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Russell Investment Funds

Filed: 7 Mar 11, 7:00pm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05371

 

Russell Investment Funds

(Exact name of registrant as specified in charter)

 

1301 2nd Avenue 18th Floor, Seattle Washington 98101

(Address of principal executive offices) (Zip code)

 

Mary Beth Rhoden, Secretary and Chief Legal Officer

Russell Investment Funds

1301 2nd Avenue

18th Floor

Seattle, Washington 98101

206-505-4846

(Name and address of agent for service)

Registrant’s telephone number, including area code: 206-505-7877

Date of fiscal year end: December 31

Date of reporting period: January 1, 2010 to December 31, 2010

 

 

 


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Item 1. Reports to Stockholders


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LOGO

 

2010 ANNUAL REPORT

 

 

Russell Investment Funds

 

 

DECEMBER 31, 2010

FUND

Multi-Style Equity Fund

Aggressive Equity Fund

Non-U.S. Fund

Core Bond Fund

Real Estate Securities Fund

 

LOGO


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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.


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Russell Investment Funds

Annual Report

December 31, 2010

Table of Contents

 

   Page 
To Our Shareholders   3  
Market Summary   4  
Multi-Style Equity Fund   10  
Aggressive Equity Fund   22  
Non-U.S. Fund   36  
Core Bond Fund   48  
Real Estate Securities Fund   78  
Notes to Schedules of Investments   88  
Statements of Assets and Liabilities   89  
Statements of Operations   92  
Statements of Changes in Net Assets   94  
Financial Highlights   96  
Notes to Financial Highlights   98  
Notes to Financial Statements   99  
Report of Independent Registered Public Accounting Firm   117  
Tax Information   118  
Basis for Approval of Investment Advisory Contracts   119  
Shareholder Requests for Additional Information   124  
Disclosure of Information about Fund Trustees and Officers   125  
Adviser, Money Managers and Service Providers   130  


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Russell Investment Funds

Copyright © Russell Investments 2011. All rights reserved.

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

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

Securities products and services offered through Russell Financial Services, Inc., a member of FINRA and part of Russell Investments.

Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Index return information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its affiliates.

Russell Investments is the owner of the trademarks, service marks, and copyrights related to its respective indexes.

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


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To Our Shareholders

I am pleased to share with you the results from the Russell Investment Funds’ 2010 Annual Report. It provides portfolio management discussions and fund-specific insights regarding fund performance for the fiscal year ending December 31, 2010.

Russell Investments’ mission is plain and simple — to improve financial security for people. We work to achieve this goal by delivering disciplined investment strategies, objective research and industry-leading service. Despite the difficult economic times and volatile investment markets, we will never lose sight of this primary mission.

Looking back at 2010, it has been a year of progress and challenges. Investors are still wrestling with the aftershocks of market disruptions. The broad equity market, represented by the Russell Global Index, is up more than 9% year-to-date at the writing of this letter in December. But employment numbers in the U.S. are still a cause for concern, as are the debt challenges of several European countries. We believe the experiences of 2010 continue to demonstrate the value of diversification and proactive investment management.

Now more than ever, we believe investors are best served by remaining focused on long-term investing using well-diversified, asset allocated portfolios. We believe it is equally important for investors to continue to talk with their financial advisors to ensure their portfolios remain aligned with their goals. Working with a trusted advisor is the best way to maintain this focus.

The Russell Investments team has decades of experience managing people’s investments through all kinds of market cycles. We believe monitoring investment managers continuously, and maintaining a disciplined approach to portfolio management and implementation is the best way to achieve long-term goals.

On behalf of the Russell Investments team, thank you for your continued support.

Best regards,

LOGO

Sandra Cavanaugh

CEO, Americas Private Client Services

Russell Investment Management Company

 

To Our Shareholders 3


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Russell Investment Funds

Market Summary as of December 31, 2010 (Unaudited)

U.S. Equity Markets

For the fiscal year ended December 31, 2010, the U.S. equity market experienced high levels of volatility, but less than in the one year period ended December 31, 2009. While the markets experienced numerous reversals during the period, investors became increasingly, though cautiously, optimistic regarding the sustainability of the global economic recovery. Strong corporate earnings growth translated into strong positive returns for the major market indexes. The broad market Russell 3000® Index rose 16.93% over the period as global growth recovered and the U.S. economy appeared to be stabilizing.

The economy continued to grow over the fiscal year, but at a slow pace. Relative to past recoveries from deep recessions, economic growth as measured by gross domestic product (GDP) failed to rebound as quickly or with the strength necessary to increase employment and provide assurances that the recessionary period was truly over. Unemployment remained high, averaging approximately 9.5% over the period while wage growth remained stagnant. The national savings rate increased from a modestly negative percentage to a more substantial 6%. While this is a longer-term positive factor for the U.S. economy as it improves the financial health of consumers, the short-term result has been to lower consumer spending. Given the key role that consumer spending continues to play in driving U.S. GDP, expectations for a strong economic recovery moderated as the fiscal year progressed and investors began to expect a more slowly paced increase in economic activity going forward. Expectations were further moderated by a persistently weak housing market, where sales declined following the expiration of the first time home buyers tax credit in the spring.

In response to the slow pace of the economic recovery, and its jobless nature, the U.S. government stepped up its efforts to stimulate economic growth. Unemployment benefits were extended to support consumer demand, while stimulus spending injected capital into the economy. Toward the latter part of the fiscal year, the Federal Reserve announced its intention to expand its quantitative easing efforts beyond the purchase of mortgage backed securities and into direct purchases of U.S. government debt. The market rose as a result due to expectations that this direct injection of money into the economy would cause interest rates to decline in the intermediate-term, and inflationary expectations to rise in the longer-term. Investors took comfort in the Federal Reserve taking such actions to help provide support for the economy and guide it towards a sustainable recovery.

Over the course of the period, global economic growth rebounded on the strength of emerging markets demand and growth. This has been a key to improving investor sentiment and has driven the relative outperformance of some of the more export-oriented sectors including producer durables, materials and processing, and technology. The consumer discretionary sector, which was the best performing sector over the one year period, benefited from both international demand and a modest domestic recovery. Increased global wealth has driven up demand for aspirational goods and services, with leisure travel, lodging and gaming all benefiting.

Domestically, retailers with strong market share and the ability to increase profit margins performed well. The utilities sector outperformed as well. Demand for companies with a lower degree of perceived downside risk increased, as did the desire for steady sources of income. On the other end of the return spectrum, the financial services sector underperformed relative to the benchmark. Increasing financial regulations and an uncertain business landscape made investors wary of investing in banks, brokerage companies and other financial institutions. Concerns over additional losses related to the housing market and uncertainty over the health of loan portfolios also concerned investors. Health care stocks lagged as well, due largely to the uncertainty associated with the passage of new health care legislation and its impact on corporate profitability. Energy stocks underperformed due to concerns over weaker demand growth for gas and oil in a sluggish economic recovery. Potential fallout from the Gulf Coast oil spill also created uncertainty around deep water exploration and drilling firms. Lastly, the consumer staples sector lagged despite strong demand from overseas markets, as investors gravitated away from these companies’ higher relative valuations and the potential margin pressure they could face if commodity prices rise.

Overall, the period was marked by a high degree of correlation among stock price movements across large segments of the benchmark. As such, benchmark and market returns were driven by the performance of the higher and lower ends of

 

 4   Market Summary


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Russell Investment Company

 

the risk spectrum where there was more stock price return differentiation. This was largely a result of significant oscillations in investor sentiment driven by macro-economic news and events. This resulted in a “risk on/risk off” phenomenon. Positive economic and company specific news resulted in a “risk on” scenario where companies with more economic sensitivity outperformed the benchmark when “risk” was in favor. In contrast, negative news on the economy, employment, housing, and the European sovereign debt situation resulted in a highly risk-averse (“risk off”) environment in which investors sought safe haven or more defensively oriented investments. Throughout the fiscal year it was a struggle between these two forces, as investors were heavily swayed more by macro-economic news than by company-specific data.

The high degree of uncertainty in the market regarding regulatory, fiscal and monetary policy resulted in a challenging active management environment in U.S. equities. Value-oriented managers had a particularly difficult time due to their almost perennial underweight to the strongly performing utilities sector, while growth-oriented managers fared better. The relative outperformance of consumer staples and parts of the health care sector in the more defensive periods decreased returns for value managers. Additionally, commodity-oriented stocks performed relatively well as investors bet on a sustainable global economic recovery. In contrast, value managers were overweight in technology and consumer discretionary sector companies that they believed had relatively higher and more sustainable growth characteristics. The more cyclical consumer and technology companies as well as those focusing on lower-end domestic consumer spending and targeting international growth performed relatively well.

Growth managers fared relatively well as investors favored growth companies, pushing up the price of stocks associated with international and emerging markets. This applied to technology and consumer product companies as well as agricultural, commodities, and industrial companies producing goods and basic resources needed to satiate emerging market demand. The stocks of the fastest growing companies outperformed the stocks of companies whose earnings grew at a slower rate. This is based on return data categorizing stocks according to each company’s 5-year historical EPS Growth, 1-Year Sales Growth, and IBES Long-Term Forecasted Growth.

Driven by expectations for a moderate global economic recovery, stock prices in the U.S. rose strongly across the investment style as well as the market capitalization spectra.

For the period, the Russell 1000® Growth Index returned 16.7% and the Russell 1000® Value Index returned 15.51%, while the Russell 2000® Growth Index returned 29.1% and the Russell 2000® Value Index returned 24.5%. Small capitalization stocks outperformed large capitalization stocks for the one year period as the Russell 2000® Index returned 26.9% and the Russell 1000® Index returned 16.1% for the period. Mid capitalization stocks once again performed well over the period, while micro capitalization stocks performed best as the Russell Midcap® Index returned 25.47% and the Russell Microcap® Index returned 28.9% for the fiscal year.

The Lipper® Small Cap Value Funds Average outperformed the Russell 2000® Value Index by 1.25%, the Lipper® Small Cap Core Funds Average underperformed the Russell 2000® Index by 1.12% and the Lipper® Small Cap Growth Funds Average underperformed the Russell 2000® Growth Index by 2.05%. The Lipper® Large Cap Growth Funds Average underperformed the Russell 1000® Growth Index by 1.58%, the Lipper® Large Cap Core Funds Average underperformed the Russell 1000® Index by 3.94%, and the Lipper® Large Cap Value Funds Average underperformed the Russell 1000® Value Index by 1.81%.

Non-U.S. Developed Equity Markets

2010 was a rollercoaster year for investors. The Non-U.S. developed equity markets, as measured by the MSCI EAFE Index, rose 7.75% during the year, with most of the Index’s gains coming in the second half of the year. Fears of the European sovereign debt crisis igniting another global economic downturn subsided as a gradual recovery became more likely. Markets fell sharply at the end of April and remained extremely volatile until September, when riskier stocks began to improve as investors gained optimism. On a month-by-month basis, market leadership was inconsistent, but trends became more apparent when the whole of 2010 was taken into account.

The risk factor that was most rewarded was high beta, followed by high price-volatility and high price-momentum. All three factors are a reflection of the market environment that benefited riskier stocks. The prices of high beta stocks tend to rise faster than the broad market in positive return environments, but also fall faster when markets are negative. The price volatility factor represents stocks whose prices tend to change more than the average stock, meaning performance gains and losses are amplified. This is similar to market beta, except that there isn’t necessarily a relationship between the performance of the market and its underlying stocks. Stocks with high-price momentum performed better than the market during the 12 months prior. Their outperformance signals the fact that stocks that did well in 2009 continued to

 

Market Summary 5


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Russell Investment Company

 

outperform in 2010. Momentum made a comeback in 2010, as many of the stocks that rose in 2009 continued to lead the market. Stocks that are typically considered higher-quality, those with high profitability or return on equity, underperformed. However, financial leverage was the worst performing market factor. Financial leverage is a characteristic that investors can use to determine balance sheet quality. Financial leverage is the degree to which a company is utilizing borrowed money (debt) to finance its operations. Financial leverage can boost profits in certain periods, but when debt repayment is a concern, as it was in 2010, companies with a high-level of financial leverage, can perform poorly. Growth stocks significantly outperformed value stocks, with the MSCI EAFE Growth Index returning 12.25% and outperforming the MSCI EAFE Value Index by 9.0%.

Small cap stocks outperformed large cap stocks by a wide margin, as measured by the MSCI EAFE Small Cap Index and the MSCI EAFE Index. U.S. stocks, as measured by the Russell 1000® Index, outperformed developed non-U.S. stocks, as measured by the MSCI EAFE Index, by more than 8.35%, indicating that signs of economic recovery were more evident in the U.S. Extremely negative performance outcomes by the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain), catalyzed by fears surrounding sovereign debt, weighed heavily on international markets. Greece and Spain were penalized most, with returns of -44.87% and -21.95%, respectively, as measured by the MSCI Greece Index and MSCI Spain Index. Both countries’ performance suffered due to uncertainty regarding their ability to service sovereign debt, but experienced some recovery toward the end of the year. Although markets tended to reward risk, stocks with severe debt issues lagged the market. Investors’ dislike for financial leverage impacted country-level returns as well. The weak performance from Greece and Spain confirm this sentiment. Japan as measured by MSCI Japan, out-performed the MSCI EAFE Index returning 15.44% for the year. Emerging markets companies continued to outpace developed markets with the strong return of 18.88%, as measured by the MSCI Emerging Markets Index. Argentina, Thailand, and Peru were the best performing emerging markets countries, all returning over 50% for the year, as measured by the MSCI Argentina Index, MSCI Thailand Index and MSCI Peru Index. China severely underperformed the broader MSCI Emerging Markets Index and the MSCI EAFE Index with a positive return of only 4.63%, as measured by the MSCI China Index , due to inflationary pressures and fears of economic overheating.

The industrials sector was the best performing of the ten sectors in the MSCI EAFE Index, with a return of 20.39%. The companies that make up the sector tend to be economically sensitive and thus performed well given the improving economic environment. Consumer discretionary stocks benefited from the upswing in consumer spending and the sector ended the year up 19.73%. The materials, technology and consumer staples sectors also out-performed the MSCI EAFE Index. Utilities and financials were the only two sectors with negative performance during the year, with returns of -4.88% and -1.62%, respectively, as measured by the MSCI EAFE Utilities and MSCI EAFE Financials Sector Indices . Consumer stocks were led by automobiles and retail. There remains a great deal of skepticism surrounding the health of commercial banks.

Emerging Markets

The MSCI Emerging Markets Index (“the Index”) was up 18.88% over the fiscal year ended December 31, 2010. In spite of persistent volatility, Emerging Markets finished ahead of Developed Markets, which gained 11.76% over the year, as measured by the MSCI Daily TR Net Developed Markets Index in U.S. dollar terms.

Emerging market gains during 2010 were largely driven by a strong recovery in the second half of the fiscal year as the global economic backdrop turned positive. The Index had a modest return of 2.40% during the first calendar quarter, driven by concerns over the sustainability of economic recovery resulting from moves to withdraw stimulus funding in the U.S. and China and by concerns about a growing debt crisis in Europe.

This was followed by a negative and challenging second quarter in which emerging market stocks, commodities and currencies fell sharply, as investor appetite for risk diminished in favor of safer assets, including gold — which reached a record high — and the U.S. dollar. The Index gave up 8.37%, led by heavy losses in May, when the Index endured its worst month since October 2008. The intensifying debt crisis in Europe, evidence of a slowdown in the U.S. and Chinese economies, a massive overhaul of the U.S. banking system and a crisis on the Korean peninsula all had a negative impact.

Emerging market stocks went on to rally sharply over the third quarter, notably in July and September, when the Index enjoyed its best monthly gain since July 2009. The Index gained 18.03% over the period, helped by the secular growth stories that prevailed in certain markets. Investors were also buoyed by news in July that the IMF had raised its global growth forecast and by second-quarter earnings releases from a number of the world’s biggest companies that were well in excess of expectations. Gains were reinforced by more upbeat news from Europe, where the results of the stress tests on banks were largely welcomed.

 

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The positive trend continued in the fourth quarter, driven by further signs of a burgeoning recovery in the U.S., strong growth in China and by speculation that the second round of quantitative easing (i.e., a policy by which the Federal Reserve purchases U.S. treasuries with newly created central bank money) would help global growth accelerate. A very positive third quarter earnings season and central bank intervention in Europe also helped offset the negative impact of monetary tightening in China and renewed concerns over the debt crisis in Western Europe.

Throughout, there was notable dispersion across country returns over the calendar year, with the smaller emerging market countries performing best. Thailand gained 55.71%, as measured by the MSCI Daily TR Net Emerging Markets Thailand Index. In Latin America, key beneficiaries of the demand for raw materials and the increased risk appetite were strongest, including Peruvian stocks, which gained 53.32%, as measured by the MSCI Daily TR Net Emerging Markets Peru Index, Chilean stocks, which increased 44.16%, as measured by the MSCI daily TR Net Emerging Markets Chile Index in U.S. dollar terms, and Colombian stocks, which gained 43.41%, as measured by the MSCI Daily TR Net Emerging Markets Colombia Index in U.S. dollar terms.

From a regional standpoint, returns in Europe were generally weaker, reflected by the negative returns from Hungary, which declined 9.58%, as measured by the MSCI Daily TR Net Emerging Markets Hungary Index in U.S. dollar terms, and the Czech Republic, which fell 2.53%, as measured by MSCI Daily TR Net Emerging Markets Czech Republic Index in U.S. dollar terms. The larger emerging market countries China and Brazil also stood out in that both had modest returns over the calendar year relative to others, gaining just 4.63% and 6.54%, respectively, as per the MSCI daily TR Net Emerging Markets China Index in U.S. dollar terms and MSCI Daily TR Net Emerging Markets Brazil Index in U.S. dollar terms. At the sector level, the consumer theme dominated returns, with consumer staples stocks gaining 30.35%, as measured by the MSCI Daily TR Net Emerging Markets Consumer Staples Index in U.S. dollar terms, and consumer discretionary stocks gaining 31.40%, as measured by the MSCI Daily TR Net Emerging Markets Consumer Discretionary Index in U.S. dollar terms. This was well ahead of the more defensive utilities sector, which gained 8.10%, as measured by the MSCI Daily TR Net Emerging Markets Utilities Index in U.S. dollar terms, and energy, which gained 9.91%, as measured by the MSCI Daily TR Net Emerging Markets Energy Index in U.S. dollar terms over the calendar year.

Small capitalization stocks, as measured by the MSCI Daily TR Net Emerging Markets Small Cap Index in U.S. dollar terms, gained 27.17%, beating larger-capitalization counterparts, which rose 18.34%, as measured by the MSCI Daily TR Net Emerging Markets Large Cap Index in U.S. dollar terms.

U.S./Global Fixed Income Markets

Over most of the fiscal year ended December 31, 2010, fixed income markets largely continued the global credit rally that started in the early part of 2009, which began with the announcement of government stimulus programs and the release of generally positive U.S. bank stress test results. Despite bouts of volatility brought on by concerns around European sovereign debt, the uncertainty of U.S. economic recovery, the Gulf Coast oil spill, and Federal Reserve market intervention, U.S. interest rates declined and broad bond market indices did well: The 2-year Treasury yield decreased 54 bps to 0.60% and the 10-year yield decreased 54 bps to 3.30%; the Barclays Capital U.S. Aggregate (investment grade) Bond Index, U.S. High Yield Bond Index and Emerging Market Bond Index returned 6.54%, 15.12% and 12.84%, respectively.

There was little market turmoil at the beginning of 2010. Investors anticipated that the U.S. economic recovery would soon stabilize and transition off of government stimulus support. As an example of this, at the end of March 2010, the U.S. Federal Reserve Bank (the Fed) completed its $1.25 trillion agency mortgage-backed security buying program without credit markets being materially disturbed.

By late April and early May, investors saw the return of volatility: The Greek and peripheral European sovereign debt crisis made investors anxious that credit events originating in one region could again spread to other parts of the world. At the same time, the Gulf Coast oil spill reminded investors that unexpected and seemingly random negative events could still pop up and roil financial markets. The U.S. Treasury yield curve reflected this anxiety, with the two-year Treasury yield dropping from 0.58% to 0.60%, and the ten-year Treasury yield dropping from 1.06% to 2.93%i, as investors ran to (and bid up the prices on) low-risk debt backstopped by the U.S. government. Simultaneously, the Fed again became concerned with the U.S. economy, and began to signal that it would hold the overnight target rate at its historically low range of 0.00% to 0.25% for an extended period (which it did through the end of the year). This effectively signaled to investors who had been expecting a rate increase by the end of 2010 to not look for one until well into 2011. Included in this message was that the Fed believed deflation was a greater near-term risk than inflation.

 

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The housing market, which precipitated the financial crisis in the summer of 2007, continued to have an impact on the overall market throughout the year. Investors were concerned about the effectiveness of U.S. government programs to help borrowers refinance or modify their mortgages in an attempt to stem the rising tide of foreclosures. This problem was exacerbated in the latter part of the year with news that several large residential mortgage servicers were halting foreclosures due to inaccurate or incomplete paperwork, and lawsuits were filed that contended banks did not legally have the right to proceed with certain foreclosures. Despite these issues (which remained unresolved at year end), over the period both residential and commercial mortgage-backed securities performed well, both in terms of total return and relative returns, as compared to equivalent-duration U.S. Treasuries.

Despite the aforementioned bouts of volatility, it was the Fed’s announcement of more support in the form of another round of quantitative easing dubbed “QE2” (i.e., purchasing U.S. Treasuries with newly created central bank money) that caused the fixed income market to fluctuate and turn negative in the last two months of the year. The Fed had previously indicated the possibility of another round of monetary easing and the general expectation had been that QE2 would keep Treasury rates low and thus bode well for credit markets. However, investors focused on the inflationary and U.S. dollar-depressing effects of QE2, with many openly criticizing the $600 billion program. This caused Treasury yields to reverse course and start heading back up. During the first ten months of the year, the 2-year Treasury yield decreased 80 bps to 0.34% and the 10-year yield decreased 124 bps to 2.60%. Following the announcement of QE2, over November and December, 2-year and 10-year Treasury yields increased 26 bps and 69 bps, respectively. Thus it was the Fed’s effort to bolster the economy that caused Treasuries to return -2.6% in the fourth quarter of 2010, which in turn moved the U.S. Aggregate Bond Index to post its first negative quarterly total return in two years.

 

 

 

 

 

iApril-June 2010 peak-to-trough changes

 

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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

LOGO

 

Multi-Style Equity Fund

 
   Total
Return
 

1 Year

   16.46

5 Years

   2.51%§ 

10 Years

   1.25%§ 
Russell 1000® Index ** 
   Total
Return
 

1 Year

   16.10

5 Years

   2.59%§ 

10 Years

   1.83%§ 

 

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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion — December 31, 2010 (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 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, 2010?

For the fiscal year ended December 31, 2010, the Multi-Style Equity Fund gained 16.46%. This compared to the Russell 1000® Index, which gained 16.10% 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 fiscal year ended December 31, 2010, the Lipper® Large-Cap Core Funds (VIP) Average gained 13.50%. This average return 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 fiscal year ended December 31, 2010 was marked by two almost separate periods — pre and post quantitative easing announced by the U.S. Federal Reserve. Quantitative easing involves purchasing U.S. Treasuries with newly created central bank money. During the first quarter, equity markets maintained some of the positive momentum generated during 2009, but gave back all gains and were posting negative year to date returns as late as August. Concerns over sovereign debt issues in Europe and negative housing data dragged down equity markets during the second and early third quarters. Near the end of the third quarter the U.S. Federal Reserve announced an additional amount of monetary stimulus and equity markets responded strongly by rallying for the duration of the year.

Growth stocks outperformed value stocks by more than 1.2% for the fiscal year ended December 31, 2010, as measured by the Russell 1000® Growth Index against the Russell 1000® Value Index. Stocks with high forecasted growth outperformed those with low forecasted growth and stocks with high historical growth outperformed those with low historical growth, Small cap stocks outperformed large cap stocks by more than 10% for the

year ended December 31, 2010, as measured by the Russell 2000® Index against the Russell 1000® Index. The relative performance of small capitalization stocks reflects the market’s preference for risk over the fiscal year. Stocks with greater volatility outperformed those with lower volatility, reinforcing the market’s increasing appetite for risk. Stocks with high long-term debt-to-capital outperformed those with low long-term debt-to-capital, as financials and other previously poor performing stocks rallied toward the end of the year.

The market also rewarded pro-cyclical sectors during the year. The consumer discretionary sector was the best performer as investors reacted to positive spending data and better-than- expected holiday sales. Utilities and consumer staples, both considered defensive sectors, posted negative returns for the year as investors looked for riskier stocks. The Fund benefited from the pro-cyclical trend through its overweight to consumer discretionary and underweight to consumer staples and utilities. The Fund also benefited from an underweight to health care, the worst performing sector in the Russell 1000® Index.

During the second half of the year, a focus on the performance of individual stocks began to outweigh some of the focus on general macro-economic conditions that had prevailed earlier in the year. The increased appetite for risk among investors, along with declining correlations among stocks in particular, provided a favorable backdrop for active money management in general and for the Fund. General views of the overall equity market began to improve at the end of the third quarter, led by a subsiding fear of European debt contagion and improved confidence in the sustainability of the global recovery. This trend was illustrated by a rotation into the financial services industry by the Fund, particularly into the diversified banks sector.

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

Over the fiscal year, the Fund’s managers emphasized companies with high forecasted growth. They looked to companies with overseas exposure, particularly to emerging markets and companies with limited risk of sovereign debt contagion. This contributed positively to returns as the market rewarded risk over the year and emerging market economies, particularly China, exhibited incredible gross domestic product growth. From a strategic standpoint, the Fund aims to be positioned neutrally between growth and value. However, as managers rotated and markets rallied, the Fund experienced some tilt toward increased growth and momentum exposure, both of which contributed positively to returns during the year.

Manager sector weighting decisions played a critical role in determining manager and Fund performance during the year with the consumer discretionary, producer durables and materials & processing sectors all outperforming the Russell 1000® Index. Managers with overweights to these sectors tended to perform better during the year. On the other hand, health care and utilities stocks underperformed the Fund’s benchmark.

 

 

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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

Stock selection in the health care sector was the largest detractor from returns during the fiscal year. The Fund was overweight to some of the worst performing stocks in the pharmaceuticals and biotechnology industries. Stock selection within the financial services sector was the second largest detractor from returns. Holdings within the financial data & systems and diversified financial services industries hurt performance. The Fund’s underweight to real estate investment trusts (REITs) also detracted from performance, as this industry outperformed the rest of the index during the year.

Stock selection within the producer durables, consumer discretionary and energy sectors contributed positively to the Fund’s performance during the fiscal year. Expectations that demand for oil would continue to increase due to the ongoing economic expansion in China and other emerging economies drove up select stock prices in the energy sector, especially in the second half of the year. Within the producer durables sector, returns were led by engines and construction & handling companies on the improved sentiment surrounding global, but specifically emerging market, economic growth. In the consumer discretionary sector, the casinos & gambling industry was the best performing industry, reflecting hopes of more discretionary spending by consumers.

First Eagle Investment Management, LLC (“First Eagle”), outperformed the Russell 1000® Index as a result of both sector allocation decisions and stock selection particularly within the consumer discretionary and materials & processing sectors. First Eagle also benefited from an overweight to the energy sector, specifically from a large overweight to the oil crude producers industry. In addition, they generated positive performance from the financial services sector, particularly in the diversified banks industry. Holdings within the consumer staples sector detracted from returns, mainly due to stock selection in the food industry.

BlackRock Capital Management, Inc. (“BlackRock”), outperformed the Russell 1000® Growth Index on the strength of their stock selection. The effect was strongest within the technology sector where positions in the computer services software & systems industry added to performance. BlackRock also benefited from stock selection within producer durables, where they benefited from holdings in engines and industrial machinery companies. Sector allocation detracted from returns due primarily to an overweight to technology and a neutral weighting to health care.

Given the pro-risk, cyclically driven environment particularly during the second half of the year, Montag & Caldwell, LLC’s (“Montag”) more defensively oriented consistent growth strategy underperformed the Russell 1000® Growth Index during the fiscal year due to both negative stock selection and sector allocation decisions. Stock selection in the financial services sector detracted most from returns, primarily through holdings in the financial data & systems and securities brokerage & services industries. An overweight to the health care sector also detracted from performance. Negative stock selection in the

consumer staples sector, particularly in the food industry, detracted from returns. In contrast, Montag benefited from positive stock selection in the energy sector.

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 in the Fund segments assigned to money managers to identify particular stocks that have been selected and are held in overweight positions 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. RIMCo performs this analysis and ranking, and purchases or sells stocks based on this analysis and ranking, on a regular, periodic basis. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers

The “select holdings” portions of the Fund’s portfolio underperformed the Russell 1000® Index during the year due to negative stock selection. The largest detractor from returns during the year was stock selection within the financial services industry. Poor stock selection in the health care and technology sectors also detracted meaningfully from returns. Large underweights to the consumer discretionary and materials & processing sectors hurt performance, as the two sectors performed well during the year. The portfolio’s large underweight to smaller cap companies further detracted from the Fund’s performance as small capitalization stocks substantially outperformed large capitalization stocks.

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

During the year, there were no changes to the Fund’s structure or to the money manager line-up.

 

Money Managers as of December 31, 2010 Style
BlackRock Capital Management, Inc. Growth
Columbus Circle Investors Growth
DePrince, Race & Zollo, Inc. Value
First Eagle Investment Management, LLC Market Oriented
Institutional Capital LLC Value
Jacobs Levy Equity Management, Inc. Value
Montag & Caldwell, LLC Growth
Suffolk Capital Management, Inc. Market Oriented

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of 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.

 

 

 12   Multi-Style Equity Fund


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

 

 

* Assumes initial investment on January 1, 2001.

 

** 

Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions reinvested as of the ex-dividend dates.

 

§ Annualized.

The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

Multi-Style Equity Fund 13


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Shareholder Expense Example — December 31, 2010 (Unaudited)

 

 

 

Fund Expenses

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

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory 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, 2010 to December 31, 2010.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

Core Class

  Actual
Performance
   Hypothetical
Performance
(5% return
before expenses)
 
    

Beginning Account Value July 1, 2010

  $1,000.00    $1,000.00  

Ending Account Value December 31, 2010

  $1,244.50    $1,020.67  

Expenses Paid During Period*

  $5.09    $4.58  

 

*Expenses are equal to the Fund’s annualized expense ratio of 0.90% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher.

 

 14   Multi-Style Equity Fund


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
Common Stocks - 97.3%      
Consumer Discretionary - 13.8%      

Amazon.com, Inc. (Æ)

   16,882      3,038 

Autoliv, Inc. (Ñ)

   600      47 

Baidu, Inc. - ADR (Æ)

   3,800      367 

Bed Bath & Beyond, Inc. (Æ)

   18,651      917 

BJ’s Wholesale Club, Inc. (Æ)

   4,500      216 

Carnival Corp.

   23,100      1,065 

CBS Corp. Class B

   63,833      1,216 

Coach, Inc.

   12,200      675 

Comcast Corp. Class A

   55,376      1,217 

Costco Wholesale Corp. (Ñ)

   26,000      1,877 

DISH Network Corp. Class A (Æ)

   10,000      197 

eBay, Inc. (Æ)

   16,800      468 

Estee Lauder Cos., Inc. (The) Class A

   11,619      938 

Ford Motor Co. (Æ)(Ñ)

   149,545      2,511 

Gap, Inc. (The) (Ñ)

   41,400      917 

General Motors Co. (Æ)(Ñ)

   24,964      921 

Harman International Industries, Inc. (Æ)

   2,900      134 

Home Depot, Inc.

   83,710      2,935 

Hyatt Hotels Corp. (Æ)

   5,300      242 

Johnson Controls, Inc.

   92,325      3,526 

Kohl’s Corp. (Æ)(Ñ)

   13,300      723 

Las Vegas Sands Corp. (Æ)

   39,915      1,834 

Lear Corp. (Æ)(Ñ)

   4,334      428 

Lowe’s Cos., Inc.

   82,150      2,059 

McDonald’s Corp.

   25,200      1,934 

NetFlix, Inc. (Æ)(Ñ)

   2,300      404 

Nike, Inc. Class B

   31,100      2,657 

priceline.com, Inc. (Æ)(Ñ)

   3,196      1,277 

Royal Caribbean Cruises, Ltd. (Æ)(Ñ)

   15,400      724 

Stanley Black & Decker, Inc. (Ñ)

   30,150      2,016 

Starbucks Corp.

   45,760      1,470 

Starwood Hotels & Resorts Worldwide, Inc. (Ñ)(ö)

   26,200      1,593 

Target Corp.

   29,700      1,786 

Tiffany & Co. (Ñ)

   6,800      423 

Time Warner, Inc.

   18,000      579 

TJX Cos., Inc.

   29,600      1,314 

Tyco Electronics, Ltd.

   24,152      855 

Urban Outfitters, Inc. (Æ)(Ñ)

   6,700      240 

Viacom, Inc. Class A

   93,642      3,708 

Wal-Mart Stores, Inc.

   28,800      1,554 

Walt Disney Co. (The)

   94,940      3,561 

Warnaco Group, Inc. (The) (Æ)

   9,800      540 

Wendy’s/Arby’s Group, Inc. Class A

   26,700      123 
         
       55,226 
         
Consumer Staples - 8.0%      

Archer-Daniels-Midland Co.

   20,300      611 

Clorox Co.

   4,300      272 

Coca-Cola Co. (The)

   109,179      7,181 

Colgate-Palmolive Co.

   6,200      498 

ConAgra Foods, Inc.

   35,900      811 

Corn Products International, Inc.

   8,000      368 

CVS Caremark Corp.

   18,600      647 

Energizer Holdings, Inc. (Æ)

   3,200      233 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

JM Smucker Co. (The)

   16,200      1,064 

Kimberly-Clark Corp.

   6,800      429 

Kraft Foods, Inc. Class A (Ñ)

   49,800      1,569 

Kroger Co. (The)

   20,000      447 

Lorillard, Inc.

   4,800      394 

Molson Coors Brewing Co. Class B

   16,450      826 

PepsiCo, Inc.

   109,838      7,174 

Procter & Gamble Co. (The)

   103,784      6,677 

Safeway, Inc. (Ñ)

   25,300      569 

Walgreen Co. (Ñ)

   18,800      732 

Whole Foods Market, Inc. (Ñ)

   31,499      1,594 
         
       32,096 
         
Energy - 11.9%      

Anadarko Petroleum Corp.

   13,200      1,005 

Apache Corp.

   42,006      5,009 

Cameron International Corp. (Æ)

   27,200      1,380 

Chevron Corp.

   70,707      6,452 

ConocoPhillips

   75,797      5,162 

Devon Energy Corp.

   13,633      1,070 

Dresser-Rand Group, Inc. (Æ)

   3,400      145 

EnCana Corp.

   15,600      454 

Exxon Mobil Corp.

   12,100      885 

Halliburton Co.

   44,500      1,817 

Marathon Oil Corp.

   119,647      4,430 

Massey Energy Co.

   16,600      891 

Murphy Oil Corp.

   18,700      1,394 

Nabors Industries, Ltd. (Æ)

   5,600      131 

National Oilwell Varco, Inc.

   19,635      1,321 

Occidental Petroleum Corp.

   74,330      7,291 

Pioneer Natural Resources Co. (Ñ)

   23,235      2,017 

Rowan Cos., Inc. (Æ)(Ñ)

   4,800      168 

Royal Dutch Shell PLC - ADR

   10,400      695 

Schlumberger, Ltd.

   37,300      3,114 

SEACOR Holdings, Inc. (Ñ)

   740      75 

Spectra Energy Corp.

   5,100      127 

Statoil ASA - ADR (Ñ)

   30,400      723 

SunPower Corp. Class B (Æ)(Ñ)

   62,000      769 

Valero Energy Corp. (Ñ)

   21,700      502 

Williams Cos., Inc. (The)

   27,700      685 
         
       47,712 
         
Financial Services—16.0%      

Aflac, Inc.

   31,650      1,786 

Allied World Assurance Co. Holdings, Ltd. (Ñ)

   3,100      184 

Allstate Corp. (The) (Ñ)

   37,700      1,202 

American Express Co.

   47,570      2,041 

American Financial Group, Inc.

   7,500      242 

Ameriprise Financial, Inc.

   6,900      397 

AON Corp. (Ñ)

   31,750      1,461 

Ares Capital Corp.

   4,300      71 

Assurant, Inc.

   7,900      304 

Axis Capital Holdings, Ltd. (Ñ)

   5,700      205 

Bank of America Corp.

   74,700      997 

Bank of Hawaii Corp. (Ñ)

   1,900      90 

Bank of New York Mellon Corp. (The) (Ñ)

   64,600      1,951 

 

Multi-Style Equity Fund 15


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

BB&T Corp. (Ñ)

   87,950      2,312 

Berkshire Hathaway, Inc. Class B (Æ)

   1,700      136 

BlackRock, Inc. Class A

   7,150      1,363 

Charles Schwab Corp. (The) (Ñ)

   54,150      927 

Chubb Corp. (Ñ)

   7,600      453 

CIT Group, Inc. (Æ)

   8,100      382 

Citigroup, Inc. (Æ)

   581,070      2,749 

CNA Financial Corp. (Æ)(Ñ)

   3,500      95 

Discover Financial Services (Ñ)

   24,400      452 

Endurance Specialty Holdings, Ltd. (Ñ)

   7,000      322 

Federated Investors, Inc. Class B (Ñ)

   18,800      492 

Fifth Third Bancorp (Ñ)

   72,426      1,063 

Fulton Financial Corp. (Ñ)

   17,500      181 

Goldman Sachs Group, Inc. (The)

   21,178      3,561 

Hartford Financial Services Group, Inc. (Ñ)

   36,100      956 

HCC Insurance Holdings, Inc.

   8,800      255 

Hersha Hospitality Trust Class A (ö)

   5,000      33 

Hudson City Bancorp, Inc. (Ñ)

   50,900      648 

Huntington Bancshares, Inc.

   171,100      1,175 

Jefferies Group, Inc. (Ñ)

   12,800      341 

JPMorgan Chase & Co.

   111,251      4,719 

KeyCorp

   57,200      506 

Liberty Property Trust (Ñ)(ö)

   5,100      163 

Lincoln National Corp.

   40,300      1,121 

Loews Corp.

   8,100      315 

Marsh & McLennan Cos., Inc.

   26,400      722 

Mastercard, Inc. Class A

   3,828      858 

Mercury General Corp. (Ñ)

   11,200      482 

MetLife, Inc.

   71,694      3,186 

Morgan Stanley

   40,700      1,108 

Netspend Holdings, Inc. (Æ)(Ñ)

   2,088      27 

Northern Trust Corp. (Ñ)

   16,100      892 

NYSE Euronext

   7,400      222 

People’s United Financial, Inc. (Ñ)

   29,000      406 

Piedmont Office Realty Trust, Inc. Class A (Ñ)(ö)

   1,200      24 

Plum Creek Timber Co., Inc. (Ñ)(ö)

   15,000      562 

PNC Financial Services Group, Inc.

   33,100      2,010 

Progressive Corp. (The)

   13,600      270 

Prudential Financial, Inc.

   27,300      1,603 

Reinsurance Group of America, Inc. Class A (Ñ)

   3,100      167 

Senior Housing Properties Trust (ö)

   8,800      193 

State Street Corp.

   23,400      1,084 

SunTrust Banks, Inc. (Ñ)

   28,000      826 

Transatlantic Holdings, Inc.

   6,500      336 

Travelers Cos., Inc. (The) (Ñ)

   8,500      474 

Unum Group

   9,300      225 

US Bancorp (Ñ)

   160,159      4,319 

Valley National Bancorp (Ñ)

   32,239      461 

Visa, Inc. Class A

   11,737      826 

Washington Federal, Inc. (Ñ)

   2,900      49 

Webster Financial Corp. (Ñ)

   4,700      93 

Wells Fargo & Co.

   221,011      6,848 
         
       63,924 
         
   Principal
Amount ($)
or Shares
     Market
Value
$
 
Health Care - 11.3%      

Abbott Laboratories

   61,026      2,924 

Aetna, Inc.

   13,500      412 

Alexion Pharmaceuticals, Inc. (Æ)(Ñ)

   4,500      362 

Allergan, Inc.

   63,462      4,358 

Amgen, Inc. (Æ)

   12,151      667 

Baxter International, Inc.

   15,300      774 

Boston Scientific Corp. (Æ)(Ñ)

   50,000      379 

Bristol-Myers Squibb Co.

   19,004      503 

Cardinal Health, Inc.

   3,800      146 

Celgene Corp. (Æ)

   18,602      1,100 

Cerner Corp. (Æ)(Ñ)

   5,400      512 

Cigna Corp.

   9,000      330 

Covance, Inc. (Æ)(Ñ)

   8,800      452 

Coventry Health Care, Inc. (Æ)

   12,100      319 

Covidien PLC

   33,850      1,546 

Dendreon Corp. (Æ)(Ñ)

   10,100      353 

Eli Lilly & Co. (Ñ)

   14,400      505 

Express Scripts, Inc. Class A (Æ)

   13,200      713 

Hologic, Inc. (Æ)(Ñ)

   8,900      167 

Humana, Inc. (Æ)

   8,600      471 

Illumina, Inc. (Æ)(Ñ)

   18,957      1,201 

Johnson & Johnson

   34,600      2,140 

Life Technologies Corp. (Æ)

   7,600      422 

Lincare Holdings, Inc. (Ñ)

   16,400      440 

Medicis Pharmaceutical Corp. Class A (Ñ)

   32,000      857 

Medtronic, Inc.

   22,516      835 

Merck & Co., Inc.

   169,450      6,107 

Pfizer, Inc.

   372,184      6,518 

Sanofi-Aventis SA - ADR

   72,050      2,322 

St. Jude Medical, Inc. (Æ)(Ñ)

   25,416      1,087 

Stryker Corp. (Ñ)

   36,000      1,933 

Teleflex, Inc. (Ñ)

   7,000      377 

Teva Pharmaceutical Industries, Ltd. - ADR

   11,900      620 

Thermo Fisher Scientific, Inc. (Æ)

   16,517      914 

UnitedHealth Group, Inc.

   23,600      852 

Watson Pharmaceuticals, Inc. Class B (Æ)

   19,900      1,028 

WellPoint, Inc. (Æ)

   8,500      483 
         
       45,129 
         
Materials and Processing - 5.1%      

Agnico-Eagle Mines, Ltd. (Þ)

   2,400      184 

Air Products & Chemicals, Inc. (Ñ)

   10,400      946 

Airgas, Inc.

   1,737      108 

Alcoa, Inc.

   18,100      279 

Celanese Corp. Class A

   12,100      498 

CF Industries Holdings, Inc. (Ñ)

   4,466      604 

Cytec Industries, Inc.

   4,700      249 

Ecolab, Inc.

   5,900      297 

EI du Pont de Nemours & Co.

   16,700      833 

Freeport-McMoRan Copper & Gold, Inc. Class B

   13,100      1,574 

Huntsman Corp.

   42,500      663 

MeadWestvaco Corp.

   10,200      267 

Monsanto Co.

   36,069      2,512 

Newmont Mining Corp.

   41,317      2,537 

 

 16   Multi-Style Equity Fund


Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Nucor Corp. (Ñ)

   17,700      776 

Owens-Illinois, Inc. (Æ)

   31,850      978 

Packaging Corp. of America

   9,200      238 

Potash Corp. of Saskatchewan, Inc.

   9,362      1,449 

Reliance Steel & Aluminum Co.

   3,100      158 

Rio Tinto PLC - ADR

   14,800      1,061 

Sealed Air Corp. (Ñ)

   31,300      797 

SPX Corp.

   12,400      887 

Steel Dynamics, Inc. (Ñ)

   30,000      549 

Textron, Inc. (Ñ)

   3,300      78 

Vulcan Materials Co. (Ñ)

   18,100      803 

Weyerhaeuser Co. (Ñ)

   54,266      1,027 
         
       20,352 
         
Producer Durables - 10.3%      

Accenture PLC Class A

   67,250      3,262 

AGCO Corp. (Æ)(Ñ)

   2,300      117 

Agilent Technologies, Inc. (Æ)

   18,382      762 

AO Smith Corp.

   1,900      72 

Atlas Air Worldwide Holdings, Inc. (Æ)

   600      33 

Automatic Data Processing, Inc. (Ñ)

   15,600      722 

Avery Dennison Corp. (Ñ)

   2,900      123 

Boeing Co. (The)

   13,200      862 

Carlisle Cos., Inc.

   9,900      393 

Caterpillar, Inc. (Ñ)

   33,525      3,140 

Chicago Bridge & Iron Co. NV (Æ)

   1,100      36 

CNH Global NV (Æ)

   1,200      57 

Crane Co.

   5,400      222 

Danaher Corp. (Ñ)

   23,200      1,094 

Deere & Co.

   13,802      1,146 

Delta Air Lines, Inc. (Æ)(Ñ)

   62,200      784 

Embraer SA (Æ)

   13,000      382 

EMCOR Group, Inc. (Æ)

   1,200      35 

Emerson Electric Co.

   23,000      1,315 

FedEx Corp. (Ñ)

   12,378      1,151 

Fluor Corp. (Ñ)

   35,600      2,360 

General Dynamics Corp.

   18,000      1,277 

General Electric Co.

   48,200      882 

Harsco Corp.

   20,500      581 

Honeywell International, Inc.

   87,798      4,668 

Ingersoll-Rand PLC (Ñ)

   22,600      1,064 

Jacobs Engineering Group, Inc. (Æ)

   2,800      128 

Joy Global, Inc.

   5,100      442 

KBR, Inc.

   7,200      219 

L-3 Communications Holdings, Inc.

   4,600      324 

Lexmark International, Inc. Class A (Æ)

   8,300      289 

Lockheed Martin Corp. (Ñ)

   8,000      559 

Manpower, Inc. (Ñ)

   15,300      960 

McDermott International, Inc. (Æ)

   3,500      72 

Moody’s Corp. (Ñ)

   20,000      531 

Moog, Inc. Class A (Æ)(Ñ)

   2,100      84 

Northrop Grumman Corp. (Ñ)

   7,400      479 

PACCAR, Inc.

   15,000      861 

Pitney Bowes, Inc. (Ñ)

   25,700      621 

Robert Half International, Inc. (Ñ)

   14,700      450 

Rockwell Automation, Inc. (Ñ)

   20,700      1,484 

Ryder System, Inc. (Ñ)

   3,500      184 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Shaw Group, Inc. (The) (Æ)

   2,000      68 

Terex Corp. (Æ)(Ñ)

   6,400      199 

Tidewater, Inc. (Ñ)

   13,400      721 

Union Pacific Corp.

   5,800      537 

United Continental Holdings, Inc. (Æ)

   12,800      305 

United Parcel Service, Inc. Class B

   53,262      3,866 

URS Corp. (Æ)

   6,600      275 

Verisk Analytics, Inc. Class A (Æ)

   322      11 

Waste Management, Inc. (Ñ)

   12,200      450 

Xerox Corp. (Ñ)

   40,000      461 
         
       41,120 
         
Technology - 17.6%      

Akamai Technologies, Inc. (Æ)

   7,000      329 

Amdocs, Ltd. (Æ)

   13,100      360 

Amphenol Corp. Class A (Ñ)

   37,733      1,992 

Apple, Inc. (Æ)

   27,597      8,901 

Applied Materials, Inc. (Ñ)

   94,400      1,326 

BCE, Inc. (Ñ)

   51,900      1,840 

Broadcom Corp. Class A

   109,444      4,766 

Brocade Communications Systems, Inc. (Æ)

   16,500      87 

CA, Inc. (Ñ)

   6,400      156 

Check Point Software Technologies, Ltd. (Æ)(Ñ)

   17,100      791 

Cisco Systems, Inc. (Æ)

   52,700      1,066 

Citrix Systems, Inc. (Æ)

   9,400      643 

Cognizant Technology Solutions Corp. Class A (Æ)

   22,671      1,661 

Computer Sciences Corp.

   8,000      397 

Cree, Inc. (Æ)

   9,000      593 

Ctrip.com International, Ltd. - ADR (Æ)

   11,200      453 

Diebold, Inc. (Ñ)

   10,500      337 

Electronic Arts, Inc. (Æ)(Ñ)

   12,800      210 

F5 Networks, Inc. (Æ)(Ñ)

   10,892      1,418 

Google, Inc. Class A (Æ)

   11,815      7,018 

Harris Corp. (Ñ)

   7,400      335 

Hewlett-Packard Co.

   22,300      939 

Ingram Micro, Inc. Class A (Æ)

   11,300      216 

Intel Corp.

   33,000      694 

International Business Machines Corp.

   11,145      1,636 

Intuit, Inc. (Æ)(Ñ)

   9,180      453 

Juniper Networks, Inc. (Æ)

   37,192      1,373 

Lam Research Corp. (Æ)

   7,900      409 

LSI Corp. (Æ)

   37,700      226 

Maxim Integrated Products, Inc. (Ñ)

   43,600      1,030 

Micron Technology, Inc. (Æ)(Ñ)

   45,400      364 

Microsoft Corp.

   144,350      4,031 

Molex, Inc. (Ñ)

   14,800      336 

Motorola, Inc. (Æ)

   57,700      523 

National Semiconductor Corp. (Ñ)

   58,400      804 

NetApp, Inc. (Æ)(Ñ)

   28,581      1,571 

Nokia OYJ - ADR (Ñ)

   32,100      331 

Oracle Corp.

   131,440      4,115 

QUALCOMM, Inc.

   157,653      7,802 

Red Hat, Inc. (Æ)

   26,059      1,189 

Salesforce.com, Inc. (Æ)(Ñ)

   9,400      1,241 

SanDisk Corp. (Æ)

   12,782      637 

 

Multi-Style Equity Fund 17


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Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
   Market
Value
$
 
    

Synopsys, Inc. (Æ)

   13,200    355 

Tech Data Corp. (Æ)

   6,300    277 

Texas Instruments, Inc. (Ñ)

   86,226    2,803 

VMware, Inc. Class A (Æ)(Ñ)

   5,200    462 

Vodafone Group PLC - ADR (Ñ)

   95,700    2,529 
       
     71,025 
       
Utilities - 3.3%    

AGL Resources, Inc.

   4,600    165 

American Electric Power Co., Inc.

   19,400    699 

American Water Works Co., Inc.

   21,000    531 

AT&T, Inc.

   54,800    1,609 

Calpine Corp. (Æ)(Ñ)

   59,368    792 

CenterPoint Energy, Inc. (Ñ)

   25,800    406 

Constellation Energy Group, Inc.

   11,800    361 

Duke Energy Corp.

   25,900    461 

Edison International (Ñ)

   11,600    448 

Energen Corp.

   5,200    251 

Entergy Corp.

   5,000    354 

Exelon Corp. (Ñ)

   9,300    387 

Frontier Communications Corp. (Ñ)

   23,900    233 

Great Plains Energy, Inc. (Ñ)

   22,200    430 

MDU Resources Group, Inc.

   21,800    442 

NextEra Energy, Inc.

   22,300    1,160 

NII Holdings, Inc. (Æ)

   8,100     362 

NiSource, Inc. (Ñ)

   23,500     414 

Northeast Utilities

   10,900     347 

NV Energy, Inc.

   22,600     318 

OGE Energy Corp.

   6,400     291 

Pepco Holdings, Inc. (Ñ)

   20,400     372 

PG&E Corp.

   8,100     388 

PNM Resources, Inc. (Ñ)

   7,400     96 

PPL Corp. (Ñ)

   11,100     292 

Progress Energy, Inc. Class D

   7,700     335 

Questar Corp. (Ñ)

   9,400     164 

Southern Union Co. (Ñ)

   9,700     233 

Veolia Environnement SA - ADR

   13,400     393 

Verizon Communications, Inc.

   12,200     437 
       
     13,171 
       
Total Common Stocks
(cost $317,038)
     389,755 
       
Short-Term Investments - 2.2%    

Russell U.S. Cash Management Fund

   8,880,639(¥   8,881 
       
Total Short-Term Investments
(cost $8,881)
     8,881 
       
   Principal
Amount ($)
or Shares
   Market
Value
$
 
Other Securities - 17.0%    

Russell Investment Funds Liquidating Trust (×)

   1,329,628(¥   1,330 

Russell U.S. Cash Collateral Fund (×)

   66,617,631(¥   66,617 
       
Total Other Securities
(cost $67,947)
     67,947 
       
Total Investments - 116.5%
(identified cost $393,866)
     466,583 
Other Assets and Liabilities,
Net - (16.5%)
     (66,112
       
Net Assets - 100.0%     400,471 
       

 

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

 

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Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands

 

 

Futures Contracts  Number of
Contracts
   

Notional
Amount

   Expiration
Date
  Unrealized
Appreciation
(Depreciation)
$
 
          
          

Long Positions

          

Russell 1000 Mini Index

   21    USD     1,458   03/11   30 

S&P 500 E-Mini Index (CME)

   96    USD     6,014   03/11   89 

S&P 500 Index (CME)

   7    USD     2,193   03/11   46 

S&P Midcap 400 E-Mini Index (CME)

   9    USD     815   03/11   9 
             

Total Unrealized Appreciation (Depreciation) on Open Futures Contracts

           174 
             

 

 

 

Presentation of Portfolio Holdings — December 31, 2010

Amounts in thousands

 

   Market Value   

% of Net
Assets

 
Portfolio Summary  Level 1   Level 2   Level 3   Total   
          
          

Common Stocks

          

Consumer Discretionary

  $55,226   $    $    $55,226    13.8  

Consumer Staples

   32,096              32,096    8.0  

Energy

   47,712              47,712    11.9  

Financial Services

   63,924              63,924    16.0  

Health Care

   45,129              45,129    11.3  

Materials and Processing

   20,352              20,352    5.1  

Producer Durables

   41,120              41,120    10.3  

Technology

   71,025              71,025    17.6  

Utilities

   13,171              13,171    3.3  

Short-Term Investments

        8,881         8,881    2.2  

Other Securities

        67,947         67,947    17.0  
                         

Total Investments

   389,755    76,828         466,583    116.5  
                      

Other Assets and Liabilities, Net

           (16.5
             
           100.0  
             

Other Financial Instruments

          

Futures Contracts

   174              174    
                      

Total Other Financial Instruments**

   174              174   
                      

 

* Less than .05% of net assets.
** Other financial instruments reflected in the Schedule of Investments, such as futures, forwards, and swap contracts which are valued at the unrealized appreciation/depreciation on the instruments.

For a description of the levels see note 2 in the Notes to Financial Statements.

 

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

 

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Table of Contents

Russell Investment Funds

Multi-Style Equity Fund

Fair Value of Derivative Instruments — December 31, 2010

Amounts in thousands

 

 

Derivatives not accounted for as hedging instruments  Equity
Contracts
 
  

Location: Statement of Assets and Liabilities - Assets

  

Daily variation margin on futures contracts*

  $174  
     
Derivatives not accounted for as hedging instruments  Equity
Contracts
 

Location: Statement of Operations - Net realized gain (loss)

  

Futures contracts

  $2,066  
     

Location: Statement of Operations - Net change in unrealized appreciation (depreciation)

  

Futures contracts

  $(189
     

 

*Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the statement of assets and liabilities

For further disclosure on derivatives see note 2 in Notes to Financial Statements.

 

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

 

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Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

LOGO

 

Aggressive Equity Fund 
   Total
Return
 

1 Year

   24.88

5 Years

   2.14%§ 

10 Years

   4.56%§ 
Russell 2500 Index ** 
   Total
Return
 

1 Year

   26.71

5 Years

   4.86%§ 

10 Years

   6.98%§ 

 

 22   Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion — December 31, 2010 (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 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 six 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, 2010?

For the fiscal year ended December 31, 2010, the Aggressive Equity Fund gained 24.88%. This is compared to the Russell 2500™ Index, which gained 26.71% 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 fiscal year ended December 31, 2010, the Lipper® Small-Cap Core Funds (VIP) Average gained 25.96%. This average return 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?

A high degree of correlation among stock price movements resulted in a more difficult environment for active management. Price differentiation in the market was more prevalent at the higher and lower ends of the risk and growth spectrum and the returns of the Fund decreased when the “risk on” scenario was present. A “risk on” scenario exists where positive economic and company-specific news leads companies with more economic sensitivity to outperform the benchmark when “risk” is in favor. In this environment, companies with significant economic sensitivity and often poor fundamentals (in the form of high debt and low cash on the balance sheet) outperformed the market. This market environment was prevalent during the fiscal year and detracted from Fund performance as the Fund was clearly positioned in stocks with stronger fundamentals. The fiscal year could be characterized as driven more by macroeconomic forces than company specific data, which did not favor the multi-manager process of the Fund.

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

The Fund employs six money managers: two growth-oriented, one market-oriented and three value-oriented. Three of the six managers and two of the three value managers outperformed their respective benchmarks. This was reflective of the conditions in the market with managers benefiting from a moderation in investors’ appetite for riskier companies (i.e., companies with significant levels of debt and negative earnings), but penalized by elevated stock correlations (i.e. similar as opposed to differentiated return patterns) caused investors’ focus on macro related events, such as European sovereign debt worries and ongoing weak U.S. housing and employment data, rather than on corporate earnings and company announcements. This made it a more difficult market for active management.

While the U.S. economic recovery was slower than many investors anticipated, which curtailed investors’ appetite for speculation, investors retained an overweight exposure to companies that were sensitive to these economic conditions. Consequently, managers across the style spectrum with exposure to cyclical stocks or sectors, specifically the technology sector, fared better than those managers without such exposure.

DePrince, Race & Zollo, Inc., (“DePrince”) a yield-focused value manager, underperformed its style benchmark, the Russell 2500™ Value Index, for the fiscal year. DePrince faced several headwinds during the fiscal year that meaningfully impeded their ability to outperform their benchmark. First, their focus on sustainable dividend yield was not rewarded, as investors alternated between high-yield stocks and zero yielding stocks. In addition, DePrince’s macro positioning created significant difficulties as DePrince reduced its risk exposure starting in late 2009 and into early 2010. This was in response to the duration and magnitude of the risk rally, which was predicated on the belief that the U.S. would rebound strongly from the recession. However, DePrince’s risk reduction efforts were premature, as a high tolerance for risk continued to be rewarded during the fiscal year. As a result of this environment, stock selection detracted from performance, with selection in financial services representing the largest detractor. DePrince’s overweight exposure to regional banks also detracted from performance relative to the style benchmark.

Tygh Capital Management, Inc. (“Tygh”), a quality-focused growth-oriented manager, underperformed its style benchmark, the Russell 2500™Growth Index, for the fiscal year. While investor preference for risk detracted from Tygh’s process, underperformance was driven mainly by weak stock selection. The largest detractors to performance relative to its style benchmark were in the consumer discretionary sector, specifically in Tygh’s specialty retail and restaurant holdings. This negative selection was a function of both the companies

 

 

Aggressive Equity Fund 23


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

held in the sector and Tygh’s underweight or lack of exposure to several larger index constituents that performed well during the period.

Jacobs Levy Equity Management, Inc., like other quantitative managers, faced a number of difficulties during the fiscal year arising from the unfavorable active management environment, particularly the ongoing macroeconomic uncertainty and investors’ preference for risk. Nevertheless, the manager, driven by its macroeconomic model, had a bias to smaller, lower valuation, more economically sensitive stocks. These exposures were beneficial for the manager and were reflected in positive stock selection, which was positive across the majority of sectors and accounted for all of the manager’s outperformance relative to its style benchmark, the Russell 2500 Value Index.

Ranger Investment Management, L.P., a growth manager that focuses on higher quality stocks with sustainable earnings growth, underperformed its style benchmark, the Russell 2500 Growth Index. Investor preference for risk and stock selection detracted from returns. Health care stock selection detracted from returns due to holdings in the health care services and pharmaceutical sectors. Stock selection within the materials and processing and consumer discretionary sector detracted from benchmark-relative performance as a result of retail and metal related holdings. Stock selection within the producer durables and technology sectors, however, had a positive impact on returns.

Signia Capital Management, LLC, (“Signia”) a value-oriented manager, outperformed its style benchmark, the Russell 2500™ Value Index, for the fiscal year. Signia’s preference for attractively priced, higher-risk stocks was rewarded during the fiscal year, as investors continued to prefer economically sensitive, higher-risk companies. Signia’s stock selection drove performance, as several precious and industrial metal sector holdings accounted for much of its outperformance through the fiscal year due to an improving global economic outlook and a

weakening U.S. Dollar. Technology sector stock selection contributed as well on the strength of semi-conductor holdings.

ClariVest Asset Management, LLC, has a quantitative process that focuses on identifying companies with sustainable trends in earnings, price and analyst estimate revisions. This approach met with limited success during the year, due to the volatility of the market and U.S. economic uncertainty. In addition, elevated stock correlations created significant difficulties for quantitative processes that look to exploit stock differentiation, which further undermined Clarivest’s ability to outperform its style benchmark, the Russell 2500.

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

There were no changes to the Fund’s structure or the money manager lineup in 2010.

 

Money Managers as of December 31, 2010  Styles
ClariVest Asset Management LLC  Market Oriented
DePrince, Race, & Zollo, Inc.  Value
Jacobs Levy Equity Management, Inc.  Value
Ranger Investment Management, L.P.  Growth
Signia Capital Management, LLC  Value
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 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.

 

 

 

* Assumes initial investment on January 1, 2001.

 

** 

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

 

§ Annualized.

The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

 24   Aggressive Equity Fund


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Russell Investment Funds

Aggressive Equity Fund

Shareholder Expense Example — December 31, 2010 (Unaudited)

 

 

 

Fund Expenses

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

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory 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, 2010 to December 31, 2010.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate

of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

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

 

Core Class

  Actual
Performance
   Hypothetical
Performance
(5% return
before expenses)
 
    

Beginning Account Value July 1, 2010

  $1,000.00    $1,000.00  

Ending Account Value

December 31, 2010

  $1,296.90    $1,019.91  

Expenses Paid During Period*

  $6.08    $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). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher.

 

Aggressive Equity Fund 25


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
Common Stocks - 95.4%      
Consumer Discretionary - 12.2%      

Acacia Research - Acacia Technologies (Æ)

   11,940      310  

Advance Auto Parts, Inc.

   2,800      185  

Amerco, Inc. (Æ)(Ñ)

   2,100      202  

America’s Car-Mart, Inc. (Æ)(Ñ)

   9,610      260  

Arctic Cat, Inc. (Æ)

   1,800      26  

Asbury Automotive Group, Inc. (Æ)

   12,631      233  

Ascena Retail Group, Inc. (Æ)

   13,887      367  

Bebe Stores, Inc. (Ñ)

   64,400      384  

BJ’s Wholesale Club, Inc. (Æ)

   5,600      268  

Bob Evans Farms, Inc. (Ñ)

   2,400      79  

Buffalo Wild Wings, Inc. (Æ)

   5,261      231  

Callaway Golf Co. (Ñ)

   26,456      213  

Cato Corp. (The) Class A (Ñ)

   3,300      90  

Chico’s FAS, Inc. (Ñ)

   36,400      438  

Childrens Place Retail Stores, Inc. (The) (Æ)(Ñ)

   7,080      351  

Christopher & Banks Corp. (Ñ)

   29,282      180  

Coinstar, Inc. (Æ)(Ñ)

   11,808      667  

Columbia Sportswear Co. (Ñ)

   2,805      169  

Corinthian Colleges, Inc. (Æ)(Ñ)

   26,203      137  

Cracker Barrel Old Country Store, Inc. (Ñ)

   1,200      66  

CROCS, Inc. (Æ)(Ñ)

   23,274      398  

Dick’s Sporting Goods, Inc. (Æ)(Ñ)

   12,153      456  

Dillard’s, Inc. Class A (Ñ)

   9,200      349  

Dollar Tree, Inc. (Æ)

   13,300      747  

Elizabeth Arden, Inc. (Æ)(Ñ)

   3,100      71  

Expedia, Inc.

   13,390      336  

Federal-Mogul Corp. (Æ)

   19,019      392  

Finish Line, Inc. (The) Class A (Ñ)

   29,335      504  

Flextronics International, Ltd. (Æ)

   18,570      146  

Foot Locker, Inc. (Ñ)

   24,850      488  

Fossil, Inc. (Æ)(Ñ)

   6,700      472  

Fred’s, Inc. Class A (Ñ)

   20,000      276  

Furniture Brands International, Inc. (Æ)(Ñ)

   2,300      12  

Gentex Corp. (Ñ)

   17,540      518  

G-III Apparel Group, Ltd. (Æ)(Ñ)

   8,650      304  

Harley-Davidson, Inc. (Ñ)

   3,400      118  

Harman International Industries, Inc. (Æ)

   8,600      398  

Helen of Troy, Ltd. (Æ)

   3,100      92  

Hillenbrand, Inc. (Ñ)

   18,600      387  

Hyatt Hotels Corp. (Æ)(Ñ)

   3,800      174  

Jones Group, Inc. (The)

   28,100      437  

Kenneth Cole Productions, Inc. Class A (Æ)(Ñ)

   20,764      259  

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

   8,900      49  

Lear Corp. (Æ)(Ñ)

   1,400      138  

Lifetime Brands, Inc. (Æ)

   1,500      21  

LKQ Corp. (Æ)

   30,661      697  

Meredith Corp. (Ñ)

   11,300      392  

MGM Resorts International (Æ)(Ñ)

   32,195      478  

OfficeMax, Inc. (Æ)(Ñ)

   19,662      348  

Oxford Industries, Inc. (Ñ)

   5,825      149  

Panera Bread Co. Class A (Æ)(Ñ)

   4,070      412  

Penn National Gaming, Inc. (Æ)(Ñ)

   6,100      214  

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

   1,600      44  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

PF Chang’s China Bistro, Inc. (Ñ)

   14,548      705  

Pool Corp. (Ñ)

   11,400      257  

RC2 Corp. (Æ)

   6,900      150  

Rent-A-Center, Inc. Class A (Ñ)

   3,300      107  

Rick’s Cabaret International, Inc. (Æ)

   900      7  

Ross Stores, Inc.

   2,300      145  

Ruby Tuesday, Inc. (Æ)(Ñ)

   26,896      351  

Scholastic Corp.

   5,400      160  

Shoe Carnival, Inc. (Æ)(Ñ)

   1,400      38  

Standard Motor Products, Inc. (Ñ)

   24,000      328  

Stein Mart, Inc. (Ñ)

   1,000      9  

Steven Madden, Ltd. (Æ)(Ñ)

   19,326      807  

Stewart Enterprises, Inc. Class A (Ñ)

   53,800      360  

Superior Industries International, Inc. (Ñ)

   30,025      637  

Systemax, Inc. (Æ)(Ñ)

   1,700      24  

Tempur-Pedic International, Inc. (Æ)(Ñ)

   9,004      361  

Texas Roadhouse, Inc. Class A (Æ)(Ñ)

   33,180      570  

TRW Automotive Holdings Corp. (Æ)(Ñ)

   11,300      596  

Urban Outfitters, Inc. (Æ)(Ñ)

   1,247      45  

Warnaco Group, Inc. (The) (Æ)(Ñ)

   6,396      352  

Wendy’s/Arby’s Group, Inc. Class A

   51,100      236  

WESCO International, Inc. (Æ)(Ñ)

   500      26  

Wet Seal, Inc. (The) Class A (Æ)(Ñ)

   19,900      74  

Williams-Sonoma, Inc. (Ñ)

   12,220      436  

WMS Industries, Inc. (Æ)(Ñ)

   5,719      259  

Wolverine World Wide, Inc. (Ñ)

   16,820      536  

Wyndham Worldwide Corp.

   20,000      599  
         
       23,307  
         
Consumer Staples - 2.2%      

Andersons, Inc. (The) (Ñ)

   5,388      196  

Constellation Brands, Inc. Class A (Æ)(Ñ)

   37,800      837  

Corn Products International, Inc. (Ñ)

   25,500      1,173  

Energizer Holdings, Inc. (Æ)

   5,500      401  

Hansen Natural Corp. (Æ)

   3,200      167  

Nash Finch Co. (Ñ)

   1,500      64  

Omega Protein Corp. (Æ)(Ñ)

   1,300      11  

Pilgrim’s Pride Corp. (Æ)

   1,300      9  

Rite Aid Corp. (Æ)

   80,500      71  

Sanderson Farms, Inc. (Ñ)

   6,100      239  

Spartan Stores, Inc. (Ñ)

   4,600      78  

Susser Holdings Corp. (Æ)

   900      12  

Tootsie Roll Industries, Inc.

   8,600      249  

TreeHouse Foods, Inc. (Æ)(Ñ)

   6,980      357  

Tyson Foods, Inc. Class A

   22,109      381  
         
       4,245  
         
Energy - 5.1%      

Alpha Natural Resources, Inc. (Æ)

   9,108      546  

Bronco Drilling Co., Inc. (Æ)

   3,700      30  

Complete Production Services, Inc. (Æ)(Ñ)

   8,675      256  

Comstock Resources, Inc. (Æ)(Ñ)

   8,862      218  

Core Laboratories NV

   4,867      433  

CVR Energy, Inc. (Æ)

   6,900      105  

Dawson Geophysical Co. (Æ)(Ñ)

   1,300      41  

Exterran Holdings, Inc. (Æ)

   9,876      237  

Forest Oil Corp. (Æ)(Ñ)

   10,619      403  

 

 26   Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Global Industries, Ltd. (Æ)(Ñ)

   27,998      194  

Gulf Island Fabrication, Inc.

   2,200      62  

Helix Energy Solutions Group, Inc. (Æ)(Ñ)

   14,024      170  

Helmerich & Payne, Inc. (Ñ)

   9,404      456  

Oil States International, Inc. (Æ)

   8,600      551  

Parker Drilling Co. (Æ)

   2,500      11  

Patterson-UTI Energy, Inc.

   31,046      669  

Penn Virginia Corp. (Ñ)

   29,300      493  

Pioneer Natural Resources Co. (Ñ)

   3,450      300  

Precision Drilling Corp. (Æ)

   28,161      273  

Rosetta Resources, Inc. (Æ)(Ñ)

   15,190      571  

Rowan Cos., Inc. (Æ)(Ñ)

   14,881      520  

SEACOR Holdings, Inc. (Ñ)

   4,800      486  

Sunoco, Inc.

   15,887      641  

Tesoro Corp. (Æ)(Ñ)

   21,600      400  

Tetra Technologies, Inc. (Æ)(Ñ)

   19,655      233  

Thompson Creek Metals Co., Inc. -
ADR (Æ)

   15,532      229  

Unit Corp. (Æ)(Ñ)

   8,681      404  

USEC, Inc. (Æ)(Ñ)

   21,700      131  

Walter Energy, Inc. Class A

   5,015      640  

Western Refining, Inc. (Æ)

   9,924      105  
         
       9,808  
         
Financial Services - 17.1%      

Advance America Cash Advance Centers, Inc. (Ñ)

   3,100      17  

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

   13,723      1,362  

Allied World Assurance Co. Holdings, Ltd.

   2,000      119  

American Capital Agency Corp. (Ñ)(ö)

   23,900      687  

American Financial Group, Inc.

   11,400      368  

American National Insurance Co.

   700      60  

American Safety Insurance Holdings,
Ltd. (Æ)

   1,400      30  

Ameriprise Financial, Inc.

   5,324      306  

Amtrust Financial Services, Inc. (Ñ)

   3,000      53  

Apollo Commercial Real Estate Finance, Inc. (Ñ)(ö)

   4,000      65  

Ares Capital Corp.

   53,980      890  

Argo Group International Holdings, Ltd.

   3,800      142  

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

   10,300      99  

Aspen Insurance Holdings, Ltd. (Ñ)

   6,300      180  

Assurant, Inc. (Ñ)

   4,300      166  

Astoria Financial Corp.

   7,200      100  

Axis Capital Holdings, Ltd.

   1,100      39  

BancorpSouth, Inc. (Ñ)

   16,800      268  

BioMed Realty Trust, Inc. (Ñ)(ö)

   18,883      352  

BOK Financial Corp. (Ñ)

   13,590      727  

Boston Private Financial Holdings, Inc. (Ñ)

   47,121      309  

Brandywine Realty Trust (Ñ)(ö)

   15,000      175  

Broadridge Financial Solutions, Inc. (Ñ)

   2,700      59  

Brookline Bancorp, Inc. (Ñ)

   30,900      335  

Camden Property Trust (ö)

   4,700      254  

Capitol Federal Financial, Inc. (Ñ)

   27,591      329  

CapLease, Inc. (Ñ)(ö)

   1,100      6  

Chesapeake Lodging Trust (Ñ)(ö)

   1,200      23  

City National Corp. (Ñ)

   5,900      362  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Cogdell Spencer, Inc. (Ñ)(ö)

   6,000      35  

Cohen & Steers, Inc. (Ñ)

   3,400      89  

Colonial Properties Trust (ö)

   39,162      707  

CommonWealth REIT (Ñ)(ö)

   12,675      323  

Community Bank System, Inc.

   13,700      380  

Community Trust Bancorp, Inc. (Ñ)

   1,000      29  

CoreLogic, Inc. (Æ)

   13,600      252  

Cousins Properties, Inc. (Ñ)(ö)

   18,869      157  

DiamondRock Hospitality Co. (Æ)(Ñ)(ö)

   41,769      502  

Dime Community Bancshares, Inc. (Ñ)

   8,700      127  

Duff & Phelps Corp. Class A (Ñ)

   30,800      519  

Dynex Capital, Inc. (Ñ)(ö)

   28,000      306  

Education Realty Trust, Inc. (ö)

   9,600      75  

Endurance Specialty Holdings, Ltd. (Ñ)

   6,600      304  

Ezcorp, Inc. Class A (Æ)

   24,774      672  

FBL Financial Group, Inc. Class A (Ñ)

   1,800      52  

Fidelity National Financial, Inc. Class A (Ñ)

   26,100      357  

First Financial Bancorp (Ñ)

   7,200      133  

First Interstate Bancsystem, Inc.
Class A (Ñ)

   1,100      17  

First Midwest Bancorp, Inc. (Ñ)

   11,900      137  

First Potomac Realty Trust (Ñ)(ö)

   4,400      74  

FirstMerit Corp. (Ñ)

   13,400      265  

Flagstone Reinsurance Holdings SA (Ñ)

   23,800      300  

Flushing Financial Corp. (Ñ)

   2,500      35  

FPIC Insurance Group, Inc. (Æ)

   900      33  

Franklin Street Properties Corp. (Ñ)(ö)

   22,243      317  

Fulton Financial Corp. (Ñ)

   30,900      320  

Glacier Bancorp, Inc. (Ñ)

   8,800      133  

Global Cash Access Holdings, Inc. (Æ)

   2,400      8  

Global Indemnity PLC Class A (Æ)

   1,200      25  

Hancock Holding Co. (Ñ)

   9,701      338  

Hanmi Financial Corp. (Æ)

   16,400      19  

Hatteras Financial Corp. (Ñ)(ö)

   7,700      233  

HCC Insurance Holdings, Inc.

   12,400      359  

Healthcare Realty Trust, Inc. (ö)

   9,700      205  

Hercules Technology Growth Capital, Inc. (Ñ)

   3,900      40  

Hersha Hospitality Trust Class A (ö)

   11,300      75  

Hilltop Holdings, Inc. (Æ)

   600      6  

Home Bancshares, Inc.

   2,750      61  

Horace Mann Educators Corp.

   7,600      137  

Hospitality Properties Trust (Ñ)(ö)

   23,043      531  

Huntington Bancshares, Inc.

   15,000      103  

Iberiabank Corp. (Ñ)

   600      35  

Infinity Property & Casualty Corp.

   1,100      68  

IntercontinentalExchange, Inc. (Æ)(Ñ)

   2,817      336  

Invesco Mortgage Capital, Inc. (Ñ)(ö)

   27,000      590  

Investment Technology Group, Inc. (Æ)

   1,900      31  

JER Investors Trust, Inc. (Æ)(Þ)

   1,771        

Jones Lang LaSalle, Inc.

   3,200      269  

Knight Capital Group, Inc. Class A (Æ)(Ñ)

   19,093      263  

Kohlberg Capital Corp. (Ñ)

   2,800      20  

LaSalle Hotel Properties (Ñ)(ö)

   12,977      342  

Lazard, Ltd. Class A

   29,191      1,153  

Liberty Property Trust (ö)

   11,100      354  

Mack-Cali Realty Corp. (Ñ)(ö)

   10,200      337  

 

Aggressive Equity Fund 27


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Maiden Holdings, Ltd. (Ñ)

   4,500      35  

MCG Capital Corp.

   8,900      62  

Meadowbrook Insurance Group, Inc.

   7,785      80  

Medical Properties Trust, Inc. (Ñ)(ö)

   18,400      199  

MFA Financial, Inc. (Ñ)(ö)

   38,300      313  

Montpelier Re Holdings, Ltd. (Ñ)

   15,800      315  

MSCI, Inc. Class A (Æ)(Ñ)

   9,014      351  

Nelnet, Inc. Class A

   8,800      208  

Newcastle Investment Corp. (Æ)(ö)

   3,600      24  

OceanFirst Financial Corp.

   1,700      22  

Old National Bancorp (Ñ)

   19,951      237  

OneBeacon Insurance Group, Ltd.
Class A (Ñ)

   2,800      42  

Oritani Financial Corp. (Ñ)

   13,900      170  

Parkway Properties, Inc. (Ñ)(ö)

   1,900      33  

PennantPark Investment Corp. (Ñ)

   27,758      340  

Phoenix Cos., Inc. (The) (Æ)(Ñ)

   16,800      43  

Piedmont Office Realty Trust, Inc.
Class A (Ñ)(ö)

   8,900      179  

Piper Jaffray Cos. (Æ)

   8,238      288  

Post Properties, Inc. (Ñ)(ö)

   7,300      265  

Potlatch Corp. (Ñ)(ö)

   12,500      407  

Prosperity Bancshares, Inc. (Ñ)

   26,780      1,053  

Protective Life Corp. (Ñ)

   11,600      309  

PS Business Parks, Inc. (ö)

   2,300      128  

Raymond James Financial, Inc. (Ñ)

   10,497      343  

Reinsurance Group of America, Inc.
Class A (Ñ)

   5,500      295  

Republic Bancorp, Inc. Class A

   1,100      26  

Resource Capital Corp. (Ñ)(ö)

   44,713      330  

Retail Opportunity Investments Corp. (Ñ)(ö)

   2,800      28  

Sandy Spring Bancorp, Inc. (Ñ)

   1,200      22  

SeaBright Holdings, Inc. (Ñ)

   2,000      18  

Selective Insurance Group, Inc. (Ñ)

   22,300      405  

Signature Bank NY (Æ)(Ñ)

   5,950      298  

SL Green Realty Corp. (Ñ)(ö)

   4,700      317  

Southwest Bancorp, Inc. (Æ)(Ñ)

   1,700      21  

Sovran Self Storage, Inc. (ö)

   2,200      81  

StanCorp Financial Group, Inc. (Ñ)

   4,500      203  

StellarOne Corp. (Ñ)

   19,587      285  

Sterling Bancorp Class N (Ñ)

   10,700      112  

Sterling Bancshares, Inc. (Ñ)

   37,200      261  

Strategic Hotels & Resorts, Inc. (Æ)(ö)

   10,100      53  

Susquehanna Bancshares, Inc. (Ñ)

   22,100      214  

SVB Financial Group (Æ)(Ñ)

   5,270      280  

Symetra Financial Corp.

   30,000      411  

Texas Capital Bancshares, Inc. (Æ)(Ñ)

   12,619      268  

TICC Capital Corp. (Ñ)

   32,000      359  

Transatlantic Holdings, Inc.

   6,700      346  

Trustmark Corp. (Ñ)

   13,200      328  

UMB Financial Corp. (Ñ)

   8,800      364  

United Financial Bancorp, Inc. (Ñ)

   1,500      23  

Unitrin, Inc.

   4,800      118  

Washington Federal, Inc. (Ñ)

   45,226      765  

Webster Financial Corp.

   12,100      238  

West Coast Bancorp (Æ)

   3,900      11  

White Mountains Insurance Group, Ltd. (Ñ)

   400      134  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Whitney Holding Corp. (Ñ)

   12,604      178  
         
       32,708  
         
Health Care - 10.1%      

Affymetrix, Inc. (Æ)(Ñ)

   23,800      120  

Albany Molecular Research, Inc. (Æ)(Ñ)

   24,017      135  

Allscripts Healthcare Solutions, Inc. (Æ)

   28,546      550  

Amedisys, Inc. (Æ)

   6,968      233  

American Oriental Bioengineering, Inc. (Æ)(Ñ)

   5,000      12  

AMERIGROUP Corp. Class A (Æ)

   4,400      193  

Analogic Corp. (Ñ)

   8,394      415  

Angiodynamics, Inc. (Æ)

   2,700      41  

Brookdale Senior Living, Inc. (Æ)(Ñ)

   20,369      436  

Catalyst Health Solutions, Inc. (Æ)(Ñ)

   18,288      851  

Celera Corp. (Æ)

   5,500      35  

Centene Corp. (Æ)(Ñ)

   3,400      86  

Conmed Corp. (Æ)(Ñ)

   8,966      237  

Cooper Cos., Inc. (The)

   6,584      371  

Coventry Health Care, Inc. (Æ)

   17,100      451  

Cross Country Healthcare, Inc. (Æ)

   2,800      24  

Cynosure, Inc. Class A (Æ)(Ñ)

   16,320      166  

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

   14,011      906  

Endo Pharmaceuticals Holdings, Inc. (Æ)

   13,100      468  

Ensign Group, Inc. (The) (Ñ)

   3,800      95  

Five Star Quality Care, Inc. (Æ)(Ñ)

   38,300      271  

Gentiva Health Services, Inc. (Æ)

   11,316      301  

Greatbatch, Inc. (Æ)(Ñ)

   8,836      213  

Harvard Bioscience, Inc. (Æ)(Ñ)

   39,716      162  

Health Management Associates, Inc. Class A (Æ)

   46,126      440  

Health Net, Inc. (Æ)

   30,800      840  

Healthsouth Corp. (Æ)(Ñ)

   11,697      242  

Healthspring, Inc. (Æ)

   21,655      575  

Healthways, Inc. (Æ)(Ñ)

   1,500      17  

HMS Holdings Corp. (Æ)

   10,450      676  

Hologic, Inc. (Æ)(Ñ)

   23,400      440  

Humana, Inc. (Æ)(Ñ)

   6,900      378  

IDEXX Laboratories, Inc. (Æ)(Ñ)

   5,858      405  

Illumina, Inc. (Æ)(Ñ)

   7,436      471  

Impax Laboratories, Inc. (Æ)

   5,000      101  

Kindred Healthcare, Inc. (Æ)(Ñ)

   16,548      304  

LifePoint Hospitals, Inc. (Æ)(Ñ)

   5,300      195  

Magellan Health Services, Inc. (Æ)

   7,930      375  

Medicines Co. (The) (Æ)(Ñ)

   10,300      146  

Mednax, Inc. (Æ)(Ñ)

   5,884      396  

Meridian Bioscience, Inc. (Ñ)

   9,100      211  

Molina Healthcare, Inc. (Æ)(Ñ)

   9,700      270  

Palomar Medical Technologies, Inc. (Æ)(Ñ)

   2,300      33  

Par Pharmaceutical Cos., Inc. (Æ)(Ñ)

   25,400      977  

PerkinElmer, Inc. (Ñ)

   8,968      232  

Quality Systems, Inc. (Ñ)

   6,030      421  

Salix Pharmaceuticals, Ltd. (Æ)(Ñ)

   7,747      364  

SuperGen, Inc. (Æ)(Ñ)

   4,200      11  

SXC Health Solutions Corp. (Æ)

   26,680      1,143  

Symmetry Medical, Inc. (Æ)(Ñ)

   16,118      150  

 

 28   Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Teleflex, Inc. (Ñ)

   2,200      118  

TomoTherapy, Inc. (Æ)(Ñ)

   3,400      12  

Triple-S Management Corp. Class B (Æ)

   2,400      46  

United Therapeutics Corp. (Æ)(Ñ)

   5,404      342  

Universal American Corp. (Ñ)

   7,500      153  

Viropharma, Inc. (Æ)(Ñ)

   26,100      452  

Vital Images, Inc. (Æ)

   1,000      14  

Warner Chilcott PLC Class A (Ñ)

   15,860      358  

Watson Pharmaceuticals, Inc. Class B (Æ)

   6,100      315  

West Pharmaceutical Services, Inc. (Ñ)

   14,600      602  

Zoll Medical Corp. (Æ)(Ñ)

   9,710      362  
         
       19,359  
         
Materials and Processing - 8.2%      

A Schulman, Inc. (Ñ)

   20,500      469  

Albemarle Corp.

   13,090      731  

Apogee Enterprises, Inc. (Ñ)

   4,200      57  

Arch Chemicals, Inc. (Ñ)

   7,500      284  

Ashland, Inc.

   11,700      595  

Ball Corp.

   10,800      736  

Boise, Inc. (Ñ)

   7,900      63  

Buckeye Technologies, Inc.

   21,187      445  

Cabot Corp.

   11,310      425  

Comfort Systems USA, Inc. (Ñ)

   9,800      129  

Commercial Metals Co. (Ñ)

   26,400      438  

Cytec Industries, Inc.

   17,649      937  

Domtar Corp.

   2,600      197  

Fastenal Co. (Ñ)

   5,834      350  

Ferro Corp. (Æ)(Ñ)

   19,478      285  

HB Fuller Co.

   17,400      357  

Horsehead Holding Corp. (Æ)(Ñ)

   17,654      230  

Huntsman Corp.

   19,500      304  

Interline Brands, Inc. (Æ)

   20,300      462  

Kaiser Aluminum Corp. (Ñ)

   6,150      308  

KapStone Paper and Packaging
Corp. (Æ)(Ñ)

   25,400      389  

Kaydon Corp. (Ñ)

   7,600      309  

Kronos Worldwide, Inc. (Æ)(Ñ)

   1,000      42  

Lexicon Pharmaceuticals, Inc. (Æ)(Ñ)

   22,800      33  

MeadWestvaco Corp. (Ñ)

   2,500      65  

Minerals Technologies, Inc.

   3,900      255  

Mueller Water Products, Inc. Class A (Ñ)

   54,900      229  

Neenah Paper, Inc. (Ñ)

   1,800      35  

OM Group, Inc. (Æ)

   13,634      525  

Owens & Minor, Inc. (Ñ)

   11,000      324  

Packaging Corp. of America

   13,900      359  

Pan American Silver Corp.

   5,268      217  

PolyOne Corp. (Æ)

   12,800      160  

Polypore International, Inc. (Æ)(Ñ)

   6,711      273  

Reliance Steel & Aluminum Co. (Ñ)

   7,800      399  

RTI International Metals, Inc. (Æ)

   7,474      202  

Scotts Miracle-Gro Co. (The) Class A (Ñ)

   6,192      314  

ShengdaTech, Inc. (Æ)(Ñ)

   3,100      15  

Simpson Manufacturing Co., Inc. (Ñ)

   1,300      40  

Timken Co.

   16,600      793  

Titanium Metals Corp. (Æ)(Ñ)

   20,630      354  

TPC Group, Inc. (Æ)(Ñ)

   26,790      813  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Universal Forest Products, Inc. (Ñ)

   10,250      399  

Valspar Corp.

   10,600      365  

Watsco, Inc.

   5,002      316  

WR Grace & Co. (Æ)(Ñ)

   19,048      669  
         
       15,696  
         
Producer Durables - 20.7%      

ABM Industries, Inc. (Ñ)

   16,800      442  

Actuant Corp. Class A (Ñ)

   13,309      354  

Advanced Battery Technologies, Inc. (Æ)(Ñ)

   3,800      15  

Aecom Technology Corp. (Æ)(Ñ)

   10,300      288  

AGCO Corp. (Æ)(Ñ)

   12,139      615  

Aircastle, Ltd. (Ñ)

   38,200      399  

Alaska Air Group, Inc. (Æ)

   12,800      727  

Alexander & Baldwin, Inc. (Ñ)

   12,717      509  

AO Smith Corp.

   8,400      320  

Applied Industrial Technologies, Inc.

   19,900      647  

Arkansas Best Corp. (Ñ)

   2,700      74  

Astec Industries, Inc. (Æ)(Ñ)

   6,703      217  

Atlas Air Worldwide Holdings, Inc. (Æ)(Ñ)

   3,500      195  

Avery Dennison Corp. (Ñ)

   2,100      89  

Barnes Group, Inc. (Ñ)

   12,500      258  

BE Aerospace, Inc. (Æ)

   28,550      1,058  

Booz Allen Hamilton Holding Corp.
Class A (Æ)(Ñ)

   12,867      250  

Brady Corp. Class A (Ñ)

   12,500      408  

Briggs & Stratton Corp. (Ñ)

   24,900      490  

CAI International, Inc. (Æ)(Ñ)

   12,923      253  

Carlisle Cos., Inc. (Ñ)

   9,400      374  

Celadon Group, Inc. (Æ)

   2,300      34  

Ceradyne, Inc. (Æ)

   9,059      286  

Chart Industries, Inc. (Æ)(Ñ)

   13,756      465  

Compass Diversified Holdings

   15,700      278  

Consolidated Graphics, Inc. (Æ)

   2,380      115  

Convergys Corp. (Æ)(Ñ)

   1,700      22  

Con-way, Inc. (Ñ)

   8,600      315  

CRA International, Inc. (Æ)(Ñ)

   1,100      26  

Crane Co.

   8,300      341  

Cubic Corp.

   4,100      193  

Curtiss-Wright Corp. (Ñ)

   16,100      535  

DHT Holdings, Inc.

   3,300      15  

Diana Shipping, Inc. (Æ)(Ñ)

   17,932      216  

Ducommun, Inc.

   1,800      39  

Dycom Industries, Inc. (Æ)

   2,500      37  

Electro Rent Corp.

   5,474      88  

Electronics for Imaging, Inc. (Æ)(Ñ)

   4,952      71  

EMCOR Group, Inc. (Æ)

   5,300      154  

EnerSys (Æ)

   17,790      571  

Ennis, Inc. (Ñ)

   1,600      27  

EnPro Industries, Inc. (Æ)(Ñ)

   8,186      340  

Esterline Technologies Corp. (Æ)

   8,800      604  

Excel Maritime Carriers, Ltd.
Class A (Æ)(Ñ)

   11,100      62  

Forward Air Corp. (Ñ)

   7,800      221  

G&K Services, Inc. Class A (Ñ)

   10,400      321  

Genesee & Wyoming, Inc. Class A (Æ)(Ñ)

   9,022      478  

GrafTech International, Ltd. (Æ)

   13,259      263  

 

Aggressive Equity Fund 29


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Granite Construction, Inc. (Ñ)

   13,700      376  

Greenbrier Cos., Inc. (Æ)(Ñ)

   10,000      210  

Group 1 Automotive, Inc. (Ñ)

   7,020      293  

Gulfmark Offshore, Inc. Class A (Æ)

   4,000      122  

Harsco Corp. (Ñ)

   18,100      512  

Haynes International, Inc. (Ñ)

   700      29  

HUB Group, Inc. Class A (Æ)

   8,709      306  

Insituform Technologies, Inc.
Class A (Æ)(Ñ)

   6,542      173  

JB Hunt Transport Services, Inc.

   12,570      513  

Joy Global, Inc.

   14,835      1,287  

Kansas City Southern (Æ)

   3,700      177  

KBR, Inc.

   58,528      1,784  

Kelly Services, Inc. Class A (Æ)(Ñ)

   4,400      83  

Kennametal, Inc. (Ñ)

   17,876      705  

Knight Transportation, Inc. (Ñ)

   34,875      662  

Layne Christensen Co. (Æ)(Ñ)

   9,305      320  

Lexmark International, Inc. Class A (Æ)

   10,500      366  

Littelfuse, Inc.

   3,200      151  

LMI Aerospace, Inc. (Æ)(Ñ)

   1,400      22  

M&F Worldwide Corp. (Æ)(Ñ)

   3,600      83  

Manpower, Inc. (Ñ)

   6,347      398  

MAXIMUS, Inc.

   8,500      557  

McDermott International, Inc. (Æ)(Ñ)

   51,377      1,063  

Michael Baker Corp. (Æ)(Ñ)

   300      9  

Miller Industries, Inc. (Ñ)

   1,300      18  

MSC Industrial Direct Co. Class A

   7,115      460  

NACCO Industries, Inc. Class A

   800      87  

Nalco Holding Co. (Ñ)

   12,121      387  

National Instruments Corp. (Ñ)

   9,329      351  

Navistar International Corp. (Æ)(Ñ)

   13,820      800  

Ness Technologies, Inc. (Æ)

   4,100      24  

Oshkosh Corp. (Æ)(Ñ)

   18,000      635  

OSI Systems, Inc. (Æ)(Ñ)

   5,632      205  

Railamerica, Inc. (Æ)(Ñ)

   4,900      63  

Resources Connection, Inc. (Ñ)

   17,300      322  

Robbins & Myers, Inc. (Ñ)

   16,462      589  

Robert Half International, Inc. (Ñ)

   11,767      360  

Roper Industries, Inc. (Ñ)

   10,296      787  

RR Donnelley & Sons Co.

   17,000      297  

RSC Holdings, Inc. (Æ)(Ñ)

   10,900      106  

Ryder System, Inc.

   9,300      490  

Saia, Inc. (Æ)(Ñ)

   2,100      35  

Sensata Technologies Holding NV (Æ)

   15,256      459  

SFN Group, Inc. (Æ)(Ñ)

   6,800      66  

Shaw Group, Inc. (The)(Æ)

   8,200      281  

Sims Metal Management, Ltd. - ADR

   8,204      179  

Skywest, Inc. (Ñ)

   27,700      433  

Snyders-Lance, Inc. (Ñ)

   13,000      305  

Southwest Airlines Co.

   15,879      206  

Spirit Aerosystems Holdings, Inc.
Class A (Æ)(Ñ)

   9,900      206  

Steelcase, Inc. Class A (Ñ)

   16,100      170  

TAL International Group, Inc. (Ñ)

   10,000      309  

Tecumseh Products Co. Class A (Æ)

   1,900      25  

Teekay Corp. (Ñ)

   6,000      198  

Teledyne Technologies, Inc. (Æ)

   9,100      400  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

TeleTech Holdings, Inc. (Æ)

   1,500      31  

Textainer Group Holdings, Ltd. (Ñ)

   14,073      401  

TransDigm Group, Inc. (Æ)

   5,360      386  

Trimas Corp. (Æ)

   4,600      94  

Trimble Navigation, Ltd. (Æ)

   11,227      448  

Trinity Industries, Inc. (Ñ)

   14,600      389  

Triumph Group, Inc. (Ñ)

   10,520      942  

Tsakos Energy Navigation, Ltd. (Ñ)

   31,200      312  

Tutor Perini Corp.

   8,600      184  

Unifirst Corp.

   1,500      83  

Unisys Corp. (Æ)

   2,600      67  

URS Corp. (Æ)

   23,950      996  

UTi Worldwide, Inc.

   22,940      486  

Wabtec Corp. (Ñ)

   9,140      483  

Watts Water Technologies, Inc. Class A (Ñ)

   4,800      176  

Werner Enterprises, Inc. (Ñ)

   10,000      226  

Woodward Governor Co. (Ñ)

   10,529      395  
         
       39,652  
         
Technology - 14.6%      

ADTRAN, Inc. (Ñ)

   14,123      511  

Advanced Analogic Technologies, Inc. (Æ)

   600      2  

Amdocs, Ltd. (Æ)

   3,700      102  

American Reprographics Co. (Æ)(Ñ)

   5,000      38  

Amkor Technology, Inc. (Æ)(Ñ)

   21,300      157  

Amphenol Corp. Class A (Ñ)

   14,793      782  

Anadigics, Inc. (Æ)(Ñ)

   4,800      33  

Ansys, Inc. (Æ)

   10,777      562  

Arris Group, Inc. (Æ)

   5,900      66  

Aruba Networks, Inc. (Æ)(Ñ)

   11,081      231  

Atmel Corp. (Æ)

   45,909      567  

Avago Technologies, Ltd.

   11,168      318  

Aviat Networks, Inc. (Æ)

   7,900      40  

Avid Technology, Inc. (Æ)

   600      10  

AVX Corp.

   18,100      279  

Axcelis Technologies, Inc. (Æ)(Ñ)

   6,300      22  

Benchmark Electronics, Inc. (Æ)(Ñ)

   8,000      145  

Black Box Corp. (Ñ)

   3,000      115  

Brocade Communications Systems, Inc. (Æ)

   60,100      318  

Cogo Group, Inc. (Æ)

   900      8  

Coherent, Inc. (Æ)

   13,133      592  

Cohu, Inc. (Ñ)

   18,250      303  

Concur Technologies, Inc. (Æ)(Ñ)

   8,200      426  

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

   17,837      338  

Cypress Semiconductor Corp. (Æ)

   25,253      469  

Digi International, Inc. (Æ)(Ñ)

   2,000      22  

Dolby Laboratories, Inc. Class A (Æ)

   6,930      462  

DSP Group, Inc. (Æ)

   1,700      14  

Earthlink, Inc. (Ñ)

   71,700      617  

Electro Scientific Industries, Inc. (Æ)

   28,388      455  

EMS Technologies, Inc. (Æ)

   1,900      38  

Emulex Corp. (Æ)

   18,667      218  

Entropic Communications, Inc. (Æ)(Ñ)

   26,090      315  

Epicor Software Corp. (Æ)

   4,900      49  

Equinix, Inc. (Æ)(Ñ)

   4,960      403  

Exar Corp. (Æ)(Ñ)

   4,500      31  

Extreme Networks (Æ)(Ñ)

   13,800      43  

 

 30   Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

FEI Co. (Æ)(Ñ)

   1,000      26  

Formfactor, Inc. (Æ)(Ñ)

   9,900      88  

Global Crossing, Ltd. (Æ)

   1,500      19  

Hittite Microwave Corp. (Æ)

   7,353      449  

Hutchinson Technology, Inc. (Æ)(Ñ)

   1,100      4  

IAC/InterActiveCorp (Æ)(Ñ)

   7,294      209  

Imation Corp. (Æ)(Ñ)

   4,000      41  

Informatica Corp. (Æ)(Ñ)

   16,077      708  

Infospace, Inc. (Æ)(Ñ)

   3,800      32  

Ingram Micro, Inc. Class A (Æ)

   18,300      349  

Insight Enterprises, Inc. (Æ)(Ñ)

   2,000      26  

Integrated Device Technology, Inc. (Æ)

   22,300      149  

Integrated Silicon Solution, Inc. (Æ)(Ñ)

   3,000      24  

Internap Network Services Corp. (Æ)(Ñ)

   15,082      92  

International Rectifier Corp. (Æ)(Ñ)

   19,816      588  

Intersil Corp. Class A (Ñ)

   28,900      441  

Intevac, Inc. (Æ)

   1,600      22  

Kemet Corp. (Æ)

   28,100      410  

Kulicke & Soffa Industries, Inc. (Æ)(Ñ)

   14,100      102  

Lam Research Corp. (Æ)

   8,428      436  

Lattice Semiconductor Corp. (Æ)(Ñ)

   18,510      112  

Lawson Software, Inc. (Æ)

   32,610      302  

LSI Corp. (Æ)

   62,500      374  

MEMC Electronic Materials, Inc. (Æ)(Ñ)

   14,426      162  

Methode Electronics, Inc. (Ñ)

   22,900      297  

MICROS Systems, Inc. (Æ)

   14,013      616  

Microsemi Corp. (Æ)

   22,721      520  

MIPS Technologies, Inc. Class A (Æ)(Ñ)

   33,450      507  

Molex, Inc. (Ñ)

   16,400      373  

Motricity, Inc. (Æ)(Ñ)

   21,071      391  

Multi-Fineline Electronix, Inc. (Æ)(Ñ)

   8,746      232  

Netlogic Microsystems, Inc. (Æ)(Ñ)

   8,241      259  

NICE Systems, Ltd. - ADR (Æ)

   18,173      635  

Novatel Wireless, Inc. (Æ)

   10,500      100  

Novellus Systems, Inc. (Æ)

   22,800      738  

Omnivision Technologies, Inc. (Æ)(Ñ)

   1,886      56  

PMC - Sierra, Inc. (Æ)

   33,694      289  

Polycom, Inc. (Æ)(Ñ)

   8,346      325  

Powerwave Technologies, Inc. (Æ)

   26,000      66  

Radisys Corp. (Æ)(Ñ)

   1,900      17  

RealNetworks, Inc. (Æ)(Ñ)

   15,100      63  

RightNow Technologies, Inc. (Æ)

   3,583      85  

Rovi Corp. (Æ)(Ñ)

   14,940      927  

Rudolph Technologies, Inc. (Æ)(Ñ)

   2,000      16  

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

   13,279      544  

Seachange International, Inc. (Æ)(Ñ)

   4,400      38  

Sigma Designs, Inc. (Æ)(Ñ)

   4,900      69  

Silicon Graphics International Corp. (Æ)

   700      6  

Silicon Image, Inc. (Æ)

   26,900      198  

Skyworks Solutions, Inc. (Æ)(Ñ)

   24,060      689  

Smith Micro Software, Inc. (Æ)(Ñ)

   17,328      273  

Sourcefire, Inc. (Æ)(Ñ)

   19,390      503  

Standard Microsystems Corp. (Æ)(Ñ)

   3,300      95  

SuccessFactors, Inc. (Æ)(Ñ)

   27,401      793  

Symmetricom, Inc. (Æ)

   3,000      21  

Synchronoss Technologies, Inc. (Æ)(Ñ)

   12,190      326  

SYNNEX Corp. (Æ)(Ñ)

   3,100      97  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Synopsys, Inc. (Æ)(Ñ)

   14,800      398  

Taleo Corp. Class A (Æ)(Ñ)

   12,220      338  

Tech Data Corp. (Æ)

   6,300      277  

Tekelec (Æ)

   8,100      96  

TeleCommunication Systems, Inc.
Class A (Æ)(Ñ)

   6,500      30  

Tellabs, Inc.

   35,500      241  

Tier Technologies, Inc. Class B (Æ)

   21,377      128  

Trident Microsystems, Inc. (Æ)

   7,800      14  

TTM Technologies, Inc. (Æ)(Ñ)

   3,400      51  

United Online, Inc. (Ñ)

   100,657      664  

Varian Semiconductor Equipment Associates, Inc. (Æ)

   12,537      463  

VeriFone Systems, Inc. (Æ)(Ñ)

   12,386      477  

Verint Systems, Inc. (Æ)

   5,209      165  

Vishay Intertechnology, Inc. (Æ)(Ñ)

   13,776      202  

Zoran Corp. (Æ)

   5,300      47  
         
       28,021  
         
Utilities - 5.2%      

AGL Resources, Inc.

   11,400      408  

Allete, Inc. (Ñ)

   12,000      447  

Approach Resources, Inc. (Æ)(Ñ)

   24,487      567  

Atmos Energy Corp. (Ñ)

   9,700      303  

Black Hills Corp. (Ñ)

   13,100      393  

California Water Service Group (Ñ)

   7,500      280  

Central Vermont Public Service Corp. (Ñ)

   900      20  

Chesapeake Utilities Corp. (Ñ)

   1,200      50  

Clayton Williams Energy, Inc. (Æ)(Ñ)

   500      42  

DPL, Inc. (Ñ)

   2,800      72  

El Paso Electric Co. (Æ)

   31,700      873  

Energen Corp.

   7,800      376  

GenOn Energy, Inc. (Æ)(Ñ)

   7,654      29  

Georesources, Inc. (Æ)(Ñ)

   2,000      44  

Great Plains Energy, Inc. (Ñ)

   10,100      196  

Idacorp, Inc.

   5,800      214  

Integrys Energy Group, Inc. (Ñ)

   3,700      179  

Laclede Group, Inc. (The)(Ñ)

   1,600      58  

MDU Resources Group, Inc.

   11,600      235  

NII Holdings, Inc. (Æ)

   9,406      420  

NiSource, Inc. (Ñ)

   29,300      517  

NorthWestern Corp.

   2,300      66  

NV Energy, Inc.

   21,400      301  

OGE Energy Corp. (Ñ)

   6,600      300  

Ormat Technologies, Inc. (Ñ)

   11,900      352  

Otter Tail Corp. (Ñ)

   15,200      343  

Pinnacle West Capital Corp.

   8,400      348  

PNM Resources, Inc. (Ñ)

   16,100      210  

Portland General Electric Co.

   28,500      618  

Questar Corp. (Ñ)

   3,200      56  

Southern Union Co.

   3,600      87  

Southwest Gas Corp. (Ñ)

   6,200      227  

Telephone & Data Systems, Inc. (Ñ)

   5,800      212  

UGI Corp. (Ñ)

   12,100      382  

UIL Holdings Corp. (Ñ)

   5,600      168  

US Cellular Corp. (Æ)(Ñ)

   2,300      115  

USA Mobility, Inc. (Ñ)

   2,200      39  

 

Aggressive Equity Fund 31


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
   Market
Value
$
 
    

Vaalco Energy, Inc. (Æ)

   7,900    57  

Vectren Corp.

   7,700    195  

W&T Offshore, Inc. (Ñ)

   8,300    148  

Warren Resources, Inc. (Æ)(Ñ)

   11,700    53  
       
     10,000  
       
Total Common Stocks
(cost $146,934)
     182,796  
       
Short-Term Investments - 4.5%    

Russell U.S. Cash Management Fund

   8,699,200(¥   8,699  
Total Short-Term Investments
(cost $8,699)
     8,699  
       
Other Securities - 38.6%    

Russell Investment Funds Liquidating Trust (×)

   2,947,920 (¥   2,948 

Russell U.S. Cash Collateral Fund (×)

   71,139,132 (¥   71,139 
       
Total Other Securities
(cost $74,087)
     74,087  
       
Total Investments - 138.5%
(identified cost $229,720)
     265,582  
Other Assets and Liabilities, Net - (38.5%)     (73,819
       
Net Assets - 100.0%     191,763 
       

 

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

 

 32   Aggressive Equity Fund


Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

 

Futures Contracts  Number of
Contracts
       Notional
Amount
   Expiration
Date
  Unrealized
Appreciation
(Depreciation)
$
 
          
          
Long Positions          

Russell 2000 Mini Index Futures (CME)

   114    USD     8,918   03/11   122 
             

Total Unrealized Appreciation (Depreciation) on Open Futures Contracts

           122 
             

 

 

 

Presentation of Portfolio Holdings — December 31, 2010

Amounts in thousands

 

   Market Value   % of Net
Assets
 
Portfolio Summary  Level 1   Level 2   Level 3   Total   
          
          
          

Common Stocks

          

Consumer Discretionary

  $23,307   $    $    $23,307    12.2  

Consumer Staples

   4,245              4,245    2.2  

Energy

   9,808              9,808    5.1  

Financial Services

   32,708              32,708    17.1  

Health Care

   19,359              19,359    10.1  

Materials and Processing

   15,696              15,696    8.2  

Producer Durables

   39,652              39,652    20.7  

Technology

   28,021              28,021    14.6  

Utilities

   10,000              10,000    5.2  

Short-Term Investments

        8,699         8,699    4.5  

Other Securities

        74,087         74,087    38.6  
                         

Total Investments

   182,796    82,786         265,582    138.5  
                      

Other Assets and Liabilities, Net

           (38.5
             
           100.0  
             

Other Financial Instruments

          

Futures Contracts

   122              122    0.1  
                      

Total Other Financial Instruments*

   122              122   
                      

 

*Other financial instruments reflected in the Schedule of Investments, such as futures, forwards, and swap contracts which are valued at the unrealized appreciation/depreciation on the instruments.

For a description of the levels see note 2 in the Notes to Financial Statements.

 

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

Fair Value of Derivative Instruments — December 31, 2010

Amounts in thousands

 

 

Derivatives not accounted for as hedging instruments  Equity
Contracts
 
  

Location: Statement of Assets and Liabilities - Assets

  

Daily variation margin on futures contracts*

  $122  
     
Derivatives not accounted for as hedging instruments  Equity
Contracts
 

Location: Statement of Operations - Net realized gain (loss)

  

Futures contracts

  $2,062  
     

Location: Statement of Operations - Net change in unrealized appreciation (depreciation)

  

Futures contracts

  $(255
     

 

*Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the statement of assets and liabilities

For further disclosure on derivatives see note 2 in Notes to Financial Statements.

 

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

 

 34   Aggressive Equity Fund


Table of Contents

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Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

LOGO

 

Non-U.S. Fund 
   Total
Return
 

1 Year

   11.42

5 Years

   2.02%§ 

10 Years

   3.16%§ 
MSCI EAFE® Index Net (USD)** 
   Total
Return
 

1 Year

   7.75

5 Years

   2.46%§ 

10 Years

   3.50%§ 

 

 36   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

The Non-U.S. 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 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 new 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, 2010?

For the fiscal year ended December 31, 2010, the Non-U.S. Fund gained 11.42%. This compared to its benchmark, the MSCI EAFE® Index (net of tax on dividends from foreign holdings), which returned 7.75% over 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 fiscal year ended December 31, 2010, the Lipper® International Core Funds (VIP) Average returned 9.40%. This average return serves as a peer comparison and is expressed net of operating expenses.

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

In 2010, the Fund outperformed its benchmark by 3.67%. Growth managers Marsico Capital Management, LLC (“Marsico”) and MFS Institutional Advisors, Inc. (“MFS”) were the best performers, although all four of the Fund’s managers out-performed the MSCI EAFE Index over the fiscal year. Growth managers were best able to capture market trends that favored stocks with strong earnings growth potential, as measured by analysts’ earnings forecasts.

The Fund was well positioned to take advantage of the volatile market conditions in 2010. Collectively, the money managers’ preferred quality balance sheets, which boosted performance in a market where investors were skeptical of companies with high debt levels. Stocks with high financial leverage, as measured by debt/capital ratios, were the worst performers in the MSCI EAFE Index and the Fund was underweight to such stocks.

Spain was one of the worst performing countries during the fiscal year, losing 22% as measured by the MSCI EAFE Index. During the fiscal year, the Fund had only about 2% allocated to the country and was underweight in many of the country’s financial stocks, such as Banco Bilbao Vizcaya Argentaria and Banco Santander, that performed the worst on a relative basis. This contributed significantly to the Fund’s outperformance during 2010. In addition, the Fund had no exposure to Greece

which, with a return of -45%, was the worst performing country in the index during the fiscal year. The PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) lagged the broader market in 2010 due to sovereign debt issues that threatened to derail the financial system. The Fund was underweight all of the above markets, except for Italy. The Fund was overweight Italy relative to the MSCI EAFE Index by approximately 0.4%, with an average allocation of 3.4%. Italy was the only one of the five above-named markets to detract from the Fund’s performance.

Exposure to stocks in non-index countries, such as Canada and certain emerging markets countries, also contributed positively to performance relative to the MSCI EAFE Index. Three holdings in Canada were particularly helpful. An allocation of over 1% to the stock Canadian National Railway resulted in strong positive contribution, making it among the top 10 positive contributing stocks in the Fund. There were 6 Canadian stocks held in the Fund during the course of the year, but none were as substantial or beneficial as Canadian National Railway, which benefited along with other economically sensitive stocks in the industrials sector. The Fund had an average allocation of 7.7% to emerging markets stocks, which was a positive, given the relative strength versus developed markets stocks. The money managers allocated slightly more than 1% of the Fund’s assets to stocks in China, India and Brazil. Emerging markets exposure remained stable over the course of the year. Growth managers maintained an optimistic view of emerging markets stocks, while value managers were skeptical of high valuations and their prolonged outperformance.

The Fund’s biggest detractor to performance relative to the MSCI EAFE Index came from its underweight to the materials sector, which returned just under 18% during the year. The underweight reflected money managers concern that commodity prices have accelerated too quickly and companies who have outperformed will be unable to sustain such strong relative performance.

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

Investment strategies that favored small capitalization stocks with high prospects for earnings growth and low financial leverage performed best during the period. Stocks with high price momentum and high valuations generally outperformed the Fund’s benchmark. The best performing market factor was high beta, which is a factor that describes stocks that perform better than the broader market when it has a positive return. Investment strategies that were able to avoid the financial turmoil in the PIIGS countries also performed well.

Money managers’ positioning translated into strong performance at the Fund level. While the Fund was neutral in terms of its exposure to growth, it benefited significantly from its underweight to financial leverage and overweight to price

 

 

Non-U.S. Fund 37


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

momentum as compared to the Fund’s benchmark. Country positioning was also favorable. In addition to the beneficial market environment, it was the money managers’ stock selection within sectors and countries that positively impacted the Fund’s relative performance most significantly. It was a unique fiscal year in which all four of the Fund’s money managers outperformed the Fund’s benchmark.

Marsico was the best performing money manager in the Fund, out-pacing the MSCI EAFE Index by about 7% during the fiscal year. In addition to high exposure to growth, emerging markets and price momentum, Marsico’s stock selection was significantly positive. Strong stock selection in the consumer discretionary sector contributed significantly where the Fund’s overweight was backed by gains from a position in Swiss luxury goods company Swatch.

MFS outperformed the MSCI EAFE Index by about 4% during the fiscal year. Its quality-growth strategy favored stocks with strong earnings growth and low financial leverage, particularly stocks with high growth prospects due to emerging markets demand. LVMH Moet Hennessy Louis Vuitton was the top contributor in MFS’s portfolio. It is a good example of a luxury goods stock in the consumer discretionary sector that benefited from growing demand from emerging markets countries. MFS’s underweight to the financials sector and strong stock selection that underweighted commercial banks in favor of capital markets stocks like Julius Baer Group also helped relative performance.

Barrow Hanley’s outperformed the MSCI EAFE Index by over 5%. Its small capitalization stock exposure was a positive tailwind during the year. Barrow’s strongest gains came from stock selection in the industrials and technology sectors. Its large overweight in Georg Fischer, a Swiss manufacturer of piping components, resulted in the biggest single stock contributor to relative performance. The company benefited from higher expectations in growth for manufacturing.

Pzena Investment Management, LLC (“Pzena”) outperformed the MSCI EAFE Index by just over 3% during the period. Pzena had the deepest value exposure of all the Fund’s money managers and was overweight to the underperforming financials sector. However, strong stock selection allowed it to overcome less than ideal style exposure. Pzena’s biggest gains came from stock selection and a 7% overweight to the technology sector. The two top contributing stocks in Pzena’s portfolio came from the technology sector: OMRON Corp and Tyco Electronics. Within the financials sector, the portfolio’s lack of exposure to Spanish bank, Banco Santander S.A., also contributed positively to relative performance.

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

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

 

Money Managers as of December 31, 2010 Styles
Barrow Hanley Mewhinney & Strauss, Inc. Value
Marsico Capital Management, LLC Growth
MFS Institutional Advisors, Inc. Growth
Pzena Investment Management, LLC Value

The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of 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.


 

* Assumes initial investment on January 1, 2001.

 

** 

Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE®) Index Net (USD) is an index, with dividends reinvested, representative of the securities markets of 20 developed countries in Europe, Australasia and the Far East.

 

§ Annualized.

The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

 38   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Shareholder Expense Example — December 31, 2010 (Unaudited)

 

 

 

Fund Expenses

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

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory 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, 2010 to December 31, 2010.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate

of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

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

 

Core Class

  Actual
Performance
   Hypothetical
Performance
(5% return
before expenses)
 
    

Beginning Account Value July 1, 2010

  $1,000.00    $1,000.00  

Ending Account Value
December 31, 2010

  $1,262.10    $1,019.96  

Expenses Paid During Period*

  $5.93    $5.30  

 

*Expenses are equal to the Fund’s annualized expense ratio of 1.04% (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). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, 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, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
Common Stocks - 92.7%      
Australia - 0.5%      

Billabong International, Ltd. (Ñ)

   175,800       1,465  

Westpac Banking Corp.

   20,750      471  
         
       1,936  
         
Austria - 0.1%      

Erste Group Bank AG

   11,177      525  
         
Belgium - 0.7%      

Anheuser-Busch InBev NV Class 2

   31,116      1,778  

KBC Groep NV (Æ)

   17,798      608  
         
       2,386  
         
Bermuda - 2.2%      

Esprit Holdings, Ltd.

   157,900      751  

Jardine Matheson Holdings, Ltd.

   68,900      3,028  

Li & Fung, Ltd.

   626,000      3,629  

RenaissanceRe Holdings, Ltd.

   13,200      841  
         
       8,249  
         
Brazil - 2.1%      

Anhanguera Educacional Participacoes SA

   21,500      518  

Banco Santander Brasil SA - ADR

   44,840      610  

BR Malls Participacoes SA

   161,800      1,667  

OGX Petroleo e Gas Participacoes SA (Æ)

   259,800      3,131  

PDG Realty SA Empreendimentos e Participacoes

   265,900      1,628  
         
       7,554  
         
Canada - 1.5%      

Canadian National Railway Co. (Þ)

   66,234      4,403  

Teck Resources, Ltd. Class B

   19,343      1,202  
         
       5,605  
         
Cayman Islands - 0.2%      

Baidu, Inc. - ADR (Æ)

   6,791      656  
         
China - 0.5%      

Ping An Insurance Group Co. of China, Ltd. Class H

   171,500      1,917  
         
Czech Republic - 0.2%      

Komercni Banka AS

   2,759      653  
         
Denmark - 1.2%      

Danske Bank A/S (Æ)

   26,851      688  

Novo Nordisk A/S Class B

   16,896      1,902  

Novozymes A/S Class B (Ñ)

   5,486      764  

Pandora A/S (Æ)

   15,111      911  
         
       4,265  
         
Finland - 0.7%      

Fortum OYJ

   26,700      810  

Pohjola Bank PLC Class A

   142,425      1,707  
         
       2,517  
         
   Principal
Amount ($)
or Shares
     Market
Value
$
 
France - 9.1%      

Accor SA

   32,888      1,466  

Air France-KLM

   48,506      885  

Air Liquide SA Class A

   13,962      1,766  

AXA SA - ADR

   22,414      374  

BNP Paribas

   13,727      876  

Capital Gemini SA

   25,000      1,169  

CNP Assurances

   39,164      708  

Credit Agricole SA

   80,710      1,027  

Danone

   20,233      1,271  

GDF Suez

   30,200      1,086  

Lagardere SCA

   20,281      836  

Legrand SA - ADR

   20,057      817  

LVMH Moet Hennessy Louis Vuitton
SA - ADR

   18,822      3,096  

Natixis (Æ)

   72,658      340  

Pernod-Ricard SA

   26,225      2,469  

Publicis Groupe SA - ADR

   34,527      1,801  

Rallye SA

   46,885      2,018  

Safran SA

   11,328      401  

Sanofi-Aventis SA - ADR

   26,882      1,726  

Schneider Electric SA

   33,787      5,059  

SCOR SE - ADR

   38,980      990  

Total SA

   14,563      773  

UBISOFT Entertainment (Æ)(Ñ)

   87,645      936  

Vivendi SA - ADR

   57,700      1,560  
         
       33,450  
         
Germany - 8.0%      

Adidas AG

   12,652      826  

BASF SE

   31,084      2,480  

Bayer AG

   21,622      1,598  

Beiersdorf AG

   21,963      1,219  

Daimler AG (Æ)

   18,292      1,240  

Deutsche Boerse AG

   15,906      1,101  

E.ON AG

   37,700      1,156  

Henkel AG & Co. KGaA

   7,262      375  

Infineon Technologies AG - ADR (Æ)

   49,879      464  

Linde AG

   24,154      3,665  

MAN SE

   21,469      2,553  

Merck & Co., Inc.

   10,986      879  

Metro AG

   17,530      1,262  

MTU Aero Engines Holding AG

   39,071      2,641  

Muenchener Rueckversicherungs AG

   4,599      698  

SAP AG - ADR

   14,004      713  

Siemens AG

   23,932      2,962  

ThyssenKrupp AG - ADR

   31,253      1,295  

Volkswagen AG (Ñ)

   16,680      2,359  
         
       29,486  
         
Hong Kong - 0.9%      

AIA Group, Ltd. (Æ)

   76,000      214  

China Unicom Hong Kong, Ltd. (Ñ)

   516,000      736  

CNOOC, Ltd.

   592,000      1,409  

Hang Lung Properties, Ltd. - ADR

   230,000      1,075  
         
       3,434  
         

 

 40   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
India - 1.5%      

ICICI Bank, Ltd. - ADR

   76,664      3,883  

Infosys Technologies, Ltd. - ADR

   21,310      1,621  
         
       5,504  
         
Indonesia - 0.1%      

Astra International Tbk PT

   73,500      445  
         
Ireland - 0.3%      

Accenture PLC Class A

   21,400      1,038  
         
Israel - 0.6%      

Teva Pharmaceutical Industries, Ltd. - ADR

   41,327      2,154  
         
Italy - 2.4%      

ENI SpA -ADR

   60,207      1,316  

Finmeccanica SpA

   193,047      2,195  

Parmalat SpA

   728,570      1,995  

Snam Rete Gas SpA

   298,425      1,484  

UniCredit SpA

   618,941      1,280  

Unione di Banche Italiane SCPA

   78,220      685  
         
       8,955  
         
Japan - 13.1%      

Aeon Credit Service Co., Ltd. (Ñ)

   14,400      203  

Amada Co., Ltd.

   149,700      1,217  

Canon, Inc. (Ñ)

   127,200      6,523  

Dai-ichi Life Insurance Co., Ltd. (The)

   500      811  

Daikin Industries, Ltd.

   15,000      532  

Dena Co., Ltd. (Ñ)

   26,200      939  

Denso Corp.

   21,800      752  

FamilyMart Co., Ltd.

   28,900      1,089  

Fanuc, Ltd.

   11,500      1,764  

Hirose Electric Co., Ltd.

   1,600      180  

Honda Motor Co., Ltd. (Ñ)

   42,000      1,660  

Hoya Corp.

   64,900      1,575  

Inpex Corp.

   243      1,421  

ITOCHU Corp.

   208,600      2,110  

Japan Tobacco, Inc. (Ñ)

   296      1,094  

Komatsu, Ltd.

   64,500      1,950  

Konica Minolta Holdings, Inc.

   43,500      452  

Lawson, Inc.

   20,800      1,029  

Mabuchi Motor Co., Ltd. (Ñ)

   29,300      1,509  

Marubeni Corp.

   182,000      1,279  

Mitsubishi Chemical Holdings Corp.

   225,500      1,529  

Mitsubishi UFJ Financial Group, Inc.

   138,800      750  

Mizuho Financial Group, Inc.

   190,900      359  

Mori Seiki Co., Ltd. (Ñ)

   74,100      878  

MS&AD Insurance Group Holdings

   46,400      1,162  

NGK Spark Plug Co., Ltd.

   56,000      858  

Nintendo Co., Ltd.

   3,000      880  

Nissan Motor Co., Ltd.

   93,400      888  

Nomura Holdings, Inc.

   89,200      565  

NTT DoCoMo, Inc. - ADR

   2,050      36  

NTT DoCoMo, Inc.

   900      1,571  

Omron Corp.

   30,200      800  
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Shin-Etsu Chemical Co., Ltd.

   32,100      1,738  

Sumitomo Mitsui Financial Group, Inc.

   48,400      1,723  

Suzuken Co., Ltd.

   25,300      772  

Takeda Pharmaceutical Co., Ltd.

   24,300      1,195  

THK Co., Ltd. (Ñ)

   50,500      1,160  

Toshiba TEC Corp.

   310,379      1,504  

Toyota Motor Corp.

   42,900      1,689  
         
       48,146  
         
Luxembourg - 0.7%      

ArcelorMittal

   31,873      1,213  

Millicom International Cellular SA

   12,810      1,224  
         
       2,437  
         
Malaysia - 0.1%      

Genting BHD - ADR

   135,900      493  
         
Mexico - 0.1%      

America Movil SAB de CV - ADR

   5,430      311  
         
Netherlands - 6.1%      

Aegon NV

   166,382      1,020  

Akzo Nobel NV

   63,410      3,947  

Brit Insurance Holdings NV (ö)

   62,259      1,012  

Core Laboratories NV (Ñ)

   4,076      363  

European Aeronautic Defence and Space Co. NV

   66,490      1,551  

Heineken NV

   50,227      2,461  

ING Groep NV (Æ)

   459,525      4,484  

Koninklijke Philips Electronics NV

   52,080      1,595  

LyondellBasell Industries NV Class A (Æ)

   12,860      442  

Randstad Holding NV (Æ)

   20,605      1,088  

Reed Elsevier NV

   93,400      1,157  

Sensata Technologies Holding NV (Æ)

   28,840      868  

Unilever NV

   36,450      1,134  

Wolters Kluwer NV

   63,040      1,382  
         
       22,504  
         
Norway - 0.8%      

DnB NOR ASA

   137,800      1,934  

Statoil ASA Class N

   43,900      1,043  
         
       2,977  
         
Russia - 0.5%      

Gazprom OAO - ADR

   69,870      1,766  
         
Singapore - 2.0%      

CapitaLand, Ltd.

   354,000      1,027  

Jardine Cycle & Carriage, Ltd. (Ñ)

   125,900      3,591  

Keppel Corp., Ltd. - ADR

   31,000      273  

Singapore Telecommunications, Ltd.

   362,000      860  

United Overseas Bank, Ltd.

   112,400      1,594  
         
       7,345  
         

 

Non-U.S. Fund 41


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
South Africa - 0.8%      

MTN Group, Ltd.

   107,157      2,186  

Naspers, Ltd.

   14,860      875  
         
       3,061  
         
South Korea - 0.4%      

Samsung Electronics Co., Ltd.

   1,600      1,337  
         
Spain - 1.5%      

Banco Santander SA - ADR

   238,732      2,536  

Inditex SA

   27,592      2,068  

Indra Sistemas SA (Ñ)

   30,400      520  

Red Electrica Corp. SA (Ñ)

   7,263      341  
         
       5,465  
         
Sweden - 1.1%      

Assa Abloy AB Class B

   28,573      806  

Skandinaviska Enskilda Banken AB Class A

   55,751      465  

Svenska Cellulosa AB Class B

   46,263      730  

Telefonaktiebolaget LM Ericsson Class B

   173,695      2,011  
         
       4,012  
         
Switzerland - 9.4%      

ACE, Ltd.

   19,550      1,217  

Cie Financiere Richemont SA

   18,164      1,069  

Clariant AG (Æ)

   53,200      1,079  

Credit Suisse Group AG

   27,999      1,130  

GAM Holding AG

   58,201      962  

Georg Fischer AG (Æ)

   5,253      2,961  

Givaudan SA

   1,006      1,086  

Helvetia Holding AG

   4,615      1,775  

Julius Baer Group, Ltd.

   69,814      3,270  

Nestle SA

   94,533      5,536  

Novartis AG

   38,700      2,277  

Roche Holding AG

   13,283      1,947  

Sonova Holding AG

   4,066      527  

Swatch Group AG (The) Class B

   5,347      2,384  

Swiss Reinsurance Co., Ltd.

   11,952      651  

Tyco Electronics, Ltd.

   64,750      2,292  

UBS AG (Æ)

   177,482      2,913  

Zurich Financial Services AG

   5,053      1,309  
         
       34,385  
         
Taiwan - 0.9%      

Hon Hai Precision Industry Co., Ltd. (Þ)

   147,840      595  

Hon Hai Precision Industry Co., Ltd. - GDR

   70,168      567  

HTC Corp.

   14,200      438  

Taiwan Semiconductor Manufacturing Co., Ltd. - ADR

   126,705      1,588  
         
       3,188  
         
Thailand - 0.3%      

Bangkok Bank PCL

   208,800      1,056  
         
   Principal
Amount ($)
or Shares
     Market
Value
$
 
United Kingdom - 20.6%      

Aegis Group PLC

   755,902      1,657  

Anglo American PLC

   43,974      2,291  

ARM Holdings PLC

   66,894      455  

Aviva PLC

   152,921      941  

BAE Systems PLC

   279,500      1,438  

Barclays PLC

   1,244,116      5,119  

BG Group PLC

   35,277      714  

BP PLC

   525,047      3,847  

BP PLC - ADR

   6,700      296  

Bunzl PLC

   62,900      705  

Burberry Group PLC

   44,980      789  

Cable & Wireless Worldwide PLC

   1,313,900      1,347  

Carillion PLC

   213,025      1,278  

Compass Group PLC

   164,569      1,491  

Dairy Crest Group PLC

   163,809      1,082  

Diageo PLC

   110,407      2,045  

Ensco PLC - ADR

   24,400      1,302  

Hays PLC

   238,908      481  

Home Retail Group PLC

   227,803      670  

HSBC Holdings PLC

   810,607      8,262  

Imperial Tobacco Group PLC

   110,747      3,397  

National Grid PLC

   132,514      1,155  

Reckitt Benckiser Group PLC

   74,764      4,112  

Rolls-Royce Group PLC (Æ)

   88,362      858  

Royal Bank of Scotland Group PLC - ADR (Æ)(Å)

   1,267,698      777  

Royal Dutch Shell PLC Class A

   177,649      5,884  

Sage Group PLC (The)

   473,167      2,019  

Smith & Nephew PLC

   144,960      1,523  

Smiths Group PLC

   53,578      1,041  

Spectris PLC

   104,213      2,131  

Standard Chartered PLC

   106,227      2,860  

Tesco PLC

   442,630      2,935  

Travis Perkins PLC

   113,950      1,882  

Tullow Oil PLC

   66,929      1,317  

Vodafone Group PLC - ADR

   1,718,792      4,476  

William Hill PLC

   79,497      212  

WPP PLC

   115,025      1,421  

Xstrata PLC

   39,930      940  
         
       75,150  
         
United States - 1.4%      

MercadoLibre, Inc. (Æ)

   13,619      908  

Philip Morris International, Inc.

   44,900      2,628  

Synthes, Inc. (Æ)(Ñ)

   12,708      1,726  
         
       5,262  
         
Virgin Islands, British - 0.1%      

Mail.ru Group, Ltd. - GDR (Æ)(Å)

   10,389      357  
         
Total Common Stocks
(cost $288,764)
       339,981  
         

 

 42   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
   Market
Value
$
 
    
Preferred Stocks - 0.1%    
Germany - 0.1%    

Porsche Automobil Holding SE

   6,600    526  
       
Total Preferred Stocks
(cost $393)
     526  
       
Short-Term Investments - 6.2%    
United States - 6.2%    

Russell U.S. Cash Management Fund

   22,674,026(¥)   22,674  
       
Total Short-Term Investments
(cost $22,674)
     22,674  
       
Other Securities - 4.7%    

Russell Investment Funds Liquidating
Trust (X)

   10,154,873(¥)   10,155  

Russell U.S. Cash Collateral Fund (X)

   
7,153,147
(¥
   7,153  
       
Total Other Securities
(cost $17,308)
     17,308  
       
Total Investments - 103.7%
(identified cost $329,139)
     380,489  
Other Assets and Liabilities,
Net - (3.7%)
     (13,619
       
Net Assets - 100.0%     366,870  
       

 

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

 

Non-U.S. Fund 43


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

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

Long Positions

         

ASX SPI 200 Index Futures (Australia)

   4   AUD     473   03/11   (1

CAC-40 Index Futures (France)

   48   EUR     1,829   01/11   (56

DAX Index Futures (Germany)

   9   EUR     1,559   03/11   (37

EURO STOXX 50 Index Futures (EMU)

   136   EUR     3,800   03/11   (109

FTSE-100 Index Futures (UK)

   43   GBP     2,534   03/11   30 

Hang Seng Index Futures (Hong Kong)

   2   HKD    2,302   01/11     

S&P TSE 60 Index Futures (Canada)

   10   CAD     1,534   03/11   3 

TOPIX Index Futures (Japan)

   80   JPY     716,800   03/11   181 
            

Total Unrealized Appreciation (Depreciation) on Open Futures Contracts

   11 
            

 

Foreign Currency Exchange Contracts 

Counterparty

  Amount
Sold
   Amount
Bought
   

Settlement
Date

  Unrealized
Appreciation
(Depreciation)
$
 
           

Bank of America

   USD    1,524    AUD     1,500   03/16/11   (3

Bank of America

   EUR   500    USD     656   03/16/11   (6

Bank of America

   GBP   100    USD     154   03/16/11   (1

Barclays Bank PLC

   USD    1,604    EUR     1,212   03/16/11   15 

Barclays Bank PLC

   USD    821    GBP     524   03/16/11   (4

BNP Paribas

   USD   821    GBP     524   03/16/11   (5

BNP Paribas

   USD   1,390    JPY     115,000   03/16/11   22 

Brown Brothers Harriman & Co.

   USD   36    GBP     23   01/04/11     

Brown Brothers Harriman & Co.

   USD   44    GBP     29   01/04/11     

Brown Brothers Harriman & Co.

   USD   29    GBP     19   01/05/11     

Brown Brothers Harriman & Co.

   USD   260    GBP     168   01/05/11   3 

Brown Brothers Harriman & Co.

   USD   471    GBP     305   01/05/11   5 

Brown Brothers Harriman & Co.

   EUR   190    USD     252   01/05/11   (2

Brown Brothers Harriman & Co.

   EUR   351    USD     466   01/05/11   (3

Credit Suisse First Boston

   EUR   100    USD    131   03/16/11   (2

Credit Suisse First Boston

   GBP   130    USD     200   03/16/11   (3

Credit Suisse First Boston

   JPY   30,000    USD     366   03/16/11   (4

Deutsche Bank AG

   USD   981    EUR     750   03/16/11   21 

Deutsche Bank AG

   USD   1,604    EUR     1,212   03/16/11   14 

Deutsche Bank AG

   USD   386    GBP     250   03/16/11   4 

Deutsche Bank AG

   USD   1,390    JPY    115,000   03/16/11   27 

HSBC Bank PLC

   USD   1,605    EUR    1,212   03/16/11   14 

HSBC Bank PLC

   USD    358    JPY    30,000   03/16/11   12 

HSBC Bank PLC

   USD   1,390    JPY     115,000   03/16/11   27 

JP Morgan Chase Bank

   USD   327    EUR     250   03/16/11   7 

JP Morgan Chase Bank

   USD   1,605    EUR     1,212   03/16/11   14 

JP Morgan Chase Bank

   USD   821    GBP     524   03/16/11   (4

JP Morgan Chase Bank

   USD   10    JPY     846   01/04/11     

JP Morgan Chase Bank

   USD   1,390    JPY     115,000   03/16/11   26 

JP Morgan Chase Bank

   JPY   6,570    USD     80   01/05/11     

Mellon Bank

   USD   821    GBP     524   03/16/11   (4

Mellon Bank

   USD   1,390    JPY     115,000   03/16/11   27 

Royal Bank of Canada

   USD   1,604    EUR     1,212   03/16/11   15 

Royal Bank of Canada

   USD   821    GBP     524   03/16/11   (4

Royal Bank of Canada

   USD   1,390    JPY     115,000   03/16/11   26 

Royal Bank of Scotland PLC

   GBP   700    USD     1,095   03/16/11   5 

 

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

 

 44   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

Foreign Currency Exchange Contracts 

Counterparty

  Amount
Sold
   Amount
Bought
   

Settlement
Date

  Unrealized
Appreciation
(Depreciation)
$
 
           

Societe Generale

   USD   1,605    EUR     1,212   03/16/11   14 

Societe Generale

   USD   821    GBP     524   03/16/11   (4

State Street Bank & Trust Co.

   USD   48    EUR     36   01/04/11     

State Street Bank & Trust Co.

   HKD   48    USD     6   01/03/11     

State Street Bank & Trust Co.

   JPY   324    USD     4   01/06/11     

State Street Bank & Trust Co.

   JPY   913    USD     11   01/06/11     

State Street Bank & Trust Co.

   JPY   30,000    USD     362   03/16/11   (8

Westpac Banking Corp.

   USD   1,507    CAD     1,500   03/16/11   (1

Westpac Banking Corp.

   USD    772    HKD     6,000   03/16/11     

Westpac Banking Corp.

   EUR    200    USD     263   03/16/11   (4

Westpac Banking Corp.

   JPY    200,000    USD     2,468   03/16/11   2 
              

Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts

   240 
              

 

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

 

Non-U.S. Fund 45


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Presentation of Portfolio Holdings — December 31, 2010

Amounts in thousands

 

   Market Value   

% of Net
Assets

 
Portfolio Summary  Level 1   Level 2   Level 3   Total   
          

Common Stocks

          

Australia

  $    $1,936   $    $1,936    0.5  

Austria

        525         525    0.1  

Belgium

        2,386         2,386    0.7  

Bermuda

   841    7,408         8,249    2.2  

Brazil

   1,128    6,426         7,554    2.1  

Canada

   5,605              5,605    1.5  

Cayman Islands

   656              656    0.2  

China

        1,917         1,917    0.5  

Czech Republic

        653         653    0.2  

Denmark

        4,265         4,265    1.2  

Finland

        2,517         2,517    0.7  

France

        33,450         33,450    9.1  

Germany

        29,486         29,486    8.0  

Hong Kong

   214    3,220         3,434    0.9  

India

   5,504              5,504    1.5  

Indonesia

        445         445    0.1  

Ireland

   1,038              1,038    0.3  

Israel

   2,154              2,154    0.6  

Italy

        8,955         8,955    2.4  

Japan

   36    48,110         48,146    13.1  

Luxembourg

   1,224    1,213         2,437    0.7  

Malaysia

        493         493    0.1  

Mexico

   311              311    0.1  

Netherlands

   1,673    20,831         22,504    6.1  

Norway

        2,977         2,977    0.8  

Russia

        1,766         1,766    0.5  

Singapore

        7,345         7,345    2.0  

South Africa

        3,061         3,061    0.8  

South Korea

        1,337         1,337    0.4  

Spain

        5,465         5,465    1.5  

Sweden

        4,012         4,012    1.1  

Switzerland

   3,509    30,876         34,385    9.4  

Taiwan

   1,588    1,600         3,188    0.9  

Thailand

        1,056         1,056    0.3  

United Kingdom

   6,120    69,030         75,150    20.6  

United States

   5,262              5,262    1.4  

Virgin Islands, British

   357              357    0.1  

Preferred Stocks

        526         526    0.1  

Short-Term Investments

        22,674         22,674    6.2  

Other Securities

        17,308         17,308    4.7  
                         

Total Investments

   37,220    343,269         380,489    103.7  
                      

Other Assets and Liabilities, Net

           (3.7
             
           100.0  
             

Other Financial Instruments

          

Futures Contracts

   11              11    

Foreign Currency Exchange Contracts

   4    236         240    0.1  
                      

Total Other Financial Instruments**

   15    236         251   
                      

 

* Less than .05% of net assets.

 

** Other financial instruments reflected in the Schedule of Investments, such as futures, forwards, and swap contracts which are valued at the unrealized appreciation/depreciation on the instruments.

For a description of the levels see note 2 in the Notes to Financial Statements.

 

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

 

 46   Non-U.S. Fund


Table of Contents

Russell Investment Funds

Non-U.S. Fund

Fair Value of Derivative Instruments — December 31, 2010

Amounts in thousands

 

 

Derivatives not accounted for as hedging instruments  Foreign Currency
Contracts
  Equity
Contracts
 
   

Location: Statement of Assets and Liabilities - Assets

   

Unrealized appreciation on foreign currency exchange contracts

  $302   $  

Daily variation margin on futures contracts*

       214  
         

Total

  $302   $214  
         

Location: Statement of Assets and Liabilities - Liabilities

   

Unrealized depreciation on foreign currency exchange contracts

  $62   $  

Daily variation margin on futures contracts*

       (203
         

Total

  $62   $(203
         
Derivatives not accounted for as hedging instruments  Foreign Currency
Contracts
  Equity
Contracts
 

Location: Statement of Operations - Net realized gain (loss)

   

Futures contracts

  $   $915  

Foreign currency-related transactions

   (539    
         

Total

  $(539 $915  
         

Location: Statement of Operations - Net change in unrealized appreciation (depreciation)

   

Futures contracts

  $   $(544

Foreign currency-related transactions

   1,069      
         

Total

  $1,069   $(544
         

 

*Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the statement of assets and liabilities

For further disclosure on derivatives see note 2 in Notes to Financial Statements.

 

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

 

Non-U.S. Fund 47


Table of Contents

Russell Investment Funds

Core Bond Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

LOGO

 

Core Bond Fund     
   Total
Return
 

1 Year

   10.02

5 Years

   6.45%§ 

10 Years

   6.12%§ 
Barclays Capital U.S. Aggregate Bond Index** 
   Total
Return
 

1 Year

   6.54

5 Years

   5.80%§ 

10 Years

   5.84%§ 

 

 48   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Portfolio Management Discussion — December 31, 2010 (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 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 as a secondary objective, capital appreciation.

How did the Fund perform relative to its benchmark for the fiscal year ended December 31, 2010?

For the fiscal year ended December 31, 2010, the Core Bond Fund gained 10.02%. This compared to its benchmark the Barclays Capital U.S. Aggregate Bond Index, which gained 6.54% 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, 2010, the Lipper® BBB Rated Corp Debt Funds (VIP) Average had a 7.85% return. This average return serves as a peer comparison and is expressed net of operating expenses.

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

During the fiscal year, the Fund was well positioned to take advantage of the broad fixed income rally, which occurred when assets returned to a level of pricing that more accurately reflected their credit risk. The key drivers of the Fund’s relatively strong performance in 2010 were a material overweight position in non-agency mortgage-backed securities (MBS), an overweight position in investment grade credit/corporate debts (with an emphasis on financials) and overweight positions in high yield corporate securities. The Fund’s investment grade credit positions benefited from the recovery the credit markets exhibited in 2010, which had resulted from sectors recovering from depressed levels through improved credit fundamentals and decreased investor risk aversion. Similarly, MBS also exhibited a recovery from depressed levels, which was a result of the market’s search for yield and a realization that pricing was too low relative to the security fundamentals of the instruments. Among the primary corporate debt sub-sectors (i.e., financials, industrials and utilities), financials outperformed the other sub-sectors. The performance of the financials sub-sector was largely driven by its relatively poor performance in 2008 as result of the credit crisis exhibited in that year. Because of its poor performance in 2008, the financials sub-sector represented a good value in 2010. Additionally, financials also benefited in 2010 from a modification to the U.S. Treasury yield curve, which allowed

banks to borrow inexpensively in the short term and lend out at a higher rate in the long term.

To a lesser extent, allocations to commercial mortgage-backed securities (CMBS), emerging market debt (EMD), and non-dollar investments also contributed positively to the Fund’s performance in 2010. CMBS performed well as the sector did not suffer the same crisis as the residential mortgage sector experienced in 2008. Because of this, investors pursued the relatively high yields available within the CMBS sector. EMD performed well as the general global recovery during the year appeared to occur sooner in emerging economies, many of which had better fiscal positions than those of certain developed economies. The Fund’s positions in non-dollar investments benefited from issue selection and tactical currency investments aimed at capturing returns resulting from the volatility exhibited within the currency markets.

During 2010, duration and yield curve positioning generally did not have an impact on the Fund’s performance. Over the period, the U.S. Treasury yield curve experienced many fluctuations. Though the shorter end of the curve was anchored by a Federal Reserve low-rate policy, the longer end of the curve was weakened by investor concerns about sovereign credit risk in Europe, the uncertain future of the U.S. dollar as a reserve currency resulting from statements by certain countries and inflation concerns stemming from the Federal Reserve’s second round of quantitative easing (QE2) (i.e., the injection of capital into the market through the direct purchase of certain types of assets). The shorter end of the yield curve represents yields on shorter maturity treasury securities, while the longer end of the curve represents yields on the longer maturity treasury securities.

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

The Fund’s money managers tend to invest the Fund’s assets in non-Treasury sectors and in types of securities that are not found within the Index (e.g. high yield credit, MBS and EMD. As a result of having a more aggressive asset allocation relative to the Index, as more aggressive risk profiles continued to experience positive returns during 2010, the Fund’s underweight to U.S. Treasuries and overweight to non-Treasury securities resulted in the Fund generating returns in excess of the Index. While sector positions varied throughout 2010, allocations to some of the best performing sectors of the fixed income markets were beneficial to Fund performance. Overweight exposure to both investment grade financials and CMBS and the transition of the Fund’s position in agency mortgages from overweight to underweight over the course of the year contributed positively to Fund performance in 2010. Exposure to MBS was the largest contributor to Fund performance in 2010.

The Fund’s money managers rotate in and out of various sectors in order to gain exposure to those sectors or securities that the

 

 

Core Bond Fund 49


Table of Contents

Russell Investment Funds

Core Bond Fund

Portfolio Management Discussion — December 31, 2010 (Unaudited)

 

 

 

money managers believe could provide the highest value relative to other areas of the market. For example, Pacific Investment Management Company LLC put significant emphasis on non agency mortgage backed securities in an attempt to benefit from such sector’s significant yield and price appreciation which contributed positively to performance. Metropolitan West Asset Management, LLC maintained an emphasis on MBS and CMBS throughout the year and, as a result, the Fund’s performance benefited from the increased demand for these securities. Similarly, Goldman Sachs Asset Management, L.P., also maintained an emphasis on MBS throughout the year and the Fund’s performance benefited from increased demand for these securities. Although investment strategies and techniques will vary across the Fund’s money managers (e.g., different sector emphasis or the same emphasis at different times), the Fund’s performance over the year generally benefited from sector rotation implemented by the money managers.

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

There were no changes to the Fund’s money manager line-up during the year. Manager weights were adjusted throughout the year.

Money Managers as of December 31, 2010 Styles
Goldman Sachs Asset Management, L.P. Fully Discretionary
Metropolitan West Asset Management, LLC Sector Rotation
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 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.

 

 

 

* Assumes initial investment on January 1, 2001.

 

** The Barclays Capital U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment-grade corporate debt securities and mortgage-backed securities.

 

§ Annualized.

The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results.

 

 50   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Shareholder Expense Example — December 31, 2010 (Unaudited)

 

 

 

Fund Expenses

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

Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory 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, 2010 to December 31, 2010.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses

based on the Fund’s actual expense ratio and an assumed rate

of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

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

 

Core Class

  Actual
Performance
   Hypothetical
Performance
(5% return
before expenses)
 
    

Beginning Account Value July 1, 2010

  $1,000.00    $1,000.00  

Ending Account Value
December 31, 2010

  $1,030.20    $1,021.73  

Expenses Paid During Period*

  $3.53    $3.52  

 

*Expenses are equal to the Fund’s annualized expense ratio of 0.69% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher.
 

 

Core Bond Fund 51


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      
Long-Term Investments - 92.8%      
Asset-Backed Securities - 4.8%      

Access Group, Inc.
Series 2008-1 Class A
1.588% due 10/27/25 (Ê)

   757      773 

Accredited Mortgage Loan Trust
Series 2004-2 Class A2
0.561% due 07/25/34 (Ê)

   27      20 

ACE Securities Corp.
Series 2003-OP1 Class M2
2.511% due 12/25/33 (Ê)

   14      11 

Series 2005-SD3 Class A
0.661% due 08/25/45 (Ê)

   84      80 

Aegis Asset Backed Securities Trust
Series 2003-3 Class M2
2.736% due 01/25/34 (Ê)

   92      68 

Ally Auto Receivables Trust
Series 2009-A Class A2
1.320% due 03/15/12 (Þ)

   74      74 

Ameriquest Mortgage Securities, Inc.
Series 2002-D Class M1
4.011% due 02/25/33 (Ê)

   90      53 

Series 2004-R10 Class A5
0.651% due 11/25/34 (Ê)

            

Asset Backed Securities Corp. Home Equity
Series 2005-HE5 Class M3
0.741% due 06/25/35 (Ê)

   1,050      764 

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

   190      149 

Brazos Higher Education Authority
Series 2005-3 Class A14
0.413% due 09/25/23 (Ê)

   411      408 

Series 2010-1 Class A1
1.202% due 05/25/29 (Ê)

   300      299 

Centex Home Equity
Series 2006-A Class AV4
0.511% due 06/25/36 (Ê)

   700      461 

CIT Mortgage Loan Trust
Series 2007-1 Class 2A1
1.261% due 10/25/37 (Å)(Ê)

   92      88 

Series 2007-1 Class 2A2
1.511% due 10/25/37 (Å)(Ê)

   130      92 

Series 2007-1 Class 2A3
1.711% due 10/25/37 (Å)(Ê)

   180      96 

Citigroup Mortgage Loan Trust, Inc.
Series 2003-HE4 Class A
0.671% due 12/25/33 (Ê)(Þ)

   520      471 

Series 2006-WFH3 Class A2
0.361% due 10/25/36 (Ê)

   77      77 

Series 2007-WFH1 Class A3
0.411% due 01/25/37 (Ê)

   1,045      797 

Series 2007-WFH1 Class A4
0.461% due 01/25/37 (Ê)

   840      432 

Series 2007-WFH4 Class A2B
1.311% due 07/25/37 (Ê)

   1,290      749 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Conseco Financial Corp.
Series 1996-10 Class M1
7.240% due 11/15/28

   700      699 

Series 1999-2 Class A5
6.680% due 12/01/30

   832      846 

Countrywide Asset-Backed Certificates
Series 2004-AB2 Class M3
0.861% due 05/25/36 (Ê)

   95      21 

Series 2004-BC1 Class M1
1.011% due 02/25/34 (Ê)

   76      63 

Series 2006-11 Class 1AF4
6.028% due 09/25/46 (Ê)

   164      64 

Countrywide Home Equity Loan Trust
Series 2006-HW Class 2A1B
0.410% due 11/15/36 (Ê)

   335      254 

First Franklin Mortgage Loan Asset Backed Certificates
Series 2006-FF15 Class A3
0.311% due 11/25/36 (Ê)

   20      20 

Series 2007-FF1 Class A2B
0.351% due 01/25/38 (Ê)

   862      536 

GMAC Mortgage Corp. Loan Trust
Series 2007-HE3 Class 1A1
7.000% due 09/25/37

   47      34 

Series 2007-HE3 Class 2A1
7.000% due 09/25/37

   59      40 

Goal Capital Funding Trust
Series 2010-1 Class A
0.984% due 08/25/48 (Ê)(Þ)

   97      96 

GSAA Trust
Series 2006-2 Class 2A3
0.531% due 12/25/35 (Ê)

   320      292 

GSAMP Trust
Series 2003-HE2 Class M1
1.236% due 08/25/33 (Ê)

   60      41 

HSBC Home Equity Loan Trust
Series 2005-1 Class A
0.551% due 01/20/34 (Ê)

   163      149 

Series 2006-4 Class A3V
0.411% due 03/20/36 (Ê)

   800      760 

Series 2007-1 Class AS
0.461% due 03/20/36 (Ê)

   584      546 

Series 2007-3 Class APT
1.461% due 11/20/36 (Ê)

   258      238 

HSI Asset Securitization Corp. Trust
Series 2006-HE2 Class 2A1
0.311% due 12/25/36 (Ê)

   5      5 

Indymac Residential Asset Backed Trust
Series 2006-H2 Class A
0.411% due 06/28/36 (Ê)

   224      83 

IXIS Real Estate Capital Trust
Series 2005-HE1 Class M2
0.996% due 06/25/35 (Ê)

   399      379 

JP Morgan Mortgage Acquisition Corp.
Series 2007-CH4 Class A4
0.421% due 05/25/37 (Ê)

   1,000      468 
 

 

 52   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Knowledgeworks Foundation
Series 2010-1 Class A
1.242% due 02/25/42 (Ê)

   292      288 

Lehman XS Trust
Series 2005-5N Class 3A1A
0.561% due 11/25/35 (Ê)

   314      242 

Series 2005-7N Class 1A1A
0.531% due 12/25/35 (Ê)

   349      237 

Series 2006-16N Class A4A
0.451% due 11/25/46 (Ê)

   574      356 

Long Beach Mortgage Loan Trust
Series 2004-4 Class 1A1
0.541% due 10/25/34 (Ê)

   5      4 

Mastr Asset Backed Securities Trust
Series 2003-WMC2 Class M2
2.736% due 08/25/33 (Ê)

   57      47 

Series 2005-WMC1 Class M1
0.681% due 03/25/35 (Ê)

   252      252 

Missouri Higher Education Loan Authority
Series 2010-1 Class A1
1.234% due 11/26/32 (Ê)

   910      914 

Morgan Stanley ABS Capital I
Series 2003-NC8 Class M3
3.411% due 09/25/33 (Ê)

   25      6 

Series 2006-HE1 Class A4
0.551% due 01/25/36 (Ê)

   1,950      1,107 

Series 2007-HE2 Class A2B
0.351% due 01/25/37 (Ê)

   1,043      528 

Nelnet Student Loan Trust
Series 2010-3A Class A
1.068% due 07/27/48 (Ê)(Þ)

   394      393 

New Century Home Equity Loan Trust
Series 2004-4 Class M2
0.791% due 02/25/35 (Ê)

   215      145 

Northstar Education Finance, Inc.
Series 2004-1 Class A4
0.478% due 04/29/19 (Ê)

   1,000      988 

Option One Mortgage Loan Trust
Series 2003-2 Class M2
2.811% due 04/25/33 (Ê)

   36      17 

Series 2003-3 Class M3
3.261% due 06/25/33 (Ê)

   23      8 

Series 2003-4 Class M2
2.736% due 07/25/33 (Ê)

   24      9 

Park Place Securities, Inc.
Series 2005-WCW1 Class M1
0.711% due 09/25/35 (Ê)

   210      157 

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

   127      117 

Renaissance Home Equity Loan Trust
Series 2005-1 Class M1
5.357% due 05/25/35

   61      33 

Series 2005-2 Class AF4
4.934% due 08/25/35

   85      72 

Series 2006-1 Class AF6
5.746% due 05/25/36

   166      128 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Residential Asset Mortgage Products, Inc.
Series 2003-RS9 Class AI6A
6.110% due 10/25/33

   381      372 

Series 2003-RS11 Class AI6A
5.980% due 12/25/33

   116      110 

Residential Asset Securities Corp.
Series 2003-KS2 Class MI1
4.800% due 04/25/33

   120      71 

Series 2003-KS2 Class MI3
6.100% due 04/25/33

   46      6 

Series 2003-KS4 Class AIIB

0.841% due 06/25/33 (Ê)

   32      16 

Series 2007-KS2 Class AI1
0.331% due 02/25/37 (Ê)

   37      37 

SG Mortgage Securities Trust
Series 2006-OPT2 Class A3C
0.411% due 10/25/36 (Ê)

   1,500      567 

SLM Student Loan Trust
Series 2008-2 Class A1
0.588% due 01/25/15 (Ê)

   39      39 

Series 2008-7 Class A2
0.788% due 10/25/17 (Ê)

   2,800      2,803 

Small Business Administration Participation Certificates
Series 2005-20G Class 1
7.600% due 07/01/25

   620      660 

Soundview Home Equity Loan Trust
Series 2005-OPT3 Class A4
0.561% due 11/25/35 (Ê)

   586      557 

Structured Asset Securities Corp.
Series 2006-BC3 Class A2
0.311% due 10/25/36 (Ê)

   11      11 
         
       22,893 
         
Corporate Bonds and Notes - 16.7%      

Agilent Technologies, Inc.
5.500% due 09/14/15

   300      326 

Alcoa, Inc.
5.375% due 01/15/13

   800      853 

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

   90      95 

Allstate Life Global Funding Trusts
5.375% due 04/30/13

   200      218 

Ally Financial, Inc.
7.500% due 12/31/13 (Ñ)

   1,900      2,039 

7.500% due 09/15/20 (Þ)

   100      105 

Series UNRE
7.000% due 02/01/12

   400      414 

Altria Group, Inc.
9.700% due 11/10/18

   200      264 

American Express Bank FSB
Series BKNT
5.500% due 04/16/13

   300      323 

6.000% due 09/13/17

   400      446 

American Express Centurion Bank
Series BKN1
6.000% due 09/13/17

   400      446 
 

 

Core Bond Fund 53


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

American Express Co.
7.000% due 03/19/18

   200      233 

American General Finance Corp.
6.900% due 12/15/17

   300      242 

Series MTNI

4.875% due 07/15/12 (Ñ)

   100      94 

American International Group, Inc.
5.600% due 10/18/16

   700      721 

5.450% due 05/18/17

   1,000      1,013 

5.850% due 01/16/18

   900      928 

Amgen, Inc.
6.900% due 06/01/38

   1,000      1,213 

Anadarko Petroleum Corp.
6.375% due 09/15/17

   250      272 

Anheuser-Busch InBev Worldwide, Inc.
7.200% due 01/15/14 (Þ)

   125      143 

4.125% due 01/15/15

   225      237 

7.750% due 01/15/19 (Þ)

   125      156 

Appalachian Power Co.
Series O
5.650% due 08/15/12

   65      69 

Arizona Public Service Co.
5.800% due 06/30/14 (Ñ)

   100      110 

6.250% due 08/01/16

   75      84 

AT&T, Inc.
4.950% due 01/15/13

   200      214 

5.500% due 02/01/18

   200      222 

6.300% due 01/15/38

   900      949 

6.400% due 05/15/38

   175      186 

BAC Capital Trust XV
1.096% due 06/01/56 (Ê)

   375      233 

Bank of America Corp.
5.625% due 10/14/16

   115      119 

6.000% due 09/01/17

   335      351 

5.750% due 12/01/17

   140      146 

5.625% due 07/01/20

   175      178 

5.875% due 01/05/21

   225      233 

Bank of America NA
Series BKNT
0.582% due 06/15/16 (Ê)

   200      179 

6.100% due 06/15/17

   175      183 

BankAmerica Capital III
Series*
0.859% due 01/15/27 (Ê)

   350      249 

Bear Stearns Cos. LLC (The)
6.950% due 08/10/12

   600      655 

7.250% due 02/01/18

   445      527 

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

   225      247 

Boston Scientific Corp.
4.500% due 01/15/15

   275      281 

7.000% due 11/15/35

   63      63 

Burlington Northern Santa Fe LLC
6.875% due 12/01/27

   25      29 

6.750% due 03/15/29

   10      11 

Capital One Capital III
7.686% due 08/15/36

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

Caterpillar Financial Services Corp.
4.850% due 12/07/12

   100      107 

Cellco Partnership / Verizon Wireless Capital LLC
5.250% due 02/01/12

   700      733 

8.500% due 11/15/18

   175      229 

CenterPoint Energy Resources Corp.
6.125% due 11/01/17

   50      56 

Chase Capital III Series C
0.846% due 03/01/27 (Ê)

   295      233 

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

   335      352 

Chubb Corp.
6.375% due 03/29/67

   175      182 

CIT Group, Inc. (Ñ)
7.000% due 05/01/13

   156      160 

7.000% due 05/01/14

   85      86 

7.000% due 05/01/15

   285      285 

7.000% due 05/01/17

   198      198 

Series . 7.000% due 05/01/16

   141      142 

Citigroup Capital XXI
8.300% due 12/21/57

   500      520 

Citigroup, Inc.
5.500% due 08/27/12

   200      212 

5.625% due 08/27/12

   200      210 

5.500% due 04/11/13

   700      745 

5.850% due 07/02/13

   100      108 

2.286% due 08/13/13 (Ê)

   100      102 

6.375% due 08/12/14

   150      166 

5.000% due 09/15/14

   400      414 

4.700% due 05/29/15

   50      52 

5.850% due 08/02/16 (Ñ)

   55      59 

6.000% due 08/15/17

   850      922 

6.125% due 11/21/17

   405      444 

5.375% due 08/09/20 (Ñ)

   250      260 

6.125% due 08/25/36

   300      287 

6.875% due 03/05/38

   600      666 

8.125% due 07/15/39

   165      210 

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

   10      11 

Comcast Cable Communications Holdings, Inc.
9.455% due 11/15/22

   100      138 

Comcast Cable Holdings LLC
9.800% due 02/01/12 (Ñ)

   180      196 

Comcast Holdings Corp.
10.625% due 07/15/12

   125      142 

Continental Airlines 1999-1 Class A Pass Through Trust
Series 991A
6.545% due 02/02/19

   190      201 

Continental Airlines 2007-1 Class A Pass Through Trust
Series 071A
5.983% due 04/19/22

   145      153 
 

 

 54   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Continental Airlines 2009-1 Pass Through Trust
9.000% due 07/08/16

   240      275 

Countrywide Financial Corp.
Series MTN
5.800% due 06/07/12 (Ñ)

   100      105 

COX Communications, Inc.
5.875% due 12/01/16 (Þ)

   75      84 

Credit Suisse USA, Inc.
5.500% due 08/15/13

   45      49 

DCP Midstream LLC
9.750% due 03/15/19 (Þ)

   100      129 

Dell, Inc.
4.700% due 04/15/13

   400      429 

Delta Air Lines, Inc.
9.500% due 09/15/14 (Ñ)(Þ)

   382      416 

Developers Diversified Realty Corp.
7.500% due 04/01/17

   175      195 

Discover Bank
Series BKNT
8.700% due 11/18/19

   250      294 

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

   125      129 

Dow Chemical Co. (The)
7.600% due 05/15/14

   300      346 

Dynegy Roseton / Danskammer Pass Through Trust
Series B
7.670% due 11/08/16

   700      658 

Edison Mission Energy
7.000% due 05/15/17

   675      535 

El Paso Corp.
Series GMTN
8.050% due 10/15/30 (Ñ)

   200      203 

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

   100      110 

El Paso Pipeline Partners Operating Co. LLC
6.500% due 04/01/20

   75      79 

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

   300      329 

Enterprise Products Operating LLC
6.650% due 04/15/18

   125      143 

Series A
8.375% due 08/01/66

   100      107 

Farmers Exchange Capital
7.050% due 07/15/28 (Þ)

   500      483 

7.200% due 07/15/48 (Þ)

   300      272 

Fifth Third Bancorp
8.250% due 03/01/38

   1,100      1,266 

Fifth Third Bank
Series BKNT
0.394% due 05/17/13 (Ê)

   250      240 

First Niagara Financial Group, Inc.
6.750% due 03/19/20

   125      130 

Ford Motor Credit Co. LLC
7.500% due 08/01/12

   1,000      1,063 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

FPL Energy Wind Funding LLC
6.876% due 06/27/17 (Þ)

   235      229 

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

   300      332 

General Electric Capital Corp.
1.184% due 05/22/13 (Ê)

   75      75 

5.900% due 05/13/14

   350      387 

5.625% due 05/01/18

   230      251 

4.375% due 09/16/20 (Ñ)

   300      295 

5.875% due 01/14/38

   300      311 

6.375% due 11/15/67

   1,900      1,881 

Series EMTN
0.595% due 03/20/14 (Ê)

   400      380 

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

   250      270 

Goldman Sachs Group, Inc. (The)
6.000% due 05/01/14

   150      165 

6.250% due 09/01/17

   600      662 

6.150% due 04/01/18

   400      440 

7.500% due 02/15/19

   550      641 

6.000% due 06/15/20 (Ñ)

   285      308 

6.750% due 10/01/37

   800      818 

Series MTNB
0.688% due 07/22/15 (Ê)

   100      96 

HCA, Inc.
8.500% due 04/15/19

   300      329 

7.875% due 02/15/20 (Ñ)

   125      134 

HCP, Inc.
6.700% due 01/30/18 (Ñ)

   425      456 

Health Care REIT, Inc.
4.700% due 09/15/17

   400      399 

4.950% due 01/15/21 (Ñ)

   300      289 

Healthcare Realty Trust, Inc.
6.500% due 01/17/17

   700      755 

Historic TW, Inc.
8.050% due 01/15/16

   195      233 

Hospira, Inc.
5.600% due 09/15/40

   150      147 

HSBC Bank USA
4.875% due 08/24/20

   600      596 

Indiantown Cogeneration, LP
Series A-10
9.770% due 12/15/20

   275      298 

International Lease Finance Corp.
6.500% due 09/01/14 (Þ)

   720      763 

6.750% due 09/01/16 (Þ)

   100      107 

International Paper Co.
7.950% due 06/15/18

   75      89 

JP Morgan Chase Capital XIII
Series M
1.253% due 09/30/34 (Ê)

   480      380 

JP Morgan Chase Capital XX
Series T
6.550% due 09/29/36

   200      201 

JP Morgan Chase Capital XXIII
1.286% due 05/15/47 (Ê)

   545      420 
 

 

Core Bond Fund 55


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

JPMorgan Chase & Co.
5.375% due 01/15/14

   170      185 

6.000% due 01/15/18

   200      223 

4.250% due 10/15/20 (Ñ)

   300      293 

Series 1
7.900% due 04/29/49 (Æ)(ƒ)

   300      319 

JPMorgan Chase Bank NA
Series BKNT
5.875% due 06/13/16 (Ñ)

   70      77 

6.000% due 10/01/17

   570      631 

JPMorgan Chase Capital XXI
Series U
1.236% due 02/02/37 (Ê)(Ñ)

   335      259 

KCP&L Greater Missouri Operations Co.
11.875% due 07/01/12

   640      726 

Kinder Morgan Energy Partners, LP
5.950% due 02/15/18

   700      771 

Kraft Foods, Inc.
6.125% due 02/01/18

   200      228 

6.125% due 08/23/18

   125      143 

6.500% due 02/09/40

   175      196 

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

   125      129 

Lehman Brothers Holdings, Inc.
5.625% due 01/24/13 (Ø)

   200      49 

6.200% due 09/26/14 (Ø)

   200      46 

Liberty Property, LP
4.750% due 10/01/20 (Ñ)

   275      272 

Life Technologies Corp.
6.000% due 03/01/20

   145      155 

5.000% due 01/15/21

   275      272 

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

   84      80 

MBNA Capital B
Series B
1.087% due 02/01/27 (Ê)

   985      687 

MBNA Corp.
6.125% due 03/01/13

   200      215 

Merrill Lynch & Co., Inc.
6.050% due 08/15/12

   100      106 

6.050% due 05/16/16

   300      309 

6.400% due 08/28/17

   325      343 

6.875% due 04/25/18

   500      547 

MetLife, Inc.
4.750% due 02/08/21

   350      357 

6.400% due 12/15/36

   100      94 

Metropolitan Life Global Funding I
5.125% due 06/10/14 (Þ)

   200      218 

Mirant Mid Atlantic Pass Through Trust A
Series A
8.625% due 06/30/12

   150      155 

Mirant Mid Atlantic Pass Through Trust B
Series B
9.125% due 06/30/17

   282      303 

Morgan Stanley
0.739% due 10/18/16 (Ê)(Ñ)

   435      402 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

5.450% due 01/09/17

   225      233 

6.250% due 08/28/17 (Ñ)

   600      647 

5.950% due 12/28/17

   125      132 

6.625% due 04/01/18

   450      488 

5.500% due 07/24/20 (Ñ)

   425      429 

Series GMTN

2.786% due 05/14/13 (Ê)

   200      207 

National City Bank
Series BKNT
0.673% due 06/07/17 (Ê)

   700      631 

NBC Universal, Inc.
4.375% due 04/01/21 (Þ)

   300      291 

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

   100      112 

News America Holdings, Inc.
8.250% due 10/17/96

   20      24 

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

   200      216 

Nisource Finance Corp.
6.400% due 03/15/18

   145      161 

6.125% due 03/01/22

   335      361 

Oncor Electric Delivery Co. LLC
6.800% due 09/01/18

   550      644 

Panhandle Eastern Pipeline Co., LP
8.125% due 06/01/19

   450      519 

Philip Morris International, Inc.
6.375% due 05/16/38

   100      116 

PNC Bank NA
Series BKNT
6.875% due 04/01/18

   175      200 

Progress Energy, Inc.
5.625% due 01/15/16 (Ñ)

   40      45 

7.050% due 03/15/19

   200      237 

ProLogis
1.875% due 11/15/37 (Ñ)

   150      148 

Prudential Financial, Inc.
3.875% due 01/14/15

   375      387 

4.500% due 11/15/20

   100      98 

Prudential Holdings LLC
8.695% due 12/18/23 (Þ)

   550      655 

Public Service Co. of New Mexico
7.950% due 05/15/18

   260      292 

Puget Sound Energy, Inc.
Series A
6.974% due 06/01/67

   125      123 

Pulte Group, Inc.
5.250% due 01/15/14

   1,000      985 

Qwest Corp.
7.625% due 06/15/15

   100      113 

8.375% due 05/01/16 (Ñ)

   175      207 

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

   75      69 

Reliant Energy Mid-Atlantic Power Holdings LLC
Series B
9.237% due 07/02/17

   299      323 
 

 

 56   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Rensselaer Polytechnic Institute
5.600% due 09/01/20

   325      335 

Sabine Pass LNG, LP
7.250% due 11/30/13

   730      710 

7.500% due 11/30/16 (Ñ)

   65      61 

Series 144a
7.500% due 11/30/16 (Å)

   380      356 

Simon Property Group, LP
6.100% due 05/01/16

   130      146 

5.650% due 02/01/20

   275      297 

4.375% due 03/01/21

   100      99 

SLM Corp.
Series MTNA
5.000% due 04/15/15

   1,800      1,734 

Southern Union Co.
7.200% due 11/01/66

   740      682 

Sprint Capital Corp.
8.375% due 03/15/12

   125      132 

State Street Capital Trust III
8.250% due 01/29/49 (ƒ)(Ñ)

   200      203 

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

   150      151 

Target Corp.
5.125% due 01/15/13

   400      433 

Tennessee Gas Pipeline Co.
8.000% due 02/01/16

   200      232 

7.500% due 04/01/17

   75      86 

8.375% due 06/15/32

   100      118 

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

   400      451 

Transatlantic Holdings, Inc.
8.000% due 11/30/39

   150      154 

TransDigm, Inc.
7.750% due 12/15/18 (Å)(Ñ)

   250      259 

UAL 2009-1 Pass Through Trust
10.400% due 11/01/16

   94      109 

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

   205      232 

Union Pacific Corp.
5.700% due 08/15/18

   400      449 

UnitedHealth Group, Inc.
4.875% due 02/15/13

   200      213 

6.000% due 06/15/17

   3      3 

6.500% due 06/15/37

   45      50 

Valero Energy Corp.
9.375% due 03/15/19

   450      559 

6.125% due 02/01/20

   100      106 

Wachovia Corp.
5.625% due 10/15/16

   100      109 

5.750% due 02/01/18 (Ñ)

   500      555 

WCI Finance LLC / WEA Finance LLC
5.400% due 10/01/12 (Þ)

   75      80 

WEA Finance LLC / WT Finance Aust Pty, Ltd.
7.500% due 06/02/14 (Þ)

   205      233 

6.750% due 09/02/19 (Þ)

   95      106 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Wells Fargo & Co.
5.625% due 12/11/17

   300      332 

Series K
7.980% due 03/29/49 (ƒ)

   3,300      3,483 

Whirlpool Corp.
8.000% due 05/01/12 (Ñ)

   25      27 

8.600% due 05/01/14

   75      86 

Williams Cos., Inc. (The)
7.875% due 09/01/21

   416      491 

8.750% due 03/15/32 (Ñ)

   175      214 

Windstream Corp.
Series WI
8.625% due 08/01/16

   125      132 

ZFS Finance USA Trust II
6.450% due 12/15/65 (Þ)

   300      295 
         
       79,022 
         
International Debt - 9.2%      

Achmea Hypotheekbank NV
3.200% due 11/03/14 (Þ)

   900      936 

AK Transneft OJSC Via TransCapitalInvest, Ltd.
8.700% due 08/07/18 (Þ)

   100      124 

Anglo American Capital PLC
9.375% due 04/08/14 (Þ)

   100      120 

9.375% due 04/08/19 (Þ)

   100      135 

ANZ National International, Ltd.
6.200% due 07/19/13 (Þ)

   600      660 

ArcelorMittal
6.125% due 06/01/18

   175      186 

ARES CLO Funds
Series 2003-7A Class A1B
0.836% due 05/08/15 (Å)(Ê)

   384      371 

Series 2005-10A Class A3
0.544% due 09/18/17 (Å)(Ê)

   635      597 

Arkle Master Issuer PLC
Series 2010-2A Class 1A1
1.684% due 05/17/60 (Ê)(Þ)

   600      599 

Armstrong Loan Funding, Ltd.
Series 2008-1A Class A
0.837% due 08/01/16 (Å)(Ê)

   306      303 

AstraZeneca PLC
5.900% due 09/15/17

   100      116 

AWAS Aviation Capital, Ltd.
7.000% due 10/15/16 (Å)

   365      362 

Bank of Montreal
2.850% due 06/09/15 (Ñ)(Þ)

   100      102 

Barclays Bank PLC
5.450% due 09/12/12

   1,300      1,392 

6.050% due 12/04/17 (Þ)

   200      205 

BAT International Finance PLC
9.500% due 11/15/18 (Þ)

   150      197 

BBVA Bancomer SA
7.250% due 04/22/20 (Þ)

   300      317 

Black Diamond CLO, Ltd.
Series 2007-1A Class AD
0.538% due 04/29/19 (Ê)(Þ)

   750      677 
 

 

Core Bond Fund 57


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

BM&FBovespa SA
5.500% due 07/16/20 (Þ)

   100      102 

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

   300      273 

Bolivarian Republic of Venezuela
8.250% due 10/13/24

   60      39 

BP Capital Markets PLC
5.250% due 11/07/13

   175      190 

3.875% due 03/10/15

   150      155 

4.500% due 10/01/20

   150      150 

BRFkredit AS
2.050% due 04/15/13 (Þ)

   1,200      1,219 

Canadian Natural Resources, Ltd.
5.150% due 02/01/13

   100      108 

Chatham Light CLO, Ltd.
Series 2005-2A Class A1
0.536% due 08/03/19 (Å)(Ê)

   495      463 

Cie de Financement Foncier
1.625% due 07/23/12 (Ñ)(Þ)

   500      502 

2.125% due 04/22/13 (Þ)

   200      202 

Corp. Nacional del Cobre de Chile
7.500% due 01/15/19 (Þ)

   200      243 

Covidien International Finance SA
4.200% due 06/15/20

   175      175 

Credit Agricole SA
8.375% due 10/29/49 (ƒ)(Þ)

   150      154 

Credit Suisse NY
6.000% due 02/15/18 (Ñ)

   770      826 

CSN Islands XI Corp.
6.875% due 09/21/19 (Ñ)(Þ)

   200      216 

Danske Bank A/S
2.500% due 05/10/12 (Þ)

   500      512 

Deutsche Bank AG
6.000% due 09/01/17

   600      672 

Dexia Credit Local SA
0.768% due 04/29/14 (Ê)(Þ)

   500      498 

DnB NOR Boligkreditt
2.100% due 10/14/15 (Ñ)(Þ)

   500      475 

Dolphin Energy, Ltd.
5.888% due 06/15/19 (Þ)

   120      128 

Electricite De France
5.500% due 01/26/14 (Þ)

   200      220 

6.500% due 01/26/19 (Þ)

   200      233 

6.950% due 01/26/39 (Þ)

   200      237 

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

   100      105 

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

   300      328 

5.125% due 10/07/19 (Ñ)(Þ)

   175      173 

Export-Import Bank of Korea
5.875% due 01/14/15

   700      758 

FIH Erhvervsbank A/S
2.450% due 08/17/12 (Ñ)(Þ)

   500      513 

Gazprom International SA for Gazprom
Series regs
7.201% due 02/01/20

   58      62 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Gazprom Via Gaz Capital SA
Series REGS
9.250% due 04/23/19

   110      135 

HBOS PLC
Series GMTN
6.750% due 05/21/18 (Þ)

   825      772 

Holmes Master Issuer PLC
Series 2010-1A Class A2
1.671% due 10/15/54 (Ê)(Þ)

   300      300 

HSBC Bank USA
Series CLN
Zero coupon due 08/15/40

   590      734 

HSBC Holdings PLC

      

6.500% due 05/02/36

   100      104 

6.500% due 09/15/37

   100      105 

Indian Oil Corp., Ltd.
4.750% due 01/22/15

   400      412 

ING Bank NV
2.500% due 01/14/16 (Å)

   600      585 

Israel Government AID Bond
5.500% due 09/18/33

   400      444 

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

   60      63 

LeasePlan Corp. NV
3.000% due 05/07/12 (Þ)

   400      411 

Lloyds TSB Bank PLC
6.500% due 09/14/20 (Þ)

   200      184 

Macquarie Bank, Ltd.
3.300% due 07/17/14 (Þ)

   1,000      1,056 

Majapahit Holding BV
Series REGS
7.750% due 10/17/16

   100      116 

Mexico Government International Bond
6.050% due 01/11/40

   260      266 

Monument Park CDO, Ltd.
Series 2004-1A Class A1
0.839% due 01/20/16 (Ê)(Þ)

   628      607 

Morgan Stanley Bank AG for OAO
Gazprom
Series REGS
9.625% due 03/01/13

   900      1,020 

MUFG Capital Finance 1, Ltd.
6.346% due 07/29/49 (ƒ)

   200      202 

National Australia Bank, Ltd.
5.350% due 06/12/13 (Ñ)(Þ)

   800      867 

Nexen, Inc.
7.500% due 07/30/39

   125      136 

Noble Group, Ltd.
6.750% due 01/29/20 (Þ)

   100      111 

North American Development Bank
4.375% due 02/11/20

   400      412 

Peruvian Government International Bond
5.625% due 11/18/50

   40      37 

Petrobras International Finance Co. - Pifco
7.875% due 03/15/19

   800      946 

Petro-Canada
6.050% due 05/15/18

   100      114 

Petroleos Mexicanos
8.000% due 05/03/19

   320      386 
 

 

 58   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Qatar Government International Bond
5.250% due 01/20/20 (Þ)

   520      549 

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

   250      258 

Series REGS
6.750% due 09/30/19

   300      346 

Republic of Venezuela
7.750% due 10/13/19

   60      41 

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

   100      100 

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

   300      231 

Series 1
9.118% due 03/31/49 (ƒ)

   300      296 

Royal Bank of Scotland PLC (The)
1.500% due 03/30/12 (Þ)

   1,200      1,209 

2.625% due 05/11/12 (Þ)

   300      307 

4.875% due 08/25/14 (Þ)

   1,000      1,024 

5.625% due 08/24/20 (Ñ)

   200      199 

Russia Government International Bond
Series REGS
7.500% due 03/31/30

   107      124 

RZD Capital, Ltd.
5.739% due 04/03/17

   500      520 

Santander US Debt SA Unipersonal
2.991% due 10/07/13 (Þ)

   400      389 

Silverstone Master Issuer PLC
Series 2010-1A Class A1
1.684% due 01/21/55 (Ê)(Þ)

   500      501 

SLM Corp.
1.044% due 06/17/13 (Ê)

   150      178 

Sparebanken 1 Boligkreditt
1.250% due 10/25/13 (Þ)

   1,000      993 

Stadshypotek AB
1.450% due 09/30/13 (Þ)

   800      799 

State of Qatar
5.150% due 04/09/14

   100      107 

Suncor Energy, Inc.
6.100% due 06/01/18

   100      115 

Swedbank AB

      

2.800% due 02/10/12 (Þ)

   100      102 

2.900% due 01/14/13 (Þ)

   100      103 

Swedish Housing Finance Corp.
3.125% due 03/23/12 (Þ)

   1,000      1,027 

Teck Resources, Ltd.
10.750% due 05/15/19

   200      260 

Telecom Italia Capital SA
7.200% due 07/18/36

   225      211 

Telemar Norte Leste SA
5.500% due 10/23/20 (Þ)

   125      120 

TransCanada PipeLines, Ltd.
6.350% due 05/15/67

   225      222 

Transocean, Inc.

      

4.950% due 11/15/15

   75      78 

6.500% due 11/15/20

   300      319 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

UBS AG
5.850% due 12/31/17 (Å)

   270      123 

Series DPNT

      

5.875% due 12/20/17

   400      440 

5.750% due 04/25/18

   100      109 

Vale Overseas, Ltd.
5.625% due 09/15/19

   400      426 

Venezuela Government International Bond
5.750% due 02/26/16

   150      106 

Vivendi SA
5.750% due 04/04/13 (Þ)

   400      431 

Wells Fargo & Co.
0.933% due 03/23/16

   400      507 

Westpac Banking Corp.

      

1.900% due 12/14/12 (Þ)

   800      814 

3.585% due 08/14/14 (Þ)

   700      746 

WG Horizons CLO
Series 2006-1A Class A
1 0.552% due 05/24/19 (Ê)(Þ)

   800      730 

White Nights Gazprom

      

10.500% due 03/08/14

   200      239 

10.500% due 03/25/14

   300      358 
         
       43,612 
         
Loan Agreements - 0.2%      

Adam Aircraft Industries, Term Loan
15.290% due 05/01/12 (Å)(ø)

   49        

CIT Group, Inc. Term Loan
36.250% due 08/11/15

   500      510 

HCA, Inc.
Term Loan A
1.553% due 11/17/12 (Ê)

   507      501 
         
       1,011 
         
Mortgage-Backed Securities - 45.4%      

ABN Amro Mortgage Corp.
Series 2003-13 Class A
35.500% due 01/25/34

   1,909      1,806 

Adjustable Rate Mortgage Trust
Series 2004-5 Class 2A
12.879% due 04/25/35

   51      45 

American Home Mortgage Assets
Series 2007-4 Class A
20.451% due 08/25/37 (Ê)

   1,009      728 

American Home Mortgage Investment Trust
Series 2004-4 Class 4A
2.261% due 02/25/45 (Ê)

   72      64 

Banc of America Commercial Mortgage, Inc.
Series 2002-PB2 Class A
46.186% due 06/11/35

   533      552 

Series 2005-2 Class A
44.783% due 07/10/43

   316      328 

Series 2006-1 Class A
45.372% due 09/10/45

   280      300 

Series 2006-2 Class A
45.740% due 05/10/45

   200      219 
 

 

Core Bond Fund 59


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Series 2006-4 Class A
4 5.634% due 07/10/46

   500      536 

Banc of America Funding Corp.
Series 2005-D Class A1
2.861% due 05/25/35 (Ê)

   85      82 

Series 2006-3 Class 5A
8 5.500% due 03/25/36

   475      433 

Series 2006-A Class 4A1
5.472% due 02/20/36 (Ê)

   353      294 

Series 2006-I Class 5A
1 6.079% due 10/20/46 (Ê)

   1,345      1,191 

Banc of America Mortgage Securities, Inc.
Series 2004-1 Class 5A
1 6.500% due 09/25/33

   6      6 

Series 2004-11 Class 2A
1 5.750% due 01/25/35

   213      220 

Series 2005-H Class 2A5
3.184% due 09/25/35 (Ê)

   220      177 

Series 2006-B Class 1A
1 3.197% due 10/20/46 (Ê)

   69      41 

Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-1 Class 6A1
2.850% due 04/25/33 (Ê)

   25      24 

Series 2003-8 Class 4A1
3.113% due 01/25/34 (Ê)

   73      69 

Series 2004-9 Class 22A1
3.609% due 11/25/34 (Ê)

   47      46 

Series 2005-2 Class
A1 2.730% due 03/25/35 (Ê)

   773      734 

Series 2007-3 Class 1A1
5.326% due 05/25/47 (Ê)

   277      208 

Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
2.875% due 05/25/35 (Ê)

   164      128 

Series 2005-7 Class 22A1
2.955% due 09/25/35 (Ê)

   398      302 

Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A
2.680% due 12/25/35 (Ê)

   49      47 

Series 2006-AR7 Class 1A4A
5.536% due 11/25/36 (Ê)

   633      477 

Series 2007-AR8 Class 2A1A
5.781% due 07/25/37 (Ê)

   823      602 

Citigroup/Deutsche Bank Commercial Mortgage Trust
Series 2005-CD1 Class A4
5.222% due 07/15/44

   340      366 

Series 2006-CD3 Class A5
5.617% due 10/15/48

   190      204 

Commercial Mortgage Pass Through Certificates
Series 2006-C8 Class A4
5.306% due 12/10/46

   200      209 

Series 2007-C9 Class A4
5.815% due 12/10/49

   360      387 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Countrywide Alternative Loan Trust
Series 2005-32T1 Class A7
0.511% due 08/25/35 (Ê)

   39      37 

Series 2005-48T1 Class A6
5.500% due 11/25/35

   897      664 

Series 2006-36T2 Class 1A9
1.161% due 12/25/36 (Ê)

   288      157 

Series 2006-OA16 Class A2
0.451% due 10/25/46 (Ê)

   1,596      1,017 

Series 2006-OA19 Class A1
0.441% due 02/20/47 (Ê)

   681      394 

Series 2007-15CB Class A5
5.750% due 07/25/37

   683      498 

Series 2007-J2 Class 2A1
6.000% due 07/25/37

   190      152 

Series 2007-OA11 Class A1A
1.708% due 11/25/47 (Ê)

   896      495 

Countrywide Home Loan Mortgage Pass Through Trust
Series 2003-52 Class A1
2.833% due 02/19/34 (Ê)

   111      96 

Series 2004-22 Class A3
3.121% due 11/25/34 (Ê)

   155      124 

Series 2004-HYB9 Class 1A1
2.920% due 02/20/35 (Ê)

   256      221 

Series 2005-1 Class 2A1
0.551% due 03/25/35 (Ê)

   1,508      842 

Series 2005-3 Class 1A2
0.551% due 04/25/35 (Ê)

   23      15 

Series 2005-HYB9 Class 3A2A
3.017% due 02/20/36 (Ê)

   48      39 

Series 2007-1 Class A1
6.000% due 03/25/37

   1,390      1,183 

Series 2007-2 Class A2
6.000% due 03/25/37

   2,100      1,808 

Series 2007-4 Class 1A10
6.000% due 05/25/37

   2,000      1,632 

Series 2007-HY1 Class 1A2
5.517% due 04/25/37 (Ê)

   64      9 

Credit Suisse First Boston Mortgage Securities Corp.
Series 2005-9 Class 2A1
5.500% due 10/25/35

   335      291 

Credit Suisse Mortgage Capital Certificates
Series 2006-8 Class 4A1
6.500% due 10/25/21

   473      360 

Series 2006-C2 Class A3
5.659% due 03/15/39

   100      105 

Deutsche ALT-A Securities, Inc. Alternate Loan Trust
Series 2005-AR1 Class 2A3
2.021% due 08/25/35 (Ê)

   465      251 

Series 2007-OA1 Class A1
0.411% due 02/25/47 (Ê)

   2,253      1,232 

Series 2007-OA2 Class A1
1.098% due 04/25/47 (Ê)

   1,240      738 
 

 

 60   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Fannie Mae

      

2.896% due 2017 (Ê)

   27      27 

6.000% due 2017

   29      32 

4.000% due 2018

   422      440 

4.500% due 2018

   114      122 

6.000% due 2019

   218      237 

5.500% due 2020

   94      101 

6.000% due 2020

   269      292 

5.500% due 2021

   185      199 

5.500% due 2022

   243      261 

5.500% due 2023

   226      245 

4.500% due 2025

   1,267      1,341 

6.000% due 2026

   452      491 

6.000% due 2027

   246      267 

6.000% due 2028

   18      20 

6.000% due 2032

   252      278 

5.000% due 2033

   102      108 

5.500% due 2033

   16      18 

6.000% due 2033

   13      14 

5.000% due 2034

   788      834 

5.500% due 2034

   613      662 

5.500% due 2035

   6      6 

3.865% due 2036 (Ê)

   271      270 

5.500% due 2037

   880      942 

6.000% due 2037

   596      653 

6.500% due 2037

   9,795      10,893 

5.500% due 2038

   4,303      4,627 

6.000% due 2038

   1,168      1,283 

4.500% due 2039

   2,694      2,779 

4.000% due 2040

   7,137      7,111 

4.500% due 2040

   4,848      4,985 

15 Year TBA(Ï)

      

3.000%

   4,000      3,909 

3.500%

   1,865      1,878 

4.000%

   2,000      2,060 

30 Year TBA(Ï)

      

4.000%

   1,000      995 

4.500%

   25,000      25,658 

5.000%

   2,000      2,103 

5.500%

   7,000      7,489 

Series 2003-343 Class 6
Interest Only STRIP
5.000% due 10/01/33

   149      27 

Series 2003-345 Class 18
Interest Only STRIP
4.500% due 12/01/18

   370      40 

Series 2003-345 Class 19
Interest Only STRIP
4.500% due 01/01/19

   409      44 

Series 2005-365 Class 12
Interest Only STRIP
5.500% due 12/01/35

   573      94 

Series 2006-369 Class 8
Interest Only STRIP
5.500% due 04/01/36

   105      18 

Fannie Mae REMICS

      

Series 1999-56 Class Z
7.000% due 12/18/29

   63      71 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Series 2003-32 Class FH
0.661% due 11/25/22 (Ê)

   126      126 

Series 2003-35 Class FY
0.661% due 05/25/18 (Ê)

   199      200 

Series 2006-27 Class SH
Interest Only STRIP
6.439% due 04/25/36 (Ê)

   3,078      444 

Series 2006-48 Class LG
Zero coupon due 06/25/36

   12      11 

Series 2007-30 Class AF
0.571% due 04/25/37 (Ê)

   105      105 

Series 2010-95 Class S
Interest Only STRIP
6.339% due 09/25/40 (Ê)

   3,125      514 

Fannie Mae Whole Loan

      

Series 2003-W1 Class 1A1
6.465% due 12/25/42

   29      33 

Federal Home Loan Mortgage Corp. Structured Pass Through Securities
Series 2005-63 Class 1A1
1.542% due 02/25/45 (Ê)

   23      22 

Freddie Mac

      

6.000% due 2016

   12      13 

5.000% due 2018

   173      184 

5.000% due 2019

   337      360 

5.000% due 2020

   308      329 

3.500% due 2025

   1,500      1,511 

2.813% due 2030 (Ê)

   1      1 

5.000% due 2035

   1,072      1,130 

5.293% due 2037 (Ê)

   235      249 

5.500% due 2037

   1,018      1,079 

6.000% due 2037

   924      1,020 

5.500% due 2038

   4,082      4,412 

6.000% due 2038

   2,677      2,945 

4.500% due 2039

   3,020      3,121 

6.000% due 2039

   94      104 

4.500% due 2040

   1,871      1,919 

5.500% due 2040

   928      990 

15 Year TBA (Ï)

      

3.500%

   8,110      8,158 

30 Year TBA (Ï)

      

4.000%

   3,000      2,978 

5.000%

   3,000      3,146 

5.500%

   3,000      3,197 

Freddie Mac REMICS
Series 2000-2266 Class F
0.710% due 11/15/30 (Ê)

   9      9 

Series 2005-3019 Class IM
Interest Only STRIP
5.500% due 01/15/31

   55      2 

Series 2007-3335 Class BF
0.410% due 07/15/19 (Ê)

   148      148 

Series 2007-3335 Class FT
0.410% due 08/15/19 (Ê)

   307      306 

Ginnie Mae I

      

3.950% due 2025

   100      100 

6.000% due 2029

   7      8 
 

 

Core Bond Fund 61


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

6.500% due 2037

   537      606 

6.500% due 2038

   1,928      2,177 

4.500% due 2039

   1,814      1,887 

5.500% due 2039

   162      176 

6.500% due 2039

   747      843 

30 Year TBA (Ï)

      

3.500%

   3,000      2,888 

4.000%

   3,755      3,780 

Ginnie Mae II

      

3.375% due 2026 (Ê)

   117      121 

2.625% due 2027 (Ê)

   8      8 

2.750% due 2032 (Ê)

   43      44 

30 Year TBA(Ï)

      

4.000%

   4,840      4,833 

5.000%

   1,000      1,063 

Goldman Sachs Mortgage Securities Corp. II
Series 2007-GG10 Class A4
5.807% due 08/10/45

   500      523 

Government National Mortgage Association
Series 2000-29 Class F
0.761% due 09/20/30 (Ê)

   13      13 

Interest Only STRIP
6.539% due 05/16/37 (Ê)

   2,923      435 

Series 2010-116 Class MP
3.500% due 09/16/40

   2,094      2,094 

Greenwich Capital Commercial Funding Corp.
Series 2002-C1 Class A4
4.948% due 01/11/35

   685      717 

Series 2004-GG1 Class A7
5.317% due 06/10/36

   465      502 

Series 2006-GG7 Class A4
5.883% due 07/10/38 (Ê)

   1,105      1,206 

Series 2007-GG9 Class A4
5.444% due 03/10/39

   1,115      1,175 

GS Mortgage Securities Corp. II
Series 2006-GG6 Class A4
5.553% due 04/10/38

   320      344 

Series 2006-GG8 Class AAB
5.535% due 11/10/39

   200      212 

GSR Mortgage Loan Trust
Series 2005-AR7 Class 6A1
5.193% due 11/25/35 (Ê)

   160      156 

Series 2006-2F Class 3A3
6.000% due 02/25/36

   812      652 

Series 2006-3F Class 2A3
5.750% due 03/25/36

   385      340 

Series 2006-8F Class 4A17
6.000% due 09/25/36

   543      467 

Series 2007-AR1 Class 1A1
3.013% due 03/25/37 (Ê)

   1,708      1,081 

Series 2007-AR2 Class 2A1
3.276% due 05/25/47 (Ê)

   1,006      763 

Harborview Mortgage Loan Trust
Series 2005-3 Class 2A1A
0.501% due 06/19/35 (Ê)

   1,404      951 

Series 2005-4 Class 3A1
2.960% due 07/19/35

   122      97 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Indymac Index Mortgage Loan Trust
Series 2005-AR15 Class A1
5.047% due 09/25/35

   512      426 

Series 2006-AR35 Class 2A1A
0.431% due 01/25/37 (Ê)

   544      292 

Series 2007-AR5 Class 1A1
5.086% due 05/25/37

   632      317 

JP Morgan Chase Commercial Mortgage Securities Corp.
Series 2001-CIB3 Class A3
6.465% due 11/15/35 (Ê)

   646      664 

Series 2004-LN2 Class A1
4.475% due 07/15/41 (Ê)

   231      236 

Series 2005-LDP4 Class A3A1
4.871% due 10/15/42 (Ê)

   185      187 

Series 2005-LDP4 Class A4
4.918% due 10/15/42 (Ê)

   325      344 

Series 2005-LDP5 Class A4
5.203% due 12/15/44 (Ê)

   390      420 

Series 2006-CB16 Class A4
5.552% due 05/12/45 (Ê)

   220      235 

Series 2006-LDP7 Class A4
5.872% due 04/15/45 (Ê)

   650      711 

Series 2006-LDP8 Class A3B
5.447% due 05/15/45 (Ê)

   250      261 

Series 2006-LDP8 Class A4
5.399% due 05/15/45 (Ê)

   290      309 

Series 2007-CB18 Class A4
5.440% due 06/12/47 (Ê)

   1,200      1,258 

Series 2007-CB19 Class A4
5.742% due 02/12/49 (Ê)

   340      361 

Series 2007-LD12 Class A4
5.882% due 02/15/51 (Ê)

   100      106 

Series 2007-LDPX Class A3
5.420% due 01/15/49 (Ê)

   700      728 

JP Morgan Mortgage Trust
Series 2005-A1 Class 6T1
5.036% due 02/25/35 (Ê)

   60      60 

Series 2005-A5 Class TA1
5.415% due 08/25/35

   562      551 

Series 2005-S3 Class 1A2

      

5.750% due 01/25/36

   95      86 

Series 2007-A1 Class 2A2
3.102% due 07/25/35 (Ê)

   406      377 

Series 2007-A4 Class 3A1
5.885% due 06/25/37

   2,182      1,900 

Series 2007-S3 Class 1A8
6.000% due 08/25/37

   1,401      1,339 

LB-UBS Commercial Mortgage Trust
Series 2006-C1 Class A4
5.156% due 02/15/31

   1,500      1,602 

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

   258      211 

Series 2006-8 Class 2A1
0.681% due 12/25/36 (Ê)

   639      363 

Series 2007-8 Class 3A1
7.250% due 09/25/37

   797      438 
 

 

 62   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Lehman XS Trust
Series 2007-7N Class 1A2
0.501% due 06/25/47 (Ê)

   785      425 

MASTR Alternative Loans Trust Series
2003-4 Class B1
5.738% due 06/25/33

   147      99 

Series 2004-10 Class 5A6
5.750% due 09/25/34

   152      152 

Mellon Residential Funding Corp.
Series 2000-TBC2 Class A1
0.740% due 06/15/30 (Ê)

   108      105 

Merrill Lynch Floating Trust
Series 2006-1 Class A
1 0.330% due 06/15/22 (Ê)(Þ)

   405      393 

Merrill Lynch Mortgage Investors, Inc.
Series 2005-A10 Class A
0.471% due 02/25/36 (Ê)

   83      63 

Merrill Lynch/Countrywide Commercial Mortgage Trust
Series 2007-6 Class A4
5.485% due 03/12/51

   100      102 

MLCC Mortgage Investors, Inc.
Series 2005-3 Class 5A
0.511% due 11/25/35 (Ê)

   49      44 

Morgan Stanley Capital I
Series 2005-HQ6 Class A4A
4.989% due 08/13/42

   740      784 

Series 2005-IQ10 Class AAB
5.178% due 09/15/42

   407      427 

Series 2006-HQ9 Class A4
5.731% due 07/12/44

   295      320 

Series 2006-HQ10 Class A4
5.328% due 11/12/41

   130      138 

Series 2007-T27 Class A4
5.648% due 06/11/42

   675      733 

NCUA Guaranteed Notes
Series 2010-C1 Class APT
2.650% due 10/29/20

   498      484 

Series 2010-R1 Class 1A
0.715% due 10/07/20 (Ê)

   1,572      1,570 

Series 2010-R2 Class 1A
0.635% due 11/06/17 (Ê)

   1,591      1,591 

Series 2010-R2 Class 2A
0.735% due 11/05/20 (Ê)

   806      801 

Prime Mortgage Trust
Series 2004-CL1 Class 1A2
0.661% due 02/25/34 (Ê)

   19      17 

Residential Accredit Loans, Inc.
Series 2005-QO5 Class A1
1.328% due 01/25/46 (Ê)

   1,708      981 

Series 2005-QS13 Class 2A3
5.750% due 09/25/35

   386      338 

Series 2007-QO4 Class A1
0.461% due 05/25/47 (Ê)

   1,383      811 

Residential Asset Securitization Trust
Series 2003-A15 Class 1A2
0.711% due 02/25/34 (Ê)

   151      140 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

Series 2005-A10 Class A3
5.500% due 09/25/35

   319      269 

Series 2006-A9CB Class A6
6.000% due 09/25/36

   259      156 

Residential Funding Mortgage Securities I
Series 2005-SA4 Class 2A1
3.212% due 09/25/35 (Ê)

   440      352 

Series 2006-SA4 Class 2A1
6.092% due 11/25/36 (Ê)

   281      208 

Sequoia Mortgage Trust
Series 2001-5 Class A
0.611% due 10/19/26 (Ê)

   46      39 

Structured Adjustable Rate Mortgage Loan Trust
Series 2004-12 Class 3A2
2.716% due 09/25/34 (Ê)

   48      41 

Series 2004-16 Class 3A1
2.736% due 11/25/34 (Ê)

   187      161 

Series 2006-12 Class 2A1
5.605% due 01/25/37

   620      481 

Structured Asset Mortgage Investments, Inc.
Series 2005-AR5 Class A3
0.511% due 07/19/35 (Ê)

   138      128 

Series 2006-AR2 Class A1
0.491% due 02/25/36 (Ê)

   446      290 

Series 2006-AR8 Class A1A
0.461% due 10/25/36 (Ê)

   623      403 

Structured Asset Securities Corp.
Series 2003-34A Class 5A4
2.650% due 11/25/33 (Ê)

   733      712 

Suntrust Adjustable Rate Mortgage Loan Trust
Series 2007-2 Class 3A3
5.612% due 04/25/37 (Ê)

   3,044      2,586 

Thornburg Mortgage Securities Trust
Series 2006-5 Class A1
0.381% due 10/25/46 (Ê)

   752      745 

Series 2006-6 Class A1
0.371% due 11/25/46 (Ê)

   76      75 

Wachovia Bank Commercial Mortgage Trust
Series 2005-C21 Class A4
5.204% due 10/15/44

   1,000      1,081 

Series 2006-C27 Class A3
5.765% due 07/15/45

   700      753 

Washington Mutual Alternative Mortgage Pass-Through Certificates
Series 2007-OA1 Class 2A
1.043% due 12/25/46 (Ê)

   585      278 

Washington Mutual Mortgage Pass Through Certificates
Series 2005-AR6 Class B3
0.921% due 04/25/45 (Å)(Ê)

   189      10 

Series 2005-AR13 Class A1A1
0.551% due 10/25/45 (Ê)

   28      23 

Series 2005-AR17 Class A1A1
0.531% due 12/25/45 (Ê)

   332      283 

Series 2006-AR2 Class 1A1
4.991% due 03/25/37 (Ê)

   475      386 

 

Core Bond Fund 63


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Series 2007-HY3 Class 4B1 Interest Only STRIP
5.009% due 03/25/37 (Ê)

   124      9 

Wells Fargo Mortgage Backed Securities Trust
Series 2006-2 Class 2A3
5.500% due 03/25/36

   250      233 

Series 2006-6 Class 1A22
6.000% due 05/25/36 (Ê)

   1,300      1,208 

Series 2006-AR2 Class 2A1
3.425% due 03/25/36

   205      181 

Series 2006-AR10 Class 4A1
5.046% due 07/25/36 (Ê)

   55      43 

Series 2006-AR14 Class 1A7
5.739% due 10/25/36

   1,700      1,450 

Series 2006-AR17 Class A1
5.017% due 10/25/36 (Ê)

   1,116      908 

Series 2007-8 Class 1A16
6.000% due 07/25/37

   224      200 

Series 2007-AR8 Class A1
6.134% due 11/25/37

   375      302 
         
       214,431 
         
Municipal Bonds - 1.9%      

Chicago Transit Authority Revenue Bonds
6.899% due 12/01/40

   400      396 

City of New York New York General Obligation Unlimited
6.246% due 06/01/35

   1,100      1,077 

Connecticut State Health & Educational Facility Authority Revenue Bonds
5.000% due 07/01/42

   100      101 

County of Clark Nevada Revenue Bonds
6.820% due 07/01/45

   100      98 

Illinois Municipal Electric Agency Revenue Bonds
6.832% due 02/01/35

   100      103 

Irvine Ranch Water District Revenue Bonds
6.622% due 05/01/40

   1,000      1,003 

Los Angeles Unified School District General Obligation Unlimited
4.500% due 07/01/22 (µ)

   400      392 

New Jersey State Turnpike Authority Revenue Bonds
7.102% due 01/01/41

   1,000      1,084 

New York State Dormitory Authority Revenue Bonds
5.000% due 07/01/40

   50      50 

North Carolina Turnkpike Authority Revenue Bonds
6.700% due 01/01/39

   100      104 

Northern California Power Agency Revenue Bonds
7.311% due 06/01/40

   1,000      1,011 

Public Power Generation Agency Revenue Bonds
7.242% due 01/01/41

   100      99 
   Principal
Amount ($)
or Shares
     Market
Value
$
 

State of California General Obligation Unlimited
7.500% due 04/01/34

   425      439 

7.950% due 03/01/36

   110      113 

5.650% due 04/01/39 (Ê)

   100      106 

7.550% due 04/01/39

   655      680 

7.625% due 03/01/40

   400      417 

7.600% due 11/01/40

   325      338 

State of Illinois General Obligation Unlimited
4.071% due 01/01/14

   100      101 

7.350% due 07/01/35

   550      539 

State of Louisiana Revenue Bonds
3.000% due 05/01/43 (Ê)

   400      404 

University of California Revenue Bonds
6.270% due 05/15/31

   400      388 
         
       9,043 
         
Non-US Bonds - 1.5%      

Argentina Government International Bond
6.500% due 12/15/35

   EUR 1,730      290 

Canadian Government Bond
2.500% due 09/01/13

   CAD 400      409 

2.000% due 12/01/14

   CAD 1,000      997 

FCE Bank plc
7.125% due 01/15/13

   EUR 600      838 

Federative Republic of Brazil
12.500% due 01/05/22

   BRL 300      215 

10.250% due 01/10/28

   BRL 1,400      875 

Fortis Bank Nederland Holding NV
3.000% due 04/17/12

   EUR 200      273 

Hellas Telecommunications Luxembourg V Series REGS
4.835% due 10/15/12 (Ê)

   EUR 128      38 

Impress Holdings BV Series REGS
3.960% due 09/15/13 (Ê)

   EUR 125      166 

Mexican Bonos Series M 20
10.000% due 12/05/24

   MXN 3,991      403 

Mexican Bonos Desarr
8.500% due 11/18/38

   MXN 1,726      149 

Morgan Stanley
1.029% due 03/01/13 (Ê)

   EUR 600      766 

Province of Ontario Canada
4.700% due 06/02/37

   CAD 400      423 

4.600% due 06/02/39

   CAD 100      105 

Societe Financement de l’Economie Francaise
2.125% due 05/20/12

   EUR 100      136 

South Africa Government Bond
Series R204
8.000% due 12/21/18

   ZAR 1,900      287 

Series R208
6.750% due 03/31/21

   ZAR 4,340      594 
         
       6,964 
         
United States Government Agencies - 3.8%  

Fannie Mae
5.375% due 06/12/17

   900      1,036 

 

 64   Core Bond Fund


Table of Contents

Russell Investment Funds

Core Bond Fund

Schedule of Investments, continued — December 31, 2010

Amounts in thousands (except share amounts)

 

   Principal
Amount ($)
or Shares
     Market
Value
$
 
      

Federal Home Loan Banks
0.600% due 06/04/12

   1,570      1,570 

3.625% due 10/18/13

   100      107 

3.125% due 12/13/13

   200      211 

4.500% due 09/13/19

   1,100      1,183 

Federal Home Loan Mortgage Corp.
0.330% due 10/12/12 (Ê)

   2,970      2,976 

1.750% due 09/10/15

   1,000      983 

Federal National Mortgage Association
0.281% due 08/23/12 (Ê)

   855      855 

0.420% due 09/13/12 (Ê)

   1,455      1,457 

0.291% due 10/18/12 (Ê)

   1,485      1,486 

1.250% due 08/20/13

   100      101 

1.125% due 09/30/13

   100      100 

2.875% due 12/11/13

   100      105 

0.750% due 12/18/13

   2,600      2,571 

3.000% due 09/16/14

   500      527 

1.625% due 10/26/15

   100      97 

Freddie Mac
5.000% due 07/15/14

   500      560 

4.375% due 07/17/15

   900      993 

5.250% due 04/18/16

   600      686 

5.000% due 02/16/17

   100      113 

Tennessee Valley Authority
4.625% due 09/15/60

   100      94 
         
       17,811 
         
United States Government Treasuries - 9.3%  

United States Treasury Principal
Principal Only STRIP
Zero coupon due 11/15/21

   1,938      1,288 

United States Treasury Inflation Indexed Bonds

      

3.375% due 01/15/12 (Æ)

   1,293      1,352 

3.000% due 07/15/12

   730      775 

2.000% due 01/15/16 (Æ)

   1,320      1,437 

1.250% due 07/15/20 (Æ)

   401      411 

2.375% due 01/15/25 (Æ)

   4,125