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Russell Investment Funds

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

 

Investment Company Act file number: 811-05371

 

 

Russell Investment Funds

(Exact name of registrant as specified in charter)

 

909 A Street, Tacoma Washington 98402

(Address of principal executive offices) (Zip code)

 

Gregory J. Lyons, Assistant Secretary

Russell Investment Funds

909 A Street

Tacoma, Washington 98402

253-439-2406

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: 253-572-9500

 

Date of fiscal year end: December 31

 

Date of reporting period: January 1, 2007 to December 31, 2007


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Item 1.Reports to Stockholders


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LOGO

 

2007 ANNUAL REPORT

 

 

Russell Investment Funds

 

 

DECEMBER 31, 2007

FUND

Multi-Style Equity Fund

Aggressive Equity Fund

Non-U.S. Fund

Real Estate Securities Fund

Core Bond Fund

 

LOGO


Table of Contents

 

 

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.


Table of Contents

 

Russell Investment Funds

Annual Report

December 31, 2007

Table of Contents

 

   Page
To Our Shareholders  3
Market Summary  4
Multi-Style Equity Fund  10
Aggressive Equity Fund  20
Non-U.S. Fund  36
Real Estate Securities Fund  54
Core Bond Fund  62
Notes to Schedules of Investments  91
Statements of Assets and Liabilities  92
Statements of Operations  94
Statements of Changes in Net Assets  96
Financial Highlights  98
Notes to Financial Highlights  100
Notes to Financial Statements  101
Report of Independent Registered Public Accounting Firm  114
Tax Information  115
Basis for Approval of Investment Advisory Contracts  116
Shareholder Requests for Additional Information  120
Disclosure of Information about Fund Directors  121
Matter Submitted to a Vote of Shareholder  125
Adviser, Money Managers and Service Providers  126


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Russell Investment Funds

Copyright © Russell Investment Group 2008. All rights reserved.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.

Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.

Securities distributed through Russell Fund Distributors, Inc. member Financial Industry Regulatory Authority, part of Russell Investment Group.

Russell Investment Group and Standard & Poor’s Corporation are the owners of the trademarks, service marks, and copyrights related to their respective indexes. Index performance is not indicative of the performance of any specific investment. Indexes are not managed and may not be invested in directly.

Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.


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To Our Shareholders

Thank you for taking the time to review Russell Investment Funds’ 2007 Annual Report. The portfolio management discussions and fund-specific details will give you a deeper understanding of fund performance for the fiscal year ended December 31, 2007.

Every day, we strive to improve financial security for people and earn the continued support of our investors.

Our decades of experience evaluating global markets — and the people who make investment decisions in them — extends through numerous cycles, trends and turnarounds. It’s a perspective that allows us to deliver you long-term investment strategies.

Our dedicated money manager research analysts and portfolio managers perform the vital work to select some of the world’s best managers for the funds. This deliberate combination of investment managers is intended to help provide more consistent returns through all kinds of market environments.

We appreciate your continued support.

Regards,

LOGO

Greg Stark

Chief Executive Officer, Chairman and President

Russell Investment Management Company

 

To Our Shareholders 3


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Russell Investment Funds

Market Summary as of December 31, 2007 (Unaudited)

U.S. Equity Markets

For the fiscal year ending December 31, 2007, US equity markets were positive, with the broad market Russell 3000® Index returning 5.1%. Stocks benefited from increased merger and acquisition activity during the first half of the year, and from surprisingly strong corporate profits. For the fiscal year, the growth rates of gross domestic product and corporate profits remained strong but decelerated toward year end. After almost four years of double-digit profit growth, earnings growth fell to single digit levels.

The housing slowdown that began in the summer of 2006 continued through this fiscal year, and was further impacted by rising defaults rates in subprime loans. At the same time, there was significant weakness in the US dollar, as it depreciated against all major currencies. In the fiscal year, The Federal Reserve Board lowered the federal funds rate three times, the first such cuts in four years, citing the slowing pace of economic expansion and the intensification of the housing correction as the reason behind the cuts. The period also saw significantly higher commodity prices across the board due in part to significant global demand from developing nations.

Although the domestic economy was decelerating, the U.S. equity market was buoyed by strong exports to faster growing developing, non-U.S. economies. With approximately 40% of U.S. corporation’s revenues derived from international customers, the declining U.S. dollar provided increased demand for U.S. products abroad.

In the wake of these powerful macroeconomic forces, the fiscal year was a transitional one marked by three distinct themes: Multinational companies with exposure to developing markets outpaced domestically-driven companies, growth companies fared better than their value counterparts and U.S. large capitalization stocks outperformed U.S. small capitalization stocks.

US companies with revenue streams that could benefit either directly or indirectly from the expanding global economy were rewarded over the fiscal year. The best performing sectors in the Russell 3000® Index were those that had some tie to the global markets — commodities, technology, and industrials. Agriculture and fertilizer stocks led the Russell 3000® Index due to increased global demand for food and an increase in corn production due to ethanol demand. Similarly, commodities related companies, especially copper, benefited from the construction boom in Asia and elsewhere. For the fiscal year, the other energy sector of the Russell 3000® Index returned 38.9%, the integrated oils sector returned 29.6%, and the materials and processing sector returned 26.0%.

The worst performing sectors in the Russell 3000® Index were those tied closely to domestic consumer spending and the housing and subprime markets, particularly mortgage lenders. The repercussions of the developments in the subprime lending market and the resulting housing slowdown caused homebuilders and building related industries to struggle as well. The financial services sector returned - -16.3% for the fiscal year and consumer discretionary sector returned -3.6%, both significantly trailing the Russell 3000® Index return of 5.1%.

 

4 Market Summary


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Russell Investment Funds

 

Reversing a trend that had prevailed for the last six years, growth stocks outperformed value stocks over the fiscal year. Growth and momentum factors were rewarded over the period, especially exposure to high price to book stocks and those with high historical growth rates. The Russell 1000® Growth Index returned 11.8% while the Russell 1000® Value Index returned -0.2%. A similar trend was seen in small cap markets, with the Russell 2000® Growth Index and Russell 2000® Value Index returning 7.1% and -9.8%, respectively.

In a turnaround from the previous fiscal year, large capitalization stocks outperformed small capitalization stocks. The Russell 1000® Index returned 5.8% for the fiscal year, while the Russell 2000® Index returned -1.6%. The larger in capitalization a company was, the better its returns were over the fiscal period. Microcap stocks struggled even more than the broader small cap Russell 2000® Index, with the Russell Microcap Index returning -8.0% for the fiscal year.

During the fiscal year, the market environment was largely favorable for active growth managers. The Lipper Large Cap Growth Funds Average outperformed the Russell 1000® Growth Index by 2.33%, as active managers held companies with strong momentum that were growing faster than the companies in the Russell 1000® Growth Index. The period was also favorable for active value managers who typically do not have as much exposure to the financial services sector as the Russell 1000® Value Index. The Lipper® Large Cap Value Funds Average outperformed the Russell 1000® Value Index by 2.28%. The market environment was more challenging for active core, or market-oriented, managers as the markets were driven by commodity based companies, not an area where market-oriented managers typically focus. The Lipper® Large Cap Core Funds Average barely trailed the Russell 1000® Index by 0.19% net of fees, but modestly outperformed on a gross of fee basis. The Lipper® Small Cap Core Funds Average slightly outpaced the Russell 2000® Index by 0.18%.

U.S. Real Estate Markets

For the fiscal year ending December 31, 2007, real estate investment trusts (REITs) generated a -15.69% return, as measured by the FTSE NAREIT Equity Index. As well as being well below the overall U.S. equity market return, this return represented a substantial pull-back from the prior year’s return of 35.06%. The low REIT return was also accompanied by exceptionally high volatility during the period. In January, REITs were up over 8%; in June and July, REITs lost over 16%. From August through October, REITs rallied with a gain of over 12% and, finally, during the last two months, REITs experienced a decline of over 13%.

Early in the fiscal year, the REIT market continued to be driven by the same factors that made the prior year so successful, mainly mergers and acquisitions by private investors acquiring public REITs at large premiums to their share prices. The most prominent privatization was Equity Office Property, the industry’s largest REIT, which became the prize in a bidding war between Blackstone, a private equity firm and Vornado, a public company. The REIT market peaked at all-time record levels in mid-February 2007. At that time, while property market fundamentals were improving and REIT earnings were solid, REIT pricing appeared to be well ahead of earnings expectations.

By June 2007, concerns arose among REIT investors that problems in the residential subprime mortgage loan market would be a precursor to similar issues in the commercial mortgage market. Additionally, the 0.6% increase in the 10 year treasury rate which occurred during that month caused investors to reassess the capitalization rates used to value real estate. These events combined to put substantial downward pressure on REIT share prices.

During the last few months of the year, REITs suffered along with the other financial sector stocks as sentiment turned decidedly negative for this broad market sector. Concerns about a weaker economy and tightened credit put upward pressure on dividend yields and contributed to higher capitalization rates and

 

Market Summary 5


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Russell Investment Funds

 

discount rates used to value underlying properties. Over the course of the year, the average dividend yield for companies in the FTSE NAREIT Equity Index increased sharply, from 3.69% to 4.91%. In the fourth quarter, the average dividend yield increased from 4.12% to 4.91%. REITs ended the year with dividend yields trading at a premium to the 10-year Treasuries, which ended the year at 4.03%.

Non-U.S. Equity Markets

Non-U.S. stocks gained 11.17% as measured by the MSCI EAFE Index for the fiscal year ending December 31, 2007. Non-U.S. stocks were boosted as the U.S. dollar weakened over the course of the fiscal year. In local currency, the MSCI EAFE Index rose 3.54% over the 12-month period.

The market continued to benefit from global growth, merger and acquisition activity and strong corporate earnings, especially in the first half of the year. In the second half of the year, the market withstood several periods of increased market volatility brought on by investors’ risk aversion relating to the potential negative spillover effects of the developments in the subprime lending market and housing slowdown in the U.S. Growth in emerging economies, like India and China, also had a positive impact on the strength of developed markets through their demand for goods and infrastructure development throughout the year.

Europe, as represented by the MSCI Europe Index, returned 13.86% over the fiscal year. Merger and acquisition-related gains combined with strong earnings drove European equities higher, with merger-and-acquisition activity in the year surpassing last year’s record pace. Across Europe, the best performing sectors were materials and utilities, up 38.95% and 33.00%, respectively. By country, Germany was a notable contributor to performance, benefiting from the strong performance of its automobiles industry. Elsewhere, MSCI United Kingdom Index lagged Continental Europe with a gain of 8.36%. The U.K. underperformed the rest of Europe due to weakness in its financials sector.

The MSCI Japan Index continued to lag other major non-U.S. markets in the fiscal year, with a return of -4.23% for the year. Investor concerns included weak economic data, lackluster earnings, and political turmoil. Elsewhere in the region, the MSCI Pacific ex-Japan Index gained 30.73% with strong gains in the Hong Kong, Singapore and Australian markets.

From a sector perspective, materials stocks had the best returns, up 31.75%, especially in the area of metals and mining, which was driven by industry consolidation and the continued upturn in commodities prices. Telecommunication services, up 28.21%, also benefited from strong earnings results. Health care and financials were the notable laggards, returning 0.55% and -1.82%, respectively, as measured by the MSCI EAFE health care and financials sector groupings.

The year also saw a change in market leadership from previous years, both in terms of style and market cap. Market leadership during the period favored growth stocks, with the MSCI EAFE Growth Index rising 16.45%, compared with 5.96% for the MSCI EAFE Value Index. Investors, in general, favored larger capitalization stocks over smaller capitalization stocks with the S&P/Citigroup PMI World ex-U.S. Index (an index of larger capitalization companies) up 14.17% in the period versus the S&P/Citigroup EMI World ex-U.S. (in index of smaller capitalization companies) up 7.32%.

Markets not represented in the MSCI EAFE Index, but commonly included in non-U.S. stock funds, offered significant opportunities for gains during the period. Emerging markets outperformed their developed counterparts, as the MSCI Emerging Markets Index rose 39.39%. Emerging markets countries benefited from continued strong economic growth, which benefited the materials and industrials sectors (both posting over 60% returns for the period.) Canadian stocks, as measured by the MSCI Canada Index, rose 29.57% during the period.

 

6 Market Summary


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Russell Investment Funds

 

U.S. Fixed Income Markets

The Lehman Brothers U.S. Aggregate Bond Index, a broad measure of U.S. investment grade fixed income securities, returned 6.97% for the year ended December 31, 2007. All major sub-sectors trailed U.S. Treasuries as the subprime crisis largely caused a widespread “flight to quality” throughout fixed income markets, where investors moved their capital away from riskier investments to the safest possible investments (in this case U.S. Treasuries).

There were two predominant factors that affected fixed income markets throughout fiscal 2007. The first, occurring during the third quarter of calendar 2007, took the form of a massive re-pricing of risk across many fixed income sectors, largely as a result of developments within the subprime lending market. The second was the Federal Reserve’s second and third quarter cuts to the target federal funds rate for overnight loans between banks, combined with the global liquidity plan the Fed orchestrated with other major central banks.

The Subprime Market

Subprime borrowers are often defined loosely as those borrowers with higher risk/higher interest rate loans because of lack of income documentation, poor credit history, and/or high loan-to-value ratios. The proliferation of the subprime mortgages – and securities firms packaging the subprime debt into AAA-rated bonds — helped fuel the U.S. housing boom over the past decade.

Many factors contributed to a surge in what some regard as looser mortgage lending practices in late 2005 and 2006. The strength of the real estate market created additional demand for mortgage-backed securities, including those that were backed by subprime loans. This increased the potential profit for originating subprime mortgages, loans which many banks had previously avoided making because of their higher default risk. Traditional requirements to obtaining a mortgage (such as proof of income, a down payment or a moderate loan-to-value ratio) were abandoned and adjustable rate loans with artificially low introductory rates and interest-only loans became more common. Record low interest rates and loosening lending standards assisted in pushing real estate prices to record highs and resulted in a record number of re-financings. A high level of liquidity in the market enabled investment banks to borrow more to produce more “structured” financial products. This included buying lower credit rated mortgage-backed securities and re-packaging them into higher rated collateralized debt obligations (CDOs), which were in turn re-introduced into the market.

Problems in the subprime market appeared during the fourth quarter of 2006 when borrower delinquencies reached a four-year high1. Adjustable rate mortgages reset to higher rates and some borrowers could not afford to make the new higher monthly payments. The housing market began to cool, with some borrowers now owing more than their homes were worth.

Concerns increased in May 2007 when the U.S. housing market continued to soften and, for the first time since 1991, national home prices posted a year-over-year decrease2. During 2007, the level of payment delinquencies and early defaults on mortgage loans to subprime borrowers increased significantly. Demand for CDOs evaporated and mortgage lenders no longer had easy access to capital to originate loans. Investors became more risk averse and a flight to quality ensued.

 

 

1

 

Bloomberg, U.S. Subprime Mortgage Delinquencies at 4-Year High, 13-Mar-07.

2

 

Bloomberg, Fed Sees Housing Dampening Growth Longer than Expected (per S&P/Case-Shiller study), 30-May-07.

 

Market Summary 7


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Russell Investment Funds

 

The subsequent fallout from developments in the subprime market has been widespread. The housing market, consumer confidence and companies in the financial services sector were negatively impacted. Access to capital became more constrained resulting in less liquidity in the markets and a “credit crunch” (an environment where investment capital is difficult to obtain). Some mortgage lenders declared bankruptcy or exited the business. Non-U.S. Treasury fixed income sectors generally performed poorly as investors moved out of those sectors and into U.S. Treasuries. The uncertainty surrounding the extent of the impact to the global economy led to market volatility and impacted equity and fixed income markets around the globe.

The Federal Reserve’s rate cuts and global liquidity plan

On two separate occasions during the third quarter of 2007, the Federal Reserve (“the Fed”) cut the target rate for overnight loans between banks. On September 18, the Fed lowered the target rate by 0.50% to 4.75%, the first rate change since the Fed last raised the target to 5.25% in June 2006. The reason cited for the cut was that “the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally” and that the rate cut “is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time”3. On October 31, a further 0.25% cut lowered the target rate to 4.50%, with the Fed stating that inflation and growth risks were approximately balanced.

On December 11, the Fed cut the target rate for overnight loans between banks by 25 basis points (less than the anticipated 50 basis point cut) to 4.25%, stating that recent developments “have increased the uncertainty surrounding the outlook for economic growth and inflation.” Stocks declined and Treasuries surged as investors thought that the move was not sufficient to hold off an economic downturn. The following day the Fed, in conjunction with the European Central Bank (ECB) and central banks in England, Switzerland and Canada, announced the biggest act of global economic cooperation since the September 11th terrorist attacks, a multi-stage plan designed to provide liquidity to the stressed credit markets. In a related move, the ECB flooded financial markets with $500 billion in two-week loans to banks, the largest amount ever extended in a single move by the ECB. This was done in order to maintain liquidity in other markets at year-end.

Prior to the Fed rate cuts, the flight to quality pushed up U.S. Treasury prices, which, in turn, lowered their yields (also referred to as a downward shift in the yield curve). The Fed’s rate cuts propelled this downward progression of yields across all maturities. During 2007, yields on 2-year maturity Treasuries declined 1.76 % while yields on 10-year maturities declined 0.68%. A major change was the yield curve shifting from its beginning-of-year inverted (i.e. downward sloping) position by steepening significantly between 2- and 10-year maturities. The 2-year/10-year spread widened 1.08%, going from (0.11)% to 0.98%.

 

 

 

3

 

Bloomberg, Fed Surprises with a 50-basis point Rate Cut, 18-Sep-07.

 

8 Market Summary


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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

LOGO

 

Multi-Style Equity Fund 
   Total
Return
 

1 Year

  10.36%

5 Years

  13.56

10 Years

  5.11

 

Russell 1000® Index ** 
   Total
Return
 

1 Year

  5.77%

5 Years

  13.43

10 Years

  6.20

 

* Assumes initial investment on January 1, 1998.

 

**

 

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.

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.

 

10 Multi-Style Equity Fund


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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

The Multi-Style Equity Fund (the “Fund”) allocates most of its assets among multiple money managers. Russell Investment Management Company (“RIMCo”), as the Fund’s advisor, may change the allocation of the Fund’s assets among money managers at any time. An exemptive order from the Securities and Exchange Commission (SEC) permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Fund’s Board without a shareholder vote. Pursuant to the terms of the exemptive order, the Fund is required to notify its shareholders within 60 days of when a money manager begins providing services. The Fund currently has eight money managers.

What is the Fund’s investment objective?

The Fund seeks to provide long term capital growth.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2007?

For the fiscal year ended December 31, 2007, the Multi-Style Equity Fund gained 10.36%. This compared to the Russell 1000® Index, which gained 5.77% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.

For the year ended December 31, 2007, the Lipper® Large-Cap Core Funds (VIP) Average returned 5.93%. This result serves as a peer comparison and is expressed net of operating expenses.

RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is representative of the aggregate of each money manager’s benchmark index.

How did the market conditions described in the Market Summary report affect the Fund’s performance?

The market environment for the year favored large capitalization stocks, and companies with a growth focus. Additionally, multinational companies that export to emerging markets performed particularly well. This was a favorable environment for the Fund.

The Fund was overweight in growth stocks, large cap stocks and exporters to developing markets stocks, and underweight to utilities. This strategy emphasized companies that were believed to be sustainable growth companies on the one hand and cyclical companies with strong long-term prospects due to global demand (e.g., agriculture, infrastructure) on the other.

How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?

Over the past year, the Fund maintained its overweight to companies with above-average growth rates that managers

believed were selling at attractive valuations. That positioning was rewarded in this period where growth stocks outpaced value stocks. The Fund benefited from growing global demand through its exposure to infrastructure and agriculture related stocks.

The Fund had strong stock selection in most sectors, especially the consumer discretionary, health care and financial sectors. Fund tilts toward growth stocks, beta (stocks whose price fluctuate more than the market), and momentum (stocks that show superior earnings and price performance) contributed positively as these factors were rewarded in the period. The Fund also benefited from an underweight to the financials sector and an overweight to technology, consumer staples and materials and processing sectors.

The Fund’s growth money managers, Turner Investment Partners, Inc., Montag & Caldwell, Inc. and Columbus Circle benefited from the strong growth environment as well as favorable stock selection and all outperformed both the Russell 1000 Index return of 5.8%, as well as the Russell 1000 Growth Index return of 11.8%. Value manager DePrince, Race & Zollo had a negative return for the year, but its results were within expectations given the market environment and its investment approach.

RIMCo currently employs a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo analyzes the holdings of the Fund’s money managers in their Fund segments to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers. As the Fund outperformed for the period, the select holdings strategy also outperformed the benchmark.

At the stock selection level, the Fund benefited from overweight positions in strong performers such as Apple, Research in Motion, Google, Hess, Schlumberger and Occidental Petroleum. Overweights to US Air and AIG, and underweights to Exxon Mobil and Chevron, detracted from performance.

Describe any changes to the Fund’s structure or the money manager line-up.

In July 2007, Ark Asset Management Company, Inc. was replaced with Columbus Circle Investors. In September, Arnhold and S. Bleichroeder was added as a market-oriented manager in the Fund.


 

Multi-Style Equity Fund 11


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Russell Investment Funds

Multi-Style Equity Fund

Shareholder Expense Example — December 31, 2007 (Unaudited)

 

 

 

Fund Expenses

The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from July 1, 2007 to December 31, 2007.

Actual Expenses

The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Actual
Performance
  Hypothetical
Performance
(5% return
before expenses)
    

Beginning Account Value

    

July 1, 2007

  $1,000.00  $1,000.00

Ending Account Value

    

December 31, 2007

  $1,021.00  $1,020.77

Expenses Paid During Period*

  $4.48  $4.48

 

*Expenses are equal to the Fund’s annualized expense ratio of 0.88% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Reflects amounts waived and/or reimbursed by the investment adviser. Without the waiver and/or reimbursement, expenses would have been higher.

 

12 Multi-Style Equity Fund


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Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Common Stocks - 95.5%

      

Auto and Transportation - 1.4%

      

Daimler AG

  5,800    555

Ford Motor Co. (Æ)(Ñ)

  11,900    80

General Motors Corp. (Ñ)

  40,665    1,012

Norfolk Southern Corp.

  41,900    2,113

Northwest Airlines Corp. (Æ)

  14,100    204

Tidewater, Inc.

  6,300    346

TRW Automotive Holdings Corp. (Æ)(Ñ)

  6,400    134

UAL Corp. (Æ)(Ñ)

  25,100    895

Union Pacific Corp.

  5,860    736

United Parcel Service, Inc. Class B

  11,000    778

US Airways Group, Inc. (Æ)(Ñ)

  3,100    46
       
      6,899
       

Consumer Discretionary - 10.8%

      

Activision, Inc. (Æ)

  14,550    432

Amazon.Com, Inc. (Æ)(Ñ)

  21,920    2,031

Apollo Group, Inc. Class A (Æ)

  8,210    576

Avon Products, Inc.

  27,500    1,087

Barnes & Noble, Inc. (Ñ)

  7,600    262

BJ’s Wholesale Club, Inc. (Æ)(Ñ)

  9,000    305

Black & Decker Corp. (Ñ)

  9,600    669

Clear Channel Communications, Inc. (Ñ)

  2,800    97

Clear Channel Outdoor Holdings, Inc. Class A (Æ)(Ñ)

  80,684    2,232

Convergys Corp. (Æ)

  9,200    151

Costco Wholesale Corp. (Ñ)

  33,400    2,330

DreamWorks Animation SKG, Inc. Class A (Æ)(Ñ)

  3,300    84

eBay, Inc. (Æ)

  58,000    1,925

EchoStar Communications Corp. Class A (Æ)(Ñ)

  4,555    172

Electronic Arts, Inc. (Æ)(Ñ)

  31,540    1,842

Foot Locker, Inc.

  51,200    699

GameStop Corp. Class A (Æ)(Ñ)

  8,410    522

Gap, Inc. (The)

  44,800    953

Google, Inc. Class A (Æ)

  13,990    9,674

Guess?, Inc. (Ñ)

  24,860    942

Home Depot, Inc.

  30,800    830

Intercontinental Hotels Group
PLC - ADR (Ñ)

  30,759    535

International Game Technology

  20,300    892

JC Penney Co., Inc.

  20,100    884

Jones Apparel Group, Inc. (Ñ)

  29,500    472

Kohl’s Corp. (Æ)

  13,200    605
   Principal
Amount ($)
or Shares
    Market
Value
$

Las Vegas Sands Corp. (Æ)(Ñ)

  6,515    671

Leggett & Platt, Inc. (Ñ)

  28,900    504

Limited Brands, Inc. (Ñ)

  49,200    931

McDonald’s Corp.

  85,898    5,060

Nike, Inc. Class B (Ñ)

  24,500    1,574

Nintendo Co., Ltd. - ADR (Ñ)

  6,970    516

OfficeMax, Inc. (Ñ)

  39,800    822

Phillips-Van Heusen Corp.

  11,800    435

RR Donnelley & Sons Co.

  18,400    694

Saks, Inc. (Æ)(Ñ)

  36,600    760

Starbucks Corp. (Æ)(Ñ)

  21,810    446

Target Corp.

  26,650    1,333

Tech Data Corp. (Æ)

  3,300    125

TJX Cos., Inc.

  8,900    256

Under Armour, Inc. Class A (Æ)(Ñ)

  9,250    404

VeriSign, Inc. (Æ)(Ñ)

  13,950    525

Viacom, Inc. Class B (Æ)

  28,400    1,247

Virgin Media, Inc.

  1,400    24

Wal-Mart Stores, Inc. (Ñ)

  41,200    1,958

Walt Disney Co. (The) (Ñ)

  18,600    600

Waste Management, Inc.

  31,000    1,013

Yahoo!, Inc. (Æ)

  12,800    298

Yum! Brands, Inc.

  11,580    443
       
      51,842
       

Consumer Staples - 8.4%

      

Campbell Soup Co. (Ñ)

  27,300    975

Clorox Co.

  16,700    1,088

Coca-Cola Co. (The)

  176,970    10,861

Colgate-Palmolive Co.

  25,740    2,007

ConAgra Foods, Inc.

  22,800    542

Diageo PLC - ADR

  5,330    457

Fomento Economico Mexicano SAB
de CV - ADR

  9,900    378

Hershey Co. (The) (Ñ)

  22,700    894

Kraft Foods, Inc. Class A (Ñ)

  68,900    2,248

Kroger Co. (The)

  17,900    478

McCormick & Co., Inc. (Ñ)

  16,900    641

Molson Coors Brewing Co. Class B (Ñ)

  20,700    1,069

Pepsi Bottling Group, Inc.

  2,500    99

PepsiCo, Inc.

  73,500    5,579

Procter & Gamble Co.

  124,000    9,104

Safeway, Inc. (Ñ)

  15,800    540

Sara Lee Corp.

  26,400    424

SUPERVALU, Inc. (Ñ)

  12,000    450

Unilever NV

  36,800    1,342

Walgreen Co.

  7,184    274

Wm. Wrigley Jr. Co. (Ñ)

  18,892    1,106
       
      40,556
       

 

Multi-Style Equity Fund 13


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Financial Services - 14.2%

      

ACE, Ltd. (Ñ)

  33,700    2,082

AMB Property Corp. (ö)

  2,200    127

American Express Co.

  27,300    1,420

American International Group, Inc. (Ñ)

  103,350    6,025

Annaly Capital Management, Inc. (ö)

  74,800    1,360

AON Corp.

  15,000    715

Arch Capital Group, Ltd. (Æ)

  4,400    310

Astoria Financial Corp.

  22,600    526

Automatic Data Processing, Inc.

  12,300    548

Axis Capital Holdings, Ltd. (Ñ)

  8,100    316

Bank of America Corp.

  63,900    2,636

Bank of New York Mellon Corp. (The)

  65,526    3,195

BlackRock, Inc. Class A (Ñ)

  1,680    364

Capital One Financial Corp. (Ñ)

  25,200    1,191

Chubb Corp.

  6,600    360

Citigroup, Inc.

  82,300    2,423

CME Group, Inc. Class A (Ñ)

  1,330    912

CNA Financial Corp. (Ñ)

  7,400    250

Colonial BancGroup, Inc. (The) (Ñ)

  34,500    467

Cullen/Frost Bankers, Inc. (Ñ)

  9,700    491

Discover Financial Services (Ñ)

  28,900    436

Duke Realty Corp. (ö)(Ñ)

  15,100    394

Fannie Mae (Ñ)

  13,000    520

First Horizon National Corp. (Ñ)

  13,600    247

Freddie Mac (Ñ)

  10,700    365

Goldman Sachs Group, Inc. (The) (Ñ)

  21,330    4,587

H&R Block, Inc. (Ñ)

  24,900    462

Hartford Financial Services Group, Inc. (Ñ)

  16,700    1,456

Hospitality Properties Trust (ö)

  9,300    300

Host Hotels & Resorts, Inc. (ö)

  78,500    1,338

IntercontinentalExchange, Inc. (Æ)

  4,430    853

JPMorgan Chase & Co. (Ñ)

  186,350    8,134

Lehman Brothers Holdings, Inc. (Ñ)

  15,600    1,021

Loews Corp.

  11,700    589

Mack-Cali Realty Corp. (ö)(Ñ)

  9,000    306

Marshall & Ilsley Corp.

  23,900    633

Mastercard, Inc. Class A (Ñ)

  10,370    2,232

Mercury General Corp. (Ñ)

  19,800    986

MetLife, Inc. (Ñ)

  9,500    585

Morgan Stanley (Ñ)

  70,950    3,768

Nasdaq Stock Market, Inc. (The) (Æ)(Ñ)

  4,400    218

Northern Trust Corp. (Ñ)

  9,800    750

OneBeacon Insurance Group, Ltd. Class A

  1,800    39

Paychex, Inc. (Ñ)

  37,100    1,344
   Principal
Amount ($)
or Shares
    Market
Value
$

Prologis (ö)(Ñ)

  2,700    171

Protective Life Corp.

  13,700    562

Prudential Financial, Inc. (Ñ)

  7,300    679

South Financial Group, Inc. (The) (Ñ)

  28,400    444

Sovereign Bancorp, Inc.

  35,100    400

SunTrust Banks, Inc. (Ñ)

  13,800    862

TCF Financial Corp. (Ñ)

  19,400    348

Transatlantic Holdings, Inc. (Ñ)

  500    36

Travelers Cos., Inc. (The)

  13,400    721

Wachovia Corp. (Ñ)

  30,700    1,167

Wells Fargo & Co.

  92,300    2,787

Western Union Co. (The)

  46,700    1,134

Wilmington Trust Corp. (Ñ)

  23,900    841

WR Berkley Corp.

  11,000    328

XL Capital, Ltd. Class A (Ñ)

  7,000    352
       
      68,113
       

Health Care - 14.9%

      

Abbott Laboratories

  36,300    2,038

Aetna, Inc.

  9,300    537

Alcon, Inc.

  6,000    858

Allergan, Inc. (Ñ)

  42,180    2,710

AMERIGROUP Corp. Class A (Æ)

  7,200    262

Baxter International, Inc.

  15,280    887

Beckman Coulter, Inc. (Ñ)

  500    36

Boston Scientific Corp. (Æ)

  41,200    479

Bristol-Myers Squibb Co.

  87,700    2,326

Cardinal Health, Inc.

  21,400    1,236

Celgene Corp. (Æ)(Ñ)

  2,800    129

Charles River Laboratories International, Inc. (Æ)(Ñ)

  5,940    391

Community Health Systems, Inc. (Æ)(Ñ)

  16,500    608

Cooper Cos., Inc. (The) (Ñ)

  11,300    429

Covidien, Ltd.

  34,500    1,528

CVS Caremark Corp.

  175,900    6,992

Dentsply International, Inc.

  7,720    348

Eli Lilly & Co.

  21,400    1,143

Express Scripts, Inc. Class A (Æ)

  15,900    1,161

Genzyme Corp. (Æ)

  8,590    639

Gilead Sciences, Inc. (Æ)(Ñ)

  117,020    5,384

Human Genome Sciences, Inc. (Æ)(Ñ)

  71,800    750

Intuitive Surgical, Inc. (Æ)(Ñ)

  6,890    2,236

Johnson & Johnson

  55,600    3,709

King Pharmaceuticals, Inc. (Æ)(Ñ)

  26,700    273

McKesson Corp.

  7,800    511

Medco Health Solutions, Inc. (Æ)

  21,120    2,142

Merck & Co., Inc.

  159,011    9,240

 

14 Multi-Style Equity Fund


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Millennium Pharmaceuticals, Inc. (Æ)(Ñ)

  40,400    605

Mylan, Inc. (Ñ)

  46,500    654

Myriad Genetics, Inc. (Æ)(Ñ)

  6,800    316

Novartis AG - ADR

  50,350    2,734

Pfizer, Inc.

  120,600    2,741

Schering-Plough Corp.

  113,600    3,026

Shire PLC - ADR (Ñ)

  7,550    521

St. Jude Medical, Inc. (Æ)(Ñ)

  23,037    936

Stericycle, Inc. (Æ)

  4,470    266

Stryker Corp.

  28,100    2,100

Teva Pharmaceutical Industries, Ltd. - ADR

  20,100    934

Thermo Fisher Scientific, Inc. (Æ)(Ñ)

  72,420    4,177

Wyeth

  79,682    3,521
       
      71,513
       

Integrated Oils - 6.2%

      

Chevron Corp.

  35,600    3,323

ConocoPhillips

  20,100    1,775

Exxon Mobil Corp.

  89,400    8,376

Hess Corp. (Ñ)

  31,200    3,147

Marathon Oil Corp.

  38,400    2,337

Occidental Petroleum Corp. (Ñ)

  101,600    7,822

Total SA - ADR

  33,650    2,779
       
      29,559
       

Materials and Processing - 6.5%

    

Agrium, Inc.

  22,400    1,617

Alcoa, Inc.

  15,500    567

Archer-Daniels-Midland Co.

  24,490    1,137

Ashland, Inc. (Ñ)

  29,400    1,394

Avery Dennison Corp.

  12,800    680

Bemis Co., Inc. (Ñ)

  21,200    580

Bunge, Ltd.

  6,820    794

Cabot Corp.

  17,700    590

Chicago Bridge & Iron Co. NV

  8,300    502

Commercial Metals Co. (Ñ)

  7,100    209

Cytec Industries, Inc.

  9,700    597

Dow Chemical Co. (The)

  12,800    505

EI Du Pont de Nemours & Co. (Ñ)

  83,000    3,659

EMCOR Group, Inc. (Æ)

  9,600    227

Freeport-McMoRan Copper & Gold, Inc. Class B

  11,400    1,168

International Paper Co. (Ñ)

  52,000    1,684

KBR, Inc. (Æ)(Ñ)

  5,400    210

Lubrizol Corp.

  800    43

Masco Corp. (Ñ)

  79,950    1,728
   Principal
Amount ($)
or Shares
    Market
Value
$

Monsanto Co.

  42,770    4,777

Mosaic Co. (The) (Æ)

  4,570    431

Nalco Holding Co. (Ñ)

  9,300    225

Newmont Mining Corp.

  3,600    176

Nucor Corp. (Ñ)

  13,500    799

Perini Corp. (Æ)(Ñ)

  4,000    166

Potash Corp. of Saskatchewan

  8,800    1,267

PPG Industries, Inc.

  8,600    604

Rohm & Haas Co. (Ñ)

  45,600    2,420

RPM International, Inc.

  33,400    678

Sonoco Products Co.

  22,800    745

Timken Co.

  17,500    575

USEC, Inc. (Æ)(Ñ)

  10,900    98

Valspar Corp. (Ñ)

  23,300    525
       
      31,377
       

Miscellaneous - 3.7%

      

3M Co.

  15,578    1,314

ABB, Ltd. - ADR

  28,350    816

Brunswick Corp. (Ñ)

  31,400    535

General Electric Co.

  322,700    11,963

Textron, Inc.

  41,600    2,966

Tyco International, Ltd.

  3,700    147
       
      17,741
       

Other Energy - 4.9%

      

Baker Hughes, Inc.

  22,600    1,833

Cameron International Corp. (Æ)(Ñ)

  33,860    1,630

Consol Energy, Inc.

  13,080    936

Continental Resources, Inc. (Æ)(Ñ)

  4,100    107

Devon Energy Corp. (Ñ)

  40,967    3,642

Diamond Offshore Drilling, Inc. (Ñ)

  5,310    754

Frontier Oil Corp. (Ñ)

  5,900    239

Halliburton Co. (Ñ)

  46,900    1,778

National Oilwell Varco, Inc. (Æ)

  15,300    1,124

Patterson - UTI Energy, Inc. (Ñ)

  7,900    154

Schlumberger, Ltd.

  52,100    5,125

Sunoco, Inc.

  13,000    942

Valero Energy Corp.

  8,500    595

Western Refining, Inc. (Ñ)

  1,800    44

Williams Cos., Inc.

  40,555    1,451

XTO Energy, Inc. (Ñ)

  59,850    3,074
       
      23,428
       

Producer Durables - 4.4%

      

Applied Materials, Inc.

  115,170    2,045

Deere & Co. (Ñ)

  26,780    2,494

Diebold, Inc.

  16,600    481

 

Multi-Style Equity Fund 15


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Dover Corp.

  23,700    1,092

DR Horton, Inc. (Ñ)

  17,500    230

Emerson Electric Co.

  63,900    3,621

Gardner Denver, Inc. (Æ)

  3,900    129

Graco, Inc. (Ñ)

  15,300    570

KB Home (Ñ)

  10,600    229

Lexmark International, Inc. Class A (Æ)(Ñ)

  6,500    227

Molex, Inc. (Ñ)

  22,500    614

Nokia OYJ - ADR

  41,800    1,605

Northrop Grumman Corp.

  7,200    566

Parker Hannifin Corp. (Ñ)

  20,382    1,535

Pentair, Inc.

  22,700    790

Raytheon Co. (Ñ)

  28,126    1,707

Roper Industries, Inc. (Ñ)

  6,730    421

Steelcase, Inc. Class A (Ñ)

  7,600    121

United Technologies Corp.

  22,404    1,715

Varian Semiconductor Equipment Associates, Inc. (Æ)(Ñ)

  9,050    335

Waters Corp. (Æ)

  5,540    438
       
      20,965
       

Technology - 16.1%

      

Advanced Micro Devices, Inc. (Æ)(Ñ)

  21,800    163

Amphenol Corp. Class A (Ñ)

  57,766    2,679

Analog Devices, Inc. (Ñ)

  52,497    1,664

Apple, Inc. (Æ)

  44,910    8,896

Applera Corp. - Applied Biosystems Group

  23,200    787

AU Optronics Corp. - ADR

  1    

Broadcom Corp. Class A (Æ)(Ñ)

  16,900    442

Cisco Systems, Inc. (Æ)

  339,440    9,189

Citrix Systems, Inc. (Æ)

  8,320    316

Computer Sciences Corp. (Æ)(Ñ)

  9,200    455

Corning, Inc. 2008

  39,300    943

Dell, Inc. (Æ)(Ñ)

  46,800    1,147

Electronic Data Systems Corp.

  18,600    386

EMC Corp. (Æ)

  42,500    788

First Solar, Inc. (Æ)(Ñ)

  2,400    641

Garmin, Ltd. (Ñ)

  10,400    1,009

General Dynamics Corp.

  6,100    543

Hewlett-Packard Co.

  121,900    6,153

Intel Corp.

  269,300    7,180

International Business Machines Corp.

  10,100    1,092

Juniper Networks, Inc. (Æ)(Ñ)

  44,640    1,482

Linear Technology Corp. (Ñ)

  10,500    334

LSI Corp. (Æ)(Ñ)

  19,500    104

Maxim Integrated Products, Inc. (Ñ)

  84,400    2,235
   Principal
Amount ($)
or Shares
    Market
Value
$

MEMC Electronic Materials, Inc. (Æ)

  15,100    1,336

Microsoft Corp.

  227,879    8,112

Motorola, Inc.

  147,000    2,358

Nvidia Corp. (Ñ)

  24,300    827

Qualcomm, Inc.

  91,500    3,600

Research In Motion, Ltd. (Æ)

  24,795    2,812

Salesforce.com, Inc. (Æ)(Ñ)

  5,970    374

Sanmina-SCI Corp. (Æ)

  46,400    84

Seagate Technology

  24,320    620

Seagate Technology, Inc. (Æ)

  2,300    

Sun Microsystems, Inc. (Æ)

  27,125    492

Sunpower Corp. Class A (Æ)(Ñ)

  6,280    819

Taiwan Semiconductor Manufacturing Co., Ltd. - ADR

  102,334    1,019

Texas Instruments, Inc.

  55,450    1,852

Tyco Electronics, Ltd.

  96,933    3,599

Unisys Corp. (Æ)(Ñ)

  7,200    34

VMware, Inc. Class A (Æ)(Ñ)

  4,400    374

Western Digital Corp. (Æ)(Ñ)

  7,100    214
       
      77,154
       

Utilities - 4.0%

      

AGL Resources, Inc.

  10,500    395

Alliant Energy Corp. (Ñ)

  6,800    277

Aqua America, Inc. (Ñ)

  31,800    674

AT&T, Inc.

  139,011    5,777

Citizens Communications Co. (Ñ)

  63,300    806

Edison International (Ñ)

  9,600    512

Embarq Corp.

  5,900    292

NiSource, Inc. (Ñ)

  23,300    440

Pepco Holdings, Inc.

  21,300    625

PG&E Corp. (Ñ)

  8,100    349

Progress Energy, Inc. - CVO

  1,300    

Public Service Enterprise Group, Inc.

  500    49

SCANA Corp.

  7,800    329

TECO Energy, Inc. (Ñ)

  21,100    363

Telephone & Data Systems, Inc.

  1,400    88

Verizon Communications, Inc. (Ñ)

  93,500    4,085

Vimpel-Communications - ADR

  25,000    1,040

Vodafone Group PLC - ADR

  56,750    2,118

Windstream Corp. (Ñ)

  61,900    806
       
      19,025
       
Total Common Stocks      

(cost $411,021)

      458,172
       

 

16 Multi-Style Equity Fund


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
 
      

Short-Term Investments - 4.5%

    

Russell Investment Company Money Market Fund

  20,640,000    20,640 

United States Treasury Bills (ž)(§)

      

2.962% due 03/20/08

  1,200    1,191 
        
Total Short-Term Investments
      

(cost $21,832)

      21,831 
        
Other Securities - 23.0%      

State Street Securities Lending Quality Trust (×)

  110,488,585    110,489 
        
Total Other Securities
      

(cost $110,489)

      110,489 
        
Total Investments - 123.0%      

(identified cost $543,342)

      590,492 
Other Assets and Liabilities, Net - (23.0%)      (110,570)
        
Net Assets - 100.0%      479,922 
        

 


 

See accompanying notes which are an integral part of the financial statements.

 

Multi-Style Equity Fund 17


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

Futures Contracts
(Number of Contracts)
  Notional
Amount
    Unrealized
Appreciation
(Depreciation)
$
 
      
      

Long Positions

      

Russell 1000 Index expiration date 03/08 (7)

  USD2,818    (29)

S&P 500 E-Mini Index (CME) expiration date 03/08 (50)

  USD3,693    (53)

S&P 500 Index (CME)
expiration date 03/08 (8)

  USD2,954    (40)

S&P Midcap 400 E-Mini Index (CME)
expiration date 03/08 (138)

  USD  11,934    (176)
        

Total Unrealized Appreciation (Depreciation) on Open Futures Contracts

      (298)
        

 

 

Presentation of Portfolio Holdings — December 31, 2007

 

Portfolio Summary    % of Net
Assets
 
    
    

Auto and Transportation

    1.4 

Consumer Discretionary

    10.8 

Consumer Staples

    8.4 

Financial Services

    14.2 

Health Care

    14.9 

Integrated Oils

    6.2 

Materials and Processing

    6.5 

Miscellaneous

    3.7 

Other Energy

    4.9 

Producer Durables

    4.4 

Technology

    16.1 

Utilities

    4.0 

Short-Term Investments

    4.5 

Other Securities

    23.0 
      

Total Investments

    123.0 

Other Assets and Liabilities, Net

    (23.0)
      
    100.0 
      

Futures Contracts

    (0.1)

 

See accompanying notes which are an integral part of the financial statements.

 

18 Multi-Style Equity Fund


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Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

LOGO

 

Aggressive Equity Fund 
   Total
Return
 

1 Year

  3.42%

5 Years

  16.10

10 Years

  5.90

 

Russell 2500™ Index ** 
   Total
Return
 

1 Year

  1.38%

5 Years

  16.99

10 Years

  9.01

 

 

* Assumes initial investment on January 1, 1998.

 

**

 

Russell 2500™ Index is composed of the bottom 500 stocks the Russell 1000® Index and all the stocks in the Russell 2000® Index. The Russell 2500™ Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates.

 

§ Annualized.

Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

20 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

The Aggressive Equity Fund (the “Fund”) allocates most of its assets among multiple money managers. Russell Investment Management Company (“RIMCo”), as the Fund’s advisor, may change the allocation of the Fund’s assets among money managers at any time. An exemptive order from the Securities and Exchange Commission (SEC) permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Fund’s Board without a shareholder vote. Pursuant to the terms of the exemptive order, the Fund is required to notify its shareholders within 60 days of when a money manager begins providing services. The Fund currently has eight money managers.

What is the Fund’s investment objective?

The Fund seeks to provide long term capital growth.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2007?

For the fiscal year ended December 31, 2007, the Aggressive Equity Fund gained 3.42%. This compared to the Russell 2500™ Index, which gained 1.38% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.

For the year ended December 31, 2007, the Lipper® Small-Cap Core Funds (VIP) Average returned -1.64%. This result serves as a peer comparison and is expressed net of operating expenses.

How did the market conditions described in the Market Summary report affect the Fund’s performance?

The switch from value leadership to growth leadership helped the Fund during the year as the Fund was overweight stocks with higher estimated earnings. Additionally, the Fund was underweight deeper value stocks.

Throughout the year, stock selection in consumer discretionary and financial services was additive. Stock returns within these sectors were extremely volatile depending on their exposure to subprime mortgages and housing. This presented a positive environment for active managers to outperform based on stock selection.

Additionally, exposure to U.S. companies with non-U.S. sales tended to help managers particularly as the U.S. dollar fell and investors began to question the strength of the U.S. consumer. Managers also benefited by being underweight sectors with exposure to housing or credit risk. Engineering, solar energy, and chemicals companies held by the Fund contributed positively to performance.

 

How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?

The Fund outperformed its Index for the year. Returns were largely driven by stock selection in the consumer discretionary sector as well as an underweight to financial services. The high growth and high valuation stocks performed best.

Gould Investment Partners LLC and Tygh Capital Management, Inc. were the best performing managers in the Fund. Gould’s outperformance was driven largely by stock selection in the consumer discretionary sector. Additionally, Gould’s stock selection in producer durables, technology, and other energy were additive. The largest contributor at the stock level was Crocs, which was up 70.42% for the year and consistently one of Gould’s largest holdings. Solar stocks (Suntech Power Holdings, SunPower Corp, JA Solar Holdings, First Solar) were a major source of Gould’s returns throughout the year. Gould benefited significantly by investing in high-growth stocks regardless of valuations, both factors that were rewarded significantly throughout most of the year.

Tygh benefited from stock selection in the consumer discretionary and technology sectors in addition to strong stock selection in industrial stocks such as McDermott International and Foster Wheeler. The consumer discretionary sector was led by an overweight in aQuantive, which was up significantly. Consumer discretionary companies that focused on home entertainment systems led the sector. Tygh benefited significantly from not being overly valuation sensitive, as valuation metrics underperformed during the year due to the shift from value leadership to growth leadership.

PanAgora Asset Management, Inc. and Jacobs Levy Equity Management, Inc. underperformed the Fund’s benchmark. Exposure to ten of the twelve economic sectors negatively contributed to performance. Stock selection in financial services, consumer discretionary, and health care sectors was the largest detractor. PanAgora’s exposure to valuation factors was a detriment, as these factors went largely unrewarded in the market as growth began to outperform value. Additionally, selection of lower market capitalization securities detracted from performance.

Jacobs Levy’s underperformance was due to its overweight in the consumer discretionary sector, a combination of its underweight and weak stock selection in the other energy sector, and its underweight in the utilities sector. Additionally, Jacob Levy’s weak stock selection in the technology sector detracted from performance.


 

Aggressive Equity Fund 21


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

Describe any changes to the Fund’s structure or the money manager line-up.

In March 2007, DePrince, Race & Zollo, Inc. was hired to replace Geewax, Terker & Company and Nicholas-Applegate Capital Management, LLC. Also in March, pursuant to an asset purchase agreement with CapitalWorks Investment Partners, LLC, the CapitalWorks investment team became Berkeley Capital Management, LLP. In September of 2007, Berkeley was replaced with Ranger Investment Management, LP.

 

Money Managers as of
December 31, 2007
  Styles

ClariVest Asset Management LLC

  Market-Oriented

David J. Greene and Company, LLC

  Value

DePrince, Race & Zollo, Inc.

  Value

Gould Investment Partners LLC

  Growth

Jacobs Levy Equity Management, Inc.

  Value

PanAgora Asset Management, Inc.

  Market-Oriented

Ranger Investment Management, L.P.

  Growth

Tygh Capital Management, Inc.

  Growth

 

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for Russell Investment Funds (RIF) are based on numerous factors, should not be relied on as an indication of investment decisions of any RIF Fund.


 

22 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Shareholder Expense Example — December 31, 2007 (Unaudited)

 

 

 

Fund Expenses

The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from July 1, 2007 to December 31, 2007.

Actual Expenses

The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Actual
Performance
  Hypothetical
Performance
(5% return
before expenses)
    

Beginning Account Value

    

July 1, 2007

  $1,000.00  $1,000.00

Ending Account Value

    

December 31, 2007

  $953.90  $1,019.91

Expenses Paid During Period*

  $5.17  $5.35

 

*Expenses are equal to the Fund’s annualized expense ratio of 1.05% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Reflects amounts waived and/or reimbursed by the investment adviser. Without the waiver and/or reimbursement, expenses would have been higher.

 

Aggressive Equity Fund 23


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Common Stocks - 96.3%

      

Auto and Transportation - 2.7%

      

AAR Corp. (Æ)(Ñ)

  24,492    931

ABX Holdings, Inc. (Æ)(Ñ)

  100    

Accuride Corp. (Æ)

  248    2

Aftermarket Technology Corp. (Æ)

  6,800    185

Alaska Air Group, Inc. (Æ)(Ñ)

  5,200    130

Allegiant Travel Co. (Æ)(Ñ)

  5,000    161

Amerigon, Inc. (Æ)(Ñ)

  9,300    197

Autoliv, Inc.

  55    3

BorgWarner, Inc.

  18    1

Con-way, Inc. (Ñ)

  6,000    249

Continental Airlines, Inc. Class A (Æ)

  9,778    218

Dana Corp. (Æ)(Ñ)

  47,300    1

Danaos Corp.

  4,200    111

Double Hull Tankers, Inc. (Ñ)

  15,000    184

Expeditors International of Washington, Inc. (Ñ)

  6,801    304

Genco Shipping & Trading, Ltd. (Ñ)

  1,800    99

Hub Group, Inc. Class A (Æ)

  11,515    306

Kansas City Southern (Æ)(Ñ)

  5,700    196

Kirby Corp. (Æ)(Ñ)

  8,651    402

Lear Corp. (Æ)

  4,600    127

Modine Manufacturing Co. (Ñ)

  6,900    114

Navistar International Corp. (Æ)(Ñ)

  2,000    108

Northwest Airlines Corp. (Æ)

  9,600    139

Overseas Shipholding Group, Inc.

  2,900    216

Skywest, Inc. (Ñ)

  5,974    160

Standard Motor Products, Inc.

  3,312    27

Stoneridge, Inc. (Æ)(Ñ)

  1,600    13

TBS International, Ltd. Class A (Æ)(Ñ)

  600    20

Tidewater, Inc.

  323    18

TRW Automotive Holdings Corp. (Æ)(Ñ)

  11,200    234

UAL Corp. (Æ)

  4,478    160

US Airways Group, Inc. (Æ)(Ñ)

  13,000    191

UTI Worldwide, Inc. (Ñ)

  11,708    229

Visteon Corp. (Æ)(Ñ)

  9,700    43

Wabtec Corp. (Ñ)

  20,300    699
       
      6,178
       

Consumer Discretionary - 14.6%

    

Abercrombie & Fitch Co. Class A

  6,970    557

ABM Industries, Inc. (Ñ)

  3,500    71

Activision, Inc. (Æ)

  45,968    1,365

Administaff, Inc.

  1,791    51

Advance Auto Parts, Inc. (Ñ)

  4,800    182

Advisory Board Co. (The) (Æ)(Ñ)

  7,569    486
   Principal
Amount ($)
or Shares
    Market
Value
$

AFC Enterprises (Æ)(Ñ)

  5,000    57

Alberto-Culver Co. Class B

  12,700    312

American Woodmark Corp.

  6,145    112

Ameristar Casinos, Inc. (Ñ)

  17,200    474

Apollo Group, Inc. Class A (Æ)

  5,799    407

Asbury Automotive Group, Inc. (Ñ)

  4,100    62

AutoNation, Inc. (Æ)(Ñ)

  19,000    298

Bally Technologies, Inc. (Æ)(Ñ)

  18,388    914

Barnes & Noble, Inc.

  9,300    320

Big Lots, Inc. (Æ)

  11,019    176

BJ’s Wholesale Club, Inc. (Æ)(Ñ)

  17,000    575

Black & Decker Corp.

  3,058    213

Blockbuster, Inc. Class A (Æ)

  27,999    109

Blyth, Inc. (Ñ)

  6,200    136

Bob Evans Farms, Inc.

  1,819    49

Books-A-Million, Inc. Class A

  437    5

Borders Group, Inc. (Ñ)

  24,634    262

Brightpoint, Inc. (Æ)(Ñ)

  22,400    344

Brown Shoe Co., Inc. (Ñ)

  9,900    150

Buckle, Inc. (The)

  4,600    152

Capella Education Co. (Æ)(Ñ)

  500    33

Carter’s, Inc. (Æ)(Ñ)

  4,400    85

CBRL Group, Inc.

  6,879    223

CDI Corp. (Ñ)

  2,100    51

Chemed Corp. (Ñ)

  11,286    631

Chipotle Mexican Grill, Inc. Class A (Æ)(Ñ)

  3,700    544

Churchill Downs, Inc. (Ñ)

  4,700    254

CMGI, Inc. (Æ)(Ñ)

  13,980    183

Convergys Corp. (Æ)

  41,552    684

Corinthian Colleges, Inc. (Æ)(Ñ)

  15,100    233

Corrections Corp. of America (Æ)(Ñ)

  9,800    289

CROCS, Inc. (Æ)(Ñ)

  10,500    387

CSS Industries, Inc. (Ñ)

  1,500    55

Denny’s Corp. (Æ)

  12,278    46

DeVry, Inc.

  2,471    128

Discovery Holding Co. Class A (Æ)(Ñ)

  6,700    168

Dolby Laboratories, Inc. Class A (Æ)

  12,600    626

Dollar Tree Stores, Inc. (Æ)

  16,259    421

DreamWorks Animation SKG, Inc. Class A (Æ)(Ñ)

  13,956    356

DynCorp International, Inc. Class A (Æ)(Ñ)

  8,200    220

Earthlink, Inc. (Æ)(Ñ)

  37,900    268

Electronic Arts, Inc. (Æ)(Ñ)

  8,964    524

Family Dollar Stores, Inc.

  268    5

Focus Media Holding, Ltd. - ADR (Æ)(Ñ)

  8,600    489

FTD Group, Inc. (Ñ)

  22,600    291

 

24 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

FTI Consulting, Inc. (Æ)(Ñ)

  12,300    758

Gaiam, Inc. Class A (Æ)(Ñ)

  10,900    324

GameStop Corp. Class A (Æ)(Ñ)

  5,799    360

Gaylord Entertainment Co. (Æ)(Ñ)

  4,900    198

Geo Group, Inc. (The) (Æ)(Ñ)

  21,722    608

Gray Television, Inc. (Ñ)

  34,500    277

Great Lakes Dredge & Dock Co.

  2,300    20

Greenfield Online, Inc. (Æ)

  7,127    104

Group 1 Automotive, Inc. (Ñ)

  5,200    124

Harris Interactive, Inc. (Æ)(Ñ)

  5,100    22

Hasbro, Inc. (Ñ)

  22,470    575

Hertz Global Holdings, Inc. (Æ)(Ñ)

  9,700    154

Hewitt Associates, Inc. Class A (Æ)

  17,134    656

Hooker Furniture Corp. (Ñ)

  1,000    20

ICF International, Inc. (Æ)(Ñ)

  7,300    184

IHOP Corp.

  2,522    92

IKON Office Solutions, Inc.

  3,662    48

Infospace, Inc.

  6,100    115

infoUSA, Inc. (Ñ)

  21,671    194

Insight Enterprises, Inc. (Æ)(Ñ)

  1,000    18

International Speedway Corp. Class A

  4,600    189

inVentiv Health, Inc. (Æ)(Ñ)

  12,600    390

Jack in the Box, Inc. (Æ)

  7,900    204

Jakks Pacific, Inc. (Æ)(Ñ)

  6,600    156

Jo-Ann Stores, Inc. (Æ)

  7,836    103

Journal Communications, Inc. Class A (Ñ)

  8,000    72

Kelly Services, Inc. Class A (Ñ)

  3,400    63

Kenneth Cole Productions, Inc. Class A (Ñ)

  2,700    47

Leapfrog Enterprises, Inc. Class A (Æ)(Ñ)

  5,800    39

Learning Tree International, Inc. (Æ)

  8,666    199

LECG Corp. (Æ)

  102    2

Lin TV Corp. Class A (Æ)(Ñ)

  5,600    68

LKQ Corp. (Æ)

  15,690    330

Maidenform Brands, Inc. (Æ)(Ñ)

  2,500    34

MAXIMUS, Inc.

  2,589    100

Meredith Corp. (Ñ)

  2,600    143

Mohawk Industries, Inc. (Æ)

  1,287    96

MSC Industrial Direct Co. Class A (Ñ)

  4,654    188

Net 1 UEPS Technologies, Inc. (Æ)

  4,170    122

New Oriental Education & Technology Group - ADR (Æ)

  5,400    435

Nu Skin Enterprises, Inc. Class A (Ñ)

  4,300    71

O’Charleys, Inc. (Ñ)

  18,594    279

O’Reilly Automotive, Inc. (Æ)(Ñ)

  14,191    460

Orient-Express Hotels, Ltd. Class A (Ñ)

  7,362    423
   Principal
Amount ($)
or Shares
    Market
Value
$

Overstock.com, Inc. (Æ)

  2,887    45

Papa John’s International, Inc. (Æ)(Ñ)

  5,400    123

PC Connection, Inc. (Æ)(Ñ)

  2,800    32

Perficient, Inc. (Æ)(Ñ)

  39,900    628

Perry Ellis International, Inc. (Æ)(Ñ)

  8,776    135

Phillips-Van Heusen Corp. (Ñ)

  10,000    369

Pier 1 Imports, Inc. (Æ)(Ñ)

  31,600    165

Prestige Brands Holdings, Inc. (Æ)

  2,010    15

Quiksilver, Inc. (Æ)(Ñ)

  26,900    231

RadioShack Corp.

  12,112    204

Red Robin Gourmet Burgers, Inc. (Æ)

  1,748    56

Rent-A-Center, Inc. Class A (Æ)

  3,300    48

Republic Services, Inc. Class A

  23,689    743

Revlon, Inc. Class A (Æ)(Ñ)

  11,100    13

Rush Enterprises, Inc. Class A (Æ)

  2,295    42

Scholastic Corp. (Æ)(Ñ)

  11,290    394

Service Corp. International (Ñ)

  12,400    174

Shanda Interactive Entertainment, Ltd. - ADR (Æ)(Ñ)

  9,600    320

Sinclair Broadcast Group, Inc. Class A (Ñ)

  27,581    226

Sohu.com, Inc. (Æ)(Ñ)

  1,900    104

Sonic Automotive, Inc. Class A (Ñ)

  5,800    112

Source Interlink Cos., Inc. (Æ)(Ñ)

  11,200    32

Spectrum Brands, Inc. (Æ)(Ñ)

  7,500    40

Speedway Motorsports, Inc. (Ñ)

  1,400    44

Spherion Corp. (Æ)(Ñ)

  28,200    205

Stewart Enterprises, Inc. Class A (Ñ)

  30,300    270

Strayer Education, Inc. (Ñ)

  1,800    307

Tech Data Corp. (Æ)

  8,045    303

Tiffany & Co.

  4,115    189

Toro Co. (Ñ)

  1,700    93

United Natural Foods, Inc. (Æ)(Ñ)

  14,450    458

United Online, Inc. (Ñ)

  55,200    652

United Stationers, Inc. (Æ)(Ñ)

  3,400    157

Urban Outfitters, Inc. (Æ)(Ñ)

  24,940    680

VeriSign, Inc. (Æ)(Ñ)

  18,130    682

Volcom, Inc. (Æ)(Ñ)

  9,600    211

Volt Information Sciences, Inc. (Æ)

  2,200    40

Warnaco Group, Inc. (The) (Æ)(Ñ)

  8,300    289

Warner Music Group Corp. (Ñ)

  24,600    149

West Marine, Inc. (Æ)(Ñ)

  5,534    50

Westwood One, Inc. (Ñ)

  17,200    34

World Wrestling Entertainment, Inc. Class A (Ñ)

  14,300    211
       
      33,372
       

Consumer Staples - 2.4%

      

Alliance One International, Inc. (Æ)(Ñ)

  37,391    152

 

Aggressive Equity Fund 25


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

B&G Foods, Inc. Class A (Ñ)

  23,700    242

Boston Beer Co., Inc. Class A (Æ)(Ñ)

  1,469    55

Chiquita Brands International, Inc. (Æ)

  3,094    57

Church & Dwight Co., Inc.

  3,842    208

Coca-Cola Bottling Co. Consolidated (Ñ)

  200    12

Del Monte Foods Co.

  15,500    147

Flowers Foods, Inc. (Ñ)

  2,400    56

Fresh Del Monte Produce, Inc. (Æ)(Ñ)

  24,900    836

Green Mountain Coffee Roasters, Inc. (Æ)(Ñ)

  7,800    317

Hormel Foods Corp.

  2,000    81

JM Smucker Co. (The)

  9,142    470

Loews Corp. - Carolina Group

  7,400    631

Molson Coors Brewing Co. Class B (Ñ)

  8,700    449

Nash Finch Co.

  7,237    255

NBTY, Inc. (Æ)

  7,338    201

PepsiAmericas, Inc. (Ñ)

  8,900    297

Ralcorp Holdings, Inc. (Æ)

  14    1

Ruddick Corp.

  1,600    56

Sanderson Farms, Inc. (Ñ)

  5,852    198

Schweitzer-Mauduit International, Inc.

  4,469    116

Spartan Stores, Inc. (Ñ)

  3,200    73

Tootsie Roll Industries, Inc. (Ñ)

  8,459    232

TreeHouse Foods, Inc. (Æ)(Ñ)

  6,000    138

Universal Corp.

  4,127    211
       
      5,491
       

Financial Services - 14.4%

      

Advance America Cash Advance Centers, Inc.

  7,697    78

Affiliated Managers Group, Inc. (Æ)(Ñ)

  7,755    911

Allied World Assurance Co. Holdings, Ltd.

  3,200    161

American Financial Group, Inc.

  16,641    481

Amerisafe, Inc. (Æ)

  10,294    160

AmTrust Financial Services, Inc.

  3,486    48

Annaly Capital Management, Inc. (ö)(Ñ)

  56,844    1,033

Anthracite Capital, Inc. (ö)

  3,898    28

Anworth Mortgage Asset Corp. (ö)(Ñ)

  32,200    266

Apollo Investment Corp. (Ñ)

  11,000    188

Arch Capital Group, Ltd. (Æ)(Ñ)

  9,200    647

Ashford Hospitality Trust, Inc. (ö)(Ñ)

  23,700    170

Aspen Insurance Holdings, Ltd. (Ñ)

  12,700    366

Assurant, Inc. (Ñ)

  9,404    629

Astoria Financial Corp. (Ñ)

  9,600    223

Axis Capital Holdings, Ltd.

  11,600    452
   Principal
Amount ($)
or Shares
    Market
Value
$

Bancfirst Corp. (Ñ)

  1,000    43

Banco Latinoamericano de Exportaciones SA Class E

  3,300    54

Bancorpsouth, Inc. (Ñ)

  4,200    99

Bank of Hawaii Corp. (Ñ)

  6,000    307

BankUnited Financial Corp. Class A

  15,336    106

BioMed Realty Trust, Inc. (ö)

  7,000    162

BOK Financial Corp. (Ñ)

  930    48

Broadridge Financial Solutions, Inc. (Ñ)

  30,200    677

Calamos Asset Management, Inc. Class A

  2,886    86

Capitol Bancorp, Ltd.

  2,600    52

Capstead Mortgage Corp. (ö)(Ñ)

  23,200    306

Cash America International, Inc.

  7,797    252

CIT Group, Inc. (Ñ)

  4,800    115

City Bank (Ñ)

  1,200    27

City National Corp. (Ñ)

  3,800    226

CNA Surety Corp. (Æ)(Ñ)

  2,800    55

Colonial BancGroup, Inc. (The)

  203    3

Commerce Bancshares, Inc. (Ñ)

  4,826    216

Corus Bankshares, Inc.

  17,894    191

CyberSource Corp. (Æ)

  17,600    313

Darwin Professional Underwriters, Inc. (Æ)

  900    22

Deerfield Capital Corp. (ö)(Ñ)

  14,400    115

Deluxe Corp. (Ñ)

  35,813    1,178

Digital Realty Trust, Inc. (ö)

  3,493    134

Dime Community Bancshares (Ñ)

  14,100    180

DST Systems, Inc. (Æ)

  1,986    164

East West Bancorp, Inc. (Ñ)

  12,533    304

EastGroup Properties, Inc. (ö)(Ñ)

  700    29

Eaton Vance Corp.

  6,213    282

EMC Insurance Group, Inc. (Ñ)

  900    21

Equity Lifestyle Properties, Inc. (ö)

  1,731    79

Euronet Worldwide, Inc. (Æ)(Ñ)

  26,107    783

Evercore Partners, Inc. Class A (Ñ)

  1,000    22

Factset Research Systems, Inc. (Ñ)

  5,000    279

Fair Isaac Corp.

  115    4

FBL Financial Group, Inc. Class A

  1,800    62

FCStone Group, Inc. (Æ)(Ñ)

  7,900    364

Federated Investors, Inc. Class B

  6,861    282

Fidelity National Financial, Inc. Class A (Ñ)

  17,200    251

First American Corp. (Ñ)

  9,600    328

First Marblehead Corp. (The)

  1,626    25

FirstFed Financial Corp. (Æ)

  4,882    175

Flushing Financial Corp. (Ñ)

  10,800    173

Frontier Financial Corp.

  1,344    25

 

26 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

GAMCO Investors, Inc. Class A (Ñ)

  1,500    104

Global Payments, Inc.

  15,139    704

Gramercy Capital Corp. (ö)(Ñ)

  1,000    24

Great Southern Bancorp, Inc. (Ñ)

  700    15

Green Bankshares, Inc. (Ñ)

  1,200    23

Greenhill & Co., Inc.

  1,738    116

Hallmark Financial Services, Inc. (Æ)

  1,300    21

Hanover Insurance Group, Inc. (The)

  6,000    275

Harleysville Group, Inc. (Ñ)

  2,000    71

HCC Insurance Holdings, Inc.

  9,750    280

Heartland Payment Systems, Inc.

  1,791    48

Hercules Technology Growth Capital, Inc. (Ñ)

  26,300    327

Hersha Hospitality Trust (ö)(Ñ)

  3,400    32

Hospitality Properties Trust (ö)(Ñ)

  10,100    325

HRPT Properties Trust (ö)(Ñ)

  27,400    212

Huron Consulting Group, Inc. (Æ)(Ñ)

  6,300    508

Hypercom Corp. (Æ)(Ñ)

  3,400    17

IBERIABANK Corp. (Ñ)

  1,100    51

Imperial Capital Bancorp, Inc.

  987    18

Intervest Bancshares Corp. Class A (Ñ)

  2,300    40

Invesco, Ltd. (Ñ)

  22,629    710

Investors Bancorp, Inc. (Æ)

  17,700    250

Investors Real Estate Trust (ö)

  2,600    23

IPC Holdings, Ltd. (Ñ)

  13,300    384

Jack Henry & Associates, Inc.

  4,445    108

Janus Capital Group, Inc. (Ñ)

  4,700    154

Jefferies Group, Inc. (Ñ)

  14,828    342

JER Investment Trust, Inc. (Æ)(Þ)

  9,200    99

Jones Lang LaSalle, Inc.

  1,498    107

Kearny Financial Corp. (Ñ)

  5,800    69

Liberty Property Trust (ö)(Ñ)

  7,700    222

MCG Capital Corp. (Ñ)

  9,400    109

Meadowbrook Insurance Group, Inc. (Æ)(Ñ)

  20,200    190

MFA Mortgage Investments, Inc. (ö)

  89,500    828

Midwest Banc Holdings, Inc.

  15,400    191

MVC Capital, Inc.

  2,400    39

Nasdaq Stock Market, Inc. (The) (Æ)(Ñ)

  21,759    1,077

National Retail Properties, Inc. (ö)

  10,722    251

Nationwide Financial Services, Inc.

  5,900    266

Nationwide Health Properties, Inc. (ö)

  418    13

NewStar Financial, Inc. (Æ)(Ñ)

  2,200    18

NorthStar Realty Finance Corp. (ö)(Ñ)

  4,600    41

Ocwen Financial Corp. (Æ)

  8,817    49

Odyssey Re Holdings Corp. (Ñ)

  5,800    213

Old National Bancorp (Ñ)

  15,200    227
   Principal
Amount ($)
or Shares
    Market
Value
$

OMEGA Healthcare Investors, Inc. (ö)

  1,182    19

OneBeacon Insurance Group, Ltd. Class A

  3,500    75

optionsXpress Holdings, Inc. (Ñ)

  13,757    465

Pacific Capital Bancorp NA

  1,323    27

Pennsylvania Real Estate Investment Trust (ö)(Ñ)

  5,100    151

People’s United Financial, Inc. (Ñ)

  27,207    484

Philadelphia Consolidated Holding Co. (Æ)

  5,247    206

Phoenix Cos., Inc. (The) (Ñ)

  13,100    156

Platinum Underwriters Holdings, Ltd.

  9,900    352

Potlatch Corp. (ö)(Ñ)

  9,788    435

Preferred Bank (Ñ)

  1,050    27

Protective Life Corp.

  7,600    312

Provident New York Bancorp (Ñ)

  3,500    45

Raymond James Financial, Inc. (Ñ)

  24,300    794

Realty Income Corp. (ö)

  4,040    109

Reinsurance Group of America, Inc. (Ñ)

  5,700    299

RenaissanceRe Holdings, Ltd.

  2,400    145

Ryder System, Inc. (Ñ)

  3,800    179

S1 Corp. (Æ)(Ñ)

  35,540    259

Safety Insurance Group, Inc.

  3,611    132

SEI Investments Co. (Ñ)

  29,000    933

StanCorp Financial Group, Inc.

  6,800    343

Sterling Bancorp (Ñ)

  9,100    124

Sterling Bancshares, Inc. (Ñ)

  11,200    125

Strategic Hotels & Resorts, Inc. (ö)

  5,582    93

Sun Bancorp, Inc. (Æ)(Ñ)

  1,500    24

Superior Bancorp (Æ)(Ñ)

  3,700    20

SWS Group, Inc. (Ñ)

  10,327    131

Taylor Capital Group, Inc. (Ñ)

  1,834    37

Total System Services, Inc. (Ñ)

  10,037    281

Transatlantic Holdings, Inc. (Ñ)

  1,600    116

United America Indemnity, Ltd. Class A (Æ)

  3,500    70

United Fire & Casualty Co. (Ñ)

  1,600    47

Universal American Financial Corp. (Æ)(Ñ)

  7,672    196

Universal Health Realty Income Trust (ö)

  1,204    43

Unum Group (Ñ)

  13,600    324

Ventas, Inc. (ö)

  3,424    155

ViewPoint Financial Group

  8,800    145

Waddell & Reed Financial, Inc. Class A

  4,840    175

Webster Financial Corp. (Ñ)

  7,894    252

West Coast Bancorp (Ñ)

  900    17

 

Aggressive Equity Fund 27


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Whitney Holding Corp. (Ñ)

  6,900    180

Wilmington Trust Corp. (Ñ)

  3,500    123

Winthrop Realty Trust (ö)

  6,900    37

WP Stewart & Co., Ltd. (Æ)

  2,300    12

Wright Express Corp. (Æ)

  3,585    127

Zenith National Insurance Corp. (Ñ)

  13,874    621
       
      33,073
       

Health Care - 11.2%

      

Abaxis, Inc. (Æ)

  8,700    312

Accelrys, Inc. (Æ)(Ñ)

  24,600    185

Advanced Medical Optics, Inc. (Æ)(Ñ)

  14,200    348

Air Methods Corp. (Æ)

  1,067    53

Albany Molecular Research, Inc. (Æ)

  2,654    38

Allscripts Healthcare Solutions, Inc. (Æ)(Ñ)

  18,848    366

Alnylam Pharmaceuticals, Inc. (Æ)

  12    

Amedisys, Inc. (Æ)(Ñ)

  6,700    325

American Medical Systems Holdings, Inc. (Æ)(Ñ)

  15,140    219

AMERIGROUP Corp. Class A (Æ)(Ñ)

  19,900    725

Amsurg Corp. Class A (Æ)

  555    15

Applera Corp. - Celera Group (Æ)

  13,500    214

Apria Healthcare Group, Inc. (Æ)

  1,425    31

Arthrocare Corp. (Æ)(Ñ)

  5,156    248

Beckman Coulter, Inc. (Ñ)

  3,100    226

Bio-Rad Laboratories, Inc. Class A (Æ)

  3,700    383

Bradley Pharmaceuticals, Inc. (Æ)

  3,108    61

Centene Corp. (Æ)(Ñ)

  9,900    272

Cephalon, Inc. (Æ)

  2,158    155

Cepheid, Inc. (Æ)(Ñ)

  6,800    179

Charles River Laboratories International, Inc. (Æ)(Ñ)

  2,500    164

Community Health Systems, Inc. (Æ)(Ñ)

  10,800    398

Conmed Corp. (Æ)(Ñ)

  7,831    181

Cooper Cos., Inc. (The) (Ñ)

  11,600    441

Cubist Pharmaceuticals, Inc. (Æ)

  5,598    115

Cypress Bioscience, Inc. (Æ)

  8,100    89

Datascope Corp. (Ñ)

  8,500    309

DENTSPLY International, Inc.

  4,969    224

Discovery Laboratories, Inc. (Æ)(Ñ)

  14,200    31

Eclipsys Corp. (Æ)

  6,231    158

Emergency Medical Services Corp. Class A (Æ)(Ñ)

  4,082    120

Endo Pharmaceuticals Holdings, Inc. (Æ)

  5,692    152

eResearchTechnology, Inc. (Æ)(Ñ)

  22,400    265
   Principal
Amount ($)
or Shares
    Market
Value
$

Gen-Probe, Inc. (Æ)(Ñ)

  6,100    384

Greatbatch, Inc. (Æ)

  4,590    92

Haemonetics Corp. (Æ)(Ñ)

  9,511    599

Hanger Orthopedic Group, Inc. (Æ)(Ñ)

  1,400    15

Health Net, Inc. (Æ)

  5,114    247

Healthspring, Inc. (Æ)

  25,106    478

Healthways, Inc. (Æ)(Ñ)

  4,426    259

Henry Schein, Inc. (Æ)

  606    37

HMS Holdings Corp. (Æ)(Ñ)

  30,088    999

Hologic, Inc. (Æ)(Ñ)

  12,412    852

I-Flow Corp. (Æ)

  3,615    57

Icon PLC - ADR (Æ)

  8,290    513

Illumina, Inc. (Æ)(Ñ)

  19,472    1,154

Immucor, Inc. (Æ)(Ñ)

  32,424    1,102

IMS Health, Inc.

  5,900    136

Intuitive Surgical, Inc. (Æ)(Ñ)

  2,598    843

Invacare Corp. (Ñ)

  22,068    556

Invitrogen Corp. (Æ)(Ñ)

  8,100    757

Isis Pharmaceuticals, Inc. (Æ)(Ñ)

  6,100    96

Kendle International, Inc. (Æ)

  2,989    146

Kindred Healthcare, Inc. (Æ)(Ñ)

  3,000    75

King Pharmaceuticals, Inc. (Æ)(Ñ)

  34,534    354

KV Pharmaceutical Co. Class A (Æ)(Ñ)

  12,800    365

Lincare Holdings, Inc. (Æ)

  4,049    142

Martek Biosciences Corp. (Æ)

  2,859    85

Masimo Corp. (Æ)(Ñ)

  6,133    242

Matria Healthcare, Inc. (Æ)

  3,593    85

Medcath Corp. (Æ)

  3,698    91

Medicis Pharmaceutical Corp. Class A (Ñ)

  8,664    225

Medtox Scientific, Inc. (Æ)

  1,275    23

Meridian Bioscience, Inc. (Ñ)

  12,000    361

Millipore Corp. (Æ)(Ñ)

  4,100    300

Molina Healthcare, Inc. (Æ)(Ñ)

  5,200    201

Myriad Genetics, Inc. (Æ)(Ñ)

  7,400    344

Neurocrine Biosciences, Inc. (Æ)(Ñ)

  13,100    59

NuVasive, Inc. (Æ)

  3,800    150

Omrix Biopharmaceuticals, Inc. (Æ)(Ñ)

  7,000    243

OSI Pharmaceuticals, Inc. (Æ)

  2,519    122

Par Pharmaceutical Cos., Inc. (Æ)

  3,000    72

Patterson Cos., Inc. (Æ)

  3,740    127

Pediatrix Medical Group, Inc. (Æ)(Ñ)

  12,145    828

Perrigo Co. (Ñ)

  12,053    422

Pharmacopeia, Inc. (Æ)(Ñ)

  16,050    77

PharmaNet Development Group, Inc. (Æ)

  654    26

PharMerica Corp. (Æ)(Ñ)

  9,400    130

Phase Forward, Inc. (Æ)(Ñ)

  2,700    59

Psychiatric Solutions, Inc. (Æ)(Ñ)

  33,199    1,079

 

28 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Quality Systems, Inc. (Ñ)

  10,474    319

Resmed, Inc. (Æ)(Ñ)

  8,335    438

Sciele Pharma, Inc. (Æ)

  5,609    115

Sirona Dental Systems, Inc. (Æ)(Ñ)

  15,510    519

SurModics, Inc. (Æ)

  167    9

Symmetry Medical, Inc. (Æ)

  2,116    37

Techne Corp. (Æ)

  9,496    627

VCA Antech, Inc. (Æ)

  15,600    690

Watson Pharmaceuticals, Inc. Class B (Æ)

  9,726    264

WellCare Health Plans, Inc. (Æ)

  579    25

West Pharmaceutical Services, Inc.

  1,300    53
       
      25,707
       

Materials and Processing - 11.5%

    

Airgas, Inc.

  12,845    669

AK Steel Holding Corp. (Æ)

  3,544    164

Albemarle Corp. (Ñ)

  16,288    672

Ashland, Inc. (Ñ)

  6,300    299

Ball Corp.

  8,784    395

Barnes Group, Inc. (Ñ)

  9,936    332

Bluegreen Corp. (Æ)(Ñ)

  3,000    22

Buckeye Technologies, Inc. (Æ)(Ñ)

  41,375    517

Cambrex Corp. (Ñ)

  23,500    197

Carpenter Technology Corp. (Ñ)

  6,926    521

Celanese Corp. Class A

  23,389    990

CF Industries Holdings, Inc.

  4,144    456

Chemtura Corp.

  52,600    410

Chicago Bridge & Iron Co. NV

  12,423    751

Cie Generale de Geophysique-Veritas - ADR (Æ)

  5,109    286

Comfort Systems USA, Inc. (Ñ)

  9,800    125

Commercial Metals Co.

  4,637    137

Constar International, Inc. (Æ)(Ñ)

  10,500    43

Corn Products International, Inc. (Ñ)

  8,502    312

Crown Holdings, Inc. (Æ)

  17,600    451

Cytec Industries, Inc. (Ñ)

  12,100    745

DuPont Fabros Technology, Inc. (ö)(Ñ)

  11,200    220

Dycom Industries, Inc. (Æ)

  2,800    75

Dynamic Materials Corp. (Ñ)

  5,900    348

Eastman Chemical Co. (Ñ)

  9,289    567

EMCOR Group, Inc. (Æ)

  28,912    683

EnerSys (Æ)(Ñ)

  2,400    60

Ennis, Inc. (Ñ)

  5,900    106

Ferro Corp.

  1,911    40

Glatfelter

  18,900    289

GrafTech International, Ltd. (Æ)

  12,251    217

Granite Construction, Inc.

  5,500    199
   Principal
Amount ($)
or Shares
    Market
Value
$

Haynes International, Inc. (Æ)(Ñ)

  6,100    424

HB Fuller Co.

  7,300    164

Hecla Mining Co. (Æ)

  6,937    65

Hercules, Inc. (Ñ)

  19,344    374

Hilltop Holdings, Inc. (Æ)(Ñ)

  3,800    41

Innospec, Inc.

  5,538    95

Interface, Inc. Class A

  792    13

Jacobs Engineering Group, Inc. (Æ)(Ñ)

  12,570    1,202

KBR, Inc. (Æ)(Ñ)

  17,850    693

Koppers Holdings, Inc. (Ñ)

  4,400    190

Layne Christensen Co. (Æ)(Ñ)

  2,600    128

LB Foster Co. Class A (Æ)(Ñ)

  7,961    412

Lennox International, Inc. (Ñ)

  14,293    592

LSI Industries, Inc.

  4,300    78

Lubrizol Corp.

  3,600    195

Lydall, Inc. (Æ)

  1,200    13

McDermott International, Inc. (Æ)

  23,409    1,382

Meruelo Maddux Properties, Inc. (Æ)(Ñ)

  1,800    7

Michael Baker Corp. (Æ)

  767    32

Myers Industries, Inc. (Ñ)

  12,900    187

NewMarket Corp. (Ñ)

  500    28

Olin Corp. (Ñ)

  25,200    487

OM Group, Inc. (Æ)

  12,993    748

Owens-Illinois, Inc. (Æ)

  6,558    325

Perini Corp. (Æ)(Ñ)

  5,159    214

PolyOne Corp. (Æ)(Ñ)

  11,600    76

Quanta Services, Inc. (Æ)(Ñ)

  22,800    598

Reliance Steel & Aluminum Co.

  236    13

Rock-Tenn Co. Class A (Ñ)

  22,197    564

Rockwood Holdings, Inc. (Æ)

  3,647    121

RTI International Metals, Inc. (Æ)(Ñ)

  5,150    355

Schnitzer Steel Industries, Inc. Class A (Ñ)

  5,343    369

Shaw Group, Inc. (The) (Æ)

  3,178    192

Sigma-Aldrich Corp.

  10,100    551

Simpson Manufacturing Co., Inc.

  3,315    88

Sonoco Products Co.

  19,029    622

Spartech Corp.

  18,762    265

Standard Register Co. (The) (Ñ)

  2,100    24

Superior Essex, Inc. (Æ)(Ñ)

  5,451    131

Terra Nitrogen Co., LP (Ñ)

  2,000    299

Timken Co.

  10,700    351

Tredegar Corp.

  4,868    78

Tronox, Inc. Class B (Ñ)

  4,800    42

URS Corp. (Æ)(Ñ)

  30,586    1,662

USEC, Inc. (Æ)(Ñ)

  27,010    243

Valspar Corp. (Ñ)

  5,600    126

 

Aggressive Equity Fund 29


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Wausau Paper Corp. (Ñ)

  4,700    42

Xerium Technologies, Inc.

  3,100    16

Zep, Inc. (Æ)

  212    3
       
      26,218
       

Miscellaneous - 0.6%

      

Brunswick Corp. (Ñ)

  18,575    317

Castlepoint Holdings, Ltd. (Æ)(Þ)

  30,900    371

iPCS, Inc.

  177    6

Lancaster Colony Corp. (Ñ)

  4,400    175

Teleflex, Inc.

  7,771    489
       
      1,358
       

Other Energy - 6.3%

      

Atlas America, Inc. (Ñ)

  6,500    385

ATP Oil & Gas Corp. (Æ)

  5,400    273

Atwood Oceanics, Inc. (Æ)(Ñ)

  7,740    776

Berry Petroleum Co. Class A (Ñ)

  7,600    338

Bois d’Arc Energy, Inc. (Æ)(Ñ)

  16,200    321

Brigham Exploration Co. (Æ)(Ñ)

  40,790    307

Bronco Drilling Co., Inc. (Æ)

  2,499    37

Cameron International Corp. (Æ)(Ñ)

  6,600    318

CARBO Ceramics, Inc. (Ñ)

  6,000    223

Carrizo Oil & Gas, Inc. (Æ)(Ñ)

  7,900    432

Comstock Resources, Inc. (Æ)

  524    18

Continental Resources, Inc. (Æ)(Ñ)

  2,100    55

Core Laboratories NV (Æ)(Ñ)

  7,015    875

Dawson Geophysical Co. (Æ)(Ñ)

  1,100    79

Delek US Holdings, Inc. (Ñ)

  9,800    198

Dresser-Rand Group, Inc. (Æ)

  8,374    327

Dril-Quip, Inc. (Æ)(Ñ)

  11,400    634

EnerNOC, Inc. - ADR (Æ)(Ñ)

  5,600    275

FMC Technologies, Inc. (Æ)(Ñ)

  8,494    482

Frontier Oil Corp. (Ñ)

  2,400    97

Global Industries, Ltd. (Æ)

  15,056    322

Goodrich Petroleum Corp. (Æ)(Ñ)

  8,124    184

Grey Wolf, Inc. (Æ)(Ñ)

  41,900    223

Helmerich & Payne, Inc. (Ñ)

  9,900    397

Hornbeck Offshore Services, Inc. (Æ)(Ñ)

  9,700    436

JA Solar Holdings Co., Ltd. - ADR (Æ)(Ñ)

  5,000    349

Mariner Energy, Inc. (Æ)

  5,658    129

Meridian Resource Corp. (Æ)

  8,689    16

NATCO Group, Inc. Class A (Æ)(Ñ)

  6,815    369

Newfield Exploration Co. (Æ)

  5,050    266

Oceaneering International, Inc. (Æ)

  12,392    835

Ormat Technologies, Inc. (Ñ)

  4,900    269

Patterson-UTI Energy, Inc.

  5,000    98
   Principal
Amount ($)
or Shares
    Market
Value
$

Petrohawk Energy Corp. (Æ)

  9,346    162

Petroquest Energy, Inc. (Æ)(Ñ)

  42,900    613

Quicksilver Resources, Inc. (Æ)

  3,000    179

Range Resources Corp.

  5,000    257

Rosetta Resources, Inc. (Æ)

  2,648    52

SEACOR Holdings, Inc. (Æ)(Ñ)

  3,600    334

Southwestern Energy Co. (Æ)(Ñ)

  9,200    513

Stone Energy Corp. (Æ)

  14,000    657

T-3 Energy Services, Inc. (Æ)

  400    19

Targa Resources Partners, LP (Ñ)

  5,700    169

Tesoro Corp. (Ñ)

  14,435    688

TETRA Technologies, Inc. (Æ)(Ñ)

  11,100    173

Union Drilling, Inc. (Æ)(Ñ)

  2,900    46

W&T Offshore, Inc.

  4,390    131

Western Refining, Inc. (Ñ)

  6,400    155
       
      14,491
       

Producer Durables - 9.1%

      

Actuant Corp. Class A

  290    10

AGCO Corp. (Æ)(Ñ)

  10,227    695

Arris Group, Inc. (Æ)(Ñ)

  36,090    360

BE Aerospace, Inc. (Æ)

  26,600    1,407

Belden, Inc. (Ñ)

  14,611    650

Chart Industries, Inc. (Æ)

  12,971    401

Cognex Corp. (Ñ)

  22,400    451

Cohu, Inc. (Ñ)

  14,700    225

Crane Co. (Ñ)

  8,200    352

Credence Systems Corp. (Æ)(Ñ)

  51,799    125

CTS Corp. (Ñ)

  12,913    128

Darling International, Inc. (Æ)

  14,357    166

Dionex Corp. (Æ)(Ñ)

  3,200    265

EnPro Industries, Inc. (Æ)

  528    16

ESCO Technologies, Inc. (Æ)(Ñ)

  5,400    216

Esterline Technologies Corp. (Æ)

  2,509    130

Flowserve Corp.

  7,900    760

Gardner Denver, Inc. (Æ)

  15,700    518

General Cable Corp. (Æ)(Ñ)

  6,637    486

Goodrich Corp. (Ñ)

  18,571    1,311

HNI Corp. (Ñ)

  6,100    214

Hubbell, Inc. Class B (Ñ)

  14,554    751

Joy Global, Inc. (Ñ)

  5,255    346

Kennametal, Inc.

  11,300    428

Kimball International, Inc. Class B (Ñ)

  3,800    52

Knoll, Inc.

  4,382    72

Lexmark International, Inc. Class A (Æ)

  5,049    176

LTX Corp. (Æ)

  10,396    33

Manitowoc Co., Inc. (The) (Ñ)

  2,000    98

MasTec, Inc. (Æ)(Ñ)

  4,200    43

 

30 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Mercadolibre, Inc. (Æ)

  6,400    473

Milacron, Inc. (Æ)(Ñ)

  3,124    10

Molex, Inc. (Ñ)

  7,700    210

Moog, Inc. Class A (Æ)(Ñ)

  4,515    207

Pall Corp.

  20,800    839

Park-Ohio Holdings Corp. (Æ)(Ñ)

  700    18

Plantronics, Inc.

  338    9

Polycom, Inc. (Æ)(Ñ)

  19,945    554

Ritchie Bros Auctioneers, Inc.

  12,387    1,024

Robbins & Myers, Inc. (Ñ)

  13,200    998

Steelcase, Inc. Class A (Ñ)

  26,227    416

Sun Hydraulics Corp. (Ñ)

  3,000    76

Suntech Power Holdings Co., Ltd. - ADR (Æ)(Ñ)

  7,000    576

Tecumseh Products Co. Class A (Æ)(Ñ)

  19,318    452

Teledyne Technologies, Inc. (Æ)(Ñ)

  6,600    352

Tennant Co. (Ñ)

  3,200    142

Teradyne, Inc. (Æ)

  41,792    432

Terex Corp. (Æ)

  2,924    192

TransDigm Group, Inc. (Æ)

  9,200    416

Triumph Group, Inc. (Ñ)

  8,300    683

Ultra Clean Holdings, Inc. (Æ)

  3,486    42

Ultratech, Inc. (Æ)(Ñ)

  19,200    218

Waters Corp. (Æ)

  8,200    648

Woodward Governor Co. (Ñ)

  6,642    451

WW Grainger, Inc.

  4,600    403
       
      20,726
       

Technology - 17.6%

      

ActivIdentity Corp. (Æ)(Ñ)

  500    2

Adaptec, Inc. (Æ)

  21,100    71

ADC Telecommunications, Inc. (Æ)(Ñ)

  17,400    271

Adtran, Inc. (Ñ)

  11,200    239

Alliance Semiconductor Corp.

  16,700    27

Amkor Technology, Inc. (Æ)(Ñ)

  10,800    92

Amphenol Corp. Class A (Ñ)

  26,871    1,246

Ansys, Inc. (Æ)(Ñ)

  34,801    1,443

Applied Micro Circuits Corp. (Æ)(Ñ)

  9,099    80

ARM Holdings PLC - ADR

  35,200    260

Arrow Electronics, Inc. (Æ)

  2,190    86

AsiaInfo Holdings, Inc. (Æ)

  1,862    20

Atheros Communications, Inc. (Æ)(Ñ)

  3,800    116

Atmel Corp. (Æ)(Ñ)

  6,500    28

Avanex Corp. (Æ)(Ñ)

  64,900    65

Avici Systems, Inc.

  2,200    17

Avnet, Inc. (Æ)

  18,634    652

Avocent Corp. (Æ)

  1,056    25

AVX Corp.

  11,950    160

BearingPoint, Inc. (Æ)(Ñ)

  36,500    103
   Principal
Amount ($)
or Shares
    Market
Value
$

Blackboard, Inc. (Æ)(Ñ)

  14,000    564

BMC Software, Inc. (Æ)

  5,757    205

Bookham, Inc. (Æ)(Ñ)

  12,600    30

Brocade Communications Systems, Inc. (Æ)(Ñ)

  68,500    503

CACI International, Inc. Class A (Æ)

  3,277    147

Captaris, Inc. (Æ)

  2,903    13

Cavium Networks, Inc. (Æ)(Ñ)

  13,700    315

Cbeyond, Inc. (Æ)(Ñ)

  4,300    168

Checkpoint Systems, Inc. (Æ)(Ñ)

  9,000    234

Ciber, Inc. (Æ)(Ñ)

  2,500    15

Ciena Corp. (Æ)(Ñ)

  7,021    239

Cognizant Technology Solutions Corp. Class A (Æ)

  10,200    346

CommScope, Inc. (Æ)(Ñ)

  9,937    489

Compuware Corp. (Æ)(Ñ)

  6,600    59

Comtech Telecommunications Corp. (Æ)(Ñ)

  10,323    558

Comverse Technology, Inc. (Æ)(Ñ)

  20,700    357

Conexant Systems, Inc. (Æ)(Ñ)

  53,700    45

Cray, Inc. (Æ)

  3,300    20

CSG Systems International, Inc. (Æ)(Ñ)

  12,237    180

Cubic Corp. (Ñ)

  8,400    329

Data Domain, Inc. (Æ)

  11,900    313

Digital River, Inc. (Æ)

  3,096    102

Diodes, Inc. (Æ)(Ñ)

  20,451    615

DivX, Inc. (Æ)(Ñ)

  17,300    242

DRS Technologies, Inc.

  101    5

EPIQ Systems, Inc. (Æ)(Ñ)

  31,274    544

Equinix, Inc. (Æ)(Ñ)

  8,748    884

Extreme Networks, Inc. (Æ)(Ñ)

  16,200    57

F5 Networks, Inc. (Æ)(Ñ)

  10,655    304

First Solar, Inc. (Æ)(Ñ)

  1,800    481

Flir Systems, Inc. (Æ)(Ñ)

  27,140    849

Foundry Networks, Inc. (Æ)(Ñ)

  41,859    733

GeoEye, Inc. (Æ)(Ñ)

  17,295    582

Gerber Scientific, Inc. (Æ)(Ñ)

  3,300    36

Harris Corp. (Ñ)

  11,151    699

Hittite Microwave Corp. (Æ)(Ñ)

  14,296    683

Ikanos Communications, Inc. (Æ)

  16,600    89

Imation Corp. (Ñ)

  12,600    265

Informatica Corp. (Æ)(Ñ)

  42,067    758

Ingram Micro, Inc. Class A (Æ)

  18,100    327

Interactive Intelligence, Inc. (Æ)

  529    14

Intermec, Inc. (Æ)(Ñ)

  13,518    275

Interwoven, Inc. (Æ)

  26,000    370

Intuit, Inc. (Æ)(Ñ)

  14,426    456

ION Geophysical Corp. (Æ)(Ñ)

  19,900    314

Ixia (Æ)

  1,700    16

 

Aggressive Equity Fund 31


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

JDA Software Group, Inc. (Æ)(Ñ)

  4,500    92

JDS Uniphase Corp. (Æ)(Ñ)

  14,400    192

Keynote Systems, Inc. (Æ)(Ñ)

  14,700    207

Lawson Software, Inc. (Æ)

  12,751    131

Manhattan Associates, Inc. (Æ)

  9,838    259

Marvell Technology Group, Ltd. (Æ)

  18,750    262

MEMC Electronic Materials, Inc. (Æ)

  4,400    389

Mercury Computer Systems, Inc. (Æ)(Ñ)

  11,200    180

Merrimac Industries, Inc. (Æ)(Ñ)

  3,300    33

Methode Electronics, Inc.

  11,237    185

Micrel, Inc. (Ñ)

  56,890    481

Micros Systems, Inc. (Æ)(Ñ)

  17,634    1,237

Microsemi Corp. (Æ)(Ñ)

  19,424    430

Monolithic Power Systems, Inc. (Æ)(Ñ)

  12,470    268

NAM TAI Electronics, Inc. (Ñ)

  13,500    152

Netlogic Microsystems, Inc. (Æ)(Ñ)

  13,000    419

NetSuite, Inc. (Æ)(Ñ)

  2,446    96

Nice Systems, Ltd. - ADR (Æ)(Ñ)

  35,781    1,228

Nuance Communications, Inc. (Æ)(Ñ)

  9,600    179

Omniture, Inc. (Æ)

  10,500    350

ON Semiconductor Corp. (Æ)

  16,923    150

Openwave Systems, Inc. (Ñ)

  7,700    20

Orckit Communications, Ltd. (Æ)(Ñ)

  12,300    82

PerkinElmer, Inc.

  33,951    883

Power Integrations, Inc. (Æ)

  2,600    90

Rackable Systems, Inc. (Æ)(Ñ)

  8,300    83

RADWARE, Ltd. (Æ)(Ñ)

  7,600    117

RealNetworks, Inc. (Æ)(Ñ)

  45,300    276

RF Micro Devices, Inc. (Æ)

  21,206    121

SAIC, Inc. (Æ)(Ñ)

  6,700    135

SanDisk Corp. (Æ)(Ñ)

  9,809    325

Sanmina-SCI Corp. (Æ)(Ñ)

  90,700    165

Sapient Corp. (Æ)(Ñ)

  17,200    152

Satyam Computer Services, Ltd. - ADR (Ñ)

  21,030    562

Seachange International, Inc. (Æ)(Ñ)

  24,300    176

Seagate Technology

  3,397    87

Secure Computing Corp. (Æ)

  11,886    114

Sigma Designs, Inc. (Æ)(Ñ)

  3,900    215

Sigmatel, Inc. (Æ)(Ñ)

  6,200    13

Silicon Image, Inc. (Æ)

  8,800    40

SiRF Technology Holdings, Inc. (Æ)(Ñ)

  20,213    508

Skyworks Solutions, Inc. (Æ)(Ñ)

  77,000    654

SonicWALL, Inc. (Æ)(Ñ)

  16,300    175

SRA International, Inc. Class A (Æ)

  4,838    142

Sunpower Corp. Class A (Æ)(Ñ)

  1,900    248

Sybase, Inc. (Æ)

  12,441    325
   Principal
Amount ($)
or Shares
    Market
Value
$

Sycamore Networks, Inc. (Æ)(Ñ)

  17,800    68

Synchronoss Technologies, Inc. (Æ)

  3,310    117

Syniverse Holdings, Inc. (Æ)(Ñ)

  33,783    526

SYNNEX Corp. (Æ)(Ñ)

  5,600    110

Syntel, Inc. (Ñ)

  2,100    81

Taleo Corp. Class A (Æ)

  3,584    107

Tekelec (Æ)(Ñ)

  39,100    489

Tessera Technologies, Inc. (Æ)(Ñ)

  20,317    845

TIBCO Software, Inc. (Æ)(Ñ)

  49,200    397

Trimble Navigation, Ltd. (Æ)(Ñ)

  16,527    500

TriQuint Semiconductor, Inc. (Æ)(Ñ)

  44,700    296

Unisys Corp. (Æ)(Ñ)

  49,900    236

Utstarcom, Inc. (Æ)(Ñ)

  31,000    85

VeriFone Holdings, Inc. (Æ)(Ñ)

  19,800    460

Verigy, Ltd. (Æ)

  37,346    1,015

Verint Systems, Inc. (Æ)(Ñ)

  23,712    464

Vignette Corp. (Æ)

  10,435    152

Vocus, Inc. (Æ)(Ñ)

  16,200    559

Wavecom SA - ADR (Æ)

  5,300    90

Western Digital Corp. (Æ)(Ñ)

  22,500    680

Zebra Technologies Corp. Class A (Æ)

  2,048    71

Zoran Corp. (Æ)(Ñ)

  17,700    398
       
      40,206
       

Utilities - 5.9%

      

AGL Resources, Inc.

  7,655    288

Alliant Energy Corp. (Ñ)

  18,400    749

Atmos Energy Corp. (Ñ)

  21,732    609

Black Hills Corp.

  6,366    281

Canadian Solar, Inc. (Æ)(Ñ)

  18,800    529

Centerpoint Energy, Inc. (Ñ)

  17,400    298

CenturyTel, Inc. (Ñ)

  21,536    893

Cincinnati Bell, Inc. (Æ)

  17,294    82

Citizens Communications Co.

  8,082    103

Cleco Corp. (Ñ)

  33,516    932

CMS Energy Corp. (Ñ)

  15,200    264

Energen Corp.

  12,361    794

FiberTower Corp. (Æ)(Ñ)

  12,800    29

IDT Corp. Class B (Æ)(Ñ)

  7,400    63

Laclede Group, Inc. (The) (Ñ)

  1,524    52

MDU Resources Group, Inc. (Ñ)

  5,400    149

MGE Energy, Inc. (Ñ)

  100    4

New Jersey Resources Corp. (Ñ)

  2,200    110

NII Holdings, Inc. (Æ)

  4,276    207

Northeast Utilities

  38,400    1,202

NTELOS Holdings Corp. (Ñ)

  11,556    343

OGE Energy Corp.

  6,717    244

Oneok, Inc. (Ñ)

  5,300    237

 

32 Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
 
      

Pepco Holdings, Inc. (Ñ)

  13,900    408 

Piedmont Natural Gas Co. (Ñ)

  11,400    298 

Portland General Electric Co. (Ñ)

  7,312    203 

Premiere Global Services, Inc. (Æ)

  11,100    165 

SCANA Corp.

  3,688    155 

Sierra Pacific Resources

  26,300    447 

Southern Union Co. (Ñ)

  15,193    446 

Southwest Gas Corp. (Ñ)

  20,874    621 

Suburban Propane Partners, LP

  3,100    126 

Telephone & Data Systems, Inc.

  7,653    479 

Time Warner Telecom, Inc. Class A (Æ)(Ñ)

  23,011    467 

UGI Corp. (Ñ)

  30,900    842 

UIL Holdings Corp. (Ñ)

  9,200    340 

USA Mobility, Inc. (Æ)

  5,476    78 
        
      13,537 
        

Total Common Stocks

      

(cost $210,006)

      220,357 
        

Warrants & Rights - 0.0%

      

Financial Services - 0.0%

      

Washington Mutual, Inc.
2050 Warrants (Æ)

  42,200    7 
        
Total Warrants & Rights      

(cost $10)

      7 
        
Short-Term Investments - 3.9%      

Russell Investment Company Money Market Fund

  8,009,000    8,009 

United States Treasury Bills (ž)(§)

      

2.962% due 03/20/08

  1,000    993 
        
Total Short-Term Investments      

(cost $9,003)

      9,002 
        
Other Securities - 42.7%      

State Street Securities Lending Quality Trust (×)

  97,816,591    97,817 
        
Total Other Securities      

(cost $97,817)

      97,817 
        
Total Investments - 142.9%      

(identified cost $316,836)

      327,183 
Other Assets and Liabilities,
Net - (42.9%)
      (98,256)
        
Net Assets - 100.0%      228,927 
        

 


 

See accompanying notes which are an integral part of the financial statements.

 

Aggressive Equity Fund 33


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands

 

Futures Contracts
(Number of Contracts)
 Notional
Amount
 Unrealized
Appreciation
(Depreciation)
$
 
  
  
Long Positions  
Russell 2000 Mini Index (CME)
expiration date 03/08 (114)
 USD  8,803 (30)
    
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts
  (30)
    

 

 

Presentation of Portfolio Holdings — December 31, 2007

 

Portfolio Summary  % of Net
Assets
 
  

Auto and Transportation

  2.7 

Consumer Discretionary

  14.6 

Consumer Staples

  2.4 

Financial Services

  14.4 

Health Care

  11.2 

Materials and Processing

  11.5 

Miscellaneous

  0.6 

Other Energy

  6.3 

Producer Durables

  9.1 

Technology

  17.6 

Utilities

  5.9 

Warrants & Rights

  *

Short-Term Investments

  3.9 

Other Securities

  42.7 
    

Total Investments

  142.9 

Other Assets and Liabilities, Net

  (42.9)
    
  100.0 
    

Futures Contracts

  (—)*

 

Lessthan .05% of net assets.

 

See accompanying notes which are an integral part of the financial statements.

 

34 Aggressive Equity Fund


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Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

LOGO

 

Non-U.S. Fund 
   Total
Return
 

1 Year

  10.12%

5 Years

  20.51

10 Years

  8.04

 

MSCI EAFE® Index ** 
   Total
Return
 

1 Year

  11.17%

5 Years

  21.59

10 Years

  8.66

 

 

* Assumes initial investment on January 1, 1998.

 

** Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index is an index composed of an arithmetic, market value-weighted average of the performance of approximately 1,600 securities listed on the stock exchange of the countries of Europe, Australia, and the Far East. The index is calculated on a total-return basis, which includes reinvestment of gross dividends before deduction of withholding taxes.

 

§ Annualized.

Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

36 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

The Non-US Fund (the “Fund”) allocates most of its assets among multiple money managers. Russell Investment Management Company (“RIMCo”), as the Fund’s advisor, may change the allocation of the Fund’s assets among money managers at any time. An exemptive order from the Securities and Exchange Commission (SEC) permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Fund’s Board without a shareholder vote. Pursuant to the terms of the exemptive order, the Fund is required to notify its shareholders within 60 days of when a money manager begins providing services. The Fund currently has four money managers.

What is the Fund’s investment objective?

The Fund seeks to provide long term capital growth.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2007?

For the fiscal year ended December 31, 2007, the Non-U.S. Fund gained 10.12%. This compared to its benchmark the MSCI EAFE® Index, which gained 11.17%. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.

For the year ended December 31, 2007, the Lipper® International Core Funds (VIP) Average returned 12.36%. This result serves as a peer comparison and is expressed net of operating expenses.

How did the market conditions described in the Market Summary report affect the Fund’s performance?

During 2007, the market was quite narrowly led. This was evident in the Fund by the fact that only one manager, Wellington Management Company, LLP, outperformed the MSCI EAFE Index for the year. The market environment was more challenging for each of the other managers. AQR Capital Management, LLC, a quantitative manager, struggled as increased market volatility late in the year negatively affected quantitative strategies in particular. MFS Institutional Advisors, Inc.’s and Altrinsic Global Advisors, LLC’s emphases on growth-at-a-reasonable-price were not rewarded as the market favored stocks with high growth rates, good price momentum, and high valuations.

The Fund’s largest positions during the period were an underweight position in financials and an overweight to consumer staples. While both of these made a positive contribution to the Fund’s relative performance, the effects were overshadowed by underweight positions in some of the stronger returning sectors, including materials, telecommunications and utilities.

Similarly, the Fund’s regional positioning benefited from underweights of Japan and the United Kingdom, but suffered

from an underweight to Asia ex-Japan and a more modest position than most stronger-performing peers in emerging markets.

How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?

Fund results reflect several key exposures during the period. The primary detractors to performance stemmed from the following underweights relative to the index benchmark and/or peers during the period:

 

 

The collective impact of underweights to materials, energy, and telecommunications resulted in missing a substantial opportunity as these sectors provided some of the strongest gains throughout the year. In addition, an overweight of the consumer discretionary sector combined with ineffective security selection also detracted from performance. An underweight of the financials sector made the strongest contribution to performance from a single sector perspective. However, this was overshadowed by the aforementioned underweights.

 

 

The Fund was underweight stocks with high valuations. These stocks produced some of the strongest gains over the period, but gains were concentrated in sectors of the market where earnings were at or near record earnings levels. This created challenges for active managers with any degree of valuation sensitivity with a negative implication for security selection. Wellington’s willingness to pay higher valuations for high growth captured this trend effectively, but it was the only manager to do so.

Non-index exposure was critical during the year given the strength of emerging markets, as well as strong returns of many Canadian stocks. Exposure to these two regions accounted for the largest contributions to performance from a regional perspective. However, relative to peers, the Fund had less exposure to emerging markets and Canada resulting in less positive contributions to performance in peer-relative terms.

Only one of the four managers in the Fund outperformed for the period. Wellington, the Fund’s aggressive growth manager, was a strong performer with significant contributions from regional positioning (particularly emerging markets and Canada) and strong stock selection in financials, industrials, and technology. In contrast, MFS and Altrinsic’s investment approaches, which were focused on a balanced trade-off between growth and value, were not rewarded. AQR, a quantitative manager, was negatively impacted by a steep sell off affecting quantitative managers in the second half of the year. Its emphasis on stocks with both attractive valuations and momentum was out-of-favor particularly in the latter half of the year.


 

Non-U.S. Fund 37


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

Describe any changes to the Fund’s structure or the money manager line-up.

In May 2007, Altrinsic Global Advisors, LLC was hired to replace The Boston Company Asset Management, LLC.

 

Money Managers as of
December 31, 2007
  Styles

Altrinsic Global Advisors, LLC

  Value

AQR Capital Management, LLC

  Market-Oriented

MFS Institutional Advisors, Inc.

  Market-Oriented

Wellington Management Company, LLP

  Growth

 

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for Russell Investment Funds (RIF) are based on numerous factors, should not be relied on as an indication of investment decisions of any RIF Fund.


 

 

38 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Shareholder Expense Example — December 31, 2007 (Unaudited)

 

 

 

Fund Expenses

The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from July 1, 2007 to December 31, 2007.

Actual Expenses

The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Actual
Performance
  Hypothetical
Performance
(5% return
before expenses)
    

Beginning Account Value

    
July 1, 2007  $1,000.00  $1,000.00

Ending Account Value

    
December 31, 2007  $1,002.50  $1,019.41

Expenses Paid During Period*

  $5.80  $5.85

 

*Expenses are equal to the Fund’s annualized expense ratio of 1.15% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Reflects amounts waived and/or reimbursed by the investment adviser. Without the waiver and/or reimbursement, expenses would have been higher.

 

Non-U.S. Fund 39


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Common Stocks - 90.3%

      

Australia - 2.1%

      

Adelaide Brighton, Ltd.

  17,542    53

AGL Energy, Ltd.

  2,791    33

Amcor, Ltd.

  5,761    35

AMP, Ltd.

  12,265    107

Ansell, Ltd.

  13,178    139

APN News & Media, Ltd.

  1,926    9

Asciano Group

  1,774    11

ASX, Ltd.

  960    51

Austereo Group, Ltd.

  2,782    6

Australia & New Zealand Banking Group, Ltd.

  13,053    313

BHP Billiton, Ltd.

  27,958    980

BlueScope Steel, Ltd.

  9,876    83

Caltex Australia, Ltd.

  5,746    97

Centro Properties Group (ö)

  6,423    6

CFS Retail Property Trust (ö)

  4,243    9

Challenger Financial Services Group, Ltd.

  17,805    77

Coca-Cola Amatil, Ltd.

  9,635    80

Commonwealth Bank of Australia

  9,434    487

CSL, Ltd.

  27,228    865

CSR, Ltd. (Ñ)

  14,571    40

DB RREEF Trust (ö)

  28,562    50

Goodman Fielder, Ltd.

  72,155    120

Goodman Group (ö)

  8,246    35

GPT Group (ö)

  13,500    48

Harvey Norman Holdings, Ltd.

  11,871    71

ING Industrial Fund (ö)

  1,357    3

Insurance Australia Group, Ltd.

  8,788    32

Leighton Holdings, Ltd. (Ñ)

  15,121    806

Macquarie Airports

  1,354    5

Macquarie Group, Ltd.

  475    31

Macquarie Infrastructure Group

  18,627    49

Macquarie Office Trust (ö)

  10,185    13

Mirvac Group (ö)

  6,629    35

National Australia Bank, Ltd.

  36,045    1,189

Newcrest Mining, Ltd.

  289    8

Orica, Ltd.

  2,210    61

Origin Energy, Ltd.

  8,697    67

Pacific Brands, Ltd.

  49,459    141

PaperlinX, Ltd.

  20,959    49

Qantas Airways, Ltd.

  40,977    195

QBE Insurance Group, Ltd.

  25,148    733

Rio Tinto, Ltd. (Ñ)

  2,990    349

Santos, Ltd.

  15,899    197

Sons of Gwalia, Ltd. (Æ)(Ñ)(ß)

  8,400    
   Principal
Amount ($)
or Shares
    Market
Value
$

Stockland (ö)

  9,521    70

Suncorp-Metway, Ltd.

  5,081    75

Symbion Health, Ltd.

  4,125    14

TABCORP Holdings, Ltd.

  3,308    43

Telstra Corp., Ltd.

  35,749    140

Toll Holdings, Ltd.

  2,278    23

Wesfarmers, Ltd.

  1,120    40

Wesfarmers, Ltd. (Æ)

  1,120    40

Westfield Group (ö)

  13,530    248

Westpac Banking Corp.

  11,549    281

Woodside Petroleum, Ltd.

  1,222    54

Woolworths, Ltd.

  8,034    238

WorleyParsons, Ltd.

  567    26

Zinifex, Ltd.

  864    9
       
      9,069
       

Austria - 0.5%

      

Erste Bank der Oesterreichischen Sparkassen AG

  29,053    2,065
       

Belgium - 0.4%

      

D’ieteren SA

  66    24

Delhaize Group

  1,756    154

Hansen Transmissions International NV (Æ)

  102,035    585

KBC Groep NV

  1,267    177

Nationale A Portefeuille

  427    30

Solvay SA

  4,961    691
       
      1,661
       

Bermuda - 1.2%

      

Benfield Group, Ltd.

  138,664    777

Catlin Group, Ltd.

  2,688    20

Cnpc Hong Kong, Ltd.

  50,000    32

Esprit Holdings, Ltd.

  8,200    120

Giordano International, Ltd.

  14,000    7

Guoco Group, Ltd.

  2,000    27

Investco, Ltd. (Æ)

  80,777    2,524

Jardine Matheson Holdings, Ltd.

  3,200    88

Jardine Strategic Holdings, Ltd.

  3,000    47

Li & Fung, Ltd.

  206,000    823

Noble Group, Ltd.

  22,000    37

Orient Overseas International, Ltd.

  6,300    46

Seadrill, Ltd. (Æ)

  26,300    633

VTech Holdings, Ltd.

  4,719    34
       
      5,215
       

Brazil - 0.5%

      

Bolsa de Mercadorias e Futuros (Æ)

  56,300    791

 

40 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Cia Vale do Rio Doce - ADR

  14,800    483

Petroleo Brasileiro SA - ADR

  6,600    761
       
      2,035
       

Canada - 1.0%

      

Canadian National Railway Co. (Ñ)

  22,190    1,041

Gammon Gold, Inc. (Æ)

  47,624    384

Potash Corp. of Saskatchewan

  13,000    1,872

Research In Motion, Ltd. (Æ)

  5,600    635

Suncor Energy, Inc.

  5,000    547
       
      4,479
       

Cayman Islands - 0.7%

      

Alibaba.com, Ltd. (Æ)(Þ)

  181,200    642

ASM Pacific Technology

  4,500    33

Focus Media Holding, Ltd. - ADR (Æ)(Ñ)

  2,200    125

Kingboard Chemical Holdings, Ltd.

  12,500    74

Suntech Power Holdings Co., Ltd. - ADR (Æ)(Ñ)

  24,400    2,009

Tencent Holdings, Ltd.

  5,000    37
       
      2,920
       

China - 0.1%

      

China Communications Construction Co., Ltd. Class H

  104,000    268
       

Czech Republic - 0.2%

      

Komercni Banka AS

  3,164    760
       

Denmark - 1.0%

      

Carlsberg A/S Class B

  3,700    445

East Asiatic Co., Ltd. A/S

  1,325    103

FLSmidth & Co. A/S

  400    41

Novo Nordisk A/S Series B

  7,850    512

Rockwool International AS Class B (Ñ)

  145    33

Vestas Wind Systems A/S (Æ)

  28,100    3,004
       
      4,138
       

Egypt - 0.4%

      

Orascom Telecom Holding SAE - GDR

  19,200    1,590
       

Finland - 1.6%

      

Kesko OYJ Class B

  4,139    227

Metso OYJ

  1,272    69

Nokia OYJ

  154,598    5,953

OKO Bank PLC Class A

  5,204    99

Oriola-KD OYJ

  3,400    15

Orion OYJ Class B

  7,439    173
   Principal
Amount ($)
or Shares
    Market
Value
$

Outotec OYJ

  3,925    213

Rautaruukki OYJ

  2,904    123

Stora Enso OYJ Class R

  4,445    66

UPM-Kymmene OYJ

  5,318    106
       
      7,044
       

France - 12.9%

      

ADP (Æ)

  416    42

Air Liquide

  15,418    2,284

Alcatel-Lucent - ADR (Ñ)

  125,840    921

Alstom

  11,293    2,400

Arkema (Æ)

  6,044    394

AXA SA

  67,526    2,689

BNP Paribas

  17,087    1,837

Bouygues (Ñ)

  274    23

Business Objects SA (Æ)

  374    23

Carrefour SA

  21,113    1,637

Casino Guichard Perrachon SA (Ñ)

  2,400    261

Christian Dior SA

  1,470    192

Cie de Saint-Gobain

  1,483    141

Cie Generale de Geophysique-Veritas (Æ)

  1,153    324

Ciments Francais SA

  180    31

CNP Assurances

  3,732    484

Credit Agricole SA

  40,563    1,361

France Telecom SA

  49,609    1,780

Gaz de France SA (Ñ)

  23,789    1,385

Ipsen

  691    42

Klepierre (ö)

  767    39

L’Oreal SA

  10,667    1,523

Lafarge SA

  452    82

Legrand SA

  44,959    1,527

LVMH Moet Hennessy Louis
Vuitton SA

  32,732    3,934

NicOx SA (Æ)(Ñ)

  4,249    68

Pernod-Ricard SA

  9,362    2,156

Peugeot SA

  1,907    143

Publicis Groupe

  10,810    420

Rallye SA (Æ)

  1,254    89

Sanofi-Aventis SA

  36,204    3,309

Schneider Electric SA (Ñ)

  25,560    3,418

SEB SA

  392    71

Societe BIC SA

  2,159    154

Societe Generale

  5,707    816

Societe Television Francaise 1

  22,156    590

Suez SA

  27,830    1,886

Suez SA

  1,228    

Teleperformance

  1,666    65

 

Non-U.S. Fund 41


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Thales SA

  9,622    570

Thomson (Æ)

  5,255    74

Total SA

  86,364    7,167

UBISOFT Entertainment (Æ)

  3,752    378

Unibail-Rodamco (ö)

  715    156

Valeo SA (Ñ)

  3,884    159

Vallourec (Ñ)

  569    153

Veolia Environnement

  39,234    3,563

Vivendi (Ñ)

  111,602    5,085
       
      55,846
       

Germany - 8.3%

      

Allianz SE

  8,134    1,740

Altana AG

  17,789    430

Arcandor AG (Æ)(Ñ)

  107,309    2,542

Arques Industries AG (Ñ)

  7,880    269

BASF AG

  5,767    852

Bayer AG (Ñ)

  46,270    4,219

Bayerische Motoren Werke AG (Ñ)

  22,330    1,379

Daimler AG

  36,292    3,515

Deutsche Bank AG

  3,443    445

Deutsche Boerse AG

  9,993    1,973

Deutsche Telekom AG

  49,245    1,077

E.ON AG (Ñ)

  18,417    3,910

Epcos AG

  14,770    255

Freenet AG (Ñ)

  4,501    105

Hochtief AG

  2,446    326

Kloeckner & Co. AG

  4,175    166

KUKA AG (Æ)

  5,689    213

Lanxess AG (Ñ)

  9,474    460

Linde AG

  21,320    2,808

Merck KGAA

  13,400    1,721

Metro AG

  28,011    2,338

MTU Aero Engines Holding AG

  4,235    246

Norddeutsche Affinerie AG (Ñ)

  2,972    115

RWE AG

  3,167    444

Salzgitter AG

  5,646    831

Siemens AG

  17,541    2,754

Suedzucker AG (Ñ)

  4,988    117

ThyssenKrupp AG

  897    50

Volkswagen AG (Ñ)

  2,296    522

Vossloh AG

  1,900    222
       
      36,044
       

Greece - 0.2%

      

National Bank of Greece SA

  10,329    712
       

Hong Kong - 0.8%

      

BOC Hong Kong Holdings, Ltd.

  43,000    119
   Principal
Amount ($)
or Shares
    Market
Value
$

Cathay Pacific Airways, Ltd.

  12,000    31

Cheung Kong Holdings, Ltd.

  49,640    905

China Resources Enterprise

  72,000    307

China Unicom, Ltd.

  4,000    9

CLP Holdings, Ltd.

  11,500    78

Hang Lung Group, Ltd.

  6,000    32

Hang Lung Properties, Ltd.

  4,000    18

Hang Seng Bank, Ltd.

  3,000    61

Henderson Land Development Co., Ltd.

  9,000    83

Hong Kong & China Gas Co.

  5,000    15

Hong Kong Exchanges and Clearing, Ltd.

  7,500    211

HongKong Electric Holdings

  11,500    66

Hopewell Holdings

  22,000    101

Hutchison Whampoa, Ltd.

  11,000    124

Hysan Development Co., Ltd.

  6,000    17

Industrial and Commercial Bank of China Asia, Ltd.

  2,000    5

Link REIT (The) (ö)

  12,500    27

Minmetals Resources, Ltd.

  40,000    22

New World Development, Ltd.

  14,000    49

Sun Hung Kai Properties, Ltd.

  38,000    799

Swire Pacific, Ltd.

  9,000    123

Techtronic Industries Co.

  6,500    7

Television Broadcasts, Ltd.

  9,000    54

Wharf Holdings, Ltd.

  16,000    83

Wheelock & Co., Ltd.

  16,000    49
       
      3,395
       

India - 0.2%

      

Satyam Computer Services, Ltd. - ADR 

  31,100    831
       

Indonesia - 0.1%

      

Bank Central Asia Tbk PT

  245,500    189

Telekomunikasi Indonesia Tbk PT - ADR

  1,750    73
       
      262
       

Ireland - 0.5%

      

Elan Corp. PLC - ADR (Æ)(Ñ)

  64,300    1,413

Ryanair Holdings PLC - ADR (Æ)(Ñ)

  19,710    778
       
      2,191
       

Italy - 3.5%

      

Alleanza Assicurazioni SpA

  93,388    1,200

Ansaldo STS SpA (Æ)

  68,608    867

 

42 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Arnoldo Mondadori Editore SpA (Ñ)

  105,444    858

Assicurazioni Generali SpA

  16,253    729

Danieli SPA (Æ)

  2,115    50

Enel SpA

  42,845    506

ENI SpA

  72,544    2,643

Fiat SpA

  19,870    511

Finmeccanica SpA

  5,693    180

Fondiaria-Sai SpA

  8,774    362

Impregilo SPA (Æ)

  29,685    199

Indesit Co. SpA

  8,743    134

Intesa Sanpaolo SpA

  189,425    1,486

Mediaset SpA

  205,256    2,064

Milano Assicurazioni SPA

  33,598    261

Parmalat Finanziaria SpA (Ñ)(Æ)(ß)

  12,500    

Prysmian SpA (Æ)

  2,317    57

Telecom Italia SpA

  878,082    2,064

UniCredito Italiano SpA

  89,635    746

Unione di Banche Italiane SCPA

  1,315    36
       
      14,953
       

Japan - 15.8%

      

77 Bank, Ltd. (The)

  12,000    75

Aeon Credit Service Co., Ltd.

  43,100    637

Alfresa Holdings Corp. (Ñ)

  1,500    91

Alpine Electronics, Inc.

  3,000    50

Alps Electric Co., Ltd.

  10,100    131

AOC Holdings, Inc.

  4,300    63

Asahi Glass Co., Ltd. (Ñ)

  98,000    1,300

Asahi Kasei Corp. (Ñ)

  27,000    180

Astellas Pharma, Inc. (Ñ)

  9,900    432

Awa Bank, Ltd. (The)

  3,000    17

Bank of Yokohama, Ltd. (The) (Ñ)

  33,000    233

Bosch Corp. (Ñ)

  38,000    186

Bridgestone Corp. (Ñ)

  46,100    812

Brother Industries, Ltd. (Ñ)

  3,700    48

Canon Marketing Japan, Inc. (Ñ)

  2,800    52

Canon, Inc. (Ñ)

  74,700    3,413

Capcom Co., Ltd. (Ñ)

  2,100    54

Chuo Mitsui Trust Holdings, Inc.

  4,000    31

COMSYS Holdings Corp.

  19,000    156

Daihatsu Motor Co., Ltd.

  5,000    47

Daiichi Sankyo Co., Ltd.

  1,900    58

Daishi Bank, Ltd. (The)

  5,000    20

Daiwa House Industry Co., Ltd.

  84,420    1,086

Daiwa Securities Group, Inc.

  68,950    635

Denki Kagaku Kogyo K K

  18,000    78

Eisai Co., Ltd.

  1,400    55

Exedy Corp.

  1,200    40

Ezaki Glico Co., Ltd. (Ñ)

  2,000    20
   Principal
Amount ($)
or Shares
    Market
Value
$

FamilyMart Co., Ltd.

  2,600    81

Fanuc, Ltd.

  11,200    1,093

FCC Co., Ltd.

  2,300    41

Fuji Fire & Marine Insurance Co., Ltd. (The)

  32,000    86

Fuji Television Network, Inc.

  554    919

FUJIFILM Holdings Corp.

  4,800    203

Fujitsu, Ltd. (Ñ)

  11,000    74

H2O Retailing Corp. (Ñ)

  8,000    62

Hachijuni Bank, Ltd. (The) (Ñ)

  25,000    168

Higo Bank, Ltd. (The)

  6,000    39

Hino Motors, Ltd.

  34,000    220

Hirose Electric Co., Ltd. (Ñ)

  7,100    823

Hitachi Kokusai Electric, Inc.

  6,000    74

Hitachi, Ltd.

  14,000    103

Hokkaido Electric Power Co., Inc.

  2,300    50

Hokkoku Bank, Ltd. (The)

  7,000    32

Honda Motor Co., Ltd. (Ñ)

  6,100    202

Hyakujushi Bank, Ltd. (The)

  3,000    15

Idemitsu Kosan Co., Ltd. (Ñ)

  400    42

Inpex Holdings, Inc.

  174    1,872

ITOCHU Corp. (Ñ)

  29,000    282

Iyo Bank, Ltd. (The)

  6,000    58

Japan Steel Works, Ltd. (The)

  6,000    88

Japan Tobacco, Inc. (Ñ)

  268    1,589

JFE Holdings, Inc.

  6,600    333

JFE Shoji Holdings, Inc.

  26,000    166

JGC Corp.

  12,000    206

Joyo Bank, Ltd. (The)

  266,940    1,488

Juki Corp.

  22,000    135

Kagoshima Bank, Ltd. (The)

  12,000    82

Kansai Electric Power Co., Inc. (The)

  9,700    226

Kao Corp. (Ñ)

  132,000    3,972

Kawasaki Kisen Kaisha, Ltd.

  14,000    137

KDDI Corp.

  47    349

Keihin Corp.

  3,600    64

Keiyo Bank, Ltd. (The) (Ñ)

  14,000    80

Kintetsu World Express, Inc.

  3,500    121

Kobe Steel, Ltd.

  68,000    220

Komatsu, Ltd. (Ñ)

  4,300    116

Komori Corp.

  3,000    67

Kose Corp. (Ñ)

  58,240    1,552

Kyocera Corp.

  1,200    105

Kyoei Steel, Ltd.

  1,400    26

Kyowa Hakko Kogyo Co., Ltd. (Ñ)

  2,000    21

Leopalace21 Corp.

  1,600    43

Makino Milling Machine Co., Ltd.

  5,000    35

Makita Corp.

  1,600    67

Marubeni Corp.

  7,000    49

 

Non-U.S. Fund 43


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Matsushita Electric Industrial Co., Ltd.

  19,000    389

Matsushita Electric Works, Ltd.

  19,000    211

Mazda Motor Corp.

  19,000    95

Meiji Dairies Corp.

  15,000    76

MID Reit, Inc. (ö)(Ñ)

  138    644

Millea Holdings, Inc.

  5,800    196

Mitsubishi Chemical Holdings Corp.

  10,500    80

Mitsubishi Corp.

  8,300    226

Mitsubishi Electric Corp.

  10,000    103

Mitsubishi Estate Co., Ltd.

  10,000    240

Mitsubishi Heavy Industries, Ltd.

  20,000    86

Mitsubishi Materials Corp.

  19,000    81

Mitsubishi UFJ Financial Group, Inc.

  117,630    1,095

Mitsui & Co., Ltd. (Ñ)

  11,000    233

Mitsui Fudosan Co., Ltd.

  8,000    173

Mitsui OSK Lines, Ltd.

  16,000    203

Mitsui Sumitomo Insurance Co., Ltd.

  45,980    449

Mitsui-Soko Co., Ltd.

  114,560    614

Mizuho Financial Group, Inc.

  37    176

Mori Seiki Co., Ltd. (Ñ)

  800    16

New City Residence Investment Corp. (ö)

  94    383

Nichirei Corp.

  35,000    145

Nifco, Inc.

  800    19

Nikko Cordial Corp. (Æ)(Ñ)

  2,000    30

Nintendo Co., Ltd.

  3,800    2,307

Nippon Commercial Investment Corp. (ö)

  179    789

Nippon Express Co., Ltd.

  37,000    189

Nippon Kayaku Co., Ltd.

  18,000    117

Nippon Konpo Unyu Soko Co., Ltd.

  3,000    40

Nippon Mining Holdings, Inc.

  6,000    39

Nippon Oil Corp.

  38,000    310

Nippon Residential Investment Corp. (ö)

  117    526

Nippon Seiki Co., Ltd.

  1,000    22

Nippon Steel Corp.

  52,000    320

Nippon Telegraph & Telephone Corp.

  73    361

Nippon Yusen KK

  11,000    88

Nipponkoa Insurance Co., Ltd. (Ñ)

  239,490    2,171

Nissan Motor Co., Ltd. (Ñ)

  17,000    184

Nissan Shatai Co., Ltd. (Æ)

  9,000    73

Nisshin Seifun Group, Inc.

  5,000    50

Nisshin Steel Co., Ltd. (Ñ)

  8,000    28

Nisshinbo Industries, Inc. (Ñ)

  2,000    24

Nissin Kogyo Co., Ltd.

  6,200    145

Nomura Holdings, Inc. (Ñ)

  146,620    2,451

NTN Corp. (Ñ)

  16,000    139
   Principal
Amount ($)
or Shares
    Market
Value
$

Okinawa Electric Power Co., Inc. (The)

  600    28

OKUMA Corp.

  1,000    11

Omron Corp.

  36,300    859

ORIX Corp.

  830    139

Pacific Metals Co., Ltd. (Ñ)

  2,000    19

Resona Holdings, Inc. (Ñ)

  35    64

Ricoh Co., Ltd.

  87,000    1,600

Sankyo Co., Ltd.

  2,200    102

Santen Pharmaceutical Co., Ltd.

  2,100    52

Sanwa Holdings Corp. (Ñ)

  6,000    30

Sasebo Heavy Industries Co., Ltd.

  5,000    23

Seiko Epson Corp.

  1,400    30

Seino Holdings Corp. (Ñ)

  2,000    14

Sekisui House, Ltd.

  5,000    54

Seven & I Holdings Co., Ltd.

  35,460    1,031

Sharp Corp. (Ñ)

  7,000    125

Shiga Bank, Ltd. (The)

  10,000    67

Shima Seiki Manufacturing, Ltd.

  500    23

Shin-Etsu Chemical Co., Ltd.

  12,700    794

Shinwa Kaiun Kaisha, Ltd.

  9,000    54

Shizuoka Bank, Ltd. (The)

  55,000    605

Showa Shell Sekiyu KK (Ñ)

  10,205    114

SMC Corp.

  13,748    1,636

Sohgo Security Services Co., Ltd.

  2,000    32

Sony Corp. (Ñ)

  30,900    1,677

Star Micronics Co., Ltd.

  2,100    46

Sugi Pharmacy Co., Ltd. (Ñ)

  36,340    1,041

Sumco Techxiv Corp. (Ñ)

  600    21

Sumitomo Bakelite Co., Ltd. (Ñ)

  188,250    1,131

Sumitomo Corp.

  6,700    95

Sumitomo Heavy Industries, Ltd. (Ñ)

  13,000    119

Sumitomo Metal Industries, Ltd.

  14,000    65

Sumitomo Metal Mining Co., Ltd.

  1,000    17

Sumitomo Mitsui Financial Group, Inc. (Ñ)

  17    127

Sumitomo Realty & Development Co., Ltd.

  2,000    49

Sumitomo Trust & Banking Co., Ltd. (The)

  312,660    2,082

Suzuki Motor Corp.

  35,760    1,076

Takeda Pharmaceutical Co., Ltd.

  33,420    1,954

TDK Corp.

  4,100    304

THK Co., Ltd.

  500    10

Toho Co., Ltd. (Ñ)

  3,100    69

Toho Pharmaceutical Co., Ltd.

  5,590    109

Tokai Rubber Industries, Inc.

  8,400    144

Tokyo Electric Power Co., Inc. (The) (Ñ)

  9,500    246

 

44 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Tokyo Gas Co., Ltd.

  159,000    742

Tokyu Land Corp. (Ñ)

  8,000    68

TonenGeneral Sekiyu KK (Ñ)

  7,000    69

Toshiba Corp. (Ñ)

  20,000    149

Toshiba TEC Corp.

  20,000    135

Toyo Engineering Corp.

  17,000    84

Toyo Ink Manufacturing Co., Ltd.

  5,000    17

Toyo Seikan Kaisha, Ltd. (Ñ)

  1,500    27

Toyo Suisan Kaisha, Ltd.

  15,000    273

Toyota Auto Body Co., Ltd.

  4,400    71

Toyota Boshoku Corp.

  800    26

Toyota Motor Corp. (Ñ)

  50,800    2,734

United Urban Investment Corp. (ö)

  80    537

West Japan Railway Co.

  17    84

Yamada Denki Co., Ltd. (Ñ)

  4,220    480

Yamaha Corp.

  6,700    153

Yamato Holdings Co., Ltd.

  14,000    202

Yamato Kogyo Co., Ltd.

  3,400    139

Yokohama Rubber Co., Ltd. (The)

  11,000    65
       
      68,155
       

Luxembourg - 0.7%

      

ArcelorMittal

  4,694    361

Millicom International Cellular SA (Æ)(Ñ)

  19,900    2,347

SES

  13,157    345
       
      3,053
       

Mexico - 0.1%

      

Grupo Modelo SAB de CV

  56,000    264
       

Netherlands - 4.2%

      

Akzo Nobel NV

  4,056    323

ASM International NV

  7,555    185

ASML Holding NV (Æ)

  67,526    2,122

CSM

  1,286    43

Fugro NV

  609    47

Heineken NV

  63,842    4,112

ING Groep NV

  39,169    1,529

Koninklijke Ahold NV (Æ)

  5,211    72

Koninklijke Philips Electronics NV

  39,155    1,697

OCE NV (Ñ)

  23,090    416

Rodamco Europe NV (ö)

  817    102

Royal KPN NV

  7,397    134

TNT NV

  55,160    2,295

TomTom NV (Æ)(Ñ)

  4,003    299

Unilever NV

  132,463    4,850
       
      18,226
       
   Principal
Amount ($)
or Shares
    Market
Value
$

Netherlands Antilles - 0.0%

      

Hunter Douglas NV

  1,774    131
       

Norway - 0.2%

      

StatoilHydro ASA

  30,502    943
       

Papua New Guinea - 0.0%

      

Oil Search, Ltd.

  2,425    10
       

Portugal - 0.2%

      

Energias de Portugal SA

  148,542    966
       

Russia - 0.4%

      

Gazprom OAO - ADR

  30,200    1,701
       

Singapore - 0.7%

      

Allgreen Properties, Ltd.

  40,000    41

Ascendas Real Estate Investment Trust (Æ)(ö)

  4,000    7

CapitaCommercial Trust (Æ)(ö)

  2,000    3

CapitaLand, Ltd.

  11,000    47

CapitaMall Trust (ö)

  4,000    9

China Aviation Oil Singapore Corp., Ltd.

  6,000    9

Cosco Corp. Singapore, Ltd.

  6,000    24

Creative Technology, Ltd.

  3,600    16

DBS Group Holdings, Ltd.

  44,000    623

Haw Par Corp., Ltd.

  2,000    10

Jardine Cycle & Carriage, Ltd.

  1,000    15

Keppel Corp., Ltd.

  10,000    89

NatSteel, Ltd.

  10,000    10

Neptune Orient Lines, Ltd.

  16,000    43

Oversea-Chinese Banking Corp.

  13,000    75

Pacific Century Regional Developments, Ltd. (Æ)

  68,000    16

SembCorp Industries, Ltd.

  10,880    43

Singapore Airlines, Ltd.

  9,470    113

Singapore Petroleum Co., Ltd.

  8,000    42

Singapore Technologies Engineering, Ltd.

  1,000    3

Singapore Telecommunications, Ltd.

  619,000    1,699

STATS ChipPAC, Ltd. (Æ)

  3,425    4

Suntec Real Estate Investment Trust (Æ)(ö)

  3,000    3

United Overseas Bank, Ltd.

  8,000    111

Wing Tai Holdings, Ltd.

  13,000    24
       
      3,079
       

South Africa - 0.1%

      

MTN Group, Ltd.

  22,200    416
       

 

Non-U.S. Fund 45


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

South Korea - 0.8%

      

Kookmin Bank - ADR (Ñ)

  14,070    1,032

LG Electronics, Inc. (Æ)

  9,333    983

Samsung Electronics Co., Ltd.

  2,816    1,655
       
      3,670
       

Spain - 2.2%

      

Altadis SA

  1,592    116

Banco Bilbao Vizcaya Argentaria SA

  49,515    1,216

Banco Santander SA

  48,633    1,051

Bolsas y Mercados Espanoles (Æ)

  611    41

Gamesa Corp. Tecnologica SA

  26,985    1,248

Gas Natural SDG SA (Ñ)

  364    21

Gestevision Telecinco SA

  6,557    166

Grifols SA

  881    20

Iberdrola Renovables (Æ)

  177,697    1,468

Iberdrola SA

  5,784    87

Iberia Lineas Aereas de Espana

  43,891    190

Inditex SA

  3,115    189

Repsol YPF SA

  10,826    386

Tecnicas Reunidas SA

  2,143    136

Telefonica SA

  96,420    3,116

Union Fenosa SA

  398    27

Vertice Trescientos Sesenta Grados SA (Æ)

  4,020    13
       
      9,491
       

Sweden - 1.3%

      

Alfa Laval AB

  1,625    90

Boliden AB (Æ)

  7,900    98

Electrolux AB

  25,100    418

Industrivarden AB Class A

  3,500    61

Nordea Bank AB

  86,810    1,440

OMX AB

  500    20

Peab AB

  2,000    20

Peab Industri AB (Æ)

  1,000    9

SAS AB (Æ)

  12,700    162

Scania AB Class B (Æ)

  21,800    515

Skandinaviska Enskilda Banken AB Class A

  7,000    177

SKF AB Class B

  14,000    235

Ssab Svenskt Stal AB Series A

  12,600    338

Telefonaktiebolaget LM Ericsson Series B Class B

  713,330    1,668

TeliaSonera AB

  29,500    274

Volvo AB (Æ)

      

Class A

  3,400    56

Class B

  5,700    95
       
      5,676
       
   Principal
Amount ($)
or Shares
    Market
Value
$

Switzerland - 8.3%

      

ABB, Ltd.

  10,779    311

Actelion, Ltd. (Æ)(Ñ)

  13,680    623

Baloise Holding AG

  837    83

Bucher Industries AG (Æ)

  104    24

Ciba Specialty Chemicals AG

  1,792    83

Credit Suisse Group

  13,998    842

Georg Fischer AG (Æ)

  80    49

Givaudan SA

  2,130    2,046

Helvetia Holding AG

  532    191

Julius Baer Holding AG

  39,498    3,211

Kuoni Reisen Holding AG

  93    48

Logitech International SA (Æ)

  75,790    2,752

Nestle SA

  22,754    10,426

Novartis AG

  16,418    894

Rieter Holding AG

  41    18

Roche Holding AG

  30,829    5,310

Sika AG

  50    94

Sonova Holding AG

  21,737    2,431

Swatch Group AG

  2,189    656

Swiss Life Holding (Æ)

  1,197    296

Swiss Reinsurance

  29,177    2,047

Swisscom AG

  277    108

UBS AG

  66,982    3,111

Zurich Financial Services AG

  678    200
       
      35,854
       

Taiwan - 0.2%

      

Taiwan Semiconductor Manufacturing Co., Ltd. - ADR

  87,390    870
       

Thailand - 0.1%

      

Bangkok Bank PCL

  173,500    613
       

Turkey - 0.2%

      

Turkcell Iletisim Hizmet AS - ADR

  29,900    824
       

United Kingdom - 18.2%

      

3i Group PLC

  823    16

Amec PLC

  14,568    242

Anglo American PLC

  9,642    584

Antofagasta PLC

  3,122    44

ARM Holdings PLC

  354,995    870

AstraZeneca PLC

  17,536    753

Atkins WS PLC

  3,918    89

BAE Systems PLC

  73,509    720

Barclays PLC

  32,017    324

BBA Aviation PLC

  8,576    35

BG Group PLC

  35,085    808

 

46 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

BHP Billiton PLC

  49,892    1,537

Bovis Homes Group PLC

  1,154    14

BP PLC

  157,032    1,920

BP PLC - ADR (Ñ)

  23,720    1,736

Brit Insurance Holdings PLC

  26,788    121

British Airways PLC (Æ)

  11,418    70

British American Tobacco PLC

  9,838    387

British Energy Group PLC

  14,973    163

British Land Co. PLC (ö)

  3,265    61

BT Group PLC

  115,685    624

Burberry Group PLC

  119,110    1,341

Cable & Wireless PLC

  10,106    37

Cadbury Schweppes PLC

  122,682    1,529

Carphone Warehouse Group PLC

  315,575    2,153

Centrica PLC

  28,754    204

Charter PLC (Æ)

  1,607    25

Cobham PLC

  25,068    104

Compass Group PLC

  5,785    35

Daily Mail & General Trust PLC Class A

  1,037    10

Davis Service Group PLC

  15,107    153

Dawnay Day Treveria PLC

  586,180    693

De La Rue PLC

  1,365    26

Diageo PLC

  237,860    5,091

easyJet PLC (Æ)

  71,525    867

Friends Provident PLC

  9,621    31

Galiform PLC (Æ)

  4,993    9

GlaxoSmithKline PLC

  254,922    6,469

HBOS PLC

  27,396    397

Home Retail Group PLC

  87,756    564

HSBC Holdings PLC

  93,215    1,564

IG Group Holdings PLC

  10,051    81

Invensys PLC (Æ)

  5,611    25

J Sainsbury PLC

  51,870    437

Kesa Electricals PLC

  57,426    265

Kingfisher PLC

  222,493    641

Ladbrokes PLC

  150,385    960

Land Securities Group PLC (ö)

  3,833    114

Legal & General Group PLC

  100,982    261

Liberty International PLC (ö)

  471    10

Lloyds TSB Group PLC

  28,773    268

Man Group PLC

  233,925    2,691

National Express Group PLC

  4,128    101

National Grid PLC

  63,147    1,044

Next PLC

  4,290    138

Pearson PLC

  20,708    301

Petrofac, Ltd.

  10,160    110

Premier Farnell PLC

  3,208    9

Provident Financial PLC

  14,263    235

Reckitt Benckiser Group PLC

  97,747    5,647
   Principal
Amount ($)
or Shares
    Market
Value
$

Reed Elsevier PLC

  5,030    68

Regus Group PLC

  95,727    156

Resolution PLC

  4,157    59

Reuters Group PLC

  8,904    112

Rio Tinto PLC

  7,416    777

Rolls-Royce Group PLC (Æ)

  9,742    105

Royal Bank of Scotland Group PLC

  224,330    2,017

Royal Dutch Shell PLC Class A

  82,086    3,458

Royal Dutch Shell PLC Class B

  27,539    1,152

Royal Dutch Shell PLC Class A

  274    12

SABMiller PLC

  4,856    137

Schroders PLC

  56,804    1,462

Scottish & Southern Energy PLC

  31,198    1,013

Shire PLC

  3,812    88

Smiths Group PLC

  86,838    1,741

Stagecoach Group PLC

  83,571    469

Standard Chartered PLC

  20,456    743

Tesco PLC

  529,817    5,003

Tomkins PLC

  22,652    80

Tullett Prebon PLC

  20,315    188

Unilever PLC

  32,541    1,220

Vodafone Group PLC

  337,503    1,258

Vodafone Group PLC - ADR

  71,630    2,673

Weir Group PLC (The)

  5,771    93

WH Smith PLC

  17,622    113

William Hill PLC

  193,817    2,010

WM Morrison Supermarkets PLC

  46,272    298

WPP Group PLC

  362,599    4,642

Xstrata PLC

  25,008    1,761
       
      78,666
       

United States - 0.4%

      

NYSE Euronext

  855    74

Synthes, Inc.

  14,256    1,762
       
      1,836
       
Total Common Stocks      

(cost $342,859)

      389,922
       
Preferred Stocks - 0.6%

Germany - 0.5%

      

Henkel KGaA

  36,107    2,024

Volkswagen AG

  115    17
       
      2,041
       

Italy - 0.1%

      

Unipol Gruppo Finanziario SpA

  77,511    244
       
Total Preferred Stocks      

(cost $2,116)

      2,285
       

 

Non-U.S. Fund 47


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Notional
Amount
    Market
Value
$
 
      

Options Purchased - 0.0%

    

Switzerland - 0.0%

      

Swiss Market Index Futures

      

Mar 2008 8,398.00 Put (9)

  CHF  668    40 

Mar 2008 8,532.77 Put (13)

  CHF980    57 
        
Total Options Purchased      

(cost $95)

      97 
        
   

Principal
Amount ($)
or Shares

      

Short-Term Investments - 8.2%

    

United States - 8.2%

      

Russell Investment Company Money Market Fund

   33,315,000    33,315 

United States Treasury Bills (§)(ž) 2.952% due 03/20/08

   2,200    2,184 
        
Total Short-Term Investments    

(cost $35,501)

      35,499 
        
Other Securities - 9.1%      

State Street Securities Lending Quality Trust (×)

   39,195,360    39,195 
        
Total Other Securities      

(cost $39,195)

      39,195 
        
Total Investments - 108.2%      

(identified cost $419,766)

      466,998 
Other Assets and Liabilities,
Net - (8.2%)
      (35,312)
        
Net Assets - 100.0%      431,686 
        

A portion of the portfolio has been fair valued as of period end.


 

See accompanying notes which are an integral part of the financial statements.

 

48 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands

 

Futures Contracts
(Number of Contracts)
  Notional
Amount
    Unrealized
Appreciation
(Depreciation)
$
 
      
      

Long Positions

      

AEX Index (Netherlands) expiration date 01/08 (11)

  EUR1,137    24 

CAC-40 Index (France) expiration date 01/08 (57)

  EUR3,204    45 

DAX Index (Germany) expiration date 03/08 (23)

  EUR4,683    216 

EUR STOXX 50 Index
(EMU) expiration date 03/08 (96)

  EUR4,258    131 

FTSE-100 Index (UK)
expiration date 03/08 (119)

  GBP7,681    270 

Hang Seng Index (Hong Kong) expiration date 01/08 (21)

  HKD29,306    10 

MSCI Singapore Index
expiration date 01/08 (1)

  SGD85    1 

TOPIX Index (Japan)
expiration date 03/08 (132)

  JPY1,940,400    (971)

Short Positions

      

IBEX Plus Index (Spain)
expiration date 01/08 (19)

  EUR2,871    44 

MIB-30 (Italy)
expiration date 03/08 (9)

  EUR1,751    (19)

OMX Stockholm 30 Index (Sweden) expiration date 01/08 (100)

  SEK10,838    (15)

SPI 200 Index (Australia) expiration date 03/08 (44)

  AUD6,983    (111)
        

Total Unrealized Appreciation (Depreciation) on Open Futures Contracts

      (375)
        
Options Written
(Number of Contracts)
 Notional
Amount
 

Market
Value
$

 
�� 
Switzerland  
Swiss Market Index Futures  
Mar 2008 8,398.00 Call (9) CHF  668 (40)
Mar 2008 8,532.77 Call (13) CHF980 (57)
    
Total Liability for Options Written
(premiums received $95)
  (97)
    

 

See accompanying notes which are an integral part of the financial statements.

 

Non-U.S. Fund 49


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands

 

Index Swap Contracts                         

Fund Receives
Underlying Security

  

Counter
Party

  Notional
Amount
  

Fund Pays
Floating Rate

  Termination
Date
  Unrealized
Appreciation
(Depreciation)
$
 
            

MSCI Denmark
Local Net Total Return Index

  Merrill Lynch  DKK  3,994  

1 Month EUR LIBOR
minus 0.80%

  03/19/08  (14)

MSCI Denmark
Local Net Total Return Index

  Merrill Lynch  DKK  708  

1 Month EUR LIBOR
minus 0.80%

  03/19/08  (2)

MSCI Belgium
Local Net Total Return Index

  Merrill Lynch  EUR  325  

1 Month EUR LIBOR
plus 0.12%

  03/19/08  11 
              

Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts

    (5)
              
Industry Diversification
(Unaudited)
  % of
Net
Assets
     

Market

Value
$

 
      
      

Auto and Transportation

  5.0     21,408 

Consumer Discretionary

  10.5     45,552 

Consumer Staples

  12.5     52,711 

Financial Services

  17.7     74,227 

Health Care

  6.8     29,616 

Information Technology

  0.2     791 

Integrated Oils

  5.1     21,533 

Materials and Processing

  8.7     38,040 

Miscellaneous

  1.2     4,922 

Other Energy

  1.3     5,858 

Producer Durables

  9.8     44,451 

Technology

  3.3     13,952 

Utilities

  8.8     39,146 

Options Purchased

       97 

Short-Term Investments

  8.2     35,499 

Other Securities

  9.1     39,195 
          

Total Investments

  108.2     466,998 

Other Assets and Liabilities, Net

  (8.2)    (35,312)
          

Net Assets

  100.0     431,686 
          
Geographic Diversification
(Unaudited)
  % of
Net
Assets
     Market
Value
$
 
      

Africa

  0.1     416 

Asia

  5.1     22,067 

Europe

  47.4     204,530 

Japan

  15.8     68,155 

Latin America

  2.5     10,434 

Middle East

  0.4     1,590 

Other Regions

  9.6     41,945 

United Kingdom

  18.2     78,666 

Other Securities

  9.1     39,195 
          

Total Investments

  108.2     466,998 

Other Assets and Liabilities, Net

  (8.2)    (35,312)
          

Net Assets

  100.0     431,686 
          

 

See accompanying notes which are an integral part of the financial statements.

 

50 Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands

 

Foreign Currency Exchange Contracts 
     
Amount
Sold
 Amount
Bought
 Settlement
Date
 Unrealized
Appreciation
(Depreciation)
$
 
USD 25 CHF 29 01/03/08  
USD 50 CHF 57 03/19/08 1 
USD 111 EUR 77 01/02/08 2 
USD 43 EUR 29 01/03/08  
USD 288 EUR 200 03/19/08 5 
USD 292 EUR 200 03/19/08 1 
USD 295 EUR 200 03/19/08 (2)
USD 430 EUR 300 03/19/08 9 
USD 732 EUR 500 03/19/08 (1)
USD 1,320 EUR 900 03/19/08 (3)
USD 1,903 EUR 1,300 03/19/08 (1)
USD 2,261 EUR 1,570 03/19/08 37 
USD 2,345 EUR 1,627 03/19/08 36 
USD 3,515 EUR 2,440 03/19/08 55 
USD 5,857 EUR 4,067 03/19/08 94 
USD 12,897 EUR 8,800 03/19/08 (21)
USD 13,600 EUR 9,300 03/19/08 7 
USD 30 GBP 15 01/02/08  
USD 26 GBP 13 01/03/08  
USD 56 GBP 28 01/03/08  
USD 199 GBP 100 03/19/08  
USD 399 GBP 200 03/19/08 (1)
USD 504 GBP 250 03/19/08 (8)
USD 607 GBP 300 03/19/08 (11)
USD 1,313 GBP 650 03/19/08 (22)
USD 8,071 GBP 4,000 03/19/08 (125)
USD 9,091 GBP 4,500 03/19/08 (153)
USD 101 HKD 789 03/19/08  
USD 234 HKD 1,822 03/19/08  
USD 65 JPY 7,318 01/07/08 1 
USD 77 JPY 8,624 01/08/08  
USD 446 JPY 50,000 03/19/08 5 
USD 545 JPY 60,000 03/19/08 (4)
USD 909 JPY 100,000 03/19/08 (6)
USD 909 JPY 100,000 03/19/08 (7)
USD 1,898 JPY 212,137 03/19/08 17 
USD 2,182 JPY 240,000 03/19/08 (15)
USD 2,958 JPY 325,000 03/19/08 (24)
USD 3,912 JPY 430,000 03/19/08 (30)
USD 4,071 JPY 455,817 03/19/08 44 
USD 4,869 JPY 535,000 03/19/08 (39)
USD 2 MXN 21 01/02/08  
USD 2 MXN 21 01/03/08  
USD 16,047 NOK 89,379 03/19/08 377 
USD 87 SEK 571 03/19/08 1 
USD 520 SGD 756 03/19/08 8 
AUD 324 USD 276 03/19/08 (7)
AUD 324 USD 276 03/19/08 (7)
AUD 701 USD 598 03/19/08 (14)
Foreign Currency Exchange Contracts 
Amount
Sold
 Amount
Bought
 Settlement
Date
 Unrealized
Appreciation
(Depreciation)
$
 
CHF 6,601 USD 5,758 03/19/08 (99)
DKK 11 USD 2 03/19/08  
DKK 890 USD 172 03/19/08 (3)
EUR 19 USD 28 01/02/08  
EUR 39 USD 57 01/02/08  
EUR 42 USD 61 01/02/08  
EUR 39 USD 57 01/03/08  
EUR 39 USD 57 01/03/08  
EUR 100 USD 147 03/19/08 1 
EUR 100 USD 148 03/19/08 2 
EUR 200 USD 292 03/19/08  
EUR 400 USD 586 03/19/08 1 
EUR 500 USD 733 03/19/08 1 
EUR 500 USD 733 03/19/08 1 
EUR 600 USD 880 03/19/08 2 
EUR 800 USD 1,178 03/19/08 7 
EUR 1,200 USD 1,759 03/19/08 3 
EUR 6,148 USD 8,844 03/19/08 (151)
EUR 8,100 USD 11,858 03/19/08 7 
GBP 95 USD 189 01/02/08  
GBP 61 USD 122 01/03/08 1 
GBP 100 USD 202 03/19/08 3 
GBP 100 USD 202 03/19/08 4 
GBP 100 USD 204 03/19/08 5 
GBP 200 USD 408 03/19/08 11 
GBP 237 USD 477 03/19/08 7 
GBP 250 USD 505 03/19/08 9 
GBP 300 USD 606 03/19/08 11 
GBP 570 USD 1,148 03/19/08 16 
GBP 700 USD 1,415 03/19/08 25 
GBP 1,140 USD 2,295 03/19/08 31 
GBP 2,105 USD 4,254 03/19/08 73 
GBP 3,000 USD 6,060 03/19/08 101 
GBP 5,675 USD 11,414 03/19/08 142 
JPY 5,000 USD 46 03/19/08  
JPY 50,000 USD 450 03/19/08 (2)
JPY 50,000 USD 461 03/19/08 9 
JPY 100,000 USD 905 03/19/08 2 
JPY 150,000 USD 1,366 03/19/08 12 
JPY 595,000 USD 5,411 03/19/08 39 
NOK 3,259 USD 584 03/19/08 (15)
NOK 3,259 USD 585 03/19/08 (14)
NOK 18,725 USD 3,352 03/19/08 (89)
SEK 18,888 USD 2,878 03/19/08 (46)
SGD 22 USD 15 03/19/08  
ZAR 751 USD 107 01/02/08 (3)
       
     303 
       

 

See accompanying notes which are an integral part of the financial statements.

 

Non-U.S. Fund 51


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Presentation of Portfolio Holdings — December 31, 2007

 

 

Categories  % of Net
Assets
 
  
  
  

Australia

  2.1 

Austria

  0.5 

Belgium

  0.4 

Bermuda

  1.2 

Brazil

  0.5 

Canada

  1.0 

Cayman Islands

  0.7 

China

  0.1 

Czech Republic

  0.2 

Denmark

  1.0 

Egypt

  0.4 

Finland

  1.6 

France

  12.9 

Germany

  8.3 

Greece

  0.2 

Hong Kong

  0.8 

India

  0.2 

Indonesia

  0.1 

Ireland

  0.5 

Italy

  3.5 

Japan

  15.8 

Luxembourg

  0.7 

Mexico

  0.1 

Netherlands

  4.2 

Netherlands Antilles

  *

Norway

  0.2 

Papua New Guinea

  *

Portugal

  0.2 

Russia

  0.4 

Singapore

  0.7 

South Africa

  0.1 

South Korea

  0.8 

Spain

  2.2 

Sweden

  1.3 

Switzerland

  8.3 

Taiwan

  0.2 

Thailand

  0.1 

Turkey

  0.2 

United Kingdom

  18.2 

United States

  0.4 

Preferred Stocks

  0.6 

Options Purchased

  *

Short-Term Investments

  8.2 

Other Securities

  9.1 
    

Total Investments

  108.2 

Other Assets and Liabilities Net

  (8.2)
    
  100.0 
    
Categories  % of Net
Assets
 
  

Futures Contracts

  (—*)

Options Written

  (—*)

Foreign Currency Exchange Contracts

  *

Index Swap Contracts

  (—*)

 

*Less than .05% of net assets.

 

See accompanying notes which are an integral part of the financial statements.

 

52 Non-U.S. Fund


Table of Contents

 

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Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

LOGO

 

Real Estate Securities Fund 
   Total
Return
 

1 Year

  (15.86)%

5 Years

  19.03

Inception*

  14.17

 

FTSE NAREIT Equity REIT Index ** 
   Total
Return
 

1 Year

  (15.69)%

5 Years

  18.17

Inception*

  14.16

 

* The Fund commenced operations on April 30, 1999.

 

** FTSE National Association of Real Estate Investment Trusts (NAREIT) Equity REIT Index is an index composed of all the data based on the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market value-weighted. The total-return calculation is based upon whether it is 1-month, 3-months or 12-months. Only those REITs listed for the entire period are used in the total return calculation.

 

§ Annualized.

Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

54 Real Estate Securities Fund


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

The Real Estate Securities Fund (the “Fund”) allocates most of its assets among multiple money managers. Russell Investment Management Company (“RIMCo”), as the Fund’s advisor, may change the allocation of the Fund’s assets among money managers at any time. An exemptive order from the Securities and Exchange Commission (SEC) permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Fund’s Board without a shareholder vote. Pursuant to the terms of the exemptive order, the Fund is required to notify its shareholders within 60 days of when a money manager begins providing services. The Fund currently has five money managers.

What is the Fund’s investment objective?

The Fund seeks to provide current income and long term capital growth.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2007?

For the fiscal year ended December 31, 2007, the Real Estate Securities Fund returned (15.86)%. This compared to the FTSE NAREIT Equity REIT Index, which returned (15.69)% during the same period. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.

For the year ended December 31, 2007, the Lipper® Real Estate Funds (VIP) Average returned (14.87)%. This result serves as a peer comparison and is expressed net of operating expenses.

How did the market conditions described in the Market Summary report affect the Fund’s performance?

The money managers positioned the Fund to benefit from property sectors with the strongest supply and demand fundamentals. The largest overweight positions were in the regional malls and office sectors. The market favored the more defensive sectors, including industrial, health care and specialty. As discussed below, sector positioning was a negative contributor to the Fund’s performance during the fiscal year.

The Fund maintained a primary focus on the larger and more liquid REITs during the fiscal year. With the exceptional volatility experienced during the fiscal year, this positioning generally benefited the Fund during periods when the REIT market was rising, but detracted during periods when the market was declining. Non-dedicated REIT investors typically trade the more liquid securities when they rotate into or out of the sector.

Mergers and acquisitions activity was a positive contributor to the Fund’s performance. The Fund maintained overweight positions in two companies that were acquisition targets: Hilton Hotels Corporation and Archstone-Smith Trust. Both companies were acquired by private market investors at significant premiums to their share prices.

 

How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?

AEW Management and Advisors, L.P. pursues a value-oriented style that focuses on identifying companies that it believes are mispriced relative to underlying real estate net asset value. AEW underperformed the benchmark during the fiscal year due primarily to adverse sector selection. The primary detractors were underweight positions in the outperforming health care and specialty sectors. Stock selection had a neutral impact on performance.

INVESCO Institutional (N.A.) maintains a broadly diversified portfolio with exposure to all major property sectors. Its investment style incorporates fundamental property market research and bottom-up quantitative securities analysis. INVESCO outperformed the benchmark during the fiscal year due to contributions from stock selection and, to a lesser extent, sector selection. Stock selection was strongest in the industrial and health care sectors. Positive sector selection was driven by an overweight in the health care sector and an underweight in the mixed industrial/office sector. An underweight in the outperforming specialty sector partially offset these positive effects.

RREEF America L.L.C.’s style emphasizes a top-down approach to property sector weights based on an assessment of property market fundamentals. RREEF outperformed the benchmark during the fiscal year due to contributions from stock selection. Stock selection was strongest in the shopping centers, apartments, health care and industrial sectors. Sector selection had a negative impact on overall performance, driven by underweight positions in the outperforming specialty and health care sectors.

Heitman Real Estate Securities LLC manages a concentrated portfolio with a bottom-up approach to stock selection focusing on companies that it believes have attractive valuations relative to growth prospects. Heitman outperformed the benchmark during the fiscal year, primarily as a result of effective stock selection. Stock selection was strongest in the regional malls, shopping centers, health care and apartments sectors. Sector selection detracted from performance, due primarily to an underweight in the outperforming specialty sector.

Cohen & Steers Capital Management Inc. was added to the Fund in May 2007 and manages a broadly diversified portfolio of global property securities. Cohen & Steers uses a bottom-up approach to portfolio construction, emphasizing the relationship between price and net asset value as the principal valuation metric. From its hire through the end of the fiscal year, its global portfolio had a positive impact on Fund performance. Investments in the Asia Pacific region, particularly in Hong Kong, had a positive


 

Real Estate Securities Fund 55


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

contribution, but this was partially offset by investments in the underperforming United Kingdom market.

Describe any changes to the Fund’s structure or the money manager line-up.

Cohen & Steers was added to the manager line-up in May 2007 at a 10% target weight to implement a global strategy for the Fund. The global strategy is intended to provide diversification benefits and the potential to participate in the evolving non-U.S. REIT market. The non-U.S. REIT market continues to grow as more countries adopt REIT structures.

 

 

Money Managers as of
December 31, 2007
  Styles

AEW Management and Advisors, L.P.

  Value

Cohen & Steers Capital Management, Inc.

  Global
Market-Oriented

Heitman Real Estate Securities LLC

  Growth

INVESCO Institutional (N.A.), Inc. which acts
as a money manager to the Fund through its
INVESCO Real Estate division

  Market-Oriented

RREEF America L.L.C.

  Market-Oriented

 

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for Russell Investment Funds (RIF) are based on numerous factors, should not be relied on as an indication of investment decisions of any RIF Fund.


 

56 Real Estate Securities Fund


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Shareholder Expense Example — December 31, 2007 (Unaudited)

 

 

 

Fund Expenses

The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from July 1, 2007 to December 31, 2007.

Actual Expenses

The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Actual
Performance
  Hypothetical
Performance
(5% return
before expenses)
    

Beginning Account Value

    

July 1, 2007

  $1,000.00  $1,000.00

Ending Account Value

    

December 31, 2007

  $900.10  $1,020.42

Expenses Paid During Period*

  $4.55  $4.84

 

*Expenses are equal to the Fund’s annualized expense ratio of 0.95% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

Real Estate Securities Fund 57


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Schedule of Investments — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Common Stocks - 96.4%

      

Apartments - 13.5%

      

Apartment Investment & Management Co. Class A (ö)(Ñ)

  156,403    5,432

AvalonBay Communities, Inc. (ö)

  189,941    17,881

BRE Properties, Inc. Class A (ö)(Ñ)

  156,472    6,342

Camden Property Trust (ö)(Ñ)

  158,900    7,651

Colonial Properties Trust (ö)

  29,500    668

Deutsche Wohnen AG

  3,915    120

Equity Residential (ö)(Ñ)

  463,018    16,886

Essex Property Trust, Inc. (ö)(Ñ)

  64,137    6,253

Home Properties, Inc. (ö)(Ñ)

  11,000    493

Mid-America Apartment Communities, Inc. (ö)

  34,700    1,483

UDR, Inc. (ö)(Ñ)

  128,203    2,545
       
      65,754
       

Diversified - 10.4%

      

British Land Co. PLC (ö)

  56,095    1,046

CA Immobilien Anlagen AG (Æ)

  10,010    222

CapitaLand, Ltd.

  29,000    125

Castellum AB

  42,000    431

Cheung Kong Holdings, Ltd.

  21,429    390

DB RREEF Trust (ö)

  144,028    252

Eurocastle Investment, Ltd.

  2,309    56

Forest City Enterprises, Inc. Class A

  8,459    376

GPT Group (ö)

  208,378    736

Great Eagle Holdings, Ltd.

  203,361    751

Heiwa Real Estate Co., Ltd.

  43,000    272

Helical Bar PLC

  34,700    224

Henderson Land Development Co., Ltd.

  158,822    1,472

Hysan Development Co., Ltd.

  194,264    550

ICADE (ö)

  1,372    205

iStar Financial, Inc. (ö)(Ñ)

  56,000    1,459

IVG Immobilien AG

  4,609    156

Kenedix Realty Investment Corp. Class A (ö)

  25    165

Kerry Properties, Ltd.

  15,000    120

Land Securities Group PLC (ö)

  79,627    2,368

Mirvac Group (ö)

  65,396    344

Mitsubishi Estate Co., Ltd.

  100,000    2,397

Mitsui Fudosan Co., Ltd.

  93,000    2,010

New World China Land, Ltd.

  432,435    386

Sino Land Co.

  133,912    470

Sino-Ocean Land Holdings, Ltd. (Æ)

  944    1

Sponda OYJ

  19,281    229

Stockland (ö)

  52,925    390
   Principal
Amount ($)
or Shares
    Market
Value
$

Sumitomo Realty & Development Co., Ltd.

  9,000    221

Sun Hung Kai Properties, Ltd.

  66,409    1,397

Unibail-Rodamco (ö)

  10,617    2,311

Vornado Realty Trust (ö)(Ñ)

  294,397    25,892

Washington Real Estate Investment Trust (ö)(Ñ)

  83,000    2,607

Wharf Holdings, Ltd.

  120,577    622
       
      50,653
       

Free Standing Retail - 0.1%

      

Realty Income Corp. (ö)(Ñ)

  24,400    659
       

Health Care - 8.0%

      

HCP, Inc. (ö)(Ñ)

  253,550    8,818

Health Care REIT, Inc. (ö)(Ñ)

  79,800    3,566

Healthcare Realty Trust, Inc. (ö)(Ñ)

  36,300    922

LTC Properties, Inc. (ö)

  40,000    1,002

Nationwide Health Properties, Inc. (ö)

  301,050    9,444

Omega Healthcare Investors, Inc. (ö)

  106,500    1,709

Senior Housing Properties Trust (ö)(Ñ)

  86,000    1,951

Ventas, Inc. (ö)

  257,300    11,643
       
      39,055
       

Industrial - 7.4%

      

AMB Property Corp. (ö)(Ñ)

  126,200    7,264

DCT Industrial Trust, Inc. (ö)(Ñ)

  275,800    2,568

First Potomac Realty Trust (ö)(Ñ)

  62,800    1,086

Goodman Group (ö)

  115,824    499

Prologis (ö)

  379,969    24,082

Segro PLC (ö)

  82,813    769
       
      36,268
       

Lodging/Resorts - 6.7%

      

Ashford Hospitality Trust, Inc. (ö)(Ñ)

  125,800    905

DiamondRock Hospitality Co. (ö)(Ñ)

  48,300    724

FelCor Lodging Trust, Inc. (ö)

  77,950    1,215

Hospitality Properties Trust (ö)

  16,000    516

Host Hotels & Resorts, Inc. (ö)

  1,132,591    19,299

LaSalle Hotel Properties (ö)(Ñ)

  83,213    2,654

Shangri-La Asia, Ltd.

  151,211    470

Starwood Hotels & Resorts Worldwide, Inc.

  155,609    6,851

Sunstone Hotel Investors, Inc. (ö)

  10,951    200
       
      32,834
       

Manufactured Homes - 0.4%

      

Equity Lifestyle Properties, Inc. (ö)

  46,250    2,112
       

 

58 Real Estate Securities Fund


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Mixed Industrial/Office - 1.0%

      

Liberty Property Trust (ö)(Ñ)

  126,091    3,633

PS Business Parks, Inc. (ö)

  23,400    1,229
       
      4,862
       

Office - 15.3%

      

Alexandria Real Estate Equities, Inc. (ö)(Ñ)

  43,500    4,423

Alstria Office REIT-AG (Æ)(ö)

  12,291    184

Beni Stabili SpA

  355,394    385

BioMed Realty Trust, Inc. (ö)

  200,561    4,647

Boston Properties, Inc. (ö)

  224,473    20,609

Brandywine Realty Trust (ö)(Ñ)

  206,881    3,709

Brookfield Properties Corp. (Ñ)

  183,588    3,534

CapitaCommercial Trust (Æ)(ö)

  147,000    250

Commonwealth Property Office Fund (ö)

  488,644    664

Corporate Office Properties Trust SBI MD (ö)(Ñ)

  58,600    1,846

DA Office Investment Corp. Class A (ö)

  15    96

Derwent London PLC (ö)

  53,227    1,485

Douglas Emmett, Inc. (ö)

  291,690    6,595

Great Portland Estates PLC (ö)

  94,633    897

Highwoods Properties, Inc. (ö)(Ñ)

  35,400    1,040

Hongkong Land Holdings, Ltd.

  274,000    1,345

HRPT Properties Trust (ö)(Ñ)

  173,000    1,337

Kilroy Realty Corp. (ö)(Ñ)

  70,862    3,895

Mack-Cali Realty Corp. (ö)(Ñ)

  69,051    2,348

Maguire Properties, Inc. (ö)

  13,678    403

Nomura Real Estate Office Fund, Inc. Class A (ö)

  22    207

Norwegian Property ASA

  16,291    198

Parkway Properties, Inc. (ö)(Ñ)

  10,600    392

SL Green Realty Corp. (ö)(Ñ)

  149,120    13,937

Societe Immobiliere de Location pour l’Industrie et le Commerce (ö)

  1,741    254

Tishman Speyer Office Fund (ö)

  137,300    195

Tokyo Tatemono Co., Ltd.

  2,000    19
       
      74,894
       

Regional Malls - 16.0%

      

Aeon Mall Co., Ltd.

  22,600    593

CBL & Associates Properties, Inc. (ö)(Ñ)

  72,300    1,729

CFS Retail Property Trust (ö)

  202,360    415

General Growth Properties, Inc. (ö)

  376,220    15,493
   Principal
Amount ($)
or Shares
    Market
Value
$

Macerich Co. (The) (ö)(Ñ)

  188,102    13,366

Simon Property Group, Inc. (ö)

  447,627    38,881

Taubman Centers, Inc. (ö)(Ñ)

  145,900    7,177

Westfield Group (ö)

  34,463    631
       
      78,285
       

Self Storage - 4.4%

      

Extra Space Storage, Inc. (ö)(Ñ)

  95,800    1,369

Public Storage (ö)(Ñ)

  273,851    20,103
       
      21,472
       

Shopping Centers - 11.0%

      

Cedar Shopping Centers, Inc. (ö)

  62,000    634

Citycon Oyj

  46,277    246

Corio NV (ö)

  3,418    275

Developers Diversified Realty Corp. (ö)

  258,163    9,885

Federal Realty Invs Trust (ö)(Ñ)

  206,458    16,960

Hammerson PLC (ö)

  44,579    907

Kimco Realty Corp. (ö)(Ñ)

  187,900    6,840

Kite Realty Group Trust (ö)(Ñ)

  102,400    1,564

Mercialys SA (ö)

  3,681    140

Regency Centers Corp. (ö)

  191,467    12,348

Saul Centers, Inc. (ö)

  17,600    940

Tanger Factory Outlet Centers (ö)(Ñ)

  78,750    2,970
       
      53,709
       

Specialty - 2.2%

      

Digital Realty Trust, Inc. (ö)(Ñ)

  167,700    6,435

DuPont Fabros Technology, Inc. (ö)(Ñ)

  53,600    1,050

Entertainment Properties Trust (ö)(Ñ)

  18,000    846

Plum Creek Timber Co., Inc. (ö)(Ñ)

  49,500    2,279
       
      10,610
       
Total Common Stocks      

(cost $402,796)

      471,167
       
Warrants & Rights - 0.0%      

Wharf Holdings, Ltd. (Æ)

  15,071    21
       
Total Warrants & Rights      

(cost $—)

      21
       
Short-Term Investments - 3.1%      

Russell Investment Company Money Market Fund

  15,210,000    15,210
       
Total Short-Term Investments      

(cost $15,210)

      15,210
       

 

Real Estate Securities Fund 59


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
 
      
Other Securities - 19.8%      

State Street Securities Lending Quality Trust (×)

  96,537,248    96,537 
        
Total Other Securities      

(cost $96,537)

      96,537 
        
Total Investments - 119.3%      

(identified cost $514,543)

      582,935 
Other Assets and Liabilities, Net - (19.3%)      (94,126)
        
Net Assets - 100.0%      488,809 
        

 

See accompanying notes which are an integral part of the financial statements.

 

60 Real Estate Securities Fund


Table of Contents

Russell Investment Funds

Real Estate Securities Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands

 

Foreign Currency Exchange Contracts
     
Amount
Sold
 Amount
Bought
 Settlement
Date
 Unrealized
Appreciation
(Depreciation)
$
USD 3 AUD 4 01/02/08 
USD 11 AUD 12 01/02/08 
USD 13 AUD 15 01/02/08 
USD 26 AUD 30 01/02/08 
USD 4 AUD 5 01/03/08 
USD 11 AUD 12 01/03/08 
USD 15 AUD 17 01/03/08 
USD 66 AUD 76 01/03/08 
USD 63 HKD 492 01/02/08 
USD 73 HKD 571 01/02/08 
USD 58 HKD 452 01/08/08 
USD 102 SGD 148 01/02/08 
EUR 6 USD 8 01/03/08 
EUR 9 USD 13 01/03/08 
EUR 12 USD 17 01/03/08 
SGD 39 USD 27 01/02/08 
SGD 14 USD 10 01/03/08 
      
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts 
      

 

 

Presentation of Portfolio Holdings — December 31, 2007

 

Categories  % of Net
Assets
 
  

Apartments

  13.5 

Diversified

  10.4 

Free Standing Retail

  0.1 

Health Care

  8.0 

Industrial

  7.4 

Lodging/Resorts

  6.7 

Manufactured Homes

  0.4 

Mixed Industrial/Office

  1.0 

Office

  15.3 

Regional Malls

  16.0 

Self Storage

  4.4 

Shopping Centers

  11.0 

Specialty

  2.2 

Warrants & Rights

  *

Short-Term Investments

  3.1 

Other Securities

  19.8 
    

Total Investments

  119.3 

Other Assets and Liabilities, Net

  (19.3)
    
  100.0 
    

Foreign Currency Exchange Contracts

  *

 

*Less than .05% of net assets.

 

See accompanying notes which are an integral part of the financial statements.

 

Real Estate Securities Fund 61


Table of Contents

Russell Investment Funds

Core Bond Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

LOGO

 

Core Bond Fund     
   Total
Return
 

1 Year

  7.24%

5 Years

  4.74

10 Years

  5.63

 

Lehman Brothers Aggregate Bond Index ** 
   Total
Return
 

1 Year

  6.97%

5 Years

  4.42

10 Years

  5.97

 

 

* Assumes initial investment on January 1, 1998.

 

** Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/ depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization.

 

§ Annualized.

Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

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Table of Contents

Russell Investment Funds

Core Bond Fund

Portfolio Management Discussion and Analysis — December 31, 2007 (Unaudited)

 

 

 

The Core Bond Fund (the “Fund”) allocates most of its assets among multiple money managers. Russell Investment Management Company (“RIMCo”), as the Fund’s advisor, may change the allocation of the Fund’s assets among money managers at any time. An exemptive order from the Securities and Exchange Commission (SEC) permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Fund’s Board without a shareholder vote. Pursuant to the terms of the exemptive order, the Fund is required to notify its shareholders within 60 days of when a money manager begins providing services. The Fund currently has three money managers.

What is the Fund’s investment objective?

The Fund seeks to provide current income and the preservation of capital.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2007?

For the fiscal year ended December 31, 2007, the Core Bond Fund gained 7.24%. This compared to its benchmark the Lehman Brothers Aggregate Bond Index, which gained 6.97%. The Fund’s performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind.

For the year ended December 31, 2007, the Lipper® BBB Rated Corp Debt Funds (VIP) Average returned 5.27%. This result serves as a peer comparison and is expressed net of operating expenses.

How did the market conditions described in the Market Summary report affect the Fund’s performance?

Investors’ flight to the relative safety of U.S. Treasuries and the subsequent re-pricing of risk (i.e., the market demanding increased compensation for assuming a given level of risk) impacted nearly all non-Treasury fixed income investments. As a result, non-Treasury investments posted lower returns than the benchmark. Given that the Fund’s money managers typically invest in non-Treasury sectors, the Fund was generally hurt by exposure to so-called “spread sectors” (e.g., mortgages, corporates, asset-backed securities), but benefited significantly by underweighting investment grade corporates versus its benchmark.

The decline in short-term interest rates benefited the Fund as several of the Fund’s managers anticipated the decline and increased sensitivity to interest rates (also called increased duration). In general, as interest rates decline bond prices increase. Therefore, the increase in duration had a positive impact on performance.

Finally, as the Federal Reserve decreased the federal funds rate, intermediate maturity yields also declined resulting in a shift in yields otherwise known as a shift in the yield curve. This yield curve movement benefited the Fund as the Fund’s money managers anticipated the change and varied the maturity of their holdings.

 

Overall, managers’ investment decisions resulted in the Fund outperforming both its Index and its peers as measured by the Lipper® BBB Rated Corp Debt Funds (VIP) Average.

How did the investment strategies and techniques employed by the Fund and its money managers affect its performance?

By far, the largest impact on Fund performance was from the re-pricing of risk (i.e., the market demanding increased compensation for assuming a given level of risk) and the concern with the consumer’s ability to make mortgage payments. This fear of consumer creditworthiness also spread to broader market sectors and securities that have less exposure to consumer risk, which in turn added to volatility and lower returns. The Fund’s exposure to consumer-related investments in mortgage-backed and asset-backed sectors negatively impacted performance in these sectors. Being defensively positioned with respect to credit, however, was beneficial.

At the manager level, Pacific Investment Management Company LLC (“PIMCO”) was the best performing manager mainly due to its yield curve and sector allocation decisions. Goldman Sachs Asset Management, L.P. also generated positive performance as duration management as well as investments in securities outside of the United States generated positive excess return. Bear Stearns Asset Management Inc. underperformed over the year due to its duration positioning and exposure to securitized products such as mortgage-backed and asset-backed securities.

Describe any changes to the Fund’s structure or the money manager line-up.

There were no changes to the Fund’s structure or money manager line-up during the fiscal year.

 

Money Managers as of
December 31, 2007
  Styles

Bear Stearns Asset Management Inc.

  Sector Rotation

Goldman Sachs Asset Management, L.P.

  Fully Discretionary

Pacific Investment Management Company LLC

  Fully Discretionary

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Russell Investment Management Company (RIMCo), or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for Russell Investment Funds (RIF) are based on numerous factors, should not be relied on as an indication of investment decisions of any RIF Fund.


 

Core Bond Fund 63


Table of Contents

Russell Investment Funds

Core Bond Fund

Shareholder Expense Example — December 31, 2007 (Unaudited)

 

 

 

Fund Expenses

The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Annual Report. Please refer to this information when reviewing the Expense Example for a Fund.

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from July 1, 2007 to December 31, 2007.

Actual Expenses

The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Actual
Performance
  Hypothetical
Performance
(5% return
before expenses)
    

Beginning Account Value

    

July 1, 2007

  $1,000.00  $1,000.00

Ending Account Value

    

December 31, 2007

  $1,060.60  $1,021.68

Expenses Paid During Period*

  $3.64  $3.57

 

*Expenses are equal to the Fund’s annualized expense ratio of 0.70% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Reflects amounts waived and/or reimbursed by the investment adviser. Without the waiver and/or reimbursement, expenses would have been higher.

 

64 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Long-Term Investments - 90.6%

      

Asset-Backed Securities - 3.6%

      

Accredited Mortgage Loan Trust (Ê)

      

Series 2004-2 Class A2

      

5.165% due 07/25/34

  41    40

ACE Securities Corp. (Ê)

      

Series 2003-OP1 Class M2

      

6.365% due 12/25/33

  55    53

Series 2005-SD3 Class A

      

5.265% due 08/25/45

  236    223

Aegis Asset Backed Securities Trust (Ê)
Series 2003-3 Class M2
6.515% due 01/25/34

  110    72

American Express Credit Account Master Trust (Ê)

      

Series 2004-C Class C (Å)

      

5.528% due 02/15/12

  207    207

Series 2005-3 Class A

      

5.028% due 01/18/11

  700    700

Ameriquest Mortgage Securities, Inc. (Ê)

      

Series 2002-D Class M1

      

7.236% due 02/25/33

  90    67

Series 2004-R8 Class A5

      

5.235% due 09/25/34

  29    29

Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41

  190    183

CIT Mortgage Loan Trust (Ê)(Þ)

      

Series 2007-1 Class 2A1

      

5.865% due 10/01/37

  425    418

Series 2007-1 Class 2A2

      

6.115% due 10/01/37

  130    124

Series 2007-1 Class 2A3

      

6.239% due 10/01/37

  180    164

Countrywide Asset-Backed Certificates

      

Series 2004-13 Class AF3

      

3.989% due 02/25/31

  7    7

Series 2004-AB2 Class M3 (Ê)

      

5.465% due 05/25/36

  95    83

Series 2004-BC1 Class M1 (Ê)

      

5.365% due 02/25/34

  95    88

Series 2006-11 Class 1AF4

      

6.300% due 09/25/46

  170    158

Countrywide Home Equity Loan Trust (Ê)
Series 2006-HW Class 2A1B
5.178% due 11/15/36

  698    652
   Principal
Amount ($)
or Shares
    Market
Value
$

First Franklin Mortgage Loan Asset Backed Certificates (Ê)
Series 2006-FF1 Class A3
4.915% due 11/25/36

  213    207

GMAC Mortgage Corp. Loan Trust
Series 2007-HE3 Class 2A1
7.000% due 09/25/37

  97    98

GSAA Trust

      

Series 2006-2 Class 2A3 (Ê)

      

5.135% due 12/25/35

  320    314

Series 2006-4 Class 1A2

      

5.951% due 03/25/36

  234    232

GSAMP Trust (Ê)

      

Series 2003-HE2 Class M1

      

5.515% due 08/25/33

  131    117

Series 2004-SEA Class A2A

      

5.155% due 03/25/34

  59    59

HFC Home Equity Loan Asset Backed Certificates (Ê)

      

Series 2005-1 Class A

      

5.239% due 01/20/34

  224    219

Series 2007-3 Class APT

      

6.149% due 11/20/36

  434    424

Home Equity Asset Trust (Ê)
Series 2005-2 Class 2A2
5.065% due 07/25/35

  4    4

HSI Asset Securitization Corp. Trust (Ê)
Series 2006-HE2 Class 2A1
4.833% due 12/25/36

  73    70

Indymac Residential Asset Backed Trust (Ê)
Series 2006-H2 Class A
4.950% due 06/28/36

  427    387

Lehman XS Trust (Ê)

      

Series 2005-1 Class 2A2

      

4.660% due 07/25/35

  117    117

Series 2006-16N Class A1A

      

4.945% due 11/25/46

  173    166

Series 2007-4N Class 3A2A

      

5.683% due 04/25/37

  900    846

Long Beach Mortgage Loan Trust (Ê)

      

Series 2004-4 Class 1A1

      

5.145% due 10/25/34

  5    4

Series 2006-9 Class 2A1

      

4.925% due 10/25/36

  606    591

Mastr Asset Backed Securities Trust (Ê)
Series 2003-WMC Class M2
7.340% due 08/25/33

  57    48

 

Core Bond Fund 65


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Morgan Stanley ABS Capital I (Ê)

      

Series 2003-NC8 Class M3

      

6.965% due 09/25/33

  38    32

Series 2006-HE7 Class A2A

      

4.915% due 09/25/36

  552    538

New Century Home Equity Loan Trust (Ê) Series 2004-4 Class M2
5.395% due 02/25/35

  215    202

Option One Mortgage Loan Trust (Ê)

      

Series 2003-2 Class M2

      

6.565% due 04/25/33

  48    41

Series 2003-3 Class M3

      

6.865% due 06/25/33

  38    29

Series 2003-4 Class M2

      

6.515% due 07/25/33

  31    28

Park Place Securities, Inc. (Ê)
Series 2005-WCW Class M1
5.315% due 09/25/35

  210    176

Popular ABS Mortgage Pass-Through Trust Series 2005-6 Class A3
5.680% due 01/25/36

  230    228

Renaissance Home Equity Loan Trust

      

Series 2005-1 Class M1

      

5.357% due 05/25/35

  80    70

Series 2005-2 Class AF4

      

4.934% due 08/25/35

  85    78

Series 2006-1 Class AF6

      

5.746% due 05/25/36

  175    162

Residential Asset Mortgage Products, Inc.

      

Series 2003-RS1 Class AI6A

      

5.980% due 12/25/33

  197    196

Series 2006-RZ4 Class A1A (Ê)

      

4.945% due 10/25/36

  711    692

Residential Asset Securities Corp.

      

Series 2003-KS2 Class MI1

      

4.800% due 04/25/33

  450    426

Series 2003-KS2 Class MI3

      

6.100% due 04/25/33

  83    61

Series 2006-KS9 Class AI1 (Ê)

      

4.935% due 11/25/36

  168    164

Series 2007-KS2 Class AI1 (Ê)

      

4.935% due 02/25/37

  390    382

SBI Heloc Trust (Ê)(þ)
Series 2006-1A Class 1A2A
5.035% due 08/25/36

  113    108

SLM Student Loan Trust (Ê)
Series 2007-3 Class A1
5.074% due 10/27/14

  683    682
   Principal
Amount ($)
or Shares
    Market
Value
$

Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/10/10

  6    6

Soundview Home Equity Loan Trust

      

Series 2006-2 Class A2 (Ê)

      

4.995% due 03/25/36

  155    154

Series 2006-WF1 Class A2

      

5.645% due 10/25/36

  290    287

Structured Asset Investment Loan Trust (Ê)
Series 2005-3 Class M2
5.305% due 04/25/35

  120    100

Structured Asset Securities Corp.

      

Series 2004-19X Class A2

      

4.370% due 10/25/34

  120    119

Series 2006-BC3 Class A2 (Ê)

      

4.915% due 10/25/36

  182    179

VTB 24 Capital PLC (Ê)
5.971% due 12/07/09

  100    97
       
      12,408
       

Certificates of Deposit - 0.2%

      

Calyon NY
5.204% due 01/16/09

  300    300

Nordea Bank Finland PLC
5.443% due 04/09/09

  400    400
       
      700
       

Corporate Bonds and Notes - 19.0%

    

Abbott Laboratories

      

5.600% due 05/15/11

  260    269

5.875% due 05/15/16

  80    84

Ace Capital Trust II
9.700% due 04/01/30

  175    222

Alamosa Delaware, Inc.
8.500% due 01/31/12

  100    102

Alion Science and Technology Corp.
10.250% due 02/01/15

  200    171

Allied Waste NA, Inc. (Ñ)
Series B
7.125% due 05/15/16

  90    89

Altria Group, Inc.
7.750% due 01/15/27

  25    32

American Casino & Entertainment Properties LLC
7.850% due 02/01/12

  115    119

American Electric Power Co., Inc.
Series C
5.375% due 03/15/10

  35    36

 

66 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

American Express Bank FSB
Series BKNT
6.000% due 09/13/17

  400    402

American Express Centurion Bank
Series BKNT
5.550% due 10/17/12

  250    254

Series BKN1

      

6.000% due 09/13/17

  400    402

American General Finance Corp.

      

4.875% due 05/15/10

  225    226

6.900% due 12/15/17

  400    400

American International Group, Inc.

      

4.700% due 10/01/10

  130    130

5.375% due 10/18/11

  195    198

5.050% due 10/01/15

  265    256

5.850% due 01/16/18

  900    906

6.250% due 03/15/87

  150    134

Americo Life, Inc. (Å)
7.875% due 05/01/13

  75    77

Amkor Technology, Inc.
7.750% due 05/15/13

  175    165

Anadarko Petroleum Corp.
5.950% due 09/15/16

  100    102

ANZ Capital Trust (ƒ)(Þ)
4.484% due 12/31/49

  225    221

Appalachian Power Co.

  65    66

Series O
5.650% due 08/15/12

      

Arizona Public Service Co.

      

5.800% due 06/30/14

  100    100

6.250% due 08/01/16

  150    153

AT&T Mobility LLC
6.500% due 12/15/11

  120    126

AT&T, Inc.

      

5.100% due 09/15/14

  45    45

6.500% due 09/01/37

  125    131

6.300% due 01/15/38

  875    889

Atmos Energy Corp.
6.350% due 06/15/17

  65    66

BAE Systems Holdings, Inc. (Þ)
6.400% due 12/15/11

  395    416

Bank of America Corp.

      

5.875% due 02/15/09

  80    81

4.875% due 11/06/09 (Ê)

  100    100

5.625% due 10/14/16

  115    116

6.000% due 09/01/17

  335    342

5.750% due 12/01/17

  150    150
   Principal
Amount ($)
or Shares
    Market
Value
$

Bank of America NA
Series BKNT (Ê)

      

5.133% due 06/12/09

  700    698

5.271% due 06/15/16

  200    195

Bank of New York Mellon Corp. (The)
5.125% due 11/01/11

  215    218

Bausch & Lomb, Inc. (Þ)
9.875% due 11/01/15

  125    127

Bear Stearns Cos., Inc. (The)

      

5.494% due 07/16/09 (Ê)

  1,200    1,154

6.950% due 08/10/12

  600    617

BellSouth Corp.

      

4.240% due 04/26/21 (Þ)

  300    299

6.550% due 06/15/34

  35    36

Bellsouth Telecommunications, Inc.
7.000% due 12/01/95

  245    255

BNP Paribas Capital Trust (ƒ)(Å)
9.003% due 12/29/49

  450    482

Boardwalk Pipelines, LP
5.875% due 11/15/16

  225    230

Boeing Capital Corp., Ltd. (Ñ)
6.100% due 03/01/11

  50    52

Burlington Northern Santa Fe Corp.

      

5.650% due 05/01/17

  105    104

6.875% due 12/01/27

  25    26

6.750% due 03/15/29

  10    10

California Steel Industries, Inc.
6.125% due 03/15/14

  385    339

Caterpillar Financial Services Corp.

      

4.965% due 05/18/09 (Ê)

  1,100    1,097

4.300% due 06/01/10

  170    169

4.850% due 12/07/12 (Ñ)

  145    145

5.850% due 09/01/17

  95    98

Catlin Insurance Co., Ltd. (ƒ)(Å)
7.249% due 12/31/49

  100    91

CenterPoint Energy Houston
Electric LLC

      

Series J2
5.700% due 03/15/13

  110    111

CenterPoint Energy Resources Corp.

      

6.125% due 11/01/17

  50    51

Series B

      

7.875% due 04/01/13

  165    181

Chubb Corp.

      

6.375% due 03/29/37 (Ñ)

  175    171

6.000% due 05/11/37

  95    90

CIT Group, Inc.
6.875% due 11/01/09

  45    45

 

Core Bond Fund 67


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Citigroup Capital XXI
8.300% due 12/21/77

  100    106

Citigroup Funding, Inc. (Ê)

      

4.896% due 04/23/09

  100    99

4.858% due 06/26/09

  200    197

Citigroup Global Markets
Holdings, Inc. (Ê)
Series MTNA
5.091% due 03/17/09

  200    198

Citigroup, Inc.

      

5.024% due 01/30/09 (Ê)

  100    99

5.228% due 12/28/09 (Ê)

  400    393

6.500% due 01/18/11

  245    256

5.500% due 08/27/12 (Ñ)

  200    204

5.850% due 07/02/13

  425    438

4.700% due 05/29/15 (Ñ)

  50    47

5.850% due 08/02/16 (Ñ)

  55    56

6.000% due 08/15/17 (Ñ)

  400    408

6.125% due 08/25/36

  300    284

Citizens Communications Co.(Ñ)
9.250% due 05/15/11

  125    135

Clorox Co.
4.200% due 01/15/10

  100    99

CNA Financial Corp.
6.500% due 08/15/16

  125    128

Columbus Southern Power Co.
Series C
5.500% due 03/01/13

  10    10

Comcast Cable Communications Holdings, Inc.

    

9.455% due 11/15/22

  125    159

Comcast Cable Holdings LLC

      

9.800% due 02/01/12

  180    208

7.875% due 08/01/13

  335    367

Comcast Corp.

      

5.900% due 03/15/16

  115    116

6.500% due 01/15/17

  65    68

6.450% due 03/15/37

  80    81

Commonwealth Edison Co.

      

6.950% due 07/15/18

  50    51

5.900% due 03/15/36

  75    70

Series 105

      

5.400% due 12/15/11

  125    126

Series 98

      

6.150% due 03/15/12

  80    83

Community Health Systems, Inc.
8.875% due 07/15/15

  165    168

COX Communications, Inc.

      

4.625% due 01/15/10 (Ñ)

  350    347

5.875% due 12/01/16 (Þ)

  75    75
   Principal
Amount ($)
or Shares
    Market
Value
$

Credit Suisse USA, Inc.

      

4.875% due 08/15/10

  65    66

5.250% due 03/02/11 (Ñ)

  55    56

6.500% due 01/15/12

  25    26

5.500% due 08/15/13 (Ñ)

  45    46

4.875% due 01/15/15

  55    54

CSC Holdings, Inc.

      

Series B

      

8.125% due 07/15/09

  210    213

8.125% due 08/15/09

  175    178

6.750% due 04/15/12

  90    86

CVS Caremark Corp.

      

5.750% due 08/15/11

  215    220

5.750% due 06/01/17

  180    181

Daimler Finance NA LLC

      

5.461% due 03/13/09 (Ê)

  400    398

5.541% due 03/13/09 (Ê)(Ñ)

  300    298

6.500% due 11/15/13

  145    152

Dayton Power & Light Co. (The)
5.125% due 10/01/13

  135    134

DCP Midstream LLC (Ñ)
6.875% due 02/01/11

  20    21

Delta Air Lines, Inc.
Series 00-1
7.570% due 11/18/10

  205    207

Detroit Edison Co. (The)
6.350% due 10/15/32

  50    51

Devon Financing Corp. ULC
7.875% due 09/30/31

  100    121

Dex Media West LLC/Dex Media Finance Co.
Series B
9.875% due 08/15/13

  245    255

Dominion Resources, Inc.

      

Series A

      

5.200% due 01/15/16

  240    233

Series B

      

6.250% due 06/30/12 (Ñ)

  66    69

DPL, Inc.
6.875% due 09/01/11

  193    205

Drummond Co., Inc. (Þ)
7.375% due 02/15/16

  160    148

Echostar DBS Corp.
7.125% due 02/01/16

  125    128

El Paso Corp.
8.050% due 10/15/30

  200    208

El Paso Natural Gas Co.
7.500% due 11/15/26

  100    105

 

68 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Eli Lilly & Co. (Ñ)
5.200% due 03/15/17

  305    305

Energy Transfer Partners, LP
5.950% due 02/01/15

  325    319

Enterprise Products Operating, LP

      

4.950% due 06/01/10

  125    125

8.375% due 08/01/66

  100    102

Exelon Generation Co. LLC
6.200% due 10/01/17

  40    40

FedEx Corp.
7.600% due 07/01/97

  75    89

.Financing Corp.

      

Principal Only STRIP

      

Series 2P

      

Zero coupon due 11/30/17

  60    38

Series 6P

      

Zero coupon due 08/03/18

  300    184

Series 10P

      

Zero coupon due 11/30/17

  510    325

Series 15P

      

Zero coupon due 03/07/19

  70    42

FirstEnergy Corp.

      

Series B

      

6.450% due 11/15/11

  280    289

Series C

      

7.375% due 11/15/31

  125    137

Fiserv, Inc.
6.125% due 11/20/12

  335    341

Ford Motor Credit Co. LLC
7.875% due 06/15/10

  200    185

Freeport-McMoRan Copper & Gold, Inc. 8.375% due 04/01/17

  415    445

General Electric Capital Corp.

      

5.250% due 01/20/10 (Ê)

  200    198

5.250% due 10/19/12

  175    179

6.375% due 11/15/67

  1,900    1,962

Series GMTN

      

5.500% due 04/28/11

  220    226

Series MTN (Ê)

      

5.095% due 10/26/09

  500    499

Series MTNA

      

5.450% due 01/15/13

  405    417

General Electric Co.
5.250% due 12/06/17

  65    65

Goldman Sachs Group, Inc. (The)

      

5.248% due 03/30/09 (Ê)

  400    398

6.875% due 01/15/11

  565    599

5.350% due 01/15/16 (Ñ)

  410    406

5.625% due 01/15/17 (Ñ)

  80    78

6.250% due 09/01/17 (Ñ)

  600    624

6.750% due 10/01/37

  935    916
   Principal
Amount ($)
or Shares
    Market
Value
$

GrafTech Finance, Inc.
10.250% due 02/15/12

  125    129

Harrah’s Operating Co., Inc.
5.500% due 07/01/10

  125    116

Hawaiian Telcom Communications, Inc. (Ê)
Series B
10.318% due 05/01/13

  240    242

HCA, Inc.

      

9.125% due 11/15/14

  125    130

9.250% due 11/15/16

  120    126

HCP, Inc.
5.950% due 09/15/11

  300    301

Historic TW, Inc.

      

8.050% due 01/15/16

  195    217

6.625% due 05/15/29

  10    10

Home Depot, Inc.
5.400% due 03/01/16

  35    33

HSBC Finance Corp.

      

5.240% due 10/21/09 (Ê)

  100    100

5.213% due 03/12/10 (Ê)

  300    294

5.137% due 05/10/10 (Ê)

  100    97

6.375% due 11/27/12

  185    190

5.000% due 06/30/15

  110    105

Idearc, Inc.
8.000% due 11/15/16

  125    115

Inmarsat Finance PLC (Ñ)
10.375% due 11/15/12

  125    121

International Business Machines Corp.
7.125% due 12/01/96

  230    250

International Lease Finance Corp.

      

5.750% due 06/15/11

  80    81

5.625% due 09/20/13 (Ñ)

  80    80

International Paper Co.
5.850% due 10/30/12

  510    519

International Steel Group, Inc. (Ñ)
6.500% due 04/15/14

  210    216

iPCS, Inc. (Ê)
7.036% due 05/01/13

  35    33

iStar Financial, Inc.
Series B
5.125% due 04/01/11

  200    178

Jersey Central Power & Light Co.
5.625% due 05/01/16

  90    88

Johnson & Johnson

      

5.550% due 08/15/17

  75    79

5.950% due 08/15/37

  40    43

JP Morgan Chase Bank
Series EMTN
6.000% due 05/22/45

  860    758

 

Core Bond Fund 69


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

JPMorgan Chase & Co.

      

5.600% due 06/01/11

  115    119

5.375% due 01/15/14

  170    169

6.000% due 01/15/18

  265    270

JPMorgan Chase Bank NA

      

Series BKNT

      

5.875% due 06/13/16

  70    71

6.000% due 10/01/17

  400    407

Kellogg Co.
Series B
6.600% due 04/01/11

  445    472

Kerr-McGee Corp.
6.950% due 07/01/24

  125    134

Kraft Foods, Inc.

      

5.625% due 11/01/11

  575    588

6.500% due 08/11/17

  100    103

6.125% due 02/01/18

  200    202

Kroger Co. (The)

      

8.000% due 09/15/29

  15    17

7.500% due 04/01/31

  25    28

L-3 Communications Corp.
Series B
6.375% due 10/15/15

  125    123

Lehman Brothers Holdings, Inc.

      

5.241% due 01/23/09 (Ê)(Ñ)

  600    588

5.320% due 04/03/09 (Ê)

  400    391

5.170% due 05/25/10 (Ê)

  200    192

5.250% due 02/06/12

  85    84

5.375% due 10/17/12

  250    348

6.200% due 09/26/14 (Ñ)

  375    382

5.500% due 04/04/16

  100    96

Level 3 Communications, Inc.
6.000% due 09/15/09

  60    56

Level 3 Financing, Inc.
12.250% due 03/15/13

  150    152

M&T Bank Corp.
5.375% due 05/24/12

  215    214

Mandalay Resort Group
6.500% due 07/31/09

  90    90

Manufacturers & Traders Trust Co.
5.585% due 12/28/20

  84    78

Mashantucket Western Pequot Tribe (Þ)
8.500% due 11/15/15

  235    237

McLeodUSA, Inc. (Þ)
10.500% due 10/01/11

  225    251

MedQuest, Inc. (Ñ)
Series B
11.875% due 08/15/12

  225    235
   Principal
Amount ($)
or Shares
    Market
Value
$

Merrill Lynch & Co., Inc.

      

5.211% due 12/04/09 (Ê)

  200    194

6.050% due 08/15/12

  290    296

6.050% due 05/16/16

  85    84

5.700% due 05/02/17 (Ñ)

  65    62

6.400% due 08/28/17 (Ñ)

  435    442

Series MTN (Ê)

      

4.948% due 05/08/09

  900    876

Series MTNC

      

4.250% due 02/08/10

  25    25

MetLife, Inc.
6.400% due 12/15/36

  100    92

Metropolitan Life Global
Funding I (Ê)(Þ)
4.945% due 05/17/10

  400    397

MGM Mirage
6.750% due 09/01/12

  300    292

Midamerican Energy Holdings Co.
6.125% due 04/01/36

  150    150

Miller Brewing Co. (Þ)
5.500% due 08/15/13

  110    111

Mohegan Tribal Gaming Authority
8.000% due 04/01/12

  125    127

Morgan Stanley

      

4.925% due 05/07/09 (Ê)

  300    296

5.375% due 10/15/15

  125    122

5.550% due 04/27/17

  70    68

6.250% due 08/28/17 (Ñ)

  100    102

5.950% due 12/28/17 (Ñ)

  225    225

Series GMTN

      

5.006% due 02/09/09 (Ê)

  500    494

5.750% due 08/31/12

  125    128

Series MTN (Ê)

      

5.333% due 01/15/10

  300    297

Natexis Ambs Co. LLC (ƒ)(Þ)
8.440% due 12/29/49

  120    122

National Rural Utilities Cooperative Finance Corp.

      

5.750% due 08/28/09

  45    46

5.450% due 04/10/17

  215    214

Neff Corp. (Ñ)
10.000% due 06/01/15

  80    44

Nelnet, Inc.
7.400% due 09/29/36

  125    120

Nevada Power Co.
Series L
5.875% due 01/15/15

  100    99

New Cingular Wireless Services, Inc.

      

7.875% due 03/01/11

  150    162

8.125% due 05/01/12

  155    172

8.750% due 03/01/31

  85    110

 

70 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

News America Holdings, Inc.

      

7.750% due 12/01/45

  65    70

7.900% due 12/01/95

  90    100

8.250% due 10/17/96

  20    23

News America, Inc. (Å)
6.650% due 11/15/37

  225    232

NGPL PipeCo LLC (Þ)
6.514% due 12/15/12

  200    203

Nisource Finance Corp.

      

7.875% due 11/15/10

  125    133

6.400% due 03/15/18

  145    145

Noranda Aluminium Acquisition
Corp. (Ê)(Þ)
8.738% due 05/15/15

  130    109

Norfolk Southern Corp.

      

7.700% due 05/15/17

  20    23

7.050% due 05/01/37

  90    98

7.900% due 05/15/97

  470    544

Nuveen Investments, Inc. (Þ)
10.500% due 11/15/15

  235    234

Ohio Power Co.
Series F
5.500% due 02/15/13

  20    20

ONEOK Partners, LP

      

6.650% due 10/01/36

  100    101

6.850% due 10/15/37

  100    104

Pacific Gas & Electric Co.

      

4.200% due 03/01/11

  60    59

6.050% due 03/01/34

  95    95

PAETEC Holding Corp. (Þ)
9.500% due 07/15/15

  305    297

PartnerRe Finance II
6.440% due 12/01/66

  50    44

Phoenix Life Insurance Co. (Þ)
7.150% due 12/15/34

  150    164

Pride International, Inc.
7.375% due 07/15/14

  185    190

Progress Energy, Inc.

      

7.100% due 03/01/11

  77    82

5.625% due 01/15/16

  40    40

7.000% due 10/30/31

  90    98

Prudential Financial, Inc.
6.000% due 12/01/17

  110    110

Qwest Corp.
7.625% due 06/15/15

  100    102

RBS Capital Trust III (ƒ)
5.512% due 09/29/49

  200    184

Reckson Operating Partnership, LP

      

7.750% due 03/15/09

  25    26

5.150% due 01/15/11

  92    93
   Principal
Amount ($)
or Shares
    Market
Value
$

Reinsurance Group of America, Inc. (Ñ)
6.750% due 12/15/65

  75    67

Residential Capital LLC
7.875% due 06/30/10

  200    128

Rohm & Haas Co. (Ñ)
6.000% due 09/15/17

  100    102

Ryerson, Inc. (Þ)
12.000% due 11/01/15

  225    222

Safeway, Inc.
7.250% due 02/01/31

  20    22

SB Treasury Co. LLC (ƒ)(Å)
12/29/2049
9.400% due 12/29/49

  350    357

Schering-Plough Corp.
5.550% due 12/01/13

  200    202

Simon Property Group, LP
5.600% due 09/01/11

  200    201

Southern Natural Gas Co.
7.350% due 02/15/31

  75    78

Spansion, Inc. (Ñ)(Þ)
11.250% due 01/15/16

  45    38

Sprint Capital Corp.

      

7.625% due 01/30/11

  350    365

8.750% due 03/15/32

  70    79

Sprint Nextel Corp.
6.000% due 12/01/16

  350    335

SPX Corp. (Þ)
7.625% due 12/15/14

  75    77

Swiss Re Capital I, LP (ƒ)(Þ)
6.854% due 05/29/49

  225    221

Symetra Financial Corp. (Å)
6.125% due 04/01/16

  150    149

Temple-Inland, Inc.
7.875% due 05/01/12

  202    223

Tennessee Gas Pipeline Co. (Ñ)
7.000% due 10/15/28

  50    50

Time Warner Cable, Inc.

      

5.400% due 07/02/12

  600    601

5.850% due 05/01/17

  155    155

6.550% due 05/01/37 (Ñ)

  175    179

Time Warner, Inc. (Ñ)
5.875% due 11/15/16

  400    398

Travelers Cos., Inc. (The)

      

5.375% due 06/15/12

  40    41

6.250% due 06/15/37

  100    97

Travelport LLC (Ñ)
11.875% due 09/01/16

  130    139

UBS AG
Series MTN
Zero coupon due 12/31/17

  270    157

 

Core Bond Fund 71


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Unilever Capital Corp. (Ñ)
5.900% due 11/15/32

  130    129

Union Electric Co.
6.400% due 06/15/17

  205    215

Union Pacific Corp.
6.125% due 01/15/12

  120    125

Union Planters Corp.
7.750% due 03/01/11

  50    53

United States Steel Corp.

      

5.650% due 06/01/13

  135    131

6.050% due 06/01/17

  95    89

6.650% due 06/01/37

  40    36

United Technologies Corp.
5.375% due 12/15/17

  145    146

UnitedHealth Group, Inc.

      

5.250% due 03/15/11

  95    96

6.000% due 06/15/17 (Þ)

  35    35

6.500% due 06/15/37 (Þ)

  45    45

Verizon Communications, Inc. (Ê)
5.280% due 04/03/09

  500    495

Verizon Global Funding Corp. (Ñ)
6.875% due 06/15/12

  1,465    1,585

Wachovia Capital Trust III (ƒ)
5.800% due 03/15/42

  125    112

Wachovia Corp.

      

5.625% due 10/15/16

  100    99

5.750% due 06/15/17 (Ñ)

  155    154

Wachovia Mortgage FSB (Ê)
Series BKNT
4.938% due 05/08/09

  1,000    1,001

Wells Fargo & Co.

      

5.250% due 10/23/12

  135    136

4.950% due 10/16/13

  65    65

5.625% due 12/11/17

  1,005    1,006

Wells Fargo Bank NA
5.750% due 05/16/16

  140    142

Weyerhaeuser Co.
6.750% due 03/15/12

  400    420

Windstream Corp.
8.625% due 08/01/16

  125    131

Wyeth

      

6.950% due 03/15/11

  285    304

5.500% due 03/15/13

  140    144

5.950% due 04/01/37

  140    140

Xerox Corp.
5.500% due 05/15/12

  185    188
       
      65,682
       
   Principal
Amount ($)
or Shares
    Market
Value
$

International Debt - 6.4%

      

Abbey National PLC (ƒ)
6.700% due 06/29/49

  150    147

Altos Hornos de Mexico SA de CV (Ø)

      

Series A
11.375% due 04/30/49

  220    158

America Movil SAB de CV
5.500% due 03/01/14

  100    99

Argentina Bonos
Series VII
7.000% due 09/12/13

  650    572

Aspen Insurance Holdings, Ltd.
6.000% due 08/15/14

  50    51

AstraZeneca PLC (Ñ)
5.900% due 09/15/17

  100    105

AXA SA

      

8.600% due 12/15/30

  35    43

6.463% due 12/31/49 (ƒ)(Ñ)(Þ)

  100    90

Bank of Scotland PLC (Ê)(Þ)
Series MTN
5.254% due 07/17/09

  300    300

Barclays Bank PLC

      

5.450% due 09/12/12

  1,300    1,331

6.050% due 12/04/17 (Þ)

  200    199

BNP Paribas (ƒ)(Þ)
5.186% due 06/29/49

  300    273

British Telecommunications PLC

      

8.625% due 12/15/10

  300    329

9.125% due 12/15/30

  5    7

Canadian Natural Resources, Ltd.

      

6.000% due 08/15/16

  40    41

5.700% due 05/15/17 (Ñ)

  75    75

6.500% due 02/15/37

  170    170

CIT Group Funding Co. of Canada
5.600% due 11/02/11

  80    76

Citigroup Global Markets

      

Deutschland AG for OAO Gazprom
10.500% due 10/21/09

  200    216

Conoco Funding Co.
6.350% due 10/15/11

  340    361

Deutsche Bank AG (Ñ)
6.000% due 09/01/17

  600    622

Deutsche Telekom International Finance BV

      

5.064% due 03/23/09 (Ê)

  300    299

8.000% due 06/15/10

  60    64

5.375% due 03/23/11

  75    76

8.250% due 06/15/30 (Ñ)

  180    225

 

72 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

DNB Nor Bank ASA (Ê)(Þ)
5.313% due 10/13/09

  1,000    1,000

Egypt Government AID Bonds
4.450% due 09/15/15

  295    293

EnCana Corp. (Ñ)
6.500% due 02/01/38

  225    233

Endurance Specialty Holdings, Ltd.
6.150% due 10/15/15

  100    98

Enel Finance International SA (Þ)
6.250% due 09/15/17

  600    607

Export-Import Bank of China (Þ)
4.875% due 07/21/15

  110    108

Export-Import Bank of Korea

      

5.125% due 02/14/11

  100    100

5.500% due 10/17/12

  100    100

Federative Republic of Brazil (Ñ)
6.000% due 01/17/17

  590    599

10.25% due 01/10/28

  1,845    995

FMG Finance Pty, Ltd. (Þ)
10.625% due 09/01/16

  565    647

Gaz Capital for Gazprom (Å)
6.212% due 11/22/16

  115    110

GTL Trade Finance, Inc. (Þ)
7.250% due 10/20/17

  105    107

HSBC Holdings PLC (Ñ)

      

6.500% due 05/02/36

  175    170

6.500% due 09/15/37

  100    97

Inco, Ltd.
5.700% due 10/15/15

  175    175

Intelsat Bermuda, Ltd.

      

8.886% due 01/15/15 (Ê)

  110    110

11.250% due 06/15/16

  270    279

Intelsat Subsidiary Holding Co., Ltd.
8.625% due 01/15/15

  205    206

Intergen NV (Þ)
9.000% due 06/30/17

  185    195

Ispat Inland ULC
9.750% due 04/01/14

  639    692

Korea Development Bank (Ê)(Ñ)
5.370% due 04/03/10

  900    897

Korea Electric Power Corp. (Þ)
5.125% due 04/23/34

  60    61

Lukoil International Finance BV (Þ)
6.356% due 06/07/17

  340    322

Mizuho Financial Group Cayman, Ltd. (Þ)
5.790% due 04/15/14

  100    105

MUFG Capital Finance 1, Ltd. (ƒ)
6.346% due 07/25/99

  200    189

Peruvian Government International Bond (Ñ)
8.375% due 05/03/16

  160    188
   Principal
Amount ($)
or Shares
    Market
Value
$

Petrobras International Finance Co. (Ñ) 8.375% due 12/10/18

  295    351

Province of Quebec Canada Series PJ
6.125% due 01/22/11

  390    412

Ras Laffan Liquefied Natural Gas Co., Ltd. II (Þ)
5.298% due 09/30/20

  75    73

Ras Laffan Liquefied Natural Gas Co., Ltd. III (Þ)
5.838% due 09/30/27

  250    236

Resona Bank, Ltd. (ƒ)(Þ)
5.850% due 09/29/49

  255    237

Resona Preferred Global Securities Cayman, Ltd. (ƒ)(Å)
7.191% due 12/29/49

  325    322

Rogers Wireless, Inc.
6.375% due 03/01/14

  365    376

Royal Bank of Scotland Group PLC (ƒ)
6.990% due 10/29/49 (Å)

  450    449

Series 1
9.118% due 03/31/49

  700    748

Russia Government International
Bond (Þ)
7.500% due 03/31/30

  342    389

Santander Perpetual SA Unipersonal (ƒ)(Þ) 6.671% due 10/29/49

  300    301

Sanwa Finance Aruba AEC
8.350% due 07/15/09

  135    142

SMFG Preferred Capital USD 1,
Ltd. (ƒ)(Å)
6.078% due 01/29/49

  100    92

Sumitomo Mitsui Banking Corp. (ƒ)(Þ) 5.625% due 07/29/49

  400    374

Systems 2001 Asset Trust LLC (Þ) 7.156% due 12/15/11

  88    92

Telecom Italia Capital SA

      

4.875% due 10/01/10

  150    149

6.200% due 07/18/11

  105    108

5.250% due 10/01/15

  150    146

Telefonica Emisiones SAU

      

5.226% due 06/19/09 (Ê)

  300    298

6.221% due 07/03/17

  90    94

TNK-BP Finance SA (Þ)
7.500% due 03/13/13

  110    110

Transocean, Inc.
6.800% due 03/15/38

  50    51

Tyco Electronics Group SA (Þ) 6.000% due 10/01/12

  50    51

 

Core Bond Fund 73


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Tyco International Group SA
6.750% due 02/15/11

  210    220

UBS AG Series DPNT
5.875% due 12/20/17

  200    201

UFJ Finance Aruba AEC
6.750% due 07/15/13

  35    38

Vale Overseas, Ltd.

      

6.250% due 01/11/16

  35    35

6.250% due 01/23/17

  120    120

Vedanta Resources PLC (Þ)
6.625% due 02/22/10

  245    244

Vodafone Group PLC
6.150% due 02/27/37

  125    123

VTB Capital SA (Þ)
6.609% due 10/31/12

  130    129

Western Oil Sands, Inc.
8.375% due 05/01/12

  255    284

Westfield Capital Corp., Ltd. (Þ)
5.125% due 11/15/14

  125    117

Westfield Group (Þ)
5.400% due 10/01/12

  125    125

Xstrata Canada Corp.

      

7.250% due 07/15/12

  50    54

6.000% due 10/15/15

  225    228

Xstrata Finance Canada, Ltd. (Þ)
5.500% due 11/16/11

  45    46
       
      22,177
       

Loan Agreements - 0.3%

      

Adam Aircraft
11.860% due 05/01/12

  85    68

DB UFC Zuffa Bank Loan
6.938% due 06/28/12

  239    199

Flextronics International, Ltd., Term Loan

      

7.394% due 10/01/14

  135    131

7.395% due 10/03/14

  9    9

7.455% due 10/15/14

  41    40

Starbound Reinsurance, Ltd.
8.090% due 08/20/09

  420    420

Travelport Holdings, Ltd.
12.198% due 03/01/13

  125    118

TXU Corp.
8.747% due 10/10/14

  225    221
       
      1,206
       

Mortgage-Backed Securities - 54.5%

    

ABN Amro Mortgage Corp.
Series 2003-13 Class A3
5.500% due 01/25/34

  1,612    1,529
   Principal
Amount ($)
or Shares
    Market
Value
$

Adjustable Rate Mortgage Trust (Ê)
Series 2004-5 Class 2A1
4.990% due 04/25/35

  87    87

Series 2005-3 Class 8A2
5.105% due 07/25/35

  180    176

American Home Mortgage Assets (Ê)
Series 2007-1 Class A1
5.563% due 02/25/47

  887    828

American Home Mortgage Investment Trust (Ê) Series 2004-4 Class 4A
4.390% due 02/25/45

  126    121

Series 2005-2 Class 5A2
5.015% due 09/25/35

  25    25

Banc of America Alternative Loan Trust

      

Series 2003-2 Class CB2 (Ê)

      

5.365% due 04/25/33

  87    86

Series 2003-10 Class 2A2 (Ê)

      

5.315% due 12/25/33

  212    208

Series 2006-5 Class CB17

      

6.000% due 06/25/36

  220    217

Banc of America Commercial Mortgage, Inc.

      

Series 2004-3 Class A3

      

4.875% due 06/10/39

  264    264

Series 2004-4 Class A3

      

4.128% due 07/10/42

  710    704

Series 2005-2 Class A4

      

4.783% due 07/10/43

  333    328

Series 2005-3 Class A2

      

4.501% due 07/10/43

  150    148

Series 2005-5 Class A4

      

5.115% due 10/10/45

  500    493

Series 2006-1 Class A4

      

5.372% due 09/10/45

  200    201

Banc of America Funding Corp.

      

Series 2005-D Class A1 (Ê)

      

4.112% due 05/25/35

  142    141

Series 2006-3 Class 5A8

      

5.500% due 03/25/36

  475    464

Series 2006-A Class 3A2

      

5.880% due 02/20/36

  182    181

Series 2006-A Class 4A1 (Ê)

      

5.565% due 02/20/36

  473    469

Banc of America Mortgage Securities, Inc.

      

Series 2003-9 Class 1A12 (Ê)

      

5.315% due 12/25/33

  403    401

Series 2004-1 Class 5A1

      

6.500% due 09/25/33

  16    16

 

74 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2004-2 Class 1A9 (Ê)

      

5.315% due 03/25/34

  205    204

Series 2004-11 Class 2A1

      

5.750% due 01/25/35

  406    405

Series 2005-H Class 2A5 (Ê)

      

4.803% due 09/25/35

  220    214

Series 2005-L Class 3A1 (Ê)

      

5.464% due 01/25/36

  236    233

Series 2006-2 Class A15

      

6.000% due 07/25/36

  268    273

Series 2007-3 Class 1A1

      

6.000% due 09/25/37

  909    906

Bear Stearns Adjustable Rate Mortgage Trust

      

Series 2003-1 Class 6A1

      

5.037% due 04/25/33

  65    65

Series 2003-8 Class 4A1

      

4.609% due 01/25/34

  133    131

Series 2004-1 Class 21A1

      

4.457% due 04/25/34

  112    111

Series 2004-9 Class 22A1 (Ê)

      

4.780% due 11/25/34

  98    98

Series 2005-2 Class A1 (Ê)

      

4.125% due 03/25/35

  1,668    1,652

Series 2005-3 Class 2A1

      

5.072% due 06/25/35

  313    310

Bear Stearns Alt-A Trust

      

Series 2005-4 Class 23A1

      

5.368% due 05/25/35

  245    242

Series 2005-7 Class 22A1

      

5.527% due 09/25/35

  114    112

Bear Stearns Alt-A Trust II
Series 2007-1 Class 1A1
6.278% due 09/25/47

  958    956

Bear Stearns Mortgage Funding Trust (Ê)

      

Series 2006-AR2 Class 1A1

      

5.065% due 09/25/36

  913    856

Series 2006-AR2 Class 2A1

      

5.095% due 10/25/36

  884    853

Chase Mortgage Finance Corp.

      

Series 2003-S8 Class A1

      

4.500% due 09/25/18

  158    154

Series 2006-S4 Class A3

      

6.000% due 12/25/36

  266    270

Series 2006-S4 Class A4

      

6.000% due 12/25/36

  145    146

Series 2007-A1 Class 1A3

      

4.355% due 02/25/37

  844    837
   Principal
Amount ($)
or Shares
    Market
Value
$

Citigroup Mortgage Loan Trust, Inc.

      

Series 2005-11 Class A2A (Ê)

      

4.700% due 12/25/35

  80    78

Series 2006-WFH Class A2 (Ê)

      

4.883% due 11/25/36

  1,000    952

Series 2007-AR8 Class 2A1A

      

5.925% due 08/25/37

  241    243

Citigroup/Deutsche Bank Commercial Mortgage Trust

      

Series 2005-CD1 Class A4

      

5.225% due 07/15/44

  1,000    997

Series 2006-CD3 Class A5

      

5.617% due 10/15/48

  190    194

Citimortgage Alternative Loan Trust
Series 2006-A3 Class 1A5
6.000% due 07/25/36

  156    155

Countrywide Alternative Loan Trust

      

Series 2005-32T Class A7 (Ê)

      

5.115% due 08/25/35

  160    160

Series 2005-J8 Class 1A3

      

5.500% due 07/25/35

  210    205

Series 2005-J13 Class 2A3

      

5.500% due 11/25/35

  141    138

Series 2006-9T1 Class A7

      

6.000% due 05/25/36

  114    113

Series 2006-43C Class 1A7

      

6.000% due 02/25/37

  325    322

Series 2006-J2 Class A3

      

6.000% due 04/25/36

  170    168

Series 2006-OA1 Class 4A1 (Ê)

      

5.055% due 08/25/46

  684    645

Series 2006-OA1 Class A1 (Ê)

      

5.129% due 02/20/47

  821    775

Series 2007-J2 Class 2A1

      

6.000% due 07/25/37

  271    273

Series 2007-OA1 Class A1A (Ê)

      

6.168% due 04/25/43

  994    954

Countrywide Home Loan Mortgage Pass Through Trust

      

Series 2003-8 Class A2 (Ê)

      

5.365% due 05/25/18

  185    184

Series 2003-52 Class A1

      

4.501% due 02/19/34

  297    296

Series 2004-16 Class 1A1 (Ê)

      

5.265% due 09/25/34

  189    185

Series 2004-22 Class A3

      

4.801% due 11/25/34

  243    241

 

Core Bond Fund 75


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2004-HYB Class 1A1

      

4.726% due 02/20/35

  423    421

Series 2004-HYB Class A2

      

4.556% due 11/20/34

  102    101

Series 2005-3 Class 1A2 (Ê)

      

5.155% due 04/25/35

  33    31

Series 2005-HYB Class 2A1

      

4.901% due 08/20/35

  416    410

Series 2005-HYB Class 3A2A (Ê)

      

5.250% due 02/20/36

  74    74

Series 2006-OA5 Class 2A1 (Ê)

      

5.065% due 04/25/46

  764    714

Series 2007-18 Class 2A1

      

6.500% due 09/25/37

  296    301

Series 2007-HY1 Class 1A2

      

5.694% due 04/25/37

  100    99

CS First Boston Mortgage Securities Corp.

      

Series 1998-C1 Class A1B

      

6.480% due 05/17/40

  29    29

Series 1998-C2 Class A2

      

6.300% due 11/15/30

  83    84

Series 2005-9 Class 2A1

      

5.500% due 10/25/35

  451    437

Deutsche ALT-A Securities, Inc.
Alternate Loan Trust
Series 2005-AR1 Class 2A3
4.997% due 08/25/35

  465    450

DLJ Commercial Mortgage Corp.

      

Series 1998-CF1 Class A1B

      

6.410% due 02/18/31

  4    4

Series 1999-CG1 Class S

      

Interest Only STRIP

      

0.817% due 03/10/32

  3,284    34

Fannie Mae

      

5.190% due 2012

  210    214

6.000% due 2016

  16    16

5.000% due 2017

  531    533

5.510% due 2017 (Ê)

  48    48

6.000% due 2017

  89    91

4.000% due 2018

  813    782

4.500% due 2018

  4,008    3,948

5.000% due 2018

  207    207

4.500% due 2019

  175    171

5.000% due 2019

  1,181    1,184

6.000% due 2019

  492    504

4.500% due 2020

  395    388

5.000% due 2020

  1,510    1,513

6.000% due 2020

  618    633
   Principal
Amount ($)
or Shares
    Market
Value
$

5.000% due 2021

  1,429    1,430

6.500% due 2024

  508    525

6.000% due 2026

  1,149    1,170

6.000% due 2027

  553    563

6.000% due 2028

  34    35

5.500% due 2029

  94    95

6.000% due 2032

  543    555

7.000% due 2032

  187    193

3.910% due 2033 (Ê)

  251    255

5.000% due 2033

  581    568

5.070% due 2033 (Ê)

  130    134

5.500% due 2033

  2,656    2,657

6.000% due 2033

  198    201

5.000% due 2034

  674    658

5.500% due 2034

  4,189    4,190

5.000% due 2035

  609    595

5.500% due 2035

  19,922    19,913

6.000% due 2035

  160    162

5.000% due 2036

  45    44

5.500% due 2036

  923    922

5.630% due 2036 (Ê)

  443    446

6.000% due 2036

  7,457    7,571

6.500% due 2036

  113    117

7.000% due 2036

  25    25

5.000% due 2037

  6,938    6,770

5.500% due 2037

  4,055    4,051

5.560% due 2037 (Ê)

  289    294

6.000% due 2037

  3,047    3,095

6.500% due 2037

  2,719    2,787

7.000% due 2037

  3,156    3,283

7.500% due 2037

  969    1,014

Series 2003-337 Class 1

      

Principal Only STRIP

      

Zero coupon due 07/01/33

  275    202

Series 2003-343 Class 6

      

Interest Only STRIP

      

5.000% due 10/01/33

  270    61

Series 2003-345 Class 18

      

Interest Only STRIP

      

4.500% due 12/01/18

  729    105

Series 2003-345 Class 19

      

Interest Only STRIP

      

4.500% due 01/01/19

  815    118

Series 2004-353 Class 2

      

Interest Only STRIP

      

5.000% due 08/01/34

  572    143

Series 2004-356 Class 35

      

Interest Only STRIP

      

4.500% due 03/01/20

  141    21

 

76 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2004-356 Class 36

      

Interest Only STRIP

      

4.500% due 03/01/20

  240    37

Series 2005-365 Class 12

      

Interest Only STRIP

      

5.500% due 12/01/35

  1,062    232

Series 2006-369 Class 8

      

Interest Only STRIP

      

5.500% due 04/01/36

  216    50

Series 2006-372 Class 2

      

Interest Only STRIP

      

6.000% due 08/01/36

  557    122

15 Year TBA (Ï)

      

4.500%

  340    335

5.000%

  1,210    1,211

5.500%

  1,000    1,013

30 Year TBA (Ï)

      

4.500%

  530    502

5.000%

  3,175    3,092

6.000%

  4,810    4,884

6.500%

  1,695    1,742

7.000%

  9,000    9,360

Fannie Mae REMICS

      

Series 1992-10 Class ZD

      

8.000% due 11/25/21

  33    33

Series 1999-56 Class Z

      

7.000% due 12/18/29

  103    105

Series 2003-32 Class FH (Ê)

      

5.265% due 11/25/22

  323    323

Series 2003-35 Class FY (Ê)

      

5.265% due 05/25/18

  415    418

Series 2003-78 Class FI (Ê)

      

5.265% due 01/25/33

  317    317

Series 2004-21 Class FL (Ê)

      

5.215% due 11/25/32

  158    158

Series 2005-36 Class AI

      

Interest Only STRIP

      

5.500% due 10/25/26

  257    14

Series 2005-79 Class FC (Ê)

      

5.165% due 02/25/22

  150    149

Series 2006-48 Class LG

      

Principal Only STRIP

      

Zero coupon due 06/25/36

  70    39

Fannie Mae Whole Loan
Series 2003-W1 Class 1A1
6.500% due 12/25/42

  40    42

Federal Home Loan Mortgage
Corp. Structured Pass
Through Securities (Ê)
Series 2005-63 Class 1A1
6.063% due 02/25/45

  35    35
   Principal
Amount ($)
or Shares
    Market
Value
$

First Horizon Alternative Mortgage Securities

      

Series 2004-AA3 Class A1 (Ê)

      

5.302% due 09/25/34

  53    53

Series 2006-AA5 Class A2 (Ê)

      

6.522% due 09/25/36

  150    153

Series 2006-FA3 Class A6

      

6.000% due 07/25/36

  236    235

First Horizon Asset Securities, Inc. (Ê)

      

Series 2004-AR6 Class 2A1

      

4.750% due 12/25/34

  46    45

Series 2005-AR5 Class 3A1

      

5.535% due 10/25/35

  114    113

Freddie Mac

      

6.000% due 2016

  26    26

5.000% due 2018

  649    651

4.000% due 2019

  1,648    1,583

5.000% due 2019

  739    741

5.000% due 2020

  1,346    1,348

5.500% due 2020

  789    799

7.360% due 2030 (Ê)

  1    2

5.000% due 2033

  206    201

6.890% due 2034 (Ê)

  102    103

6.000% due 2035

  146    147

5.870% due 2036 (Ê)

  119    120

5.940% due 2036 (Ê)

  233    236

5.970% due 2036 (Ê)

  139    141

5.540% due 2037 (Ê)

  427    433

5.570% due 2037 (Ê)

  183    185

5.720% due 2037 (Ê)

  712    724

5.760% due 2037 (Ê)

  250    255

5.810% due 2037 (Ê)

  204    207

5.830% due 2037 (Ê)

  189    192

5.870% due 2037 (Ê)

  89    90

5.890% due 2037 (Ê)

  69    71

6.000% due 2037

  1,979    2,009

30 Year TBA (Ï)

      

5.000%

  1,485    1,449

5.500%

  2,520    2,514

Freddie Mac REMICS

      

Series 2000-226 Class F (Ê)

      

5.478% due 11/15/30

  16    16

Series 2003-256 Class FJ (Ê)

      

5.428% due 02/15/33

  142    143

Series 2003-258 Class IG

      

Interest Only STRIP

      

4.500% due 10/15/16

  111    9

Series 2003-262 Class AB

      

2.900% due 11/15/14

  239    235

 

Core Bond Fund 77


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2004-276 Class IP

      

Interest Only STRIP

      

5.500% due 07/15/23

  152    3

Series 2004-281 Class DF (Ê)

      

5.478% due 06/15/23

  121    122

Series 2005-292 Class IG

      

Interest Only STRIP

      

5.000% due 04/15/23

  169    25

Series 2005-294 Class FA (Ê)

      

5.198% due 03/15/20

  233    233

Series 2005-299 Class KF (Ê)

      

5.428% due 06/15/35

  76    75

Series 2005-301 Class IM

      

Interest Only STRIP

      

5.500% due 01/15/31

  167    17

Series 2006-313 Class FP (Ê)

      

Zero coupon due 04/15/36

  165    168

Series 2006-317 Class XI (Ê)

      

Principal Only STRIP

      

Zero coupon due 10/15/35

  260    3

Series 2006-323 Class PA

      

6.000% due 03/15/26

  281    285

Series 2007-330 Class GL (Ê)

      

6.514% due 04/15/37

  87    95

Series 2007-333 Class AF (Ê)

      

5.178% due 10/15/20

  2,000    1,991

Series 2007-333 Class BF (Ê)

      

5.178% due 07/15/19

  363    361

Series 2007-333 Class FT (Ê)

      

5.178% due 08/15/19

  1,449    1,442

Series 2007-334 Class FA (Ê)

      

5.258% due 02/15/19

  1,396    1,388

Ginnie Mae I

      

6.000% due 2029

  13    13

6.000% due 2036

  473    485

6.000% due 2037

  506    518

30 Year TBA (Ï)

      

5.500%

  1,650    1,662

Ginnie Mae II (Ê)

      

6.380% due 2026

  200    202

5.630% due 2027

  12    13

5.750% due 2032

  87    88

GMAC Commercial Mortgage Securities, Inc.

Series 1999-C2 Class A2
6.945% due 09/15/33

  189    194

GMAC Mortgage Corp. Loan Trust

      

Series 2004-JR1 Class A6 (Ê)

      

5.315% due 12/25/33

  96    95
   Principal
Amount ($)
or Shares
    Market
Value
$

Series 2007-HE3 Class 1A1

      

7.000% due 09/25/37

  98    98

Government National Mortgage Association (Ê)

      

Series 1999-40 Class FE

      

5.578% due 11/16/29

  117    118

Series 2000-29 Class F

      

5.449% due 09/20/30

  22    22

Greenwich Capital Commercial Funding Corp.

      

Series 2003-C2 Class A2

      

4.022% due 01/05/36

  200    198

Series 2004-GG1 Class A7

      

5.317% due 06/10/36

  465    473

Series 2007-GG9 Class A4

      

5.444% due 03/10/39

  215    216

GS Mortgage Securities Corp. II

      

Series 2006-FL8 Class A1 (Ê)(Þ)

      

5.352% due 06/06/20

  1    1

Series 2006-GG6 Class A4

      

5.553% due 04/10/38

  135    137

Series 2006-GG8 Class AAB

      

5.535% due 11/10/39

  200    202

Series 2007-GG1 Class A4

      

5.799% due 08/10/45

  645    667

GSR Mortgage Loan Trust
Series 2005-AR7 Class 6A1
5.251% due 11/25/35

  261    252

Harborview Mortgage Loan Trust

      

Series 2005-4 Class 3A1

      

5.148% due 07/19/35

  189    187

Series 2005-14 Class 3A1A

      

5.300% due 12/19/35

  111    111

Series 2005-16 Class 3A1A (Ê)

      

5.215% due 01/19/36

  449    428

Indymac Index Mortgage Loan Trust

      

Series 2005-AR1 Class A1

      

5.443% due 09/25/35

  684    671

Series 2006-AR2 Class A2 (Ê)

      

4.945% due 11/25/36

  118    117

JP Morgan Chase Commercial Mortgage Securities Corp.

      

Series 2001-CIB Class A2

      

6.244% due 04/15/35

  155    156

Series 2004-LN2 Class A1

      

4.475% due 07/15/41

  340    338

Series 2005-LDP Class A3A1

      

4.871% due 10/15/42

  210    208

 

78 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2005-LDP Class A4

      

4.918% due 10/15/42

  325    315

5.179% due 12/15/44

  390    388

Series 2006-CB1 Class A4

      

5.552% due 05/12/45

  220    223

Series 2006-LDP Class A3

      

5.336% due 05/15/47

  305    304

Series 2006-LDP Class A3B

      

5.447% due 05/15/45

  250    251

Series 2006-LDP Class A4

      

5.875% due 04/15/45

  650    676

5.399% due 05/15/45

  290    291

Series 2007-LDP Class A3

      

5.420% due 01/15/49

  275    275

JP Morgan Mortgage Trust (Ê)

      

Series 2005-A1 Class 6T1

      

5.405% due 02/25/35

  137    134

Series 2007-A1 Class 2A2

      

4.755% due 07/25/35

  872    866

LB-UBS Commercial Mortgage Trust

      

Series 2004-C4 Class A3

      

4.976% due 06/15/29

  155    158

Series 2006-C1 Class A4

      

5.156% due 02/15/31

  1,000    989

Series 2006-C4 Class A4

      

5.883% due 06/15/38

  105    110

Series 2007-C6 Class A4

      

5.858% due 07/15/40

  270    280

Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36

  629    627

Lehman XS Trust (Ê)

      

Series 2005-5N Class 3A1A

      

5.165% due 11/25/35

  503    477

Series 2006-16N Class A4A

      

5.055% due 11/25/46

  829    787

Mastr Adjustable Rate Mortgages Trust (Ê)

      

Series 2004-13 Class 3A4

      

3.787% due 11/21/34

  198    196

Series 2006-OA2 Class 4A1A

      

5.713% due 12/25/46

  836    813

MASTR Alternative Loans Trust

      

Series 2003-4 Class B1

      

5.677% due 06/25/33

  195    192

Series 2004-10 Class 5A6

      

5.750% due 09/25/34

  170    168

MASTR Asset Securitization Trust (Ê)

      

Series 2003-7 Class 4A35

      

5.265% due 09/25/33

  237    235
   Principal
Amount ($)
or Shares
    Market
Value
$

Series 2004-4 Class 2A2

      

5.315% due 04/25/34

  88    88

Mellon Residential Funding Corp. (Ê)
Series 2000-TBC Class A1
5.508% due 06/15/30

  197    194

Merrill Lynch Floating Trust (Ê)(Þ)
Series 2006-1 Class A1
5.098% due 06/15/22

  842    849

Merrill Lynch Mortgage Investors, Inc. (Ê)
Series 2005-A10 Class A
5.075% due 02/25/36

  105    101

MLCC Mortgage Investors, Inc. (Ê)

      

Series 2004-HB1 Class A2

      

5.750% due 04/25/29

  42    41

Series 2005-3 Class 5A

      

5.115% due 11/25/35

  61    59

Morgan Stanley Capital I

      

Series 2005-IQ1 Class AAB

      

5.178% due 09/15/42

  415    415

Series 2006-HQ1 Class A4

      

5.328% due 11/12/41

  130    130

Series 2006-HQ8 Class A4

      

5.388% due 03/12/44

  310    313

Series 2006-HQ9 Class A4

      

5.731% due 07/12/44

  200    206

MortgageIT Trust (Ê)
Series 2005-AR1 Class 1A1
5.115% due 11/25/35

  499    472

Prime Mortgage Trust (Ê)
Series 2004-CL1 Class 1A2
5.265% due 02/25/34

  41    40

Residential Accredit Loans, Inc.

      

Series 2004-QS5 Class A6 (Ê)

      

5.465% due 04/25/34

  61    59

Series 2004-QS8 Class A4 (Ê)

      

5.265% due 06/25/34

  308    302

Series 2005-QA8 Class NB3

      

5.479% due 07/25/35

  255    252

Series 2005-QO5 Class A1 (Ê)

      

5.863% due 01/25/46

  592    566

Series 2006-QS6 Class 1A13

      

6.000% due 06/25/36

  395    394

Series 2007-QH9 Class A1

      

6.550% due 11/25/37

  995    985

Residential Asset Securities Corp. (Ê)
Series 2003-KS4 Class AIIB
5.445% due 06/25/33

  56    55

 

Core Bond Fund 79


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Residential Asset Securitization Trust

      

Series 2003-A15 Class 1A2 (Ê)

      

5.315% due 02/25/34

  344    338

Series 2007-A5 Class 2A3

      

6.000% due 05/25/37

  136    135

Residential Funding Mortgage Securities I

      

Series 2003-S5 Class 1A2 (Ê)

      

5.315% due 11/25/18

  183    183

Series 2003-S14 Class A5 (Ê)

      

5.265% due 07/25/18

  196    195

Series 2003-S20 Class 1A7 (Ê)

      

5.365% due 12/25/33

  71    71

Series 2005-SA4 Class 2A1

      

5.207% due 09/25/35

  735    730

Series 2006-SA4 Class 2A1

      

6.123% due 11/25/36

  491    492

Sequoia Mortgage Trust (Ê)
Series 2001-5 Class A
5.315% due 10/19/26

  71    70

Small Business Administration Participation Certificates
Series 2005-20G Class 1
4.750% due 07/01/25

  879    863

Structured Adjustable Rate Mortgage Loan Trust

      

Series 2004-5 Class 3A1

      

4.380% due 05/25/34

  156    154

Series 2004-12 Class 3A2

      

5.250% due 09/25/34

  70    70

Series 2004-16 Class 3A1

      

5.450% due 11/25/34

  255    253

Structured Asset Mortgage Investments, Inc. (Ê)

      

Series 2005-AR5 Class A3

      

5.215% due 07/19/35

  184    179

Series 2006-AR2 Class A1

      

5.095% due 02/25/36

  606    573

Series 2006-AR8 Class A1A

      

5.065% due 10/25/36

  845    808

Series 2007-AR6 Class A1

      

6.363% due 11/25/37

  996    970

Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34

  467    465

Thornburg Mortgage Securities Trust (Ê)

      

Series 2003-2 Class A1

      

5.205% due 04/25/43

  120    120
   Principal
Amount ($)
or Shares
    Market
Value
$

Series 2006-5 Class A1

      

4.985% due 09/25/46

  782    765

Series 2006-6 Class A1

      

4.975% due 12/25/36

  156    153

Wachovia Bank Commercial Mortgage Trust Series 2005-C21 Class A4
5.210% due 10/15/44

  1,000    990

Washington Mutual Alternative Mortgage Pass-Through Certificates

      

Series 2005-4 Class CB11

      

5.500% due 06/25/35

  90    86

Series 2006-AR8 Class 2A (Ê)

      

5.638% due 10/25/46

  801    777

Series 2006-AR9 Class 2A (Ê)

      

5.628% due 11/25/46

  879    848

Series 2007-OA1 Class 2A (Ê)

      

5.508% due 12/25/46

  760    703

Washington Mutual Mortgage Pass Through Certificates

      

Series 2003-S9 Class A2 (Ê)

      

5.415% due 10/25/33

  344    342

Series 2004-AR3 Class A2

      

4.243% due 06/25/34

  169    168

Series 2005-AR1 Class 1A1

      

4.835% due 10/25/35

  292    290

Series 2005-AR1 Class A1A1 (Ê)

      

5.155% due 10/25/45

  38    36

5.135% due 12/25/45

  477    452

Series 2005-AR6 Class B3 (Ê)

      

5.525% due 04/25/45

  210    194

Series 2006-AR1 Class 3A1A (Ê)

      

5.708% due 09/25/46

  793    770

Series 2006-AR2 Class 1A1

      

5.313% due 03/25/37

  805    806

Series 2007-HY3 Class 4A1

      

5.349% due 03/25/37

  904    900

Series 2007-HY3 Class 4B1

      

5.350% due 03/25/37

  125    118

Series 2007-HY4 Class 1A1 (Ê)

      

5.554% due 04/25/37

  165    163

Wells Fargo Alternative Loan Trust
Series 2007-PA6 Class A1
6.607% due 12/26/37

  937    939

Wells Fargo Mortgage Backed Securities Trust

      

Series 2005-17 Class 2A1

      

5.500% due 01/25/36

  658    644

Series 2005-AR6 Class A1 (Ê)

      

5.039% due 04/25/35

  758    722

 

80 Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      

Series 2006-2 Class 2A3

      

5.500% due 03/25/36

   444    446

Series 2006-AR1 Class AIO

      

Interest Only STRIP

      

0.450% due 10/25/36

   9,532    99

Series 2006-AR2 Class 2A1

      

4.950% due 03/25/36

   321    317

Series 2007-8 Class 1A16

      

6.000% due 07/25/37

   358    357

Series 2007-10 Class 2A5

      

6.250% due 07/25/37

   181    184
       
      188,516
       

Municipal Bonds - 0.4%

      

New York City Municipal Water Finance Authority Revenue Bonds
4.750% due 06/15/37

   1,300    1,303
       

Non-US Bonds - 0.3%

      

Argentina Bocon
Series PR12
2.000% due 01/03/16

  ARS 1,078    449

Bombardier, Inc. (Å)
7.250% due 11/15/16

  EUR125    183

Federative Republic of Brazil

      

12.570% due 01/05/22

  BRL300    189

10.250% due 01/10/28 (Ñ)

  BRL140    76

Ineos Group Holdings PLC
Series REGS
7.875% due 02/15/16

  EUR125    153
       
      1,050
       

United States Government Agencies - 3.0%

    

Fannie Mae (Ñ)
4.150% due 09/10/09 (Ñ)

   2,200    2,220

3.875% due 02/15/10

   510    513

4.750% due 04/20/10

   1,400    1,436

4.125% due 05/12/10

   1,500    1,518

5.050% due 02/07/11

   1,200    1,249

Federal Home Loan Bank
5.375% due 08/19/11

   295    311

Federal Home Loan Bank Discount Notes

      

5.310% due 12/28/12 (Ñ)

   1,000    1,060

Financing Corp.

      

Principal Only STRIP
Series 1
Zero coupon due 05/11/16

   80    55
   Principal
Amount ($)
or Shares
    Market
Value
$

Series 1P

      

Zero coupon due 05/11/18

  95    59

Series 3P

      

Zero coupon due 11/30/17

  170    108

Series 5P

      

Zero coupon due 02/08/18

  65    41

Series 8P

      

Zero coupon due 08/03/18

  605    371

Series 9P

      

Zero coupon due 10/06/17

  310    200

Series 12P

      

Zero coupon due 12/06/18

  245    147

Series 13

      

Zero coupon due 12/27/16

  275    184

Series 13P

      

Zero coupon due 12/27/18

  1,130    678

Series 16P

      

Zero coupon due 04/05/19

  380    224

Series 19

      

Zero coupon due 06/06/16

  230    158
       
      10,532
       

United States Government Treasuries - 2.9%

United States Treasury Principal (Ñ)

      

Principal Only STRIP

      

Zero coupon due 11/15/21

  445    235

Zero coupon due 08/15/25

  300    132

Zero coupon due 08/15/26

  300    127

United States Treasury Inflation Indexed Bonds

      

0.875% due 04/15/10

  1,331    1,326

2.375% due 04/15/11

  212    221

3.375% due 01/15/12 (Ñ)

  982    1,072

2.000% due 04/15/12

  103    107

2.000% due 01/15/14 (Ñ)

  113    117

2.000% due 07/15/14 (Ñ)

  1,518    1,569

2.625% due 07/15/17

  101    108

2.375% due 01/15/25 (Ñ)

  120    126

2.000% due 01/15/26 (Ñ)

  316    314

2.375% due 01/15/27 (Ñ)

  207    219

United States Treasury Notes (Ñ)

      

4.000% due 08/31/09

  900    913

4.750% due 05/31/12

  600    633

4.250% due 08/15/15

  345    354

6.000% due 02/15/26

  2,310    2,734
       
      10,307
       
Total Long-Term Investments      

(cost $315,146)

      313,881
       

 

Core Bond Fund 81


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2007

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
    Market
Value
$
      
Preferred Stocks - 0.3%      

Financial Services - 0.3%

      

DG Funding Trust (Æ)(Å)

   49    517

Fannie Mae (Æ)

   14,000    360
       
Total Preferred Stocks      

(cost $866)

      877
       
   

Notional
Amount

     

Options Purchased - 0.4%

      

(Number of Contracts)

      

Eurodollar Futures

      

Mar 2008 91.75 Put (241)

  USD 603    2

Mar 2008 92.00 Put (43)

  USD108    

Mar 2008 92.50 Put (58)

  USD145    

Mar 2008 92.75 Put (53)

  USD133    

Mar 2008 93.00 Put (68)

  USD170    

Jun 2008 92.75 Put (40)

  USD100    

Swaptions

(Fund Pays/Fund Receives)

      

USD Three Month LIBOR/USD
4.750%

      

Feb 2008 0.00 Call (1)

   5,000    38

USD Three Month LIBOR/USD
5.000%

      

Feb 2008 0.00 Call (1)

   6,000    140

USD Three Month LIBOR/USD
4.750%

      

Mar 2008 0.00 Call (2)

   15,000    302

USD Three Month LIBOR/USD
4.750%

      

Sep 2008 0.00 Call (3)

   13,900    288

USD Three Month LIBOR/USD
4.750%

      

Dec 2008 0.00 Call (1)

   6,200    123

USD Three Month LIBOR/USD
5.000%

      

Dec 2008 0.00 Call (1)

   15,100    356

USD Three Month LIBOR/USD
5.200%

      

Feb 2009 0.00 Call (1)

   5,000    130
       
Total Options Purchased      

(cost $305)

      1,379
       
   Principal
Amount ($)
or Shares
    Market
Value
$

Short-Term Investments - 15.3%

    

Abbey National Treasury Services PLC (Ê)
Series YCD
5.175% due 07/02/08

  500    500

American Express Bank FSB (Ê)
Series BKNT
5.038% due 10/16/08

  300    299

AMFM, Inc.
8.000% due 11/01/08

  50    52

Amstel Funding Corp.
5.887% due 01/16/08

  510    509

Atlantic Asset Securitization
5.907% due 01/15/08

  510    509

Barclays Bank PLC
4.619% due 03/17/08

  600    600

Chariot Funding, LLC
5.857% due 01/16/08

  510    509

Citigroup Funding, Inc. (Ê)
5.136% due 12/08/08

  100    99

Citigroup Global Markets Holdings, Inc. (Ê)
Series MTNM
5.191% due 03/07/08

  400    400

Citigroup, Inc.
3.500% due 02/01/08

  560    559

Clear Channel Communications, Inc.
4.625% due 01/15/08

  125    125

Clipper Receivables Co.
6.145% due 01/17/08

  510    509

CSC Holdings, Inc. (Ñ)
7.250% due 07/15/08

  125    125

Dexia Credit SA
4.759% due 09/29/08

  1,100    1,099

Falcon Asset Securitization Co. LLC
5.857% due 01/16/08

  510    509

Federal Home Loan Bank D (ç)(ž)
Zero coupon due 01/11/08

  60    60

Federal Home Loan Bank Discount Notes