canada | USD | 243 | CAD | 330 | 03/16/16 | (4 | ) | |
Royal Bank of Canada | USD | 4,440 | EUR | 4,070 | 03/16/16 | (10 | ) | |
Royal Bank of Canada | USD | 988 | JPY | 121,249 | 03/16/16 | 22 | ||
State Street | USD | 438 | EUR | 400 | 03/16/16 | (2 | ) | |
State Street | USD | 12 | HKD | 95 | 01/05/16 | — |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 107
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Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
State Street | USD | 43 | HKD | 334 | 01/05/16 | — | ||
State Street | USD | 49 | HKD | 380 | 01/05/16 | — | ||
State Street | USD | 67 | HKD | 522 | 01/05/16 | — | ||
State Street | USD | 4 | JPY | 498 | 01/04/16 | — | ||
State Street | USD | 20 | JPY | 2,349 | 01/04/16 | — | ||
State Street | USD | 3 | JPY | 333 | 01/05/16 | — | ||
State Street | USD | 20 | JPY | 2,361 | 01/05/16 | — | ||
State Street | USD | 4 | JPY | 505 | 01/06/16 | — | ||
State Street | USD | 54 | JPY | 6,492 | 01/06/16 | — | ||
State Street | AUD | 100 | USD | 72 | 03/16/16 | (1 | ) | |
State Street | EUR | 100 | USD | 111 | 03/16/16 | 2 | ||
State Street | HKD | 318 | USD | 41 | 01/05/16 | — | ||
State Street | HKD | 1,286 | USD | 166 | 01/05/16 | — | ||
State Street | HKD | 1,400 | USD | 181 | 03/16/16 | — | ||
State Street | JPY | 476 | USD | 4 | 01/04/16 | — | ||
State Street | JPY | 3,978 | USD | 33 | 01/04/16 | — | ||
State Street | JPY | 474 | USD | 4 | 01/05/16 | — | ||
State Street | JPY | 1,548 | USD | 13 | 01/06/16 | — | ||
State Street | JPY | 2,358 | USD | 20 | 01/06/16 | — | ||
State Street | JPY | 3,099 | USD | 26 | 01/06/16 | — | ||
State Street | JPY | 13,307 | USD | 110 | 01/06/16 | — | ||
State Street | JPY | 20,000 | USD | 165 | 03/16/16 | (2 | ) | |
UBS | AUD | 100 | USD | 72 | 03/16/16 | (1 | ) | |
UBS | EUR | 150 | USD | 165 | 03/16/16 | 2 | ||
UBS | JPY | 15,000 | USD | 124 | 03/16/16 | (1 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 15 |
Presentation of Portfolio Holdings | |||||||||||
Amounts in thousands | |||||||||||
Fair Value | |||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||
Common Stocks | |||||||||||
Australia | $ | — | $ | 39,068 | $ | — | $ | 39,068 | 5.0 | ||
Austria | — | 284 | — | 284 | —* | ||||||
Belgium | — | 38 | — | 38 | —* | ||||||
Brazil | — | 732 | — | 732 | 0.1 | ||||||
Canada | 10,425 | — | — | 10,425 | 1.3 | ||||||
China | — | 428 | — | 428 | 0.1 | ||||||
Finland | — | 1,651 | — | 1,651 | 0.2 | ||||||
France | 5,825 | 20,783 | — | 26,608 | 3.4 | ||||||
Germany | — | 22,291 | — | 22,291 | 2.8 | ||||||
Hong Kong | — | 67,368 | — | 67,368 | 8.7 | ||||||
Ireland | — | 2,032 | — | 2,032 | 0.3 | ||||||
Italy | — | 2,576 | — | 2,576 | 0.3 | ||||||
Japan | — | 81,354 | — | 81,354 | 10.5 | ||||||
Netherlands | — | 12,645 | — | 12,645 | 1.6 | ||||||
Norway | — | 941 | — | 941 | 0.1 | ||||||
Singapore | — | 12,407 | — | 12,407 | 1.6 | ||||||
Spain | — | 3,766 | — | 3,766 | 0.5 | ||||||
Sweden | — | 6,080 | — | 6,080 | 0.8 | ||||||
Switzerland | — | 2,112 | — | 2,112 | 0.3 | ||||||
United Kingdom | — | 48,786 | — | 48,786 | 6.3 | ||||||
United States | 410,017 | — | — | 410,017 | 52.7 | ||||||
Warrants & Rights | — | 1 | — | 1 | —* | ||||||
Short-Term Investments | — | 20,350 | — | 20,350 | 2.6 | ||||||
Other Securities | — | 8,223 | — | 8,223 | 1.1 | ||||||
Total Investments | 426,267 | 353,916 | — | 780,183 | 100.3 |
See accompanying notes which are an integral part of the financial statements.
108 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | |||||||||||||||
Amounts in thousands | |||||||||||||||
Fair Value | |||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||||||
Other Assets and Liabilities, Net | (0.3 | ) | |||||||||||||
100.0 | |||||||||||||||
Other Financial Instruments | |||||||||||||||
Futures Contracts | 434 | — | — | 434 | 0.1 | ||||||||||
Foreign Currency Exchange Contracts | — | 15 | — | 15 | —* | ||||||||||
Total Other Financial Instruments** | $ | 434 | $ | 15 | $ | — | $ | 449 |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation/depreciation on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 109
Russell Investment Funds
Global Real Estate Securities Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | ||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 63 | ||
Variation margin on futures contracts* | 466 | — | ||||
Total | $ | 466 | $ | 63 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||||
Variation margin on futures contracts* | $ | 32 | $ | — | ||
Unrealized depreciation on foreign currency exchange contracts | — | 48 | ||||
Total | $ | 32 | $ | 48 | ||
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | ||||||
Futures contracts | $ | 959 | $ | — | ||
Foreign currency-related transactions** | — | (986 | ) | |||
Total | $ | 959 | $ | (986 | ) | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||
Futures contracts | $ | (119 | ) | $ | — | |
Foreign currency-related transactions*** | — | 175 | ||||
Total | $ | (119 | ) | $ | 175 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the Statement of Assets and Liabilities. |
** | Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported within the Statement of Operations. |
*** | Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related transactions reported within the Statement of Operations. |
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
110 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | |||||||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||||||
Gross | Net Amounts | ||||||||||||
Amounts | of Assets | ||||||||||||
Gross | Offset in the | Presented in | |||||||||||
Amounts of | Statement of | the Statement | |||||||||||
Recognized | Assets and | of Assets and | |||||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||||||
Securities on Loan* | Investments, at fair value | $ | 7,856 | $ | — | $ | 7,856 | ||||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 63 | — | 63 | |||||||||
Futures Contracts | Variation margin on futures contracts | 1 | — | 1 | |||||||||
Total Financial and Derivative Assets | 7,920 | — | 7,920 | ||||||||||
Financial and Derivative Assets not subject to a netting agreement | (1) | — | (1 | ) | |||||||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 7,919 | $ | — | $ | 7,919 | |||||||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||||||
Gross Amounts Not Offset in | |||||||||||||
the Statement of Assets and | |||||||||||||
Liabilities | |||||||||||||
Net Amounts | |||||||||||||
of Assets | |||||||||||||
Presented in | |||||||||||||
the Statement | Financial and | ||||||||||||
of Assets and | Derivative | Collateral | |||||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||||||
BNP Paribas | $ | 3 | $ | — | $ | — | $ | 3 | |||||
Citigroup | 2,162 | — | 2,162 | — | |||||||||
Fidelity | 261 | — | 261 | — | |||||||||
Goldman Sachs | 3,512 | — | 3,512 | — | |||||||||
HSBC | 29 | 21 | — | 8 | |||||||||
JPMorgan Chase | 1,922 | — | 1,922 | — | |||||||||
Morgan Stanley | 1 | 1 | — | — | |||||||||
Royal Bank of Canada | 25 | 14 | — | 11 | |||||||||
State Street | 2 | 2 | — | — | |||||||||
UBS | 2 | 2 | — | — | |||||||||
Total | $ | 7,919 | $ | 40 | $ | 7,857 | $ | 22 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 111
Russell Investment Funds
Global Real Estate Securities Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 122 | $ | — $ | 122 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 48 | — | 48 | |||||
Total Financial and Derivative Liabilities | 170 | — | 170 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (123) | — | (123 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 47 | $ | — $ | 47 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 3 | $ | — | $ | — | $ | 3 | |
HSBC | 21 | 21 | — | — | |||||
Morgan Stanley | 3 | 1 | — | 2 | |||||
Royal Bank of Canada | 14 | 14 | — | — | |||||
State Street | 4 | 2 | — | 2 | |||||
UBS | 2 | 2 | — | — | |||||
Total | $ | 47 | $ | 40 | $ | — | $ | 7 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
112 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | |||
Assets | |||
Investments, at identified cost | $ | 693,960 | |
Investments, at fair value(*)(>) | 780,183 | ||
Cash (restricted)(a) | 1,770 | ||
Foreign currency holdings(^) | 715 | ||
Unrealized appreciation on foreign currency exchange contracts | 63 | ||
Receivables: | |||
Dividends and interest | 2,747 | ||
Dividends from affiliated Russell funds | 3 | ||
Investments sold | 4,459 | ||
Fund shares sold | 200 | ||
Foreign capital gains taxes recoverable | 137 | ||
Variation margin on futures contracts | 1 | ||
Total assets | 790,278 | ||
Liabilities | |||
Payables: | |||
Investments purchased | 2,928 | ||
Fund shares redeemed | 142 | ||
Accrued fees to affiliates | 564 | ||
Other accrued expenses | 160 | ||
Variation margin on futures contracts | 122 | ||
Unrealized depreciation on foreign currency exchange contracts | 48 | ||
Payable upon return of securities loaned | 8,223 | ||
Total liabilities | 12,187 | ||
Net Assets | $ | 778,091 | |
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (9,845 | ) |
Accumulated net realized gain (loss) | (9,291 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 86,223 | ||
Futures contracts | 434 | ||
Foreign currency-related transactions | (11 | ) | |
Shares of beneficial interest | 529 | ||
Additional paid-in capital | 710,052 | ||
Net Assets | $ | 778,091 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 14.71 | |
Net assets | $ | 778,091,295 | |
Shares outstanding ($.01 par value) | 52,889,444 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 715 | |
(*) Securities on loan included in investments | $ | 7,856 | |
(>) Investments in affiliates, Russell U.S. Cash Management Fund and Russell U.S. Cash Collateral Fund | $ | 28,573 | |
(a) Cash Collateral for Futures | $ | 1,770 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 113
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 22,862 | |
Dividends from affiliated Russell funds | 22 | ||
Securities lending income | 74 | ||
Less foreign taxes withheld | (986 | ) | |
Total investment income | 21,972 | ||
Expenses | |||
Advisory fees | 6,298 | ||
Administrative fees | 394 | ||
Custodian fees | 405 | ||
Transfer agent fees | 35 | ||
Professional fees | 87 | ||
Trustees’ fees | 20 | ||
Printing fees | 84 | ||
Miscellaneous | 28 | ||
Total expenses | 7,351 | ||
Net investment income (loss) | 14,621 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 30,653 | ||
Futures contracts | 959 | ||
Foreign currency-related transactions | (801 | ) | |
Net realized gain (loss) | 30,811 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (43,176 | ) | |
Futures contracts | (119 | ) | |
Foreign currency-related transactions | 176 | ||
Net change in unrealized appreciation (depreciation) | (43,119 | ) | |
Net realized and unrealized gain (loss) | (12,308 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | 2,313 |
See accompanying notes which are an integral part of the financial statements.
114 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 14,621 | $ | 12,894 | ||
Net realized gain (loss) | 30,811 | 50,876 | ||||
Net change in unrealized appreciation (depreciation) | (43,119 | ) | 35,483 | |||
Net increase (decrease) in net assets from operations | 2,313 | 99,253 | ||||
Distributions | ||||||
From net investment income | (12,834 | ) | (24,165 | ) | ||
From net realized gain | (35,698 | ) | (32,525 | ) | ||
Net decrease in net assets from distributions | (48,532 | ) | (56,690 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 46,934 | 76,400 | ||||
Total Net Increase (Decrease) in Net Assets | 715 | 118,963 | ||||
Net Assets | ||||||
Beginning of period | 777,376 | 658,413 | ||||
End of period | $ | 778,091 | $ | 777,376 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (9,845 | ) | $ | (16,768 | ) |
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 2,025 | $ | 31,721 | 2,734 | $ | 42,340 | ||||||
Proceeds from reinvestment of distributions | 3,235 | 48,532 | 3,585 | 56,689 | ||||||||
Payments for shares redeemed | (2,115 | ) | (33,319 | ) | (1,437 | ) | (22,629 | ) | ||||
Total increase (decrease) | 3,145 | $ | 46,934 | 4,882 | $ | 76,400 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 115
Russell Investment Funds
Global Real Estate Securities Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 15.63 | .29 | (.25 | ) | .04 | (.25 | ) | (.71 | ) | |||||||
December 31, 2014 | 14.68 | .28 | 1.89 | 2.17 | (.52 | ) | (.70 | ) | ||||||||
December 31, 2013 | 15.37 | .31 | .24 | .55 | (.63 | ) | (.61 | ) | ||||||||
December 31, 2012 | 12.65 | .30 | 3.15 | 3.45 | (.73 | ) | — | |||||||||
December 31, 2011 | 13.92 | .29 | (1.25 | ) | (.96 | ) | (.31 | ) | — | |||||||
See accompanying notes which are an integral part of the financial statements.
116 Global Real Estate Securities Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||||
(.96 | ) | 14.71 | .25 | 778,091 | .93 | .93 | 1.86 | 64 | |||||||||
(1.22 | ) | 15.63 | 14.75 | 777,376 | .95 | .95 | 1.76 | 64 | |||||||||
(1.24 | ) | 14.68 | 3.70 | 658,413 | .93 | .93 | 1.97 | 72 | |||||||||
(.73 | ) | 15.37 | 27.56 | 608,360 | .95 | .95 | 2.08 | 59 | |||||||||
(.31 | ) | 12.65 | (7.05 | ) | 470,964 | .95 | .95 | 2.11 | 57 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 117
Russell Investment Funds
Notes to Schedule of Investments — December 31, 2015
Footnotes:
(Æ) Non-income-producing security.
(ö) Real Estate Investment Trust (REIT).
(§) All or a portion of the shares of this security are held as collateral in connection with futures contracts purchased (sold), options
written, or swaps entered into by the Fund.
(~ ) Rate noted is yield-to-maturity from date of acquisition.
(ç) At amortized cost, which approximates market.
(Ê) Adjustable or floating rate security. Rate shown reflects rate in effect at period end.
(Ï) Forward commitment.
(ƒ) Perpetual floating rate security. Rate shown reflects rate in effect at period end.
(µ) Bond is insured by a guarantor.
(æ) Pre-refunded: These bonds are collateralized by U.S. Treasury securities, which are held in escrow by a trustee and used to pay
principal and interest in the tax-exempt issue and to retire the bonds in full at the earliest refunding date.
(Ø) In default.
(ß) Illiquid security.
(x) The security is purchased with the cash collateral from the securities loaned.
(Ñ) All or a portion of the shares of this security are on loan.
(Þ) Restricted security. Security may have contractual restrictions on resale, may have been offered in a private placement transaction,
and may not be registered under the Securities Act of 1933.
(Å) Illiquid and restricted security.
(å) Currency balances were held in connection with futures contracts purchased (sold), options written, or swaps entered into by the
Fund. See Note 2.
(8) Unrounded units
(v) Loan agreement still pending. Rate not available at period end. 1.000% rate is used as a placeholder.
Abbreviations:
144A - Represents private placement security for qualified buyers according to rule 144A of the Securities Act of 1933.
ADR - American Depositary Receipt
ADS - American Depositary Share
BBSW - Bank Bill Swap Reference Rate
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
EMU - European Economic and Monetary Union
EURIBOR - Euro Interbank Offered Bank
FDIC - Federal Deposit Insurance Company
GDR - Global Depositary Receipt
GDS - Global Depositary Share
HIBOR – Hong Kong Interbank Offer Rate
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
PRIBOR – Prague Interbank Offered Rate
REMIC - Real Estate Mortgage Investment Conduit
SIBOR – Singapore Interbank Offered Rate
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
UK - United Kingdom
118 Notes to Schedule of Investments
Russell Investment Funds
Notes to Schedule of Investments, continued — December 31, 2015
Foreign Currency Abbreviations: | ||
ARS - Argentine peso | HUF - Hungarian forint | PKR - Pakistani rupee |
AUD - Australian dollar | IDR - Indonesian rupiah | PLN - Polish zloty |
BRL - Brazilian real | ILS - Israeli shekel | RUB - Russian ruble |
CAD - Canadian dollar | INR - Indian rupee | SEK - Swedish krona |
CHF - Swiss franc | ISK - Icelandic krona | SGD - Singapore dollar |
CLP - Chilean peso | ITL - Italian lira | SKK - Slovakian koruna |
CNY - Chinese yuan renminbi | JPY - Japanese yen | THB - Thai baht |
COP - Colombian peso | KES - Kenyan schilling | TRY - Turkish lira |
CRC - Costa Rican colon | KRW - South Korean won | TWD - Taiwanese dollar |
CZK - Czech koruna | MXN - Mexican peso | USD - United States dollar |
DKK - Danish krone | MYR – Malaysian ringgit | VEB - Venezuelan bolivar |
EGP - Egyptian pound | NOK - Norwegian krone | VND - Vietnamese dong |
EUR - Euro | NZD - New Zealand dollar | ZAR - South African rand |
GBP - British pound sterling | PEN - Peruvian nuevo sol | |
HKD – Hong Kong dollar | PHP – Philippine peso |
Notes to Schedule of Investments 119
Russell Investment Funds
Notes to Financial Highlights — December 31, 2015
(a) Average daily shares outstanding were used for this calculation.
(b) May reflect amounts waived and/or reimbursed by Russell Investment Management Company (“RIMCo”).
(c) Less than $.01 per share.
(d) The total return does not reflect any Insurance Company Separate Account or Policy Charges.
See accompanying notes which are an integral part of the financial statements.
120 Notes to Financial Highlights
Russell Investment Funds
Notes to Financial Statements — December 31, 2015
1. Organization
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with nine different investment
portfolios referred to as funds (each a “Fund” and collectively the “Funds”). These financial statements report on five of these Funds.
The Investment Company provides the investment base for one or more variable insurance products issued by one or more insurance
companies. These Funds are offered at net asset value (“NAV”) to qualified insurance company separate accounts offering variable
insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended (“Investment
Company Act”), as an open-end management investment company. It is organized and operated as a Massachusetts business trust
under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust Agreement”), and the
provisions of Massachusetts law governing the operation of a Massachusetts business trust. The Investment Company’s Master Trust
Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest.
2. Significant Accounting Policies
The Funds’ financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
which require the use of management estimates and assumptions at the date of the financial statements. Actual results could differ
from those estimates. The Funds are considered investment companies under U.S. GAAP and follow the accounting and reporting
guidance applicable to investment companies. The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
In May 2015, Financial Accounting Standards Board issued Accounting Standard Updates (“ASU”) No. 2015-07, Fair Value
Measurement (Topic 820), Disclosures for Investments in certain entities that calculate NAV per share (or its equivalent). The ASU
removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net
asset value per share practical expedient and amends certain disclosure requirements for such investments. The ASU is effective
for interim and annual reporting periods beginning after December 15, 2015. The ASU was not early adopted as of year-end and its
impact for future reporting periods is being evaluated.
Security Valuation
The Funds value portfolio securities according to Board-approved securities valuation procedures which include market and fair
value procedures. The Board has delegated the responsibility for administration of the securities valuation procedures to Russell
Fund Services Company (“RFSC”).
U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to
valuation methods and requires a separate disclosure of the fair value hierarchy for each major category of assets and liabilities,
that segregates fair value measurements into levels (Level 1, 2, and 3). The inputs or methodology used for valuing securities are
not necessarily an indication of the risk associated with investing in those securities. Levels 1, 2 and 3 of the fair value hierarchy
are defined as follows:
• Level 1 — Quoted prices (unadjusted) in active markets or exchanges for identical assets and liabilities.
• Level 2 — Inputs other than quoted prices included within Level 1 that are observable, which may include, but are not
limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets
or liabilities in markets that are not active, and inputs such as interest rates, yield curves, implied volatilities, credit spreads
or other market corroborated inputs.
• Level 3 — Significant unobservable inputs based on the best information available in the circumstances, to the extent
observable inputs are not available, which may include assumptions made by RFSC, acting at the discretion of the Board,
that are used in determining the fair value of investments.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for
example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and
other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised
in determining fair value is greatest for instruments categorized in Level 3. The inputs or methodology used for valuing securities
are not necessarily an indication of the risk associated with investing in those securities.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that
is significant to the fair value measurement in its entirety.
Notes to Financial Statements 121
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
The valuation techniques and significant inputs used in determining the fair market values of financial instruments categorized as
Level 1 and Level 2 of the fair value hierarchy are as follows:
Equity securities, including common and preferred stock, that are traded on a national securities exchange (or reported on the
NASDAQ national market), are stated at the last reported sales price on the day of valuation. To the extent these securities are
actively traded, and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred
stock and other equities traded on inactive markets or valued by reference to similar instruments are categorized as Level 2 of the
fair value hierarchy. Certain foreign equity securities may be fair valued using a pricing service that considers the correlation of
the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary
Receipts, financial futures, exchange-traded funds, and the movement of certain indexes of securities, based on the statistical
analysis of historical relationships. Foreign equity securities prices as described above are categorized as Level 2 of the fair value
hierarchy.
Fixed income securities including corporate, convertible, U.S. government agency, municipal bonds and notes, U.S. treasury
obligations, sovereign issues, bank loans, bank notes and non-U.S. bonds are normally valued by pricing service providers that use
broker dealer quotations or valuation estimates from their internal pricing models. The pricing service providers’ internal models
use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads and
default rates. Such fixed income securities that use pricing service internal models as described above are categorized as Level
2 of the fair value hierarchy. Such fixed income securities that use broker dealer quotations are categorized as Level 3 of the fair
value hierarchy.
Fixed income securities purchased on a delayed-delivery basis and marked-to-market daily until settlement at the forward settlement
date are categorized as Level 2 of the fair value hierarchy.
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These
securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their
internal pricing models. The pricing models for these securities usually consider tranche-level attributes, including estimated cash
flows of each tranche, market-based yield spreads for each tranche, and current market data, as well as incorporate deal collateral
performance, as available. Mortgage and asset-backed securities that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy.
Investments in privately held investment funds will be valued based upon the net asset value ("NAV") of such investments and
are categorized as Level 2 of the fair value hierarchy if the privately-held investment funds’ redemption terms require 90 days
notice or less. If the redemption terms require greater than 90 days notice for redemptions, then the investment will be categorized
as Level 3. The Funds have adopted the authoritative guidance under U.S. GAAP for estimating the fair value of investments in
funds that have calculated NAV per share in accordance with the specialized accounting guidance for investment companies.
Accordingly, the Funds estimate the fair value of an investment in a fund using the NAV per share without further adjustment as a
practical expedient, if the NAV per share of the investment is determined in accordance with the specialized accounting guidance
for investment companies as of the reporting entity’s measurement date.
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost, which approximates fair market
value. These investments are categorized as Level 2 of the fair value hierarchy.
Derivative instruments are instruments such as foreign currency contracts, futures contracts, options contracts, or swap agreements
that derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors.
Derivatives may be classified into two groups depending upon the way that they are traded: privately traded over-the-counter
(“OTC”) derivatives that do not go through an exchange or intermediary and exchange-traded derivatives that are traded through
specialized derivatives exchanges or other regulated exchanges. OTC derivatives are normally valued on the basis of broker dealer
quotations or pricing service providers. Depending on the product and the terms of the transaction, the value of the derivative
instrument can be estimated by a pricing service provider using a series of techniques, including simulation pricing models.
The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest
rates, yield curves, dividends and exchange rates. OTC derivatives that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy, with the exception of foreign currency spot contracts which
are categorized as Level 1 of the fair value hierarchy. OTC derivatives that use broker dealer quotations are categorized as level 3 of
the fair value hierarchy. Exchange-traded derivatives are valued based on the last reported sales price on the day of valuation and
are categorized as Level 1 of the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are valued at
the daily settlement price determined by the respective exchange. For centrally cleared credit default swaps, the clearing facility
122 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
requires its members to provide actionable levels across complete term structures. These levels along with external third party
prices are used to produce daily settlement prices. These securities are categorized as Level 2 of the fair value hierarchy. Centrally
cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index
swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price. These securities are
categorized as Level 2 of the fair value hierarchy.
Events or circumstances affecting the values of Fund securities that occur between the closing of the principal markets on which
they trade and the time the NAV of Fund shares is determined may be reflected in the calculation of NAV for each applicable
Fund when the Fund deems that the particular event or circumstance would materially affect such Fund’s NAV. Funds that invest
primarily in frequently traded exchange-listed securities will use fair value pricing in limited circumstances since reliable market
quotations will often be readily available. Funds that invest in foreign securities are likely to use fair value pricing more often since
significant events may occur between the close of foreign markets and the time of pricing which would trigger fair value pricing
of the foreign securities. Although there are observable inputs assigned on a security level, prices are derived from factors using
proprietary models or matrix pricing. For this reason, significant events will cause movement between Levels 1 and 2. Significant
events that could trigger fair value pricing of one or more securities include: any market movement of the U.S. securities market;
a company development such as a material business development; a natural disaster or emergency situation; or an armed conflict.
The NAV of a Fund’s portfolio that includes foreign securities may change on days when shareholders will not be able to purchase
or redeem Fund shares, since foreign securities can trade on non-business days.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as
of year end.
The Multi-Style Equity and Aggressive Equity Funds had no transfers between Levels 1, 2, and 3 for the period ended December
31, 2015. The Non-U.S. and Global Real Estate Securities Funds had no transfers between Level 1, 2, and 3 other than as a result
of application of fair value pricing for the period ended December 31, 2015.
At the beginning of the period, the Core Bond Fund had transfers out of Level 1 into Level 2 representing the level assignment for
non-listed preferred stock instruments. As of December 31, 2015, the amount transferred from Level 1 to Level 2 in the Core Bond
Fund was $556,675.
At the beginning of the period, the Core Bond Fund had transfers out of Level 2 into Level 3 representing financial instruments for
which approved vendor sources were not available. As of December 31, 2015, the amount transferred from Level 2 to Level 3 in
the Core Bond Fund was $154,066.
At the beginning of the period, the Core Bond Fund had transfers out of Level 3 into Level 2 representing financial instruments for
which approved vendor sources became available. As of December 31, 2015, the amount transferred from Level 3 to Level 2 in the
Core Bond Fund was $4,710,712.
Level 3 Fair Value Investments
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of
the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available, or are not reliable, are valued at fair value as
determined in good faith by RFSC and are categorized as Level 3 of the fair value hierarchy. Market quotes are considered not
readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or
broker quotes). When RFSC applies fair valuation methods that use significant unobservable inputs to determine a Fund’s NAV,
securities will not be priced on the basis of quotes from the primary market in which they are traded, but instead may be priced by
another method that RFSC believes accurately reflects fair value and will be categorized as Level 3 of the fair value hierarchy. Fair
value pricing may require subjective determinations about the value of a security. While the securities valuation procedures are
intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the process cannot
guarantee that fair values determined by RFSC would accurately reflect the price that a Fund could obtain for a security if it were to
dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ
from the value that would be realized if the security was sold.
RFSC employs third party pricing vendors to provide fair value measurements. RFSC oversees third-party pricing service providers
in order to support the valuation process throughout the year.
The significant unobservable input used in fair value measurement of certain of the Funds’ preferred equity securities is the
redemption value calculated on a fully-diluted basis if converted to common stock. Significant increases or decreases in the
redemption value would have a direct and proportional impact to fair value.
Notes to Financial Statements 123
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
The significant unobservable input used in the fair value measurement of certain Funds’ debt securities is the yield to worst ratio.
Significant increases (decreases) in the yield to worst ratio would result in a lower (higher) fair value measurement.
These significant unobservable inputs are further disclosed in the Presentation of Portfolio Holdings for each respective Fund as
applicable.
If third party evaluated vendor pricing is neither available nor deemed to be indicative of fair value, RFSC may elect to obtain
indicative market quotations (“broker quotes”) directly from the broker or passed through from a third party vendor. In the event
that the source of fair value is from a single source broker quote, these securities are classified as Level 3 per the fair value
hierarchy. Broker quotes are typically received from established market participants. Although independently received on a daily
basis, RFSC does not have the transparency to view the underlying inputs which support the broker quotes. Significant changes
in the broker quote would have direct and proportional changes in the fair value of the security. There is a third-party pricing
exception to the quantitative disclosure requirement when prices are not determined by the reporting entity. RFSC is exercising
this exception and has made a reasonable attempt to obtain quantitative information from the third party pricing vendors regarding
the unobservable inputs used.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances
for reported fair values that present changes attributable to total realized and unrealized gains or losses, purchases and sales, and
transfers in/out of the Level 3 category during the period. Additionally, U.S. GAAP requires quantitative information regarding the
significant unobservable inputs used in the determination of fair value of assets categorized as Level 3 in the fair value hierarchy. In
accordance with the requirements of U.S. GAAP, a fair value hierarchy, a Level 3 reconciliation and an additional disclosure about
fair value measurements, if any, has been included in the Presentation of Portfolio Holdings for each respective Fund.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the NAV stated in the
financial statements to be different from the NAV at which shareholders may transact. Realized gains and losses from securities
transactions, if applicable, are recorded on the basis of specific identified cost incurred within a particular Fund.
Investment Income
Dividend income is recorded net of applicable withholding taxes on the ex-dividend date, except that certain dividends from
foreign securities are recorded as soon as the Funds are informed of the dividend, subsequent to the ex-dividend date. Interest
income is recorded daily on the accrual basis. The Core Bond Fund classifies gains and losses realized on prepayments received on
mortgage-backed securities as an adjustment to interest income. All premiums and discounts, including original issue discounts,
are amortized/ accreted using the effective interest method. Debt obligation securities may be placed in a non-accrual status and
related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all
or a portion of interest has become doubtful.
Federal Income Taxes
Since the Investment Company is a Massachusetts business trust, each Fund is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be distributed to each Fund’s shareholders without regard
to the income and capital gains (or losses) of the other Funds.
For each year, each Fund intends to qualify or continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”) and intends to distribute all of its taxable income and capital gains.
Therefore, no federal income tax provision is required for the Funds.
The Funds comply with the authoritative guidance for uncertainty in income taxes which requires management to determine whether
a tax position of the Funds is more likely than not to be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the
tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement with the relevant taxing authority. Management determined that no accruals need to be made in
the financial statements due to uncertain tax positions. Management continually reviews and adjusts the Funds’ liability for income
taxes based on analyses of tax laws and regulations, as well as their interpretations, and other relevant factors.
Each Fund files a U.S. tax return. At December 31, 2015, the Funds had recorded no liabilities for net unrecognized tax benefits
relating to uncertain income tax positions they have taken or expect to take in future tax returns. While the statute of limitations
remains open to examine the Funds’ U.S. tax returns filed for the fiscal years ended December 31, 2012 through December 31,
124 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
2014, no examinations are in progress or anticipated at this time. The Funds are not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Shareholders
For all Funds, income, capital gain distributions and return of capital, if any, are recorded on the ex-dividend date. Income
distributions are generally declared and paid according to the following schedule:
Declared | Payable | Funds |
Quarterly | April, July, October and mid-December | Multi-Style Equity, Aggressive Equity, Core Bond and Global |
Real Estate Securities Funds | ||
Annually | Mid-December | Non-U.S. Fund |
Capital gain distributions are generally declared and paid annually. An additional distribution may be paid by the Funds to avoid
imposition of federal income and excise tax on any remaining undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax
regulations which may differ from U.S. GAAP. As a result, net investment income and net realized gain (or loss) on investments
and foreign currency-related transactions for a reporting period may differ significantly from distributions during such period. The
differences between tax regulations and U.S. GAAP primarily relate to investments in options, futures, forward contracts, swap
contracts, passive foreign investment companies, foreign-denominated investments, mortgage-backed securities, certain securities
sold at a loss, wash sale deferrals and capital loss carryforwards. Accordingly, the Funds may periodically make reclassifications
among certain of their capital accounts without impacting their NAVs.
Expenses
The Funds pay their own expenses other than those expressly assumed by Russell Investment Management Company ("RIMCo"),
the Funds’ adviser, or RFSC. Most expenses can be directly attributed to the individual Funds. Expenses which cannot be directly
attributed to a specific Fund are allocated among all Funds principally based on their relative net assets.
Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts and transactions of the Funds are
translated into U.S. dollars on the following basis:
(a) Fair value of investment securities, other assets and liabilities at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing rate of exchange prevailing on the respective trade
dates of such transactions.
Net realized gains or losses from foreign currency-related transactions arise from: sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the trade and settlement dates on securities transactions; the
difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds’ books and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized gains or losses from foreign currency-related transactions
arise from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in the exchange
rates.
The Funds do not isolate that portion of the results of operations of the Funds that arises as a result of changes in exchange rates
from that portion that arises from changes in market prices of investments during the year. Such fluctuations are included with the
net realized and unrealized gain or loss from investments. However, for federal income tax purposes, the Funds do isolate the effects
of changes in foreign exchange rates from the fluctuations arising from changes in market prices for realized gain (or loss) on debt
obligations.
Capital Gains Taxes
The Non-U.S. and Global Real Estate Securities Funds may be subject to capital gains taxes and repatriation taxes imposed by
certain countries in which they invest. The Non-U.S. and Global Real Estate Securities Funds may record a deferred capital gains
tax liability with respect to the unrealized appreciation on foreign securities for potential capital gains and repatriation taxes at
December 31, 2015. The accrual for capital gains and repatriation taxes is included in net unrealized appreciation (depreciation)
on investments in the Statements of Assets and Liabilities. The amounts related to capital gains and repatriation taxes paid are
included in net realized gain (loss) on investments in the Statements of Operations. As of December 31, 2015, there were no
deferred capital tax gains.
Notes to Financial Statements 125
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Derivatives
Certain Funds may invest in derivatives. Derivative securities are instruments or agreements whose value is derived from an
underlying security or index. They include options, futures, swaps and forwards. These instruments offer unique characteristics and
risks that facilitate the Funds’ investment strategies.
The Funds typically use derivatives in three ways: exposing cash to markets, hedging and return enhancement. In addition, the
Non-U.S. and Global Real Estate Securities Funds may enter into foreign exchange contracts for trade settlement purposes. The
Funds may pursue their strategy of being fully invested by exposing cash to the performance of appropriate markets by purchasing
securities and/or derivatives. This is intended to cause the Funds to perform as though cash were actually invested in those markets.
Hedging may be used by certain Funds to limit or control risks, such as adverse movements in exchange rates and interest rates.
Return enhancement can be accomplished through the use of derivatives in a Fund, including using derivatives as a substitute for
holding physical securities, and using them to express various macro views (e.g., interest rate movements, currency movements,
and macro credit strategies). By purchasing certain instruments, the Funds may more effectively achieve the desired portfolio
characteristics that assist them in meeting their investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks include, but are not limited to, market risk, liquidity risk,
leveraging risk, counterparty risk, basis risk, reinvestment risk, political risk, prepayment risk, extension risk, valuation risk and
credit risk.
Futures, certain options and cleared swaps are traded or cleared on an exchange or central exchange clearing house. Exchange-
traded or exchange-cleared transactions generally present less counterparty risk to a Fund. The exchange’s clearinghouse stands
between the Fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the clearing
house and the clearing member. Cleared swap contracts are subject to clearing house rules, including initial and variation margin
requirement, daily settlement of obligations and the clearing house guarantee of payments to the broker. There is, however, still
counterparty risk due to the insolvency of the broker with respect to any margin held in the brokers’ customer accounts. While
clearing members are required to segregate customer assets from their own assets, in the event of insolvency, there may be a
shortfall in the amount of margin held by the broker for its clients. Collateral and margin requirements for exchange-traded or
exchange-cleared derivatives are established through regulation, as well as set by the broker or applicable clearinghouse. Margin
for exchange-traded and exchange-cleared transactions are detailed in the Statements of Assets and Liabilities as cash held at the
broker for futures contracts and cash held at the broker for swap contracts, respectively. Securities pledged by a Fund for exchange-
traded and exchange-cleared transactions are noted as collateral or margin requirements in the Schedule of Investments.
The effects of derivative instruments, categorized by risk exposure, on the Statements of Assets and Liabilities and the Statements of
Operations, for the period ended December 31, 2015, if applicable, are disclosed in the Fair Value of Derivative Instruments table
following each applicable Fund’s Schedule of Investments.
Foreign Currency Exchange Contracts
Certain funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“FX
contracts”). From time to time, certain Funds may enter into FX contracts to hedge certain foreign currency-denominated assets.
FX contracts are recorded at fair value. Certain risks may arise upon entering into these FX contracts from the potential inability
of counterparties to meet the terms of their FX contracts and are generally limited to the amount of unrealized gain on the FX
contracts, if any, that are disclosed in the Statements of Assets and Liabilities.
For the period ended December 31, 2015, the following Funds entered into foreign currency exchange contracts primarily for the
strategies listed below:
Funds | Strategies |
Non-U.S. Fund | Return enhancement, hedging, exposing cash to markets and trade settlement |
Core Bond Fund | Return enhancement and hedging |
Global Real Estate Securities Fund | Exposing cash to markets and trade settlement |
The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the fiscal year as required to meet
strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this
disclosure, volume is measured by the amounts bought and sold in USD.
126 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Outstanding Contract Amounts Bought | |||||||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | |||||||
Non-U.S. Fund | $ | 31,406,054 | $ | 27,851,220 | $ | 64,272,696 | $ | 116,019,353 | |||
Core Bond Fund | 404,212,938 | 388,687,653 | 451,978,429 | 219,150,010 | |||||||
Global Real Estate Securities Fund | 20,903,916 | 22,102,212 | 16,721,450 | 20,474,028 | |||||||
Outstanding Contract Amounts Sold | |||||||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | |||||||
Non-U.S. Fund | $ | 31,195,199 | $ | 27,800,041 | $ | 64,191,056 | $ | 115,604,794 | |||
Core Bond Fund | 402,843,749 | 388,235,638 | 449,561,958 | 219,661,024 | |||||||
Global Real Estate Securities Fund | 20,744,828 | 22,144,664 | 16,739,305 | 20,471,933 |
Options
Certain Funds may purchase and sell (write) call and put options on securities and securities indices. Such options are traded on
a national securities exchange or in an OTC market. The Funds may also purchase and sell (write) call and put options on foreign
currencies.
When a Fund writes a covered call or a put option, an amount equal to the premium received by the Fund is included in the Fund’s
Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-
to-market to reflect the current fair value of the option written. The Fund receives a premium on the sale of a call option but gives
up the opportunity to profit from any increase in the value of the underlying instrument above the exercise price of the option, and
when the Fund writes a put option it is exposed to a decline in the price of the underlying instrument.
When a Fund sells an uncovered call option, it does not simultaneously have a long position in the underlying security. When a
Fund sells an uncovered put option, it does not simultaneously have a short position in the underlying security. Uncovered options
are riskier than covered options because there is no underlying security held by the Fund that can act as a partial hedge.
Whether an option which the Fund has written expires on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the premium originally received. When a put option which
a Fund has written is exercised, the amount of the premium originally received will reduce the cost of the security which a Fund
purchases upon exercise of the option.
The Funds’ use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts of these instruments reflect the extent of the Funds’ exposure to
market risk. The risks may be caused by an imperfect correlation between movements in the price of the instrument and the price
of the underlying securities and interest rates.
Certain Funds may enter into a swaption (an option on a swap). In a swaption, in exchange for an option, the buyer gains the right
but not the obligation to enter into a specified swap agreement with the issuer on a specified future date. The writer of the contract
receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap.
For the period ended December 31, 2015, the Core Bond Fund purchased/sold options primarily for return enhancement and
hedging.
The Core Bond Fund’s options contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic
requirements. The following table illustrates the quarterly activity of options contracts measured by notional in USD.
Notional of Options Contracts Opened or Closed | ||||||||
Funds | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||||
Core Bond Fund | Opened | — | — | — | — | |||
Closed | 19,575,810 | — | — | — | ||||
Futures Contracts |
The Funds may invest in futures contracts (i.e., interest rate, foreign currency and index futures contracts).The face or contract
value of these instruments reflect the extent of the Funds’ exposure to off balance sheet risk. The primary risks associated with the
use of futures contracts are an imperfect correlation between the change in fair value of the securities held by the Funds and the
prices of futures contracts, and the possibility of an illiquid market. Upon entering into a futures contract, the Funds are required to
deposit with a broker an amount, termed the initial margin, which typically represents 5% to 10% of the purchase price indicated
in the futures contract. Payments to and from the broker, known as variation margin, are typically required to be made on a daily
Notes to Financial Statements 127
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
basis as the price of the futures contract fluctuates. Changes in initial settlement value are accounted for as unrealized appreciation
(depreciation) until the contracts are terminated, at which time realized gains and losses are recognized.
For the period ended December 31, 2015, the following Funds entered into futures contracts primarily for the strategies listed
below:
Funds | Strategies |
Multi-Style Equity Fund | Exposing cash to markets |
Aggressive Equity Fund | Exposing cash to markets |
Non-U.S. Fund | Return enhancement, hedging and exposing cash to markets |
Core Bond Fund | Return enhancement, hedging and exposing cash to markets |
Global Real Estate Securities Fund | Exposing cash to markets |
The Funds’ futures contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of futures contracts measured by notional in USD.
Notional of Futures Contracts Opened or Closed | ||||||||||||
Funds | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||||||||
Multi-Style Equity Fund | Opened | 49,961,835 | 33,687,845 | 47,078,926 | 41,398,061 | |||||||
Closed | 42,363,148 | 40,029,060 | 48,184,309 | 39,226,100 | ||||||||
Aggressive Equity Fund | Opened | 18,639,637 | 19,338,568 | 19,460,350 | 20,987,837 | |||||||
Closed | 24,093,072 | 20,686,092 | 23,257,531 | 14,355,326 | ||||||||
Non-U.S. Fund | Opened | 70,414,263 | 60,662,911 | 84,485,385 | 151,899,799 | |||||||
Closed | 71,621,443 | 63,363,117 | 73,472,280 | 111,814,671 | ||||||||
Core Bond Fund | Opened | 451,127,897 | 385,105,110 | 175,505,265 | 159,596,854 | |||||||
Closed | 368,549,543 | 513,891,691 | 277,973,229 | 146,410,874 | ||||||||
Global Real Estate Securities Fund | Opened | 35,777,869 | 37,322,843 | 37,358,037 | 34,314,465 | |||||||
Closed | 38,288,111 | 34,589,704 | 36,102,417 | 34,576,079 |
Swap Agreements
The Funds may enter into swap agreements, on either an asset-based or liability-based basis, depending on whether they are
hedging their assets or their liabilities, and will usually enter into swaps on a net basis (i.e., the two payment streams are netted
out, with the Funds receiving or paying only the net amount of the two payments). When a Fund engages in a swap, it exchanges
its obligations to pay or rights to receive payments for the obligations to pay or rights to receive payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments).
Certain Funds may enter into several different types of swap agreements including credit default, interest rate, total return (equity
and/or index) and currency swaps. Credit default swaps are a counterparty agreement which allows the transfer of third party
credit risk (the possibility that an issuer will default on its obligation by failing to pay principal or interest in a timely manner)
from one party to another. The lender faces the credit risk from a third party and the counterparty in the swap agrees to insure this
risk in exchange for regular periodic payments. Interest rate swaps are a counterparty agreement, can be customized to meet each
party’s needs, and involve the exchange of a fixed or variable payment per period for a payment that is not fixed. Equity swaps are
a counterparty agreement where two parties exchange two sets of cash flows on predetermined dates for an agreed upon amount
of time. The cash flows will typically be an equity index value swapped with a floating rate such as LIBOR plus or minus a pre-
defined spread. Index swap agreements are a counterparty agreement intended to expose cash to markets or to effect investment
transactions consistent with those Funds’ investment objectives and strategies. Currency swaps are a counterparty agreement where
two parties exchange specified amounts of different currencies which are followed by each paying the other a series of interest
payments that are based on the principal cash flow. At maturity the principal amounts are returned.
The Funds generally expect to enter into these transactions primarily to preserve a return or spread on a particular investment or
portion of their portfolios or to protect against any increase in the price of securities they anticipate purchasing at a later date, or for
return enhancement. Under most swap agreements entered into by a Fund, the parties' obligations are determined on a "net basis".
The net amount of the excess, if any, of the Funds’ obligations over their entitlements with respect to each swap will be accrued on a
daily basis and an amount of cash or liquid assets having an aggregate NAV at least equal to the accrued excess will be segregated.
To the extent that the Funds enter into swaps on other than a net basis, the amount maintained in a segregated account will be the
full amount of the Funds’ obligations, if any, with respect to such swaps, accrued on a daily basis. If there is a default by the other
party to such a transaction, the Funds will have contractual remedies pursuant to the agreement related to the transaction.
128 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
A Fund may not receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes
bankrupt.
Credit Default Swaps
The Core Bond Fund may enter into credit default swaps. A credit default swap can refer to corporate issues, asset-backed securities
or an index of assets, each known as the reference entity or underlying asset. The Fund may act as either the buyer or the seller
of a credit default swap involving one party making a stream of payments to another party in exchange for the right to receive a
specified return in the event of a default or other credit event. Depending upon the terms of the contract, the credit default swap may
be closed via physical settlement. However, due to the possible or potential instability in the market, there is a risk that the Fund
may be unable to deliver the underlying debt security to the other party to the agreement. Additionally, the Fund may not receive
the expected amount under the swap agreement if the other party to the agreement defaults or becomes bankrupt. In an unhedged
credit default swap, the Fund enters into a credit default swap without owning the underlying asset or debt issued by the reference
entity. Credit default swaps allow the Fund to acquire or reduce credit exposure to a particular issuer, asset or basket of assets.
As the seller of protection in a credit default swap, the Fund would be required to pay the par or other agreed-upon value (or
otherwise perform according to the swap contract) of a reference debt obligation to the counterparty in the event of a default (or
other specified credit event) and the counterparty would be required to surrender the reference debt obligation. In return, the Fund
would receive from the counterparty a periodic stream of payments over the term of the contract provided that no credit event has
occurred. If no credit event occurs, the Fund would keep the stream of payments and would have no payment obligations. As a seller
of protection, the Fund would effectively add leverage to its portfolio because in addition to its total net assets, that Fund would be
subject to investment exposure on the notional amount of the swap.
The Fund may also purchase protection via credit default swap contracts in order to offset the risk of default of debt securities held
their portfolios or to take a short position in a debt security, in which case the Fund would function as the counterparty referenced
in the preceding paragraph.
If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of
the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer
of protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Fund may use credit
default swaps to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has
exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood (as measured by the
credit default swap’s spread) of a particular issuer’s default.
Deliverable obligations for credit default swaps on asset-backed securities in most instances are limited to the specific referenced
obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown
or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These
reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap
agreement generally will be adjusted by corresponding amounts. The Core Bond Fund may use credit default swaps on asset-backed
securities to provide a measure of protection against defaults (or other defined credit events) of the referenced obligation or to take
an active long or short position with respect to the likelihood of a particular referenced obligation’s default (or another defined credit
event).
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for
the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of
the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be
representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a
poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the
indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging
markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized
terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and
if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes
periodically, usually every six months, and, for most indices, each name has an equal weight in the index. Traders may use credit
default swaps on indices to speculate on changes in credit quality.
Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on
corporate issues as of period-end are disclosed in the Schedules of Investments and generally serve as an indicator of the current
status of the payment/performance risk and represent the likelihood or risk of default (or other defined credit event) for the credit
derivative. The implied credit spread of a particular referenced entity reflects the cost of entering into a credit default swap and
Notes to Financial Statements 129
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-
backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of
the payment/performance risk. Wider credit spreads and increasing fair values, in absolute terms when compared to the notional
amount of the swap, generally represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk
of default or other credit event occurring as defined under the terms of the agreement. The maximum potential amount of future
payments (undiscounted) that the Fund as a seller of protection could be required to make under a credit default swap agreement
equals the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of December
31, 2015, for which a Fund is the seller of protection are disclosed in the Schedules of Investments. These potential amounts would
be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the
agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund
for the same referenced entity or entities.
Credit default swaps could result in losses if the Fund does not correctly evaluate the creditworthiness of the company or companies
on which the credit default swap is based. Credit default swap agreements may involve greater risks than if the Fund had invested
in the reference obligation directly since, in addition to risks relating to the reference obligation, credit default swaps are subject to
illiquidity and counterparty risk. The Fund will generally incur a greater degree of risk when it sells a credit default swap than when
it purchases a credit default swap. As a buyer of a credit default swap, the Fund may lose its investment and recover nothing should
a credit event fail to occur and the swap is held to its termination date. As seller of a credit default swap, if a credit event were
to occur, the value of any deliverable obligation received by the Fund, coupled with the upfront or periodic payments previously
received, may be less than what it pays to the buyer, resulting in a loss of value to the Fund.
If the creditworthiness of the Fund’s swap counterparty declines, the risk that the counterparty may not perform could increase,
potentially resulting in a loss to the Fund. To limit the counterparty risk involved in swap agreements, the Fund will only enter
into swap agreements with counterparties that meet certain standards of creditworthiness. Although there can be no assurance
that the Fund will be able to do so, the Fund may be able to reduce or eliminate its exposure under a swap agreement either by
assignment or other disposition, or by entering into an offsetting swap agreement with the same party or another creditworthy party.
The Fund may have limited ability to eliminate its exposure under a credit default swap if the credit quality of the reference entity
or underlying asset has declined.
For the period ended December 31, 2015, the Core Bond Fund entered into credit default swaps primarily for return enhancement,
hedging and exposing cash to markets.
The Core Bond Fund’s credit default swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of credit default swap contracts. For the purpose
of this disclosure, the volume is measured by the base notional amounts outstanding at each quarter end.
Credit Default Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | |||||||
Core Bond Fund | 5,000,000 | 722,700 | 42,350,000 | 21,253,749 |
Interest Rate Swaps
The use of interest rate swaps is a highly specialized activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If RIMCo or a money manager using this technique is incorrect in its
forecast of fair values, interest rates and other applicable factors, the investment performance of a Fund might diminish compared
to what it would have been if this investment technique were not used.
Interest rate swaps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount of interest payments that the Funds are contractually obligated to
make. Interest rate swaps are traded on exchanges and are subject to central clearing. If the clearing house or futures commission
merchant defaults, the Funds' risk of loss consists of the net amount of interest payments that the Funds are contractually entitled
to receive. The counterparty risk for cleared derivatives is generally lower than for uncleared derivatives. However, clearing may
subject the Fund to increased costs or margin requirements.
For the period ended December 31, 2015, the Core Bond Fund entered into interest rate swaps primarily for return enhancement,
hedging and exposing cash to markets.
The Core Bond Fund’s interest rate swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of interest rate swap contracts. For the purpose of
this disclosure, the volume is measured by the base notional amounts outstanding at each quarter end.
130 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Interest Rate Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | |||||||
Core Bond Fund | 6,712,573 | 6,998,569 | 9,288,968 | 9,175,815 |
Total Return Swaps
Certain Funds may enter into index swap agreements to expose cash to markets or to effect investment transactions. Index swap
agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more
than one year. In a standard index swap transaction, the two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular investments or instruments. The returns to be exchanged between the parties are calculated with
respect to a “notional amount” (i.e., a specified dollar amount that is hypothetically invested in a “basket” of securities representing
a particular index).
For the period ended December 31, 2015, the Core Bond Fund entered into total return swaps primarily for the strategy of exposing
cash to markets.
The Core Bond Fund’s total return swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of total return swap contracts. For the purpose of
this disclosure, volume is measured by base notional amounts outstanding at each quarter end.
Total Return Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | |||||||
Core Bond Fund | 46,136,750 | 108,506,667 | 146,504,624 | 102,796,019 |
Currency Swaps
Certain Funds may enter into currency swap agreements to enhance returns or for hedging purposes. Currency swap agreements are
agreements where two parties exchange specified amounts of different currencies which are followed by paying the other a series of
interest payments that are based on the principal cash flow. At maturity, the principal amounts are exchanged.
For the period ended December 31, 2015, none of the Funds entered into currency swaps.
Master Agreements
Certain Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”)
with counterparties that govern transactions in OTC derivative and foreign exchange contracts entered into by the Funds and
those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements,
collateral and events of default or termination. Events of termination and default include conditions that may entitle either party
to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial
derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty
organization, each type of transaction may be covered by a different ISDA Master Agreement, resulting in the need for multiple
agreements with a single counterparty. As the ISDA Master Agreements are specific to unique operations of different asset types,
they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed
under a single agreement with a counterparty.
Master Repurchase Agreements (“Master Repo Agreements”) govern transactions between a Fund and select counterparties.
The Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and
maintenance of collateral for repurchase and reverse repurchase agreements.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors
surrounding the settlement of certain forward settling transactions, such as delayed delivery by and between a Fund and select
counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment
and transfer, events of default, termination, and maintenance of collateral.
Disclosure about Offsetting Assets and Liabilities
Balance sheet disclosure is based on various netting agreements between brokers and counterparties, such as ISDA Master
Agreements, Master Repo Agreements and Master Forward Agreements. Certain funds utilize multiple counterparties. The
quantitative disclosure begins with disaggregation of counterparties by legal entity and the roll up of the data to reflect a single
counterparty in the table within the Funds’ financial statements. Net exposure represents the net receivable (payable) that would be
Notes to Financial Statements 131
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed
under the same master agreement with the same legal entity.
Loan Agreements
The Core Bond Fund may invest in direct debt instruments which are interests in amounts owed by corporate, governmental, or
other borrowers to lenders or lending syndicates. The Fund’s investments in loans may be in the form of participations in loans
or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution
(the “agent”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement.
When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it
is entitled only from the agent selling the loan agreement and only upon receipt by the agent of payments from the borrower. The
Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund
may be subject to the credit risk of both the borrower and the agent that is selling the loan agreement. When the Fund purchases
assignments from agents it acquires direct rights against the borrower on the loan. As of December 31, 2015, the Core Bond Fund
had no unfunded loan commitments.
Local Access Products
Certain Funds may invest in local access products, also known as certificates of participation, participation notes or participation
interest notes. Local access products are issued by banks or broker-dealers and are designed to replicate the performance of foreign
companies or foreign securities markets and can be used by the Fund as an alternative means to access the securities market of a
frontier emerging market country. The performance results of local access products will not replicate exactly the performance of
the foreign companies or foreign securities markets that they seek to replicate due to transaction and other expenses. Investments
in local access products involve certain risks in addition to those associated with a direct investment in the underlying foreign
companies or foreign securities markets whose return they seek to replicate. There can be no assurance that there will be a trading
market or that the trading price of local access products will equal the underlying value of the foreign company or foreign securities
market that it seeks to replicate. The Funds rely on the creditworthiness of the counterparty issuing the local access products and
have no rights against the issuer of the underlying security. The Funds minimize this risk by entering into agreements only with
counterparties that RIMCo deems creditworthy. Due to liquidity and transfer restrictions, the secondary markets on which the local
access products are traded may be less liquid than the markets for other securities, or may be completely illiquid.
Emerging Markets Securities
Certain Funds may invest in emerging markets securities. Investing in emerging markets securities can pose some risks different
from, and greater than, risks of investing in U.S. or developed markets securities. These risks include: a risk of loss due to
exposure to economic structures that are generally less diverse and mature, and to political systems which may have less stability,
than those of more developed countries; smaller market capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign investment; and possible difficulties in the repatriation of investment
income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political
crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of
government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar,
and devaluation may occur subsequent to investments in these currencies by the Funds. Emerging market securities may be
subject to currency transfer restrictions and may experience delays and disruptions in settlement procedures. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of
certain emerging market countries.
Emerging Markets Debt
The Core Bond Fund may invest in emerging markets debt. The Fund's emerging markets debt securities may include obligations
of governments and corporations. As with any fixed income securities, emerging markets debt securities are subject to the risk of
being downgraded in credit rating due to the risk of default. In the event of a default on any investments in foreign debt obligations,
it may be more difficult for the Fund to obtain or to enforce a judgment against the issuers of such securities. With respect to debt
issued by emerging market governments, such issuers may be unwilling to pay interest and repay principal when due, either due
to an inability to pay or submission to political pressure not to pay, and as a result may default, declare temporary suspensions of
interest payments or require that the conditions for payment be renegotiated.
132 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Repurchase Agreements
The Core Bond Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which a Fund acquires
a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller
at an agreed upon price and date (normally within a few days or weeks). The resale price reflects an agreed upon interest rate
effective for the period the security is held by a Fund and is unrelated to the interest rate on the security. The securities acquired
by a Fund constitute collateral for the repurchase obligation. In these transactions, the securities acquired by a Fund (including
accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and must be held by the
custodian bank until repurchased. A Fund will not invest more than 15% of its net assets (taken at current fair value) in repurchase
agreements maturing in more than seven days.
Mortgage-Related and Other Asset-Backed Securities
The Core Bond Fund may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage
instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”).
Specific types of instruments may include reverse mortgages, mortgage pass-through securities, collateralized mortgage obligations
(“CMO”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and
other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real
property. The value of a Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived
changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the
quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its
investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage
and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become
increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In
addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
Mortgage-Backed Securities
MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying
the securities. In practice, however, unscheduled or early payments of principal and interest on the underlying mortgages may make
the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of
a Fund’s portfolio at the time resulting in reinvestment risk.
Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS,
making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.
MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased
prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid
off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a
price above par. In such an environment, this risk limits the potential price appreciation of these securities.
Agency Mortgage-Backed Securities
Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as Fannie Mae (the Federal
National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Although these instruments may
be guaranteed by the U.S. government or a government sponsored entity, many such MBS are not backed by the full faith and credit
of the United States and are still exposed to the risk of non-payment.
Privately Issued Mortgage-Backed Securities
MBS held by a Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies,
investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or SPVs) and
other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-agency MBS may offer higher
yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues.
Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments
on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other
variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards
that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or nonconforming
loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of
Notes to Financial Statements 133
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a
level of risk exists for all loans.
Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae and Freddie
Mac), MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit
enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the
transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and
subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or tranches, with one or more classes being
senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying
mortgage loans are borne first by the holders of the subordinated class); creation of reserve funds (in which case cash or investments,
sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and
overcollateralization (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds
that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit
enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS
that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable
to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private
MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or
government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower
characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured
housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater
extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans.
Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a
perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in a Fund's portfolio
may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.
Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Funds’ ABS may be affected by, among other things,
actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the
receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of
the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.
Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.
Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest
rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may
lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans
related to sub-prime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market.
ABS (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit
of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts
owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may
not, in some cases, be available to support payments on these securities. ABS are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in
the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not
pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment
in such a security. The availability of ABS may be affected by legislative or regulatory developments. It is possible that such
developments may require the Funds to dispose of any then-existing holdings of such securities.
134 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Forward Commitments
The Core Bond Fund may contract to purchase securities for a fixed price at a future date beyond customary settlement time. The
price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction
is negotiated. The Fund may dispose of a forward commitment transaction prior to settlement if it is appropriate to do so and may
realize short-term gains (or losses) upon such sale. When effecting such transactions, cash or liquid high-grade debt obligations
of the Fund in a dollar amount sufficient to make payment for the portfolio securities to be purchased will be earmarked on the
Fund’s records at the trade date and until the transaction is settled. A forward commitment transaction involves a risk of loss if the
value of the security to be purchased declines prior to the settlement date or the other party to the transaction fails to complete the
transaction.
The Core Bond Fund may invest in to-be-announced ("TBA") mortgage-backed securities. A TBA security is a forward mortgage-
backed securities trade in which a seller agrees to issue a TBA mortgage-backed security at a future date. The securities are
purchased and sold on a forward commitment basis with an approximate principal amount and maturity date. The actual principal
amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. These securities are
within the parameters of industry “good delivery” standards.
As of December 31, 2015, the Core Bond Fund had no cash collateral balances in connection with TBAs.
Inflation-Indexed Bonds
The Core Bond Fund may invest in inflation-indexed securities, which are typically bonds or notes designed to provide a return
higher than the rate of inflation (based on a designated index) if held to maturity. A common type of inflation-indexed security is a
U.S. Treasury Inflation-Protected Security (“TIPS”). The principal of a TIPS increases with inflation and decreases with deflation,
as measured by the Consumer Price Index. When a TIPS matures, the adjusted principal or original principal is paid, whichever is
greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest
payments rise with inflation and fall with deflation.
Guarantees
In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general
indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that
may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote.
Market, Credit and Counterparty Risk
In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential
loss exists due to changes in the market (market risk) or failure of the other party to a transaction to perform (credit risk). Similar
to credit risk, the Funds may also be exposed to counterparty risk or risk that an institution or other entity with which the Funds
have unsettled or open transactions will default. The potential loss could exceed the value of the relevant assets recorded in the
Funds' financial statements (the “Assets”). The Assets consist principally of cash due from counterparties and investments. The
extent of the Funds’ exposure to market, credit and counterparty risks with respect to the Assets approximates their carrying value
as recorded in the Funds’ Statements of Assets and Liabilities.
Global economies and financial markets are becoming increasingly interconnected and political and economic conditions (including
recent instability and volatility) and events (including natural disasters) in one country, region or financial market may adversely
impact issuers in a different country, region or financial market. As a result, issuers of securities held by a Fund may experience
significant declines in the value of their assets and even cease operations. Such conditions and/or events may not have the same
impact on all types of securities and may expose a Fund to greater market and liquidity risk and potential difficulty in valuing
portfolio instruments held. This could cause a Fund to underperform other types of investments.
3. Investment Transactions
Securities
During the period ended December 31, 2015, purchases and sales of investment securities (excluding U.S. Government and Agency
obligations, short-term investments, options, futures and repurchase agreements) were as follows:
Notes to Financial Statements 135
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Purchases | Sales | |||
Multi-Style Equity Fund | $ | 450,258,760 | $ | 488,157,484 |
Aggressive Equity Fund | 316,126,661 | 330,063,613 | ||
Non-U.S. Fund | 125,287,639 | 135,737,393 | ||
Core Bond Fund | 424,014,718 | 285,692,917 | ||
Global Real Estate Securities Fund | 494,679,442 | 482,286,767 |
Purchases and sales of U.S. Government and Agency obligations (excluding short-term investments, options, futures and repurchase
agreements) were as follows:
Purchases | Sales | |||
Core Bond Fund | $ | 1,406,268,978 | $ | 1,380,551,589 |
Securities Lending
The Investment Company has a securities lending program whereby each Fund can loan securities with a value up to 33 1/3% of
each Fund’s total assets. The maturity associated with these securities is considered continuous. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government Agency obligations as collateral against the loaned securities. As of December
31, 2015, to the extent that a loan was collateralized by cash, such collateral was invested by the securities lending agent, Brown
Brothers Harriman & Co. (“BBH”), in the Russell U.S. Cash Collateral Fund, an unregistered fund advised by RIMCo. 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, is divided between
the Fund and BBH 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 BBH and are recorded as securities lending income
for the Fund. All collateral received will be in an amount at least equal to 102% (for loans of U.S. securities) or 105% (for loans of
non-U.S. securities) of the fair value of the loaned securities at the inception of each loan. The fair value of the loaned securities is
determined at the close of business of the Fund and any additional required collateral is delivered to the Fund the next day. Should
the borrower of the securities fail financially, there is a risk of delay in recovery of the securities or loss of rights in the collateral.
Brokerage Commissions
The Funds effect certain transactions through Recapture Services, a division of BNY ConvergeEX Execution Solutions LLC
(“BNY”) and its global network of unaffiliated correspondent brokers as well as State Street Global Markets, LLC (“SSGM”) and
its global network of unaffiliated correspondent brokers. BNY and SSGM are registered brokers and are not affiliates of the Funds
or RIMCo. Trades placed through Recapture Services and SSGM and their correspondents are used (i) to obtain brokerage and
research services for RIMCo to assist RIMCo in its investment decision-making process in its capacity as Adviser to the Funds or
(ii) to generate commission rebates to the Funds on whose behalf the trades were made. For purposes of trading to obtain brokerage
and research services for RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to,
and RIMCo may, with respect to transactions it places, effect transactions with or through Recapture Services, SSGM and their
correspondents or other brokers. In addition, RIMCo recommends targets for the amount of trading that money managers direct
through Recapture Services and SSGM based upon several factors including asset class and investment style, among others.
Research services provided to RIMCo by Recapture Services, SSGM 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, which may be included in commission costs. Research provided to RIMCo may benefit the particular Funds
generating the trading activity and may also benefit other Funds within 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 Soft Commission Committee
(“SCC”), which consists principally of employees in research and investment management roles. The SCC acts as an oversight body
with respect to purchases of research services acquired by RIMCo using soft commissions generated by funds managed by RIMCo
or its affiliates, including the Funds.
Recapture Services, SSGM or other brokers may also rebate to the Funds a portion of commissions earned on certain trading by the
Funds through Recapture Services, and SSGM and their correspondents in the form of commission recapture. Commission recapture
is paid solely to those Funds generating the applicable commission. Commission recapture is generated on the instructions of the
SCC once RIMCo’s research needs have been met, as determined annually in the Soft Money Commission budgeting process.
136 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Recapture Services and SSGM retain 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 Recapture Services, SSGM and their
correspondents 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) 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 Recapture Services, SSGM and their correspondents
or a broker affiliated with the money manager or another broker to obtain research services for its own use. Research services
provided to a money manager may 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.
Additionally, the Funds paid brokerage commissions to non-affiliated brokers who provided brokerage and research services to
RIMCo.
4. Related Party Transactions, Fees and Expenses
Adviser and Administrator
RIMCo provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including
developing the investment program for each Fund and managing each Fund's overall exposures. RFSC is the Funds’ administrator
and transfer and dividend disbursing agent and among other services, with the assistance of RIMCo and its affiliates, provides the
Funds with office space, equipment and personnel necessary to operate and administrate the Funds' business and to supervise the
provision of services by certain third parties. RFSC is a wholly-owned subsidiary of RIMCo. RIMCo is a wholly-owned subsidiary
of Frank Russell Company ("FRC") (which is an indirect subsidiary of London Stock Exchange Group plc ("LSEG")).
RIMCo has advised the Funds that, on October 8, 2015, Emerald Acquisition Limited, a company incorporated under the laws
of England and Wales (“Buyer”), entered into an agreement with FRC and LSEG through which Buyer will acquire FRC’s asset
management business (“Russell Investments”), including RIMCo, from LSEG (the “Transaction”). Buyer is a newly formed
acquisition vehicle through which private equity funds affiliated with TA Associates will acquire a majority ownership interest and
private equity funds affiliated with Reverence Capital Partners will acquire a significant minority ownership interest in Russell
Investments. RIMCo expects that the Transaction will be consummated in the first half of 2016, subject to regulatory and other
approvals and confirmations, and other conditions being satisfied.
The Funds are permitted to invest their cash (i.e., cash awaiting investment or cash held to meet redemption requests or to pay
expenses) in the Russell U.S. Cash Management Fund, an unregistered fund advised by RIMCo. As of December 31, 2015, the
Funds had invested $222,718,872 in the Russell U.S. Cash Management Fund. In addition, all or a portion of the collateral received
from the Investment Company’s securities lending program in the amount of $24,387,829 is invested in the Russell U.S. Cash
Collateral Fund, an unregistered fund advised by RIMCo.
The advisory fee is based upon the average daily net assets of each Fund and the administration fee of up to 0.05% is based on the
combined average daily net assets of the Funds. Advisory and administration fees are paid monthly.
Annual Rate % | ||||||
Funds | Adviser | Administrator | ||||
Multi-Style Equity Fund | 0.73 | Up to 0.05 | ||||
Aggressive Equity Fund | 0.90 | Up to 0.05 | ||||
Non-U.S. Fund | 0.90 | Up to 0.05 | ||||
Core Bond Fund | 0.55 | Up to 0.05 | ||||
Global Real Estate Securities Fund | 0.80 | Up to 0.05 |
The following table shows the total amount of each of these fees paid by the Funds for the period ended December 31, 2015:
Advisory | Administrative | |||
Multi-Style Equity Fund | $ | 3,497,189 | $ | 239,534 |
Aggressive Equity Fund | 2,171,186 | 120,621 | ||
Non-U.S. Fund | 3,432,744 | 190,708 | ||
Core Bond Fund | 4,757,391 | 432,491 | ||
Global Real Estate Securities Fund | 6,297,949 | 393,622 |
RIMCo has agreed to certain waivers of its advisory fees as follows:
Notes to Financial Statements 137
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
For the Aggressive Equity Fund, RIMCo had agreed to certain waivers, until April 30, 2015, to waive 0.05% of its 0.90% advisory
fee. The waiver may not be terminated during the relevant period except with Board approval. The total amount of the waiver for the
period ended December 31, 2015 was $41,219. There were no reimbursements during the period.
For the Non-U.S. Fund, RIMCo had agreed to certain waivers, until April 30, 2015, to waive 0.05% of its 0.90% advisory fee. The
waiver may not be terminated during the relevant period except with Board approval. The total amount of the waiver for the period
ended December 31, 2015 was $64,093. There were no reimbursements during the period.
For the Core Bond Fund, RIMCo has contractually agreed, until April 30, 2016, to waive 0.02% of its 0.55% advisory fee. The
waiver may not be terminated during the relevant period except with Board approval. The total amount of the waiver for the period
ended December 31, 2015 was $257,554. There were no reimbursements during the period.
RIMCo does not have the ability to recover amounts waived or reimbursed from previous periods.
Transfer and Dividend Disbursing Agent
RFSC serves as transfer agent and provides dividend disbursing services to the Funds. For this service, RFSC is paid a fee based
upon the average daily net assets of the Funds for transfer agency and dividend disbursing services. RFSC retains a portion of this
fee for services provided to the Funds and pays the balance to unaffiliated agents who assist in providing these services. Transfer
agency fees paid by the Funds presented herein for the period ended December 31, 2015 were as follows:
Amount | ||
Multi-Style Equity Fund | $ | 21,079 |
Aggressive Equity Fund | 10,615 | |
Non-U.S. Fund | 16,782 | |
Core Bond Fund | 38,059 | |
Global Real Estate Securities Fund | 34,639 |
Distributor
Russell Financial Services, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, is the distributor for the Investment
Company, pursuant to the distribution agreement with the Investment Company. The Distributor receives no compensation from
Investment Company for its services.
Accrued Fees Payable to Affiliates
Accrued fees payable to affiliates for the period ended December 31, 2015 were as follows:
Multi-Style Equity | Aggressive Equity | Global Real Estate | |||||||||
Fund | Fund | Non-U.S. Fund | Core Bond Fund | Securities Fund | |||||||
Advisory fees | $ | 284,615 | $ | 168,518 | $ | 275,680 | $ | 385,838 | $ | 524,903 | |
Administration fees | 19,494 | 9,362 | 15,315 | 36,400 | 32,807 | ||||||
Transfer agent fees | 1,716 | 824 | 1,348 | 3,203 | 2,887 | ||||||
Trustee fees | 2,258 | 1,174 | 1,809 | 3,777 | 3,489 | ||||||
$ | 308,083 | $ | 179,878 | $ | 294,152 | $ | 429,218 | $ | 564,086 |
Affiliated Brokerage Commissions
The Funds effect certain transactions through Russell Implementation Services Inc. (“RIS”). RIS is a registered broker and
investment adviser and an affiliate of RIMCo. RIS uses a multi-venue trade management approach whereby RIS allocates
trades among RIS’ network of independent brokers for execution, clearing and other services. Trades placed through RIS and
its independent brokers are made (i) to manage trading associated with changes in money managers, rebalancing across existing
money managers, cash flows and other portfolio transitions, (ii) to execute portfolio securities transactions for the portion of each
Fund’s assets that RIMCo determines not to allocate to money managers, including assets RIMCo may manage to effect a Fund’s
investment strategies and/or to modify a Fund's overall portfolio characteristics and for each Fund’s cash reserves, (iii) to execute
portfolio securities transactions for the portion of a Fund’s assets that RIMCo manages based upon model portfolios provided by the
Fund’s non-discretionary managers or (iv) to execute a money manager’s portfolio securities transactions for the segment of a Fund’s
portfolio assigned to the money manager. RIMCo has authorized RIS to effect certain futures, swaps, OTC derivatives transactions,
and cleared swaps, including foreign currency spot, forwards and options trading on behalf of the Funds.
The Funds are permitted to purchase or sell securities from or to certain related affiliated funds under specified conditions outlined
in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the
138 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
Funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment
adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a -7 of the Act.
During the period ended December 31, 2015, the Funds did not engage in purchases and sales of securities pursuant to Rule 17a
-7 of the Act.
Board of Trustees
The Russell Fund Complex consists of RIC, which has 41 funds and RIF, which has 9 funds. Each of the Trustees is a Trustee
of RIC and RIF. During the period, the Funds paid each of their independent Trustees a retainer of $102,000 per year; and each
Trustee $7,000 for each regularly scheduled meeting attended in person and $3,500 for each special meeting and the Annual 38a-1
meeting attended in person, and for each Audit Committee meeting, Nominating and Governance Committee meeting, Investment
Committee meeting or any other committee meeting established and approved by the Board attended in person. Each Trustee
receives $1,000 for attendance of telephonic board meetings, except for telephonic board meetings called pursuant to RIC and
RIF’s Security Valuation and Pricing Procedures; and $500 for attendance of telephonic Committee meetings. Each independent
Trustee is also paid $200 per hour for time spent for formal deposition preparation and in depositions related to the McClure
litigation (see note 8). The Audit Committee Chair and Investment Committee Chair are each paid a fee of $15,000 per year and
the Nominating and Governance Committee Chair is paid a fee of $12,000 per year. The chairman of the Board receives additional
annual compensation of $85,000. Ms. Cavanaugh and the Trustee Emeritus are not compensated by the Russell Fund Complex for
service as a Trustee. Trustees’ out of pocket expenses are also paid by the Russell Fund Complex.
5. Federal Income Taxes
At December 31, 2015, 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 | 12/31/2017 | Totals | ||
Non-U.S. Fund | $ | 36,702,163 | $ | 36,702,163 |
Under the Regulated Investment Company Modernization Act of 2010, the Funds will be permitted to carry forward capital losses
incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those
future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of
this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment
capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being
considered all short-term as under previous law.
Multi-Style Equity | Aggressive Equity | Global Real Estate | ||||||||||||||||||
Fund | Fund | Non-U.S. Fund | Core Bond Fund | Securities Fund | ||||||||||||||||
Cost of Investments | $ | 395,873,109 | $ | 231,550,597 | $ | 330,150,602 | $ | 916,681,262 | $ | 713,657,807 | ||||||||||
Unrealized Appreciation | $ | 65,231,679 | $ | 2,589,198 | $ | 53,353,652 | $ | 8,529,507 | $ | 91,120,663 | ||||||||||
Unrealized Depreciation | (10,428,317 | ) | (2,986,920 | ) | (29,240,250 | ) | (22,092,630 | ) | (24,595,414 | ) | ||||||||||
Net Unrealized Appreciation (Depreciation) | $ | 54,803,362 | $ | (397,722 | ) $ | 24,113,402 | $ | (13,563,123 | ) $ | 66,525,249 | ||||||||||
Undistributed Ordinary Income | $ | 1,077,050 | $ | 63,374 | $ | 5,058,445 | $ | 970,468 | $ | 1,326,787 | ||||||||||
Undistributed Long-Term Capital Gains | ||||||||||||||||||||
(Capital Loss Carryforward) | $ | 6,112,814 | $ | 44,352 | $ | (36,702,163 | ) $ | — | $ | 10,872 | ||||||||||
Tax Composition of Distributions | ||||||||||||||||||||
Ordinary Income | $ | 8,346,341 | $ | 2,068,338 | $ | 4,414,323 | $ | 28,748,429 | $ | 17,026,033 | ||||||||||
Long-Term Capital Gains | $ | 34,890,059 | $ | 20,957,886 | $ | — | $ | 1,877,451 | $ | 31,505,863 |
As permitted by tax regulations, the Funds intend to defer a net realized capital loss incurred from November 1, 2015 to December
31, 2015, and treat it as arising in the fiscal year 2016. As of December 31, 2015, the Funds had realized a capital loss as follows:
Multi-Style Equity Fund | $ | 431,559 |
Aggressive Equity Fund | $ | 4,087,393 |
Core Bond Fund | $ | 3,795,767 |
Global Real Estate Securities Fund | $ | 502,880 |
Notes to Financial Statements 139
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2015
6. Record Ownership
As of December 31, 2015, the following table includes shareholders of record with greater than 10% of the total outstanding shares
of each respective Fund.
# of Shareholders | % | ||||
Multi-Style Equity Fund | 2 | 79.8 | |||
Aggressive Equity Fund | 2 | 71.7 | |||
Non-U.S. Fund | 2 | 73.8 | |||
Core Bond Fund | 2 | 75.3 | |||
Global Real Estate Securities Fund | 2 | 92.1 |
7. Restricted Securities
Restricted securities are subject to contractual limitations on resale, are often issued in private placement transactions, and are not
registered under the Securities Act of 1933, as amended (the "Act"). The most common types of restricted securities are those sold
under Rule 144A of the Act and commercial paper sold under Section 4(2) of the Act.
A Fund may invest a portion of its net assets not to exceed 15% in securities that are illiquid. This limitation is applied at the time
of purchase. Illiquid securities are securities that may not be readily marketable, and that cannot be sold within seven days in
the ordinary course of business at the approximate amount at which the Fund has valued the securities. Restricted securities are
generally considered to be illiquid.
See each Fund’s Schedule of Investments for a list of restricted securities held by a Fund that are illiquid.
8. Pending Legal Proceedings
On October 17, 2013, Fred McClure filed a derivative lawsuit against RIMCo on behalf of ten Russell Investment Company
funds: the Russell Commodity Strategies Fund, Russell Emerging Markets Fund, Russell Global Equity Fund, Russell Global
Infrastructure Fund, Russell Global Opportunistic Credit Fund, Russell International Developed Markets Fund, Russell Multi-
Strategy Alternative Fund, Russell Strategic Bond Fund, Russell U.S. Small Cap Equity Fund and Russell Global Real Estate
Securities Fund. The lawsuit, which was filed in the United States District Court for the District of Massachusetts, seeks recovery
under Section 36(b) of the Investment Company Act, as amended, for the funds’ alleged payment of excessive investment management
fees to RIMCo. On December 8, 2014, Fred McClure filed a second derivative lawsuit in the United States District Court for the
District of Massachusetts. This second suit involves the same ten funds, and the allegations are similar, although the second suit
adds a claim alleging that RFSC charged the funds excessive administrative fees under Section 36(b). The plaintiff seeks on behalf
of the funds recovery of the amount of the allegedly excessive compensation or payments received from these ten funds and earnings
that would have accrued to plaintiff had that compensation not been paid or, alternatively, rescission of the contracts and restitution
of all excessive fees paid, for a period commencing one year prior to the filing of the lawsuit through the date of the trial. RIMCo
and RFSC are defending the actions.
9. Subsequent Events
Management has evaluated the events and/or transactions that have occurred through the date the financial statements were issued
and noted no items requiring adjustments of the financial statements or additional disclosures.
140 Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements
of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of
Multi-Style Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Core Bond Fund, and Global Real Estate Securities Fund (five of the
portfolios constituting Russell Investment Funds, hereafter collectively referred to as the “Funds”) at December 31, 2015, the results of
each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”)
are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of
securities at December 31, 2015 by correspondence with the custodian, brokers and transfer agent and the application of alternative
auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
Report of Independent Registered Public Accounting Firm 141
Russell Investment Funds
Tax Information — December 31, 2015 (Unaudited)
For the tax year ended December 31, 2015, the Funds hereby designate 100% or the maximum amount allowable, of its net taxable
income as qualified dividends taxed at individual net capital gain rates.
The Form 1099 you receive in January 2016 will show the tax status of all distributions paid to your account in calendar year 2015.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate
shareholders as follows:
Multi-Style Equity | 100 | % |
Aggressive Equity | 100 | % |
Non-U.S. | 0.0 | % |
Global Real Estate Securities | 0.0 | % |
Core Bond | 0.0 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain
dividends for their taxable year ended December 31, 2015:
Multi-Style Equity | $ | 34,890,059 |
Aggressive Equity | $ | 20,957,886 |
Non-U.S. | $ | — |
Global Real Estate Securities | $ | 31,505,863 |
Core Bond | $ | 1,877,451 |
The Funds listed below paid foreign taxes and recognized foreign source income during the taxable year ended December 31, 2015.
Pursuant to Section 853 of the Internal Revenue Code, the Funds designate the following per share amounts of foreign taxes paid and
income earned from foreign sources:
Foreign | Foreign | |||||||
Taxes | Source | |||||||
Foreign | Paid | Foreign Source | Income Per | |||||
Fund Name | Taxes Paid | Per Share | Income | Share | ||||
Non-US | $ | 564,707 | $ | 0.0178 | $ | 10,035,254 | $ | 0.3160 |
Please consult a tax adviser for any questions about federal or state income tax laws.
142 Tax Information
Russell Investment Funds
Affiliated Brokerage Transactions — December 31, 2015 (Unaudited)
As mentioned in the Note 4 in the Notes to Financial Statements contained in this annual report, the Funds utilize RIS and its
independent brokers. RIS is a registered broker dealer and investment adviser and an affiliate with RIMCo. Trades placed through RIS
and its independent brokers are made (i) to manage trading associated with changes in money manager, rebalancing across existing
money managers, cash flows and other portfolio transitions, (ii) to execute portfolio securities transactions for each Fund’s assets that
RIMCo determines not to allocate to money managers including assets RIMCo may manage to manage risk in a Fund’s investment
portfolio and for each Fund’s cash reserves or (iii) to execute a money manager’s portfolio securities transactions for the segment
of a Fund’s portfolio assigned to the money manager. RIMCo has authorized RIS to effect certain futures, swaps, over-the-counter
derivatives transactions, and cleared swaps, including foreign currency spot, forwards and options trading on behalf of the Funds.
Amounts retained by RIS for the period ended December 31, 2015 were as follows:
Affiliated Broker | Fund Name | 2015 | |
RIMCo | |||
Multi-Style Equity Fund | $ | 29,141 | |
Aggressive Equity Fund | 199,671 | ||
Non-U.S. Fund | 55,592 | ||
Core Bond Fund | — | ||
Global Real Estate Securities Fund | 57,873 |
Affiliated Brokerage Transactions 143
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts — (Unaudited)
Factors Considered by the Trustees and their Recommendation
The Investment Company Act requires that the Board, including a majority of its members who are not considered to be “interested
persons” under the Investment Company Act (the “Independent Trustees”) voting separately, approve initially for a term not to exceed
two years the advisory agreement with RIMCo (the “Existing RIMCo Agreement”) and, with respect to the Funds that employ a manager-
of-managers method of investment, the portfolio management and non-discretionary investment advisory contract, as applicable, with
each discretionary and non-discretionary sub-adviser (each a “Money Manager”) of the Funds (collectively, the “Existing Money
Manager Agreements,” and together with the Existing RIMCo Agreement, the “Existing RIF Agreements”) and, thereafter, to approve
the continuation of each such Existing RIF Agreement on at least an annual basis, and that the terms and conditions of each Existing
RIF Agreement provide for its termination if continuation is not approved annually and upon its “assignment” within the meaning of
Section 2(a)(4) of the Investment Company Act (“assignment”).
The Board, including all of the Independent Trustees, considered and approved the Existing RIF Agreements for an initial term of two
years at a meeting held in person on July 29, 2014, and shareholders of each Fund approved the Fund’s Existing RIMCo Agreement on
November 3, 2014 in connection with the change of control resulting from LSEG’s acquisition of FRC in a transaction with Northwestern
Mutual Life Insurance Company (“Northwestern Mutual”) (the “LSEG Transaction”).
In connection with the LSEG Transaction, completion of which was announced on December 3, 2014, LSEG stated that it would
undertake a comprehensive review (the “Review”) of FRC’s investment management business to determine its positioning and fit with
LSEG. One part of the Review was to determine whether the FRC investment management business would be more valuable as part
of the LSEG organization or as part of an organization with existing investment management activities. On February 5, 2015, LSEG
publicly announced that it had completed the Review, that the conclusion of the Review was to explore a sale of the FRC investment
management business in its entirety, and that a sale process would commence. Following this date, LSEG solicited expressions of
interest in acquiring FRC’s investment management business from potential bidders in an auction process. LSEG will retain FRC and
FRC’s index business. FRC’s index business has historically provided various services and support to RIMCo in respect of RIMCo’s
Fund-related activities. In connection with the Transaction (defined below), FRC and Russell Investments will enter into index and
intellectual property license agreements which will provide Russell Investments, including RIMCo, with access to the LSEG retained
intellectual property and index data used in the conduct of its asset management business, including RIMCo’s Fund-related services.
The Independent Trustees discussed with RIMCo and LSEG and monitored throughout the sale process the impact of uncertainty as
to RIMCo’s ownership on the retention of key employees and on the ability of the Funds to retain assets and attract additional assets.
The Independent Trustees requested, and RIMCo provided, weekly reports regarding Fund asset inflows and outflows and departures
of key personnel. The Independent Trustees also received periodic status reports regarding the sale process from RIMCo and LSEG.
Following the emergence of interested bidders, the Independent Trustees communicated their perspectives on certain of the bidders
to RIMCo or LSEG when presented with opportunities to do so. With respect to private equity firm bidders, such as TA Associates
Management and TA Associates L.P. (together, “TA Associates”), these perspectives included Board concerns as to possible negative
market reaction to the perceived transitional nature of any transaction with a private equity firm and to any utilization of significant
leverage to complete such a transaction. The Board received status reports on the sale process not only at its regularly scheduled
quarterly meetings during the sale process but in interim telephone conference call meetings with RIMCo and/or LSEG.
In anticipation of a change of ownership of RIMCo and consequent assignment and termination of the Existing RIF Agreements as a
result of the announced conclusions of the Review, the Board met in person on May 18, 2015 (the “Existing RIF Agreement Review
Meeting”) to review and discuss with RIMCo information (the “Existing RIF Agreement Financial Information”) regarding each Fund’s
performance, fees, expenses, and profitability as of December 31, 2014.
During the course of a year, the Trustees receive a wide variety of materials regarding, among other things, the investment performance
of the Funds, sales and redemptions of the Funds’ shares, management of the Funds and other services provided by RIMCo, and
compliance with applicable regulatory requirements. In preparation for the Existing RIF Agreement Review Meeting, the Independent
Trustees, with the advice and assistance of their independent counsel (“Independent Counsel”), also requested, and the Board reviewed:
(1) information and reports prepared by RIMCo relating to the profitability of each Fund to RIMCo; (2) information (the “Third-
Party Information”) received from an independent, nationally recognized provider of investment company information comparing the
performance of certain of the Funds and their respective operating expenses over various periods of time with other peer funds not
managed by RIMCo, believed by the provider to be generally comparable in investment objectives to the Funds; and (3) information
prepared by RIMCo (the “RIMCo Comparative Information”) comparing the performance of certain underlying funds (defined below)
and their respective operating expenses over various periods of time with other peer funds not managed by RIMCo, believed by RIMCo
144 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
to be generally comparable in investment objectives to the underlying funds. In the case of each Fund, its other peer funds, whether
identified as such in the Third-Party Information or the RIMCo Comparative Information, are collectively hereinafter referred to as
the Fund’s “Comparable Funds,” and, with the Fund, such Comparable Funds are collectively hereinafter referred to as the Fund’s
“Performance Universe” in the case of performance comparisons and the Fund’s “Expense Universe” in the case of operating expense
comparisons. In the case of certain, but not all, Funds, the Third-Party Information reflected changes in the Comparable Funds
included in the Expense Universes as requested by RIMCo, which changes were noted in the Third-Party Information. The foregoing
and other information received by the Board, including the Independent Trustees, in connection with its review of the Existing RIF
Agreements at the Existing RIF Agreement Review Meeting is included in the Existing RIF Agreement Financial Information.
On October 8, 2015, LSEG announced that it had entered into a stock and asset purchase agreement with FRC and Emerald Acquisition
Limited (“Emerald Acquisition”), providing for a possible sale of FRC’s investment management business (“Russell Investments”)
to Emerald Acquisition (the “Transaction”). The Transaction, if completed, would result in the assignment of the Existing RIMCo
Agreement. Because the Existing RIMCo Agreement would terminate upon its assignment, the Board was asked to consider approval
of the terms and conditions of a new agreement (the “Post-Transaction RIMCo Agreement”) pursuant to which RIMCo, as an affiliate
of Emerald Acquisition, would continue to serve as the investment adviser of each Fund following completion of the Transaction and
thereafter to submit the Post-Transaction RIMCo Agreement to each Fund’s shareholders for approval, as required by the Investment
Company Act. Because the Existing Money Manager Agreements may be deemed to terminate upon assignment of each Fund’s
Existing RIMCo Agreement, the Board also was asked to approve new portfolio management and/or non-discretionary investment
advisory contracts with each applicable Fund’s Money Managers (the “Post-Transaction Money Manager Agreements,” and together
with the Post-Transaction RIMCo Agreement, the “Post-Transaction RIF Agreements”).
Following the announcement by LSEG of the Transaction, the Independent Trustees, with the advice and assistance of Independent
Counsel, requested information to evaluate the Post-Transaction RIF Agreements. The Independent Trustees requested information
relating to the nature, scope, and quality of services provided to the Funds by RIMCo and its affiliates and advised RIMCo of their
willingness to rely upon the Existing RIF Agreement Financial Information in their evaluation of the Post-Transaction RIF Agreements,
if and to the extent that such information, together with any information updating or supplementing such information, continued to be
accurate and complete as of the date of the request. In response to this request, RIMCo provided information relating to the nature,
scope, and quality of services provided to the Funds by RIMCo and its affiliates which information also included the Existing RIF
Agreement Financial Information as updated or supplemented as needed. Separately, the Independent Trustees submitted requests
for information specifically regarding Emerald Acquisition and the impact of the Transaction on the interests of the Funds and their
shareholders. The foregoing information and other information provided or presented by RIMCo, Emerald Acquisition, TA Associates,
and Reverence Capital to the Board, including the Independent Trustees, in connection with its evaluation of the Post-Transaction RIF
Agreements, including the information referred to below, hereinafter is referred to collectively as the “Post-Transaction RIF Agreement
Information.”
On November 3, 2015, the Board met by telephone conference call to discuss preliminarily the announcement of the Transaction with
representatives of FRC, RIMCo and TA Associates.
At a meeting held in person on December 7-8, 2015 (the “Post-Transaction RIF Agreement Information Meeting”), the Board, in further
preparation for its evaluation of the Post-Transaction RIF Agreements, reviewed the Post-Transaction RIF Agreement Information
with representatives of FRC, RIMCo, Fund management, TA Associates, and Reverence Capital, and separately in private sessions
with Independent Counsel at which no representatives of FRC, RIMCo, Fund management, TA Associates, or Reverence Capital were
present. Prior to the Post-Transaction RIF Agreement Information Meeting, the Board submitted supplemental information requests,
including a supplemental request for additional analyses and information regarding the financial stability of RIMCo and financial
models supporting the belief of TA Associates and Reverence Capital as to RIMCo’s financial stability following completion of the
Transaction. Prior to the Post-Transaction RIF Agreement Information Meeting, the Trustees received a memorandum from counsel
to the Funds (“Fund Counsel”) discussing the legal standards for their consideration of the Post-Transaction RIF Agreements, and
the Independent Trustees separately received a memorandum regarding their responsibilities from Independent Counsel. At the Post-
Transaction RIF Agreement Information Meeting, the Board requested additional information needed to evaluate the Post-Transaction
RIF Agreements, including information regarding covenants and events of default on one or more loans financing a portion of the
Transaction purchase price (the “Term Loan Facility”) borrowed under a credit agreement (the “Credit Agreement”) and a revolving
credit facility under the Credit Agreement (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”)
that could lead to a change of control of RIMCo.
Basis for Approval of Investment Advisory Contracts 145
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
The Board met in person on December 16, 2015 to consider the approval of the Post-Transaction RIF Agreements (the “Post-
Transaction RIF Agreement Evaluation Meeting,” and together with the Existing RIF Agreement Review Meeting and the Post-
Transaction RIF Agreement Information Meeting, the “Agreement Information Meetings,” or individually an “Agreement Information
Meeting”). At the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees met in person with representatives
of FRC, RIMCo, and Fund management to review additional Post-Transaction RIF Agreement Information received after the Post-
Transaction RIF Agreement Information Meeting and prior to or at that meeting. Representatives of TA Associates and Reverence
Capital participated in the Post-Transaction RIF Agreement Information Meeting in person and participated in the Post-Transaction
RIF Agreement Evaluation Meeting by conference call. Presentations made by FRC, RIMCo, TA Associates, and Reverence Capital
at the Agreement Information Meetings encompassed all of the Funds and the other RIMCo-managed funds for which the Board has
supervisory responsibility (the “Other Russell Funds”). Information received by the Board, including the Independent Trustees, prior
to and at the Agreement Information Meetings is included in the Post-Transaction RIF Agreement Information. Presentations made by
FRC, RIMCo, TA Associates, and Reverence Capital at the Agreement Information Meetings also are included in the Post-Transaction
RIF Agreement Information. Prior to voting at the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees
met in executive session with Independent Counsel, at which no representatives of FRC, RIMCo, Fund management, TA Associates,
or Reverence Capital were present, to review additional Post-Transaction RIF Agreement Information received prior to and at the
Meeting. The discussion below reflects all of these reviews.
The Board’s evaluation of the Post-Transaction RIF Agreements reflected the Post-Transaction RIF Agreement Information and other
information received by the Board during the course of the year or in prior years. The Independent Trustees’ evaluations of the Post-
Transaction RIF Agreements also reflected the knowledge and familiarity gained as Board members of the Funds and the Other Russell
Funds with respect to services provided by RIMCo, RIMCo’s affiliates, and each Money Manager to the Funds under the Existing RIF
Agreements and services proposed to be provided to the Funds under the Post-Transaction RIF Agreements.
In evaluating the Post-Transaction RIF Agreement Information, the Board considered that each of the Funds (the “Manager-of-Managers
Funds”), other than the Funds that are structured as funds of funds (the “Funds of Funds”), and each of the funds in which the Funds of
Funds invest (the “Underlying Funds”), employs a manager-of-managers method of investment and RIMCo’s advice that such Manager-
of-Managers Funds and Underlying Funds in employing a manager-of-managers method of investment operate in a manner that is
distinctly different from most other investment companies. In the case of most other investment companies, an investment advisory
fee is paid by the investment company to its adviser, which in turn employs and compensates individual portfolio managers to make
specific securities selections consistent with the adviser’s style and investment philosophy. RIMCo has engaged multiple unaffiliated
Money Managers for all Funds except the Funds of Funds, which are currently managed only by RIMCo, and for all Underlying Funds.
A Money Manager may have (1) a discretionary asset management assignment pursuant to which it is allocated a portion of a Manager-
of-Managers Fund’s or Underlying Fund’s assets to manage directly in its discretion, (2) a non-discretionary assignment pursuant to
which it provides a model portfolio to RIMCo representing its investment recommendations, based upon which RIMCo purchases and
sells securities for a Manager-of-Managers Fund or Underlying Fund, or (3) both a discretionary and a non-discretionary assignment.
The Board considered that RIMCo (rather than any Money Manager in the case of Manager-of-Managers Funds and Underlying Funds)
is responsible under the Existing RIMCo Agreement, and would be responsible under the Post-Transaction RIMCo Agreement, for
determining, implementing, and maintaining the investment program for each Fund. Assets of each Manager-of-Managers Fund and
Underlying Fund generally have been allocated among multiple Money Manager investment strategies. The Manager-of-Managers
Funds and Underlying Funds may employ discretionary and/or non-discretionary Money Managers selected by RIMCo, subject to
Board approval, for that Fund. RIMCo manages Manager-of-Managers Fund and Underlying Fund assets not allocated to discretionary
Money Managers, which include assets managed by RIMCo to effect a Manager-of-Managers Fund’s or Underlying Fund’s investment
strategies and/or to actively manage a Manager-of-Managers Fund’s or Underlying Fund’s overall exposures to seek to achieve the
desired risk/return profile for the Fund. RIMCo also manages the portion of Manager-of-Managers Fund and Underlying Fund assets
for which a Manager-of-Managers Fund’s or Underlying Fund’s non-discretionary Money Managers provide model portfolios to RIMCo
and each Manager-of-Managers Fund’s and Underlying Fund’s liquidity reserves. RIMCo may also manage portions of a Manager-of-
Managers Fund or Underlying Fund during transitions between Money Managers. The assets of each Fund of Funds are invested in
different combinations of Underlying Funds pursuant to target asset allocations set by RIMCo. RIMCo may modify the target asset
allocation for any Fund of Funds and/or the Underlying Funds in which the Funds of Funds invest. In all cases, Fund assets are
managed directly by RIMCo pursuant to authority provided by the Existing RIMCo Agreement, and would be managed directly by
RIMCo pursuant to authority provided by the Post-Transaction RIMCo Agreement.
146 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
RIMCo is responsible for selecting, subject to Board approval, Money Managers for each Manager-of-Managers Fund and Underlying
Fund and for actively managing allocations and reallocations of its assets among the Money Managers or their strategies and RIMCo
itself. The Board has been advised that RIMCo’s goal with respect to the Manager-of-Managers Funds and Underlying Funds is
to construct and manage diversified portfolios in a risk-aware manner. Each Money Manager for a Manager-of-Managers Fund or
Underlying Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities
for the portion of the Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Fund’s applicable investment objective,
policies and restrictions, any constraints placed by RIMCo upon their selection of portfolio securities and the Money Manager’s
specified role in a Fund. For each Manager-of-Managers Fund and Underlying Fund, RIMCo is responsible, among other things, 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 or provide recommendations with respect to certain
investment strategies for a Fund or Underlying Fund; and recommending annually to the Board whether portfolio management and
non-discretionary investment advisory contracts should be renewed, modified or terminated. In addition to its annual recommendation
as to the renewal, modification, or termination of portfolio management and non-discretionary investment advisory contracts, RIMCo
is responsible for recommending to the Board additions of new Money Managers or replacements of existing Money Managers at any
time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific
investment or strategy constraints from time to time for each Money Manager intended to capitalize on the strengths of that Money
Manager or to coordinate the investment activities of Money Managers for the Manager-of-Managers Funds or Underlying Funds in a
complementary manner. Therefore, RIMCo’s selection of Money Managers is made not only on the basis of performance considerations
but also on the basis of anticipated compatibility with other Money Managers in the same Manager-of-Managers Fund or Underlying
Fund. In light of the foregoing, the overall performance of each Manager-of-Managers Fund and Underlying Fund over appropriate
periods has reflected, in great part, the performance of RIMCo in designing the Fund’s investment program, structuring the Fund,
selecting an effective Money Manager with a particular investment style or sub-style for a segment that is complementary to the styles of
the Money Managers of other Fund segments, and allocating assets among the Money Managers or their strategies in a manner designed
to achieve the objectives of the Manager-of-Managers Fund or Underlying Fund.
The Board considered that the prospectuses for the Manager-of-Managers Funds and Underlying Funds and other public disclosures
emphasize to investors RIMCo’s role as the principal investment manager for each such 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 that information into
account when deciding to purchase shares of any Manager-of-Managers Fund or Underlying Fund. The Board further considered that
Manager-of-Managers Fund and Underlying Fund investors in pursuing their investment goals and objectives likely purchased their
shares on the basis of this information and RIMCo’s reputation for and performance record in managing the structure of the Manager-
of-Managers Funds and Underlying Funds.
The Board also considered the demands and complexity of managing the Manager-of-Managers Funds and Underlying Funds pursuant
to the manager-of-managers structure; the special expertise of RIMCo with respect to the manager-of-managers structure of the Funds;
and the likelihood that, at the current expense ratio of each Manager-of-Managers Fund and Underlying Fund, there would be no
acceptable alternative investment managers to replace RIMCo on comparable terms given the need to continue the manager-of-
managers strategy of such Fund selected by shareholders in purchasing their shares.
In addition to these general factors relating to the structure of the Manager-of-Managers Funds and Underlying Funds, the Trustees
considered, with respect to each Fund, various specific factors in respect of the Post-Transaction RIMCo Agreement, including the
following:
1. The nature, scope, and overall quality of the investment management and other services provided, and expected to be provided, to
the Fund by RIMCo;
2. The investment performance of each Fund, RIMCo and, with respect to the Manager-of-Managers Funds, each Money Manager,
including the investment performance of each Fund in absolute terms and relative to its benchmark(s) and Comparable Funds;
3. The advisory fee paid by the Fund to RIMCo (the “Advisory Fee”) and the fact that it encompasses all investment advisory fees paid
by the Fund, including the fees for any Money Managers for Manager-of-Managers Funds and Underlying Funds;
4. Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund, including any
administrative or transfer agent fees and any fees received for management or administration of securities lending cash collateral, soft
dollar arrangements and commissions in connection with portfolio securities transactions;
Basis for Approval of Investment Advisory Contracts 147
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
5. Information provided by RIMCo as to expenses incurred by the Fund including the expenses incurred by each Fund relative to its
Comparable Funds;
6. Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from the Fund;
and
7. Information provided by RIMCo concerning economies of scale and whether any scale economies are adequately shared with the
Fund.
In reviewing the nature, scope and overall quality of the investment management and other services provided, and which are expected
to be provided, to the Funds, including Fund portfolio management services, the Board discussed with senior representatives of RIMCo
at the Post-Transaction RIF Agreement Information Meeting the impact on the Funds’ operations of changes in RIMCo personnel
providing investment management and other services to the Funds during the past year or expected in the future, whether as a result of
the LSEG Transaction, the Review, the Transaction, or otherwise. The Board was not advised of any expected diminution in the nature,
scope, or quality of the investment advisory or other services provided to the Funds from such changes.
As noted above, RIMCo, in addition to managing the investment of each Manager-of-Managers Fund’s and Underlying Fund’s cash,
may directly manage a portion of certain Manager-of-Managers Funds and Underlying Funds (the “Participating Funds”) pursuant to
the relevant Existing RIMCo Agreement and the Post-Transaction RIMCo Agreement, the actual allocation being determined from time
to time by the Participating Funds’ portfolio manager. Beginning in 2012, RIMCo implemented a strategy of managing a portion of
the assets of the Participating Funds to actively manage such Funds’ overall exposures by investing in securities or other instruments
that RIMCo believes will achieve the desired risk/return profiles for such Funds. RIMCo monitors the Participating Funds’ risk/
return profiles by assessing Fund characteristics, including risk, using a variety of measurements, such as tracking error, and may
seek to actively manage Fund exposures consistent with the Funds’ investment objectives and strategies. For U.S. equity Funds, Fund
exposures may be managed with the goal to increase or decrease exposures (such as volatility, momentum, value, growth, capitalization
size, industry, or sector). For non-U.S. equity, global infrastructure, and global real estate Funds, Fund exposures may be managed with
the goal to increase or decrease exposures (such as volatility, momentum, value, growth, capitalization size, industry, sector, country
or region). For fixed-income Funds, Fund exposures may be managed with the goal to increase or decrease exposures (such as sector,
industry, currency, credit, or mortgage exposure, country risk, yield curve positioning or interest rates). For alternative and specialty
Funds, Fund exposures may be managed with the goal to increase or decrease exposures (such as volatility, momentum, value, growth,
capitalization size, industry, sector, region, currency, commodity, credit or mortgage exposure, country risk, yield curve positioning or
interest rates). For all Funds, Fund characteristics may be managed to offset undesired relative over- or under-weights in order to seek
to achieve the desired risk/return profile for each Fund. RIMCo may utilize quantitative or qualitative analysis or quantitative models
designed to assess Fund characteristics and identify a portfolio that provides the desired exposures or use strategies based on indexes
that represent the desired exposures, including index replication and optimized index sampling. Based on this, for the portion of a
Fund’s assets directly managed by RIMCo, RIMCo may invest in common stocks, fixed income securities, pooled investment vehicles,
exchange-traded notes, REITs, short-term investments, currencies and/or derivatives, including futures, forwards, options, and/or
swaps, in order to seek to achieve the desired risk/return profile for the Fund. Derivatives may be used to take long or short positions.
In addition, RIMCo may elect to adjust the exposure obtained through the cash equitization process to manage Fund exposures.
RIMCo also may manage Fund assets directly to effect a Fund’s investment strategies. RIMCo’s direct management of assets for these
purposes is hereinafter referred to as the “Direct Management Services.” RIMCo also may reallocate Fund assets among Money
Managers, increase Fund cash reserves, or determine not to be fully invested. RIMCo’s Direct Management Services generally are
not intended to be a primary driver of Manager-of-Managers Funds’ or Underlying Funds’ investment results, although the services
may have a positive or negative impact on investment results, but rather are intended to enhance incrementally the ability of Funds to
carry out their investment programs. The Board considered that during the period, and to the extent that RIMCo employs its Direct
Management Services other than via the cash equitization process in respect of Participating Funds, RIMCo is not required to pay
investment advisory fees to a Money Manager with respect to assets that are directly managed and that the profits derived by RIMCo
generally and from the Participating Funds consequently may be increased incrementally, although RIMCo may incur additional costs
in providing Direct Management Services. The Board, however, also considered the potential benefits of the Direct Management
Services to Participating Funds; the limited, although increasing, amount of assets that to the date of the Agreement Information
Meetings were being managed directly by RIMCo pursuant to the Direct Management Services; and the fact that the aggregate Advisory
Fees paid by the Participating Funds are not increased as a result of RIMCo’s direct management of Fund assets as part of the Direct
Management Services or otherwise.
148 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
In reviewing the Funds’ Advisory Fees in light of Fund performance, the Board considered that in the Post-Transaction RIF Agreement
Information and at past meetings, RIMCo noted differences between the investment strategies of certain Funds and their respective
Comparable Funds in pursuing their investment objectives. The Board noted RIMCo’s further past advice that the strategies pursued
by the Funds, among other things, are intended to result in less volatile, more moderate returns relative to each Fund’s performance
benchmark rather than more volatile, more extreme returns that its Comparable Funds may experience over time.
The Third-Party Information included, among other things, comparisons of the Funds’ Advisory Fees with the investment advisory fees
of their Comparable Funds on an actual basis (i.e., giving effect to any voluntary fee waivers implemented by RIMCo and the advisers to
such Fund’s Comparable Funds). The Third-Party Information, among other things, showed that the RIF Multi-Style Equity Fund, RIF
Aggressive Equity Fund, RIF Non-U.S. Fund, RIF Core Bond Fund, and RIF Global Real Estate Securities Fund each had an Advisory
Fee which, compared with its Comparable Funds’ investment advisory fees on an actual basis, was ranked in the fourth or fifth quintile
of its Expense Universe for that expense component. The Advisory Fee for each of the other Funds ranked in the third quintile or better
of its Expense Universe. In these rankings, the first quintile represents funds with the lowest investment advisory fees among funds in
the Expense Universe and the fifth quintile represents funds with the highest investment advisory fees among the Expense Universe
funds. The comparisons were based upon the latest fiscal years for the Expense Universe funds. The Board considered that the actual
Advisory Fee for each of the RIF Non-U.S. Fund and RIF Core Bond Fund was less than 1.5 basis points from the third quintile of its
Expense Universe. The Board further considered RIMCo’s explanation of the reasons for the Funds’ actual Advisory Fee rankings and
RIMCo’s belief that the Funds’ Advisory Fees are fair and reasonable under the circumstances, notwithstanding such comparisons.
Among other things, RIMCo noted that meaningful comparisons of investment advisory fees between funds affiliated with insurance
companies issuing variable annuity and life policies and non-affiliated funds, such as the Funds, are difficult as insurance companies
may allocate fees between the investment policies and their underlying funds. The Board determined that it would continue to monitor
the Funds’ Advisory Fees against the Funds’ Comparable Funds’ investment advisory fees.
In discussing the Funds’ Advisory Fees generally, RIMCo noted, among other things, that its Advisory Fees for the Funds encompass
services that may not be provided by investment advisers to the Funds’ Comparable Funds, such as cash equitization and, in the case
of the Manager-of-Managers Funds and Underlying Funds, management of portfolio transition costs when Money Managers are added,
terminated or replaced.
RIMCo also observed that its “margins” in providing investment advisory services to the Manager-of-Managers Funds and Underlying
Funds tend to be lower than competitors’ margins because of the demands and complexities of managing the Funds’ manager-of-
managers structure, including RIMCo’s payment of a significant portion of the Manager-of-Managers Funds’ and Underlying Funds’
Advisory Fees to their Money Managers. RIMCo expressed the view that Advisory Fees should be considered in the context of a Fund’s
total expense ratio to obtain a complete picture. The Board, however, considered each Fund’s Advisory Fee on both a standalone basis
and in the context of the Fund’s total expense ratio.
RIMCo attributed the relative ranking of the actual Advisory Fees of the RIF Multi-Style Equity Fund and the RIF Aggressive Equity
Fund to changes in the Funds’ respective Expense Universes during the past year that adversely affected each Fund’s Expense Universe
rankings. RIMCo noted that the previous advisory fee waiver of 0.05% for the RIF Aggressive Equity Fund was removed effective May
1, 2015. RIMCo further noted that the total expense ratio for the RIF Multi-Style Equity Fund and the RIF Aggressive Equity Fund,
taking into account the removal of the 0.05% Advisory Fee waiver for the RIF Aggressive Equity Fund, ranked in the third quintile
of their respective Expense Universes.
With respect to the RIF Global Real Estate Securities Fund, RIMCo noted that the Third-Party Information, to include a sufficient
number of Comparable Funds in the Fund’s Expense Universe, included both global and U.S. real estate funds in the Expense Universe.
According to RIMCo, U.S. real estate funds generally have lower investment advisory fees, which lower the Expense Universe advisory
fee median. RIMCo further noted that the Fund’s total expense ratio ranked in the third quintile of its Expense Universe.
Based upon information provided by RIMCo, the Board reviewed for each Fund whether economies of scale have been realized and
whether the Advisory Fee for such Fund appropriately reflects or should be revised to reflect any such economies. The Board reviewed,
among other things, the variability of Money Manager investment advisory fees and other factors associated with the manager-of-
managers structure employed by the Manager-of-Managers Funds and Underlying Funds as well as net Fund redemptions or purchases
in recent years, including, especially, the period since LSEG’s announcement of the conclusion of the Review and its intention to sell
the FRC investment management business. The Board considered RIMCo’s advice that the impact of its Direct Management Services
Basis for Approval of Investment Advisory Contracts 149
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
was not expected to materially affect RIMCo’s economies due to the relatively small strategic allocation targets and associated costs
to RIMCo of providing such services.
The Funds are distributed exclusively through variable annuity and variable life insurance contracts issued by insurance companies.
Currently, the Funds are made available to new holders of such insurance policies (“Insurance Contract Holders”) by one insurance
company. RIMCo has advised the Board that it does not expect that additional insurance companies will make the Funds available
to their variable annuity or variable life insurance policyholders in the near or long term because of a declining interest by the
insurance companies generally in variable insurance trusts, such as the Funds, as investment vehicles supporting their products.
Notwithstanding this expectation, RIMCo has expressed its belief that the Funds will remain viable in light of their cash inflows from
the current participating insurance company. The Board considered, among other things, the negative implications for significant
future Fund asset growth of RIMCo’s expectation that no additional insurance companies will make the Funds available to their variable
annuity and variable life insurance policyholders and other factors associated with the manager-of-managers structure employed by the
Manager-of-Managers Funds, including the variability of Money Manager investment advisory fees.
Northwestern Mutual is the insurance company making the Funds available to their Insurance Contract Holders. At the Post-Transaction
RIF Agreement Information Meeting, RIMCo expressed its belief that Northwestern Mutual intends to continue to make the Funds
available to its Insurance Contract Holders following the Transaction. However, the Board received no direct assurances in this regard
directly from Northwestern Mutual. If Northwestern Mutual were to discontinue its participation in the Funds, the Board considered
that it is unlikely that the Funds would remain viable.
The Board also considered that the fees payable to RIMCo or its affiliates by most but not all institutional clients with respect to
institutional funds with investment objectives similar to those of the Funds and the Other Russell Funds are lower, and, in some cases
may be substantially lower, than the rates paid by certain of the Funds and the Other Russell Funds. The Trustees received information
comparing the fees payable to RIMCo by certain institutional clients and the Funds. The Trustees considered the differences in the
nature and scope of services RIMCo provides to institutional clients and the Funds. RIMCo explained, among other things, that
institutional clients have fewer compliance, administrative, and other needs than the Funds. RIMCo also noted that since the Funds
must constantly issue and redeem their shares, they are more difficult to manage than institutional accounts where assets are relatively
stable. In addition, RIMCo noted that the Funds are subject to heightened regulatory requirements relative to institutional clients,
and that the process associated with the acquisition of new assets is considerably more expensive in the retail market, relative to the
institutional market. The Board noted that RIMCo provides office space and facilities to the Funds and all of the Funds’ officers.
Accordingly, the Trustees concluded that the services provided to the Funds are sufficiently different from the services provided to the
institutional clients that comparisons are not probative and should not be given significant weight.
With respect to the Funds’ total expenses, the Third-Party Information showed that none of the Funds had total expenses that ranked in
fourth or fifth quintiles of its Expense Universe. In these rankings, the first quintile represents the funds with the lowest total expenses
among funds in the Expense Universe and the fifth quintile represents funds with the highest total expenses among the Expense
Universe funds.
On the basis of the Post-Transaction RIF Agreement Information and other information previously received by the Board from RIMCo
during the course of the current year or in prior years, or presented at or in connection with the Agreement Information Meetings by
RIMCo, the Board, in respect of each Fund, found after giving effect to any applicable waivers and/or reimbursements and considering
any differences in the composition and investment strategies of its respective Comparable Funds that (1) the Advisory Fee charged by
RIMCo was reasonable in light of the nature, scope, and overall quality of the investment management and other services provided, and
expected to be provided, to the Fund; (2) the relative expense ratio of the Fund either was comparable to those of its Comparable Funds
or RIMCo had provided an explanation satisfactory to the Board as to why the relative expense ratio was not comparable to those of its
Comparable Funds; (3) RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; (4) other benefits
and fees received by RIMCo or its affiliates from the Fund were not excessive; (5) RIMCo’s profitability with respect to the Fund was
not excessive in light of the nature, scope, and overall quality of the investment management and other services provided by RIMCo;
and (6) the Advisory Fee charged by RIMCo, with implementation of the new breakpoints in the case of certain Underlying Funds,
appropriately reflects any economies of scale realized by such Fund in light of various factors, including the negative implications for
significant future Fund asset growth of RIMCo’s expectation that no additional insurance companies will make the Funds available to
their variable annuity and variable life insurance policyholders and other factors associated with the manager-of-managers structure
employed by the Manager-of-Managers Funds and Underlying Funds, including the variability of Money Manager investment advisory
fees as well as the possible discontinuation of Northwestern Mutual’s participation in the Funds.
150 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
The Board, in assessing the Funds’ performance, focused upon each Fund’s performance for the 3-year period ended December 31,
2014 as most relevant but also considered Fund performance for the 1- and 5-year periods ended such date. In reviewing the Funds’
performance generally, the Board took into consideration various steps taken by RIMCo beginning in 2012 to enhance the performance
of certain Manager-of-Managers Funds and Underlying Funds, including changes in Money Managers, and, in the case of Participating
Funds, RIMCo’s implementation of its Direct Management Services.
With respect to the RIF Aggressive Equity Fund, the Third-Party Information showed that the Fund’s performance was ranked in
the fourth quintile of its Performance Universe for the 3- and 5-year periods ended December 31, 2014 and was ranked in the fifth
quintile for the 1-year period ended such date. RIMCo noted that in 2012 it had changed the Fund’s investment strategy from investing
principally in small and medium capitalization securities to investing principally in small capitalization securities, which resulted in
a change to the Fund’s primary benchmark. RIMCo attributed the Fund’s three-year underperformance relative to its Performance
Universe to the market cap mismatch relative to the Performance Universe prior to the Fund’s investment strategy change.
With respect to the Moderate Strategy Fund, the Third-Party Information showed that the Fund’s performance was ranked in the
fifth quintile of its Performance Universe for the 3- and 5-year periods ended December 31, 2014, and ranked in the fourth quintile
of its Performance Universe for the 1-year period ended such date. The Board considered that the Balanced Strategy Fund and
Moderate Strategy Fund outperformed their respective benchmarks for the 3-year period ended December 31, 2014. With respect
to the Balanced Strategy Fund, the Third-Party Information showed that the Fund’s performance was ranked in the fourth quintile of
its Performance Universe for each of the 1- , 3- and 5-year periods ended December 31, 2014. With respect to the Growth Strategy
Fund and Equity Growth Strategy Fund, the Third-Party Information showed that each Fund’s performance was ranked in the fifth
quintile of its Performance Universe for each of the 1-, 3- and 5-year periods ended December 31, 2014. The Board considered
RIMCo’s explanation that the underperformance of the Funds relative to their respective peer groups was mainly due to asset allocation
differences. RIMCo noted, among other things, that the RIF Balanced Strategy Fund and RIF Moderate Strategy Fund tend to have
a higher allocation to fixed income and a lower allocation to equities than their Comparable Funds, and that equities have largely
outperformed fixed income on an annualized basis over the 3-year period. RIMCo also explained that each of the Funds tends
to hold more diversified growth-oriented assets beyond traditional equities (such as global real estate, infrastructure, commodities,
global high yield debt, emerging market debt, and liquid alternatives strategies), which have lagged in the strong equity markets.
This exposure, according to RIMCo, is intended to provide diversification benefits and dampen volatility. RIMCo further noted that,
within the equity positions held by the Moderate Strategy Fund, Balanced Strategy Fund, Growth Strategy Fund and Equity Growth
Strategy Fund, the Funds have more of a global equity allocation and less U.S. bias relative to their respective Comparable Funds,
and the U.S. markets outperformed international developed markets over the 3-year period ended December 31, 2014. The Board
also considered that in January 2014, the Funds implemented a change in strategic asset allocations, which decreased positions in
core fixed income, international developed equity, and commodities, and increased positions in small cap, emerging markets, and
infrastructure. According to RIMCo, these changes brought the Funds’ allocations directionally closer towards the average equity and
fixed income allocations of the Comparable Funds, although the Funds continue to maintain more diversified growth asset exposure and
a larger globally diversified equity allocation than their Comparable Funds.
In assessing performance, the Board reviewed each Fund’s absolute performance and performance relative to appropriate benchmarks
and indices, in addition to such Fund’s performance relative to its Comparable Funds. In assessing the Funds’ performance relative to
their Comparable Funds or benchmarks or in absolute terms, the Board considered RIMCo’s stated investment strategy of managing the
Funds in a risk-aware manner. The Board also considered the Money Manager changes that have been made in recent periods and that
the performance of Money Managers continues to impact Fund performance for periods prior and subsequent to their termination, and
that any incremental positive or negative impact of the Direct Management Services, which continue to evolve in nature and scope, was
not yet fully reflected in the Fund’s investment results. Lastly, the Board considered potential new strategies discussed at prior Board
meetings that may be employed by RIMCo in respect of certain Funds.
At the Post-Transaction RIF Agreement Evaluation Meeting, the Board concluded that, under the circumstances, including those
described below, and based on RIMCo’s performance information and reviews for each Fund and the other Post-Transaction RIF
Agreement Information, the performance of each of the Funds would be consistent with the approval of the Post-Transaction RIMCo
Agreement.
At the Agreement Information Meetings, with respect to the review of the terms of the Post-Transaction Money Manager Agreements,
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
Basis for Approval of Investment Advisory Contracts 151
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Funds’ underwriter; and
RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate, or
to terminate the Money Manager. The Board received reports during the course of the year from the Funds’ Chief Compliance Officer
regarding her assessments of Money Manager compliance programs and any compliance issues. RIMCo did not identify any benefits
received by Money Managers or their affiliates as a result of their relationships with the Funds other than benefits from their soft
dollar arrangements and commissions paid to any affiliated broker/dealer through which they execute trades. The Post-Transaction
RIF Agreement Information described oversight of Money Manager soft dollar arrangements. The Post-Transaction RIF Agreement
Information expressed RIMCo’s belief that, based upon certifications from Money Managers and pre-hire and ongoing reviews of Money
Manager soft dollar arrangements, policies, and procedures, the Money Managers’ soft dollar arrangements, policies, and procedures
are consistent with applicable legal standards and with disclosures made by Money Managers in their investment adviser registration
statements filed with the Securities and Exchange Commission and by the Funds in their registration statements. RIMCo, as it has in
the past, advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management
and non-discretionary investment advisory 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 standard fee rates 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 of the relevance of Money Manager profitability
in light of RIMCo’s belief that such fees are reasonable; the Board’s findings as to the reasonableness of the Advisory Fee paid by each
Fund; and the fact that each Money Manager’s fee is paid by RIMCo. Based substantially upon RIMCo’s recommendations, together
with the Post-Transaction RIF Agreement Information, the Board concluded that the fees paid to the Money Managers of each Fund are
reasonable in light of the quality of the investment advisory services provided.
In approving the Post-Transaction RIMCo Agreement and determining to submit it to shareholders for their approval, the Trustees,
in addition to the reviews described above, conducted a review that was specifically focused on the Transaction and its impact on the
interests of the Funds and their shareholders, and, in doing so, considered a variety of factors, positive and negative, deemed relevant
in their business judgment, certain of which are discussed below. The discussion below is not intended to be all-inclusive.
1. Their belief that the Post-Transaction RIMCo Agreement addresses the immediate need to provide for continuation without
interruption of the investment advisory and other services provided to the Funds by RIMCo and its affiliates following the completion
of the Transaction.
2. RIMCo’s belief that the Transaction will address the uncertainty of its employees and Fund shareholders and potential shareholders
regarding ownership of RIMCo and the continuity of services to the Funds, facilitating efforts to attract and retain qualified investment
and other professionals, to retain current Fund assets, and to attract new Fund assets. The Board noted, however, that the involvement
of TA Associates and Reverence Capital and the investments made indirectly by the limited partners of the certain private equity funds
affiliated with TA Associates (“TA Funds”) and certain private equity funds affiliated with Reverence Capital (the “Reverence Capital
Funds”) will not be viewed as permanent by employees, Fund shareholders, and potential Fund shareholders; therefore the Transaction
might not resolve these uncertainties. When TA Associates and Reverence Capital determine to end their involvement in RIMCo and
to exit the investments made by alternative investment vehicles created by or from the TA Funds, (the “TA Alternative Investment
Vehicles”) and by alternative investment vehicles (the “Reverence Capital Entities”), respectively, subsequent to the Transaction, the
manner in which such an exit would be accomplished and the consequences to RIMCo and the Funds are not determinable at this time.
In the event of such a determination and exit, the Board will consider what actions, if any, are available, necessary, appropriate, and in
the best interests of the Funds and their shareholders under the circumstances.
3. The reputations of TA Associates and Reverence Capital and their records of acquiring investments in investment management
companies, as well as their having advised the Board that there is no established timetable for their exits from the RIMCo investments
made by the TA Alternative Investment Vehicles or Reverence Capital Entities at this time. Information presented to the Board by TA
Associates and Reverence Capital at the Post-Transaction RIF Agreement Evaluation Meeting showed that past investments by TA
Associates in investment management companies historically have extended for three to ten years. In the case of RIMCo, it was noted
by TA Associates and Reverence Capital that the duration of the investments made by the TA Alternative Investment Vehicles and
the Reverence Capital Entities, respectively, could be shorter or longer than the historical duration of its investments in investment
management companies. The impact of such exit on RIMCo’s operations and financial condition is not determinable at this time,
although an exit likely would result in a change of control of RIMCo.
152 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
4. Assurances from TA Associates and Reverence Capital that RIMCo will continue to be part of Russell Investments and that Russell
Investments will continue to operate as a separate organization under its own governance structure. TA Associates and Reverence
Capital advised the Board that they did not envision involvement in RIMCo’s day-to-day operations, but that each organization will have
representation on the board of directors of a direct or indirect corporate parent company of RIMCo (the “Russell Investments Board”).
Through their representatives, TA Associates and Reverence Capital will be actively involved in the governance and growth strategy
of RIMCo, will recruit additional members for the Russell Investments Board with meaningful leadership and managerial experience
in investment management, and intend to bring strategic relationships to bear in support of driving the growth of RIMCo’s business.
5. The current intention of TA Associates and Reverence Capital to retain RIMCo’s existing management team and other key
professionals.
6. The intention of TA Associates and Reverence Capital to finance a substantial portion of the Transaction purchase price by debt
guaranteed by Emerald Acquisition and certain subsidiaries (including RIMCo) of FRC (“Transferred Subsidiaries”), (Emerald
Acquisition and certain Transferred Subsidiaries, including RIMCo, collectively, the “Guarantors”), with the possibility of a future
change of control of RIMCo upon the occurrence of certain conditions or events of default under the final terms and conditions of the
Term Loan Facility and the Revolving Credit Facility (which had not been negotiated or finalized). The Board noted that RIMCo,
TA Associates, and Reverence Capital each anticipates, based on historical operating profits of the Transferred Subsidiaries, that
cash flows from the Transferred Subsidiaries will be adequate to service all debt with appropriate cushions with no diminution in
the nature, scope, or quality of services provided to the Funds by RIMCo and its affiliates, as supported by analyses and five-year
projections prepared by and provided to the Board by TA Associates and Reverence Capital. The Board noted that TA Associates
and Reverence Capital advised the Board that the capital structure of RIMCo, giving effect to its debt service obligations, would be
appropriately balanced and that the most recent balance sheet and statement of income of RIMCo would not be changed significantly
by the Transaction. The Board particularly noted that TA Associates and Reverence Capital advised the Board that each has used
leverage effectively in prior transactions with asset managers with mutual fund complexes as part of a balanced structure and that a
TA Fund and a Reverence Capital Fund (and, indirectly, their limited partners) have guaranteed Emerald Acquisition’s obligation to
pay U.S. $150 million of the purchase price to FRC in four annual installments commencing on December 31, 2017 (the “Holdback”)
and, therefore, have an additional financial interest in the success of the Transaction until the Holdback is paid to FRC. TA Associates
and Reverence Capital informed the Board that Emerald Acquisition (which is, and it is expected that the terms of the Facilities will
require it to remain, a passive holding company with no operations) is prepared to support the business of RIMCo through reinvestment
of cash flow and additional capital investments, if and as appropriate, but made no commitments and may be financially constrained
in its ability to do so.
7. Statements from TA Associates and Reverence Capital that there should be no pressure to and there are no current plans to make
changes with respect to current Advisory Fees, expense limitations, and distribution arrangements or in the nature, scope, or quality of
services provided to the Funds by RIMCo and its affiliates.
8. The strong support expressed by the current senior management team at RIMCo for the Transaction.
9. The commitment of FRC to bear all expenses incurred by the Funds in connection with the Transaction, including all costs associated
with the proxy solicitation.
10. Statements from TA Associates and Reverence Capital that there is no intention to change any of the Funds’ affiliated or third-
party service providers in connection with the Transaction, thereby assuring continuation of services needed for the Funds’ operations
and minimizing complications in connection with the transfer of ownership of FRC’s investment management business from LSEG to
Emerald Acquisition through one or more direct or indirect wholly-owned subsidiaries (the “Owners”).
11. The Board was informed that the Transaction will result in employees of Russell Investments owning a larger financial interest,
indirectly, in RIMCo than they currently own, which may align their long-term interests with the interests of RIMCo and should help
RIMCo retain key management and investment personnel, an important factor in assessing the stability of RIMCo following completion
of the Transaction.
12. Information concerning the impact of the separation of FRC’s index business from FRC’s investment management business and
assurances from RIMCo that following the Transaction it will continue to have access to the intellectual property and index data and
related services that have been provided by FRC’s index business through license agreements that are satisfactory to RIMCo and will
not involve any cost or expense to the Funds.
Basis for Approval of Investment Advisory Contracts 153
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
13. The Existing RIMCo Agreement was approved by each Fund’s shareholders in November 2014. The terms and conditions of the
Post-Transaction RIF Agreements are substantially the same as those of the recently approved Existing RIF Agreements, which will
terminate automatically upon completion of the Transaction, and the Post-Transaction RIF Agreements will not increase any Fund’s
Advisory Fee (on a contractual or actual basis), expense ratio, economies of scale, or other fees or benefits received by RIMCo and its
affiliates as a result of their relationships with the Fund.
14. There will be no changes to the Independent Trustees of the Board in connection with the Transaction, assuring continuity of the
Funds’ supervision and oversight.
15. Assurances from RIMCo and Emerald Acquisition that no “unfair burden” has been imposed on the Funds within the meaning of
Section 15(f) of the Investment Company Act by the LSEG Transaction or the Transaction, taken singly or together, and that for a period
of two years following the effective date of the Transaction, they will use reasonable best efforts not to engage in activities that would
impose an unfair burden on the Funds.
16. The Trustees’ belief that shareholders have purchased and retained their Fund shares based upon the reputation, investment
record, and investment philosophies and strategies employed by RIMCo in managing the Funds (including the manager-of-managers
structure employed by the Manager-of-Managers Funds and employed indirectly by the Funds of Funds through their investments in
underlying Manager-of-Managers Funds).
17. Statements from TA Associates and Reverence Capital that they will not require or seek any changes to the manager-of-managers
structure employed by RIMCo in the case of the Manager-of-Managers Funds and employed by the Funds of Funds through their
investments in the Manager-of-Managers Funds or Underlying Funds or changes to the current Money Managers to the Manager-of-
Managers Funds or Underlying Funds other than in the ordinary course of business.
18. The demands and complexity of managing the Manager-of-Managers Funds and Underlying Funds pursuant to the manager-of-
managers structure, the special expertise of RIMCo with respect to the manager-of-managers structure of those Funds, and the Board’s
belief that at the current expense ratio of each Manager-of-Managers Fund and Underlying Fund, there likely would be no acceptable
alternative investment managers to replace RIMCo following termination of the Existing RIMCo Agreement on comparable terms
given the need to continue the manager-of-managers strategy selected by Fund shareholders in purchasing their shares of Manager-of-
Managers Funds or Funds of Funds that indirectly employ a manager-of-managers structure through their investments in underlying
Manager-of-Managers Funds.
19. RIMCo is a joint and several Guarantor of the Facilities and certain of the Equity Interests, including the RIMCo Equity Interest,
will be pledged as loan collateral (the “Loan Collateral”). If ownership of the Loan Collateral changes as a result of certain third-
party financial institutions’ (the “Lenders”) exercise of their rights in connection with the Facilities and the Post-Transaction RIF
Agreements automatically terminate upon the change of control of RIMCo, there may be no acceptable alternative investment managers
with special expertise to continue the manager-of-managers structure selected by shareholders of the Manager-of-Managers Funds
and Underlying Funds on comparable terms and conditions. In such event, the Board will consider what actions, if any, are available,
necessary, appropriate, and in the best interests of the Funds and their shareholders under the circumstances, which may include
approving a temporary interim advisory agreement with RIMCo in accordance with Rule 15a-4 under the Investment Company Act that
would allow RIMCo to continue to serve as investment manager for a maximum period of 150 days.
20. The belief that in the event that the Post-Transaction RIF Agreements were not approved by the Board or the Transaction is not
completed, LSEG would explore alternative options to sell or dispose of FRC’s investment management business based on the conclusion
of the Review and the Board’s concern that a transaction other than the Transaction might not be available, or if available, could entail
terms, conditions, and consequences more unfavorable to the Funds than the Transaction. The Board also considered RIMCo’s belief
that in the event of a determination by the Board not to approve the Post-Transaction RIF Agreements continued uncertainty regarding
RIMCo’s ownership could adversely affect the ability of RIMCo to attract and retain key personnel and the abilities of the Funds to
retain their current assets and to attract additional assets during the period in which LSEG pursued an alternative transaction.
In evaluating the Post-Transaction RIF Agreements, the Board considered various risks associated with the Transaction or if the
Transaction is not completed, including the possibility that a change of control terminating the Post-Transaction RIF Agreements may
occur at any time after the Transaction in the event of, among others things, (1) a default under the Facilities by the certain direct or
indirect subsidiaries of Emerald Acquisition (the “Borrowers”) and the Guarantors, including RIMCo, or (2) exits from the investments
made by the TA Alternative Investment Vehicles and/or the Reverence Capital Entities. Moreover, the Board considered that, although
154 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
TA Associates and Reverence Capital believe, based on the historical operating profits of RIMCo and the other Transferred Subsidiaries,
that the “free” cash flows of RIMCo and the other Transferred Subsidiaries will be sufficient for the Borrowers and the Guarantors to
meet their debt service obligations under the Facilities with no diminution in the nature, scope, or quality of services provided to the
Funds, the operating profits of RIMCo and the other Transferred Subsidiaries may be adversely affected by various factors, including
general economic, market and business conditions and developments specific to the business activities and operations of RIMCo and the
other Transferred Subsidiaries. Therefore, there is no assurance that the historical operating profits of RIMCo and the other Transferred
Subsidiaries will be sustained following completion of the Transaction at levels sufficient for the Borrowers and the Guarantors to meet
their obligations in respect of the Facilities and to do so without diminution in the nature, scope and quality of services provided by
RIMCo and its affiliates to the Funds. Consequently, the Board identified as the principal factor in determining whether to approve the
Post-Transaction RIF Agreements the immediate need to provide for uninterrupted investment advisory and other services required for
the operations of the Funds following the automatic termination of the Existing RIF Agreements upon completion of the Transaction.
The Board also noted LSEG’s stated intention to dispose of its interests in FRC’s investment management business and the uncertainty
that if the Board did not approve the Post-Transaction RIF Agreements, or the Transaction is not completed, another transaction could
be arranged by LSEG, or if arranged, could entail terms and conditions more unfavorable than the Transaction. No other factors or
single factor reviewed by the Board was identified as a principal factor in determining whether or not to approve the Post-Transaction
RIF Agreements and each Board member may have attributed different weights to the various factors. The Trustees evaluated all
information available to them on a Fund-by-Fund basis and their determinations were made separately in respect of each Fund.
Following the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees were advised of two changes in RIMCo’s
management, including a change in the Funds’ leadership. On January 13, 2016, RIMCo publicly announced that Vernon Barback
had been appointed President of Russell Investments. With respect to the management change affecting the Funds’ leadership, RIMCo
publicly announced on February 9, 2016 that Sandra Cavanaugh, Chief Executive Officer of the Funds and a member of the Funds’
Board, would retire at the end of June 2016. The Independent Trustees were not aware of, and therefore did not consider, these changes
in their evaluation of the Post-Transaction RIMCo Agreement. On January 14, 2016, the Independent Trustees of the Funds met by
conference call with members of RIMCo’s executive management and received information regarding these changes. On January 18,
2016, the Independent Trustees met privately by conference call with Independent Counsel to discuss the management changes, and
following that meeting, the Independent Trustees submitted a list of questions regarding the management changes and their impact
on the Funds. The Board again met with representatives of RIMCo’s executive management by conference call on January 28, 2016
to review responses to its questions. Following this review, the Independent Trustees continued the conference call meeting, after
excusing RIMCo’s representatives, to discuss in executive session with their Independent Counsel the foregoing changes in RIMCo
management. Following discussion, the Independent Trustees determined that, while the changes, particularly with respect to Ms.
Cavanaugh, would have been relevant to its evaluation of the Post-Transaction RIMCo Agreement, they would not have affected the
decision to approve the Post-Transaction RIMCo Agreement.
Basis for Approval of Investment Advisory Contracts 155
Russell Investment Funds
Shareholder Requests for Additional Information — December 31, 2015 (Unaudited)
A complete unaudited schedule of investments is made available generally no later than 60 days after the end of the first and third
quarters of each fiscal year. These reports are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354, (ii)
on the Securities and Exchange Commission’s website at www.sec.gov, and (iii) at the Securities and Exchange Commission’s public
reference room.
The Board has delegated to RIMCo, as RIF’s investment adviser, the primary responsibility for monitoring, evaluating and voting
proxies solicited by or with respect to issuers of securities in which assets of the Funds may be invested. RIMCo has established a proxy
voting committee and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting guidelines (“Guidelines”).
The Funds maintain a Portfolio Holdings Disclosure Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by the Funds. A description of the P&P, Guidelines, Portfolio
Holdings Disclosure Policy and additional information about Fund Trustees are contained in the Funds’ Statement of Additional
Information (“SAI”). The SAI and information regarding how the Funds voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30, 2015 are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354,
and (ii) on the Securities and Exchange Commission’s website at www.sec.gov.
If possible, depending on contract owner registration and address information, and unless you have otherwise opted out, only one copy
of the RIF prospectus and each annual and semi-annual report will be sent to contract owners at the same address. If you would like
to receive a separate copy of these documents, please contact your Insurance Company. If you currently receive multiple copies of the
prospectus, annual report and semi-annual report and would like to request to receive a single copy of these documents in the future,
please contact your insurance company.
Some insurance companies may offer electronic delivery of the Funds’ prospectuses and annual and semi-annual reports. Please
contact your insurance company for further details.
156 Shareholder Requests for Additional Information
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers — December 31, 2015
(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 41 funds, Russell Investment Funds (“RIF”), which has 9 funds. Each of the trustees
is a trustee of RIC and RIF. The first table provides information for the interested trustees. The second table provides information for the
independent trustees. The third table provides information for the Trustee Emeritus. The fourth table provides information for the officers.
Furthermore, each Trustee possesses the following specific attributes: Mr. Alston has business, financial and investment experience
as a senior executive of an international real estate firm and is trained as a lawyer; Ms. Blake has had experience as a certified public
accountant and has had experience as a member of boards of directors/trustees of other investment companies; Ms. Burgermeister has had
experience as a certified public accountant and as a member of boards of directors/trustees of other investment companies; Mr. Connealy
has had experience with other investment companies and their investment advisers first as a partner in the investment management
practice of PricewaterhouseCoopers LLP and, subsequently, as the senior financial executive of two other investment organizations
sponsoring and managing investment companies, and has been determined by the Board to be an audit committee financial expert; Ms.
Krysty has had business, financial and investment experience as the founder and senior executive of a registered investment adviser
focusing on high net worth individuals as well as a certified public accountant and a member of the boards of other corporations and
non-profit organizations; Mr. Tennison has had business, financial and investment experience as a senior executive of a corporation with
international activities and was trained as an accountant; and Mr. Thompson has had experience in business, governance, investment
and financial reporting matters as a senior executive of an organization sponsoring and managing other investment companies, and,
subsequently, has served as a board member of other investment companies. Ms. Cavanaugh has had experience with other financial
services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior
officer and/or director of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh
is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office* | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INTERESTED TRUSTEE | |||||
# Sandra Cavanaugh, | President and Chief | Until successor | • President and CEO RIC and RIF | 50 | • Trustee, |
Born May 10, 1954 | Executive Officer | is chosen and | • Chairman of the Board, Co-President | Russell | |
1301 Second Avenue, | since 2010 | qualified by | and CEO, Russell Financial Services, | Exchange | |
18th Floor, Seattle, WA | Trustee since 2010 | Trustees | Inc. (“RFS”) | Traded Funds | |
98101 | Appointed until | • Chairman of the Board, President | Trust | ||
successor is | and CEO, Russell Fund Services | ||||
duly elected and | Company (“RFSC”) | ||||
qualified | • Director, RIMCo | ||||
• Chairman of the Board, President and | |||||
CEO Russell Insurance Agency, Inc. | |||||
(“RIA”) (insurance agency) |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
# Ms. Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore classified as an Interested Trustee. Russell Investments announced
on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and help with a smooth transition as
Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as long as the rest of 2016 to assist
with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. Cavanaugh may resign as a
trustee of the Trust. This leadership change is not expected to have an adverse impact on any of the Funds.
Disclosure of Information about Fund Trustees and Officers 157
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES | |||||
Thaddas L. Alston, | Trustee since 2006 | Appointed until | Senior Vice President, Larco | 50 | • Until October |
Born April 7, 1945 | successor is | Investments, Ltd. (real estate firm) | 2015, Trustee, | ||
1301 Second Avenue, | duly elected and | Russell | |||
18th Floor, Seattle, WA | qualified | Exchange | |||
98101 | Traded Funds | ||||
Trust |
158 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
Kristianne Blake, | Trustee since 2000 | Appointed until | • Director and Chairman of the Audit | 50 | • Director, |
Born January 22, 1954 | Chairman since 2005 | successor is | Committee, Avista Corp (electric | Avista Corp | |
1301 Second Avenue, | duly elected and | utilities) | (electric | ||
18th Floor, Seattle, WA | qualified | • Regent, University of Washington | utilities) | ||
98101 | Approved | • President, Kristianne Gates Blake, | • Until June | ||
annually | P.S. (accounting services) | 30, 2014, | |||
• Until June 30, 2014, Director, Ecova | Director, | ||||
(total energy and sustainability | Ecova (total | ||||
management) | energy and | ||||
• Until December 31, 2013, Trustee | sustainability | ||||
and Chairman of the Operations | management) | ||||
Committee, Principal Investors Funds | • Until | ||||
and Principal Variable Contracts | December 31, | ||||
Funds (investment company) | 2013, Trustee, | ||||
• From April 2004 through December | Principal | ||||
2012, Director, Laird Norton Wealth | Investors | ||||
Management and Laird Norton Tyee | Funds | ||||
Trust (investment company) | (investment | ||||
company) | |||||
• Until | |||||
December 31, | |||||
2013, Trustee | |||||
Principal | |||||
Variable | |||||
Contracts | |||||
Funds | |||||
(investment | |||||
company) | |||||
• From April | |||||
2004 through | |||||
December | |||||
2012, | |||||
Director, Laird | |||||
Norton Wealth | |||||
Management | |||||
and Laird | |||||
Norton | |||||
Tyee Trust | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
Disclosure of Information about Fund Trustees and Officers 159
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Cheryl Burgermeister, | Trustee since 2012 | Appointed until | • Retired | 50 | • Trustee and |
Born June 26, 1951 | successor is | • Trustee and Chairperson of Select | Chairperson of | ||
1301 Second Avenue, | duly elected and | Sector SPDR Funds (investment | Select Sector | ||
18th Floor, Seattle, WA | qualified | company) | SPDR Funds | ||
98101 | • Until December 31, 2014, | (investment | |||
Chairperson of Audit Committee, | company) | ||||
Select Sector SPDR Funds | • Trustee, ALPS | ||||
(investment company) | Series Trust | ||||
(investment | |||||
company) | |||||
• Until | |||||
December | |||||
31, 2014, | |||||
Chairperson | |||||
of Audit | |||||
Committee, | |||||
Select Sector | |||||
SPDR Funds | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust | |||||
Daniel P. Connealy, | Trustee since 2003 | Appointed until | • Retired | 50 | • Until October |
Born June 6, 1946 | Chairman of the | successor is | • June 2004 to June 2014, Senior Vice | 2015, Trustee, | |
1301 Second Avenue, | Audit Committee | duly elected and | President and Chief Financial Officer, | Russell | |
18th Floor, Seattle, WA | since 2015 | qualified | Waddell & Reed Financial, Inc. | Exchange | |
98101 | Appointed until | (investment company) | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified | |||||
Katherine W. Krysty, | Trustee since 2014 | Appointed until | • Retired | 50 | • Until October |
Born December 3, 1951 | successor is | • January 2011 through March 2013, | 2015, Trustee, | ||
1301 Second Avenue | duly elected and | President Emerita, Laird Norton | Russell | ||
18th Floor, Seattle, WA | qualified | Wealth Management (investment | Exchange | ||
98101 | company) | Traded Funds | |||
Trust |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
160 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Raymond P. Tennison, Jr., | Trustee since 2000 | Appointed until | • Retired | 50 | • Until October |
Born December 21, 1955 | Chairman of | successor is | • From January 2008 to December | 2015, Trustee, | |
1301 Second Avenue | the Nominating | duly elected and | 2011, Vice Chairman of the Board, | Russell | |
18th Floor, Seattle, WA | and Governance | qualified | Simpson Investment Company (paper | Exchange | |
98101 | Committee since | Appointed until | and forest products) | Traded Funds | |
2007 | successor is | Trust | |||
duly elected and | |||||
qualified | |||||
Jack R. Thompson, | Trustee since 2005 | Appointed until | • Retired | 50 | • Until October |
Born March 21, 1949 | Chairman of | successor is | 2015, Trustee, | ||
1301 Second Avenue, | the Investment | duly elected and | Russell | ||
18th Floor, Seattle, WA | Committee since | qualified | Exchange | ||
98101 | 2015 | Appointed until | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
Disclosure of Information about Fund Trustees and Officers 161
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
TRUSTEE EMERITUS | |||||
George F. Russell, Jr., | Trustee Emeritus and | Until resignation | • Director Emeritus, Frank Russell | 50 | None |
Born July 3, 1932 | Chairman Emeritus | or removal | Company (investment consultant to | ||
1301 Second Avenue, | since 1999 | institutional investors (“FRC”)) and | |||
18th Floor, Seattle, WA | RIMCo | ||||
98101 | • 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) |
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS | |||
Cheryl Wichers, | Chief Compliance | Until removed | • Chief Compliance Officer, RIC and RIF |
Born December 16, 1966 | Officer since 2005 | by Independent | • Chief Compliance Officer, RFSC and U.S. One Inc. |
1301 Second Avenue | Trustees | • 2005 to 2011 Chief Compliance Officer, RIMCo | |
18th Floor, Seattle, WA | |||
98101 | |||
*Sandra Cavanaugh, | President and Chief | Until successor | • CEO, U.S. Private Client Services, Russell Investments |
Born May 10, 1954 | Executive Officer | is chosen and | • President and CEO, RIC and RIF |
1301 Second Avenue, | since 2010 | qualified by | • Chairman of the Board, Co-President and CEO, RFS |
18th Floor, Seattle, WA | Trustees | • Chairman of the Board, President and CEO, RFSC | |
98101 | • Director, RIMCo | ||
• Chairman of the Board, President and CEO, RIA | |||
Mark E. Swanson, | Treasurer and Chief | Until successor | • Treasurer, Chief Accounting Officer and CFO, RIC and RIF |
Born November 26, 1963 | Accounting Officer | is chosen and | • Director, RIMCo, RFSC, Russell Trust Company (“RTC”) and RFS |
1301 Second Avenue | since 1998 | qualified by | • Global Head of Fund Services, Russell Investments |
18th Floor, Seattle, WA | Trustees | • October 2011 to December 2013, Head of North America Operations | |
98101 | Russell Investments | ||
• May 2009 to October 2011, Global Head of Fund Operations, Russell | |||
Investments |
162 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS (continued) | |||
Jeffrey T. Hussey, | Chief Investment | Until removed by | • Global Chief Investment Officer, Russell Investments |
Born May 2, 1969 | Officer since 2013 | Trustees | • Chief Investment Officer, RIC and RIF |
1301 Second Avenue, | • Chairman of the Board, President and CEO, RIMCo | ||
18th Floor, Seattle WA | • Director, RTC, RIS and Russell Investments Delaware, Inc. | ||
98101 | • Board of Managers, Russell Institutional Funds Management, Inc. | ||
• 2003 to 2013 Chief Investment Officer, Fixed Income, Russell | |||
Investments | |||
Mary Beth R. Albaneze, | Secretary since 2010 | Until successor | • Associate General Counsel, Russell Investments |
Born April 25, 1969 | is chosen and | • Secretary, RIMCo, RFSC and RFS | |
1301 Second Avenue, | qualified by | • Secretary and Chief Legal Officer, RIC and RIF | |
18th Floor, Seattle, WA | Trustees | • Assistant Secretary, RFS, RIA and U.S. One Inc. | |
98101 |
* Russell Investments announced on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and help
with a smooth transition as Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as long as
the rest of 2016 to assist with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. Cavanaugh
may resign as a trustee of the Trust, This leadership change is not expected to have an adverse impact on any of the Funds.
Disclosure of Information about Fund Trustees and Officers 163
Russell Investment Funds
Adviser, Money Managers and Service Providers — December 31, 2015 | ||
Interested Trustee | Independent Registered Public Accounting Firm | |
Sandra Cavanaugh | PricewaterhouseCoopers LLP | |
Independent Trustees | 1420 5th Avenue, Suite 2800 | |
Thaddas L. Alston | Seattle, WA 98101 | |
Kristianne Blake | Money Managers | |
Cheryl Burgermeister | Multi-Style Equity Fund | |
Daniel P. Connealy | Columbus Circle Investors, Stamford, CT | |
Katherine W. Krysty | Institutional Capital LLC, Chicago, IL | |
Raymond P. Tennison, Jr. | Jacobs Levy Equity Management, Inc., Florham Park, NJ | |
Jack R. Thompson | Mar Vista Investment Partners, LLC, Los Angeles, CA | |
Trustee Emeritus | Suffolk Capital Management, LLC, New York, NY | |
George F. Russell, Jr. | Sustainable Growth Advisers, LP, Stamford, CT | |
Officers | Aggressive Equity Fund | |
Sandra Cavanaugh, President and Chief Executive Officer | DePrince, Race & Zollo, Inc., Winter Park, FL | |
Cheryl Wichers, Chief Compliance Officer | Monarch Partners Asset Management, LLC, Boston, MA | |
Jeffrey T. Hussey, Chief Investment Officer | RBC Global Asset Management (U.S.) Inc., Minneapolis, MN | |
Mark E. Swanson, Treasurer and Chief Accounting Officer | Snow Capital Management L.P., Sewickley, PA | |
Mary Beth R. Albaneze, Secretary | Timpani Capital Management, LLC, Milwaukee, WI | |
Adviser | Non-U.S. Fund | |
Russell Investment Management Company | Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX | |
1301 Second Avenue | MFS Institutional Advisors Inc., Boston, MA | |
Seattle, WA 98101 | Pzena Investment Management LLC, New York, NY | |
Administrator, Transfer and Dividend Disbursing | William Blair & Company L.L.C., Chicago, IL | |
Agent | Core Bond Fund | |
Russell Fund Services Company | Colchester Global Investors Ltd, London, England | |
1301 Second Avenue | Logan Circle Partners, L.P., Philadelphia, PA | |
Seattle, WA 98101 | Macro Currency Group — an investment group within | |
Principal Global Investors, LLC, Des Moines, IA* | ||
Custodian | Metropolitan West Asset Management LLC, Los Angeles, CA | |
State Street Bank and Trust Company | Scout Investments, Inc., Kansas City, MO | |
1 Heritage Drive | ||
North Quincy, MA 021171 | Global Real Estate Securities Fund | |
Cohen & Steers Capital Management, Inc., New York, NY | ||
Office of Shareholder Inquiries | INVESCO Advisers, Inc. which acts as a money manager to | |
1301 Second Avenue | the Fund through its INVESCO Real Estate Division, | |
Seattle, WA 98101 | Dallas, TX | |
(800) 787-7354 | Morgan Stanley Investment Management Inc., New York, NY | |
Legal Counsel | *Principal Global Investors LLC is the asset management arm of the Principal | |
Dechert LLP | Financial Group® (The Principal®), which includes various member com- | |
One International Place, 40th Floor | panies including Principal Global Investors, LLC, Principal Global Investors | |
100 Oliver Street | (Europe) Limited, and others. The Macro Currency Group is the specialist cur- | |
Boston, MA 02110 | rency investment group within Principal Global Investors. Where used herein, | |
Distributor | Macro Currency Group means Principal Global Investors, LLC. | |
Russell Financial Services, Inc. | ||
1301 Second Avenue | ||
Seattle, WA 98101 |
This report is prepared from the books and records of the Funds and is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus. Nothing herein contained
is to be considered an offer of sale or a solicitation of an offer to buy shares of Russell Investment Funds. Such offering is made only by
Prospectus, which includes details as to offering price and other material information.
164 Adviser, Money Managers and Service Providers
Russell Investment Funds
Russell Investment Funds is
a series investment company
with nine different investment
portfolios referred to as Funds.
These financial statements report
on four of these Funds.
Russell Investment Funds
LifePoints® Funds
Variable Target Portfolio Series
Annual Report
December 31, 2015
Table of Contents
Page | |
To Our Shareholders | 3 |
Market Summary | 4 |
Moderate Strategy Fund | 10 |
Balanced Strategy Fund | 28 |
Growth Strategy Fund | 46 |
Equity Growth Strategy Fund | 64 |
Notes to Financial Highlights | 82 |
Notes to Schedule of Investments | 83 |
Notes to Financial Statements | 84 |
Report of Independent Registered Public Accounting Firm | 99 |
Tax Information | 100 |
Basis for Approval of Investment Advisory Contracts | 101 |
Shareholder Requests for Additional Information | 113 |
Disclosure of Information about Fund Trustees and Officers | 114 |
Adviser and Service Providers | 121 |
Russell Investment Funds - LifePoints® Funds Variable Target Portfolio Series
Copyright © Russell Investments 2016. All rights reserved.
Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is part
of London Stock Exchange Group.
Fund objectives, risks, charges and expenses should be carefully considered before in-
vesting. A prospectus containing this and other important information must precede or
accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Financial Services, Inc., member FINRA and part of Russell
Investments.
Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance,
are not a guarantee of future performance, and are not indicative of any specific investment. Index return
information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its
affiliates.
Russell Investments is the owner of the trademarks, service marks, and copyrights related to its respective indexes.
Performance quote represents past performance and does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance data quoted.
To Our Shareholders
Fellow Shareholder,
The redeeming aspect of the market volatility in 2015 is its underscoring the importance of shareholders having solid,
long-term financial plans, realistic goals, and regular check-ins with personal financial advisors to collaborate on how best
to achieve the outcomes that matter most to shareholders. Understanding these outcomes and the tools we need to reach
them remains a central focus at Russell Investments.
Staying steady in stormy markets is vital – we see more volatility ahead.
After strong U.S. equity performance in 2014, markets experienced muted returns in 2015. The broad-based Russell
3000® Index was up 0.48% for the year ended December 31, 2015.
Markets collectively sought guidance from a cautious U.S. Federal Reserve (the “Fed”) regarding the timing of the initial
interest rate increase. It’s hard to believe the last time the Fed increased the Fed Funds rate was June 2006 – more than
nine years ago. Trying to anticipate the initial rate increase and related market impacts was a primary driver of both equity
and fixed income returns, not only in the U.S., but globally as well.
The ‘abundance of caution’ evidenced by the Fed mirrored central bank sentiment worldwide to protect the fragility of the
hard fought, lengthy, and mainly tepid recovery from the global financial crisis.
The European Central Bank expanded their Quantitative Easing (QE) Program throughout the year as they maintained
their contribution to positive economic growth. This stimulus coupled with the anticipation of increasing interest rates in
the U.S. contributed to the strengthening U.S. dollar. And in August, China made an unexpected devaluation of its currency
to project recalibrated and more modest growth expectations.
U.S. unemployment decreased throughout the year, from 5.6% at the end of December 2014 to 5.0% at the end of December
2015 and the annual inflation rate was 0.7% as of December 2015. The U.S. economy has led the world out of the recession;
as it approaches a more mature stage in its economic cycle, our belief in the primacy of global diversification deepens.
The following pages provide additional insights on the markets and the performance of Russell Investment Funds (RIF) for
the fiscal year ending December 31, 2015.
Thank you for your continued trust. All of us at Russell Investments appreciate our duties to help you achieve financial
security.
CEO, U.S. Private Client Services
To Our Shareholders 3
Russell Investment Funds
Market Summary as of December 31, 2015 (Unaudited)
U.S. Equity Markets
Broadly measured the Russell 3000® Index, U.S. stocks returned 0.48% for the one year period which is the seventh
straight fiscal year ending December 31st that the Russell 3000® Index has finished with a positive absolute return. The
Russell 3000® Index finished with a positive return in six of the fiscal year’s twelve months.
Within U.S. capitalization stocks, the Russell 1000® Growth Index outperformed the Russell 1000® Value Index by 9.50%
over the fiscal year, as stocks with lower valuations (lower price-to-book, price-to-earnings and price-to-cash flow ratios)
lagged significantly. In addition, high dividend yield stocks trailed the broader market. Factors that were rewarded during
the fiscal year included lower earnings variability and high forecasted growth. From a sector perspective, consumer staples
outperformed the Russell 1000® Index by over 7% and energy trailed the Russell 1000® Index by over 23%. The utilities
sector also trailed for the year, specifically electric utilities, which lost approximately 6% relative to the Russell 1000®
Index. Similarly, within U.S. small capitalization stocks, the Russell 2000® Growth Index outperformed the Russell 2000®
Value Index. The fiscal year was led by larger capitalization stocks as the Russell Top 200® Index returned 2.36% compared
with the Russell Midcap® Index and the Russell 2000® Index, which returned -2.44% and -4.41%, respectively. Defensive
stocks outperformed dynamic stocks across all market capitalization tiers.
In January 2015, U.S. equities got off to a rocky start with lackluster corporate earnings, mixed economic data and volatile
oil prices weighing on investor sentiment. One of the more disappointing pieces of macro-economic data was fourth-quarter
gross domestic product (“GDP”) growth coming in at an annualized rate of 2.2%, which marked both a big drop from the
third-quarter figure (5.0%) and was a shortfall on consensus forecasts. Considering all data inputs, investors sought areas of
the market with more perceived safety and yield, causing interest rate sensitive stocks, specifically real estate investment
trusts (“REITs”) and utilities, to be significantly bid up in January. In February, there was an unwinding of some of those
same interest rate sensitive valuations in the market, most notably within electric utilities. The information about January
non-farm payroll growth, which was released in early February, helped to spur a risk-on equity rally as the Russell 3000®
Index finished up 5.79% in February. While the word “patient” with regard to the normalization of U.S. monetary policy
was removed from Fed chair Yellen’s statement in March, Yellen declared that this did not mean that the central bank was
becoming “impatient.” The central bank chair emphasized that any interest-rate decision remained dependent on “further
improvement in the labor market” and on the committee becoming “reasonably confident” of increases in inflation toward
its 2.0% target.
The Russell 3000® Index edged up 0.14% from April through June, with a sell-off at the end of the period reversing most
of April and May’s gains. Severe winter weather and labor disruptions at major ports had caused a pause in U.S. economic
activity in the early part of 2015, however the contraction was less severe than originally reported with the final first-
quarter GDP estimate upwardly revised to -0.2% annualized from -0.7% annualized due to better personal consumption
figures. The period ended with uncertainty over another potential Greek bailout dominating the headlines which in part,
contributed to the selloff in equities in June.
During the third quarter, the Russell 3000® Index declined 7.25%. The severe selloff in U.S. and global equity markets
was driven in part by China’s currency devaluation and concerns over slowing global economic growth. Heightened
levels of market volatility led defensive stocks to outperform dynamic stocks at all market capitalization levels. In the
Fed’s September meeting, a decision was made to keep interest rates unchanged. Chair Yellen stated that, despite recent
international developments, domestically “the economy has been performing well, and we expect it to continue to do
so.” At the time, second-quarter GDP growth had been revised upwards to 3.7%, and was later revised higher to 3.9%.
Unemployment declined to 5.1% for August, its lowest level in seven years, assisted by a decline in the participation rate.
However, non-farm payroll growth missed expectations at +173,000 in August, following upwardly revised readings for
June (+245,000) and July (+223,000).
The Russell 3000® Index closed out 2015 on a strong note returning 6.27% for the fourth quarter. Most of the positive
return for the quarter came in October with the Russell 3000® Index returning 7.90%. In early November, non-farm payroll
4 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
growth for October was reported significantly above consensus at +271,000. This caused certain industries that may benefit
from rising interest rates to react favorably, most notably banks, which outperformed the Russell 3000® Index by over
3.60% in November. Leveraged industries that are seen as bond substitutes due to high dividend yields, such as electric
utilities and REITs, underperformed the Russell 3000® Index by 2.15% and 0.75%, respectively. In mid-December the
Fed raised short term interest rates for the first time since the financial crisis signalling the beginning of the end for the
central bank’s stimulus program. There was not a significant market reaction in December when the Fed raised rates
because the increase was mostly priced in by the market once the positive non-farm payroll growth report was released
in November signally a high probability of a raise in December. Fed officials emphasized that they intend to raise rates
gradually, and only if economic growth continues. Chair Yellen stated that, despite recent international developments,
domestically “the economy has been performing well, and we expect it to continue to do so.”
Non-U.S. Developed Equity Markets
For the fiscal year ended December 31, 2015, the non-U.S. equity market, as measured by the Russell Developed ex-U.S.
Large Cap Index (the “Index”), was down 2.6%.
After a relatively strong first half of the period, which saw the Index return 4.5%, the second half the period experienced a
large sell-off during which the Index dropped by 6.7%.
The major market drivers for non-U.S. markets for most of the fiscal year were the economic weakness and market sell-off in
China and the uncertainty around the Federal Reserve (“Fed”) interest rate hike. In August 2015, the Chinese government
and the People’s Bank of China attempted to stem equity market losses and shore up confidence in the economy by
devaluing the Renminbi. This action could not contain the market turmoil, which in turn drove major emerging markets
and currencies lower. Uncertainty around the Fed’s interest rate hike drove non-U.S. market volatility through much of
the fiscal year, however, in December, the Fed determined to raise interest rates for the first time in almost a decade. This
action was widely anticipated by non-U.S. markets and had little market impact upon announcement. In December, the
European Central Bank extended its bond repurchase program by six months to March 2017, continuing the purchases at
a rate of €60 billion a month. After the announcement, European stocks fell sharply as markets were expecting an increase
in bond purchases.
Japan was the stand out market over the period, while Europe ex-UK was almost flat for the year. Both Japan and Europe
benefited from accommodative policies and cheaper valuations. Slightly better than expected earnings results in Europe,
coupled with the European Central Bank’s willingness to continue with quantitative easing and the renewed bailout deal
with Greece during the second part of the fiscal year, brought a degree of harmony in Europe. High levels of central
bank liquidity leading to ultra-low returns on bonds pushed investors towards equities in Japan. Broadly, performance in
commodity heavy economies like Canada and Australia lagged significantly due to a demand slowdown, particularly from
China.
Commodity driven sectors, particularly energy and materials, were the worst hit in the fiscal year ended December 31,
2015 as oil prices tumbled to the lowest levels since 2009 and a demand slowdown in emerging markets caused commodity
prices to plunge significantly. Defensive sectors, led by consumer staples and healthcare, held up well as uncertainty about
global economic growth prevailed throughout the fiscal year.
In terms of factor returns, growth significantly outperformed value and small/mid-capitalization stocks modestly
outperformed large capitalization stocks during the fiscal year. Stocks with lower leverage and high momentum held up
well amid the market volatility.
Market Summary 5
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
Emerging Markets
The Russell Emerging Markets Index, as measured in U.S. dollar terms (the “Index”) lost 12.8% over the fiscal year ended
December 31, 2015. In what was a difficult year for the emerging markets asset class, macroeconomic events continued to
impact emerging market equities against a backdrop of interest rate uncertainty and geopolitical headwinds.
In the first quarter of 2015, emerging markets made a positive start to the year, with the Index returning 2.1%. The prospect
of sustained loose central bank policy outside the U.S. was a tailwind to emerging markets. In addition, the U.S. Federal
Reserve’s increased flexibility regarding the timing of an interest rate rise helped sustain a lower rate outlook in the U.S.
which, in turn, helped to increase investor appetite for riskier emerging markets investments. In contrast, dollar strength
negatively impacted several countries’ returns, with considerable disparity between them. Asia was the best-performing
region. Chinese markets had another strong quarter, ending 5.6% higher as measured by the Index. India was up 5.3%
for the quarter despite slipping in March. Buoyed by the country’s improving prospects, including cheaper oil improving
the country’s balance of payments, India’s central bank twice unexpectedly cut interest rates. Rate-cutting also helped
South Korea’s market outperform (5.0%), while Taiwan (4.0%), Thailand (2.1%) and Indonesia (1.3%) also ended in
positive territory. Meanwhile, Russia went from being the Index’s worst-performer in the fourth quarter of 2014 to the best-
performing country. The market climbed 20.6%, predominantly driven by a rebound in the rouble, while less volatility in
oil prices and a ceasefire agreement in Ukraine also aided market sentiment. In contrast, Greece slumped 21.5% over a
volatile quarter. Debt repayment negotiations between the newly-elected Syriza government and “troika” of the European
Union, the European Central Bank and the International Monetary Fund wildly fluctuated. Brazil maintained its slide with
a further 15.2% fall as the real continued to plummet. Within the Index, the health care sector recorded the highest gains.
The energy sector rebounded, while utilities ended behind its sector counterparts.
In the second quarter of 2015, the Index returned 1.7%. A weakening of the U.S. dollar and the sustained equity rally
in China drove a significantly strong start. However, the Chinese equity surge sharply reversed towards the end of the
quarter which weighed on the broader Index. Additionally, positive U.S. economic data and Federal Reserve statements
strengthened the case for at least one U.S. interest rate rise later this year, which dampened investor appetite for riskier
emerging markets investments. China (8.1%) remained one of the strongest performing regions over the quarter despite
experiencing erratic movements in the latter part of the period. The increase was a contrast to the country’s disappointing
economic data. Notably, urban investment, retail sales and industrial output data was weak while consumer price inflation
moved further away from the central bank’s target. Russia (8.0%), Brazil (6.3%), Greece (6.0%) and Colombia (3.6%) were
other notable countries that outperformed despite also experiencing sharp sell-offs during the quarter. The rouble, real
and euro all appreciated against the U.S. dollar. Select Asian markets were the worst performers over the quarter, with
Indonesia being the worst performing country within the Index (-14.1%) despite gaining ground in June. In Indonesia,
exports continued to disappoint while first-quarter gross domestic product (“GDP”) also missed estimates. Malaysia slipped
7.2% as exports contracted more steeply than expected. Thailand declined 3.4% as the country remained in deflation.
Meanwhile in India (-3.1%), the central bank cut its lending rate as expected to 7.25% in an effort to increase investment.
South Korea marginally underperformed the Index return (-0.3%) as trade numbers remained negative. Taiwan finished flat
with the benchmark (0.1%). Within the Index, the energy and health care sectors outperformed. Technology was the only
sector to decline over the quarter.
In the third quarter of 2015, the Index slumped 18.1% in the worst quarter for emerging markets equities in four years.
China’s growth slowdown caused significant volatility, while the strong U.S. dollar and instability in commodity markets
weighed on investor sentiment. The market sell-off slowed in September, however, as emerging markets edged slightly
higher following the U.S. Federal Reserve’s decision to keep interest rates steady. China (-23.9%) dragged down the Index
return despite attempts by the government and central bank to stem the sliding bear market. The PBoC twice unexpectedly
lowered its currency fix against the U.S. dollar, which caused nearly all emerging markets currencies to depreciate. Investors
remained concerned about a “hard landing” for the economy. Industrial production, urban investments, house prices and
retail sales figures confirmed that the domestic economy continued to slow. In addition, Brazil was the weakest-performing
6 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
country over the quarter, slumping 33.6% with the real falling 21.5%, as a result of factors such as the commodity sell-off,
a struggling economy and political corruption. Investors were increasingly concerned about Brazil’s economic ties to China.
Elsewhere in Latin America, oil exporter Colombia slipped 22.5% and metal exporter Peru declined 26.4%. Countries with
large current account deficits sold-off over the quarter, including Turkey (-19.5%), South Africa (-18.3%) and, to a lesser
extent, Indonesia (-24.8%). Mexico ended 10.9% lower. Russia (-13.2%) outperformed the broader Index return despite a
15.7% depreciation of the ruble over the period. In South Korea (-11.8%), second-quarter GDP slowed over the previous
quarter. In Thailand (-15.9%), inflation continued to decline. In Taiwan (-16.5%), a growth slowdown and weak price
pressures forced the central bank to unexpectedly cut interest rates to 1.75%. Malaysia decreased 17.5% as the ringgit
depreciated 14.6% against the U.S. dollar. Eastern Europe was the best-performing region, including the Czech Republic
(-2.7%), Hungary (-3.6%) and Poland (-9.4%). All sectors declined in absolute terms. On a relative basis, financials and
energy lagged behind, while safer haven sectors including consumer staples outperformed.
The fourth quarter of 2015 was positive for emerging markets with the Index up 2.6%. Nevertheless, it was quite volatile
with the Index up 7.9% in October before giving back most of its gains in November and December. The sell-off in the third
quarter, driven by China concerns, reversed course in October. China’s economy reported an expansion as services grew and
GDP came in slightly higher than expected. Emerging markets flows turned positive as well. U.S. interest rates appeared
stable, which added stability to the asset class. However, fortunes reversed as the U.S. Federal Reserve hiked interest rates
later in the quarter which contributed to a downturn in emerging markets as investors’ risk appetite decreased. In addition,
the price of oil slumped. Brent crude ended the year at $37, down from $48. This had a negative impact on oil-exporting
countries such as Russia, which experienced a sizeable sell-off. Brazil was also highly volatile during the quarter, as it
seemed to be in recovery for much of the quarter only to experience a steep drop in December. Fitch downgraded Brazil’s
credit rating to junk and finance minister Joaquim Levy resigned his office. Currency was also a headwind for emerging
markets over the quarter, as the ruble and rand depreciated by more than 10% relative to the dollar.
U.S./Global Fixed Income Markets
The fiscal year ended December 31, 2015 was characterized by slowing global growth and commodity price weakness.
Overall, this was modestly positive for fixed income assets, as yields fell, particularly among sovereign bonds. On the other
hand, credit sectors, primarily within the U.S., were challenged in this environment. Corporate bonds saw some of the
largest drawdowns as sharply reduced commodity prices (oil in particular), weakening earnings growth and elevated new
issuance weighed on returns. A key indicator of global fixed income performance, the Barclays Global Aggregate Index,
returned 1.02% for the fiscal year, in U.S. dollar -hedged terms, as yields fell and spreads widened modestly during a fiscal
year where growth fell somewhat short of expectations.
Regionally, Europe outperformed the U.S., bolstered by the launch, and subsequent increase, of a relatively aggressive
quantitative easing program and generally lower exposure to commodity-related sectors, particularly energy. The Barclays
Pan-European Aggregate Index returned 1.04% during the period (in U.S. dollar -hedged terms), led by Swiss and northern
European sovereigns, reflecting more accommodative central bank policy, pervasive low inflation/deflation in the region
and the economies’ “safe haven” status. The U.S., in comparison, returned 0.55% during the fiscal year, as measured by
the Barclays Aggregate Index, as U.S. Treasury yields fell less sharply and U.S. corporate credit underperformed European
corporate credit, largely due to greater exposure to falling commodity prices. Canadian and Asian sovereign bonds were
the strongest performers over the year, as declining energy prices, a slowdown in Asia and a return to recession in Japan
pushed yields lower.
In the U.S., economic data remained broadly positive, with solid nonfarm payroll gains and a steady decline in the
unemployment rate to just above 5% even by fiscal year-end, a level near long-term lows. Gross domestic product growth
slowed modestly from earlier in the recovery, but held in around the 1.50%-2.50% range, on average, during the fiscal
year. Inflation and wage growth were positive, albeit somewhat weak, driven partially by sharply lower commodity prices
(including a 58% drop in oil prices during the first quarter of the fiscal year). Combined with global growth headwinds,
Market Summary 7
Russell Investment Funds
Market Summary as of December 31, 2015, continued — (Unaudited)
these were significant contributors to the U.S. Federal Reserve’s decisions, in successive meetings, not to raise interest
rates, and pushing out of rate hike timing expectations drove yields lower during the period, bolstering U.S. Treasury
returns. It took until December for the Fed to finally begin tightening, which was increasingly anticipated by the market
through the fourth quarter and resulted in a partial upward reversal in yields and a flatter curve by fiscal year-end.
The story was quite different in Europe, where uncertainty over the future of Greece’s debt position and potential bailout
captured headline risk and drove market volatility early in the fiscal year. This, combined with the European Central
Bank’s (“ECB”) launch of an unexpectedly aggressive quantitative easing program, saw yields among “core” European
sovereign bonds fall markedly. Peripheral spreads also tightened later on as a Greek bailout agreement was eventually
reached and as the ECB ramped-up their stimulus later in the year. Emerging markets experienced a meaningful, and
relatively broad-based, slowdown in growth during the fiscal year, contributing to the sharp decline in commodity prices.
China and Brazil were most notable. A slowdown in China’s manufacturing and trade sectors rattled markets despite
successive moves to ease monetary policy and credit conditions. Attempts by China to manage the transition to lower
growth and a more open currency market exacerbated the market’s uncertainty surrounding future growth. In Brazil, growth
continued to disappoint, as it has for the past few years, contracting by 2.60% in the second calendar quarter of 2015,
alongside a quickly deteriorating fiscal position, accelerating inflation and political scandal surrounding Petrobras, the
state-owned energy giant.
Strong new issuance volumes characterized most credit sectors, particularly in the U.S., over the fiscal year, in both
corporate and securitized markets. Overall, corporate credit detracted modestly (the Barclays Global Aggregate Corporate
Index returned 0.05% below equivalent-duration Treasuries). Industrials underperformed significantly, particularly
commodity-related industries, which have greater representation within the U.S. Performance among securitized
assets (as measured by the Barclays Global Aggregate Securitized Index) was more mixed, with residential mortgages
underperforming equivalent-duration U.S. Treasuries by 0.05% and commercial mortgages underperforming equivalent-
duration U.S. Treasuries by 0.28%. Asset-backed securities, in contrast, outperformed equivalent-duration U.S. Treasuries
by 0.44%. High yield corporate credit was among the worst-performing segments of the market (the Barclays Global High
Yield Index returned 1.89% below equivalent-duration U.S. Treasuries), due in large part to the strong sell-off among U.S.
energy companies as the price of oil fell sharply and stayed low, significantly raising the likelihood of defaults across the
sector. Rising illiquidity concerns also drove losses, exacerbated by the distress of a handful of particularly aggressive
asset managers in the space.
Emerging market (EM) debt underperformed developed markets (the Barclays EM Hard Currency Aggregate Index,
returned 0.18%) given the slowdown among EM countries and particular concern surrounding China and Brazil. However,
following years spent worrying about the impact of Fed tightening on EM growth, the market took the December hike
in stride, likely breathing a collective sigh of relief that it had not been under worse circumstances. Local currency EM
bonds (those issued in the issuing country’s own currency), in contrast, saw much larger declines (the Barclays EM Local
Currency Government Index returned -10.38%) as currencies in particular were hit by both the slowdown in emerging
market growth and the broader U.S. Dollar rally that occurred during the fiscal year.
8 Market Summary
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Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Moderate Strategy Fund | Russell 1000® Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (1.71 | )% | 1 Year | 0.92 | % | ||
5 Years | 4.12 | %§ | 5 Years | 12.44 | %§ | ||
Inception* | 3.94 | %§ | Inception* | 6.15 | %§ | ||
Barclays U.S. Aggregate Bond Index** | |||||||
Total | |||||||
Return | |||||||
1 Year | 0.55 | % | |||||
5 Years | 3.25 | %§ | |||||
Inception* | 4.47 | %§ |
10 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Moderate Strategy Fund (the “Fund”) is a fund of funds that | (oil in particular), weakening earnings growth and elevated new |
invests principally in other Russell Investment Funds (“RIF”) | issuance weighed on returns. The Fund’s exposure to the fixed |
and Russell Investment Company (“RIC”) mutual funds (the | income asset class had a modestly negative effect on benchmark- |
“Underlying Funds”). The Underlying Funds employ a multi- | relative performance due to the Fund’s allocation to the RIF Core |
manager approach whereby portions of the Underlying Funds are | Bond Fund and the RIC Russell Global Opportunistic Credit |
allocated to different money manager strategies. Underlying Fund | Fund, which both underperformed the Fund’s benchmark due to |
assets not allocated to money managers are managed by Russell | their credit exposure. The Fund’s strategic exposure to U.S. large |
Investment Management Company (“RIMCo”), the Fund’s and | cap equities was positive, as these asset classes outperformed |
Underlying Funds’ advisor. RIMCo, as the Underlying Funds’ | fixed income. |
advisor, may change the allocation of the Underlying Funds’ | It was a mixed equity market for the fiscal year ending December |
assets among money managers at any time. An exemptive order | 31, 2015. U.S. stocks (as measured by the Russell 3000® Index) |
from the Securities and Exchange Commission (“SEC”) permits | returned 0.48% over the period, while non-U.S. equities returned |
RIMCo to engage or terminate a money manager in an Underlying | -2.56% (as measured by the Russell Developed ex-U.S. Large Cap |
Fund at any time, subject to approval by the Underlying Fund’s | Index) and emerging markets returned -12.80% (as measured by |
Board, without a shareholder vote. Pursuant to the terms of the | the Russell Emerging Markets Index). The underperformance of |
exemptive order, an Underlying Fund is required to notify its | non-U.S. equities versus fixed income was a key negative driver |
shareholders within 90 days of when a money manager begins | to the Fund’s benchmark-relative performance, as fixed income |
providing. | markets finished at 0.55% for the fiscal year as measured by the |
What is the Fund’s investment objective? | Fund’s benchmark. |
The Fund seeks to provide current income and moderate long | Within alternative strategies, commodities exposure had the |
term capital appreciation. | largest negative impact on the Fund, as the asset class (as |
measured by the Bloomberg Commodity Index Total Return) lost | |
How did the Fund perform relative to its benchmark for the | 24.66% during the period, significantly underperforming fixed |
fiscal year ended December 31, 2015? | income. Global REITs and listed infrastructure (as represented |
For the fiscal year ended December 31, 2015, the Fund lost | by the FTSE EPRA/NAREIT Developed Real Estate Index |
1.71%. This is compared to the Fund’s primary benchmark, the | (Net) and S&P Global Infrastructure Index (Net)) also negatively |
Barclays U.S. Aggregate Bond Index, which gained 0.55% during | impacted the Fund, down 0.79% and 12.17% respectively and |
the same period. The Fund’s performance includes operating | underperforming the Fund’s fixed income benchmark for the |
expenses, whereas index returns are unmanaged and do not | fiscal year. |
include expenses of any kind. | |
For the fiscal year ended December 31, 2015, the Morningstar® | How did the investment strategies and techniques employed |
Insurance Conservative Allocation, a group of funds that | by the Fund and the Underlying Funds affect the Fund’s |
Morningstar considers to have investment strategies similar | performance? |
to those of the Fund, lost 1.11%. This result serves as a peer | The Fund is a fund of funds and its performance is based on |
comparison and is expressed net of operating expenses. | RIMCo’s strategic asset |
The Fund’s underperformance relative to the Barclays U.S. | allocations and the performance of the Underlying Funds in |
Aggregate Bond Index was primarily due to the Fund’s out-of- | which the Fund invests. |
benchmark allocation to Underlying Funds invested in non-U.S. | The Fund’s strategic allocation to fixed income Underlying |
equities and commodities, which underperformed fixed income | Funds generally had a negative impact on its benchmark-relative |
over the period. | performance. An allocation to the RIF Core Bond Fund detracted, |
as this Underlying Fund underperformed the Fund’s benchmark | |
How did the market conditions described in the Market | due to the negative performance of credit, particularly high |
Summary report affect the Fund’s performance? | yield corporate credit, given the Underlying Fund’s strategic |
The fiscal year ended December 31, 2015 was characterized by | overweight to credit risk. An allocation to the RIC Russell |
slowing global growth and commodity price weakness. Overall, | Global Opportunistic Credit Fund also detracted. From an active |
this was modestly positive for fixed income assets, as yields fell. | management perspective, this Underlying Fund underperformed |
On the other hand, credit sectors, primarily within the U.S., | its benchmark due to underperformance among both developed |
were challenged in this environment. Corporate bonds saw some | market corporate high yield and emerging market bonds, the two |
of the largest drawdowns as sharply reduced commodity prices | primary sectors in which the Underlying Fund invests. |
Moderate Strategy Fund 11
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Fund’s global equity exposure also had a negative impact on | Funds and an underweight to alternative Underlying Funds. | |
its benchmark-relative performance, given the underperformance | Overall positioning was based on a cautious outlook for | |
of global equity compared to the Fund’s fixed income benchmark. | commodities and anticipated rise in interest rates, which could | |
From an active management perspective, the RIF Non-U.S. | negatively impact interest rate sensitive securities such as REITs. | |
Fund outperformed its benchmark due to underweights to | On March 3, 2015, RIMCo implemented a new target strategic | |
Asia Pacific ex-Japan and Canada as well as underweights to | asset allocation. The Fund’s target strategic asset allocation | |
materials and energy, which paid off as these regions and sectors | to various Underlying Funds was modified, and the strategic | |
underperformed. For the RIC Russell Emerging Markets Fund, | allocation to the RIC Russell Multi-Strategy Alternative Fund | |
unsuccessful stock selection in China and Brazil was the main | was removed. | |
driver of the Fund’s underperformance versus its benchmark. | ||
In connection with this reallocation, RIMCo also shifted the | ||
The Fund’s strategic allocation to U.S. large cap equity Underlying | Fund’s tactical allocations relative to the new target strategic | |
Funds positively impacted benchmark-relative performance, | asset allocation as follows: | |
while the strategic allocation to the U.S. small cap Underlying | ||
Fund detracted. The RIF Multi-Style Equity Fund (U.S. large cap | - 1.00% underweight to the RIF Global Real Estate Securities | |
equity) benefited from positive stock selection within the energy | Fund and 1.00% underweight the RIC Russell U.S. Dynamic | |
sector, an underweight to utilities and an overweight to health | Equity Fund resulting in a 2.00% overweight to the RIC | |
care. The RIF Aggressive Equity Fund (U.S. small cap equity) | Russell Global Opportunistic Credit Fund. This tactical change | |
was negatively impacted by an overweight to smaller cap value | was intended to reduce exposure to asset classes sensitive to | |
stocks, as larger cap growth stocks significantly outperformed. | anticipated rising interest rates. | |
The Fund’s strategic allocation to alternative Underlying Funds | ||
had a negative impact on benchmark-relative performance as | On July 1, 2015, RIMCo added a RIMCo-managed positioning | |
real assets underperformed the Fund’s benchmark. From an | strategy at a 2.00% weight. The addition of the positioning | |
active management standpoint, performance of these Underlying | strategy resulted in a 2.00% reduction in the Fund’s allocation to | |
Funds was mixed. The RIC Russell Global Infrastructure Fund | the RIF Multi-Style Equity Fund. The strategy had a U.S. large | |
and the RIF Global Real Estate Securities Fund outperformed | cap strategic exposure through the use of index futures contracts, | |
their respective benchmarks while the RIC Russell Commodity | and did not result in a change to the Fund’s overall U.S. equity | |
Strategies Fund modestly underperformed its benchmark. The | exposure. | |
RIC Russell Global Infrastructure Fund and the RIF Global Real | On September 3, 2015, RIMCo implemented a 0.50% underweight | |
Estate Securities Fund both benefited from strong stock selection | to the RIC Russell Commodity Strategies Fund due to limited | |
by underlying money managers. The RIC Russell Commodity | commodity price appreciation expectations over the medium | |
Strategies Fund underperformed its benchmark due to exposure | term. This resulted in a 0.50% overweight to the RIF Multi-Style | |
to the energy sector. | Equity Fund. | |
Describe any changes to the Fund’s structure or allocation | On October 13, 2015, RIMCo implemented a 3.00% underweight | |
to the Underlying Funds. | to the RIF Core Bond Fund and added an overweight to the RIC | |
RIMCo has the discretion to vary the Fund’s actual allocation from | Russell Global Opportunistic Credit Fund. This was intended | |
the target strategic asset allocation by up to +/- 5% at the equity, | to position the Fund for rising interest rates as well as take | |
fixed income or alternative category level based on RIMCo’s | advantage of discounted valuations in opportunistic sectors such | |
capital markets research. RIMCo’s asset allocation modifications | as high yield credit following the market sell-off in October. | |
had a modestly negative impact on the Fund’s performance | At the end of the fiscal year, the Fund was positioned for rising | |
relative to the Fund’s long-term strategic allocation. | interest rates, with underweights to the RIF Global Real Estate | |
Entering the fiscal year, relative to the target strategic asset | Securities Fund and RIC Russell Commodity Strategies Fund | |
allocation, the Fund had a broad overweight to equity Underlying | funding overweights to the RIC Russell Global Opportunistic | |
Credit Fund and the RIF Multi-Style Equity Fund. |
12 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
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 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 Funds (“RIF”) Fund are based on
numerous factors, should not be relied on as an indication
of investment decisions of any RIF.
* Assumes initial investment on April 30, 2007.
** The Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade
corporate debt securities and mortgage-backed securities.
*** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
Moderate Strategy Fund 13
Russell Investment Funds
Moderate Strategy Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 971.90 | $ | 1,024.65 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.55 | $ | 0.56 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.11% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
14 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | ||||
Fair | ||||
Value | ||||
Shares | $ | |||
Investments in Russell Affiliated Mutual Funds - 98.0% | ||||
Alternative - 5.5% | ||||
RIC Russell Commodity Strategies Fund Class Y | 315,471 | 1,628 | ||
RIC Russell Global Infrastructure Fund Class Y | 309,751 | 3,240 | ||
RIF Global Real Estate Securities Fund | 73,431 | 1,080 | ||
5,948 | ||||
Domestic Equities - 15.4% | ||||
RIC Russell U.S. Defensive Equity Fund Class Y | 91,113 | 4,303 | ||
RIC Russell U.S. Dynamic Equity Fund Class Y | 336,807 | 3,216 | ||
RIF Aggressive Equity Fund | 330,914 | 4,279 | ||
RIF Multi-Style Equity Fund | 290,565 | 4,835 | ||
16,633 | ||||
Fixed Income - 61.2% | ||||
RIC Russell Global Opportunistic Credit Fund Class Y | 1,600,197 | 14,098 | ||
RIC Russell Investment Grade Bond Fund Class Y | 807,871 | 17,353 | ||
RIF Core Bond Fund | 3,375,936 | 34,671 | ||
66,122 | ||||
International Equities - 15.9% | ||||
RIC Russell Emerging Markets Fund Class Y | 298,431 | 4,276 | ||
RIC Russell Global Equity Fund Class Y | 643,827 | 6,458 | ||
RIF Non-U.S. Fund | 572,058 | 6,441 | ||
17,175 | ||||
Total Investments in Russell Affiliated Mutual Funds | ||||
(cost $102,514) | 105,878 | |||
Short-Term Investments - 1.6% | ||||
Russell U.S. Cash Management Fund | 1,731,872 | (8) | 1,732 | |
Total Short-Term Investments | ||||
(cost $1,732) | 1,732 | |||
Total Investments 99.6% | ||||
(identified cost $104,246) | 107,610 | |||
Other Assets and Liabilities, Net - 0.4% | 435 | |||
Net Assets - 100.0% | 108,045 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 15
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
CAC40 10 EURO Index Futures | 5 | EUR | 232 | 01/16 | 4 | ||
EURO STOXX 50 Index Futures | 5 | EUR | 164 | 03/16 | 5 | ||
IBEX 35 Index Futures | 1 | EUR | 95 | 01/16 | — | ||
OMXS30 Index Futures | 4 | SEK | 579 | 01/16 | 1 | ||
Russell 1000 Index Mini Futures | 1 | USD | 113 | 03/16 | 2 | ||
S&P 500 E-Mini Index Futures | 15 | USD | 1,527 | 03/16 | 8 | ||
S&P Mid 400 E-Mini Index Futures | 1 | USD | 139 | 03/16 | (1 | ) | |
TOPIX Index Futures | 1 | JPY | 15,475 | 03/16 | (2 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 8 | GBP | 496 | 03/16 | (25 | ) | |
MSCI EAFE Mini Index Futures | 7 | USD | 594 | 03/16 | 2 | ||
MSCI Emerging Markets Mini Index Futures | 5 | USD | 197 | 03/16 | (2 | ) | |
Russell 1000 Index Mini Futures | 1 | USD | 113 | 03/16 | — | ||
S&P 500 E-Mini Index Futures | 5 | USD | 509 | 03/16 | 1 | ||
S&P Mid 400 E-Mini Index Futures | 1 | USD | 139 | 03/16 | 1 | ||
S&P/TSX 60 Index Futures | 2 | CAD | 304 | 03/16 | (3 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (9 | ) |
Options Written | ||||||
Amounts in thousands (except contract amounts) | ||||||
Transactions in options written contracts for the period ended December 31, 2015 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2014 | — | $ | — | |||
Opened | 16,240 | 29 | ||||
Closed | (16,240 | ) | (29 | ) | ||
Expired | — | — | ||||
Outstanding December 31, 2015 | — | $ | — |
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of America | USD | 1 | AUD | 2 | 01/12/16 | — | |||
Bank of America | USD | 5 | CAD | 7 | 01/12/16 | — | |||
Bank of America | USD | 2 | HKD | 19 | 01/12/16 | — | |||
Bank of America | USD | 1 | SGD | 2 | 01/12/16 | — | |||
Bank of America | CHF | 6 | USD | 6 | 01/12/16 | — | |||
Bank of America | EUR | 41 | USD | 44 | 01/12/16 | (1 | ) | ||
Bank of America | GBP | 6 | USD | 9 | 01/12/16 | — | |||
Bank of America | JPY | 3,511 | USD | 29 | 01/12/16 | (1 | ) | ||
Bank of America | SEK | 31 | USD | 4 | 01/12/16 | — | |||
State Street | USD | 192 | AUD | 263 | 01/12/16 | — | |||
State Street | USD | 187 | AUD | 260 | 03/16/16 | 2 | |||
State Street | USD | 240 | CAD | 333 | 01/12/16 | 1 | |||
State Street | USD | 88 | CAD | 120 | 03/16/16 | (2 | ) | ||
State Street | USD | 290 | CHF | 287 | 01/12/16 | (4 | ) | ||
State Street | USD | 1,073 | EUR | 981 | 01/12/16 | (7 | ) | ||
State Street | USD | 587 | GBP | 396 | 01/12/16 | (3 | ) | ||
State Street | USD | 80 | HKD | 621 | 01/12/16 | — | |||
State Street | USD | 677 | JPY | 81,571 | 01/12/16 | 2 | |||
State Street | USD | 756 | JPY | 92,740 | 03/16/16 | 17 | |||
State Street | USD | 108 | SEK | 906 | 01/12/16 | — |
See accompanying notes which are an integral part of the financial statements.
16 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
State Street | USD | 36 | SGD | 51 | 01/12/16 | — | ||
State Street | AUD | 265 | USD | 191 | 01/12/16 | (2 | ) | |
State Street | AUD | 263 | USD | 191 | 02/05/16 | — | ||
State Street | CAD | 340 | USD | 254 | 01/12/16 | 9 | ||
State Street | CAD | 333 | USD | 240 | 02/05/16 | (1 | ) | |
State Street | CHF | 281 | USD | 274 | 01/12/16 | (7 | ) | |
State Street | CHF | 287 | USD | 290 | 02/05/16 | 4 | ||
State Street | EUR | 940 | USD | 996 | 01/12/16 | (26 | ) | |
State Street | EUR | 981 | USD | 1,074 | 02/05/16 | 7 | ||
State Street | EUR | 460 | USD | 502 | 03/16/16 | 1 | ||
State Street | GBP | 390 | USD | 586 | 01/12/16 | 11 | ||
State Street | GBP | 396 | USD | 587 | 02/05/16 | 3 | ||
State Street | GBP | 70 | USD | 105 | 03/16/16 | 2 | ||
State Street | HKD | 640 | USD | 83 | 01/12/16 | — | ||
State Street | HKD | 621 | USD | 80 | 02/05/16 | — | ||
State Street | JPY | 78,060 | USD | 635 | 01/12/16 | (14 | ) | |
State Street | JPY | 81,571 | USD | 677 | 02/05/16 | (2 | ) | |
State Street | SEK | 875 | USD | 101 | 01/12/16 | (3 | ) | |
State Street | SEK | 906 | USD | 108 | 02/05/16 | — | ||
State Street | SGD | 53 | USD | 37 | 01/12/16 | — | ||
State Street | SGD | 51 | USD | 36 | 02/05/16 | — | ||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (14 | ) |
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 1,080 | 03/07/16 | (19 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $—(å) | (19 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 month LIBOR rate plus a fee of 0.120%.
Credit Default Swap Contracts | |||||||
Amounts in thousands | |||||||
Credit Indices | |||||||
Fund (Pays)/ | |||||||
Receives | Termination | Fair Value | |||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||
CDX NA High Yield Index | Morgan Stanley | USD | 1,600 | 5.000 | % | 12/20/20 | 19 |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - $40 (å) | 19 |
Presentation of Portfolio Holdings | |||||||||||
Amounts in thousands | |||||||||||
Fair Value | |||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||
Investments in Russell Affiliated Mutual Funds | $ | 105,878 | $ | — | $ | — | $ | 105,878 | 98.0 | ||
Short-Term Investments | — | 1,732 | — | 1,732 | 1.6 | ||||||
Total Investments | 105,878 | 1,732 | — | 107,610 | 99.6 | ||||||
Other Assets and Liabilities, Net | 0.4 | ||||||||||
100.0 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 17
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | |||||||||||||||||
Amounts in thousands | |||||||||||||||||
Fair Value | |||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||||||||
Other Financial Instruments | |||||||||||||||||
Futures Contracts | (9 | ) | — | — | (9 | ) | (—)* | ||||||||||
Foreign Currency Exchange Contracts | — | (14 | ) | — | (14 | ) | (—)* | ||||||||||
Total Return Swap Contracts | — | (19 | ) | — | (19 | ) | (—)* | ||||||||||
Credit Default Swap Contracts | — | 19 | — | 19 | —* | ||||||||||||
Total Other Financial Instruments** | $ | (9 | ) | $ | (14 | ) | $ | — | $ | (23 | ) |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
18 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||
Equity | Credit | Currency | ||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | |||
Location: Statement of Assets and Liabilities - Assets | ||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | — | $ | 59 |
Variation margin on futures contracts* | 24 | — | — | |||
Credit default swap contracts, at fair value | — | 19 | — | |||
Total | $ | 24 | $ | 19 | $ | 59 |
Location: Statement of Assets and Liabilities - Liabilities | ||||||
Variation margin on futures contracts* | $ | 33 | $ | — | $ | — |
Unrealized depreciation on foreign currency exchange contracts | — | — | 73 | |||
Total return swap contracts, at fair value | 19 | — | — | |||
Total | $ | 52 | $ | — | $ | 73 |
Foreign | |||||||||
Equity | Credit | Currency | |||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||||
Location: Statement of Operations - Net realized gain (loss) | |||||||||
Investments** | $ | (29 | ) | $ | — | $ | — | ||
Futures contracts | 60 | — | — | ||||||
Options written | 8 | — | — | ||||||
Total return swap contracts | (80 | ) | — | — | |||||
Credit default swap contracts | — | 7 | — | ||||||
Foreign currency-related transactions*** | — | — | 101 | ||||||
Total | $ | (41 | ) | $ | 7 | $ | 101 | ||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||||
Futures contracts | $ | (9 | ) | $ | — | $ | — | ||
Total return swap contracts | (19 | ) | — | — | |||||
Credit default swap contracts | — | (21 | ) | — | |||||
Foreign currency-related transactions**** | — | — | (14 | ) | |||||
Total | $ | (28 | ) | $ | (21 | ) | $ | (14 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
*** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
**** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 19
Russell Investment Funds
Moderate Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | ||||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||||
Gross | Net Amounts | |||||||||
Amounts | of Assets | |||||||||
Gross | Offset in the | Presented in | ||||||||
Amounts of | Statement of | the Statement | ||||||||
Recognized | Assets and | of Assets and | ||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | $ | 59 | $ | — $ | 59 | ||||
Futures Contracts | Variation margin on futures contracts | 21 | — | 21 | ||||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 19 | — | 19 | ||||||
Total Financial and Derivative Assets | 99 | — | 99 | |||||||
Financial and Derivative Assets not subject to a netting agreement | (40 | ) | — | (40 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 59 | $ | — $ | 59 | |||||
word | ||||||||||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Assets | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | ||||||
State Street | $ | 59 | $ | 38 | $ | — $ | 21 | |||
Total | $ | 59 | $ | 38 | $ | — $ | 21 |
See accompanying notes which are an integral part of the financial statements.
20 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 20 | $ | — $ | 20 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 73 | — | 73 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 19 | — | 19 | |||||
Total Financial and Derivative Liabilities | 112 | — | 112 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (20) | — | (20 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 92 | $ | — $ | 92 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 21 | $ | — | $ | 21 | $ | — | |
State Street | 71 | 38 | — | 33 | |||||
Total | $ | 92 | $ | 38 | $ | 21 | $ | 33 |
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 21
Russell Investment Funds
Moderate Strategy Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 104,246 |
Investments, at fair value(>) | 107,610 | |
Cash (restricted)(a)(b) | 500 | |
Unrealized appreciation on foreign currency exchange contracts | 59 | |
Receivables: | ||
Dividends and interest | 3 | |
Investments sold | 54 | |
Fund shares sold | 12 | |
Variation margin on futures contracts | 21 | |
Credit default swap contracts, at fair value(+) | 19 | |
Total assets | 108,278 | |
Liabilities | ||
Payables: | ||
Due to broker (c) | 20 | |
Fund shares redeemed | 65 | |
Accrued fees to affiliates | 5 | |
Other accrued expenses | 31 | |
Variation margin on futures contracts | 20 | |
Unrealized depreciation on foreign currency exchange contracts | 73 | |
Total return swap contracts, at fair value(8) | 19 | |
Total liabilities | 233 | |
Net Assets | $ | 108,045 |
See accompanying notes which are an integral part of the financial statements.
22 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2015
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 250 | |
Accumulated net realized gain (loss) | (1,519 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 3,364 | ||
Futures contracts | (9 | ) | |
Total return swap contracts | (19 | ) | |
Credit default swap contracts | (21 | ) | |
Foreign currency-related transactions | (14 | ) | |
Shares of beneficial interest | 110 | ||
Additional paid-in capital | 105,903 | ||
Net Assets | $ | 108,045 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 9.78 | |
Net assets | $ | 108,044,586 | |
Shares outstanding ($.01 par value) | 11,049,781 | ||
Amounts in thousands | |||
(+) Credit default swap contracts - premiums paid (received) | $ | 40 | |
(>) Investments in affiliated Russell Funds | $ | 107,610 | |
(8) Total return swap contracts – premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 400 | |
(b) Cash Collateral for Swaps | $ | 100 | |
(c) Due to Broker for Swaps | $ | 20 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 23
Russell Investment Funds
Moderate Strategy Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Income distributions from affiliated Russell funds | $ | 2,991 | |
Expenses | |||
Advisory fees | 224 | ||
Administrative fees | 48 | ||
Custodian fees | 21 | ||
Transfer agent fees | 5 | ||
Professional fees | 36 | ||
Trustees’ fees | 3 | ||
Printing fees | 20 | ||
Miscellaneous | 6 | ||
Expenses before reductions | 363 | ||
Expense reductions | (243 | ) | |
Net expenses | 120 | ||
Net investment income (loss) | 2,871 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 476 | ||
Futures contracts | 60 | ||
Options written | 8 | ||
Total return swap contracts | (80 | ) | |
Credit default swap contracts | 7 | ||
Foreign currency-related transactions | 101 | ||
Capital gain distributions from Underlying Funds | 1,961 | ||
Net realized gain (loss) | 2,533 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (7,160 | ) | |
Futures contracts | (9 | ) | |
Total return swap contracts | (19 | ) | |
Credit default swap contracts | (21 | ) | |
Foreign currency-related transactions | (14 | ) | |
Net change in unrealized appreciation (depreciation) | (7,223 | ) | |
Net realized and unrealized gain (loss) | (4,690 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (1,819 | ) |
See accompanying notes which are an integral part of the financial statements.
24 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 2,871 | $ | 3,196 | ||
Net realized gain (loss) | 2,533 | 2,739 | ||||
Net change in unrealized appreciation (depreciation) | (7,223 | ) | (706 | ) | ||
Net increase (decrease) in net assets from operations | (1,819 | ) | 5,229 | |||
Distributions | ||||||
From net investment income | (2,802 | ) | (3,195 | ) | ||
From net realized gain | (2,669 | ) | (1,659 | ) | ||
Net decrease in net assets from distributions | (5,471 | ) | (4,854 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 417 | 11,450 | ||||
Total Net Increase (Decrease) in Net Assets | (6,873 | ) | 11,825 | |||
Net Assets | ||||||
Beginning of period | 114,918 | 103,093 | ||||
End of period | $ | 108,045 | $ | 114,918 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 250 | $ | 73 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 836 | $ | 8,599 | 1,660 | $ | 17,496 | ||||||
Proceeds from reinvestment of distributions | 538 | 5,470 | 463 | 4,854 | ||||||||
Payments for shares redeemed | (1,321 | ) | (13,652 | ) | (1,032 | ) | (10,900 | ) | ||||
Total increase (decrease) | 53 | $ | 417 | 1,091 | $ | 11,450 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 25
Russell Investment Funds
Moderate Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | ||||||||||||||||
$ | Net | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 10.45 | .26 | (.43 | ) | (.17 | ) | (.25 | ) | (.25 | ) | ||||||
December 31, 2014 | 10.41 | .31 | .19 | .50 | (.30 | ) | (.16 | ) | ||||||||
December 31, 2013 | 10.10 | .18 | .50 | .68 | (.18 | ) | (.19 | ) | ||||||||
December 31, 2012 | 9.41 | .30 | .73 | 1.03 | (.29 | ) | (.05 | ) | ||||||||
December 31, 2011 | 9.64 | .27 | (.26 | ) | .01 | (.24 | ) | — | ||||||||
See accompanying notes which are an integral part of the financial statements.
26 Moderate Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.50 | ) | 9.78 | (1.71 | ) | 108,045 | .32 | .11 | 2.57 | 29 | ||||||||
(.46 | ) | 10.45 | 4.85 | 114,918 | .35 | .10 | 2.89 | 18 | |||||||||
(.37 | ) | 10.41 | 6.79 | 103,093 | .35 | .10 | 1.69 | 18 | |||||||||
(.34 | ) | 10.10 | 11.07 | 94,221 | .36 | .10 | 3.01 | 20 | |||||||||
(.24 | ) | 9.41 | .12 | 75,056 | .38 | .10 | 2.80 | 10 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 27
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Balanced Strategy Fund | Russell 1000® Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (2.30 | )% | 1 Year | 0.92 | % | ||
5 Years | 4.84 | %§ | 5 Years | 12.44 | %§ | ||
Inception* | 3.56 | %§ | Inception* | 6.15 | %§ | ||
Barclays U.S. Aggregate Bond Index** | Russell Developed ex-U.S. Large Cap® Index Net**** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 0.55 | % | 1 Year | (2.56 | )% | ||
5 Years | 3.25 | %§ | 5 Years | 3.09 | %§ | ||
Inception* | 4.47 | %§ | Inception* | 0.03 | %§ |
28 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Balanced Strategy Fund (the “Fund”) is a fund of funds that | (oil in particular), weakening earnings growth and elevated new |
invests principally in other Russell Investment Funds (“RIF”) | issuance weighed on returns. The Fund’s exposure to the fixed |
and Russell Investment Company (“RIC”) mutual funds (the | income asset class had a modestly negative effect on benchmark- |
“Underlying Funds”). The Underlying Funds employ a multi- | relative performance due to the Fund’s allocation to the RIF Core |
manager approach whereby portions of the Underlying Funds are | Bond Fund and the RIC Russell Global Opportunistic Credit |
allocated to different money manager strategies. Underlying Fund | Fund, which both underperformed the Fund’s benchmark due to |
assets not allocated to money managers are managed by Russell | their credit exposure. The Fund’s strategic exposure to U.S. large |
Investment Management Company (“RIMCo”), the Fund’s and | cap equities was positive, as these asset classes outperformed |
Underlying Funds’ advisor. RIMCo, as the Underlying Funds’ | fixed income. |
advisor, may change the allocation of the Underlying Funds’ | It was a mixed equity market for the fiscal year ending December |
assets among money managers at any time. An exemptive order | 31, 2015. U.S. stocks (as measured by the Russell 3000® Index) |
from the Securities and Exchange Commission (“SEC”) permits | returned 0.48% over the period, while non-U.S. equities returned |
RIMCo to engage or terminate a money manager in an Underlying | -2.56% (as measured by the Russell Developed ex-U.S. Large Cap |
Fund at any time, subject to approval by the Underlying Fund’s | Index) and emerging markets returned -12.80% (as measured by |
Board, without a shareholder vote. Pursuant to the terms of the | the Russell Emerging Markets Index). The underperformance of |
exemptive order, an Underlying Fund is required to notify its | non-U.S. equities versus fixed income was a key negative driver |
shareholders within 90 days of when a money manager begins | to the Fund’s benchmark-relative performance, as fixed income |
providing services. | markets finished at 0.55% for the fiscal year as measured by the |
What is the Fund’s investment objective? | Fund’s benchmark. |
The Fund seeks to provide above average long term capital | Within alternative strategies, commodities exposure had the |
appreciation and a moderate level of current income. | largest negative impact on the Fund, as the asset class (as |
measured by the Bloomberg Commodity Index Total Return) lost | |
How did the Fund perform relative to its benchmark for the | 24.66% during the period, significantly underperforming fixed |
fiscal year ended December 31, 2015? | income. Global REITs and listed infrastructure (as represented |
For the fiscal year ended December 31, 2015, the Fund lost | by the FTSE EPRA/NAREIT Developed Real Estate Index |
2.30%. This is compared to the Fund’s primary benchmark, the | (Net) and S&P Global Infrastructure Index (Net)) also negatively |
Barclays U.S. Aggregate Bond Index, which gained 0.55% during | impacted the Fund, down 0.79% and 12.17% respectively and |
the same period. The Fund’s performance includes operating | underperforming the Fund’s fixed income benchmark for the |
expenses, whereas index returns are unmanaged and do not | fiscal year. |
include expenses of any kind. | |
For the fiscal year ended December 31, 2015, the Morningstar | How did the investment strategies and techniques employed |
Insurance Moderate Allocation, a group of funds that Morningstar | by the Fund and the Underlying Funds affect the Fund’s |
considers to have investment strategies similar to those of the | performance? |
Fund, lost 0.89%. This result serves as a peer comparison and is | The Fund is a fund of funds and its performance is based on |
expressed net of operating expenses. | RIMCo’s strategic asset allocations and the performance of the |
Underlying Funds in which the Fund invests. | |
The Fund’s underperformance relative to the Barclays U.S. | |
Aggregate Bond Index was primarily due to the Fund’s out-of- | The Fund’s strategic allocation to fixed income Underlying |
benchmark allocation to Underlying Funds invested in non-U.S. | Funds generally had a negative impact on its benchmark-relative |
equities and commodities, which underperformed fixed income | performance. An allocation to the RIF Core Bond Fund detracted, |
over the period. | as this Underlying Fund underperformed the Fund’s benchmark |
due to the negative performance of credit, particularly high | |
How did the market conditions described in the Market | yield corporate credit, given the Underlying Fund’s strategic |
Summary report affect the Fund’s performance? | overweight to credit risk. An allocation to the RIC Russell |
The fiscal year ended December 31, 2015 was characterized by | Global Opportunistic Credit Fund also detracted. From an active |
slowing global growth and commodity price weakness. Overall, | management perspective, this Underlying Fund underperformed |
this was modestly positive for fixed income assets, as yields fell. | its benchmark due to underperformance among both developed |
On the other hand, credit sectors, primarily within the U.S., | market corporate high yield and emerging market bonds, the two |
were challenged in this environment. Corporate bonds saw some | primary sectors in which the Underlying Fund invests. |
of the largest drawdowns as sharply reduced commodity prices |
Balanced Strategy Fund 29
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Fund’s global equity exposure also had a negative impact on | commodities and anticipated rise in interest rates, which could |
its benchmark-relative performance, given the underperformance | negatively impact interest rate sensitive securities such as REITs. |
of global equity compared to the Fund’s fixed income benchmark. | On March 3, 2015, RIMCo implemented a new target strategic |
From an active management perspective, the RIF Non-U.S. | asset allocation. The Fund’s target strategic asset allocation |
Fund outperformed its benchmark due to underweights to | to various Underlying Funds was modified, and the strategic |
Asia Pacific ex-Japan and Canada as well as underweights to | allocation to the RIC Russell Multi-Strategy Alternative Fund |
materials and energy, which paid off as these regions and sectors | was removed. |
underperformed. For the RIC Russell Emerging Markets Fund, | |
unsuccessful stock selection in China and Brazil was the main | In connection with this reallocation, RIMCo also shifted the |
driver of the Fund’s underperformance versus its benchmark. | Fund’s tactical allocations relative to the new target strategic |
asset allocation as follows: | |
The Fund’s strategic allocation to U.S. large cap equity Underlying | |
Funds positively impacted benchmark-relative performance, | - 2.00% underweight to the RIF Global Real Estate Securities |
while the strategic allocation to the U.S. small cap Underlying | Fund resulting in a 2.00% overweight to the RIC Russell Global |
Fund detracted. The RIF Multi-Style Equity Fund (U.S. large cap | Opportunistic Credit Fund. This tactical change was intended to |
equity) benefited from positive stock selection within the energy | reduce exposure to asset classes sensitive to anticipated rising |
sector, an underweight to utilities and an overweight to health | interest rates. |
care. The RIF Aggressive Equity Fund (U.S. small cap equity) | On July 1, 2015, RIMCo added a RIMCo-managed positioning |
was negatively impacted by an overweight to smaller cap value | strategy at a 2.00% weight. The addition of the positioning |
stocks, as larger cap growth stocks significantly outperformed. | strategy resulted in a 2.00% reduction in the Fund’s allocation to |
The Fund’s strategic allocation to alternative Underlying Funds | the RIF Multi-Style Equity Fund. The strategy had a U.S. large |
had a negative impact on benchmark-relative performance as | cap strategic exposure through the use of index futures contracts, |
real assets underperformed the Fund’s benchmark. From an | and did not result in a change to the Fund’s overall U.S. equity |
active management standpoint, performance of these Underlying | exposure. |
Funds was mixed. The RIC Russell Global Infrastructure Fund | On September 3, 2015, RIMCo implemented a 0.75% underweight |
and the RIF Global Real Estate Securities Fund outperformed | to the RIC Russell Commodity Strategies Fund due to limited |
their respective benchmarks while the RIC Russell Commodity | commodity price appreciation expectations over the medium |
Strategies Fund modestly underperformed its benchmark. The | term. This resulted in a 0.75% overweight to the RIF Multi-Style |
RIC Russell Global Infrastructure Fund and the RIF Global Real | Equity Fund. |
Estate Securities Fund both benefited from strong stock selection | At the end of the fiscal year, the Fund was positioned for rising |
by underlying money managers. The RIC Russell Commodity | interest rates, with underweights to the RIF Global Real Estate |
Strategies Fund underperformed its benchmark due to exposure | Securities Fund and the RIC Russell Commodity Strategies Fund |
to the energy sector. | funding an overweight to the RIC Russell Global Opportunistic |
Describe any changes to the Fund’s structure or allocation | Credit Fund. |
to the Underlying Funds. | The views expressed in this report reflect those of the portfolio |
RIMCo has the discretion to vary the Fund’s actual allocation from | managers only through the end of the period covered by |
the target strategic asset allocation by up to +/- 5% at the equity, | the report. These views do not necessarily represent the |
fixed income or alternative category level based on RIMCo’s | views of RIMCo, or any other person in RIMCo or any other |
capital markets research. RIMCo’s asset allocation modifications | affiliated organization. These views are subject to change |
had a modestly negative impact on the Fund’s performance | at any time based upon market conditions or other events, |
relative to the Fund’s long-term strategic allocation. | and RIMCo disclaims any responsibility to update the views |
Entering the fiscal year, relative to the target strategic asset | contained herein. These views should not be relied on |
allocation, the Fund had a broad overweight to equity Underlying | as investment advice and, because investment decisions |
Funds, an underweight to alternative Underlying Funds, and | for a Russell Investment Funds (“RIF”) Fund are based on |
an overweight to the RIC Russell Global Opportunistic Credit | numerous factors, should not be relied on as an indication |
Fund. Overall positioning was based on a cautious outlook for | of investment decisions of any RIF Fund. |
30 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
* Assumes initial investment on April 30, 2007.
** The Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade
corporate debt securities and mortgage-backed securities.
*** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Russell Developed ex-U.S. Large Cap® Index (net of tax on dividends from foreign holdings) is an index which offers investors access to the large-cap
segment of the global equity market, excluding companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer
for the large-cap segment and is completely reconstituted annually to accurately reflect the changes in the market over time.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
Balanced Strategy Fund 31
Russell Investment Funds
Balanced Strategy Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 957.80 | $ | 1,024.65 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.54 | $ | 0.56 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.11% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
32 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | ||||
Fair | ||||
Value | ||||
Shares | $ | |||
Investments in Russell Affiliated Mutual Funds - 97.8% | ||||
Alternative - 7.2% | ||||
RIC Russell Commodity Strategies Fund Class Y | 1,263,771 | 6,521 | ||
RIC Russell Global Infrastructure Fund Class Y | 1,101,896 | 11,526 | ||
RIF Global Real Estate Securities Fund | 195,469 | 2,875 | ||
20,922 | ||||
Domestic Equities - 27.6% | ||||
RIC Russell U.S. Defensive Equity Fund Class Y | 425,566 | 20,100 | ||
RIC Russell U.S. Dynamic Equity Fund Class Y | 2,104,106 | 20,094 | ||
RIF Aggressive Equity Fund | 1,330,077 | 17,198 | ||
RIF Multi-Style Equity Fund | 1,338,154 | 22,267 | ||
79,659 | ||||
Fixed Income - 37.1% | ||||
RIC Russell Global Opportunistic Credit Fund Class Y | 2,958,104 | 26,061 | ||
RIF Core Bond Fund | 7,899,747 | 81,130 | ||
107,191 | ||||
International Equities - 25.9% | ||||
RIC Russell Emerging Markets Fund Class Y | 1,199,829 | 17,194 | ||
RIC Russell Global Equity Fund Class Y | 2,866,820 | 28,754 | ||
RIF Non-U.S. Fund | 2,550,241 | 28,716 | ||
74,664 | ||||
Total Investments in Russell Affiliated Mutual Funds | ||||
(cost $264,160) | 282,436 | |||
Short-Term Investments - 1.4% | ||||
Russell U.S. Cash Management Fund | 4,030,041 | (8) | 4,030 | |
Total Short-Term Investments | ||||
(cost $4,030) | 4,030 | |||
Total Investments 99.2% | ||||
(identified cost $268,190) | 286,466 | |||
Other Assets and Liabilities, Net - 0.8% | 2,209 | |||
Net Assets - 100.0% | 288,675 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 33
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 5 | EUR | 442 | 01/16 | 13 | ||
CAC40 10 EURO Index Futures | 27 | EUR | 1,252 | 01/16 | 20 | ||
DAX Index Futures | 5 | EUR | 1,346 | 03/16 | 57 | ||
EURO STOXX 50 Index Futures | 24 | EUR | 788 | 03/16 | 24 | ||
FTSE/MIB Index Futures | 3 | EUR | 322 | 03/16 | 4 | ||
IBEX 35 Index Futures | 5 | EUR | 476 | 01/16 | (3 | ) | |
OMXS30 Index Futures | 19 | SEK | 2,751 | 01/16 | 6 | ||
Russell 1000 Index Mini Futures | 3 | USD | 339 | 03/16 | 5 | ||
S&P 500 E-Mini Index Futures | 39 | USD | 3,969 | 03/16 | 18 | ||
S&P Mid 400 E-Mini Index Futures | 3 | USD | 418 | 03/16 | (3 | ) | |
TOPIX Index Futures | 2 | JPY | 30,950 | 03/16 | (4 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 38 | GBP | 2,355 | 03/16 | (144 | ) | |
MSCI EAFE Mini Index Futures | 37 | USD | 3,142 | 03/16 | 9 | ||
MSCI Emerging Markets Mini Index Futures | 24 | USD | 945 | 03/16 | (12 | ) | |
Russell 1000 Index Mini Futures | 1 | USD | 113 | 03/16 | — | ||
S&P 500 E-Mini Index Futures | 20 | USD | 2,035 | 03/16 | 5 | ||
S&P Mid 400 E-Mini Index Futures | 2 | USD | 279 | 03/16 | 2 | ||
S&P/TSX 60 Index Futures | 12 | CAD | 1,826 | 03/16 | (21 | ) | |
SPI 200 Index Futures | 9 | AUD | 1,183 | 03/16 | (60 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (84 | ) |
Options Written | ||||||
Amounts in thousands (except contract amounts) | ||||||
Transactions in options written contracts for the period ended December 31, 2015 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2014 | — | $ | — | |||
Opened | 85,618 | 154 | ||||
Closed | (85,618 | ) | (154 | ) | ||
Expired | — | — | ||||
Outstanding December 31, 2015 | — | $ | — |
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of America | USD | 9 | AUD | 12 | 01/12/16 | — | |||
Bank of America | USD | 29 | CAD | 39 | 01/12/16 | (1 | ) | ||
Bank of America | USD | 13 | HKD | 99 | 01/12/16 | — | |||
Bank of America | USD | 9 | SGD | 12 | 01/12/16 | — | |||
Bank of America | CHF | 25 | USD | 24 | 01/12/16 | (1 | ) | ||
Bank of America | EUR | 179 | USD | 190 | 01/12/16 | (4 | ) | ||
Bank of America | GBP | 25 | USD | 38 | 01/12/16 | 1 | |||
Bank of America | JPY | 15,404 | USD | 126 | 01/12/16 | (3 | ) | ||
Bank of America | SEK | 132 | USD | 15 | 01/12/16 | — | |||
BNP Paribas | AUD | 628 | USD | 452 | 01/12/16 | (6 | ) | ||
BNP Paribas | CAD | 808 | USD | 604 | 01/12/16 | 20 | |||
BNP Paribas | CHF | 667 | USD | 649 | 01/12/16 | (17 | ) |
See accompanying notes which are an integral part of the financial statements.
34 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts
Amounts in thousands
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
BNP Paribas | EUR | 2,231 | USD | 2,363 | 01/12/16 | (61 | ) |
BNP Paribas | GBP | 925 | USD | 1,387 | 01/12/16 | 25 | |
BNP Paribas | HKD | 1,518 | USD | 196 | 01/12/16 | — | |
BNP Paribas | JPY | 185,278 | USD | 1,507 | 01/12/16 | (34 | ) |
BNP Paribas | SEK | 2,077 | USD | 239 | 01/12/16 | (7 | ) |
BNP Paribas | SGD | 127 | USD | 89 | 01/12/16 | — | |
Commonwealth Bank of Australia | AUD | 628 | USD | 452 | 01/12/16 | (6 | ) |
Commonwealth Bank of Australia | CAD | 808 | USD | 604 | 01/12/16 | 20 | |
Commonwealth Bank of Australia | CHF | 667 | USD | 649 | 01/12/16 | (18 | ) |
Commonwealth Bank of Australia | EUR | 2,231 | USD | 2,362 | 01/12/16 | (63 | ) |
Commonwealth Bank of Australia | GBP | 925 | USD | 1,387 | 01/12/16 | 24 | |
Commonwealth Bank of Australia | HKD | 1,518 | USD | 196 | 01/12/16 | — | |
Commonwealth Bank of Australia | JPY | 185,278 | USD | 1,507 | 01/12/16 | (35 | ) |
Commonwealth Bank of Australia | SEK | 2,077 | USD | 239 | 01/12/16 | (7 | ) |
Commonwealth Bank of Australia | SGD | 127 | USD | 89 | 01/12/16 | — | |
State Street | USD | 453 | AUD | 622 | 01/12/16 | — | |
State Street | USD | 172 | AUD | 240 | 03/16/16 | 2 | |
State Street | USD | 568 | CAD | 789 | 01/12/16 | 2 | |
State Street | USD | 687 | CHF | 680 | 01/12/16 | (9 | ) |
State Street | USD | 2,538 | EUR | 2,320 | 01/12/16 | (16 | ) |
State Street | USD | 1,388 | GBP | 937 | 01/12/16 | (7 | ) |
State Street | USD | 189 | HKD | 1,469 | 01/12/16 | — | |
State Street | USD | 1,601 | JPY | 192,980 | 01/12/16 | 5 | |
State Street | USD | 3,466 | JPY | 425,000 | 03/16/16 | 78 | |
State Street | USD | 255 | SEK | 2,143 | 01/12/16 | (1 | ) |
State Street | USD | 85 | SGD | 121 | 01/12/16 | — | |
State Street | AUD | 622 | USD | 453 | 02/05/16 | — | |
State Street | CAD | 789 | USD | 568 | 02/05/16 | (2 | ) |
State Street | CAD | 90 | USD | 66 | 03/16/16 | 1 | |
State Street | CHF | 680 | USD | 688 | 02/05/16 | 8 | |
State Street | EUR | 2,320 | USD | 2,539 | 02/05/16 | 16 | |
State Street | EUR | 3,290 | USD | 3,591 | 03/16/16 | 9 | |
State Street | GBP | 937 | USD | 1,388 | 02/05/16 | 7 | |
State Street | GBP | 430 | USD | 645 | 03/16/16 | 11 | |
State Street | HKD | 1,469 | USD | 190 | 02/05/16 | — | |
State Street | JPY | 192,980 | USD | 1,602 | 02/05/16 | (5 | ) |
State Street | SEK | 2,143 | USD | 255 | 02/05/16 | 1 | |
State Street | SGD | 121 | USD | 85 | 02/05/16 | — | |
UBS | USD | 453 | AUD | 622 | 01/12/16 | — | |
UBS | USD | 568 | CAD | 789 | 01/12/16 | 2 | |
UBS | USD | 687 | CHF | 680 | 01/12/16 | (9 | ) |
UBS | USD | 2,538 | EUR | 2,320 | 01/12/16 | (16 | ) |
UBS | USD | 1,388 | GBP | 937 | 01/12/16 | (7 | ) |
UBS | USD | 189 | HKD | 1,469 | 01/12/16 | — | |
UBS | USD | 1,601 | JPY | 192,980 | 01/12/16 | 5 | |
UBS | USD | 255 | SEK | 2,143 | 01/12/16 | (1 | ) |
UBS | USD | 85 | SGD | 121 | 01/12/16 | — | |
UBS | AUD | 622 | USD | 453 | 02/05/16 | — | |
UBS | CAD | 789 | USD | 568 | 02/05/16 | (2 | ) |
UBS | CHF | 680 | USD | 688 | 02/05/16 | 9 | |
UBS | EUR | 2,320 | USD | 2,539 | 02/05/16 | 16 | |
UBS | GBP | 937 | USD | 1,389 | 02/05/16 | 7 | |
UBS | HKD | 1,469 | USD | 190 | 02/05/16 | — | |
UBS | JPY | 192,980 | USD | 1,602 | 02/05/16 | (5 | ) |
UBS | SEK | 2,143 | USD | 255 | 02/05/16 | 1 | |
UBS | SGD | 121 | USD | 85 | 02/05/16 | — | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (73 | ) |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 35
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2015
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 3,132 | 03/07/16 | (56 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (56 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 month LIBOR rate plus a fee of 0.120%.
Credit Default Swap Contracts | |||||||
Amounts in thousands | |||||||
Credit Indices | |||||||
Fund (Pays)/ | |||||||
Receives | Termination | Fair Value | |||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||
CDX NA High Yield Index | Morgan Stanley | USD | 5,200 | 5.000 | % | 12/20/20 | 62 |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - $131(å) | 62 |
Presentation of Portfolio Holdings | ||||||||||||||
Amounts in thousands | ||||||||||||||
Fair Value | ||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||||
Investments in Russell Affiliated Mutual Funds | $ | 282,436 | $ | — | $ | — | $ | 282,436 | 97.8 | |||||
Short-Term Investments | — | 4,030 | — | 4,030 | 1.4 | |||||||||
Total Investments | 282,436 | 4,030 | — | 286,466 | 99.2 | |||||||||
Other Assets and Liabilities, Net | 0.8 | |||||||||||||
100.0 | ||||||||||||||
Other Financial Instruments | ||||||||||||||
Futures Contracts | (84 | ) | — | — | (84 | ) | (—)* | |||||||
Foreign Currency Exchange Contracts | — | (73 | ) | — | (73 | ) | (—)* | |||||||
Total Return Swap Contracts | — | (56 | ) | — | (56 | ) | (—)* | |||||||
Credit Default Swap Contracts | — | 62 | — | 62 | —* | |||||||||
Total Other Financial Instruments** | $ | (84 | ) | $ | (67 | ) | $ | — | $ | (151 | ) |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
36 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||||||
Equity | Credit | Currency | ||||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | |||||||
Location: Statement of Assets and Liabilities - Assets | ||||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | — | $ | 270 | ||||
Variation margin on futures contracts* | 163 | — | — | |||||||
Credit default swap contracts, at fair value | — | 62 | — | |||||||
Total | $ | 163 | $ | 62 | $ | 270 | ||||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||||
Variation margin on futures contracts* | $ | 247 | $ | — | $ | — | ||||
Unrealized depreciation on foreign currency exchange contracts | — | — | 343 | |||||||
Total return swap contracts | 56 | — | — | |||||||
Total | $ | 303 | $ | — | $ | 343 | ||||
Foreign | ||||||||||
Equity | Credit | Currency | ||||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | |||||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||||
Investments* | $ | (154 | ) | $ | — | $ | — | |||
Futures contracts | 188 | — | — | |||||||
Options written | 43 | — | — | |||||||
Total return swap contracts | (229 | ) | — | — | ||||||
Credit default swap contracts | — | 22 | — | |||||||
Foreign currency-related transactions** | — | — | 523 | |||||||
Total | $ | (152 | ) | $ | 22 | $ | 523 | |||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||||
Futures contracts | $ | (84 | ) | $ | — | $ | — | |||
Total return swap contracts | (56 | ) | — | — | ||||||
Credit default swap contracts | — | (69 | ) | — | ||||||
Foreign currency-related transactions*** | — | — | (73 | ) | ||||||
Total | $ | (140 | ) | $ | (69 | ) | $ | (73 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
*** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
**** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 37
Russell Investment Funds
Balanced Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | ||||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||||
Gross | Net Amounts | |||||||||
Amounts | of Assets | |||||||||
Gross | Offset in the | Presented in | ||||||||
Amounts of | Statement of | the Statement | ||||||||
Recognized | Assets and | of Assets and | ||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | $ | 270 | $ | — $ | 270 | ||||
Futures Contracts | Variation margin on futures contracts | 102 | — | 102 | ||||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 62 | — | 62 | ||||||
Total Financial and Derivative Assets | 434 | — | 434 | |||||||
Financial and Derivative Assets not subject to a netting agreement | (164) | — | (164 | ) | ||||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 270 | $ | — $ | 270 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 1 | $ | 1 | $ — | $ | — | ||
BNP Paribas | 45 | 45 | — | — | |||||
Commonwealth Bank of Australia | 44 | 44 | — | — | |||||
State Street | 140 | 40 | — | 100 | |||||
UBS | 40 | 40 | — | — | |||||
Total | $ | 270 | $ | 170 | $ — | $ | 100 |
See accompanying notes which are an integral part of the financial statements.
38 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 67 | $ | — $ | 67 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 343 | — | 343 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 56 | — | 56 | |||||
Total Financial and Derivative Liabilities | 466 | — | 466 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (67) | — | (67 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 399 | $ | — $ | 399 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | ||||||
Bank of America | $ | 65 | $ | 1 | $ | 64 | $ | — | ||
BNP Paribas | 127 | 45 | — | 82 | ||||||
Commonwealth Bank of Australia | 127 | 44 | — | 83 | ||||||
State Street | 40 | 40 | — | — | ||||||
UBS | 40 | 40 | — | — | ||||||
Total | $ | 399 | $ | 170 | $ | 64 | $ | 165 |
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 39
Russell Investment Funds
Balanced Strategy Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 268,190 |
Investments, at fair value(>) | 286,466 | |
Cash (restricted)(a)(b) | 2,365 | |
Unrealized appreciation on foreign currency exchange contracts | 270 | |
Receivables: | ||
Dividends and interest | 9 | |
Dividends from affiliated Russell funds | 1 | |
Fund shares sold | 296 | |
Variation margin on futures contracts | 102 | |
Credit default swap contracts, at fair value(+) | 62 | |
Total assets | 289,571 | |
Liabilities | ||
Payables: | ||
Due to broker (c) | 66 | |
Investments purchased | 296 | |
Accrued fees to affiliates | 19 | |
Other accrued expenses | 49 | |
Variation margin on futures contracts | 67 | |
Unrealized depreciation on foreign currency exchange contracts | 343 | |
Total return swap contracts, at fair value(8) | 56 | |
Total liabilities | 896 | |
Net Assets | $ | 288,675 |
See accompanying notes which are an integral part of the financial statements.
40 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2015
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 710 | |
Accumulated net realized gain (loss) | (8,012 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 18,276 | ||
Futures contracts | (84 | ) | |
Total return swap contracts | (56 | ) | |
Credit default swap contracts | (69 | ) | |
Foreign currency-related transactions | (73 | ) | |
Shares of beneficial interest | 308 | ||
Additional paid-in capital | 277,675 | ||
Net Assets | $ | 288,675 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 9.38 | |
Net assets | $ | 288,675,245 | |
Shares outstanding ($.01 par value) | 30,781,166 | ||
Amounts in thousands | |||
(+) Credit default swap contracts - premiums paid (received) | $ | 131 | |
(>) Investments in affiliated Russell funds | $ | 286,466 | |
(8) Total return swap contracts - premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 1,700 | |
(b) Cash Collateral for Swaps | $ | 665 | |
(c) Due to Broker for Swaps | $ | 66 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 41
Russell Investment Funds
Balanced Strategy Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Income distributions from affiliated Russell funds | $ | 6,998 | |
Expenses | |||
Advisory fees | 616 | ||
Administrative fees | 131 | ||
Custodian fees | 22 | ||
Transfer agent fees | 14 | ||
Professional fees | 44 | ||
Trustees’ fees | 8 | ||
Printing fees | 44 | ||
Miscellaneous | 10 | ||
Expenses before reductions | 889 | ||
Expense reductions | (560 | ) | |
Net expenses | 329 | ||
Net investment income (loss) | 6,669 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 511 | ||
Futures contracts | 188 | ||
Options written | 43 | ||
Total return swap contracts | (229 | ) | |
Credit default swap contracts | 22 | ||
Foreign currency-related transactions | 523 | ||
Capital gain distributions from Underlying Funds | 8,607 | ||
Net realized gain (loss) | 9,665 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (22,901 | ) | |
Futures contracts | (84 | ) | |
Total return swap contracts | (56 | ) | |
Credit default swap contracts | (69 | ) | |
Foreign currency-related transactions | (73 | ) | |
Net change in unrealized appreciation (depreciation) | (23,183 | ) | |
Net realized and unrealized gain (loss) | (13,518 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (6,849 | ) |
See accompanying notes which are an integral part of the financial statements.
42 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 6,669 | $ | 9,075 | ||
Net realized gain (loss) | 9,665 | 10,526 | ||||
Net change in unrealized appreciation (depreciation) | (23,183 | ) | (5,508 | ) | ||
Net increase (decrease) in net assets from operations | (6,849 | ) | 14,093 | |||
Distributions | ||||||
From net investment income | (6,507 | ) | (9,123 | ) | ||
From net realized gain | (17,348 | ) | (6,011 | ) | ||
Net decrease in net assets from distributions | (23,855 | ) | (15,134 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 5,252 | 11,065 | ||||
Total Net Increase (Decrease) in Net Assets | (25,452 | ) | 10,024 | |||
Net Assets | ||||||
Beginning of period | 314,127 | 304,103 | ||||
End of period | $ | 288,675 | $ | 314,127 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 710 | $ | — |
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,258 | $ | 12,856 | 2,021 | $ | 21,298 | ||||||
Proceeds from reinvestment of distributions | 2,420 | 23,854 | 1,448 | 15,134 | ||||||||
Payments for shares redeemed | (3,096 | ) | (31,458 | ) | (2,406 | ) | (25,367 | ) | ||||
Total increase (decrease) | 582 | $ | 5,252 | 1,063 | $ | 11,065 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 43
Russell Investment Funds
Balanced Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | ||||||||||||||||
$ | Net | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2015 | 10.40 | .22 | (.44 | ) | (.22 | ) | (.22 | ) | (.58 | ) | ||||||
December 31, 2014 | 10.44 | .31 | .17 | .48 | (.31 | ) | (.21 | ) | ||||||||
December 31, 2013 | 9.55 | .21 | .96 | 1.17 | (.21 | ) | (.07 | ) | ||||||||
December 31, 2012 | 8.66 | .23 | .89 | 1.12 | (.23 | ) | — | |||||||||
December 31, 2011 | 9.07 | .21 | (.42 | ) | (.21 | ) | (.20 | ) | — | |||||||
See accompanying notes which are an integral part of the financial statements.
44 Balanced Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.80 | ) | 9.38 | (2.30 | ) | 288,675 | .29 | .11 | 2.16 | 23 | ||||||||
(.52 | ) | 10.40 | 4.61 | 314,127 | .31 | .10 | 2.91 | 22 | |||||||||
(.28 | ) | 10.44 | 12.43 | 304,103 | .31 | .10 | 2.09 | 11 | |||||||||
(.23 | ) | 9.55 | 12.95 | 253,080 | .32 | .10 | 2.49 | 21 | |||||||||
(.20 | ) | 8.66 | (2.40 | ) | 201,069 | .31 | .10 | 2.36 | 8 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 45
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Growth Strategy Fund | Barclays U.S. Aggregate Bond Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (3.31 | )% | 1 Year | 0.55 | % | ||
5 Years | 4.93 | %§ | 5 Years | 3.25 | %§ | ||
Inception* | 2.73 | %§ | Inception* | 4.47 | %§ | ||
Russell 1000® Index** | Russell Developed ex-U.S. Large Cap® Index Net**** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 0.92 | % | 1 Year | (2.56 | )% | ||
5 Years | 12.44 | %§ | 5 Years | 3.09 | %§ | ||
Inception* | 6.15 | %§ | Inception* | 0.03 | %§ |
46 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Growth Strategy Fund (the “Fund”) is a fund of funds that | to the Fund’s benchmark-relative performance, as U.S. equity | |
invests principally in other Russell Investment Funds (“RIF”) | markets finished at 0.92% for the fiscal year as measured by the | |
and Russell Investment Company (“RIC”) mutual funds (the | Fund’s benchmark. | |
“Underlying Funds”). The Underlying Funds employ a multi- | The fiscal year ended December 31, 2015 was characterized by | |
manager approach whereby portions of the Underlying Funds are | slowing global growth and commodity price weakness. Overall, | |
allocated to different money manager strategies. Underlying Fund | this was modestly positive for fixed income assets, as yields fell. | |
assets not allocated to money managers are managed by Russell | On the other hand, credit sectors, primarily within the U.S., were | |
Investment Management Company (“RIMCo”), the Fund’s and | challenged in this environment. Corporate bonds saw some of the | |
Underlying Funds’ advisor. RIMCo, as the Underlying Funds’ | largest drawdowns as sharply reduced commodity prices (oil in | |
advisor, may change the allocation of the Underlying Funds’ | particular), weakening earnings growth and elevated new issuance | |
assets among money managers at any time. An exemptive order | weighed on returns. The Fund’s exposure to the fixed income | |
from the Securities and Exchange Commission (“SEC”) permits | asset class had a modestly negative effect on benchmark-relative | |
RIMCo to engage or terminate a money manager in an Underlying | performance due to the Fund’s allocation to the RIF Core Bond | |
Fund at any time, subject to approval by the Underlying Fund’s | Fund and the RIC Russell Global Opportunistic Credit Fund, | |
Board, without a shareholder vote. Pursuant to the terms of the | which both underperformed the Fund’s U.S. equity benchmark. | |
exemptive order, an Underlying Fund is required to notify its | ||
shareholders within 90 days of when a money manager begins | Within alternative strategies, commodities exposure had the | |
providing services. | largest negative impact on the Fund, as the asset class (as | |
measured by the Bloomberg Commodity Index Total Return) lost | ||
What is the Fund’s investment objective? | 24.66% during the period, significantly underperforming fixed | |
Fund seeks to provide high long term capital appreciation, and as | income. Global REITs and listed infrastructure (as represented | |
a secondary objective, current income. | by the FTSE EPRA/NAREIT Developed Real Estate Index | |
(Net) and S&P Global Infrastructure Index (Net)) also negatively | ||
How did the Fund perform relative to its benchmark for the | impacted the Fund, down 0.79% and 12.17% respectively and | |
fiscal year ended December 31, 2015? | underperforming the Fund’s U.S. equity benchmark for the fiscal | |
For the fiscal year ended December 31, 2015, the Fund lost 3.31%. | year. | |
This is compared to the Fund’s primary benchmark, the Russell | ||
1000® Index, which gained 0.92% during the same period. The | How did the investment strategies and techniques employed | |
Fund’s performance includes operating expenses, whereas index | by the Fund and the Underlying Funds affect the Fund’s | |
returns are unmanaged and do not include expenses of any kind. | performance? | |
For the fiscal year ended December 31, 2015, the Morningstar | The Fund is a fund of funds and its performance is based on | |
Insurance Aggressive Allocation, a group of funds that Morningstar | RIMCo’s strategic asset allocations and the performance of the | |
considers to have investment strategies similar to those of the | Underlying Funds in which the Fund invests. | |
Fund, lost 1.67%. This result serves as a peer comparison and is | The Fund’s global equity exposure had a negative impact on its | |
expressed net of operating expenses. | benchmark-relative performance, given the underperformance | |
The Fund’s underperformance relative to the Russell 1000® Index | of global equity compared to the Fund’s U.S. equity benchmark. | |
was primarily due to the Fund’s out-of-benchmark allocation to | From an active management perspective, the RIF Non-U.S. Fund | |
Underlying Funds invested in non-U.S. equities, commodities | outperformed its benchmark due to underweights to Asia Pacific | |
and fixed income, which generally underperformed the U.S. large | ex-Japan and Canada as well as underweights to materials and | |
cap equity market as represented by the Russell 1000® Index. | energy which paid off as these regions and sectors underperformed. | |
For the RIC Russell Emerging Markets Fund, unsuccessful stock | ||
How did the market conditions described in the Market | selection in China and Brazil was the main driver of the Fund’s | |
Summary report affect the Fund’s performance? | underperformance versus its benchmark. | |
It was a mixed equity market for the fiscal year ending December | The Fund’s strategic allocation to U.S. equity Underlying | |
31, 2015. U.S. stocks (as measured by the Russell 3000® Index) | Funds had a mixed effect on the Fund’s benchmark-relative | |
returned 0.48% over the period, while non-U.S. equities returned | performance. From an active management perspective, the RIF | |
-2.56% (as measured by the Russell Developed ex-U.S. Large Cap | Multi-Style Equity Fund (U.S. large cap equity) benefited from | |
Index) and emerging markets returned -12.80% (as measured by | positive stock selection within the energy sector, an underweight | |
the Russell Emerging Markets Index). The underperformance of | to utilities and an overweight to health care. The RIF Aggressive | |
non-U.S. equities versus U.S. equities was a key negative driver | Equity Fund (U.S. small cap equity) was negatively impacted by |
Growth Strategy Fund 47
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
an overweight to smaller cap value stocks, as larger cap growth | to various Underlying Funds was modified, and the strategic |
stocks significantly outperformed. | allocation to the RIC Russell Multi-Strategy Alternative Fund |
The Fund’s strategic allocation to fixed income Underlying | was removed. |
Funds generally had a negative impact on its benchmark-relative | In connection with this reallocation, RIMCo also shifted the |
performance as fixed income underperformed U.S. equity. From | Fund’s tactical allocations relative to the new target strategic |
an active management perspective, the RIF Core Bond Fund | asset allocation as follows: |
underperformed its benchmark due to the negative performance | - 1.00% underweight to the RIF Global Real Estate Securities |
of credit, particularly high yield corporate credit given the | Fund resulting in a 1.00% overweight to the RIC Russell Global |
Underlying Fund’s strategic overweight to credit risk. The RIC | Opportunistic Credit Fund. This tactical change was intended to |
Russell Global Opportunistic Credit Fund underperformed its | reduce exposure to asset classes sensitive to anticipated rising |
benchmark due to underperformance among both developed | interest rates. |
market corporate high yield and emerging market bonds, the two | |
primary sectors in which the Underlying Fund invests. | On July 1, 2015, RIMCo added a RIMCo-managed positioning |
strategy at a 2.00% weight. The addition of the positioning | |
The Fund’s strategic allocation to alternative Underlying Funds | strategy resulted in a 2.00% reduction in the Fund’s allocation to |
had a negative impact on benchmark-relative performance as | the RIF Multi-Style Equity Fund. The strategy had a U.S. large |
real assets underperformed the Fund’s benchmark. From an | cap strategic exposure through the use of index futures contracts, |
active management standpoint, performance of these Underlying | and did not result in a change to the Fund’s overall U.S. equity |
Funds was mixed. The RIC Russell Global Infrastructure Fund | exposure. |
and the RIF Global Real Estate Securities Fund outperformed | |
their respective benchmarks while the RIC Russell Commodity | On September 3, 2015, RIMCo increased the Fund’s underweight |
Strategies Fund modestly underperformed its benchmark. The | to the RIC Russell Commodity Strategies Fund by 1.00% due |
RIC Russell Global Infrastructure Fund and the RIF Global Real | to limited commodity price appreciation expectations over the |
Estate Securities Fund both benefited from strong stock selection | medium term. This resulted in a 1.00% overweight to the RIF |
by underlying money managers. The RIC Russell Commodity | Multi-Style Equity Fund. |
Strategies Fund underperformed its benchmark due to exposure | At the end of the fiscal year, the Fund was positioned with less |
to the energy sector. | than benchmark risk levels and for rising interest rates, with |
underweights to the RIF Global Real Estate Securities Fund and | |
Describe any changes to the Fund’s structure or allocation | RIC Russell Commodity Strategies Fund funding an overweight |
to the Underlying Funds. | to the RIC Russell Global Opportunistic Credit Fund and the RIF |
RIMCo has the discretion to vary the Fund’s actual allocation from | Multi-Style Equity Fund. |
the target strategic asset allocation by up to +/- 5% at the equity, | |
fixed income or alternative category level based on RIMCo’s | The views expressed in this report reflect those of the portfolio |
capital markets research. RIMCo’s asset allocation modifications | managers only through the end of the period covered by |
had a modestly negative impact on the Fund’s performance | the report. These views do not necessarily represent the |
relative to the Fund’s long-term strategic allocation. | views of RIMCo, or any other person in RIMCo or any other |
Entering the fiscal year, relative to the target strategic asset | affiliated organization. These views are subject to change |
allocation, the Fund maintained a broad overweight to equity | at any time based upon market conditions or other events, |
Underlying Funds and an underweight to alternative Underlying | and RIMCo disclaims any responsibility to update the views |
Funds. Overall positioning was based on a cautious outlook for | contained herein. These views should not be relied on |
commodities and anticipated rise in interest rates, which could | as investment advice and, because investment decisions |
negatively impact interest rate sensitive securities such as REITs. | for a Russell Investment Funds (“RIF”) Fund are based on |
numerous factors, should not be relied on as an indication | |
On March 3, 2015, RIMCo implemented a new target strategic | of investment decisions of any RIF Fund. |
asset allocation. The Fund’s target strategic asset allocation |
48 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
* Assumes initial investment on April 30, 2007.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade
corporate debt securities and mortgage-backed securities.
**** The Russell Developed ex-U.S. Large Cap® Index (net of tax on dividends from foreign holdings) is an index which offers investors access to the large-cap
segment of the global equity market, excluding companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer
for the large-cap segment and is completely reconstituted annually to accurately reflect the changes in the market over time.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
Growth Strategy Fund 49
Russell Investment Funds
Growth Strategy Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 945.40 | $ | 1,024.60 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.59 | $ | 0.61 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.12% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
50 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | ||||
Fair | ||||
Value | ||||
Shares | $ | |||
Investments in Russell Affiliated Mutual Funds - 97.9% | ||||
Alternative - 11.0% | ||||
RIC Russell Commodity Strategies Fund Class Y | 1,173,201 | 6,054 | ||
RIC Russell Global Infrastructure Fund Class Y | 958,726 | 10,028 | ||
RIF Global Real Estate Securities Fund | 409,164 | 6,019 | ||
22,101 | ||||
Domestic Equities - 35.9% | ||||
RIC Russell U.S. Defensive Equity Fund Class Y | 338,429 | 15,984 | ||
RIC Russell U.S. Dynamic Equity Fund Class Y | 1,668,250 | 15,932 | ||
RIF Aggressive Equity Fund | 1,383,133 | 17,884 | ||
RIF Multi-Style Equity Fund | 1,319,110 | 21,950 | ||
71,750 | ||||
Fixed Income - 17.1% | ||||
RIC Russell Global Opportunistic Credit Fund Class Y | 1,144,015 | 10,079 | ||
RIF Core Bond Fund | 2,352,680 | 24,162 | ||
34,241 | ||||
International Equities - 33.9% | ||||
RIC Russell Emerging Markets Fund Class Y | 1,247,114 | 17,871 | ||
RIC Russell Global Equity Fund Class Y | 2,393,355 | 24,005 | ||
RIF Non-U.S. Fund | 2,305,519 | 25,960 | ||
67,836 | ||||
Total Investments in Russell Affiliated Mutual Funds | ||||
(cost $186,288) | 195,928 | |||
Short-Term Investments - 1.7% | ||||
Russell U.S. Cash Management Fund | 3,297,382 | (8) | 3,297 | |
Total Short-Term Investments | ||||
(cost $3,297) | 3,297 | |||
Total Investments 99.6% | ||||
(identified cost $189,585) | 199,225 | |||
Other Assets and Liabilities, Net - 0.4% | 891 | |||
Net Assets - 100.0% | 200,116 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 51
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 2 | EUR | 177 | 01/16 | 6 | ||
CAC40 10 EURO Index Futures | 7 | EUR | 325 | 01/16 | 5 | ||
DAX Index Futures | 1 | EUR | 269 | 03/16 | 11 | ||
EURO STOXX 50 Index Futures | 6 | EUR | 197 | 03/16 | 6 | ||
FTSE/MIB Index Futures | 1 | EUR | 107 | 03/16 | 1 | ||
IBEX 35 Index Futures | 1 | EUR | 95 | 01/16 | — | ||
OMXS30 Index Futures | 5 | SEK | 724 | 01/16 | 2 | ||
Russell 1000 Index Mini Futures | 6 | USD | 677 | 03/16 | 10 | ||
Russell 2000 Mini Index Futures | 4 | USD | 453 | 03/16 | 4 | ||
S&P 500 E-Mini Index Futures | 55 | USD | 5,597 | 03/16 | 28 | ||
S&P Mid 400 E-Mini Index Futures | 7 | USD | 976 | 03/16 | (7 | ) | |
TOPIX Index Futures | 11 | JPY | 170,225 | 03/16 | (20 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 21 | GBP | 1,301 | 03/16 | (77 | ) | |
MSCI EAFE Mini Index Futures | 3 | USD | 255 | 03/16 | 1 | ||
MSCI Emerging Markets Mini Index Futures | 6 | USD | 236 | 03/16 | (2 | ) | |
S&P/TSX 60 Index Futures | 5 | CAD | 761 | 03/16 | (9 | ) | |
SPI 200 Index Futures | 4 | AUD | 526 | 03/16 | (27 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (68 | ) |
Options Written | ||||||
Amounts in thousands (except contract amounts) | ||||||
Transactions in options written contracts for the period ended December 31, 2015 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2014 | — | $ | — | |||
Opened | 55,556 | 100 | ||||
Closed | (55,556 | ) | (100 | ) | ||
Expired | — | — | ||||
Outstanding December 31, 2015 | — | $ | — |
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of America | USD | 5 | AUD | 7 | 01/12/16 | — | |||
Bank of America | USD | 19 | CAD | 25 | 01/12/16 | (1 | ) | ||
Bank of America | USD | 8 | HKD | 62 | 01/12/16 | — | |||
Bank of America | USD | 6 | SGD | 8 | 01/12/16 | — | |||
Bank of America | CHF | 18 | USD | 18 | 01/12/16 | — | |||
Bank of America | EUR | 122 | USD | 130 | 01/12/16 | (4 | ) | ||
Bank of America | GBP | 18 | USD | 27 | 01/12/16 | 1 | |||
Bank of America | JPY | 10,450 | USD | 85 | 01/12/16 | (2 | ) | ||
Bank of America | SEK | 90 | USD | 10 | 01/12/16 | — | |||
State Street | USD | 299 | AUD | 411 | 01/12/16 | — | |||
State Street | USD | 280 | AUD | 390 | 03/16/16 | 3 | |||
State Street | USD | 374 | CAD | 520 | 01/12/16 | 1 | |||
State Street | USD | 294 | CAD | 400 | 03/16/16 | (5 | ) |
See accompanying notes which are an integral part of the financial statements.
52 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
State Street | USD | 454 | CHF | 449 | 01/12/16 | (6 | ) |
State Street | USD | 1,674 | EUR | 1,531 | 01/12/16 | (11 | ) |
State Street | USD | 916 | GBP | 618 | 01/12/16 | (5 | ) |
State Street | USD | 125 | HKD | 969 | 01/12/16 | — | |
State Street | USD | 1,056 | JPY | 127,289 | 01/12/16 | 3 | |
State Street | USD | 3,480 | JPY | 426,790 | 03/16/16 | 77 | |
State Street | USD | 168 | SEK | 1,413 | 01/12/16 | (1 | ) |
State Street | USD | 56 | SGD | 80 | 01/12/16 | — | |
State Street | AUD | 828 | USD | 597 | 01/12/16 | (7 | ) |
State Street | AUD | 411 | USD | 299 | 02/05/16 | — | |
State Street | CAD | 1,065 | USD | 797 | 01/12/16 | 27 | |
State Street | CAD | 520 | USD | 374 | 02/05/16 | (1 | ) |
State Street | CHF | 879 | USD | 856 | 01/12/16 | (22 | ) |
State Street | CHF | 449 | USD | 454 | 02/05/16 | 6 | |
State Street | EUR | 2,939 | USD | 3,114 | 01/12/16 | (80 | ) |
State Street | EUR | 1,531 | USD | 1,675 | 02/05/16 | 11 | |
State Street | EUR | 2,300 | USD | 2,510 | 03/16/16 | 6 | |
State Street | GBP | 1,218 | USD | 1,831 | 01/12/16 | 35 | |
State Street | GBP | 618 | USD | 916 | 02/05/16 | 5 | |
State Street | GBP | 40 | USD | 60 | 03/16/16 | 1 | |
State Street | HKD | 2,000 | USD | 258 | 01/12/16 | — | |
State Street | HKD | 969 | USD | 125 | 02/05/16 | — | |
State Street | JPY | 244,128 | USD | 1,986 | 01/12/16 | (45 | ) |
State Street | JPY | 127,289 | USD | 1,056 | 02/05/16 | (3 | ) |
State Street | SEK | 2,736 | USD | 315 | 01/12/16 | (9 | ) |
State Street | SEK | 1,413 | USD | 168 | 02/05/16 | 1 | |
State Street | SGD | 167 | USD | 118 | 01/12/16 | — | |
State Street | SGD | 80 | USD | 56 | 02/05/16 | — | |
UBS | USD | 299 | AUD | 411 | 01/12/16 | — | |
UBS | USD | 374 | CAD | 520 | 01/12/16 | 1 | |
UBS | USD | 454 | CHF | 449 | 01/12/16 | (6 | ) |
UBS | USD | 1,674 | EUR | 1,531 | 01/12/16 | (11 | ) |
UBS | USD | 916 | GBP | 618 | 01/12/16 | (5 | ) |
UBS | USD | 125 | HKD | 969 | 01/12/16 | — | |
UBS | USD | 1,056 | JPY | 127,289 | 01/12/16 | 3 | |
UBS | USD | 168 | SEK | 1,413 | 01/12/16 | (1 | ) |
UBS | USD | 56 | SGD | 80 | 01/12/16 | — | |
UBS | AUD | 411 | USD | 299 | 02/05/16 | — | |
UBS | CAD | 520 | USD | 374 | 02/05/16 | (1 | ) |
UBS | CHF | 449 | USD | 454 | 02/05/16 | 6 | |
UBS | EUR | 1,531 | USD | 1,675 | 02/05/16 | 11 | |
UBS | GBP | 618 | USD | 916 | 02/05/16 | 5 | |
UBS | HKD | 969 | USD | 125 | 02/05/16 | — | |
UBS | JPY | 127,289 | USD | 1,056 | 02/05/16 | (3 | ) |
UBS | SEK | 1,413 | USD | 168 | 02/05/16 | 1 | |
UBS | SGD | 80 | USD | 56 | 02/05/16 | — | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (25 | ) |
Total Return Swap Contracts (*) | ||||||
Fund Receives/(Pays) | Notional | Termination | Fair Value | |||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Index | Bank of America | USD | 6,481 | 03/07/16 | (115 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (115 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 Month LIBOR rate plus a fee of 0.120%.
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 53
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | |||||||||||||||
Amounts in thousands | |||||||||||||||
Fair Value | |||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | ||||||||||
Investments in Russell Affiliated Mutual Funds | $ | 195,928 | $ | — | $ | — | $ | 195,928 | 97.9 | ||||||
Short-Term Investments | — | 3,297 | — | 3,297 | 1.7 | ||||||||||
Total Investments | 195,928 | 3,297 | — | 199,225 | 99.6 | ||||||||||
Other Assets and Liabilities, Net | 0.4 | ||||||||||||||
100.0 | |||||||||||||||
Other Financial Instruments | |||||||||||||||
Futures Contracts | (68 | ) | — | — | (68 | ) | (—)* | ||||||||
Foreign Currency Exchange Contracts | — | (25 | ) | — | (25 | ) | (—)* | ||||||||
Total Return Swap Contracts | — | (115 | ) | — | (115 | ) | (0.1 | ) | |||||||
Total Other Financial Instruments** | $ | (68 | ) | $ | (140 | ) | $ | — | $ | (208 | ) |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
54 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | ||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 204 | ||
Variation margin on futures contracts* | 74 | — | ||||
Total | $ | 74 | $ | 204 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||||
Variation margin on futures contracts* | $ | 142 | $ | — | ||
Unrealized depreciation on foreign currency exchange contracts | — | 229 | ||||
Total return swap contracts, at fair value | 115 | — | ||||
Total | $ | 257 | $ | 229 | ||
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | ||||||
Investments** | $ | (100 | ) | $ | — | |
Futures contracts | 395 | — | ||||
Options written | 27 | — | ||||
Total return swap contracts | (474 | ) | — | |||
Foreign currency-related transactions*** | — | 299 | ||||
Total | $ | (152 | ) | $ | 299 | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||
Futures contracts | $ | (68 | ) | $ | — | |
Total return swap contracts | (115 | ) | — | |||
Foreign currency-related transactions**** | — | (25 | ) | |||
Total | $ | (183 | ) | $ | (25 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
*** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
**** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 55
Russell Investment Funds
Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | $ | 204 | $ | — $ | 204 | |||
Futures Contracts | Variation margin on futures contracts | 21 | — | 21 | |||||
Total Financial and Derivative Assets | 225 | — | 225 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (21) | — | (21 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 204 | $ | — $ | 204 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 1 | $ | 1 | $ | — $ | — | ||
State Street | 176 | 94 | — | 82 | |||||
UBS | 27 | 27 | — | — | |||||
Total | $ | 204 | $ | 122 | $ | — $ | 82 |
See accompanying notes which are an integral part of the financial statements.
56 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 78 | $ | — $ | 78 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 229 | — | 229 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 115 | — | 115 | |||||
Total Financial and Derivative Liabilities | 422 | — | 422 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (78) | — | (78 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 344 | $ | — $ | 344 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | ||||||
Bank of America | $ | 122 | $ | 1 | $ | 121 | $ | — | ||
State Street | 195 | 94 | — | 101 | ||||||
UBS | 27 | 27 | — | — | ||||||
Total | $ | 344 | $ | 122 | $ | 121 | $ | 101 |
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 57
Russell Investment Funds
Growth Strategy Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 189,585 |
Investments, at fair value(>) | 199,225 | |
Cash (restricted)(a)(b) | 1,140 | |
Unrealized appreciation on foreign currency exchange contracts | 204 | |
Receivables: | ||
Dividends from affiliated Russell funds | 1 | |
Fund shares sold | 19 | |
Variation margin on futures contracts | 21 | |
Total assets | 200,610 | |
Liabilities | ||
Payables: | ||
Due to custodian | 1 | |
Investments purchased | 18 | |
Accrued fees to affiliates | 13 | |
Other accrued expenses | 40 | |
Variation margin on futures contracts | 78 | |
Unrealized depreciation on foreign currency exchange contracts | 229 | |
Total return swap contracts, at fair value(8) | 115 | |
Total liabilities | 494 | |
Net Assets | $ | 200,116 |
See accompanying notes which are an integral part of the financial statements.
58 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2015
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 143 | |
Accumulated net realized gain (loss) | (6,834 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 9,640 | ||
Futures contracts | (68 | ) | |
Total return swap contracts | (115 | ) | |
Foreign currency-related transactions | (25 | ) | |
Shares of beneficial interest | 224 | ||
Additional paid-in capital | 197,151 | ||
Net Assets | $ | 200,116 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 8.94 | |
Net assets | $ | 200,115,532 | |
Shares outstanding ($.01 par value) | 22,394,632 | ||
Amounts in thousands | |||
(>) Investments in affiliated Russell funds | $ | 199,225 | |
(8) Total return swap contracts – premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 800 | |
(b) Cash Collateral for Swaps | $ | 340 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 59
Russell Investment Funds
Growth Strategy Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Income distributions from affiliated Russell funds | $ | 3,970 | |
Expenses | |||
Advisory fees | 419 | ||
Administrative fees | 89 | ||
Custodian fees | 21 | ||
Transfer agent fees | 9 | ||
Professional fees | 41 | ||
Trustees’ fees | 5 | ||
Printing fees | 34 | ||
Miscellaneous | 8 | ||
Expenses before reductions | 626 | ||
Expense reductions | (388 | ) | |
Net expenses | 238 | ||
Net investment income (loss) | 3,732 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | (1,762 | ) | |
Futures contracts | 395 | ||
Options written | 27 | ||
Total return swap contracts | (474 | ) | |
Foreign currency-related transactions | 299 | ||
Capital gain distributions from Underlying Funds | 7,510 | ||
Net realized gain (loss) | 5,995 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (16,495 | ) | |
Futures contracts | (68 | ) | |
Total return swap contracts | (115 | ) | |
Foreign currency-related transactions | (25 | ) | |
Net change in unrealized appreciation (depreciation) | (16,703 | ) | |
Net realized and unrealized gain (loss) | (10,708 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (6,976 | ) |
See accompanying notes which are an integral part of the financial statements.
60 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 3,732 | $ | 5,985 | ||
Net realized gain (loss) | 5,995 | 8,502 | ||||
Net change in unrealized appreciation (depreciation) | (16,703 | ) | (7,129 | ) | ||
Net increase (decrease) in net assets from operations | (6,976 | ) | 7,358 | |||
Distributions | ||||||
From net investment income | (3,824 | ) | (6,081 | ) | ||
From net realized gain | (13,529 | ) | (4,551 | ) | ||
Net decrease in net assets from distributions | (17,353 | ) | (10,632 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 16,124 | 21,639 | ||||
Total Net Increase (Decrease) in Net Assets | (8,205 | ) | 18,365 | |||
Net Assets | ||||||
Beginning of period | 208,321 | 189,956 | ||||
End of period | $ | 200,116 | $ | 208,321 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 143 | $ | — |
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,379 | $ | 13,505 | 1,972 | $ | 20,275 | ||||||
Proceeds from reinvestment of distributions | 1,836 | 17,354 | 1,045 | 10,632 | ||||||||
Payments for shares redeemed | (1,502 | ) | (14,735 | ) | (906 | ) | (9,268 | ) | ||||
Total increase (decrease) | 1,713 | $ | 16,124 | 2,111 | $ | 21,639 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 61
Russell Investment Funds
Growth Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | |||||||||||||||||
$ | Net | $ | $ | $ | $ | ||||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | ||||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | ||||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | ||||||||||||
December 31, 2015 | 10.07 | .17 | (.48 | ) | (.31 | ) | (.18 | ) | (.64 | ) | |||||||
December 31, 2014 | 10.23 | .31 | .07 | .38 | (.30 | ) | (.24 | ) | |||||||||
December 31, 2013 | 8.97 | .22 | 1.26 | 1.48 | (.22 | ) | — | ||||||||||
December 31, 2012 | 8.01 | .18 | .95 | 1.13 | (.17 | ) | — | ||||||||||
December 31, 2011 | 8.57 | .17 | (.57 | ) | (.40 | ) | (.16 | ) | — | ||||||||
See accompanying notes which are an integral part of the financial statements.
62 Growth Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.82 | ) | 8.94 | (3.31 | ) | 200,116 | .30 | .11 | 1.78 | 23 | ||||||||
(.54 | ) | 10.07 | 3.76 | 208,321 | .32 | .10 | 2.97 | 20 | |||||||||
(.22 | ) | 10.23 | 16.56 | 189,956 | .32 | .10 | 2.29 | 12 | |||||||||
(.17 | ) | 8.97 | 14.22 | 145,155 | .34 | .10 | 2.07 | 25 | |||||||||
(.16 | ) | 8.01 | (4.73 | ) | 111,479 | .34 | .10 | 2.02 | 10 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 63
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2015 (Unaudited)
Equity Growth Strategy Fund | Russell Developed ex-U.S. Large Cap® Index Net*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | (3.87 | )% | 1 Year | (2.56 | )% | ||
5 Years | 5.27 | %§ | 5 Years | 3.09 | %§ | ||
Inception* | 1.81 | %§ | Inception* | 0.03 | %§ | ||
Russell 1000® Index** | |||||||
Total | |||||||
Return | |||||||
1 Year | 0.92 | % | |||||
5 Years | 12.44 | %§ | |||||
Inception* | 6.15 | %§ |
64 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
The Equity Growth Strategy Fund (the “Fund”) is a fund of | to the Fund’s benchmark-relative performance, as U.S. equity |
funds that invests principally in other Russell Investment Funds | markets finished at 0.92% for the fiscal year as measured by the |
(“RIF”) and Russell Investment Company (“RIC”) mutual funds | Fund’s benchmark. |
(the “Underlying Funds”). The Underlying Funds employ a multi- | The fiscal year ended December 31, 2015 was characterized by |
manager approach whereby portions of the Underlying Funds are | slowing global growth and commodity price weakness. Overall, |
allocated to different money manager strategies. Underlying Fund | this was modestly positive for fixed income assets, as yields fell. |
assets not allocated to money managers are managed by Russell | On the other hand, credit sectors, primarily within the U.S., were |
Investment Management Company (“RIMCo”), the Fund’s and | challenged in this environment. Corporate bonds saw some of the |
Underlying Funds’ advisor. RIMCo, as the Underlying Funds’ | largest drawdowns as sharply reduced commodity prices (oil in |
advisor, may change the allocation of the Underlying Funds’ | particular), weakening earnings growth and elevated new issuance |
assets among money managers at any time. An exemptive order | weighed on returns. The Fund’s exposure to the fixed income |
from the Securities and Exchange Commission (“SEC”) permits | asset class had a modestly negative effect on benchmark-relative |
RIMCo to engage or terminate a money manager in an Underlying | performance due to the Fund’s allocation to the RIC Russell |
Fund at any time, subject to approval by the Underlying Fund’s | Global Opportunistic Credit Fund, which underperformed the |
Board, without a shareholder vote. Pursuant to the terms of the | Fund’s U.S. equity benchmark. |
exemptive order, an Underlying Fund is required to notify its | |
shareholders within 90 days of when a money manager begins | Within alternative strategies, commodities exposure had the |
providing services. | largest negative impact on the Fund, as the asset class (as |
measured by the Bloomberg Commodity Index Total Return) lost | |
What is the Fund’s investment objective? | 24.66% during the period, significantly underperforming fixed |
The Fund seeks to provide high long term capital appreciation. | income. Global REITs and listed infrastructure (as represented |
by the FTSE EPRA/NAREIT Developed Real Estate Index | |
How did the Fund perform relative to its benchmark for the | (Net) and S&P Global Infrastructure Index (Net)) also negatively |
fiscal year ended December 31, 2015? | impacted the Fund, down 0.79% and 12.17% respectively and |
For the fiscal year ended December 31, 2015, the Fund lost 3.87%. | underperforming the Fund’s U.S. equity benchmark for the fiscal |
This is compared to the Fund’s primary benchmark, the Russell | year. |
1000® Index, which gained 0.92% during the same period. The | |
Fund’s performance includes operating expenses, whereas index | How did the investment strategies and techniques employed |
returns are unmanaged and do not include expenses of any kind. | by the Fund and the Underlying Funds affect the Fund’s |
performance? | |
The Fund is a fund of funds and its performance is based on | |
For the fiscal year ended December 31, 2015, the Morningstar | RIMCo’s strategic asset |
Insurance World Stock Allocation, a group of funds that | |
Morningstar considers to have investment strategies similar | allocations and the performance of the Underlying Funds in |
to those of the Fund, lost 1.16%. This result serves as a peer | which the Fund invests. |
comparison and is expressed net of operating expenses. | The Fund’s global equity exposure had a negative impact on its |
The Fund’s underperformance relative to the Russell 1000® Index | benchmark-relative performance, given the underperformance |
was primarily due to the Fund’s out-of-benchmark allocation to | of global equity compared to the Fund’s U.S. equity benchmark. |
Underlying Funds invested in non-U.S. equities, commodities | From an active management perspective, the RIF Non-U.S. Fund |
and fixed income, which generally underperformed the U.S. large | outperformed its benchmark due to underweights to Asia Pacific |
cap equity market as represented by the Russell 1000® Index. | ex-Japan and Canada as well as underweights to materials and |
energy which paid off as these regions and sectors underperformed. | |
How did the market conditions described in the Market | For the RIC Russell Emerging Markets Fund, unsuccessful stock |
Summary report affect the Fund’s performance? | selection in China and Brazil was the main driver of the Fund’s |
It was a mixed equity market for the fiscal year ending December | underperformance versus its benchmark. |
31, 2015. U.S. stocks (as measured by the Russell 3000® Index) | The Fund’s strategic allocation to U.S. equity Underlying |
returned 0.48% over the period, while non-U.S. equities returned | Funds had a mixed effect on the Fund’s benchmark-relative |
-2.56% (as measured by the Russell Developed ex-U.S. Large Cap | performance. From an active management perspective, the RIF |
Index) and emerging markets returned -12.80% (as measured by | Multi-Style Equity Fund (U.S. large cap equity) benefited from |
the Russell Emerging Markets Index). The underperformance of | positive stock selection within the energy sector, an underweight |
non-U.S. equities versus U.S. equities was a key negative driver | to utilities and an overweight to health care. The RIF Aggressive |
Equity Growth Strategy Fund 65
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
Equity Fund (U.S. small cap equity) was negatively impacted by | allocation to the RIC Russell Multi-Strategy Alternative Fund |
an overweight to smaller cap value stocks, as larger cap growth | was removed. |
stocks significantly outperformed. | In connection with this reallocation, RIMCo also shifted the |
The Fund’s strategic allocation to fixed income Underlying | Fund’s tactical allocations relative to the new target strategic |
Funds generally had a negative impact on its benchmark-relative | asset allocation as follows: |
performance as fixed income underperformed U.S. equity. From | - 1.00% underweight to the RIF Global Real Estate Securities |
an active management perspective, the RIC Russell Global | Fund resulting in a 1.00% overweight to the RIC Russell Global |
Opportunistic Credit Fund underperformed its benchmark due | Opportunistic Credit Fund. This tactical change was intended to |
to underperformance among both developed market corporate | reduce exposure to asset classes sensitive to anticipated rising |
high yield and emerging market bonds, the two primary sectors in | interest rates. |
which the Underlying Fund invests. | |
On July 1, 2015, RIMCo added a RIMCo-managed positioning | |
The Fund’s strategic allocation to alternative Underlying Funds | strategy at a 2.00% weight. The addition of the positioning |
had a negative impact on benchmark-relative performance as | strategy resulted in a 2.00% reduction in the Fund’s allocation to |
real assets underperformed the Fund’s benchmark. From an | the RIF Multi-Style Equity Fund. The strategy had a U.S. large |
active management standpoint, performance of these Underlying | cap strategic exposure through the use of index futures contracts, |
Funds was mixed. The RIC Russell Global Infrastructure Fund | and did not result in a change to the Fund’s overall U.S. equity |
and the RIF Global Real Estate Securities Fund outperformed | exposure. |
their respective benchmarks while the RIC Russell Commodity | |
Strategies Fund modestly underperformed its benchmark. The | On September 3, 2015, RIMCo increased the Fund’s underweight |
RIC Russell Global Infrastructure Fund and the RIF Global Real | to the RIC Russell Commodity Strategies Fund by 1.00% due |
Estate Securities Fund both benefited from strong stock selection | to limited commodity price appreciation expectations over the |
by underlying money managers. The RIC Russell Commodity | medium term. This resulted in a 1.00% overweight to the RIF |
Strategies Fund underperformed its benchmark due to exposure | Multi-Style Equity Fund. |
to the energy sector. | At the end of the fiscal year, the Fund was positioned with less |
than benchmark risk levels and for rising interest rates, with | |
Describe any changes to the Fund’s structure or allocation | underweights to the RIF Global Real Estate Securities Fund and |
to the Underlying Funds. | RIC Russell Commodity Strategies Fund funding an overweight |
RIMCo has the discretion to vary the Fund’s actual allocation from | to the RIC Russell Global Opportunistic Credit Fund and the RIF |
the target strategic asset allocation by up to +/- 5% at the equity, | Multi-Style Equity Fund. |
fixed income or alternative category level based on RIMCo’s | |
capital markets research. RIMCo’s asset allocation modifications | The views expressed in this report reflect those of the portfolio |
had a modestly negative impact on the Fund’s performance | managers only through the end of the period covered by |
relative to the Fund’s long-term strategic allocation. | the report. These views do not necessarily represent the |
Entering the fiscal year, relative to the target strategic asset | views of RIMCo, or any other person in RIMCo or any other |
allocation, the Fund maintained a broad overweight to equity | affiliated organization. These views are subject to change |
Underlying Funds and an underweight to alternative Underlying | at any time based upon market conditions or other events, |
Funds. Overall positioning was based on a cautious outlook for | and RIMCo disclaims any responsibility to update the views |
commodities and anticipated rise in interest rates, which could | contained herein. These views should not be relied on |
negatively impact interest rate sensitive securities such as REITs. | as investment advice and, because investment decisions |
for a Russell Investment Funds (“RIF”) Fund are based on | |
On March 3, 2015, RIMCo implemented a new target strategic | numerous factors, should not be relied on as an indication |
asset allocation. The Fund’s target strategic asset allocation | of investment decisions of any RIF Fund. |
to various Underlying Funds was modified, and the strategic |
66 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2015
(Unaudited)
* Assumes initial investment on April 30, 2007.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Russell Developed ex-U.S. Large Cap® Index (net of tax on dividends from foreign holdings) is an index which offers investors access to the large-cap
segment of the global equity market, excluding companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer
for the large-cap segment and is completely reconstituted annually to accurately reflect the changes in the market over time.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results.
Equity Growth Strategy Fund 67
Russell Investment Funds
Equity Growth Strategy Fund
Shareholder Expense Example — December 31, 2015 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2015 to December 31, 2015. | July 1, 2015 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2015 | $ | 936.50 | $ | 1,024.60 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.59 | $ | 0.61 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.12% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/365 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
68 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments — December 31, 2015
Amounts in thousands (except share amounts) | ||||
Fair | ||||
Value | ||||
Shares | $ | |||
Investments in Russell Affiliated Mutual Funds - 98.0% | ||||
Alternative - 11.1% | ||||
RIC Russell Commodity Strategies Fund Class Y | 282,912 | 1,460 | ||
RIC Russell Global Infrastructure Fund Class Y | 230,414 | 2,410 | ||
RIF Global Real Estate Securities Fund | 98,078 | 1,443 | ||
5,313 | ||||
Domestic Equities - 38.9% | ||||
RIC Russell U.S. Defensive Equity Fund Class Y | 91,395 | 4,317 | ||
RIC Russell U.S. Dynamic Equity Fund Class Y | 452,195 | 4,318 | ||
RIF Aggressive Equity Fund | 407,585 | 5,270 | ||
RIF Multi-Style Equity Fund | 288,347 | 4,798 | ||
18,703 | ||||
Fixed Income - 9.1% | ||||
RIC Russell Global Opportunistic Credit Fund Class Y | 494,610 | 4,358 | ||
International Equities - 38.9% | ||||
RIC Russell Emerging Markets Fund Class Y | 367,392 | 5,265 | ||
RIC Russell Global Equity Fund Class Y | 718,595 | 7,207 | ||
RIF Non-U.S. Fund | 554,306 | 6,241 | ||
18,713 | ||||
Total Investments in Russell Affiliated Mutual Funds | ||||
(cost $42,996) | 47,087 | |||
Short-Term Investments - 1.5% | ||||
Russell U.S. Cash Management Fund | 734,258 | (8) | 734 | |
Total Short-Term Investments | ||||
(cost $734) | 734 | |||
Total Investments 99.5% | ||||
(identified cost $43,730) | 47,821 | |||
Other Assets and Liabilities, Net - 0.5% | 230 | |||
Net Assets - 100.0% | 48,051 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 69
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 1 | EUR | 88 | 01/16 | 3 | ||
CAC40 10 EURO Index Futures | 1 | EUR | 47 | 01/16 | — | ||
Euro STOXX 50 Index Futures | 1 | EUR | 33 | 03/16 | 1 | ||
Russell 1000 Mini Index Futures | 1 | USD | 113 | 03/16 | 2 | ||
Russell 2000 Mini Index Futures | 1 | USD | 113 | 03/16 | 1 | ||
S&P 500 E-Mini Index Futures | 12 | USD | 1,221 | 03/16 | 6 | ||
S&P Mid 400 E-Mini Index Futures | 1 | USD | 139 | 03/16 | (1 | ) | |
TOPIX Index Futures | 4 | JPY | 61,900 | 03/16 | (7 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 5 | GBP | 310 | 03/16 | (15 | ) | |
MSCI EAFE Mini Index Futures | 2 | USD | 170 | 03/16 | — | ||
MSCI Emerging Markets Mini Index Futures | 2 | USD | 79 | 03/16 | (1 | ) | |
S&P/TSX 60 Index Futures | 1 | CAD | 152 | 03/16 | (2 | ) | |
SPI 200 Index Futures | 1 | AUD | 131 | 03/16 | (7 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (20 | ) |
Options Written | ||||||
Amounts in thousands (except contract amounts) | ||||||
Transactions in options written contracts for the period ended December 31, 2015 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2014 | — | $ | — | |||
Opened | 15,031 | 27 | ||||
Closed | (15,031 | ) | (27 | ) | ||
Expired | — | — | ||||
Outstanding December 31, 2015 | — | $ | — |
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of America | USD | 1 | AUD | 1 | 01/12/16 | — | |||
Bank of America | USD | 5 | CAD | 7 | 01/12/16 | — | |||
Bank of America | USD | 2 | HKD | 17 | 01/12/16 | — | |||
Bank of America | USD | 1 | SGD | 2 | 01/12/16 | — | |||
Bank of America | CHF | 5 | USD | 5 | 01/12/16 | — | |||
Bank of America | EUR | 32 | USD | 34 | 01/12/16 | (1 | ) | ||
Bank of America | GBP | 5 | USD | 8 | 01/12/16 | — | |||
Bank of America | JPY | 2,722 | USD | 22 | 01/12/16 | — | |||
Bank of America | SEK | 23 | USD | 3 | 01/12/16 | — | |||
State Street | USD | 157 | AUD | 216 | 01/12/16 | — | |||
State Street | USD | 108 | AUD | 150 | 03/16/16 | 1 | |||
State Street | USD | 197 | CAD | 273 | 01/12/16 | 1 | |||
State Street | USD | 88 | CAD | 120 | 03/16/16 | (2 | ) | ||
State Street | USD | 239 | CHF | 236 | 01/12/16 | (3 | ) | ||
State Street | USD | 880 | EUR | 804 | 01/12/16 | (6 | ) |
See accompanying notes which are an integral part of the financial statements.
70 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
State Street | USD | 482 | GBP | 325 | 01/12/16 | (2 | ) |
State Street | USD | 60 | GBP | 40 | 03/16/16 | (1 | ) |
State Street | USD | 66 | HKD | 509 | 01/12/16 | — | |
State Street | USD | 555 | JPY | 66,878 | 01/12/16 | 2 | |
State Street | USD | 1,023 | JPY | 125,480 | 03/16/16 | 23 | |
State Street | USD | 88 | SEK | 742 | 01/12/16 | — | |
State Street | USD | 30 | SGD | 42 | 01/12/16 | — | |
State Street | AUD | 217 | USD | 156 | 01/12/16 | (2 | ) |
State Street | AUD | 216 | USD | 157 | 02/05/16 | — | |
State Street | CAD | 280 | USD | 210 | 01/12/16 | 7 | |
State Street | CAD | 273 | USD | 197 | 02/05/16 | (1 | ) |
State Street | CHF | 231 | USD | 225 | 01/12/16 | (6 | ) |
State Street | CHF | 236 | USD | 239 | 02/05/16 | 3 | |
State Street | EUR | 772 | USD | 818 | 01/12/16 | (20 | ) |
State Street | EUR | 804 | USD | 880 | 02/05/16 | 6 | |
State Street | EUR | 530 | USD | 578 | 03/16/16 | 1 | |
State Street | GBP | 320 | USD | 481 | 01/12/16 | 9 | |
State Street | GBP | 325 | USD | 482 | 02/05/16 | 2 | |
State Street | HKD | 526 | USD | 68 | 01/12/16 | — | |
State Street | HKD | 509 | USD | 66 | 02/05/16 | — | |
State Street | JPY | 64,156 | USD | 522 | 01/12/16 | (12 | ) |
State Street | JPY | 66,878 | USD | 555 | 02/05/16 | (2 | ) |
State Street | SEK | 719 | USD | 83 | 01/12/16 | (2 | ) |
State Street | SEK | 742 | USD | 88 | 02/05/16 | — | |
State Street | SGD | 44 | USD | 31 | 01/12/16 | — | |
State Street | SGD | 42 | USD | 30 | 02/05/16 | — | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (5 | ) |
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 1,512 | 03/07/16 | (27 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— | (27 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 month LIBOR rate plus a fee of 0.120%.
Presentation of Portfolio Holdings | ||||||||||||
Amounts in thousands | ||||||||||||
Fair Value | ||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||
Investments in Russell Affiliated Mutual Funds | $ | 47,087 | $ | — | $ | — | $ | 47,087 | 98.0 | |||
Short-Term Investments | — | 734 | — | 734 | 1.5 | |||||||
Total Investments | 47,087 | 734 | — | 47,821 | 99.5 | |||||||
Other Assets and Liabilities, Net | 0.5 | |||||||||||
100.0 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 71
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2015
Presentation of Portfolio Holdings | ||||||||||||||||||
Amounts in thousands | ||||||||||||||||||
Fair Value | ||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||||||||
Other Financial Instruments | ||||||||||||||||||
Futures Contracts | (20 | ) | — | — | (20 | ) | (—)* | |||||||||||
Foreign Currency Exchange Contracts | — | (5 | ) | — | (5 | ) | (—)* | |||||||||||
Total Return Swap Contracts | — | (27 | ) | — | (27 | ) | (0.1 | ) | ||||||||||
Total Other Financial Instruments** | $ | (20 | ) | $ | (32 | ) | $ | — | $ | (52 | ) |
* Less than .05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the instruments.
For a description of the Levels see note 2 in the Notes to Financial Statements.
For disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2015, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
72 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Fair Value of Derivative Instruments — December 31, 2015
Amounts in thousands
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | ||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 55 | ||
Variation margin on futures contracts* | 13 | — | ||||
Total | $ | 13 | $ | 55 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||||
Variation margin on futures contracts* | $ | 33 | $ | — | ||
Unrealized depreciation on foreign currency exchange contracts | — | 60 | ||||
Total return swap contracts, at fair value | 27 | — | ||||
Total | $ | 60 | $ | 60 | ||
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | ||||||
Investments** | $ | (27 | ) | $ | — | |
Futures contracts | 102 | — | ||||
Options written | 7 | — | ||||
Total return swap contracts | (110 | ) | — | |||
Foreign currency-related transactions*** | — | 72 | ||||
Total | $ | (28 | ) | $ | 72 | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||
Futures contracts | $ | (20 | ) | $ | — | |
Total return swap contracts | (27 | ) | — | |||
Foreign currency-related transactions**** | — | (5 | ) | |||
Total | $ | (47 | ) | $ | (5 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
*** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
**** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 73
Russell Investment Funds
Equity Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2015
Amounts in thousands | ||||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||||
Gross | Net Amounts | |||||||||
Amounts | of Assets | |||||||||
Gross | Offset in the | Presented in | ||||||||
Amounts of | Statement of | the Statement | ||||||||
Recognized | Assets and | of Assets and | ||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | $ | 55 | $ | — $ | 55 | ||||
Futures Contracts | Variation margin on futures contracts | 6 | — | 6 | ||||||
Total Financial and Derivative Assets | 61 | — | 61 | |||||||
Financial and Derivative Assets not subject to a netting agreement | (6) | — | (6 | ) | ||||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 55 | $ | — $ | 55 | |||||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Assets | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | ||||||
State Street | $ | 55 | $ | 33 | $ | — | $ | 22 | ||
Total | $ | 55 | $ | 33 | $ | — | $ | 22 |
See accompanying notes which are an integral part of the financial statements.
74 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2015
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 16 | $ | — $ | 16 | |||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 60 | — | 60 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 27 | — | 27 | |||||
Total Financial and Derivative Liabilities | 103 | — | 103 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (16) | — | (16 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 87 | $ | — $ | 87 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | ||||||
Bank of America | $ | 28 | $ | — | $ | — | $ | 28 | ||
State Street | 59 | 33 | — | 26 | ||||||
Total | $ | 87 | $ | 33 | $ | — | $ | 54 |
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 75
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Assets and Liabilities — December 31, 2015
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 43,730 |
Investments, at fair value(>) | 47,821 | |
Cash (restricted)(a) | 300 | |
Unrealized appreciation on foreign currency exchange contracts | 55 | |
Receivables: | ||
Dividends and interest | 1 | |
Fund shares sold | 3 | |
From affiliates | 2 | |
Variation margin on futures contracts | 6 | |
Total assets | 48,188 | |
Liabilities | ||
Payables: | ||
Due to custodian | 1 | |
Investments purchased | 3 | |
Accrued fees to affiliates | 2 | |
Other accrued expenses | 28 | |
Variation margin on futures contracts | 16 | |
Unrealized depreciation on foreign currency exchange contracts | 60 | |
Total return swap contracts, at fair value(8) | 27 | |
Total liabilities | 137 | |
Net Assets | $ | 48,051 |
See accompanying notes which are an integral part of the financial statements.
76 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2015
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 187 | |
Accumulated net realized gain (loss) | (3,823 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 4,091 | ||
Futures contracts | (20 | ) | |
Total return swap contracts | (27 | ) | |
Foreign currency-related transactions | (5 | ) | |
Shares of beneficial interest | 58 | ||
Additional paid-in capital | 47,590 | ||
Net Assets | $ | 48,051 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share:(#) | $ | 8.28 | |
Net assets | $ | 48,050,805 | |
Shares outstanding ($.01 par value) | 5,802,992 | ||
Amounts in thousands | |||
(>) Investments in affiliated Russell funds | $ | 47,821 | |
(8) Total return swap contracts – premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 300 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 77
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Operations — For the Period Ended December 31, 2015
Amounts in thousands | |||
Investment Income | |||
Income distributions from affiliated Russell funds | $ | 939 | |
Expenses | |||
Advisory fees | 102 | ||
Administrative fees | 22 | ||
Custodian fees | 20 | ||
Transfer agent fees | 2 | ||
Professional fees | 34 | ||
Trustees’ fees | 1 | ||
Printing fees | 16 | ||
Miscellaneous | 5 | ||
Expenses before reductions | 202 | ||
Expense reductions | (144 | ) | |
Net expenses | 58 | ||
Net investment income (loss) | 881 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | (12 | ) | |
Futures contracts | 102 | ||
Options written | 7 | ||
Total return swap contracts | (110 | ) | |
Foreign currency-related transactions | 72 | ||
Capital gain distributions from Underlying Funds | 2,011 | ||
Net realized gain (loss) | 2,070 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (4,773 | ) | |
Futures contracts | (20 | ) | |
Total return swap contracts | (27 | ) | |
Foreign currency-related transactions | (5 | ) | |
Net change in unrealized appreciation (depreciation) | (4,825 | ) | |
Net realized and unrealized gain (loss) | (2,755 | ) | |
Net Increase (Decrease) in Net Assets from Operations | $ | (1,874 | ) |
See accompanying notes which are an integral part of the financial statements.
78 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2015 | 2014 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 881 | $ | 1,573 | ||
Net realized gain (loss) | 2,070 | 2,954 | ||||
Net change in unrealized appreciation (depreciation) | (4,825 | ) | (2,765 | ) | ||
Net increase (decrease) in net assets from operations | (1,874 | ) | 1,762 | |||
Distributions | ||||||
From net investment income | (767 | ) | (1,699 | ) | ||
From net realized gain | (3,854 | ) | (833 | ) | ||
Net decrease in net assets from distributions | (4,621 | ) | (2,532 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 2,143 | 2,919 | ||||
Total Net Increase (Decrease) in Net Assets | (4,352 | ) | 2,149 | |||
Net Assets | ||||||
Beginning of period | 52,403 | 50,254 | ||||
End of period | $ | 48,051 | $ | 52,403 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 187 | $ | — |
* Share transaction amounts (in thousands) for the periods ended December 31, 2015 and December 31, 2014 were as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 479 | $ | 4,396 | 470 | $ | 4,549 | ||||||
Proceeds from reinvestment of distributions | 525 | 4,622 | 264 | 2,532 | ||||||||
Payments for shares redeemed | (740 | ) | (6,875 | ) | (428 | ) | (4,162 | ) | ||||
Total increase (decrease) | 264 | $ | 2,143 | 306 | $ | 2,919 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 79
Russell Investment Funds
Equity Growth Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | |||||||||||||||||
$ | Net | $ | $ | $ | $ | ||||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | ||||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | ||||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | ||||||||||||
December 31, 2015 | 9.46 | .16 | (.50 | ) | (.34 | ) | (.13 | ) | (.71 | ) | |||||||
December 31, 2014 | 9.60 | .30 | .04 | .34 | (.32 | ) | (.16 | ) | |||||||||
December 31, 2013 | 8.21 | .23 | 1.39 | 1.62 | (.23 | ) | — | ||||||||||
December 31, 2012 | 7.22 | .15 | .98 | 1.13 | (.14 | ) | — | ||||||||||
December 31, 2011 | 7.82 | .13 | (.61 | ) | (.48 | ) | (.12 | ) | — | ||||||||
See accompanying notes which are an integral part of the financial statements.
80 Equity Growth Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.84 | ) | 8.28 | (3.87 | ) | 48,051 | .39 | .11 | 1.73 | 31 | ||||||||
(.48 | ) | 9.46 | 3.48 | 52,403 | .40 | .10 | 3.04 | 25 | |||||||||
(.23 | ) | 9.60 | 19.81 | 50,254 | .41 | .10 | 2.55 | 17 | |||||||||
(.14 | ) | 8.21 | 15.68 | 39,140 | .44 | .10 | 1.79 | 37 | |||||||||
(.12 | ) | 7.22 | (6.22 | ) | 30,845 | .49 | .10 | 1.72 | 15 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 81
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Highlights — December 31, 2015
(a) Average daily shares outstanding were used for this calculation.
(b) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the Underlying Funds in which the
Fund invests.
(c) The calculation includes only those expenses charged directly to the Fund and does not include expenses charged to the Underlying Funds in which
the Fund invests.
(d) May reflect amounts waived and reimbursed by Russell Investment Management Company (“RIMCo”).
(e) The total return does not reflect any Insurance Company Separate Account or Policy Charges.
82 Notes to Financial Highlights
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Schedule of Investments — December 31, 2015
Footnotes:
(å) Currency balances were held in connection with futures contracts purchased (sold), options written, or swaps entered into by the
Fund. See Statement of Assets and Liabilities.
(8) Unrounded units.
Notes to Schedule of Investments 83
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements — December 31, 2015
1. Organization
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with nine different investment
portfolios referred to as Funds (each a “Fund” and collectively the “Funds”). These financial statements report on four of these
Funds. The Investment Company provides the investment base for one or more variable insurance products issued by one or more
insurance companies. These Funds are offered at net asset value to qualified insurance company separate accounts offering variable
insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended, ("Investment
Company Act"), as an open-end management investment company. It is organized and operated as a Massachusetts business trust
under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust Agreement”), and the
provisions of Massachusetts law governing the operation of a Massachusetts business trust. The Investment Company’s Master Trust
Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest.
Each of the Funds is a “fund of funds” and diversifies its assets by investing principally, at present, in shares of several Russell
Investment Company (“RIC”) Funds and other of the Investment Company’s Funds (together, the “Underlying Funds”). Each Fund
seeks to achieve its specific investment objective by investing in different combinations of the Underlying Funds. In addition to
investing in the Underlying Funds, Russell Investment Management Company (“RIMCo”), the Funds’ investment adviser, may
seek to actively manage the Funds' overall exposure by investing in derivatives, including futures, options, forwards and swaps,
that RIMCo believes will achieve the desired risk/return profile for the Funds. The Funds may hold cash in connection with these
investments. The Funds usually, but not always, pursue a strategy of being fully invested by exposing their cash to the performance
of segments of the global equity market by purchasing index futures contracts (also known as "equitization").
Each Fund intends its strategy of investing in combinations of equity, fixed income and alternative Underlying Funds to result in
investment diversification that an investor could otherwise achieve only by holding numerous individual investments. A Fund’s
actual allocation may vary from the target strategic asset allocation at any point in time (1) due to market movements, (2) by up to
+/- 5% at the equity, fixed income or alternative category level based on RIMCo’s capital markets research, and/or (3) due to the
implementation over a period of time of a change to the target strategic asset allocation including the addition of a new Underlying
Fund. There may be no changes in the asset allocation or to the Underlying Funds in a given year or such changes may be made
one or more times in a year.
The following table shows each Fund’s target strategic asset allocation effective May 1, 2015 to alternative, equity and fixed income
asset classes. The alternative Underlying Funds in which the Funds may invest include the RIC Russell Commodity Strategies, RIC
Russell Global Infrastructure and RIF Global Real Estate Securities Funds. The equity Underlying Funds in which the Funds may
invest include the RIC Russell U.S. Defensive Equity, RIC Russell U.S. Dynamic Equity, RIF Aggressive Equity, RIF Multi-Style
Equity, RIC Russell Emerging Markets, RIC Russell Global Equity, and RIF Non-U.S. Funds. The fixed income Underlying Funds
in which the Funds may invest include the RIC Russell Global Opportunistic Credit, RIC Russell Investment Grade Bond, RIC
Russell Short Duration Bond and RIF Core Bond Funds.
Asset Allocation Targets* | ||||||||
Moderate | Balanced | Growth | ||||||
Strategy | Strategy | Strategy | Equity Growth | |||||
Fund | Fund | Fund | Strategy Fund | |||||
Alternative ** | 7 | % | 10 | % | 13 | % | 13 | % |
Equity | 34 | % | 55 | % | 71 | % | 79 | % |
Fixed Income | 59 | % | 35 | % | 16 | % | 8 | % |
* Prospectus dated May 1, 2015, as supplemented November 6, 2015. Actual assets allocation may vary.
** Alternative Underlying Funds pursue investment strategies that differ from those of traditional broad market equity or fixed income funds or seek returns
with a low correlation to global equity markets.
2. Significant Accounting Policies
The Funds’ financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
which require the use of management estimates and assumptions at the date of the financial statements. Actual results could differ
from those estimates. The Funds are considered investment companies under U.S. GAAP and follow the accounting and reporting
guidance applicable to investment companies. The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
In May 2015, Financial Accounting Standards Board issued Accounting Standard Updates (“ASU”) No. 2015-07, Fair Value
Measurement (Topic 820), Disclosures for Investments in certain entities that calculate NAV per share (or its equivalent). The ASU
removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net
84 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
asset value per share practical expedient and amends certain disclosure requirements for such investments. The ASU is effective
for interim and annual reporting periods beginning after December 15, 2015. The ASU was not early adopted as of year-end and its
impact for future reporting periods is being evaluated.
Security Valuation
The Funds value portfolio securities according to Board-approved securities valuation procedures which include market and fair
value procedures. The Board has delegated the responsibility for administration of the securities valuation procedures to Russell
Fund Services Company (“RFSC”).
U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to
valuation methods and requires a separate disclosure of the fair value hierarchy for each major category of assets and liabilities,
that segregates fair value measurements into levels (Level 1, 2, and 3). The inputs or methodology used for valuing securities are
not necessarily an indication of the risk associated with investing in those securities. Levels 1, 2 and 3 of the fair value hierarchy
are defined as follows:
• Level 1 — Quoted prices (unadjusted) in active markets or exchanges for identical assets and liabilities.
• Level 2 — Inputs other than quoted prices included within Level 1 that are observable, which may include, but are not
limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets
or liabilities in markets that are not active, and inputs such as interest rates, yield curves, implied volatilities, credit spreads
or other market corroborated inputs
• Level 3 — Significant unobservable inputs based on the best information available in the circumstances, to the extent
observable inputs are not available, which may include assumptions made by RFSC, acting at the discretion of the Board,
that are used in determining the fair value of investments.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for
example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and
other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised
in determining fair value is greatest for instruments categorized in Level 3. The inputs or methodology used for valuing securities
are not necessarily an indication of the risk associated with investing in those securities.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that
is significant to the fair value measurement in its entirety.
The valuation techniques and significant inputs used in determining the fair market values of financial instruments categorized as
Level 1 and Level 2 of the fair value hierarchy are as follows:
Derivative instruments are instruments such as foreign currency contracts, futures contracts, options contracts, or swap agreements
that derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors.
Derivatives may be classified into two groups depending upon the way that they are traded: privately traded over-the-counter
(“OTC”) derivatives that do not go through an exchange or intermediary and exchange-traded derivatives that are traded through
specialized derivatives exchanges or other regulated exchanges. OTC derivatives are normally valued on the basis of broker dealer
quotations or pricing service providers. Depending on the product and the terms of the transaction, the value of the derivative
instrument can be estimated by a pricing service provider using a series of techniques, including simulation pricing models.
The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest
rates, yield curves, dividends and exchange rates. OTC derivatives that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy, with the exception of foreign currency spot contracts which
are categorized as Level 1 of the fair value hierarchy. OTC derivatives that use broker dealer quotations are categorized as level 3 of
the fair value hierarchy. Exchange-traded derivatives are valued based on the last reported sales price on the day of valuation and
are categorized as Level 1 of the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are valued at
the daily settlement price determined by the respective exchange. For centrally cleared credit default swaps, the clearing facility
requires its members to provide actionable levels across complete term structures. These levels along with external third party
Notes to Financial Statements 85
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
prices are used to produce daily settlement prices. These securities are categorized as Level 2 of the fair value hierarchy. Centrally
cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index
swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price. These securities are
categorized as Level 2 of the fair value hierarchy.
Level 3 Fair Value Investments
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of
the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available, or are not reliable, are valued at fair value as
determined in good faith by RFSC and are categorized as Level 3 of the fair value hierarchy. Market quotes are considered not
readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or
broker quotes). When RFSC applies fair valuation methods that use significant unobservable inputs to determine a Fund’s net
asset value ("NAV"), securities will not be priced on the basis of quotes from the primary market in which they are traded, but
instead may be priced by another method that RFSC believes accurately reflects fair value and will be categorized as Level 3 of the
fair value hierarchy. Fair value pricing may require subjective determinations about the value of a security. While the securities
valuation procedures are intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of
pricing, the process cannot guarantee that fair values determined by RFSC would accurately reflect the price that a Fund could
obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The
prices used by a Fund may differ from the value that would be realized if the security was sold.
RFSC employs third party pricing vendors to provide fair value measurements. RFSC oversees third-party pricing service providers
in order to support the valuation process throughout the year.
If third party evaluated vendor pricing is neither available nor deemed to be indicative of fair value, RFSC may elect to obtain
indicative market quotations (“broker quotes”) directly from the broker or passed through from a third party vendor. In the event
that the source of fair value is from a single source broker quote, these securities are classified as Level 3 per the fair value
hierarchy. Broker quotes are typically received from established market participants. Although independently received on a daily
basis, RFSC does not have the transparency to view the underlying inputs which support the broker quotes. Significant changes
in the broker quote would have direct and proportional changes in the fair value of the security. There is a third-party pricing
exception to the quantitative disclosure requirement when prices are not determined by the reporting entity. RFSC is exercising
this exception and has made a reasonable attempt to obtain quantitative information from the third party pricing vendors regarding
the unobservable inputs used.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances
for reported fair values that present changes attributable to total realized and unrealized gains or losses, purchases and sales, and
transfers in/out of the Level 3 category during the period. Additionally, U.S. GAAP requires quantitative information regarding the
significant unobservable inputs used in the determination of fair value of assets categorized as Level 3 in the fair value hierarchy. In
accordance with the requirements of U.S. GAAP, a fair value hierarchy, a Level 3 reconciliation and an additional disclosure about
fair value measurements, if any, has been included in the Presentation of Portfolio Holdings for each respective Fund.
These significant unobservable inputs are further disclosed in the Presentation of Portfolio Holdings for each respective Fund as
applicable.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the NAV stated in the
financial statements to be different from the NAV at which shareholders may transact. Realized gains and losses from securities
transactions, if applicable, are recorded on the basis of specific identified cost incurred within a particular Fund or Underlying
Fund.
Investment Income
Distributions of income and capital gains from the Underlying Funds are recorded on the ex-dividend date.
86 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Federal Income Taxes
Since the Investment Company is a Massachusetts business trust, each Fund is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be distributed to each Fund’s shareholders without regard
to the income and capital gains (or losses) of the other Funds.
For each year, each Fund intends to qualify or continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”) and intends to distribute all of its taxable income and capital gains.
Therefore, no federal income tax provision is required for the Funds.
Each Fund files a U.S. tax return. At December 31, 2015, the Funds had recorded no liabilities for net unrecognized tax benefits
relating to uncertain income tax positions they have taken or expect to take in future tax returns. While the statute of limitations
remains open to examine the Funds’ U.S. tax returns filed for the fiscal years ended December 31, 2012 through December 31,
2014, no examinations are in progress or anticipated at this time. The Funds are not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
The Funds comply with the authoritative guidance for uncertainty in income taxes which requires management to determine whether
a tax position of the Funds is more likely than not to be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the
tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement with the relevant taxing authority. Management determined that no accruals need to be made in
the financial statements due to uncertain tax positions. Management continually reviews and adjusts the Funds’ liability for income
taxes based on analyses of tax laws and regulations, as well as their interpretations, and other relevant factors.
Dividends and Distributions to Shareholders
Income dividends, capital gain distributions and return of capital, if any, are recorded on the ex-dividend date. Income dividends
are generally declared and paid quarterly. Capital gain distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal income and excise tax on any remaining undistributed capital
gains and net investment income.
The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax
regulations which may differ from U.S. GAAP. As a result, net investment income and net realized gain (or loss) from investment
transactions for a reporting period may differ significantly from distributions during such period. The differences between tax
regulations and U.S. GAAP primarily relate to investments in options, futures, forward contracts, swap contracts, the Underlying
Funds sold at a loss, wash sale deferrals and capital loss carryforwards. Accordingly, the Funds may periodically make reclassifications
among certain of their capital accounts without impacting their NAVs.
Expenses
Expenses included in the accompanying financial statements reflect the expenses of each Fund and do not include those expenses
incurred by the Underlying Funds. Because the Underlying Funds have varied expense and fee levels and the Funds may own
different proportions of the Underlying Funds at different times, the amount of the Underlying Funds’ fees and expenses incurred
indirectly by the Funds will vary.
The Funds pay their own expenses other than those expressly assumed by RIMCo, the Funds’ adviser, or RFSC. Most expenses can
be directly attributed to the individual Funds. Expenses which cannot be directly attributed to a specific Fund are allocated among
all Funds principally based on their relative net assets.
Derivatives
The Funds may invest in derivatives. Derivative securities are instruments or agreements whose value is derived from an underlying
security or index. They include options, futures, swaps and forwards. These instruments offer unique characteristics and risks that
facilitate the Funds’ investment strategies.
The Funds typically use derivatives in three ways: exposing cash to markets, hedging and return enhancement. In addition, certain
Funds may enter into foreign exchange contracts for trade settlement purposes. The Funds may pursue their strategy of being fully
invested by exposing cash to the performance of segments of the global equity market by purchasing index futures contracts. This
is intended to cause the Funds to perform as though cash were actually invested in the global equity market.
Notes to Financial Statements 87
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Hedging may be used by the Funds to limit or control risks, such as adverse movements in exchange rates and interest rates. Return
enhancement can be accomplished through the use of derivatives in a Fund, including using derivatives as a substitute for holding
physical securities, and using them to express various macro views (e.g., interest rate movements, currency movements, and macro
credit strategies). By purchasing certain instruments, the Funds may more effectively achieve the desired portfolio characteristics
that assist them in meeting their investment objectives. Depending on how the derivatives are structured and utilized, the risks
associated with them may vary widely. These risks include, but are not limited to, market risk, liquidity risk, leveraging risk,
counterparty risk, basis risk, reinvestment risk, political risk, prepayment risk, extension risk, valuation risk and credit risk.
Futures, certain options and cleared swaps are traded or cleared on an exchange or central exchange clearing house. Exchange-
traded or exchange-cleared transactions generally present less counterparty risk to a Fund. The exchange’s clearinghouse stands
between the Fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the clearing
house and the clearing member. Cleared swap contracts are subject to clearing house rules, including initial and variation margin
requirement, daily settlement of obligations and the clearing house guarantee of payments to the broker. There is, however, still
counterparty risk due to the insolvency of the broker with respect to any margin held in the brokers’ customer accounts. While
clearing members are required to segregate customer assets from their own assets, in the event of insolvency, there may be a
shortfall in the amount of margin held by the broker for its clients. Collateral and margin requirements for exchange-traded or
exchange-cleared derivatives are established through regulation, as well as set by the broker or applicable clearinghouse. Margin
for exchange-traded and exchange-cleared transactions are detailed in the Statements of Assets and Liabilities as cash held at the
broker for futures contracts and cash held at the broker for swap contracts, respectively. Securities pledged by a Fund for exchange-
traded and exchange-cleared transactions are noted as collateral or margin requirements in the Schedule of Investments.
The effects of derivative instruments, categorized by risk exposure, on the Statements of Assets and Liabilities and the Statements of
Operations, for the period ended December 31, 2015, if applicable, are disclosed in the Fair Value of Derivative Instruments table
following each applicable Fund’s Schedule of Investments.
Foreign Currency Exchange Contracts
The Funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“FX
contracts”). From time to time, certain Funds may enter into FX contracts to hedge certain foreign currency-denominated assets.
FX contracts are recorded at fair value. Certain risks may arise upon entering into these FX contracts from the potential inability
of counterparties to meet the terms of their FX contracts and are generally limited to the amount of unrealized gain on the FX
contracts, if any, that are disclosed in the Statements of Assets and Liabilities.
For the period ended December 31, 2015, the following Funds entered into foreign currency exchange contracts primarily for the
strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the fiscal year as required to meet
strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this
disclosure, volume is measured by the amounts bought and sold in USD.
Outstanding Contract Amounts Sold | ||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||
Moderate Strategy Fund | $ — | $ — | $ 11,461,523 | $ | 11,478,909 | |
Balanced Strategy Fund | — | — | 55,403,010 | 54,511,091 | ||
Growth Strategy Fund | — | — | 37,088,090 | 37,350,002 | ||
Equity Growth Strategy Fund | — | — | 9,941,607 | 9,931,752 | ||
Outstanding Contract Amounts Bought | ||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||
Moderate Strategy Fund | $ — | $ — | $ 11,480,629 | $ | 11,466,855 | |
Balanced Strategy Fund | — | — | 55,507,580 | 54,446,403 | ||
Growth Strategy Fund | — | — | 37,150,739 | 37,329,502 | ||
Equity Growth Strategy Fund | — | — | 9,956,975 | 9,927,236 |
88 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Options
The Funds may purchase and sell (write) call and put options on securities and securities indices. Such options are traded on a
national securities exchange or in an OTC market. The Funds may also purchase and sell (write) call and put options on foreign
currencies.
When a Fund writes a covered call or a put option, an amount equal to the premium received by the Fund is included in the Fund’s
Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-
to-market to reflect the current fair value of the option written. The Fund receives a premium on the sale of a call option but gives
up the opportunity to profit from any increase in the value of the underlying instrument above the exercise price of the option, and
when the Fund writes a put option it is exposed to a decline in the price of the underlying instrument.
When a Fund sells an uncovered call option, it does not simultaneously have a long position in the underlying security. When a
Fund sells an uncovered put option, it does not simultaneously have a short position in the underlying security. Uncovered options
are riskier than covered options because there is no underlying security held by the Fund that can act as a partial hedge.
Whether an option which the Fund has written expires on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the premium originally received. When a put option which
a Fund has written is exercised, the amount of the premium originally received will reduce the cost of the security which a Fund
purchases upon exercise of the option.
The Funds’ use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts of these instruments reflect the extent of the Funds’ exposure to
market risk. The risks may be caused by an imperfect correlation between movements in the price of the instrument and the price
of the underlying securities and interest rates.
The Funds may enter into a swaption (an option on a swap). In a swaption, in exchange for an option, the buyer gains the right but
not the obligation to enter into a specified swap agreement with the issuer on a specified future date. The writer of the contract
receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap.
For the period ended December 31, 2015, the Funds purchased or sold options primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
The Funds’ options contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of options contracts measured by notional in USD.
Notional of Options Contracts Opened or Closed | ||||||||
Funds | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||||
Moderate Strategy Fund | Opened | — | — | 2,871,147 | — | |||
Closed | — | — | — | 2,871,147 | ||||
Balanced Strategy Fund | Opened | — | — | 15,089,747 | — | |||
Closed | — | — | — | 15,089,747 | ||||
Growth Strategy Fund | Opened | — | — | 9,781,990 | — | |||
Closed | — | — | — | 9,781,990 | ||||
Equity Growth Strategy Fund | Opened | — | — | 2,653,890 | — | |||
Closed | — | — | — | 2,653,890 |
Futures Contracts
The Funds may invest in futures contracts (i.e., interest rate, foreign currency and index futures contracts).
The face or contract value of these instruments reflect the extent of the Funds’ exposure to off balance sheet risk. The primary risks
associated with the use of futures contracts are an imperfect correlation between the change in fair value of the securities held by
Notes to Financial Statements 89
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
the Funds and the prices of futures contracts, and the possibility of an illiquid market. Upon entering into a futures contract, the
Funds are required to deposit with a broker an amount, termed the initial margin, which typically represents 5% to 10% of the
purchase price indicated in the futures contract. Payments to and from the broker, known as variation margin, are typically required
to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized.
For the period ended December 31, 2015, the following Funds entered into futures contracts primarily for the strategies listed
below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Balanced Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Growth Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Equity Growth Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
The Funds’ futures contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of futures contracts measured by notional in USD.
Notional of Futures Contracts Opened or Closed | ||||||||
Funds | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||||
Moderate Strategy Fund | Opened | — | — | 10,472,461 | 7,816,986 | |||
Closed | — | — | 5,313,258 | 7,926,389 | ||||
Balanced Strategy Fund | Opened | — | — | 47,093,542 | 28,756,638 | |||
Closed | — | — | 23,841,605 | 29,443,308 | ||||
Growth Strategy Fund | Opened | — | — | 29,490,049 | 15,705,627 | |||
Closed | — | — | 15,815,091 | 15,750,880 | ||||
Equity Growth Strategy Fund | Opened | — | — | 7,115,890 | 3,463,823 | |||
Closed | — | — | 3,934,468 | 3,496,357 |
Swap Agreements
The Funds may enter into swap agreements, on either an asset-based or liability-based basis, depending on whether they are
hedging their assets or their liabilities, and will usually enter into swaps on a net basis (i.e., the two payment streams are netted
out, with the Funds receiving or paying only the net amount of the two payments). When a Fund engages in a swap, it exchanges
its obligations to pay or rights to receive payments for the obligations to pay or rights to receive payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments).
The Funds may enter into several different types of swap agreements including credit default, interest rate, total return (equity and/
or index) and currency swaps. Credit default swaps are a counterparty agreement which allows the transfer of third party credit risk
(the possibility that an issuer will default on its obligation by failing to pay principal or interest in a timely manner) from one party
to another. The lender faces the credit risk from a third party and the counterparty in the swap agrees to insure this risk in exchange
for regular periodic payments. Interest rate swaps are a counterparty agreement, can be customized to meet each party’s needs,
and involve the exchange of a fixed or variable payment per period for a payment that is not fixed. Equity swaps are a counterparty
agreement where two parties exchange two sets of cash flows on predetermined dates for an agreed upon amount of time. The cash
flows will typically be an equity index value swapped with a floating rate such as LIBOR plus or minus a pre-defined spread. Index
swap agreements are a counterparty agreement intended to expose cash to markets or to effect investment transactions consistent
with those Funds’ investment objectives and strategies. Currency swaps are a counterparty agreement where two parties exchange
specified amounts of different currencies which are followed by each paying the other a series of interest payments that are based
on the principal cash flow. At maturity the principal amounts are returned.
The Funds generally expect to enter into these transactions primarily to preserve a return or spread on a particular investment or
portion of their portfolios or to protect against any increase in the price of securities they anticipate purchasing at a later date, or for
return enhancement. Under most swap agreements entered into by a Fund, the parties' obligations are determined on a "net basis".
The net amount of the excess, if any, of the Funds’ obligations over their entitlements with respect to each swap will be accrued on a
daily basis and an amount of cash or liquid assets having an aggregate NAV at least equal to the accrued excess will be segregated.
To the extent that the Funds enter into swaps on other than a net basis, the amount maintained in a segregated account will be the
full amount of the Funds’ obligations, if any, with respect to such swaps, accrued on a daily basis. If there is a default by the other
party to such a transaction, the Funds will have contractual remedies pursuant to the agreement related to the transaction.
90 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
A Fund may not receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes
bankrupt.
Credit Default Swaps
Certain Funds may enter into credit default swaps. A credit default swap can refer to corporate issues, asset-backed securities or an
index of assets, each known as the reference entity or underlying asset. Funds may act as either the buyer or the seller of a credit
default swap involving one party making a stream of payments to another party in exchange for the right to receive a specified return
in the event of a default or other credit event. Depending upon the terms of the contract, the credit default swap may be closed via
physical settlement. However, due to the possible or potential instability in the market, there is a risk that the Funds may be unable
to deliver the underlying debt security to the other party to the agreement. Additionally, the Funds may not receive the expected
amount under the swap agreement if the other party to the agreement defaults or becomes bankrupt. In an unhedged credit default
swap, Funds enter into a credit default swap without owning the underlying asset or debt issued by the reference entity. Credit
default swaps allow Funds to acquire or reduce credit exposure to a particular issuer, asset or basket of assets.
As the seller of protection in a credit default swap, a Fund would be required to pay the par or other agreed-upon value (or otherwise
perform according to the swap contract) of a reference debt obligation to the counterparty in the event of a default (or other specified
credit event) and the counterparty would be required to surrender the reference debt obligation. In return, the Fund would receive
from the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no
credit event occurs, the Fund would keep the stream of payments and would have no payment obligations. As a seller of protection,
the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, that Fund would be subject to
investment exposure on the notional amount of the swap.
Certain Funds may also purchase protection via credit default swap contracts in order to offset the risk of default of debt securities
held their portfolios or to take a short position in a debt security, in which case the Fund would function as the counterparty
referenced in the preceding paragraph.
If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of
the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer
of protection’s right to choose the deliverable obligation with the lowest value following a credit event). Certain Funds may use
credit default swaps to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where Funds own or have
exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood (as measured by the
credit default swap’s spread) of a particular issuer’s default.
Deliverable obligations for credit default swaps on asset-backed securities in most instances are limited to the specific referenced
obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown
or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These
reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap
agreement generally will be adjusted by corresponding amounts. Certain Funds may use credit default swaps on asset-backed
securities to provide a measure of protection against defaults (or other defined credit events) of the referenced obligation or to take
an active long or short position with respect to the likelihood of a particular referenced obligation’s default (or another defined credit
event).
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for
the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of
the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be
representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a
poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the
indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging
markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized
terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and
if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes
periodically, usually every six months, and, for most indices, each name has an equal weight in the index. Traders may use credit
default swaps on indices to speculate on changes in credit quality.
Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on
corporate issues as of period-end are disclosed in the Schedules of Investments and generally serve as an indicator of the current
Notes to Financial Statements 91
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
status of the payment/performance risk and represent the likelihood or risk of default (or other defined credit event) for the credit
derivative. The implied credit spread of a particular referenced entity reflects the cost of entering into a credit default swap and
may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-
backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of
the payment/performance risk. Wider credit spreads and increasing fair values, in absolute terms when compared to the notional
amount of the swap, generally represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk
of default or other credit event occurring as defined under the terms of the agreement. The maximum potential amount of future
payments (undiscounted) that Funds as a seller of protection could be required to make under a credit default swap agreement
equals the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of December
31, 2015, for which a Fund is the seller of protection are disclosed in the Schedules of Investments. These potential amounts would
be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the
agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for
the same referenced entity or entities.
Credit default swaps could result in losses if the Funds do not correctly evaluate the creditworthiness of the company or companies
on which the credit default swap is based. Credit default swap agreements may involve greater risks than if the Funds had invested
in the reference obligation directly since, in addition to risks relating to the reference obligation, credit default swaps are subject
to illiquidity and counterparty risk. A Fund will generally incur a greater degree of risk when it sells a credit default swap than
when it purchases a credit default swap. As a buyer of a credit default swap, a Fund may lose its investment and recover nothing
should a credit event fail to occur and the swap is held to its termination date. As seller of a credit default swap, if a credit event
were to occur, the value of any deliverable obligation received by a Fund, coupled with the upfront or periodic payments previously
received, may be less than what it pays to the buyer, resulting in a loss of value to the Fund.
If the creditworthiness of a Fund’s swap counterparty declines, the risk that the counterparty may not perform could increase,
potentially resulting in a loss to the Fund. To limit the counterparty risk involved in swap agreements, the Funds will only enter
into swap agreements with counterparties that meet certain standards of creditworthiness. Although there can be no assurance that
the Funds will be able to do so, the Funds may be able to reduce or eliminate their exposure under a swap agreement either by
assignment or other disposition, or by entering into an offsetting swap agreement with the same party or another creditworthy party.
The Funds may have limited ability to eliminate their exposure under a credit default swap if the credit quality of the reference
entity or underlying asset has declined.
For the period ended December 31, 2015, the Funds entered into credit default swaps primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
The Funds’ period end credit default swap contracts, as presented in the table following the Schedule of Investments, generally are
indicative of the volume of their derivative activity during the quarter ended December 31, 2015. There was no activity prior to the
fourth quarter.
Total Return Swaps
The Funds may enter into index swap agreements to expose cash to markets or to effect investment transactions. Index swap
agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more
than one year. In a standard index swap transaction, the two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular investments or instruments.
The returns to be exchanged between the parties are calculated with respect to a “notional amount” (i.e., a specified dollar amount
that is hypothetically invested in a “basket” of securities representing a particular index).
For the period ended December 31, 2015, the Funds entered into total return swaps primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
92 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
The Funds’ period end total return swap contracts, as presented in the table following the Schedule of Investments, generally are
indicative of the volume of their derivative activity during the period ended December 31, 2015.
Total Return Swap Notional Amounts Outstanding | ||||||
Quarter Ended | March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||
Moderate Strategy Fund | $ — | $ — | $ 999,567 | $ | 1,079,618 | |
Balanced Strategy Fund | — | — | 2,900,126 | 3,132,386 | ||
Growth Strategy Fund | — | — | — | 6,480,696 | ||
Equity Growth Strategy Fund | — | — | 1,400,315 | 1,512,461 |
Master Agreements
Certain Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”)
with counterparties that govern transactions in OTC derivative and foreign exchange contracts entered into by the Funds and
those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements,
collateral and events of default or termination. Events of termination and default include conditions that may entitle either party
to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial
derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty
organization, each type of transaction may be covered by a different ISDA Master Agreement, resulting in the need for multiple
agreements with a single counterparty. As the ISDA Master Agreements are specific to unique operations of different asset types,
they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed
under a single agreement with a counterparty.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors
surrounding the settlement of certain forward settling transactions, such as delayed delivery by and between a Fund and select
counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment
and transfer, events of default, termination, and maintenance of collateral.
Disclosure about Offsetting Assets and Liabilities
The Balance Sheet disclosure is based on various netting agreements between brokers and counterparties, such as ISDA Master
Agreements and Master Forward Agreements. Certain Funds utilized multiple counterparties. The quantitative disclosure begins
with disaggregation of counterparties by legal entity and the roll up of the data to reflect a single counterparty in the table within the
Funds’ financial statements. Net exposure represents the net receivable (payable) that would be due from/to the counterparty in the
event of default. Exposure from OTC derivatives can only be netted across transactions governed under the same master agreement
with the same legal entity.
Guarantees
In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general
indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that
may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote.
Market, Credit and Counterparty Risk
In the normal course of business, the Funds or Underlying Funds trade financial instruments and enter into financial transactions
where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to a transaction to perform
(credit risk). Similar to credit risk, the Funds or Underlying Funds may also be exposed to counterparty risk or risk that an
institution or other entity with which the Funds or Underlying Funds have unsettled or open transactions will default. The potential
loss could exceed the value of the relevant assets recorded in the Funds' or Underlying Funds' financial statements (the “Assets”).
The Assets consist principally of cash due from counterparties and investments. The extent of the Funds' or Underlying Funds'
exposure to market, credit and counterparty risks with respect to the Assets approximates their carrying value as recorded in the
Funds' or Underlying Funds' Statements of Assets and Liabilities.
Global economies and financial markets are becoming increasingly interconnected and political and economic conditions (including
recent instability and volatility) and events (including natural disasters) in one country, region or financial market may adversely
impact issuers in a different country, region or financial market. As a result, issuers of securities held by an Underlying Fund may
experience significant declines in the value of their assets and even cease operations. Such conditions and/or events may not have
Notes to Financial Statements 93
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
the same impact on all types of securities and may expose an Underlying Fund to greater market and liquidity risk and potential
difficulty in valuing portfolio instruments held. This could cause an Underlying Fund to underperform other types of investments.
3. Investment Transactions
Securities
During the period ended December 31, 2015, purchases and sales of investment securities (excluding short-term investments,
options and futures) were as follows:
Purchases | Sales | |||
Moderate Strategy Fund | $ | 32,125,412 | $ | 34,547,623 |
Balanced Strategy Fund | 71,076,465 | 80,604,822 | ||
Growth Strategy Fund | 54,063,500 | 48,352,354 | ||
Equity Growth Strategy Fund | 15,794,858 | 16,377,626 |
4. Related Party Transactions, Fees and Expenses
Adviser, Administrator, Transfer and Dividend Disbursing Agent
RIMCo provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including
developing the investment program for each Fund and managing each Fund's overall exposures. RFSC is the Funds’ administrator
and transfer and dividend disbursing agent and among other services, with the assistance of RIMCo and its affiliates, provides the
Funds with office space, equipment and personnel necessary to operate and administrate the Funds' business and to supervise the
provision of services by certain third parties. RFSC is a wholly-owned subsidiary of RIMCo. RIMCo is a wholly-owned subsidiary
of Frank Russell Company ("FRC") (which is an indirect subsidiary of London Stock Exchange Group plc ("LSEG")).
RIMCo has advised the Funds that, on October 8, 2015, Emerald Acquisition Limited, a company incorporated under the laws
of England and Wales (“Buyer”), entered into an agreement with FRC and LSEG through which Buyer will acquire FRC’s asset
management business (“Russell Investments”), including RIMCo, from LSEG (the “Transaction”). Buyer is a newly formed
acquisition vehicle through which private equity funds affiliated with TA Associates will acquire a majority ownership interest and
private equity funds affiliated with Reverence Capital Partners will acquire a significant minority ownership interest in Russell
Investments. RIMCo expects that the Transaction will be consummated in the first half of 2016, subject to regulatory and other
approvals and confirmations, and other conditions being satisfied.
The Funds are permitted to invest their cash (i.e., cash awaiting investment or cash held to meet redemption requests or to pay
expenses) in the Russell U.S. Cash Management Fund, an unregistered Fund advised by RIMCo. As of December 31, 2015, the
Funds had invested $9,793,553 in the Russell U.S. Cash Management Fund.
The advisory fee of 0.20% is based upon the average daily net assets of each Fund and the administrative fee of up to 0.0425%
is based on the combined average daily net assets of the Funds. Advisory and administration fees are paid monthly. The following
table shows the total amount of each of these fees paid by the Funds for the period ended December 31, 2015:
Advisory | Administrative | |||
Moderate Strategy Fund | $ | 224,233 | $ | 47,650 |
Balanced Strategy Fund | 616,359 | 130,976 | ||
Growth Strategy Fund | 418,949 | 89,027 | ||
Equity Growth Strategy Fund | 102,297 | 21,738 |
RIMCo has agreed to certain waivers of its advisory fees as follows:
For the Moderate Strategy Fund, RIMCo has contractually agreed, until April 30, 2016, to waive up to the full amount of its
0.20% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level
expenses exceed 0.11% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include
extraordinary expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds,
which are borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except
with Board approval.
For the Balanced Strategy Fund, RIMCo has contractually agreed, until April 30, 2016, to waive up to the full amount of its
0.20% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level
expenses exceed 0.11% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include
94 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
extraordinary expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds,
which are borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except
with Board approval.
For the Growth Strategy Fund, RIMCo has contractually agreed, until April 30, 2016, to waive up to the full amount of its 0.20%
advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses
exceed 0.12% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include extraordinary
expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds, which are
borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except with Board
approval.
For the Equity Growth Strategy Fund, RIMCo has contractually agreed, until April 30, 2016, to waive up to the full amount of
its 0.20% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level
expenses exceed 0.12% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include
extraordinary expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds,
which are borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except
with Board approval.
For the period ended December 31, 2015, RIMCo waived/reimbursed the following expenses:
Waiver | Reimbursement | Total | ||||
Moderate Strategy Fund | $ | 224,233 | $ | 19,239 | $ | 243,472 |
Balanced Strategy Fund | 560,254 | — | 560,254 | |||
Growth Strategy Fund | 388,011 | — | 388,011 | |||
Equity Growth Strategy Fund | 102,297 | 41,560 | 143,857 |
RIMCo does not have the ability to recover amounts waived or reimbursed from previous periods.
RFSC is paid a fee based upon the average daily net assets of the Funds for transfer agency and dividend disbursing services. RFSC
retains a portion of this fee for its services provided to the Funds and pays the balance to unaffiliated agents who assist in providing
these services. The following shows the total amount of this fee paid by the Funds for the period ended December 31, 2015:
Amount | ||
Moderate Strategy Fund | $ | 4,933 |
Balanced Strategy Fund | 13,560 | |
Growth Strategy Fund | 9,217 | |
Equity Growth Strategy Fund | 2,251 |
Distributor
Russell Financial Services, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, is the distributor for the Investment
Company pursuant to a distribution agreement with the Investment Company. The Distributor receives no compensation from the
Investment Company for its services.
Accrued Fees Payable to Affiliates
Accrued fees payable to affiliates for the period ended December 31, 2015 were as follows:
Moderate Strategy | Balanced Strategy | Growth Strategy | Equity Growth | ||||||
Fund | Fund | Fund | Strategy Fund | ||||||
Advisory fees | $ | 251 | $ | 6,394 | $ | 4,345 | $ | — | |
Administration fees | 3,905 | 10,442 | 7,232 | 1,729 | |||||
Transfer agent fees | 404 | 1,081 | 749 | 179 | |||||
Trustee fees | 537 | 1,474 | 963 | 246 | |||||
$ | 5,097 | $ | 19,391 | $ | 13,289 | $ | 2,154 |
Board of Trustees
The Russell Fund Complex consists of RIC, which has 41 funds and RIF, which has 9 funds. Each of the Trustees is a Trustee
of RIC and RIF. During the period, the Funds paid each of their independent Trustees a retainer of $102,000 per year; and each
Trustee $7,000 for each regularly scheduled meeting attended in person and $3,500 for each special meeting and the Annual 38a-1
meeting attended in person, and for each Audit Committee meeting, Nominating and Governance Committee meeting, Investment
Notes to Financial Statements 95
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Committee meeting or any other committee meeting established and approved by the Board attended in person. Each Trustee
receives $1,000 for attendance of telephonic board meetings, except for telephonic board meetings called pursuant to RIC and
RIF’s Security Valuation and Pricing Procedures; and $500 for attendance of telephonic Committee meetings. Each independent
Trustee is also paid $200 per hour for time spent for formal deposition preparation and in depositions related to the McClure
litigation (see note 7). The Audit Committee Chair and Investment Committee Chair are each paid a fee of $15,000 per year and
the Nominating and Governance Committee Chair is paid a fee of $12,000 per year. The chairman of the Board receives additional
annual compensation of $85,000. Ms. Cavanaugh and the Trustee Emeritus are not compensated by the Russell Fund Complex for
service as a Trustee. Trustees’ out of pocket expenses are also paid by the Russell Fund Complex.
Transactions with Affiliated Companies (amounts in thousands)
An affiliated company is a company in which a Fund has ownership of at least 5% of the voting securities or which the Fund controls,
is controlled by or is under common control with. Transactions during the period ended December 31, 2015 with Underlying Funds
which are, or were, an affiliated company are as follows:
Realized Gain | Income | Capital Gains | |||||||||||
Fair Value | Purchases Cost | Sales Cost | (Loss) | Distributions | Distributions | ||||||||
Moderate Strategy Fund | |||||||||||||
RIC Russell Commodity Strategies Fund Class Y | $ | 1,628 | $ | 871 | $ | 1,292 | $ | (192 | ) | $ | — | $ | — |
RIC Russell Global Infrastructure Fund Class Y | 3,240 | 740 | 2,563 | 22 | 88 | 87 | |||||||
RIC Russell Multi-Strategy Alternative Fund | |||||||||||||
Class Y | — | 52 | 3,584 | (81 | ) | — | — | ||||||
RIF Global Real Estate Securities Fund | 1,080 | 242 | 1,115 | 339 | 25 | 54 | |||||||
RIC Russell U.S. Defensive Equity Fund Class | |||||||||||||
Y | 4,303 | 391 | 1,055 | 306 | 67 | — | |||||||
RIC Russell U.S. Dynamic Equity Fund Class Y | 3,216 | 1,382 | 644 | (39 | ) | 146 | 315 | ||||||
RIF Aggressive Equity Fund | 4,279 | 1,259 | 971 | (30 | ) | 38 | 406 | ||||||
RIF Multi-Style Equity Fund | 4,835 | 2,598 | 3,117 | 90 | 100 | 381 | |||||||
RIC Russell Global Opportunistic Credit Fund | |||||||||||||
Class Y | 14,098 | 11,784 | 1,350 | (72 | ) | 452 | — | ||||||
RIC Russell Investment Grade Bond Fund Class | |||||||||||||
Y | 17,353 | 2,068 | 4,910 | 1 | 675 | 27 | |||||||
RIF Core Bond Fund | 34,671 | 6,748 | 8,706 | 27 | 1,169 | 146 | |||||||
RIC Russell Emerging Markets Fund Class Y | 4,276 | 1,267 | 920 | (96 | ) | 16 | — | ||||||
RIC Russell Global Equity Fund Class Y | 6,458 | 1,510 | 1,298 | 45 | 126 | 545 | |||||||
RIF Non-U.S. Fund | 6,441 | 1,213 | 2,518 | 185 | 89 | — | |||||||
Russell U.S. Cash Management Fund | 1,732 | 2,907 | 1,176 | — | — | — | |||||||
$ | 107,610 | $ | 35,032 | $ | 35,219 | $ | 505 | $ | 2,991 | $ | 1,961 | ||
Balanced Strategy Fund | |||||||||||||
RIC Russell Commodity Strategies Fund Class Y | $ | 6,521 | $ | 6,009 | $ | 3,507 | $ | (525 | ) | $ | — | $ | — |
RIC Russell Global Infrastructure Fund Class Y | 11,526 | 2,067 | 3,206 | (24 | ) | 318 | 307 | ||||||
RIC Russell Multi-Strategy Alternative Fund | |||||||||||||
Class Y | — | 64 | 9,734 | (233 | ) | — | — | ||||||
RIF Global Real Estate Securities Fund | 2,875 | 534 | 1,594 | 743 | 68 | 133 | |||||||
RIC Russell U.S. Defensive Equity Fund Class | |||||||||||||
Y | 20,100 | 2,329 | 3,737 | 351 | 320 | — | |||||||
RIC Russell U.S. Dynamic Equity Fund Class Y | 20,094 | 4,437 | 4,350 | (322 | ) | 916 | 1,968 | ||||||
RIF Aggressive Equity Fund | 17,198 | 3,376 | 6,114 | (232 | ) | 169 | 1,670 | ||||||
RIF Multi-Style Equity Fund | 22,267 | 9,155 | 10,352 | 516 | 442 | 1,746 | |||||||
RIC Russell Global Opportunistic Credit Fund | |||||||||||||
Class Y | 26,061 | 18,995 | 3,357 | (225 | ) | 1,060 | — | ||||||
RIF Core Bond Fund | 81,130 | 10,465 | 14,774 | (100 | ) | 2,682 | 342 | ||||||
RIC Russell Emerging Markets Fund Class Y | 17,194 | 3,852 | 5,097 | (483 | ) | 62 | — | ||||||
RIC Russell Global Equity Fund Class Y | 28,754 | 5,537 | 5,495 | 174 | 566 | 2,441 | |||||||
RIF Non-U.S. Fund | 28,716 | 4,256 | 8,623 | 1,025 | 395 | — | |||||||
Russell U.S. Cash Management Fund | 4,030 | 8,309 | 4,279 | — | — | — | |||||||
$ | 286,466 | $ | 79,385 | $ | 84,219 | $ | 665 | $ | 6,998 | $ | 8,607 | ||
Growth Strategy Fund | |||||||||||||
RIC Russell Commodity Strategies Fund Class Y | $ | 6,054 | $ | 3,714 | $ | 3,165 | $ | (534 | ) | $ | — | $ | — |
96 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Realized Gain | Income | Capital Gains | |||||||||||
Fair Value | Purchases Cost | Sales Cost | (Loss) | Distributions | Distributions | ||||||||
RIC Russell Global Infrastructure Fund Class Y | 10,028 | 1,865 | 2,076 | (70 | ) | 273 | 265 | ||||||
RIC Russell Multi-Strategy Alternative Fund | |||||||||||||
Class Y | — | 52 | 8,615 | (226 | ) | — | — | ||||||
RIF Global Real Estate Securities Fund | 6,019 | 2,747 | 1,155 | (58 | ) | 135 | 235 | ||||||
RIC Russell U.S. Defensive Equity Fund Class | |||||||||||||
Y | 15,984 | 2,902 | 2,526 | 89 | 250 | — | |||||||
RIC Russell U.S. Dynamic Equity Fund Class Y | 15,932 | 3,710 | 3,008 | (291 | ) | 728 | 1,566 | ||||||
RIF Aggressive Equity Fund | 17,884 | 3,823 | 2,515 | (211 | ) | 163 | 1,693 | ||||||
RIF Multi-Style Equity Fund | 21,950 | 12,046 | 7,849 | (167 | ) | 384 | 1,628 | ||||||
RIC Russell Global Opportunistic Credit Fund | |||||||||||||
Class Y | 10,079 | 1,401 | 3,030 | (208 | ) | 427 | — | ||||||
RIF Core Bond Fund | 24,162 | 7,749 | 3,610 | (60 | ) | 757 | 94 | ||||||
RIC Russell Emerging Markets Fund Class Y | 17,871 | 5,025 | 2,162 | (270 | ) | 66 | — | ||||||
RIC Russell Global Equity Fund Class Y | 24,005 | 4,980 | 5,957 | 250 | 470 | 2,029 | |||||||
RIF Non-U.S. Fund | 25,960 | 4,050 | 4,346 | 94 | 317 | — | |||||||
Russell U.S. Cash Management Fund | 3,297 | 7,027 | 3,729 | — | — | — | |||||||
$ | 199,225 | $ | 61,091 | $ | 53,743 | $ | (1,662 | ) | $ | 3,970 | $ | 7,510 | |
Equity Growth Strategy Fund | |||||||||||||
RIC Russell Commodity Strategies Fund Class Y | $ | 1,460 | $ | 1,430 | $ | 808 | $ | (124 | ) | $ | — | $ | — |
RIC Russell Global Infrastructure Fund Class Y | 2,410 | 550 | 716 | (10 | ) | 66 | 64 | ||||||
RIC Russell Multi-Strategy Alternative Fund | |||||||||||||
Class Y | — | 23 | 2,697 | (67 | ) | — | — | ||||||
RIF Global Real Estate Securities Fund | 1,443 | 881 | 408 | (6 | ) | 33 | 55 | ||||||
RIC Russell U.S. Defensive Equity Fund Class | |||||||||||||
Y | 4,317 | 1,668 | 972 | (2 | ) | 69 | — | ||||||
RIC Russell U.S. Dynamic Equity Fund Class Y | 4,318 | 1,085 | 1,594 | (38 | ) | 196 | 422 | ||||||
RIF Aggressive Equity Fund | 5,270 | 1,732 | 1,073 | (81 | ) | 47 | 490 | ||||||
RIF Multi-Style Equity Fund | 4,798 | 1,966 | 2,007 | 151 | 92 | 371 | |||||||
RIC Russell Global Opportunistic Credit Fund | |||||||||||||
Class Y | 4,358 | 1,305 | 775 | (53 | ) | 184 | — | ||||||
RIC Russell Emerging Markets Fund Class Y | 5,265 | 2,058 | 1,042 | (123 | ) | 19 | — | ||||||
RIC Russell Global Equity Fund Class Y | 7,207 | 1,977 | 1,492 | (42 | ) | 141 | 609 | ||||||
RIF Non-U.S. Fund | 6,241 | 1,120 | 2,779 | 410 | 92 | — | |||||||
Russell U.S. Cash Management Fund | 734 | 1,512 | 777 | — | — | — | |||||||
$ | 47,821 | $ | 17,307 | $ | 17,140 | $ | 15 | $ | 939 | $ | 2,011 |
5. Federal Income Taxes
At December 31, 2015, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Moderate Strategy | Balanced Strategy | Equity Growth | ||||||||||||
Fund | Fund | Growth Strategy Fund | Strategy Fund | |||||||||||
Cost of Investments | $ | 107,494,186 | $ | 276,284,628 | $ | 196,003,663 | $ | 47,479,559 | ||||||
Unrealized Appreciation | $ | 249,524 | $ | 15,953,668 | $ | 6,864,698 | $ | 532,809 | ||||||
Unrealized Depreciation | (133,219 | ) | (5,772,771 | ) | (3,643,035 | ) | (190,988 | ) | ||||||
Net Unrealized Appreciation (Depreciation) | $ | 116,305 | $ | 10,180,897 | $ | 3,221,663 | $ | 341,821 | ||||||
Undistributed Ordinary Income | $ | 194,674 | $ | 509,759 | $ | — | $ | 153,124 | ||||||
Undistributed Long-Term Capital Gains | ||||||||||||||
(Capital Loss Carryforward) | $ | 1,772,561 | $ | 283,312 | $ | 5,518 | $ | — | ||||||
Tax Composition of Distributions | ||||||||||||||
Ordinary Income | $ | 2,848,249 | $ | 6,551,193 | $ | 3,895,203 | $ | 769,295 | ||||||
Long-Term Capital Gains | $ | 2,622,153 | $ | 17,302,939 | $ | 13,458,219 | $ | 3,851,748 |
As permitted by tax regulations, the Funds intend to defer a net realized capital loss incurred from November 1, 2015 to December
31, 2015, and treat it as arising in the fiscal year 2016. As of December 31, 2015, the Funds had realized a capital loss as follows:
Notes to Financial Statements 97
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2015
Moderate Strategy Fund | $ | 50,762 |
Balanced Strategy Fund | $ | 93,472 |
Growth Strategy Fund | $ | 367,750 |
Equity Growth Strategy Fund | $ | 65,039 |
At December 31, 2015, none of the Funds had capital losses available for carryforwards.
6. Record Ownership
As of December 31, 2015, the following table includes shareholders of record with greater than 10% of the total outstanding shares
of each respective Fund.
# of Shareholders | % | |||
Moderate Strategy Fund | 1 | 92.8 | ||
Balanced Strategy Fund | 1 | 91.9 | ||
Growth Strategy Fund | 1 | 88.7 | ||
Equity Growth Strategy Fund | 2 | 97.6 | ||
7. Pending Legal Proceedings
On October 17, 2013, Fred McClure filed a derivative lawsuit against RIMCo on behalf of ten RIC funds, some of which are
Underlying Funds in which the Funds invest: the Russell Commodity Strategies Fund, Russell Emerging Markets Fund, Russell
Global Equity Fund, Russell Global Infrastructure Fund, Russell Global Opportunistic Credit Fund, Russell International
Developed Markets Fund, Russell Multi-Strategy Alternative Fund, Russell Strategic Bond Fund, Russell U.S. Small Cap Equity
Fund and Russell Global Real Estate Securities Fund. The lawsuit, which was filed in the United States District Court for the
District of Massachusetts, seeks recovery under Section 36(b) of the Investment Company Act, as amended, for the funds’ alleged
payment of excessive investment management fees to RIMCo. On December 8, 2014, Fred McClure filed a second derivative
lawsuit in the United States District Court for the District of Massachusetts. This second suit involves the same ten funds, and the
allegations are similar, although the second suit adds a claim alleging that RFSC charged the funds excessive administrative fees
under Section 36(b). The plaintiff seeks on behalf of the Funds recovery of the amount of the allegedly excessive compensation or
payments received from these ten funds and earnings that would have accrued to plaintiff had that compensation not been paid or,
alternatively, rescission of the contracts and restitution of all excessive fees paid, for a period commencing one year prior to the
filing of the lawsuit through the date of the trial. RIMCo and RFSC are defending the actions.
8. Subsequent Events
Management has evaluated the events and /or transactions that have occurred through the date the financial statements were issued
and noted no items requiring adjustments to the financial statements or additional disclosures.
98 Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements
of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position
of Moderate Strategy Fund, Balanced Strategy Fund, Growth Strategy Fund, and Equity Growth Strategy Fund (four of the portfolios
constituting Russell Investment Funds, hereafter collectively referred to as the “Funds”) at December 31, 2015, the results of each of
their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”)
are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of
securities at December 31, 2015 by correspondence with brokers and the transfer agent, provide a reasonable basis for our opinion.
Report of Independent Registered Public Accounting Firm 99
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Tax Information — December 31, 2015 (Unaudited)
For the tax year ended December 31, 2015, the Funds hereby designate 100% or the maximum amount allowable of its net taxable
income as qualified dividends taxed at individual net capital gain rates.
The Form 1099 you receive in January 2016 will show the tax status of all distributions paid to your account in calendar year 2015.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate
shareholders as follows:
Moderate Strategy | 11.8 | % |
Balanced Strategy | 23.0 | % |
Growth Strategy | 34.7 | % |
Equity Growth Strategy | 39.2 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain
dividends for their taxable year ended December 31, 2015:
Moderate Strategy | $ | 2,622,153 |
Balanced Strategy | $ | 17,302,939 |
Growth Strategy | $ | 13,458,219 |
Equity Growth Strategy | $ | 3,851,748 |
100 Tax Information
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts —(Unaudited)
Factors Considered by the Trustees and their Recommendation
The Investment Company Act requires that the Board, including a majority of its members who are not considered to be “interested
persons” under the Investment Company Act (the “Independent Trustees”) voting separately, approve initially for a term not to exceed
two years the advisory agreement with RIMCo (the “Existing RIMCo Agreement”) and, with respect to the Funds that employ a manager-
of-managers method of investment, the portfolio management and non-discretionary investment advisory contract, as applicable, with
each discretionary and non-discretionary sub-adviser (each a “Money Manager”) of the Funds (collectively, the “Existing Money
Manager Agreements,” and together with the Existing RIMCo Agreement, the “Existing RIF Agreements”) and, thereafter, to approve
the continuation of each such Existing RIF Agreement on at least an annual basis, and that the terms and conditions of each Existing
RIF Agreement provide for its termination if continuation is not approved annually and upon its “assignment” within the meaning of
Section 2(a)(4) of the Investment Company Act (“assignment”).
The Board, including all of the Independent Trustees, considered and approved the Existing RIF Agreements for an initial term of two
years at a meeting held in person on July 29, 2014, and shareholders of each Fund approved the Fund’s Existing RIMCo Agreement on
November 3, 2014 in connection with the change of control resulting from LSEG’s acquisition of FRC in a transaction with Northwestern
Mutual Life Insurance Company (“Northwestern Mutual”) (the “LSEG Transaction”).
In connection with the LSEG Transaction, completion of which was announced on December 3, 2014, LSEG stated that it would
undertake a comprehensive review (the “Review”) of FRC’s investment management business to determine its positioning and fit with
LSEG. One part of the Review was to determine whether the FRC investment management business would be more valuable as part
of the LSEG organization or as part of an organization with existing investment management activities. On February 5, 2015, LSEG
publicly announced that it had completed the Review, that the conclusion of the Review was to explore a sale of the FRC investment
management business in its entirety, and that a sale process would commence. Following this date, LSEG solicited expressions of
interest in acquiring FRC’s investment management business from potential bidders in an auction process. LSEG will retain FRC and
FRC’s index business. FRC’s index business has historically provided various services and support to RIMCo in respect of RIMCo’s
Fund-related activities. In connection with the Transaction (defined below), FRC and Russell Investments will enter into index and
intellectual property license agreements which will provide Russell Investments, including RIMCo, with access to the LSEG retained
intellectual property and index data used in the conduct of its asset management business, including RIMCo’s Fund-related services.
The Independent Trustees discussed with RIMCo and LSEG and monitored throughout the sale process the impact of uncertainty as
to RIMCo’s ownership on the retention of key employees and on the ability of the Funds to retain assets and attract additional assets.
The Independent Trustees requested, and RIMCo provided, weekly reports regarding Fund asset inflows and outflows and departures
of key personnel. The Independent Trustees also received periodic status reports regarding the sale process from RIMCo and LSEG.
Following the emergence of interested bidders, the Independent Trustees communicated their perspectives on certain of the bidders
to RIMCo or LSEG when presented with opportunities to do so. With respect to private equity firm bidders, such as TA Associates
Management and TA Associates L.P. (together, “TA Associates”), these perspectives included Board concerns as to possible negative
market reaction to the perceived transitional nature of any transaction with a private equity firm and to any utilization of significant
leverage to complete such a transaction. The Board received status reports on the sale process not only at its regularly scheduled
quarterly meetings during the sale process but in interim telephone conference call meetings with RIMCo and/or LSEG.
In anticipation of a change of ownership of RIMCo and consequent assignment and termination of the Existing RIF Agreements as a
result of the announced conclusions of the Review, the Board met in person on May 18, 2015 (the “Existing RIF Agreement Review
Meeting”) to review and discuss with RIMCo information (the “Existing RIF Agreement Financial Information”) regarding each Fund’s
performance, fees, expenses, and profitability as of December 31, 2014.
During the course of a year, the Trustees receive a wide variety of materials regarding, among other things, the investment performance
of the Funds, sales and redemptions of the Funds’ shares, management of the Funds and other services provided by RIMCo, and
compliance with applicable regulatory requirements. In preparation for the Existing RIF Agreement Review Meeting, the Independent
Trustees, with the advice and assistance of their independent counsel (“Independent Counsel”), also requested, and the Board reviewed:
(1) information and reports prepared by RIMCo relating to the profitability of each Fund to RIMCo; (2) information (the “Third-
Party Information”) received from an independent, nationally recognized provider of investment company information comparing the
performance of certain of the Funds and their respective operating expenses over various periods of time with other peer funds not
managed by RIMCo, believed by the provider to be generally comparable in investment objectives to the Funds; and (3) information
prepared by RIMCo (the “RIMCo Comparative Information”) comparing the performance of the Underlying Funds and their respective
operating expenses over various periods of time with other peer funds not managed by RIMCo, believed by RIMCo to be generally
Basis for Approval of Investment Advisory Contracts 101
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
comparable in investment objectives to the Underlying Funds. In the case of each Fund, its other peer funds, whether identified as
such in the Third-Party Information or the RIMCo Comparative Information, are collectively hereinafter referred to as the Fund’s
“Comparable Funds,” and, with the Fund, such Comparable Funds are collectively hereinafter referred to as the Fund’s “Performance
Universe” in the case of performance comparisons and the Fund’s “Expense Universe” in the case of operating expense comparisons.
In the case of certain, but not all, Funds, the Third-Party Information reflected changes in the Comparable Funds included in the
Expense Universes as requested by RIMCo, which changes were noted in the Third-Party Information. The foregoing and other
information received by the Board, including the Independent Trustees, in connection with its review of the Existing RIF Agreements
at the Existing RIF Agreement Review Meeting is included in the Existing RIF Agreement Financial Information.
On October 8, 2015, LSEG announced that it had entered into a stock and asset purchase agreement with FRC and Emerald Acquisition
Limited (“Emerald Acquisition”), providing for a possible sale of FRC’s investment management business (“Russell Investments”)
to Emerald Acquisition (the “Transaction”). The Transaction, if completed, would result in the assignment of the Existing RIMCo
Agreement. Because the Existing RIMCo Agreement would terminate upon its assignment, the Board was asked to consider approval
of the terms and conditions of a new agreement (the “Post-Transaction RIMCo Agreement”) pursuant to which RIMCo, as an affiliate
of Emerald Acquisition, would continue to serve as the investment adviser of each Fund following completion of the Transaction and
thereafter to submit the Post-Transaction RIMCo Agreement to each Fund’s shareholders for approval, as required by the Investment
Company Act. Because the Existing Money Manager Agreements may be deemed to terminate upon assignment of each Fund’s
Existing RIMCo Agreement, the Board also was asked to approve new portfolio management and/or non-discretionary investment
advisory contracts with each applicable Fund’s Money Managers (the “Post-Transaction Money Manager Agreements,” and together
with the Post-Transaction RIMCo Agreement, the “Post-Transaction RIF Agreements”).
Following the announcement by LSEG of the Transaction, the Independent Trustees, with the advice and assistance of Independent
Counsel, requested information to evaluate the Post-Transaction RIF Agreements. The Independent Trustees requested information
relating to the nature, scope, and quality of services provided to the Funds by RIMCo and its affiliates and advised RIMCo of their
willingness to rely upon the Existing RIF Agreement Financial Information in their evaluation of the Post-Transaction RIF Agreements,
if and to the extent that such information, together with any information updating or supplementing such information, continued to be
accurate and complete as of the date of the request. In response to this request, RIMCo provided information relating to the nature,
scope, and quality of services provided to the Funds by RIMCo and its affiliates which information also included the Existing RIF
Agreement Financial Information as updated or supplemented as needed. Separately, the Independent Trustees submitted requests
for information specifically regarding Emerald Acquisition and the impact of the Transaction on the interests of the Funds and their
shareholders. The foregoing information and other information provided or presented by RIMCo, Emerald Acquisition, TA Associates,
and Reverence Capital to the Board, including the Independent Trustees, in connection with its evaluation of the Post-Transaction RIF
Agreements, including the information referred to below, hereinafter is referred to collectively as the “Post-Transaction RIF Agreement
Information.”
On November 3, 2015, the Board met by telephone conference call to discuss preliminarily the announcement of the Transaction with
representatives of FRC, RIMCo and TA Associates.
At a meeting held in person on December 7-8, 2015 (the “Post-Transaction RIF Agreement Information Meeting”), the Board, in further
preparation for its evaluation of the Post-Transaction RIF Agreements, reviewed the Post-Transaction RIF Agreement Information
with representatives of FRC, RIMCo, Fund management, TA Associates, and Reverence Capital, and separately in private sessions
with Independent Counsel at which no representatives of FRC, RIMCo, Fund management, TA Associates, or Reverence Capital were
present. Prior to the Post-Transaction RIF Agreement Information Meeting, the Board submitted supplemental information requests,
including a supplemental request for additional analyses and information regarding the financial stability of RIMCo and financial
models supporting the belief of TA Associates and Reverence Capital as to RIMCo’s financial stability following completion of the
Transaction. Prior to the Post-Transaction RIF Agreement Information Meeting, the Trustees received a memorandum from counsel
to the Funds (“Fund Counsel”) discussing the legal standards for their consideration of the Post-Transaction RIF Agreements, and
the Independent Trustees separately received a memorandum regarding their responsibilities from Independent Counsel. At the Post-
Transaction RIF Agreement Information Meeting, the Board requested additional information needed to evaluate the Post-Transaction
RIF Agreements, including information regarding covenants and events of default on one or more loans financing a portion of the
Transaction purchase price (the “Term Loan Facility”) borrowed under a credit agreement (the “Credit Agreement”) and a revolving
credit facility under the Credit Agreement (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Facilities”)
that could lead to a change of control of RIMCo.
102 Basis for Approval of Investment Advisory Contracts
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Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
The Board met in person on December 16, 2015 to consider the approval of the Post-Transaction RIF Agreements (the “Post-
Transaction RIF Agreement Evaluation Meeting,” and together with the Existing RIF Agreement Review Meeting and the Post-
Transaction RIF Agreement Information Meeting, the “Agreement Information Meetings,” or individually an “Agreement Information
Meeting”). At the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees met in person with representatives
of FRC, RIMCo, and Fund management to review additional Post-Transaction RIF Agreement Information received after the Post-
Transaction RIF Agreement Information Meeting and prior to or at that meeting. Representatives of TA Associates and Reverence
Capital participated in the Post-Transaction RIF Agreement Information Meeting in person and participated in the Post-Transaction
RIF Agreement Evaluation Meeting by conference call. Presentations made by FRC, RIMCo, TA Associates, and Reverence Capital
at the Agreement Information Meetings encompassed all of the Funds and the other RIMCo-managed funds for which the Board has
supervisory responsibility (the “Other Russell Funds”). Information received by the Board, including the Independent Trustees, prior
to and at the Agreement Information Meetings is included in the Post-Transaction RIF Agreement Information. Presentations made by
FRC, RIMCo, TA Associates, and Reverence Capital at the Agreement Information Meetings also are included in the Post-Transaction
RIF Agreement Information. Prior to voting at the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees
met in executive session with Independent Counsel, at which no representatives of FRC, RIMCo, Fund management, TA Associates,
or Reverence Capital were present, to review additional Post-Transaction RIF Agreement Information received prior to and at the
Meeting. The discussion below reflects all of these reviews.
The Board’s evaluation of the Post-Transaction RIF Agreements reflected the Post-Transaction RIF Agreement Information and other
information received by the Board during the course of the year or in prior years. The Independent Trustees’ evaluations of the Post-
Transaction RIF Agreements also reflected the knowledge and familiarity gained as Board members of the Funds and the Other Russell
Funds with respect to services provided by RIMCo, RIMCo’s affiliates, and each Money Manager to the Funds under the Existing RIF
Agreements and services proposed to be provided to the Funds under the Post-Transaction RIF Agreements.
In evaluating the Post-Transaction RIF Agreement Information, the Board considered that each of the Funds (the “Manager-of-Managers
Funds”), other than the Funds that are structured as funds of funds (the “Funds of Funds”), and each of the Underlying Funds in which
the Funds of Funds invest, employs a manager-of-managers method of investment and RIMCo’s advice that such Manager-of-Managers
Funds and Underlying Funds in employing a manager-of-managers method of investment operate in a manner that is distinctly different
from most other investment companies. In the case of most other investment companies, an investment advisory fee is paid by the
investment company to its adviser, which in turn employs and compensates individual portfolio managers to make specific securities
selections consistent with the adviser’s style and investment philosophy. RIMCo has engaged multiple unaffiliated Money Managers for
all Funds except the Funds of Funds, which are currently managed only by RIMCo, and for all Underlying Funds. A Money Manager
may have (1) a discretionary asset management assignment pursuant to which it is allocated a portion of a Manager-of-Managers Fund’s
or Underlying Fund’s assets to manage directly in its discretion, (2) a non-discretionary assignment pursuant to which it provides a
model portfolio to RIMCo representing its investment recommendations, based upon which RIMCo purchases and sells securities for a
Manager-of-Managers Fund or Underlying Fund, or (3) both a discretionary and a non-discretionary assignment.
The Board considered that RIMCo (rather than any Money Manager in the case of Manager-of-Managers Funds and Underlying Funds)
is responsible under the Existing RIMCo Agreement, and would be responsible under the Post-Transaction RIMCo Agreement, for
determining, implementing, and maintaining the investment program for each Fund. Assets of each Manager-of-Managers Fund and
Underlying Fund generally have been allocated among multiple Money Manager investment strategies. The Manager-of-Managers
Funds and Underlying Funds may employ discretionary and/or non-discretionary Money Managers selected by RIMCo, subject to
Board approval, for that Fund. RIMCo manages Manager-of-Managers Fund and Underlying Fund assets not allocated to discretionary
Money Managers, which include assets managed by RIMCo to effect a Manager-of-Managers Fund’s or Underlying Fund’s investment
strategies and/or to actively manage a Manager-of-Managers Fund’s or Underlying Fund’s overall exposures to seek to achieve the
desired risk/return profile for the Fund. RIMCo also manages the portion of Manager-of-Managers Fund and Underlying Fund assets
for which a Manager-of-Managers Fund’s or Underlying Fund’s non-discretionary Money Managers provide model portfolios to RIMCo
and each Manager-of-Managers Fund’s and Underlying Fund’s liquidity reserves. RIMCo may also manage portions of a Manager-of-
Managers Fund or Underlying Fund during transitions between Money Managers. The assets of each Fund of Funds are invested in
different combinations of Underlying Funds pursuant to target asset allocations set by RIMCo. RIMCo may modify the target asset
allocation for any Fund of Funds and/or the Underlying Funds in which the Funds of Funds invest. In all cases, Fund assets are
managed directly by RIMCo pursuant to authority provided by the Existing RIMCo Agreement, and would be managed directly by
RIMCo pursuant to authority provided by the Post-Transaction RIMCo Agreement.
Basis for Approval of Investment Advisory Contracts 103
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Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
RIMCo is responsible for selecting, subject to Board approval, Money Managers for each Manager-of-Managers Fund and Underlying
Fund and for actively managing allocations and reallocations of its assets among the Money Managers or their strategies and RIMCo
itself. The Board has been advised that RIMCo’s goal with respect to the Manager-of-Managers Funds and Underlying Funds is
to construct and manage diversified portfolios in a risk-aware manner. Each Money Manager for a Manager-of-Managers Fund or
Underlying Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities
for the portion of the Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Fund’s applicable investment objective,
policies and restrictions, any constraints placed by RIMCo upon their selection of portfolio securities and the Money Manager’s
specified role in a Fund. For each Manager-of-Managers Fund and Underlying Fund, RIMCo is responsible, among other things, 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 or provide recommendations with respect to certain
investment strategies for a Fund or Underlying Fund; and recommending annually to the Board whether portfolio management and
non-discretionary investment advisory contracts should be renewed, modified or terminated. In addition to its annual recommendation
as to the renewal, modification, or termination of portfolio management and non-discretionary investment advisory contracts, RIMCo
is responsible for recommending to the Board additions of new Money Managers or replacements of existing Money Managers at any
time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific
investment or strategy constraints from time to time for each Money Manager intended to capitalize on the strengths of that Money
Manager or to coordinate the investment activities of Money Managers for the Manager-of-Managers Funds or Underlying Funds in a
complementary manner. Therefore, RIMCo’s selection of Money Managers is made not only on the basis of performance considerations
but also on the basis of anticipated compatibility with other Money Managers in the same Manager-of-Managers Fund or Underlying
Fund. In light of the foregoing, the overall performance of each Manager-of-Managers Fund and Underlying Fund over appropriate
periods has reflected, in great part, the performance of RIMCo in designing the Fund’s investment program, structuring the Fund,
selecting an effective Money Manager with a particular investment style or sub-style for a segment that is complementary to the styles of
the Money Managers of other Fund segments, and allocating assets among the Money Managers or their strategies in a manner designed
to achieve the objectives of the Manager-of-Managers Fund or Underlying Fund.
The Board considered that the prospectuses for the Manager-of-Managers Funds and Underlying Funds and other public disclosures
emphasize to investors RIMCo’s role as the principal investment manager for each such 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 that information into
account when deciding to purchase shares of any Manager-of-Managers Fund or Underlying Fund. The Board further considered that
Manager-of-Managers Fund and Underlying Fund investors in pursuing their investment goals and objectives likely purchased their
shares on the basis of this information and RIMCo’s reputation for and performance record in managing the structure of the Manager-
of-Managers Funds and Underlying Funds.
The Board also considered the demands and complexity of managing the Manager-of-Managers Funds and Underlying Funds pursuant
to the manager-of-managers structure; the special expertise of RIMCo with respect to the manager-of-managers structure of the Funds;
and the likelihood that, at the current expense ratio of each Manager-of-Managers Fund and Underlying Fund, there would be no
acceptable alternative investment managers to replace RIMCo on comparable terms given the need to continue the manager-of-
managers strategy of such Fund selected by shareholders in purchasing their shares.
In addition to these general factors relating to the structure of the Manager-of-Managers Funds and Underlying Funds, the Trustees
considered, with respect to each Fund, various specific factors in respect of the Post-Transaction RIMCo Agreement, including the
following:
1. The nature, scope, and overall quality of the investment management and other services provided, and expected to be provided, to
the Fund by RIMCo;
2. The investment performance of each Fund, RIMCo and, with respect to the Manager-of-Managers Funds, each Money Manager,
including the investment performance of each Fund in absolute terms and relative to its benchmark(s) and Comparable Funds;
3. The advisory fee paid by the Fund to RIMCo (the “Advisory Fee”) and the fact that it encompasses all investment advisory fees paid
by the Fund, including the fees for any Money Managers for Manager-of-Managers Funds and Underlying Funds;
104 Basis for Approval of Investment Advisory Contracts
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Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
4. Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund, including any
administrative or transfer agent fees and any fees received for management or administration of securities lending cash collateral, soft
dollar arrangements and commissions in connection with portfolio securities transactions;
5. Information provided by RIMCo as to expenses incurred by the Fund including the expenses incurred by each Fund relative to its
Comparable Funds;
6. Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from the Fund;
and
7. Information provided by RIMCo concerning economies of scale and whether any scale economies are adequately shared with the
Fund.
In reviewing the nature, scope and overall quality of the investment management and other services provided, and which are expected
to be provided, to the Funds, including Fund portfolio management services, the Board discussed with senior representatives of RIMCo
at the Post-Transaction RIF Agreement Information Meeting the impact on the Funds’ operations of changes in RIMCo personnel
providing investment management and other services to the Funds during the past year or expected in the future, whether as a result of
the LSEG Transaction, the Review, the Transaction, or otherwise. The Board was not advised of any expected diminution in the nature,
scope, or quality of the investment advisory or other services provided to the Funds from such changes.
As noted above, RIMCo, in addition to managing the investment of each Manager-of-Managers Fund’s and Underlying Fund’s cash,
may directly manage a portion of certain Manager-of-Managers Funds and Underlying Funds (the “Participating Funds”) pursuant to
the relevant Existing RIMCo Agreement and the Post-Transaction RIMCo Agreement, the actual allocation being determined from time
to time by the Participating Funds’ portfolio manager. Beginning in 2012, RIMCo implemented a strategy of managing a portion of
the assets of the Participating Funds to actively manage such Funds’ overall exposures by investing in securities or other instruments
that RIMCo believes will achieve the desired risk/return profiles for such Funds. RIMCo monitors the Participating Funds’ risk/
return profiles by assessing Fund characteristics, including risk, using a variety of measurements, such as tracking error, and may
seek to actively manage Fund exposures consistent with the Funds’ investment objectives and strategies. For U.S. equity Funds, Fund
exposures may be managed with the goal to increase or decrease exposures (such as volatility, momentum, value, growth, capitalization
size, industry, or sector). For non-U.S. equity, global infrastructure, and global real estate Funds, Fund exposures may be managed with
the goal to increase or decrease exposures (such as volatility, momentum, value, growth, capitalization size, industry, sector, country
or region). For fixed-income Funds, Fund exposures may be managed with the goal to increase or decrease exposures (such as sector,
industry, currency, credit, or mortgage exposure, country risk, yield curve positioning or interest rates). For alternative and specialty
Funds, Fund exposures may be managed with the goal to increase or decrease exposures (such as volatility, momentum, value, growth,
capitalization size, industry, sector, region, currency, commodity, credit or mortgage exposure, country risk, yield curve positioning or
interest rates). For all Funds, Fund characteristics may be managed to offset undesired relative over- or under-weights in order to seek
to achieve the desired risk/return profile for each Fund. RIMCo may utilize quantitative or qualitative analysis or quantitative models
designed to assess Fund characteristics and identify a portfolio that provides the desired exposures or use strategies based on indexes
that represent the desired exposures, including index replication and optimized index sampling. Based on this, for the portion of a
Fund’s assets directly managed by RIMCo, RIMCo may invest in common stocks, fixed income securities, pooled investment vehicles,
exchange-traded notes, REITs, short-term investments, currencies and/or derivatives, including futures, forwards, options, and/or
swaps, in order to seek to achieve the desired risk/return profile for the Fund. Derivatives may be used to take long or short positions.
In addition, RIMCo may elect to adjust the exposure obtained through the cash equitization process to manage Fund exposures.
RIMCo also may manage Fund assets directly to effect a Fund’s investment strategies. RIMCo’s direct management of assets for these
purposes is hereinafter referred to as the “Direct Management Services.” RIMCo also may reallocate Fund assets among Money
Managers, increase Fund cash reserves, or determine not to be fully invested. RIMCo’s Direct Management Services generally are
not intended to be a primary driver of Manager-of-Managers Funds’ or Underlying Funds’ investment results, although the services
may have a positive or negative impact on investment results, but rather are intended to enhance incrementally the ability of Funds to
carry out their investment programs. The Board considered that during the period, and to the extent that RIMCo employs its Direct
Management Services other than via the cash equitization process in respect of Participating Funds, RIMCo is not required to pay
investment advisory fees to a Money Manager with respect to assets that are directly managed and that the profits derived by RIMCo
generally and from the Participating Funds consequently may be increased incrementally, although RIMCo may incur additional costs
in providing Direct Management Services. The Board, however, also considered the potential benefits of the Direct Management
Basis for Approval of Investment Advisory Contracts 105
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LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
Services to Participating Funds; the limited, although increasing, amount of assets that to the date of the Agreement Information
Meetings were being managed directly by RIMCo pursuant to the Direct Management Services; and the fact that the aggregate Advisory
Fees paid by the Participating Funds are not increased as a result of RIMCo’s direct management of Fund assets as part of the Direct
Management Services or otherwise.
In reviewing the Funds’ Advisory Fees in light of Fund performance, the Board considered that in the Post-Transaction RIF Agreement
Information and at past meetings, RIMCo noted differences between the investment strategies of certain Funds and their respective
Comparable Funds in pursuing their investment objectives. The Board noted RIMCo’s further past advice that the strategies pursued
by the Funds, among other things, are intended to result in less volatile, more moderate returns relative to each Fund’s performance
benchmark rather than more volatile, more extreme returns that its Comparable Funds may experience over time.
The Third-Party Information included, among other things, comparisons of the Funds’ Advisory Fees with the investment advisory fees
of their Comparable Funds on an actual basis (i.e., giving effect to any voluntary fee waivers implemented by RIMCo and the advisers to
such Fund’s Comparable Funds). The Third-Party Information, among other things, showed that the RIF Multi-Style Equity Fund, RIF
Aggressive Equity Fund, RIF Non-U.S. Fund, RIF Core Bond Fund, and RIF Global Real Estate Securities Fund each had an Advisory
Fee which, compared with its Comparable Funds’ investment advisory fees on an actual basis, was ranked in the fourth or fifth quintile
of its Expense Universe for that expense component. The Advisory Fee for each of the other Funds ranked in the third quintile or better
of its Expense Universe. In these rankings, the first quintile represents funds with the lowest investment advisory fees among funds in
the Expense Universe and the fifth quintile represents funds with the highest investment advisory fees among the Expense Universe
funds. The comparisons were based upon the latest fiscal years for the Expense Universe funds. The Board considered that the actual
Advisory Fee for each of the RIF Non-U.S. Fund and RIF Core Bond Fund was less than 1.5 basis points from the third quintile of its
Expense Universe. The Board further considered RIMCo’s explanation of the reasons for the Funds’ actual Advisory Fee rankings and
RIMCo’s belief that the Funds’ Advisory Fees are fair and reasonable under the circumstances, notwithstanding such comparisons.
Among other things, RIMCo noted that meaningful comparisons of investment advisory fees between funds affiliated with insurance
companies issuing variable annuity and life policies and non-affiliated funds, such as the Funds, are difficult as insurance companies
may allocate fees between the investment policies and their underlying funds. The Board determined that it would continue to monitor
the Funds’ Advisory Fees against the Funds’ Comparable Funds’ investment advisory fees.
In discussing the Funds’ Advisory Fees generally, RIMCo noted, among other things, that its Advisory Fees for the Funds encompass
services that may not be provided by investment advisers to the Funds’ Comparable Funds, such as cash equitization and, in the case
of the Manager-of-Managers Funds and Underlying Funds, management of portfolio transition costs when Money Managers are added,
terminated or replaced.
RIMCo also observed that its “margins” in providing investment advisory services to the Manager-of-Managers Funds and Underlying
Funds tend to be lower than competitors’ margins because of the demands and complexities of managing the Funds’ manager-of-
managers structure, including RIMCo’s payment of a significant portion of the Manager-of-Managers Funds’ and Underlying Funds’
Advisory Fees to their Money Managers. RIMCo expressed the view that Advisory Fees should be considered in the context of a Fund’s
total expense ratio to obtain a complete picture. The Board, however, considered each Fund’s Advisory Fee on both a standalone basis
and in the context of the Fund’s total expense ratio.
RIMCo attributed the relative ranking of the actual Advisory Fees of the RIF Multi-Style Equity Fund and the RIF Aggressive Equity
Fund to changes in the Funds’ respective Expense Universes during the past year that adversely affected each Fund’s Expense Universe
rankings. RIMCo noted that the previous advisory fee waiver of 0.05% for the RIF Aggressive Equity Fund was removed effective May
1, 2015. RIMCo further noted that the total expense ratio for the RIF Multi-Style Equity Fund and the RIF Aggressive Equity Fund,
taking into account the removal of the 0.05% Advisory Fee waiver for the RIF Aggressive Equity Fund, ranked in the third quintile
of their respective Expense Universes.
With respect to the RIF Global Real Estate Securities Fund, RIMCo noted that the Third-Party Information, to include a sufficient
number of Comparable Funds in the Fund’s Expense Universe, included both global and U.S. real estate funds in the Expense Universe.
According to RIMCo, U.S. real estate funds generally have lower investment advisory fees, which lower the Expense Universe advisory
fee median. RIMCo further noted that the Fund’s total expense ratio ranked in the third quintile of its Expense Universe.
Based upon information provided by RIMCo, the Board reviewed for each Fund whether economies of scale have been realized and
whether the Advisory Fee for such Fund appropriately reflects or should be revised to reflect any such economies. The Board reviewed,
106 Basis for Approval of Investment Advisory Contracts
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LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
among other things, the variability of Money Manager investment advisory fees and other factors associated with the manager-of-
managers structure employed by the Manager-of-Managers Funds and Underlying Funds as well as net Fund redemptions or purchases
in recent years, including, especially, the period since LSEG’s announcement of the conclusion of the Review and its intention to sell
the FRC investment management business. The Board considered RIMCo’s advice that the impact of its Direct Management Services
was not expected to materially affect RIMCo’s economies due to the relatively small strategic allocation targets and associated costs
to RIMCo of providing such services.
The Funds are distributed exclusively through variable annuity and variable life insurance contracts issued by insurance companies.
Currently, the Funds are made available to new holders of such insurance policies (“Insurance Contract Holders”) by one insurance
company. RIMCo has advised the Board that it does not expect that additional insurance companies will make the Funds available
to their variable annuity or variable life insurance policyholders in the near or long term because of a declining interest by the
insurance companies generally in variable insurance trusts, such as the Funds, as investment vehicles supporting their products.
Notwithstanding this expectation, RIMCo has expressed its belief that the Funds will remain viable in light of their cash inflows from
the current participating insurance company. The Board considered, among other things, the negative implications for significant
future Fund asset growth of RIMCo’s expectation that no additional insurance companies will make the Funds available to their variable
annuity and variable life insurance policyholders and other factors associated with the manager-of-managers structure employed by the
Manager-of-Managers Funds, including the variability of Money Manager investment advisory fees.
Northwestern Mutual is the insurance company making the Funds available to their Insurance Contract Holders. At the Post-Transaction
RIF Agreement Information Meeting, RIMCo expressed its belief that Northwestern Mutual intends to continue to make the Funds
available to its Insurance Contract Holders following the Transaction. However, the Board received no direct assurances in this regard
directly from Northwestern Mutual. If Northwestern Mutual were to discontinue its participation in the Funds, the Board considered
that it is unlikely that the Funds would remain viable.
The Board also considered that the fees payable to RIMCo or its affiliates by most but not all institutional clients with respect to
institutional funds with investment objectives similar to those of the Funds and the Other Russell Funds are lower, and, in some cases
may be substantially lower, than the rates paid by certain of the Funds and the Other Russell Funds. The Trustees received information
comparing the fees payable to RIMCo by certain institutional clients and the Funds. The Trustees considered the differences in the
nature and scope of services RIMCo provides to institutional clients and the Funds. RIMCo explained, among other things, that
institutional clients have fewer compliance, administrative, and other needs than the Funds. RIMCo also noted that since the Funds
must constantly issue and redeem their shares, they are more difficult to manage than institutional accounts where assets are relatively
stable. In addition, RIMCo noted that the Funds are subject to heightened regulatory requirements relative to institutional clients,
and that the process associated with the acquisition of new assets is considerably more expensive in the retail market, relative to the
institutional market. The Board noted that RIMCo provides office space and facilities to the Funds and all of the Funds’ officers.
Accordingly, the Trustees concluded that the services provided to the Funds are sufficiently different from the services provided to the
institutional clients that comparisons are not probative and should not be given significant weight.
With respect to the Funds’ total expenses, the Third-Party Information showed that none of the Funds had total expenses that ranked in
fourth or fifth quintiles of its Expense Universe. In these rankings, the first quintile represents the funds with the lowest total expenses
among funds in the Expense Universe and the fifth quintile represents funds with the highest total expenses among the Expense
Universe funds.
On the basis of the Post-Transaction RIF Agreement Information and other information previously received by the Board from RIMCo
during the course of the current year or in prior years, or presented at or in connection with the Agreement Information Meetings by
RIMCo, the Board, in respect of each Fund, found after giving effect to any applicable waivers and/or reimbursements and considering
any differences in the composition and investment strategies of its respective Comparable Funds that (1) the Advisory Fee charged by
RIMCo was reasonable in light of the nature, scope, and overall quality of the investment management and other services provided, and
expected to be provided, to the Fund; (2) the relative expense ratio of the Fund either was comparable to those of its Comparable Funds
or RIMCo had provided an explanation satisfactory to the Board as to why the relative expense ratio was not comparable to those of its
Comparable Funds; (3) RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; (4) other benefits
and fees received by RIMCo or its affiliates from the Fund were not excessive; (5) RIMCo’s profitability with respect to the Fund was
not excessive in light of the nature, scope, and overall quality of the investment management and other services provided by RIMCo;
and (6) the Advisory Fee charged by RIMCo, with implementation of the new breakpoints in the case of certain Underlying Funds,
appropriately reflects any economies of scale realized by such Fund in light of various factors, including the negative implications for
Basis for Approval of Investment Advisory Contracts 107
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LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
significant future Fund asset growth of RIMCo’s expectation that no additional insurance companies will make the Funds available to
their variable annuity and variable life insurance policyholders and other factors associated with the manager-of-managers structure
employed by the Manager-of-Managers Funds and Underlying Funds, including the variability of Money Manager investment advisory
fees as well as the possible discontinuation of Northwestern Mutual’s participation in the Funds.
The Board, in assessing the Funds’ performance, focused upon each Fund’s performance for the 3-year period ended December 31,
2014 as most relevant but also considered Fund performance for the 1- and 5-year periods ended such date. In reviewing the Funds’
performance generally, the Board took into consideration various steps taken by RIMCo beginning in 2012 to enhance the performance
of certain Manager-of-Managers Funds and Underlying Funds, including changes in Money Managers, and, in the case of Participating
Funds, RIMCo’s implementation of its Direct Management Services.
With respect to the RIF Aggressive Equity Fund, the Third-Party Information showed that the Fund’s performance was ranked in
the fourth quintile of its Performance Universe for the 3- and 5-year periods ended December 31, 2014 and was ranked in the fifth
quintile for the 1-year period ended such date. RIMCo noted that in 2012 it had changed the Fund’s investment strategy from investing
principally in small and medium capitalization securities to investing principally in small capitalization securities, which resulted in
a change to the Fund’s primary benchmark. RIMCo attributed the Fund’s three-year underperformance relative to its Performance
Universe to the market cap mismatch relative to the Performance Universe prior to the Fund’s investment strategy change.
With respect to the Moderate Strategy Fund, the Third-Party Information showed that the Fund’s performance was ranked in the
fifth quintile of its Performance Universe for the 3- and 5-year periods ended December 31, 2014, and ranked in the fourth quintile
of its Performance Universe for the 1-year period ended such date. The Board considered that the Balanced Strategy Fund and
Moderate Strategy Fund outperformed their respective benchmarks for the 3-year period ended December 31, 2014. With respect
to the Balanced Strategy Fund, the Third-Party Information showed that the Fund’s performance was ranked in the fourth quintile of
its Performance Universe for each of the 1- , 3- and 5-year periods ended December 31, 2014. With respect to the Growth Strategy
Fund and Equity Growth Strategy Fund, the Third-Party Information showed that each Fund’s performance was ranked in the fifth
quintile of its Performance Universe for each of the 1-, 3- and 5-year periods ended December 31, 2014. The Board considered
RIMCo’s explanation that the underperformance of the Funds relative to their respective peer groups was mainly due to asset allocation
differences. RIMCo noted, among other things, that the RIF Balanced Strategy Fund and RIF Moderate Strategy Fund tend to have
a higher allocation to fixed income and a lower allocation to equities than their Comparable Funds, and that equities have largely
outperformed fixed income on an annualized basis over the 3-year period. RIMCo also explained that each of the Funds tends
to hold more diversified growth-oriented assets beyond traditional equities (such as global real estate, infrastructure, commodities,
global high yield debt, emerging market debt, and liquid alternatives strategies), which have lagged in the strong equity markets.
This exposure, according to RIMCo, is intended to provide diversification benefits and dampen volatility. RIMCo further noted that,
within the equity positions held by the Moderate Strategy Fund, Balanced Strategy Fund, Growth Strategy Fund and Equity Growth
Strategy Fund, the Funds have more of a global equity allocation and less U.S. bias relative to their respective Comparable Funds,
and the U.S. markets outperformed international developed markets over the 3-year period ended December 31, 2014. The Board
also considered that in January 2014, the Funds implemented a change in strategic asset allocations, which decreased positions in
core fixed income, international developed equity, and commodities, and increased positions in small cap, emerging markets, and
infrastructure. According to RIMCo, these changes brought the Funds’ allocations directionally closer towards the average equity and
fixed income allocations of the Comparable Funds, although the Funds continue to maintain more diversified growth asset exposure and
a larger globally diversified equity allocation than their Comparable Funds.
In assessing performance, the Board reviewed each Fund’s absolute performance and performance relative to appropriate benchmarks
and indices, in addition to such Fund’s performance relative to its Comparable Funds. In assessing the Funds’ performance relative to
their Comparable Funds or benchmarks or in absolute terms, the Board considered RIMCo’s stated investment strategy of managing the
Funds in a risk-aware manner. The Board also considered the Money Manager changes that have been made in recent periods and that
the performance of Money Managers continues to impact Fund performance for periods prior and subsequent to their termination, and
that any incremental positive or negative impact of the Direct Management Services, which continue to evolve in nature and scope, was
not yet fully reflected in the Fund’s investment results. Lastly, the Board considered potential new strategies discussed at prior Board
meetings that may be employed by RIMCo in respect of certain Funds.
At the Post-Transaction RIF Agreement Evaluation Meeting, the Board concluded that, under the circumstances, including those
described below, and based on RIMCo’s performance information and reviews for each Fund and the other Post-Transaction RIF
108 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
Agreement Information, the performance of each of the Funds would be consistent with the approval of the Post-Transaction RIMCo
Agreement.
At the Agreement Information Meetings, with respect to the review of the terms of the Post-Transaction Money Manager Agreements,
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 Financial Services, Inc., the Funds’ underwriter; and
RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate, or
to terminate the Money Manager. The Board received reports during the course of the year from the Funds’ Chief Compliance Officer
regarding her assessments of Money Manager compliance programs and any compliance issues. RIMCo did not identify any benefits
received by Money Managers or their affiliates as a result of their relationships with the Funds other than benefits from their soft
dollar arrangements and commissions paid to any affiliated broker/dealer through which they execute trades. The Post-Transaction
RIF Agreement Information described oversight of Money Manager soft dollar arrangements. The Post-Transaction RIF Agreement
Information expressed RIMCo’s belief that, based upon certifications from Money Managers and pre-hire and ongoing reviews of Money
Manager soft dollar arrangements, policies, and procedures, the Money Managers’ soft dollar arrangements, policies, and procedures
are consistent with applicable legal standards and with disclosures made by Money Managers in their investment adviser registration
statements filed with the Securities and Exchange Commission and by the Funds in their registration statements. RIMCo, as it has in
the past, advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management
and non-discretionary investment advisory 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 standard fee rates 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 of the relevance of Money Manager profitability
in light of RIMCo’s belief that such fees are reasonable; the Board’s findings as to the reasonableness of the Advisory Fee paid by each
Fund; and the fact that each Money Manager’s fee is paid by RIMCo. Based substantially upon RIMCo’s recommendations, together
with the Post-Transaction RIF Agreement Information, the Board concluded that the fees paid to the Money Managers of each Fund are
reasonable in light of the quality of the investment advisory services provided.
In approving the Post-Transaction RIMCo Agreement and determining to submit it to shareholders for their approval, the Trustees,
in addition to the reviews described above, conducted a review that was specifically focused on the Transaction and its impact on the
interests of the Funds and their shareholders, and, in doing so, considered a variety of factors, positive and negative, deemed relevant
in their business judgment, certain of which are discussed below. The discussion below is not intended to be all-inclusive.
1. Their belief that the Post-Transaction RIMCo Agreement addresses the immediate need to provide for continuation without
interruption of the investment advisory and other services provided to the Funds by RIMCo and its affiliates following the completion
of the Transaction.
2. RIMCo’s belief that the Transaction will address the uncertainty of its employees and Fund shareholders and potential shareholders
regarding ownership of RIMCo and the continuity of services to the Funds, facilitating efforts to attract and retain qualified investment
and other professionals, to retain current Fund assets, and to attract new Fund assets. The Board noted, however, that the involvement
of TA Associates and Reverence Capital and the investments made indirectly by the limited partners of the certain private equity funds
affiliated with TA Associates (“TA Funds”) and certain private equity funds affiliated with Reverence Capital (the “Reverence Capital
Funds”) will not be viewed as permanent by employees, Fund shareholders, and potential Fund shareholders; therefore the Transaction
might not resolve these uncertainties. When TA Associates and Reverence Capital determine to end their involvement in RIMCo and
to exit the investments made by alternative investment vehicles created by or from the TA Funds, (the “TA Alternative Investment
Vehicles”) and by alternative investment vehicles (the “Reverence Capital Entities”), respectively, subsequent to the Transaction, the
manner in which such an exit would be accomplished and the consequences to RIMCo and the Funds are not determinable at this time.
In the event of such a determination and exit, the Board will consider what actions, if any, are available, necessary, appropriate, and in
the best interests of the Funds and their shareholders under the circumstances.
3. The reputations of TA Associates and Reverence Capital and their records of acquiring investments in investment management
companies, as well as their having advised the Board that there is no established timetable for their exits from the RIMCo investments
made by the TA Alternative Investment Vehicles or Reverence Capital Entities at this time. Information presented to the Board by TA
Associates and Reverence Capital at the Post-Transaction RIF Agreement Evaluation Meeting showed that past investments by TA
Associates in investment management companies historically have extended for three to ten years. In the case of RIMCo, it was noted
Basis for Approval of Investment Advisory Contracts 109
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
by TA Associates and Reverence Capital that the duration of the investments made by the TA Alternative Investment Vehicles and
the Reverence Capital Entities, respectively, could be shorter or longer than the historical duration of its investments in investment
management companies. The impact of such exit on RIMCo’s operations and financial condition is not determinable at this time,
although an exit likely would result in a change of control of RIMCo.
4. Assurances from TA Associates and Reverence Capital that RIMCo will continue to be part of Russell Investments and that Russell
Investments will continue to operate as a separate organization under its own governance structure. TA Associates and Reverence
Capital advised the Board that they did not envision involvement in RIMCo’s day-to-day operations, but that each organization will have
representation on the board of directors of a direct or indirect corporate parent company of RIMCo (the “Russell Investments Board”).
Through their representatives, TA Associates and Reverence Capital will be actively involved in the governance and growth strategy
of RIMCo, will recruit additional members for the Russell Investments Board with meaningful leadership and managerial experience
in investment management, and intend to bring strategic relationships to bear in support of driving the growth of RIMCo’s business.
5. The current intention of TA Associates and Reverence Capital to retain RIMCo’s existing management team and other key
professionals.
6. The intention of TA Associates and Reverence Capital to finance a substantial portion of the Transaction purchase price by debt
guaranteed by Emerald Acquisition and certain subsidiaries (including RIMCo) of FRC (“Transferred Subsidiaries”), (Emerald
Acquisition and certain Transferred Subsidiaries, including RIMCo, collectively, the “Guarantors”), with the possibility of a future
change of control of RIMCo upon the occurrence of certain conditions or events of default under the final terms and conditions of the
Term Loan Facility and the Revolving Credit Facility (which had not been negotiated or finalized). The Board noted that RIMCo,
TA Associates, and Reverence Capital each anticipates, based on historical operating profits of the Transferred Subsidiaries, that
cash flows from the Transferred Subsidiaries will be adequate to service all debt with appropriate cushions with no diminution in
the nature, scope, or quality of services provided to the Funds by RIMCo and its affiliates, as supported by analyses and five-year
projections prepared by and provided to the Board by TA Associates and Reverence Capital. The Board noted that TA Associates
and Reverence Capital advised the Board that the capital structure of RIMCo, giving effect to its debt service obligations, would be
appropriately balanced and that the most recent balance sheet and statement of income of RIMCo would not be changed significantly
by the Transaction. The Board particularly noted that TA Associates and Reverence Capital advised the Board that each has used
leverage effectively in prior transactions with asset managers with mutual fund complexes as part of a balanced structure and that a
TA Fund and a Reverence Capital Fund (and, indirectly, their limited partners) have guaranteed Emerald Acquisition’s obligation to
pay U.S. $150 million of the purchase price to FRC in four annual installments commencing on December 31, 2017 (the “Holdback”)
and, therefore, have an additional financial interest in the success of the Transaction until the Holdback is paid to FRC. TA Associates
and Reverence Capital informed the Board that Emerald Acquisition (which is, and it is expected that the terms of the Facilities will
require it to remain, a passive holding company with no operations) is prepared to support the business of RIMCo through reinvestment
of cash flow and additional capital investments, if and as appropriate, but made no commitments and may be financially constrained
in its ability to do so.
7. Statements from TA Associates and Reverence Capital that there should be no pressure to and there are no current plans to make
changes with respect to current Advisory Fees, expense limitations, and distribution arrangements or in the nature, scope, or quality of
services provided to the Funds by RIMCo and its affiliates.
8. The strong support expressed by the current senior management team at RIMCo for the Transaction.
9. The commitment of FRC to bear all expenses incurred by the Funds in connection with the Transaction, including all costs associated
with the proxy solicitation.
10. Statements from TA Associates and Reverence Capital that there is no intention to change any of the Funds’ affiliated or third-
party service providers in connection with the Transaction, thereby assuring continuation of services needed for the Funds’ operations
and minimizing complications in connection with the transfer of ownership of FRC’s investment management business from LSEG to
Emerald Acquisition through one or more direct or indirect wholly-owned subsidiaries (the “Owners”).
11. The Board was informed that the Transaction will result in employees of Russell Investments owning a larger financial interest,
indirectly, in RIMCo than they currently own, which may align their long-term interests with the interests of RIMCo and should help
RIMCo retain key management and investment personnel, an important factor in assessing the stability of RIMCo following completion
of the Transaction.
110 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
12. Information concerning the impact of the separation of FRC’s index business from FRC’s investment management business and
assurances from RIMCo that following the Transaction it will continue to have access to the intellectual property and index data and
related services that have been provided by FRC’s index business through license agreements that are satisfactory to RIMCo and will
not involve any cost or expense to the Funds.
13. The Existing RIMCo Agreement was approved by each Fund’s shareholders in November 2014. The terms and conditions of the
Post-Transaction RIF Agreements are substantially the same as those of the recently approved Existing RIF Agreements, which will
terminate automatically upon completion of the Transaction, and the Post-Transaction RIF Agreements will not increase any Fund’s
Advisory Fee (on a contractual or actual basis), expense ratio, economies of scale, or other fees or benefits received by RIMCo and its
affiliates as a result of their relationships with the Fund.
14. There will be no changes to the Independent Trustees of the Board in connection with the Transaction, assuring continuity of the
Funds’ supervision and oversight.
15. Assurances from RIMCo and Emerald Acquisition that no “unfair burden” has been imposed on the Funds within the meaning of
Section 15(f) of the Investment Company Act by the LSEG Transaction or the Transaction, taken singly or together, and that for a period
of two years following the effective date of the Transaction, they will use reasonable best efforts not to engage in activities that would
impose an unfair burden on the Funds.
16. The Trustees’ belief that shareholders have purchased and retained their Fund shares based upon the reputation, investment
record, and investment philosophies and strategies employed by RIMCo in managing the Funds (including the manager-of-managers
structure employed by the Manager-of-Managers Funds and employed indirectly by the Funds of Funds through their investments in
underlying Manager-of-Managers Funds).
17. Statements from TA Associates and Reverence Capital that they will not require or seek any changes to the manager-of-managers
structure employed by RIMCo in the case of the Manager-of-Managers Funds and employed by the Funds of Funds through their
investments in the Manager-of-Managers Funds or Underlying Funds or changes to the current Money Managers to the Manager-of-
Managers Funds or Underlying Funds other than in the ordinary course of business.
18. The demands and complexity of managing the Manager-of-Managers Funds and Underlying Funds pursuant to the manager-of-
managers structure, the special expertise of RIMCo with respect to the manager-of-managers structure of those Funds, and the Board’s
belief that at the current expense ratio of each Manager-of-Managers Fund and Underlying Fund, there likely would be no acceptable
alternative investment managers to replace RIMCo following termination of the Existing RIMCo Agreement on comparable terms
given the need to continue the manager-of-managers strategy selected by Fund shareholders in purchasing their shares of Manager-of-
Managers Funds or Funds of Funds that indirectly employ a manager-of-managers structure through their investments in underlying
Manager-of-Managers Funds.
19. RIMCo is a joint and several Guarantor of the Facilities and certain of the Equity Interests, including the RIMCo Equity Interest,
will be pledged as loan collateral (the “Loan Collateral”). If ownership of the Loan Collateral changes as a result of certain third-
party financial institutions’ (the “Lenders”) exercise of their rights in connection with the Facilities and the Post-Transaction RIF
Agreements automatically terminate upon the change of control of RIMCo, there may be no acceptable alternative investment managers
with special expertise to continue the manager-of-managers structure selected by shareholders of the Manager-of-Managers Funds
and Underlying Funds on comparable terms and conditions. In such event, the Board will consider what actions, if any, are available,
necessary, appropriate, and in the best interests of the Funds and their shareholders under the circumstances, which may include
approving a temporary interim advisory agreement with RIMCo in accordance with Rule 15a-4 under the Investment Company Act that
would allow RIMCo to continue to serve as investment manager for a maximum period of 150 days.
20. The belief that in the event that the Post-Transaction RIF Agreements were not approved by the Board or the Transaction is not
completed, LSEG would explore alternative options to sell or dispose of FRC’s investment management business based on the conclusion
of the Review and the Board’s concern that a transaction other than the Transaction might not be available, or if available, could entail
terms, conditions, and consequences more unfavorable to the Funds than the Transaction. The Board also considered RIMCo’s belief
that in the event of a determination by the Board not to approve the Post-Transaction RIF Agreements continued uncertainty regarding
RIMCo’s ownership could adversely affect the ability of RIMCo to attract and retain key personnel and the abilities of the Funds to
retain their current assets and to attract additional assets during the period in which LSEG pursued an alternative transaction.
Basis for Approval of Investment Advisory Contracts 111
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
In evaluating the Post-Transaction RIF Agreements, the Board considered various risks associated with the Transaction or if the
Transaction is not completed, including the possibility that a change of control terminating the Post-Transaction RIF Agreements may
occur at any time after the Transaction in the event of, among others things, (1) a default under the Facilities by the certain direct or
indirect subsidiaries of Emerald Acquisition (the “Borrowers”) and the Guarantors, including RIMCo, or (2) exits from the investments
made by the TA Alternative Investment Vehicles and/or the Reverence Capital Entities. Moreover, the Board considered that, although
TA Associates and Reverence Capital believe, based on the historical operating profits of RIMCo and the other Transferred Subsidiaries,
that the “free” cash flows of RIMCo and the other Transferred Subsidiaries will be sufficient for the Borrowers and the Guarantors to
meet their debt service obligations under the Facilities with no diminution in the nature, scope, or quality of services provided to the
Funds, the operating profits of RIMCo and the other Transferred Subsidiaries may be adversely affected by various factors, including
general economic, market and business conditions and developments specific to the business activities and operations of RIMCo and the
other Transferred Subsidiaries. Therefore, there is no assurance that the historical operating profits of RIMCo and the other Transferred
Subsidiaries will be sustained following completion of the Transaction at levels sufficient for the Borrowers and the Guarantors to meet
their obligations in respect of the Facilities and to do so without diminution in the nature, scope and quality of services provided by
RIMCo and its affiliates to the Funds. Consequently, the Board identified as the principal factor in determining whether to approve the
Post-Transaction RIF Agreements the immediate need to provide for uninterrupted investment advisory and other services required for
the operations of the Funds following the automatic termination of the Existing RIF Agreements upon completion of the Transaction.
The Board also noted LSEG’s stated intention to dispose of its interests in FRC’s investment management business and the uncertainty
that if the Board did not approve the Post-Transaction RIF Agreements, or the Transaction is not completed, another transaction could
be arranged by LSEG, or if arranged, could entail terms and conditions more unfavorable than the Transaction. No other factors or
single factor reviewed by the Board was identified as a principal factor in determining whether or not to approve the Post-Transaction
RIF Agreements and each Board member may have attributed different weights to the various factors. The Trustees evaluated all
information available to them on a Fund-by-Fund basis and their determinations were made separately in respect of each Fund.
Following the Post-Transaction RIF Agreement Evaluation Meeting, the Independent Trustees were advised of two changes in RIMCo’s
management, including a change in the Funds’ leadership. On January 13, 2016, RIMCo publicly announced that Vernon Barback
had been appointed President of Russell Investments. With respect to the management change affecting the Funds’ leadership, RIMCo
publicly announced on February 9, 2016 that Sandra Cavanaugh, Chief Executive Officer of the Funds and a member of the Funds’
Board, would retire at the end of June 2016. The Independent Trustees were not aware of, and therefore did not consider, these changes
in their evaluation of the Post-Transaction RIMCo Agreement. On January 14, 2016, the Independent Trustees of the Funds met by
conference call with members of RIMCo’s executive management and received information regarding these changes. On January 18,
2016, the Independent Trustees met privately by conference call with Independent Counsel to discuss the management changes, and
following that meeting, the Independent Trustees submitted a list of questions regarding the management changes and their impact
on the Funds. The Board again met with representatives of RIMCo’s executive management by conference call on January 28, 2016
to review responses to its questions. Following this review, the Independent Trustees continued the conference call meeting, after
excusing RIMCo’s representatives, to discuss in executive session with their Independent Counsel the foregoing changes in RIMCo
management. Following discussion, the Independent Trustees determined that, while the changes, particularly with respect to Ms.
Cavanaugh, would have been relevant to its evaluation of the Post-Transaction RIMCo Agreement, they would not have affected the
decision to approve the Post-Transaction RIMCo Agreement.
112 Basis for Approval of Investment Advisory Contracts
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Shareholder Requests for Additional Information — December 31, 2015 (Unaudited)
A complete unaudited schedule of investments is made available generally no later than 60 days after the end of the first and third
quarters of each fiscal year. These reports are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354, (ii)
on the Securities and Exchange Commission’s website at www.sec.gov, and (iii) at the Securities and Exchange Commission’s public
reference room.
The Board has delegated to RIMCo, as RIF’s investment adviser, the primary responsibility for monitoring, evaluating and voting
proxies solicited by or with respect to issuers of securities in which assets of the Funds and Underlying Funds may be invested. RIMCo
has established a proxy voting committee and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting
guidelines (“Guidelines”). The Funds maintain a Portfolio Holdings Disclosure Policy that governs the timing and circumstances of
disclosure to shareholders and third parties of information regarding the portfolio investments held by the Funds. A description of the
P&P, Guidelines, Portfolio Holdings Disclosure Policy and additional information about Fund Trustees are contained in the Funds’
Statement of Additional Information (“SAI”). The SAI and information regarding how the Funds and Underlying Funds voted proxies
relating to portfolio securities during the most recent 12-month period ended June 30, 2015 are available (i) free of charge, upon
request, by calling the Funds at (800) 787-7354, and (ii) on the Securities and Exchange Commission’s website at www.sec.gov.
If possible, depending on contract owner registration and address information, and unless you have otherwise opted out, only one copy
of the RIF prospectus and each annual and semi-annual report will be sent to contract owners at the same address. If you would like
to receive a separate copy of these documents, please contact your Insurance Company. If you currently receive multiple copies of the
prospectus, annual report and semi-annual report and would like to request to receive a single copy of these documents in the future,
please contact your insurance company.
Some insurance companies may offer electronic delivery of the Funds’ prospectuses and annual and semi-annual reports. Please
contact your insurance company for further details.
Financial statements of the Underlying Funds can be obtained at no charge by calling the Funds at (800)787-7354.
Shareholder Requests for Additional Information 113
Russell Investment Funds
LifePoints ® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers — December 31, 2015
(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 41 funds, Russell Investment Funds (“RIF”), which has 9 funds. Each of the trustees
is a trustee of RIC and RIF. The first table provides information for the interested trustees. The second table provides information for the
independent trustees. The third table provides information for the Trustee Emeritus. The fourth table provides information for the officers.
Furthermore, each Trustee possesses the following specific attributes: Mr. Alston has business, financial and investment experience
as a senior executive of an international real estate firm and is trained as a lawyer; Ms. Blake has had experience as a certified public
accountant and has had experience as a member of boards of directors/trustees of other investment companies; Ms. Burgermeister has had
experience as a certified public accountant and as a member of boards of directors/trustees of other investment companies; Mr. Connealy
has had experience with other investment companies and their investment advisers first as a partner in the investment management
practice of PricewaterhouseCoopers LLP and, subsequently, as the senior financial executive of two other investment organizations
sponsoring and managing investment companies, and has been determined by the Board to be an audit committee financial expert; Ms.
Krysty has had business, financial and investment experience as the founder and senior executive of a registered investment adviser
focusing on high net worth individuals as well as a certified public accountant and a member of the boards of other corporations and
non-profit organizations; Mr. Tennison has had business, financial and investment experience as a senior executive of a corporation with
international activities and was trained as an accountant; and Mr. Thompson has had experience in business, governance, investment
and financial reporting matters as a senior executive of an organization sponsoring and managing other investment companies, and,
subsequently, has served as a board member of other investment companies. Ms. Cavanaugh has had experience with other financial
services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior
officer and/or director of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh
is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office* | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INTERESTED TRUSTEE | |||||
# Sandra Cavanaugh, | President and Chief | Until successor | • President and CEO RIC and RIF | 50 | • Trustee, |
Born May 10, 1954 | Executive Officer | is chosen and | • Chairman of the Board, Co-President | Russell | |
1301 Second Avenue, | since 2010 | qualified by | and CEO, Russell Financial Services, | Exchange | |
18th Floor, Seattle, WA | Trustee since 2010 | Trustees | Inc. (“RFS”) | Traded Funds | |
98101 | Appointed until | • Chairman of the Board, President | Trust | ||
successor is | and CEO, Russell Fund Services | ||||
duly elected and | Company (“RFSC”) | ||||
qualified | • Director, RIMCo | ||||
• Chairman of the Board, President and | |||||
CEO Russell Insurance Agency, Inc. | |||||
(“RIA”) (insurance agency) |
* | Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75. |
# | Ms. Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore classified as an Interested Trustee. Russell Investments announced |
on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and help with a smooth transition as | |
Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as long as the rest of 2016 to assist | |
with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. Cavanaugh may resign as a | |
trustee of the Trust. This leadership change is not expected to have an adverse impact on any of the Funds. |
114 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES | |||||
Thaddas L. Alston, | Trustee since 2006 | Appointed until | Senior Vice President, Larco | 50 | • Until October |
Born April 7, 1945 | successor is | Investments, Ltd. (real estate firm) | 2015, Trustee, | ||
1301 Second Avenue, | duly elected and | Russell | |||
18th Floor, Seattle, WA | qualified | Exchange | |||
98101 | Traded Funds | ||||
Trust |
Disclosure of Information about Fund Trustees and Officers 115
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
Kristianne Blake, | Trustee since 2000 | Appointed until | • Director and Chairman of the Audit | 50 | • Director, |
Born January 22, 1954 | Chairman since 2005 | successor is | Committee, Avista Corp (electric | Avista Corp | |
1301 Second Avenue, | duly elected and | utilities) | (electric | ||
18th Floor, Seattle, WA | qualified | • Regent, University of Washington | utilities) | ||
98101 | Approved | • President, Kristianne Gates Blake, | • Until June | ||
annually | P.S. (accounting services) | 30, 2014, | |||
• Until June 30, 2014, Director, Ecova | Director, | ||||
(total energy and sustainability | Ecova (total | ||||
management) | energy and | ||||
• Until December 31, 2013, Trustee | sustainability | ||||
and Chairman of the Operations | management) | ||||
Committee, Principal Investors Funds | • Until | ||||
and Principal Variable Contracts | December 31, | ||||
Funds (investment company) | 2013, Trustee, | ||||
• From April 2004 through December | Principal | ||||
2012, Director, Laird Norton Wealth | Investors | ||||
Management and Laird Norton Tyee | Funds | ||||
Trust (investment company) | (investment | ||||
company) | |||||
• Until | |||||
December 31, | |||||
2013, Trustee | |||||
Principal | |||||
Variable | |||||
Contracts | |||||
Funds | |||||
(investment | |||||
company) | |||||
• From April | |||||
2004 through | |||||
December | |||||
2012, | |||||
Director, Laird | |||||
Norton Wealth | |||||
Management | |||||
and Laird | |||||
Norton | |||||
Tyee Trust | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
116 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Cheryl Burgermeister, | Trustee since 2012 | Appointed until | • Retired | 50 | • Trustee and |
Born June 26, 1951 | successor is | • Trustee and Chairperson of Select | Chairperson of | ||
1301 Second Avenue, | duly elected and | Sector SPDR Funds (investment | Select Sector | ||
18th Floor, Seattle, WA | qualified | company) | SPDR Funds | ||
98101 | • Until December 31, 2014, | (investment | |||
Chairperson of Audit Committee, | company) | ||||
Select Sector SPDR Funds | • Trustee, ALPS | ||||
(investment company) | Series Trust | ||||
(investment | |||||
company) | |||||
• Until | |||||
December | |||||
31, 2014, | |||||
Chairperson | |||||
of Audit | |||||
Committee, | |||||
Select Sector | |||||
SPDR Funds | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust | |||||
Daniel P. Connealy, | Trustee since 2003 | Appointed until | • Retired | 50 | • Until October |
Born June 6, 1946 | Chairman of the | successor is | • June 2004 to June 2014, Senior Vice | 2015, Trustee, | |
1301 Second Avenue, | Audit Committee | duly elected and | President and Chief Financial Officer, | Russell | |
18th Floor, Seattle, WA | since 2015 | qualified | Waddell & Reed Financial, Inc. | Exchange | |
98101 | Appointed until | (investment company) | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified | |||||
Katherine W. Krysty, | Trustee since 2014 | Appointed until | • Retired | 50 | • Until October |
Born December 3, 1951 | successor is | • January 2011 through March 2013, | 2015, Trustee, | ||
1301 Second Avenue | duly elected and | President Emerita, Laird Norton | Russell | ||
18th Floor, Seattle, WA | qualified | Wealth Management (investment | Exchange | ||
98101 | company) | Traded Funds | |||
Trust |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
Disclosure of Information about Fund Trustees and Officers 117
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Raymond P. Tennison, Jr., | Trustee since 2000 | Appointed until | • Retired | 50 | • Until October |
Born December 21, 1955 | Chairman of | successor is | • From January 2008 to December | 2015, Trustee, | |
1301 Second Avenue | the Nominating | duly elected and | 2011, Vice Chairman of the Board, | Russell | |
18th Floor, Seattle, WA | and Governance | qualified | Simpson Investment Company (paper | Exchange | |
98101 | Committee since | Appointed until | and forest products) | Traded Funds | |
2007 | successor is | Trust | |||
duly elected and | |||||
qualified | |||||
Jack R. Thompson, | Trustee since 2005 | Appointed until | • Retired | 50 | • Until October |
Born March 21, 1949 | Chairman of | successor is | 2015, Trustee, | ||
1301 Second Avenue, | the Investment | duly elected and | Russell | ||
18th Floor, Seattle, WA | Committee since | qualified | Exchange | ||
98101 | 2015 | Appointed until | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified |
* Each Trustee is subject to mandatory retirement at age 72 through December 31, 2015 and effective January 1, 2016 the mandatory retirement age is 75.
118 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office | Past 5 Years | in Russell | Held by Trustee |
Time Served | Fund | During the | |||
Complex | Past 5 Years | ||||
Overseen | |||||
by Trustee | |||||
TRUSTEE EMERITUS | |||||
George F. Russell, Jr., | Trustee Emeritus and | Until resignation | • Director Emeritus, Frank Russell | 50 | None |
Born July 3, 1932 | Chairman Emeritus | or removal | Company (investment consultant to | ||
1301 Second Avenue, | since 1999 | institutional investors (“FRC”)) and | |||
18th Floor, Seattle, WA | RIMCo | ||||
98101 | • 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) |
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS | |||
Cheryl Wichers, | Chief Compliance | Until removed | • Chief Compliance Officer, RIC and RIF |
Born December 16, 1966 | Officer since 2005 | by Independent | • Chief Compliance Officer, RFSC and U.S. One Inc. |
1301 Second Avenue | Trustees | • 2005 to 2011 Chief Compliance Officer, RIMCo | |
18th Floor, Seattle, WA | |||
98101 | |||
*Sandra Cavanaugh, | President and Chief | Until successor | • CEO, U.S. Private Client Services, Russell Investments |
Born May 10, 1954 | Executive Officer | is chosen and | • President and CEO, RIC and RIF |
1301 Second Avenue, | since 2010 | qualified by | • Chairman of the Board, Co-President and CEO, RFS |
18th Floor, Seattle, WA | Trustees | • Chairman of the Board, President and CEO, RFSC | |
98101 | • Director, RIMCo | ||
• Chairman of the Board, President and CEO, RIA | |||
Mark E. Swanson, | Treasurer and Chief | Until successor | • Treasurer, Chief Accounting Officer and CFO, RIC and RIF |
Born November 26, 1963 | Accounting Officer | is chosen and | • Director, RIMCo, RFSC, Russell Trust Company (“RTC”) and RFS |
1301 Second Avenue | since 1998 | qualified by | • Global Head of Fund Services, Russell Investments |
18th Floor, Seattle, WA | Trustees | • October 2011 to December 2013, Head of North America Operations | |
98101 | Russell Investments | ||
• May 2009 to October 2011, Global Head of Fund Operations, Russell | |||
Investments |
Disclosure of Information about Fund Trustees and Officers 119
Russell Investment Funds
LifePoints ® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued —
December 31, 2015 (Unaudited)
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS (continued) | |||
Jeffrey T. Hussey, | Chief Investment | Until removed by | • Global Chief Investment Officer, Russell Investments |
Born May 2, 1969 | Officer since 2013 | Trustees | • Chief Investment Officer, RIC and RIF |
1301 Second Avenue, | • Chairman of the Board, President and CEO, RIMCo | ||
18th Floor, Seattle WA | • Director, RTC, RIS and Russell Investments Delaware, Inc. | ||
98101 | • Board of Managers, Russell Institutional Funds Management, Inc. | ||
• 2003 to 2013 Chief Investment Officer, Fixed Income, Russell | |||
Investments | |||
Mary Beth R. Albaneze, | Secretary since 2010 | Until successor | • Associate General Counsel, Russell Investments |
Born April 25, 1969 | is chosen and | • Secretary, RIMCo, RFSC and RFS | |
1301 Second Avenue, | qualified by | • Secretary and Chief Legal Officer, RIC and RIF | |
18th Floor, Seattle, WA | Trustees | • Assistant Secretary, RFS, RIA and U.S. One Inc. | |
98101 |
* | Russell Investments announced on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and |
help with a smooth transition as Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as | |
long as the rest of 2016 to assist with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. | |
Cavanaugh may resign as a trustee of the Trust, This leadership change is not expected to have an adverse impact on any of the Funds. |
120 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Adviser and Service Providers — December 31, 2015
Interested Trustee | Administrator, Transfer and Dividend Disbursing |
Sandra Cavanaugh | Agent |
Independent Trustees | Russell Fund Services Company |
Thaddas L. Alston | 1301 Second Avenue |
Kristianne Blake | Seattle, WA 98101 |
Cheryl Burgermeister | Custodian |
Daniel P. Connealy | State Street Bank and Trust Company |
Katherine W. Krysty | 1 Heritage Drive |
Raymond P. Tennison, Jr. | North Quincy, MA 021171 |
Jack R. Thompson | Office of Shareholder Inquiries |
Trustee Emeritus | 1301 Second Avenue |
George F. Russell, Jr. | Seattle, WA 98101 |
Officers | (800) 787-7354 |
Sandra Cavanaugh, President and Chief Executive Officer | Legal Counsel |
Cheryl Wichers, Chief Compliance Officer | Dechert LLP |
Jeffrey T. Hussey, Chief Investment Officer | One International Place, 40th Floor |
Mark E. Swanson, Treasurer and Chief Accounting Officer | 100 Oliver Street |
Mary Beth R. Albaneze, Secretary | Boston, MA 02110 |
Adviser | Distributor |
Russell Investment Management Company | Russell Financial Services, Inc. |
1301 Second Avenue | 1301 Second Avenue |
Seattle, WA 98101 | Seattle, WA 98101 |
Independent Registered Public Accounting Firm | |
PricewaterhouseCoopers LLP | |
1420 5th Avenue, Suite 2800 | |
Seattle, WA 98101 |
This report is prepared from the books and records of the Funds and is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus. Nothing herein contained
is to be considered an offer of sale or a solicitation of an offer to buy shares of Russell Investment Funds. Such offering is made only by
Prospectus, which includes details as to offering price and other material information.
Adviser and Service Providers 121
Item 2. Code of Ethics. [Annual Report Only]
(a) As of the end of the period covered by the report, the registrant has adopted a code of ethics
that applies to the registrant's principal executive officer and principal financial officer
(“Code”).
(b) That Code comprises written standards that are reasonably designed to deter wrongdoing and
to promote:
1) honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
2) full, fair, accurate, timely and understandable disclosure in reports and documents
that a registrant files with, or submits to, the Securities and Exchange Commission
(“SEC”) and in other public communications made by each Mutual Fund;
3) compliance with applicable governmental laws, rules and regulations;
4) the prompt internal reporting of violations of the Code to an appropriate person or
persons identified in the Code; and
5) accountability for adherence to the Code.
(c) The Code was restated as of August 2015; the restatement did not involve any material
change.
(d) As of the end of the period covered by the report, there have been no waivers granted from a
provision of the Code that applies to the registrant’s principal executive officer and principal
financial officer.
(e) Not applicable.
(f) The registrant has filed with the SEC, pursuant to Item 12(a)(1), a copy of the Code that
applies to the registrant’s principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions, as an exhibit to its
annual report on this Form N-CSR.
Item 3. Audit Committee Financial Expert. [Annual Report Only]
Registrant's board of trustees has determined that the Registrant has at least one audit committee
financial expert serving on its audit committee. Daniel P. Connealy has been determined to be
the Audit Committee Financial Expert and is also determined to be “independent” for purposes
of Item 3, paragraph (a)(2)(i) and (ii) of Form N-CSR
Item 4. Principal Accountant Fees and Services. [Annual Report Only]
Audit Fees
(a) The aggregate fees billed for each of the last two fiscal years for professional services
rendered by the principal accountant for the audit of the registrant’s annual financial statements
or services that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years were as follows:
2014 | $ | 226,456 |
2015 | $ | 251,533 |
Audit-Related Fees
(b) The aggregate fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the performance of the audit of
the registrant’s financial statements and are not reported under paragraph (a) of this Item and the
nature of the services comprising those fees were as follows:
Fees | Nature of Services | ||
2014 | $ | 80,000 | Tax auditing services |
2015 | $ | 89,567 | Tax auditing services |
Tax Fees
(c) The aggregate fees billed in each of the last two fiscal years for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax planning and the
nature of the services comprising the fees were as follows:
Fees | Nature of Services | ||
2014 | $ | 67,400 | Tax filing services |
2015 | $ | 75,488 | Tax filing services |
All Other Fees
(d) The aggregate fees billed in each of the last two fiscal years for products and services
provided by the principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item and the nature of the services comprising those fees were as follows:
Fees | Nature of Services | ||
2014 | $ | 0 | |
2015 | $ | 0 |
(e) (1) Registrant’s audit committee has adopted the following pre-approval policies and
procedures for certain services provided by Registrant’s accountants:
Russell Investment Company
Russell Investment Funds
Audit and Non-Audit Services Pre-Approval Policy
Effective Date: August 25, 2015
I. Statement of Purpose.
This Policy has been adopted by the joint Audit Committee (the “Audit Committee”) of Russell
Investment Company (“RIC”) and Russell Investment Funds (“RIF”) to apply to any and all
engagements of the independent auditor to RIC and RIF, respectively, for audit, non-audit, tax or
other services. The term “Fund” shall collectively refer to each series of RIC and RIF. The
term “Investment Adviser” shall refer to the Funds’ advisor, Russell Investment Management
Company (“RIMCo”). This Policy does not delegate to management the responsibilities set forth
herein for the pre-approval of services performed by the Funds’ independent auditor.
II. Statement of Principles.
Under the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee of the Funds’ Board of
Trustees (the “Audit Committee”) is charged with responsibility for the appointment,
compensation and oversight of the work of the independent auditor for the Funds. As part of
these responsibilities, the Audit Committee is required to pre-approve the audit services and
permissible non-audit services such as audit-related, tax and other services (“non-audit services”)
performed by the independent auditor for the Funds to assure that the independence of the
auditor is not in any way compromised or impaired. In determining whether an auditor is
independent in light of the services it provides to a Fund, there are three guiding principles under
the Act that must be considered. In general, the independence of the auditor to the Funds would
be deemed impaired if the auditor provides a service whereby it:
· Functions in the role of management of the Funds, the adviser of the Funds or any
other affiliate* of the Funds;
· Is in the position of auditing its own work; or
· Serves in an advocacy role for the Funds, the adviser of the Funds or any other
affiliate of the Funds.
Accordingly, it is the Funds’ policy that the independent auditor for the Funds must not be
engaged to perform any service that contravenes any of the three guidelines set forth above, or
which in any way could be deemed to impair or compromise the independence of the auditor for
* For purposes of this Policy, an affiliate of the Funds is defined as the Funds’ investment adviser (but not a sub-
adviser whose role is primarily portfolio management and whose activities are overseen by the principal investment
adviser), and any entity controlling, controlled by, or under common control with the investment adviser that
provides ongoing services to the Fund.
the Funds. This Policy is designed to accomplish those requirements and will henceforth be
applied to all engagements by the Funds of their independent auditor, whether for audit, audit-
related, tax, or other non-audit services.
Rules adopted by the United States Securities and Exchange Commission (the “SEC”) establish
two distinct approaches to the pre-approval of services by the Audit Committee. The proposed
services either may receive general pre-approval through adoption by the Audit Committee of a
list of authorized services for the fund, together with a budget of expected costs for those
services (“general pre-approval”), or specific pre-approval by the Audit Committee of all
services provided to the fund on a case-by-case basis (“specific pre-approval”).
The Funds’ Audit Committee believes that the combination of these two approaches reflected in
this Policy will result in an effective and efficient procedure for the pre-approval of permissible
services performed by the Funds’ independent auditor. The Funds’ Audit and Non-Audit Pre-
Approved Services Schedule lists the audit, audit-related, tax and other services that have the
general pre-approval of the Audit Committee. As set forth in this Policy, unless a particular
service has received general pre-approval, those services will require specific pre-approval by
the Audit Committee before any such services can be provided by the independent auditor. Any
proposed service to the Funds that exceeds the pre-approved budget for those services will also
require specific pre-approval by the appropriate Audit Committee.
In assessing whether a particular audit or non-audit service should be approved, the Audit
Committee will take into account the ratio between the total amounts paid for audit, audit-
related, tax and other services, based on historical patterns, with a view toward assuring that the
level of fees paid for non-audit services as they relate to the fees paid for audit services does not
compromise or impair the independence of the auditor. The Audit Committee will review the list
of general pre-approved services, including the pre-approved budget for those services, at least
annually and more frequently if deemed appropriate by the Audit Committee, and may
implement changes thereto from time to time.
III. Delegation.
As provided in the Act and in the SEC’s rules, the Audit Committee from time to time may
delegate either general or specific pre-approval authority to one or more of its members. Any
member to whom such authority is delegated must report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
IV. Audit Services.
The annual audit services engagement terms and fees for the independent auditor for the Funds
require specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the independent
auditor in order to be able to form an opinion on the financial statements for the Funds for that
year. These other procedures include reviews of information systems, procedural reviews and
testing performed in order to understand and rely on the Funds’ systems of internal control, and
consultations relating to the audit. Audit services also include the attestation engagement for the
independent auditor’s report on the report from management on financial reporting internal
controls. The Audit Committee will review the audit services engagement as necessary or
appropriate in the sole judgment of the Audit Committee.
In addition to the pre-approval by the Audit Committee of the annual engagement of the
independent auditor to perform audit services, the Audit Committee may grant general pre-
approval to other audit services, which are those services that only the independent auditor
reasonably can provide. These services are generally related to the issuance of an audit opinion,
and may include statutory audits and services associated with the Funds’ SEC registration
statement on Form N-1A, periodic reports and documents filed with or information requested by
the SEC or other regulatory or self-regulatory organizations, or other documents issued in
connection with the Funds’ securities offerings.
The Audit Committee has pre-approved the audit services set forth in Schedule A of the Audit
and Non-Audit Pre-Approved Services Schedule. All other audit services not listed in Schedule
A of the Audit and Non-Audit Pre-Approved Services Schedule must be specifically pre-
approved by the Audit Committee or its delegate.
V. Audit-Related Services.
Audit-related services are assurance and related services that are reasonably related to the
performance of the audit or review of the financial statements for the Funds, or the separate
financial statements for a series of the Funds that are traditionally performed by the independent
auditor. Because the Audit Committee believes that the provision of audit-related services does
not compromise or impair the independence of the auditor and is consistent with the SEC’s rules
on auditor independence, the Audit Committee may grant pre-approval to audit related services.
“Audit related services” include, among others, accounting consultations related to accounting,
financial reporting or disclosure matters not classified as “audit services;” assistance with
understanding and implementing new accounting and financial reporting or disclosure matters
not classified as “audit services;” assistance with understanding and implementing new
accounting and financial reporting guidance from rulemaking authorities; agreed upon or
expanded audit procedures related to accounting and/or billing records required to respond to or
comply with financial, accounting or regulatory reporting matters; and assistance with internal
reporting requirements, including those under Form N-SAR and Form N-CSR.
The Audit Committee has pre-approved the audit-related services set forth in Schedule B of the
Audit and Non-Audit Pre-Approved Services Schedule. All other audit-related services not
listed in Schedule B of the Audit and Non-Audit Pre-Approved Services Schedule must be
specifically pre-approved by the Audit Committee or its delegate.
VI. Tax Services.
The Audit Committee believes that the independent auditor can provide tax services to the
Funds, such as tax compliance, tax planning and tax advice, without impairing the auditor’s
independence and the SEC has stated that the independent auditor may provide such services.
Consequently, the Audit Committee believes that it may grant general pre-approval to those tax
services that have historically been provided by the auditor, that the Audit Committee has
reviewed and believes would not impair the independence of the auditor, and that are consistent
with the SEC’s rules on auditor independence. However, the Audit Committee will not permit
the retention of the independent auditor to provide tax advice in connection with any transaction
recommended by the independent auditor, the sole business purpose of which may be tax
avoidance and the tax treatment of which may not be supported by the United States Internal
Revenue Code and related regulations or the applicable tax statutes and regulations that apply to
the Funds’ investments outside the United States. The Audit Committee will consult with the
Treasurer of the Funds or outside counsel to determine that the Funds’ tax planning and reporting
positions are consistent with this policy.
The Audit Committee has pre-approved the tax services set forth in Schedule C of the Audit and
Non-Audit Pre-Approved Services Schedule. All other tax services not listed in Schedule C of
the Audit and Non-Audit Pre-Approved Services Schedule must be specifically pre-approved by
the Audit Committee or its delegate.
VII. All Other Services.
The Audit Committee believes, based on the SEC’s rules prohibiting the independent auditor
from providing specific non-audit services, that other types of non-audit services are permitted.
Accordingly, the Audit Committee believes that it may grant general pre-approval to those
permissible non-audit services classified as “all other” services that the Audit Committee
believes are routine and recurring services, would not impair or compromise the independence of
the auditor and are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the permissible “all other services” set forth in Schedule
D of the Audit and Non-Audit Pre-Approved Services Schedule. Permissible “all other services”
not listed in Schedule D of the Audit and Non-Audit Pre-Approved Services Schedule must be
specifically pre-approved by the Audit Committee or its delegate.
A list of the SEC’s prohibited non-audit services are as follows:
· Bookkeeping or other services relating to the accounting records or financial statements
of the Funds
· Financial information system design and implementation
· Appraisal or valuation services, fairness opinions or contribution-in-kind reports
· Actuarial services
· Internal audit outsourcing services
· Management functions
· Human resources services
· Broker-dealer, investment adviser or investment banking services
· Legal services unrelated to the audit
· Expert services unrelated to the audit
The SEC’s rules and relevant official interpretations and guidance should be consulted to
determine the scope of these prohibited services and the applicability of any exceptions to certain
of the prohibitions. Under no circumstance may an executive, manager or associate of the
Funds, or the Investment Adviser, authorize the independent auditor for the Funds to provide
prohibited non-audit services.
VIII. De Minimis Waiver.
In accordance with the Act and SEC regulations, notwithstanding anything in this Policy to the
contrary, the pre-approval requirements of this Policy are waived with respect to the provision of
non-audit services that are permissible for an independent auditor to perform, provided:
(a) The aggregate amount of all such services provided constitutes no more than five
percent of the total amount of fees paid by RIC or RIF, as applicable, to the
independent auditor during the fiscal year in which the services were provided;
(b) Such services were not recognized by the Funds at the time of the engagement to
be non-audit services requiring pre-approval by the Audit Committee or its
delegate; and
(c) Such services are promptly brought to the attention of the Audit Committee and
approved by the Audit Committee or its delegate prior to the completion of the
audit, pursuant to the pre-approval provisions of this Policy.
In connection with the approval of any non-audit service pursuant to this de minimis exception, a
record shall be made indicating that each of the conditions for this exception has been satisfied.
IX. Pre-Approval Fee Levels or Budgeted Amounts.
Pre-approved fee levels or budgeted amounts for all services to be provided by the independent
auditor will be established annually by the Audit Committee and shall be subject to periodic
subsequent review during the year if deemed appropriate by the Audit Committee (separate
amounts may be specified for the Funds and for other affiliates in the investment company
complex subject to pre-approval). Any proposed services exceeding these levels or amounts will
require specific pre-approval by the Audit Committee. The Audit Committee will be mindful of
the overall relationship of fees for audit and non-audit services in determining whether to pre-
approve any such services. For each fiscal year, the Audit Committee may determine the
appropriateness of the ratio between the total amount of fees for audit, audit-related, and tax
services for the Funds (including any audit-related or tax services fees for affiliates subject to
pre-approval), and the total amount of fees for certain permissible non-audit services classified as
“all other services” for the Funds (including any such services for affiliates subject to pre-
approval by the Audit Committee or its delegate).
X. Procedures.
All requests or applications for services to be provided by the independent auditor that do not
require specific pre-approval by the Audit Committee will be submitted to the “RIC/RIF
Clearance Committee” (the “Clearance Committee”) (which shall be comprised of not less than
three members, including the Treasurer of the Funds who shall serve as its Chairperson) and
must include a detailed description of the services to be rendered and the estimated costs of those
services. The Clearance Committee will determine whether such services are included within the
list of services that have received general pre-approval by the Audit Committee. The Audit
Committee will be informed not less frequently than quarterly by the Chairperson of the
Clearance Committee of any such services rendered by the independent auditor for the Funds and
the fees paid to the independent auditors for such services.
Requests or applications to provide services that require specific pre-approval by the Audit
Committee will be submitted to the Audit Committee by both the independent auditor and the
Clearance Committee and must include a joint certification by the engagement partner of the
independent auditor and the Chairperson of the Clearing Committee that, in their view, the
request or application does not involve a prohibited non-audit service and is consistent with the
SEC’s rules governing auditor independence.
The Internal Audit Department of Frank Russell Company, the parent company of RIMCo, and
the officers of RIC and RIF will report to the Chairman of the Audit Committee any breach of
this Policy that comes to the attention of the Internal Audit Department of Frank Russell
Company or an officer of RIC or RIF.
XI. Additional Requirements.
The Audit Committee has determined to take additional measures on an annual basis to meet its
responsibility to oversee the work performed by the independent auditor and to assure the
independent auditor’s continuing independence from the Funds and their affiliates, including
Frank Russell Company. Such efforts will include, but not be limited to, reviewing a written
annual statement from the independent auditor delineating all relationships between the
independent auditor and RIC, RIF and Frank Russell Company and their subsidiaries and
affiliates, consistent with the Public Company Accounting Oversight Board’s Independence
Standards Board Standard No. 1, and discussing with the independent auditor its methods and
procedures for ensuring its independence.
(e) (2) The percentage of services described in each of paragraphs (b) through (d) of this Item
that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X is as follows:
Audit Fees | 0 | % |
Audit-Related Fees | 0 | % |
Tax Fees | 0 | % |
All Other Fees | 0 | % |
(f) For services, 50 percent or more of which were pre-approved, the percentage of hours
expended on the principal accountant’s engagement to audit the registrant’s financial statements
for the most recent fiscal year that were attributed to work performed by persons other than the
principal accountant’s full-time, permanent employees was 0%.
(g) The aggregate non-audit fees billed by registrant’s accountant for services rendered to the
registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each of the last two fiscal years of the
registrant were as follows:
2014 | $ | 0 |
2015 | $ | 0 |
(h) The registrant’s audit committee of the board of trustees has considered whether the
provision of nonaudit services that were rendered to the registrant’s investment adviser (not
including any subadviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants. [Not Applicable]
Item 6. [Schedules of Investments are included as part of the Report to Shareholders filed
under Item 1 of this form]
Items 7-9. [Not Applicable]
Item 10. Submission of Matters to a Vote of Security Holders
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant’s Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures
(a) Registrant's principal executive officer and principal financial officer have concluded
that Registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under
the Investment Company Act of 1940 (the “Act”)) are effective, based on their evaluation
of these controls and procedures as of a date within 90 days of the date this report is filed
with the Securities and Exchange Commission.
(b) There were no significant changes in Registrant's internal control over financial
reporting that occurred during the period covered by this report that has materially
affected or is likely to materially affect Registrant's internal control over financial
reporting.
Item 12. Exhibit List
(a) Registrant’s code of ethics described in Item 2.
(b) Certification for principal executive officer of Registrant as required by Rule 30a-2(a)
under the Act and certification for principal financial officer of Registrant as required by
Rule 30a-2(a) under the Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Russell Investment Funds
By: | /s/ Sandra Cavanaugh |
Sandra Cavanaugh | |
President and Chief Executive Officer, Russell Investment Funds |
Date: February 25, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By: | /s/ Sandra Cavanaugh |
Sandra Cavanaugh | |
President and Chief Executive Officer, Russell Investment Funds |
Date: February 25, 2016
By: | /s/ Mark E. Swanson |
Mark E. Swanson | |
Treasurer and Chief Accounting Officer and Chief Financial Officer, Russell Investment | |
Funds |
Date: February 25, 2016