Table of Contents
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, 2011 to December 31, 2011
Table of Contents
Item 1. Reports to Stockholders
Table of Contents
2011 ANNUAL REPORT
Russell
Investment Funds
DECEMBER 31, 2011
FUND
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
Global Real Estate Securities Fund
Table of Contents
Russell Investment Funds
Russell Investment Funds is a
series investment company with
ten different investment portfolios referred to as Funds. These
financial statements report on five
of these Funds.
Table of Contents
Russell Investment Funds
Annual Report
December 31, 2011
Table of Contents
Table of Contents
Russell Investment Funds
Copyright © Russell Investments 2012. 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 distributed through Russell Financial Services, Inc., member FINRA and part of Russell Investments.
Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Index return information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its affiliates.
Russell Investments is the owner of the trademarks, service marks, and copyrights related to its respective indexes.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.
Table of Contents
I am pleased to present you with Russell Investment Funds’ 2011 Annual Report for the fiscal year ending December 31, 2011. Inside you’ll find portfolio management discussions and fund performance information.
Although 2011 proved to be a challenging year for world markets, all of us at Russell remain focused on our primary mission — improving financial security for people.
For over 75 years, we’ve helped clients invest in all kinds of markets throughout the market cycle. During good times and uncertain times, we are guided by the same disciplined, long-term investment approach. We conduct our own objective research of worldwide capital markets and independent money managers, which allows us to build portfolios with a global perspective.
In 2011, we witnessed non-stop assaults on the world economy: an earthquake, tsunami and nuclear disaster in Japan; ongoing conflicts in the Middle East; a financial crisis in Europe centered in Greece, Italy and Spain; the downgrade of U.S. debt in the summer; and continued market volatility throughout the fall.
As of December 31, 2011, the broad global equity market, represented by the Russell Global Index, was down 7.67% year-to-date. Market volatility made the journey even more unsettling for many investors. To help you cope with such uncertain times, we suggest you work closely with your financial advisor.
Your advisor can help you focus on your investment goals and the plan to help you reach them. We also believe it’s important to talk with your advisor about the mix of investments in your portfolio to make sure you are comfortable with them and your investment time horizon.
Volatile markets — like those we endured in 2011 — are often driven by emotions in the short-term. Longer-term, we believe underlying fundamentals drive the market. This belief, along with a thoughtful plan and globally diversified portfolio, can help you look past the day-to-day market gyrations and help you reach your long-term goals.
From all of us at Russell Investments, thank you for the trust you have placed in our firm.
Best regards,
Sandra Cavanaugh
CEO, Americas Private Client Services
Russell Investment Management Company
| To Our Shareholders | 3 |
Table of Contents
Russell Investment Funds
Market Summary as of December 31, 2011 (Unaudited)
U.S. Equity Markets
The fiscal year ended December 31, 2011 was a relatively tumultuous period for the U.S. equity market. Despite macroeconomic uncertainty and high levels of volatility, the Russell 1000® Index rose 1.50%, while the Russell 2000® Index lost 4.18% over the year.
The U.S. equity market started off strongly in 2011. Investor confidence was buoyed by the Federal Reserve’s second round of quantitative easing (“QE2”), which demonstrated the Federal Reserve’s willingness to take action to stimulate the U.S. economy. This, in combination with positive corporate earnings numbers, drove up both equity and real asset markets. The energy sector was the largest beneficiary of this expansion through early 2011, as rising crude oil prices contributed to rising share prices of oil producers and distributors. The strong performance of energy and other cyclically-oriented sectors resulted in factors such as high beta (a stock’s sensitivity to market movement) and high earnings variability being rewarded during the first quarter.
The strength of the U.S. equity market rally was underlined by four months of consecutive positive returns for U.S. large capitalization stocks, as the Russell 1000® Index rose 9.44% between January 1, 2011 and April 30, 2011. U.S. small capitalization stocks were even larger beneficiaries of investors’ elevated appetite for risk, with the Russell 2000® Index appreciating 10.79% over the same period.
Though there was some economic optimism that underlined relatively strong equity returns during the first four months of 2011, the period was also marked by high volatility and macroeconomic concerns. In January, oil prices began to rise due to unrest across the Arab world. Beginning with the ousting of Tunisia’s president on January 14th, 2011, a number of Arab nations ruled by authoritarian regimes experienced popular uprisings in what became known as the “Arab Spring.” The initial upheaval in Tunisia and Egypt quickly led to the overthrow of both governments. However, unrest in Libya and growing concern about unrest in Saudi Arabia caused many investors to fear a potential oil supply disruption. While Saudi Arabia managed to avert a serious crisis, Libya disintegrated into civil war and this turmoil helped drive crude oil prices above $100 per barrel, a psychologically important number for investors.
With the market struggling to digest the potential impact of the “Arab Spring,” on March 11th, 2011, a large earthquake and tsunami ravaged a significant portion of Japan, the world’s third largest economy. The natural disaster devastated key parts of Japan’s industrial heartland, including the country’s automotive industry, and caused a nuclear crisis at the Fukushima nuclear plant. The Fukushima crisis fomented global criticism of nuclear power and provided a further tailwind to rising oil prices.
In the month following Japan’s disaster and bolstered by the ongoing war in Libya, West Texas Intermediate crude oil prices, which are a key input to U.S. gasoline prices, peaked at over $110 dollars a barrel. These were price levels not seen since the oil price rally of 2007. The negative economic impacts of such elevated prices on inflation and the consumer caused many investors and governments to become more concerned about the detrimental effect these prices would have on the fragile global economic recovery. In June 2011, the International Energy Agency released 60 million barrels of oil into the market in an effort to push oil prices down. This contributed to a decrease in oil prices over the following months. After leading markets during early 2011, energy stocks struggled throughout the second and third quarters of 2011 in response to lower oil prices and global economic concerns and were among the worst performing stocks in the Russell 1000® and Russell 2000® Indexes.
While economic concerns remained, the positive impact of lower oil prices on consumer spending and the diminishing risks of inflation provided investors with some hope that the global economic recovery could continue. However, the optimism quickly dissipated in June with the re-emergence of the European debt crisis, as Greece, Italian and Spanish bond yields rose rapidly. With fears that the sovereign debt contagion had spread to Italy and Spain, investors questioned the viability of both the Eurozone and the European Union.
| 4 | Market Summary |
Table of Contents
Russell Investment Funds
Sovereign debt issues became the key market theme for the next several months. While Europe continued to be mired in uncertainty, the U.S. became the focal point of investor concern in late July and early August, as political contention over the budget deficit threatened to result in a U.S. government debt default. While this outcome was eventually avoided, the uncertainty resulted in Standards & Poor’s downgrade of U.S. sovereign debt from its prestigious AAA credit rating. This downgrade, along with weakening U.S. economic data such as disappointing housing data and increasing unemployment, was a catalyst for a U.S. equity market sell-off, which was further exacerbated by the political gridlock in Europe on a solution to the ongoing sovereign debt crisis. Consequentially, the Russell 1000® Index and the Russell 2000® Index both experienced one of the largest quarterly declines in their history, falling 14.68% and 21.87% in the third quarter, respectively.
The market’s focus on macroeconomic news, especially coming out of Europe, drove correlations among stocks higher and was a large determinant of overall market performance. The fear and macro-driven market environment during the second and third quarters of 2011 saw higher risk stocks penalized. Consequently, stocks perceived to be sensitive to economic growth, including those with higher betas and more cyclical earnings patterns, struggled. Investors sought stocks in categories that are traditionally viewed as “safe” investments, such as consumer staples and utilities. As a result, stocks with low volatility and high dividend yields performed best, as investors looked to reduce their sensitivity to a potentially weakening economic environment.
While the sell off pushed the market into bear market territory, October saw the U.S. equity market rebound as fears about another global economic meltdown eased. Many market commentators viewed the magnitude of the rebound as the result of the deeply depressed valuations witnessed in September. The dividend yield on the Russell 1000® Index and the S&P 500® Index both surpassed the yield on 10-Year Treasury notes. Investors began to show more willingness to take the risk of owning high growth stocks and stocks with very low price-to-earnings and price-to-book ratios as a result of the sell off. With economic data showing positive but slow economic growth and European governments making progress on the sovereign debt crisis, market fears declined through October.
The month of October was particularly strong for U.S. equities. The Russell 1000® Index finished up 11.21%, just 61 basis points shy of the overall fourth quarter return and the Russell 1000® Index’s highest one-month return since December of 1991. The Russell 2000® Index rose 11.21%. Following October, the U.S. equity market began to exhibit some of the same trends from earlier in 2011. As a whole, the fourth quarter was different from a factor and characteristics perspective than the rest of 2011, though much of the difference was due to the month of October. November was slightly more turbulent, with the market ending close to even for the month. After the optimism of October, investors became increasingly worried about the implications of the ongoing European debt crisis. These fears were evidenced by the rapid increase in Italian bond yields, which rose above the psychologically important 7% threshold, and by a weak German bond auction during November. The failure to stem the continuing European debt crisis caused equity markets to fall throughout much of November. However, in response to news of a coordinated monetary easing from the European Central Bank and the central banks of the U.S., Canada, Switzerland, Japan, and the U.K., equity markets rallied in the last week of November. December was the least volatile month of the quarter, partially due to low trading volumes. The market was also supported by declining U.S. unemployment figures (9.1% for September, 9.0% for October, 8.6% for November as measured by U.S. Bureau of Labor Statistics), declining year-over-year inflation figures (3.9% for September, 3.6% for October, 3.4% for November as measured by U.S. Bureau of Labor Statistics) and positive U.S. housing market news, including an increase in housing starts. However it was low beta stocks that led the market’s positive move during December.
The overall style environment during the year favored growth managers. The Russell 1000® Growth Index returned 2.64% and the Russell 1000® Value Index returned 0.39%. As the market struggled during the second and third quarters of 2011, growth managers were better able to limit losses. Quality elements of many growth companies, including high profitability and low amounts of debt, were beneficial to growth stock performance. However, many growth managers struggled to match their benchmarks as their higher beta positioning was out of favor during the market’s most risk averse portions of the year. Some more cyclical exposures that are commonly held among value managers, including high earnings variability, leverage and low valuations, all provided headwinds to performance during the fiscal year. Market leadership was narrow overall, with the Russell 1000® Index utilities sector outperforming the Russell 1000® Index by approximately 1100 basis points during the year. Although the Top 50 capitalization tier of the Russell 1000® Index generated a positive return for the year, the remaining 950 stocks, in aggregate, produced negative returns.
| Market Summary | 5 |
Table of Contents
Russell Investment Funds
Non-U.S. Developed Equity Markets
For the fiscal year ended December 31, 2011, the non-U.S. equity market as measured by the Russell Developed ex-U.S. Large Cap® Index (the “Index”) was down 12.35%. The period was marked by volatile swings in stock prices and a series of unfavorable global developments. With the depressed U.S. housing market continuing to negatively affect the global economy and an increasingly difficult credit crisis gripping Europe, Japan’s earthquake and tsunami dealt a serious blow to Japan’s already struggling economy and added to the difficult global market environment. Japan’s earthquake severely damaged its Fukushima nuclear power facility, and the economic ripple effects of the nuclear disaster were evident in major changes to national energy policies and global supply chains, most notably in the global auto and technology industries. With the added threats of mounting inflationary pressures in emerging markets due to rising commodity prices, including food and energy, and civil unrest in the Middle East, investors grew increasingly risk averse as 2011 progressed.
Amidst the uncertainty in the global economy, corporate earnings proved resilient through the period as expectations for sharp deterioration in earnings were not realized. The European Union’s decision to write down Greece’s debt and recapitalize many European banks was welcomed by investors. While markets rallied in October on the European Union’s assurances that it would reach a successful resolution of the sovereign debt crisis, the lack of tangible details eroded much of the confidence provided by this plan.
After weakening sharply in the first half of 2011, the U.S. dollar rapidly recovered versus other major currencies as investor outlook dimmed with worsening global economic conditions. The net impact over the full year was a slight degradation of international equity market performance for U.S. dollar investors. The Index fell 11.9% in local currencies. The U.S. Federal Reserve’s first and second rounds of quantitative easing (a form of monetary policy used to increase the money supply through the Federal Reserve’s purchase of government securities or other securities from the market), combined with indications that there could be more rounds of such activity to come, kept the dollar down for much of the period, even as the global market’s flight to quality continued to support U.S. debt issuance at historically low yields.
In a world increasingly concerned with flagging economic growth, investors gravitated to areas of the market most likely able to sustain growth in a weak global economy. This favored stable growth sectors such as consumer staples and health care and growth oriented investment strategies in general. The Russell Developed ex-U.S. Large Cap Growth® Index ended the 12-month period down 9.60%. In contrast, the Russell Developed ex-U.S. Large Cap Value® Index was down more than 14.5%, with its heavy exposure to financial stocks a major factor in its underperformance.
Regionally, the United Kingdom (U.K.) offered some downside protection to market declines. The U.K. is home to many of the world’s largest consumer staples, health care and energy companies. Unilever, British American Tobacco, GlaxoSmithKline, British Petroleum and Shell are the types of stable earning companies investors favored during the period. Stocks in the Russell Europe ex-U.K. Index fell a less dramatic 4.8%.
Japan’s geographic and economic distance from Europe should have proved an advantage as Japanese share prices started the period at already depressed levels. However, the March earthquake and ensuing nuclear disaster eroded Japan’s position as a relative safe haven. Japanese shares ended the period down 12.6% in U.S. dollars as measured by the Russell Asia ex-Japan Index. A strengthening yen continued to challenge Japanese export companies, but benefited foreign investors. The Japanese market was down over 17% in Yen terms as measured by the Russell Asia ex-Japan Index.
Given its link to global economics, Asia/Pacific ex-Japan as a region performed in line with the broad non-US equity markets, falling slightly more than 12% as measured by the Index. The outlook of potentially weakening future demand had an erosive impact on commodity producing countries, specifically Australia. Within the region, Hong Kong fell sharply, down 18.5%, on fears that China’s anti-inflationary measures would cause an economic slowdown.
Europe ex-U.K. was the worst performing region within the developed markets, declining 15.2% for the period. Europe’s greatest detriment remained the increasing risk of a sovereign debt default in Greece, Ireland, Italy, Portugal, and Spain. A default represents a serious threat to the survival of the European Union, as the economically healthier nations would be forced to bail out their more fiscally stressed members. While the stock markets of the distressed European nations fell collectively, led by the nearly 57% drop in the value of Greek shares, the stock markets of more fiscally sound Germany and France also reflected the strains, and ended the period down 18.1% and 16.7%, respectively, as measured by the Index.
| 6 | Market Summary |
Table of Contents
Russell Investment Funds
The woes of Asia/Pacific ex-Japan and Europe ex-U.K. were reflected in sector performance. Classically defensive sectors, such as consumer staples, health care and telecommunications, led the non-U.S. equity market, with health care faring best at a 6.1% gain for the period as measured by the Index. While areas most dependent on economic expansion, such as financials, consumer discretionary and technology, experienced short-lived rallies during the year, the faltering global recovery took its toll, with these sectors slumping 14-20% as measured by the Russell Large Cap Developed ex-U.S. Financial, Consumer Discretionary and Technology Indexes. An outlier were energy stocks, which only fell 3.7% as measured by the Russell Large Cap Developed ex-U.S. Energy Index, as unrest within a number of energy producing nations kept global oil prices at elevated levels.
Mining/materials stocks were the worst performers in the period, down 22.9% as measured by the Russell Large Cap Developed ex-U.S. Materials Index on the outlook for slower growth in the developed economies and in China, which is a major buyer of iron ore and copper. Beyond this, the stresses facing the global financial sector, including persistent weakness in the U.S. housing/mortgage market, exposure to distressed sovereign debts and the additional threats of high unemployment and anemic capital markets, contributed to the financial sector falling 19.9% as measured by the Russell Large Cap Developed ex-U.S. Financials Index. European bank stocks slid on fears that degradation in the value of holdings in “risk free” sovereign debt securities such as Greece and other highly indebted nations might result in a bank collapse. Technology stocks also lagged, falling 20% during the year as measured by the Russell Large Cap Developed ex-U.S. Technology Index, given slower demand for European tech hardware used in manufacturing and renewed corporate reduction in capital expenditures and use of consulting services.
Emerging Markets
The Russell Emerging Markets Index (the “Index”) was down 19.40% over the fiscal year ended December 31, 2011. The period was characterized by high levels of volatility and macro-economic events that impacted the market, such as Middle East conflict in early 2011 and the European sovereign debt crisis in the second half of the year. Inflationary pressures remained strong during the most of the fiscal year. However, emerging markets central banks raised interest rates to contain inflation and emerging markets’ currencies appreciated in value relative to the U.S. dollar until the summer of 2011, when, driven by market fears, investors redeemed capital out of emerging markets, causing a market decline. After late summer 2011, as concerns regarding inflation decreased, emerging markets eased their anti-inflationary monetary policies, providing some relief to their capital markets. However, inflationary concerns were replaced with concerns regarding slowdown of global demand and the negative effect on economic growth.
In early 2011, investors lost some of their appetite for emerging market stocks, as pro-democracy movements swept through oil-producing regions in North Africa and the Middle East. This pushed up the price of crude oil, prompted worries about global economic growth, and served as a reminder of the political risks that can accompany investments in emerging markets. Investors’ risk appetite was further diminished by an earthquake, tsunami and nuclear disaster in Japan, which disrupted global manufacturing supply chains. The Index held up relatively well in the first quarter of 2011 given the magnitude of these events, returning 1.41% over that period.
During the second quarter of 2011, rising prices, particularly of food and energy, became a concern for policymakers in the developing world. Central banks in emerging markets weighed the need to control inflation against the possibility of encouraging destabilizing capital inflows from developed markets, where interest rates remained at or close to historic lows. Despite these concerns, policymakers across the developing world opted to increase interest rates. While this strengthened the currencies of some countries, equity markets suffered as a result of the increases and the Index declined 0.85% during the quarter.
The third quarter of 2011 was characterized by a deepening sovereign debt crisis in Europe, caused by the excessive debt of Greece and other European countries. By September, the International Monetary Fund (“IMF”) warned that the global economy had entered a “dangerous new phase.” IMF estimates showed that the chance of a serious slowdown in the global economy had doubled since earlier in the year. In a reminder that slowdown in the developed world carried risks for emerging markets, the IMF also warned that the developing world faced the risk of sharp reversals or even a sudden stop in economic growth. The overall effect of this economic uncertainty was a sharp rise in risk aversion during the third quarter of 2011, which caused investors to flee from emerging market equities in favor of safe-haven investments such as U.S., German and United Kingdom government bonds. The Index declined 22.38% during the third quarter.
The fourth quarter started off positively, as a resolution to the European debt crisis seemed possible. The Index recovered 12.59% in October. However, this optimism quickly unraveled as continental European governments reacted negatively to the U.K. Prime Minister’s decision to seek an exemption to pending regulations that might have a deleterious impact to London’s financial center. Purchasing Managers Index data showed contractionary signals, both in
| Market Summary | 7 |
Table of Contents
Russell Investment Funds
developed and emerging markets nations, while earnings revisions continued to fall. The remainder of the quarter was a difficult and volatile period for emerging markets. Stocks across the developing world tumbled on slowing global economic activity and continued uncertainty about European sovereign debt crisis. Emerging markets’ returns were further impacted by currency volatility. As European banks sought to shore up their balance sheets, they sharply curtailed loans to emerging markets and the resulting capital flight caused the value of many emerging markets currencies to fall. Emerging markets were mixed at the individual country level, but overall ended the period 3.27% higher as measured by the Index.
As energy companies comprise a large percentage of the Russian market, a double-digit rise in the price of crude oil contributed to Russia’s strong performance through November. In December, however, Russian equities fell due to political protests over the outcome of recent elections and the Russian market finished the year lower, declining 20.72% over the year as measured by the Index. The Czech Republic was the best performing emerging market in the European region during the year, declining 9.19% as measured by the Index, while Hungary and Turkey were among the worst performers. The Hungarian market fell by 34.07% as measured by the Index as its sovereign-debt crisis deepened. The problem was intensified when Hungary’s currency, the forint, fell to a record low against the Swiss franc, which is the currency in which most Hungarian mortgages are denominated. The Turkish stock market fell by 35.40% as measured by the Index as investors grew concerned that Turkey’s central bank was failing to address the country’s widening current-account deficit. Turkey’s foreign trade deficit, the key driver of the country’s increasing current account gap, grew significantly over the period, fueling market concerns that Turkish policy makers have failed to manage the fast-growing economy. Egypt was the worst performing country in the Europe, Middle East and Africa region. The Egyptian market fell 45.31% as measured by the Index as protests against military rulers continued.
In Latin America, Mexico was one of the best performing emerging markets in 2011. The Mexican market experienced a 13.23% loss as measured by the Index. High oil prices (which caused higher transportation costs) made Mexico’s proximity to the United States more valuable, while a fall in the peso made the country’s exports more competitive. Other Latin American markets followed the global trend downward due to the lower price of some mined commodities such as copper, since mined commodities represent a significant portion of the exports of some Latin American economies. The Chilean market, an important copper exporter, was the worst performing country in Latin America, falling 22.69% as measured by the Index. The one-year period also saw a dramatic change in Brazil’s monetary policy. Initially, the Brazilian interest rate was raised in an effort to control inflation. By August, however, Brazilian policymakers were lowering interest rates in order to shield the country’s economy from an expected global slowdown. By the end of October, Brazilian industrial output had contracted for two consecutive quarters, prompting recession worries. The central bank responded quickly and cut interest rates again in November and December, triggering a positive market response. Brazilian equities advanced 8.86% in third quarter and finished the year down 20.09% as measured by the Index.
In Asia, there was significant difference in country-by-country performance. Indonesia was the standout performer, gaining 3.94% as measured by the Index. Indonesia’s strong performance stood in contrast to weakening in two of Asia’s larger markets, as India and China were down 37.56% and 20.91%, respectively, as measured by the Index. The Reserve Bank of India undertook the fastest interest rate increase in its history and seven interest rate hikes in 2011 took India’s interest rate to 8.5% by the end of the period. In China, inflation hit a 37-month-high in July, even as the central bank raised interest rates. Chinese policymakers increased the required reserve ratio for banks on multiple occasions in the first half of the year, prompting renewed fears of a ‘hard landing’ in the Chinese economy. However, in the fourth quarter of 2011, Chinese policymakers took steps to loosen monetary policy and protect growth by reducing the reserve requirement ratio. Small Southeast Asian countries also performed strongly. Philippines and Malaysia gained 2.05% and 0.04%, respectively, as measured by the Index.
Throughout the year, political, economic, and corporate uncertainty caused defensive industries to be in favor across the globe. Specifically, consumer staples and utilities were the best performing sectors in 2011, falling 0.92% and 8.54%, respectively, as measured by the Index. While the materials and processing sector performed poorly on broad moderation in global demand for commodities, it was paradoxically gold mining that did the worst, largely as a result of relative optimism for equities (which increasingly appeared undervalued). Large capitalization stocks did significantly better than small capitalization stocks over the period.
U.S. Global Fixed Income Markets
The fiscal year ended December 31, 2011 started off strong for fixed income markets, with the continuation of the global credit rally. Fixed income sectors that carry credit risk (i.e., credit sectors) generally outperformed similar duration U.S.
| 8 | Market Summary |
Table of Contents
Russell Investment Funds
Treasury securities. However, investors became increasingly pessimistic starting in May, when negative economic data caused investors to revise growth forecasts downward. The less optimistic growth outlook started a flight-to-quality trend, which led to substantially positive performance for U.S. Treasuries, while nearly all other fixed income sectors suffered. This dynamic generally persisted until the fourth quarter, when the market environment for credit sectors was more favorable given positive economic data releases. However, overarching concerns over the European sovereign debt crisis continued to linger and contributed to a flight-to-quality in November despite a positive environment for credit sectors in the other months of the quarter. For the fiscal year ended December 31, 2011, the Barclays Capital U.S. Aggregate Bond Index and the BofAML Global High Yield Index (USD hedged) returned 7.84% and 3.18%, respectively. However, reflective of the generally poor environment for credit risk in 2011, these Indexes lost 1.14% and 4.22%, respectively, relative to similar duration U.S. Treasury securities. The difference in yields between longer maturity (e.g., 10-year note) and shorter maturity (e.g., 2-year note) U.S. Treasury securities decreased materially this year, which is known as “yield curve flattening.” The yield difference decreased the most in August when yields of longer maturity Treasury securities declined significantly during the flight-to-quality. Yields of shorter maturity Treasuries had a smaller magnitude of decline as yields on short maturity Treasuries were already at very low levels due to the U.S. Federal Reserve’s (the “Fed”) quantitative easing efforts to keep short-term interest rates low in order to stimulate economic growth. Thus, longer maturity Treasuries outperformed shorter maturity Treasuries in 2011.
Credit sectors performed well relative to similar duration U.S. Treasury securities during the first four months of the year, as the economy showed signs that it was stabilizing, which lead to economic growth forecasts that generally supported the performance of riskier assets. With Treasury prices falling and a continued market demand for riskier credit sector securities, credit sectors generally outperformed similar duration Treasuries through May 2011. During this same period, investors also faced a series geopolitical events occurring abroad that dampened investor optimism. In January, the markets focused on Egypt as an uprising of civil resistance resulted in protests, labor strikes and demonstrations in an effort to overthrow the Egyptian president. In February, while the Egyptian protests continued, the markets simultaneously focused their attention on the violent civil war in Libya. With Libya being a large producer of the world’s oil supply, investors had concerns over the Libyan civil war’s impact on oil prices, which rose 10% from the end of February through April as measured by the price change in West Texas Intermediate Crude Oil futures contracts.
The non-agency mortgage sector performance was generally strong during the first four months of the year. In April, the Fed began selling sub-prime securities that were acquired from American International Group (“AIG”) in 2008 and held in a trust called Maiden Lane II. The initial sales were received well by investors, who welcomed the additional supply in the marketplace as the non-agency mortgage market had been shrinking with little to no new issuance since the start of the financial crisis. However, the Fed announced an indefinite halt to the Maiden Lane II sales in June after watching the market prices for sub-prime mortgages drop materially since the initial sales due to a drawn out sales process. The sale of the Maiden Lane II assets involved frequent periodic sales that gave little time for investors to analyze and value the securities being sold, which dampened investors demand. The overall impact of the Fed’s sales was mixed as it demonstrated that there was pent-up demand for non-agency mortgages but also revealed the limits of the incremental demand and ultimately left non-agency mortgage prices lower. Generally, performance of non-agency mortgages was negative for the year.
The last eight months of the year were much more unfavorable than the first four. While credit sectors were able to push through many headwinds in the first part of the year, they began to underperform similar duration Treasury securities in May as investors started to lose optimism given the growing concerns over the European debt crisis, slowing U.S. economic growth, stagnant job market and negative housing market news. A renewed focus on these concerns sparked a flight-to-quality whereby investors sought the safety and liquidity of Treasuries over riskier credit sectors. Consequently, despite the formal end of the Fed’s quantitative easing in June, Treasury securities remained in demand and Treasury yields across all parts of the yield curve continued to decline.
Given the flight-to-quality and concerns over the negative impact of the European debt crisis on financial companies, financial-related corporate bonds performed poorly compared to non-financial corporate bonds. Generally, investors perceived non-financial corporate bond sub-sectors, such as industrials and utilities, to be less tied to the European debt crisis. Broadly, corporate bonds continued to exhibit low default rates and strong fundamentals, as many corporate bond issuers were able to refinance their debt after the peak of the financial crisis in 2008, putting them in a better financial position to repay their corporate debt going forward. As a relative comparison, global high yield corporate bonds generally underperformed emerging market debt in 2011 as emerging market debt securities tend to be longer in maturity and more interest rate sensitive than global high yield bonds. However, from a credit perspective, emerging market debt underperformed similar duration U.S. Treasury securities more than global high yield corporate bonds did.
| Market Summary | 9 |
Table of Contents
Russell Investment Funds
In July, concerns regarding a possible default and/or downgrade of U.S. government debt increased due to political gridlock and the possibility that the U.S. debt ceiling would not be raised in time to prevent a default. Ultimately, the debt ceiling was raised. However, Standard and Poor’s downgraded the U.S. debt rating to AA+ from the highest rating of AAA. Generally, a rating agency downgrade signals increased credit risk, which typically leads to higher yields to compensate investors for the additional risk. However, with serious concerns about the European debt crisis, U.S. Treasury securities reinforced their status as the world’s safe haven asset and saw their yields decline following the ratings downgrade. The dramatic flight-to-quality in early August caused Treasury yields to drop to historically low levels while credit sector yields lagged considerably or even rose in some instances.
With investors on edge and fearing the possibility of a recession, the Fed explicitly stated its intent to keep short-term interest rates low until at least mid-2013. Additionally, in September, the Fed formally announced a stimulus program to sell $400 billion in Treasury securities with maturities less than 3 years while purchasing the same amount in Treasury securities with maturities longer than 6 years. This was designed to lower longer term interest rates without the Fed having to take on additional debt. While the structure of the program was largely anticipated, investors underestimated its size. Thus, after the announcement, long term Treasury bonds saw a downward correction in yield to reflect the amount of the Fed’s buying. In addition, investors were surprised by the Fed’s simultaneous announcement of its intent to reinvest principal payments from its agency debt and agency mortgage-backed securities holdings back into agency mortgages-backed securities. This reinvestment plan was designed to keep mortgage rates low by creating demand for mortgage securities, thereby encouraging lenders to issue more mortgages to borrowers. This led to more divergent performance within agency mortgages depending on coupon and maturity date. The year ended on a higher note with a generally positive environment for credit sectors in the fourth quarter due to better than expected economic data and positive developments around the European debt crisis. For example, non-farm payrolls bested consensus estimates at the end of September. In addition, labor markets showed signs of improvement as the unemployment rate decreased from September to December. As seen by November’s flight-to-quality, in which the BofAML Global High Yield Index (USD hedged) lost 3.11% relative to similar duration Treasuries, investors still remained cautious throughout the quarter given the lack of a long term solution for the European debt crisis. However, some positive developments around the European debt crisis occurred near the end of November, including the expansion of the purview of the European Financial Stability Facility. In addition, a group of central banks (European Union, United States, Canada, Japan, England, and Switzerland) agreed to provide cheaper access to the U.S. dollar currency to commercial banks in each central bank’s respective jurisdiction. This coordinated effort by the central banks to improve financial market liquidity was a positive development for credit sectors.
| 10 | Market Summary |
Table of Contents
(This page intentionally left blank)
Table of Contents
Russell Investment Funds
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
| Multi-Style Equity Fund | ||||
| Total Return | |||
1 Year | (1.55 | )% | ||
5 Years | (0.24 | )%§ | ||
10 Years | 2.65 | %§ | ||
| Russell 1000® Index** | ||||
| Total Return | |||
1 Year | 1.50 | % | ||
5 Years | (0.02 | )%§ | ||
10 Years | 3.34 | %§ | ||
| 12 | Multi-Style Equity Fund |
Table of Contents
\
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (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 seven 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, 2011?
For the fiscal year ended December 31, 2011, the Multi-Style Equity Fund lost 1.55%. This is compared to the Fund’s benchmark, the Russell 1000® Index, which gained 1.50% 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, 2011, the Lipper® Large-Cap Core Funds (VIP) Average, a group of funds that Lipper considers to have investment strategies similar to those of the Fund, lost 1.08%. This result serves as a peer comparison and is expressed net of operating expenses.
RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is representative of the aggregate of each money manager’s benchmark index.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The year ended December 31, 2011 was driven almost entirely by defensively-oriented factors. Despite periods of more mixed factor and sector leadership, the strongly defensive second and third quarters of 2011 had a significant enough impact to largely determine investment outcomes for the entire period. Stocks with high betas were severely penalized during the year, as were stocks with low price-to-book ratios and debt-laden balance sheets. As investors began to lend more influence to the possibility of a double dip recession in the United States and a sovereign debt default in Europe, high quality and less economically sensitive stocks were rewarded. Stocks of companies with high returns-on-assets and high returns-on-equity fared best during the fiscal year. The largest capitalization stocks and those with high dividend yields also did well as investors became increasingly focused on owning more stable securities perceived to be better able to weather uncertain and difficult economic conditions.
The Fund was able to perform well during periods when economically sensitive sectors were rewarded and the market rotated toward stocks that would benefit from a continued economic recovery. In contrast, the Fund struggled during the more risk-averse environment during the second and third quarters of 2011. The third quarter alone accounted for more than half of the Fund’s underperformance for fiscal year.
Defensive stocks (i.e., less economically sensitive, less financially leveraged, and less volatile stocks) outperformed dynamic stocks (i.e., more economically sensitive, more financially leveraged, and more volatile stocks) both in the Russell 1000® Index and the Russell 2000® Index for the fiscal year. As the European market began to seriously price in the risk of a European sovereign debt default scenario in the third quarter of 2011, the Russell 1000® Index experienced its worst quarter of performance in almost 20 years. Not surprisingly, more defensive securities were able to perform better during this period. The Fund was positioned for a moderate economic recovery and was underweight to the more defensive stocks that performed best during that time period. This was detrimental to the Fund’s performance.
Similar to fiscal year 2010, growth stocks outperformed value stocks during fiscal year 2011. By far, the worst-performing sector within the Russell 1000® Index was financial services. Fears of a sovereign debt default and a double dip recession within the U.S. and Europe had an asymmetrical impact on the sector. In addition, the share price of many insurers was negatively impacted by the earthquake, tsunami and nuclear crisis in Japan. The best-performing sector in the Russell 1000® Index was consumer staples, followed by utilities. The utilities sector outperformed the Russell 1000® Index by more than 1100 basis points for the year. The strong performance of the consumer staples and utilities sectors evidences the year’s overall market trend, as investors sold stocks of economically sensitive companies and bought stocks of companies that may be less volatile but are subject to greater regulation and/or have limited growth potential.
How did the investment strategies and techniques employed by the Fund and its money managers affect its benchmark relative performance?
During the course of the fiscal year, the Fund was positioned for a continued U.S. economic recovery. The Fund performed well when investors were not focused on macroeconomic risks. During the second and third quarters of 2011, the Fund struggled amid a highly correlated global sell off of risky assets and a factor environment in which most measures of economic cyclicality and market sensitivity were severely penalized. The larger cap and more defensive managers were able to withstand this environment better than those with more economically sensitive exposures, including overweights to stocks with high betas and high earnings variability. The Fund was able to perform well during the month of October, when correlations fell, concerns over Europe receded and U.S. economic data began to show a brighter outlook, and the market rewarded stocks that were positioned to benefit from a
| Multi-Style Equity Fund | 13 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
continued economic recovery. The Fund’s underweight to stocks with high dividend yields and underweight to the largest cap stocks within the Russell 1000® Index both detracted from performance.
The largest detractor from Fund performance was stock selection. The impact was most significant from negative stock selection in the technology sector. Stock selection effects also detracted from returns within the financial services sector. The Fund saw little impact from sector weighting decisions during the year. It benefited from a slight overweight to the consumer discretionary sector during the period, but over the course of the fiscal year the impact was negligible.
BlackRock Capital Management, Inc. (“Blackrock”) underperformed the Russell 1000® Growth Index for the year. BlackRock’s earnings momentum strategy was unsuccessful during the year as the market rewarded more defensive and lower risk stocks. BlackRock’s overweight to stocks with high betas and underweight to stocks with high returns-on-equity both detracted from performance during the year. Stock selection effects were the largest driver of negative returns in the BlackRock portfolio.
Columbus Circle Investors (“Columbus Circle”) underperformed the Russell 1000® Growth Index for the year. Columbus Circle’s higher beta earnings momentum strategy faced severe factor headwinds during the year. A large underweight to stocks with high dividend yields detracted from returns during the year, as did a large underweight to stocks with high returns-on-equity. Stock selection effects detracted significantly within the technology and energy sectors.
DePrince, Race & Zollo, Inc. (“DePrince”) underperformed the Russell 1000® Value Index for the year. DePrince was well positioned from a factor and characteristic perspective, with an underweight to stocks with high betas and an overweight to stocks with high dividend yields. Stock selection effects were negative for DePrince and enough to offset the gains derived from factor exposures. Stock selection detracted from returns within the materials and processing and consumer discretionary sectors.
First Eagle Investment Management Company, LLC (“First Eagle”) underperformed the Russell 1000® Index from January 1, 2011 to its termination on December 8, 2011. During that time, First Eagle’s sector exposures detracted most significantly from its returns, due primarily to underweights to the more defensively positioned consumer staples and health care sectors. Stock selection effects detracted from returns within the materials and processing and producer durables sectors.
Institutional Capital LLC (“ICAP”) outperformed the Russell 1000® Value Index for the year. ICAP benefited from being underweight to the smallest cap stocks within the Russell 1000® Value Index. ICAP’s underweight to stocks with high betas was
also beneficial during the year. An overweight to stocks with strong returns-on-equity also contributed positively to excess return.
Jacobs Levy Equity Management Inc’s (“Jacobs Levy”) quantitatively oriented value strategy outperformed the Russell 1000® Value Index for the year. Jacobs Levy benefited from being underweight to stocks with high betas during the year. The manager’s overweight to the consumer staples sector and underweight to the financial services sector both contributed positively to performance.
Montag & Caldwell, LLC (“Montag”) outperformed the Russell 1000® Growth Index from January 1, 2011 to its termination on December 9, 2011. During that time, Montag benefited from positive sector exposure effects, specifically from an overweight to consumer staples and an underweight to materials and processing. Montag also benefited from positive stock selection effects within the consumer discretionary sector.
Suffolk Capital Management, LLC (“Suffolk”) underperformed the Russell 1000® Index for the year. Suffolk’s large overweight to stocks with high betas and large underweight to stocks with high dividend yields both detracted from performance during the year. Sector exposure effects detracted from returns due to underweights to the utilities, consumer staples, and energy sectors. Stock selection detracted from returns within the financial services and energy sectors.
Sustainable Growth Advisers, LP (“SGA”) was hired on December 23, 2011. For the period of December 23, 2011 to December 31, 2011, SGA performed in line with the Russell 1000® Growth Index and had a moderately positive impact on the Fund’s performance. During this time, SGA benefited from positive stock selection effects, especially within the consumer staples and technology sectors.
Describe any changes to the Fund’s structure or the money manager line-up.
First Eagle Investment Management, LLC and Montag & Caldwell, LLC were terminated in December 2011. Sustainable Growth Advisers, LP was hired in December 2011.
| Money Managers as of December 31, 2011 | Style | |
BlackRock Capital Management, Inc. | Growth | |
Columbus Circle Investors | Growth | |
DePrince, Race & Zollo, Inc. | Value | |
Institutional Capital LLC | Value | |
Jacobs Levy Equity Management Inc. | Value | |
Suffolk Capital Management LLC | Market Oriented | |
Sustainable Growth Advisers, LP | Growth | |
| 14 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis — December 11, 2011 (Unaudited)
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of RIMCo, or any other person in RIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and RIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for 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 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 | 15 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Shareholder Expense Example — December 31, 2011 (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, 2011 to December 31, 2011.
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.
| Actual Performance | Hypothetical Performance (5% return before expenses) | ||||||
Beginning Account Value | ||||||||
July 1, 2011 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
December 31, 2011 | $ | 935.60 | $ | 1,021.12 | ||||
Expenses Paid During Period* | $ | 3.95 | $ | 4.13 | ||||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.81% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
| 16 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Common Stocks - 96.9% | ||||||||
| Consumer Discretionary -14.1% | ||||||||
Abercrombie & Fitch Co. Class A | 6,000 | 293 | ||||||
Amazon.com, Inc. (Æ) | 20,078 | 3,475 | ||||||
American Eagle Outfitters, Inc. | 31,600 | 483 | ||||||
Apollo Group, Inc. Class A (Æ) | 11,800 | 636 | ||||||
Avon Products, Inc. | 35,500 | 620 | ||||||
Bed Bath & Beyond, Inc. (Æ) | 20,754 | 1,203 | ||||||
BorgWarner, Inc. (Æ) | 2,300 | 147 | ||||||
Chipotle Mexican Grill, Inc. Class A (Æ) | 600 | 203 | ||||||
Coach, Inc. | 5,400 | 330 | ||||||
Comcast Corp. Class A (Æ) | 16,400 | 389 | ||||||
DIRECTV, Inc. Class A (Æ) | 10,090 | 431 | ||||||
DISH Network Corp. Class A | 6,500 | 185 | ||||||
DSW, Inc. Class A | 5,600 | 248 | ||||||
eBay, Inc. (Æ) | 75,800 | 2,298 | ||||||
Embraer SA - ADR (Æ) | 20,100 | 507 | ||||||
Estee Lauder Cos., Inc. (The) Class A | 6,589 | 740 | ||||||
Ford Motor Co. | 103,021 | 1,109 | ||||||
Gap, Inc. (The) | 49,900 | 926 | ||||||
General Motors Co. (Æ) | 37,900 | 768 | ||||||
Group 1 Automotive, Inc. | 500 | 26 | ||||||
Hanesbrands, Inc. (Æ) | 13,500 | 295 | ||||||
Harman International Industries, Inc. | 8,700 | 331 | ||||||
Home Depot, Inc. | 39,965 | 1,680 | ||||||
Hyatt Hotels Corp. Class A (Æ) | 2,400 | 90 | ||||||
International Game Technology | 16,700 | 287 | ||||||
Johnson Controls, Inc. | 139,808 | 4,370 | ||||||
Kohl’s Corp. | 13,300 | 656 | ||||||
Las Vegas Sands Corp. (Æ) | 52,754 | 2,254 | ||||||
Limited Brands, Inc. | 11,910 | 481 | ||||||
Lowe’s Cos., Inc. | 53,326 | 1,354 | ||||||
McDonald’s Corp. | 11,534 | 1,157 | ||||||
McGraw-Hill Cos., Inc. (The) | 12,100 | 544 | ||||||
Michael Kors Holdings, Ltd. (Æ) | 2,445 | 67 | ||||||
News Corp. Class A | 61,500 | 1,097 | ||||||
Nike, Inc. Class B | 9,600 | 925 | ||||||
priceline.com, Inc. (Æ) | 1,886 | 882 | ||||||
Snap-on, Inc. | 7,400 | 375 | ||||||
Stanley Black & Decker, Inc. | 12,400 | 839 | ||||||
Starbucks Corp. | 73,850 | 3,398 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 24,300 | 1,166 | ||||||
Target Corp. | 13,600 | 697 | ||||||
Tesla Motors, Inc. (Æ)(Ñ) | 8,500 | 243 | ||||||
Tiffany & Co. | 11,500 | 762 | ||||||
Time Warner, Inc. | 126,661 | 4,577 | ||||||
TJX Cos., Inc. | 2,578 | 166 | ||||||
Tractor Supply Co. | 2,900 | 203 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. (Æ) | 3,500 | 227 | ||||||
VF Corp. | 5,440 | 691 | ||||||
Viacom, Inc. Class B | 58,323 | 2,648 | ||||||
VistaPrint NV (Æ)(Ñ) | 11,500 | 352 | ||||||
Wal-Mart Stores, Inc. | 25,600 | 1,530 | ||||||
Whirlpool Corp. | 7,900 | 375 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Williams-Sonoma, Inc. | 9,200 | 354 | ||||||
Yum! Brands, Inc. | 41,300 | 2,437 | ||||||
|
| |||||||
| 52,527 | ||||||||
|
| |||||||
| Consumer Staples - 9.1% | ||||||||
Andersons, Inc. (The) | 600 | 26 | ||||||
Anheuser-Busch InBev NV - ADR | 10,300 | 628 | ||||||
Archer-Daniels-Midland Co. | 99,200 | 2,837 | ||||||
Bunge, Ltd. | 10,900 | 623 | ||||||
Campbell Soup Co. (Ñ) | 12,700 | 422 | ||||||
Cia de Bebidas das Americas - ADR | 41,700 | 1,505 | ||||||
Clorox Co. (The) | 17,500 | 1,165 | ||||||
Coca-Cola Co. (The) | 87,075 | 6,092 | ||||||
Coca-Cola Enterprises, Inc. | 23,800 | 614 | ||||||
Colgate-Palmolive Co. | 16,300 | 1,506 | ||||||
ConAgra Foods, Inc. | 32,400 | 855 | ||||||
Dean Foods Co. (Æ) | 55,000 | 616 | ||||||
Green Mountain Coffee Roasters, Inc. (Æ) | 1,600 | 72 | ||||||
Hershey Co. (The) | 18,952 | 1,171 | ||||||
Kroger Co. (The) | 25,800 | 625 | ||||||
Lorillard, Inc. | 6,900 | 787 | ||||||
Mead Johnson Nutrition Co. Class A | 7,200 | 495 | ||||||
PepsiCo, Inc. | 50,537 | 3,353 | ||||||
Procter & Gamble Co. (The) | 100,145 | 6,680 | ||||||
Safeway, Inc. | 30,300 | 638 | ||||||
Sara Lee Corp. | 11,900 | 225 | ||||||
SUPERVALU, Inc. (Ñ) | 65,400 | 531 | ||||||
Tyson Foods, Inc. Class A | 51,000 | 1,053 | ||||||
Whole Foods Market, Inc. | 18,639 | 1,297 | ||||||
|
| |||||||
| 33,816 | ||||||||
|
| |||||||
| Energy - 10.7% | ||||||||
Alpha Natural Resources, Inc. (Æ) | 29,800 | 609 | ||||||
Anadarko Petroleum Corp. | 21,400 | 1,633 | ||||||
Apache Corp. | 14,280 | 1,294 | ||||||
Arch Coal, Inc. | 43,700 | 634 | ||||||
Baker Hughes, Inc. | 16,700 | 813 | ||||||
Cabot Oil & Gas Corp. | 11,083 | 841 | ||||||
Chevron Corp. | 9,200 | 979 | ||||||
Cloud Peak Energy, Inc. (Æ) | 13,600 | 263 | ||||||
Devon Energy Corp. | 21,598 | 1,339 | ||||||
Dresser-Rand Group, Inc. (Æ) | 11,800 | 589 | ||||||
Ensco PLC - ADR | 13,090 | 614 | ||||||
EQT Corp. | 11,500 | 630 | ||||||
Exxon Mobil Corp. | 65,550 | 5,557 | ||||||
Forest Oil Corp. (Æ) | 38,600 | 523 | ||||||
Halliburton Co. | 15,747 | 543 | ||||||
Helmerich & Payne, Inc. | 5,500 | 321 | ||||||
Hess Corp. | 17,658 | 1,003 | ||||||
Kinder Morgan, Inc. (Ñ) | 15,600 | 502 | ||||||
Marathon Oil Corp. | 64,569 | 1,890 | ||||||
Marathon Petroleum Corp. | 39,600 | 1,318 | ||||||
Murphy Oil Corp. | 35,372 | 1,971 | ||||||
Nabors Industries, Ltd. (Æ) | 28,500 | 494 | ||||||
National Oilwell Varco, Inc. | 43,281 | 2,943 | ||||||
Noble Energy, Inc. | 5,000 | 472 | ||||||
Occidental Petroleum Corp. | 36,342 | 3,405 | ||||||
Patterson-UTI Energy, Inc. | 31,100 | 621 | ||||||
| Multi-Style Equity Fund | 17 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Plains Exploration & Production Co. (Æ) | 13,700 | 503 | ||||||
QEP Resources, Inc. | 6,000 | 176 | ||||||
Range Resources Corp. | 9,300 | 576 | ||||||
Schlumberger, Ltd. | 40,500 | 2,766 | ||||||
SM Energy Co. | 4,200 | 307 | ||||||
Southwestern Energy Co. (Æ) | 24,330 | 777 | ||||||
Statoil ASA - ADR | 32,700 | 837 | ||||||
Total SA - ADR (Ñ) | 9,700 | 496 | ||||||
Transocean, Ltd. | 11,100 | 426 | ||||||
Unit Corp. (Æ) | 9,000 | 418 | ||||||
Valero Energy Corp. | 35,100 | 739 | ||||||
|
| |||||||
| 39,822 | ||||||||
|
| |||||||
| Financial Services - 14.9% | ||||||||
ACE, Ltd. | 18,350 | 1,287 | ||||||
Allied World Assurance Co. Holdings AG | 10,500 | 661 | ||||||
Allstate Corp. (The) | 61,588 | 1,688 | ||||||
Amarin Corp Plc Sponsored ADR (Æ) | 35,300 | 264 | ||||||
American Express Co. | 19,288 | 910 | ||||||
Anworth Mortgage Asset Corp. (ö) | 36,600 | 230 | ||||||
Aspen Insurance Holdings, Ltd. | 22,000 | 583 | ||||||
Associated Banc-Corp. | 26,100 | 292 | ||||||
Assurant, Inc. | 10,100 | 415 | ||||||
Bank of New York Mellon Corp. (The) | 113,600 | 2,262 | ||||||
BB&T Corp. | 132,931 | 3,346 | ||||||
Berkshire Hathaway, Inc. Class B (Æ) | 1,200 | 92 | ||||||
BlackRock, Inc. Class A | 9,000 | 1,604 | ||||||
Capital One Financial Corp. | 45,244 | 1,913 | ||||||
Chubb Corp. (The) | 7,600 | 526 | ||||||
Citigroup, Inc. | 27,100 | 713 | ||||||
City National Corp. | 8,100 | 358 | ||||||
Cullen/Frost Bankers, Inc. | 9,000 | 476 | ||||||
Discover Financial Services | 70,513 | 1,692 | ||||||
EastGroup Properties, Inc. (ö) | 900 | 39 | ||||||
Everest Re Group, Ltd. | 7,700 | 647 | ||||||
Extra Space Storage, Inc. (ö) | 5,500 | 133 | ||||||
First American Financial Corp. | 13,400 | 170 | ||||||
Fulton Financial Corp. | 39,100 | 384 | ||||||
Hartford Financial Services Group, Inc. | 36,300 | 590 | ||||||
Hospitality Properties Trust (ö) | 6,300 | 145 | ||||||
Interactive Brokers Group, Inc. Class A | 28,700 | 429 | ||||||
Jefferies Group, Inc. (Ñ) | 20,400 | 281 | ||||||
Jones Lang LaSalle, Inc. | 1,300 | 80 | ||||||
JPMorgan Chase & Co. | 235,217 | 7,819 | ||||||
KeyCorp | 63,300 | 487 | ||||||
Liberty Property Trust (ö) | 19,300 | 596 | ||||||
Lincoln National Corp. | 30,100 | 585 | ||||||
Mastercard, Inc. Class A | 4,168 | 1,554 | ||||||
Mercury General Corp. | 10,300 | 470 | ||||||
MetLife, Inc. | 110,661 | 3,450 | ||||||
Morgan Stanley | 60,200 | 911 | ||||||
Northern Trust Corp. | 24,899 | 987 | ||||||
PartnerRe, Ltd. - ADR | 10,060 | 646 | ||||||
People’s United Financial, Inc. | 30,100 | 387 | ||||||
PNC Financial Services Group, Inc. | 9,700 | 559 | ||||||
ProAssurance Corp. | 900 | 72 | ||||||
Protective Life Corp. | 3,300 | 74 | ||||||
Prudential Financial, Inc. | 30,500 | 1,529 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Reinsurance Group of America, Inc. Class A | 8,300 | 434 | ||||||
Simon Property Group, Inc. (ö) | 5,430 | 700 | ||||||
State Street Corp. | 37,200 | 1,500 | ||||||
SunTrust Banks, Inc. | 31,800 | 563 | ||||||
SVB Financial Group (Æ) | 2,800 | 134 | ||||||
Travelers Cos., Inc. (The) | 9,600 | 568 | ||||||
US Bancorp | 26,400 | 714 | ||||||
Validus Holdings, Ltd. | 13,600 | 428 | ||||||
Valley National Bancorp | 35,150 | 435 | ||||||
Visa, Inc. Class A | 28,169 | 2,859 | ||||||
Webster Financial Corp. | 2,500 | 51 | ||||||
Wells Fargo & Co. | 184,450 | 5,083 | ||||||
|
| |||||||
| 55,805 | ||||||||
|
| |||||||
| Health Care - 12.9% | ||||||||
Abbott Laboratories | 17,190 | 966 | ||||||
Aetna, Inc. | 19,200 | 810 | ||||||
Alere, Inc. (Æ) | 11,800 | 272 | ||||||
Alexion Pharmaceuticals, Inc. (Æ) | 3,600 | 257 | ||||||
Allergan, Inc. | 23,380 | 2,051 | ||||||
AmerisourceBergen Corp. Class A | 19,316 | 718 | ||||||
Amgen, Inc. | 10,300 | 661 | ||||||
Baxter International, Inc. | 12,700 | 628 | ||||||
Biogen Idec, Inc. (Æ) | 6,300 | 693 | ||||||
Boston Scientific Corp. (Æ) | 126,700 | 677 | ||||||
Cardinal Health, Inc. | 22,900 | 930 | ||||||
Centene Corp. (Æ) | 1,900 | 75 | ||||||
Cerner Corp. (Æ) | 35,000 | 2,144 | ||||||
Cigna Corp. | 1,900 | 80 | ||||||
Cooper Cos., Inc. (The) | 2,200 | 155 | ||||||
Covidien PLC | 31,400 | 1,413 | ||||||
Dentsply International, Inc. | 20,900 | 731 | ||||||
Eli Lilly & Co. | 15,900 | 661 | ||||||
Gilead Sciences, Inc. (Æ) | 11,620 | 476 | ||||||
Health Net, Inc. (Æ) | 6,700 | 204 | ||||||
Hologic, Inc. (Æ) | 24,000 | 420 | ||||||
Humana, Inc. | 8,740 | 766 | ||||||
Intuitive Surgical, Inc. (Æ) | 2,200 | 1,019 | ||||||
Johnson & Johnson | 85,900 | 5,634 | ||||||
Medicis Pharmaceutical Corp. Class A | 1,500 | 50 | ||||||
Medtronic, Inc. | 17,016 | 651 | ||||||
Merck & Co., Inc. | 94,391 | 3,558 | ||||||
Mylan, Inc. (Æ) | 73,200 | 1,571 | ||||||
Novo Nordisk A/S - ADR | 9,900 | 1,141 | ||||||
Perrigo Co. | 5,700 | 555 | ||||||
Pfizer, Inc. | 405,892 | 8,785 | ||||||
Sanofi - ADR | 58,800 | 2,149 | ||||||
Stryker Corp. | 10,605 | 527 | ||||||
Teva Pharmaceutical Industries, | 11,250 | 454 | ||||||
UnitedHealth Group, Inc. | 44,800 | 2,271 | ||||||
Valeant Pharmaceuticals International, Inc. (Æ) | 10,210 | 476 | ||||||
Vertex Pharmaceuticals, Inc. (Æ) | 5,800 | 193 | ||||||
Warner Chilcott PLC Class A (Æ) | 45,100 | 682 | ||||||
Watson Pharmaceuticals, Inc. Class B (Æ) | 18,883 | 1,139 | ||||||
| 18 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
WellPoint, Inc. | 22,900 | 1,517 | ||||||
|
| |||||||
| 48,160 | ||||||||
|
| |||||||
| Materials and Processing - 4.3% | ||||||||
Alcoa, Inc. | 15,200 | 131 | ||||||
Bemis Co., Inc. | 17,700 | 532 | ||||||
Celanese Corp. Class A | 8,200 | 363 | ||||||
CF Industries Holdings, Inc. | 1,650 | 239 | ||||||
Dow Chemical Co. (The) | 33,900 | 975 | ||||||
Ecolab, Inc. | 27,000 | 1,562 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 20,600 | 758 | ||||||
Huntsman Corp. | 104,800 | 1,048 | ||||||
Martin Marietta Materials, Inc. (Ñ) | 8,000 | 603 | ||||||
MeadWestvaco Corp. | 10,200 | 305 | ||||||
Monsanto Co. | 69,486 | 4,870 | ||||||
Nucor Corp. | 17,800 | 704 | ||||||
Packaging Corp. of America | 11,900 | 300 | ||||||
Potash Corp. of Saskatchewan, Inc. | 13,840 | 571 | ||||||
Praxair, Inc. | 7,200 | 770 | ||||||
Precision Castparts Corp. | 2,900 | 478 | ||||||
Rockwood Holdings, Inc. (Æ) | 5,100 | 201 | ||||||
Sealed Air Corp. | 44,800 | 771 | ||||||
Steel Dynamics, Inc. | 47,500 | 625 | ||||||
WR Grace & Co. (Æ) | 5,100 | 234 | ||||||
|
| |||||||
| 16,040 | ||||||||
|
| |||||||
| Producer Durables - 11.3% | ||||||||
Accenture PLC Class A | 29,042 | 1,546 | ||||||
AGCO Corp. (Æ) | 14,600 | 627 | ||||||
Automatic Data Processing, Inc. | 28,600 | 1,546 | ||||||
Boeing Co. (The) | 28,538 | 2,094 | ||||||
Booz Allen Hamilton Holding Corp. Class A (Æ) | 11,700 | 202 | ||||||
Brink’s Co. (The) | 10,700 | 288 | ||||||
Caterpillar, Inc. | 19,544 | 1,770 | ||||||
Con-way, Inc. | 21,000 | 612 | ||||||
Cummins, Inc. | 6,210 | 547 | ||||||
Danaher Corp. | 19,400 | 913 | ||||||
Danone - ADR | 90,800 | 1,148 | ||||||
Deere & Co. | 12,982 | 1,004 | ||||||
Eaton Corp. | 10,300 | 448 | ||||||
Emerson Electric Co. | 25,455 | 1,186 | ||||||
FedEx Corp. | 24,559 | 2,051 | ||||||
General Dynamics Corp. | 7,000 | 465 | ||||||
General Electric Co. | 206,300 | 3,695 | ||||||
Harsco Corp. | 23,000 | 473 | ||||||
Honeywell International, Inc. | 73,458 | 3,994 | ||||||
Illinois Tool Works, Inc. | 21,600 | 1,009 | ||||||
Itron, Inc. (Æ) | 12,100 | 433 | ||||||
ITT Corp. | 700 | 14 | ||||||
Joy Global, Inc. | 7,420 | 556 | ||||||
KBR, Inc. | 19,500 | 543 | ||||||
L-3 Communications Holdings, Inc. Class 3 | 10,100 | 673 | ||||||
Lockheed Martin Corp. | 11,600 | 938 | ||||||
Manpower, Inc. | 22,200 | 793 | ||||||
Monster Worldwide, Inc. (Æ) | 6,000 | 48 | ||||||
Navistar International Corp. (Æ) | 10,800 | 409 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Norfolk Southern Corp. | 4,000 | 291 | ||||||
Northrop Grumman Corp. | 9,800 | 573 | ||||||
Parker Hannifin Corp. | 10,900 | 831 | ||||||
Pentair, Inc. | 26,614 | 886 | ||||||
Pitney Bowes, Inc. | 29,800 | 552 | ||||||
Republic Services, Inc. Class A | 27,000 | 744 | ||||||
Rockwell Automation, Inc. | 18,500 | 1,358 | ||||||
RR Donnelley & Sons Co. | 30,000 | 433 | ||||||
Ryder System, Inc. | 4,200 | 223 | ||||||
Synopsys, Inc. (Æ) | 11,800 | 321 | ||||||
Terex Corp. (Æ) | 12,800 | 173 | ||||||
Textron, Inc. | 27,800 | 514 | ||||||
Tidewater, Inc. | 13,600 | 670 | ||||||
Union Pacific Corp. | 6,450 | 683 | ||||||
United Continental Holdings, Inc. (Æ) | 32,000 | 604 | ||||||
United Parcel Service, Inc. Class B | 13,602 | 995 | ||||||
United Technologies Corp. | 14,400 | 1,053 | ||||||
URS Corp. (Æ ) | 18,000 | 632 | ||||||
UTi Worldwide, Inc. | 17,400 | 231 | ||||||
Werner Enterprises, Inc. | 6,700 | 161 | ||||||
Xerox Corp. | 40,000 | 318 | ||||||
|
| |||||||
| 42,271 | ||||||||
|
| |||||||
| Technology - 16.7% | ||||||||
Altera Corp. | 15,600 | 579 | ||||||
American Tower Corp. Class A | 4,500 | 270 | ||||||
Apple, Inc. (Æ) | 22,145 | 8,970 | ||||||
Applied Materials, Inc. | 197,450 | 2,115 | ||||||
Avago Technologies, Ltd. | 14,200 | 410 | ||||||
BCE, Inc. | 14,050 | 585 | ||||||
Broadcom Corp. Class A | 9,300 | 273 | ||||||
Check Point Software Technologies, Ltd. (Æ)(Ñ) | 9,400 | 494 | ||||||
Cisco Systems, Inc. | 295,194 | 5,337 | ||||||
Citrix Systems, Inc. (Æ) | 9,700 | 589 | ||||||
Cognizant Technology Solutions Corp. Class A (Æ) | 11,633 | 748 | ||||||
Dell, Inc. (Æ) | 43,200 | 632 | ||||||
Diebold, Inc. | 10,900 | 328 | ||||||
Electronic Arts, Inc. (Æ) | 48,800 | 1,005 | ||||||
EMC Corp. (Æ) | 25,200 | 543 | ||||||
Google, Inc. Class A (Æ) | 7,390 | 4,773 | ||||||
Harris Corp. | 10,900 | 393 | ||||||
Hewlett-Packard Co. | 25,400 | 654 | ||||||
IAC/InterActiveCorp | 15,300 | 652 | ||||||
Integrated Device Technology, Inc. (Æ) | 71,400 | 390 | ||||||
International Business Machines Corp. | 5,100 | 938 | ||||||
Intersil Corp. Class A | 22,100 | 231 | ||||||
Koninklijke Philips Electronics NV | 33,000 | 691 | ||||||
Linear Technology Corp. | 21,000 | 631 | ||||||
LSI Corp. (Æ) | 109,600 | 652 | ||||||
Marvell Technology Group, Ltd. (Æ) | 51,900 | 719 | ||||||
Maxim Integrated Products, Inc. | 25,200 | 656 | ||||||
Mentor Graphics Corp. (Æ) | 9,000 | 122 | ||||||
Micron Technology, Inc. (Æ) | 58,600 | 369 | ||||||
Microsoft Corp. | 217,650 | 5,651 | ||||||
Motorola Solutions, Inc. | 16,142 | 747 | ||||||
NCR Corp. (Æ) | 34,400 | 566 | ||||||
| Multi-Style Equity Fund | 19 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
NetApp, Inc. (Æ) | 11,441 | 415 | ||||||
NXP Semiconductor NV (Æ) | 11,400 | 175 | ||||||
Oracle Corp. | 64,585 | 1,656 | ||||||
QUALCOMM, Inc. | 74,627 | 4,081 | ||||||
Rackspace Hosting, Inc. (Æ) | 6,500 | 280 | ||||||
Red Hat, Inc. (Æ) | 47,200 | 1,949 | ||||||
Riverbed Technology, Inc. (Æ) | 11,900 | 280 | ||||||
Salesforce.com, Inc. (Æ) | 13,970 | 1,417 | ||||||
SanDisk Corp. (Æ) | 16,068 | 791 | ||||||
Teradata Corp. (Æ) | 8,200 | 398 | ||||||
Texas Instruments, Inc. | 164,274 | 4,782 | ||||||
Unisys Corp. (Æ) | 3,900 | 77 | ||||||
VeriFone Systems, Inc. (Æ) | 8,400 | 298 | ||||||
VMware, Inc. Class A (Æ) | 7,400 | 615 | ||||||
Vodafone Group PLC - ADR | 116,100 | 3,254 | ||||||
Xilinx, Inc. | 8,500 | 273 | ||||||
Zynga, Inc. Class A (Æ)(Ñ) | 1,805 | 17 | ||||||
|
| |||||||
| 62,471 | ||||||||
|
| |||||||
| Utilities - 2.9% | ||||||||
Ameren Corp. | 13,500 | 447 | ||||||
AT&T, Inc. | 92,400 | 2,794 | ||||||
California Water Service Group | 1,000 | 18 | ||||||
Edison International | 11,600 | 480 | ||||||
Encana Corp. | 18,200 | 337 | ||||||
Entergy Corp. | 6,600 | 482 | ||||||
Exelon Corp. | 9,700 | 421 | ||||||
FirstEnergy Corp. | 18,100 | 802 | ||||||
Frontier Communications Corp. | 65,200 | 336 | ||||||
MDU Resources Group, Inc. | 22,900 | 491 | ||||||
NextEra Energy, Inc. | 28,596 | 1,741 | ||||||
NII Holdings, Inc. (Æ) | 13,300 | 283 | ||||||
NV Energy, Inc. | 22,600 | 370 | ||||||
PG&E Corp. | 8,700 | 359 | ||||||
PPL Corp. | 8,500 | 250 | ||||||
Telephone & Data Systems, Inc. (Ñ) | 9,900 | 256 | ||||||
Time Warner Telecom, Inc. Class A (Æ) | 2,000 | 39 | ||||||
Verizon Communications, Inc. | 16,000 | 642 | ||||||
Xylem, Inc. | 18,900 | 486 | ||||||
|
| |||||||
| 11,034 | ||||||||
|
| |||||||
| Total Common Stocks (cost $334,389) | 361,946 | |||||||
|
| |||||||
| Short-Term Investments - 2.7% | ||||||||
Russell U.S. Cash Management Fund | 10,158,134 | (¥) | 10,158 | |||||
|
| |||||||
| Total Short-Term Investments (cost $10,158) | 10,158 | |||||||
|
| |||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Other Securities - 0.7% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 95,769 | (¥) | 97 | |||||
Russell U.S. Cash Collateral Fund (×) | 2,493,867 | (¥) | 2,494 | |||||
|
| |||||||
| Total Other Securities (cost $2,590) | 2,591 | |||||||
|
| |||||||
| Total Investments - 100.3% | ||||||||
(identified cost $347,137) | 374,695 | |||||||
| Other Assets and Liabilities, Net - (0.3%) | (1,303 | ) | ||||||
|
| |||||||
| Net Assets - 100.0% | 373,392 | |||||||
|
| |||||||
See accompanying notes which are an integral part of the financial statements.
| 20 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized $ | ||||||||||
| Long Positions | ||||||||||||||
Russell 1000 Mini Index Futures (CME) | 22 | USD | 1,520 | 03/12 | 19 | |||||||||
S&P 500 E-Mini Index Futures (CME) | 125 | USD | 7,829 | 03/12 | 14 | |||||||||
S&P 500 Index Futures (CME) | 7 | USD | 2,192 | 03/12 | (10 | ) | ||||||||
|
| |||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 23 | |||||||||||||
|
| |||||||||||||
Presentation of Portfolio Holdings — December 31, 2011
Amounts in thousands
| Market Value | % of Net | |||||||||||||||||||
| Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Consumer Discretionary | $ | 52,527 | $ | — | $ | — | $ | 52,527 | 14.1 | |||||||||||
Consumer Staples | 33,816 | — | — | 33,816 | 9.1 | |||||||||||||||
Energy | 39,822 | — | — | 39,822 | 10.7 | |||||||||||||||
Financial Services | 55,805 | — | — | 55,805 | 14.9 | |||||||||||||||
Health Care | 48,160 | — | — | 48,160 | 12.9 | |||||||||||||||
Materials and Processing | 16,040 | — | — | 16,040 | 4.3 | |||||||||||||||
Producer Durables | 42,271 | — | — | 42,271 | 11.3 | |||||||||||||||
Technology | 62,471 | — | — | 62,471 | 16.7 | |||||||||||||||
Utilities | 11,034 | — | — | 11,034 | 2.9 | |||||||||||||||
Short-Term Investments | — | 10,158 | — | 10,158 | 2.7 | |||||||||||||||
Other Securities | — | 2,591 | — | 2,591 | 0.7 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 361,946 | 12,749 | — | 374,695 | 100.3 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (0.3 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
| 100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 23 | — | — | 23 | — | * | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 23 | $ | — | $ | — | $ | 23 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| * | Less than .05% of net assets. |
| ** | Other financial instruments reflected, such as futures, forwards, interest rate swaps, and credit default swaps 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.
There were no significant transfers in and out of levels 1, 2 and 3 during the period ending December 31, 2011.
See accompanying notes which are an integral part of the financial statements.
| Multi-Style Equity Fund | 21 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Fair Value of Derivative Instruments — December 31, 2011
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* | $ | 33 | ||
|
| |||
Location: Statement of Assets and Liabilities - Liabilities | ||||
Daily variation margin on futures contracts* | $ | 10 | ||
|
| |||
| Derivatives not accounted for as hedging instruments | Equity Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | (804 | ) | |
|
| |||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | (151 | ) | |
|
| |||
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statements 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.
| 22 | Multi-Style Equity Fund |
Table of Contents
(This page intentionally left blank)
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
| Aggressive Equity Fund | ||||
| Total Return | |||
1 Year | (4.20 | )% | ||
5 Years | (1.48 | )%§ | ||
10 Years | 4.36 | %§ | ||
| Russell 2500TM Index** | ||||
| Total Return | |||
1 Year | (2.51 | )% | ||
5 Years | 1.24 | %§ | ||
10 Years | 6.57 | %§ | ||
| 24 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Portfolio Management Discussion and Analysis — December 31, 2011 (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, 2011?
For the fiscal year ended December 31, 2011, the Aggressive Equity Fund lost 4.20%. This is compared to the Fund’s benchmark, the Russell 2500™ Index, which lost 2.51% 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, 2011, the Lipper® Small-Cap Core Funds (VIP) Average, a group of funds that Lipper considers to have investment strategies similar to those of the Fund, lost 3.59%. This result serves as a peer comparison and is expressed net of operating expenses.
RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is representative of the aggregate of each money manager’s benchmark index.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The fiscal year ended December 31, 2011 was a volatile, macro driven market environment. While the U.S. economy continued to show signs of improvement, the vulnerability of this recovery left investors highly sensitive to macroeconomic news. Consequently, investors spent much of the year oscillating between risk and defensiveness, as mixed U.S. economic data, U.S. budget deficit worries and a European sovereign debt crisis all stressed investors’ already frayed nerves. Investors’ focus on the macroeconomic news meant that less attention was paid to company fundamentals, causing stock correlations to be at elevated levels (i.e., similar as opposed to differentiated return patterns) for all of 2011. Stock correlations rose in late 2011 as the European crisis became the global economy’s largest concern. These elevated correlations inhibited excess returns from active management and therefore the money managers’ ability to add value through stock selection.
In response to the economic uncertainty, higher quality growth companies outperformed as investors sought the protection of
companies with greater earnings and operating certainty. These types of companies provided relative downside protection and had the capability to grow earnings despite the economic environment. This preference was beneficial for the Fund, which has a bias to higher quality growth stocks.
How did the investment strategies and techniques employed by the Fund and its money managers affect its benchmark relative performance?
The Fund employs six money managers: two growth-oriented, one market-oriented and three value-oriented. Three of the six managers outperformed for the one year period ending December 31, 2011. Two of the three managers that outperformed, ClariVest Asset Management, LLC (“ClariVest”) and Jacobs Levy Equity Management, Inc. (“Jacobs Levy”), are quantitative managers that benefited from a more favorable market environment for quantitative strategies. Despite the macroeconomic volatility, which resulted in elevated stock correlations, factor correlations remained at normalized levels. In addition factor payoffs were mostly linear in nature (i.e., exposures to factor tails, which are the extreme ends of factors such as high and low beta, were not dominating factor returns as they had in 2009 and 2010). This enabled quantitative managers to be rewarded for their factor bets and consequently outperform through positive stock selection.
For fundamental managers, the market was far more mixed. Investors’ preference for more defensive, higher quality growth stocks was a reflective of the economic uncertainty; however, this meant that higher beta, more cyclically focused managers struggled. In addition, the elevated stock correlations, which were a result of the macroeconomic focus, inhibited stock selection and this was an additional headwind to active managers. Consequently, while there was an even split of managers that outperformed and underperformed, the performance of the underperforming managers was skewed negatively, so that underperforming managers dominated performance.
ClariVest, a quantitative manager that focuses on attractively priced companies with sustainable earnings growth and positive earnings estimate revisions, outperformed its style benchmark, the Russell 2500™ Index. ClariVest benefited from a combination of favorable factor payoffs and a conducive environment for quantitative managers, where there was greater factor payoff stability. This provided positive tailwinds for the manager’s stock selection, which was positive across all but two sectors and accounted for all of the manager’s outperformance. Selection within the consumer discretionary sector was the largest positive contributor. In contrast, the manager’s cyclical sector exposure was penalized and this detracted meaningfully from performance.
DePrince, Race & Zollo, Inc. (“DePrince”), a yield-focused value manager, underperformed its style benchmark, the Russell 2500™ Value Index, for the fiscal year. 2011 was a mixed market environment for the manager. While benefiting
| Aggressive Equity Fund | 25 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
from an underweight exposure to risk and a focus on higher dividend yield, the manager was penalized for its bias to small cap stocks with negative price momentum. However, it was the negative factor headwinds and weak stock selection, primarily within financial services, that resulted in the manager’s negative performance.
Jacobs Levy, a quantitative manager that employs dynamic factor weighting, outperformed its style benchmark, the Russell 2500™ Value Index, for the fiscal year. The manager benefited from the relatively favorable environment for quantitative managers. The manager also benefited from a rotation in early 2011 away from smaller, riskier, more value oriented stocks towards companies with sustainable growth characteristics. The combination of the market conditions and positioning resulted in positive stock selection across all but two sectors, and this accounted for all of the manager’s outperformance.
Ranger Investment Management, L.P. (“Ranger”), a growth manager that focuses on higher quality stocks with accelerating earnings growth, outperformed its style benchmark, the Russell 2500™ Growth Index. Ranger’s focus on higher quality growth stocks was rewarded during the quarter and provided positive tailwinds to the manager’s stock selection. Aided by the favorable market environment and additive active decisions, stock selection was positive and accounted for almost all of the manager’s position. Stock selection within health care was the largest contributor to the manager’s performance.
Signia Capital Management, LLC. (“Signia”), a value-oriented manager, underperformed its style benchmark, the Russell 2500™ Value Index, for the fiscal year. While Signia struggled with an unfavorable environment that penalized its deeper value, higher risk strategy, its underperformance was magnified by weak stock selection. As a result, stock selection was negative across the majority of sectors, with selection in technology the largest detraction. While stock selection was
negative, the manager’s pro-cyclical sector exposure also detracted, primarily due to an underweight exposure to utilities.
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 the manager benefited from investors’ preference for quality growth, with an overweight exposure to return on equity and earnings growth rewarded, stock selection was negative due to a number of poor decisions made by the manager during the year. The largest of these was in health care, which was also the manager’s worst performing sector.
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 during the period.
| Money Managers as of December 31, 2011 | 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.
| 26 | Aggressive Equity Fund |
| * | Assumes initial investment on January 1, 2001. |
| ** | Russell 2500™ Index is composed of the bottom 500 stocks the Russell 1000® Index and all the stocks in the Russell 2000® Index. The Russell 2500™ Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. |
| § | Annualized. |
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.
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Shareholder Expense Example — December 31, 2011 (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, 2011 to December 31, 2011.
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.
| Actual Performance | Hypothetical Performance (5% return before expenses) | ||||||
Beginning Account Value | ||||||||
July 1, 2011 | $ | 1,000 .00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
December 31, 2011 | $ | 899 .30 | $ | 1,020.21 | ||||
Expenses Paid During Period* | $ | 4 .74 | $ | 5 .04 | ||||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 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 | 27 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Common Stocks - 96.6% | ||||||||
| Consumer Discretionary - 12.7% | ||||||||
Aaron’s, Inc. Class A | 3,600 | 96 | ||||||
Abercrombie & Fitch Co. Class A | 5,300 | 259 | ||||||
AFC Enterprises, Inc. (Æ) | 14,000 | 206 | ||||||
Amerco, Inc. | 4,442 | 393 | ||||||
American Eagle Outfitters, Inc. | 14,044 | 215 | ||||||
America’s Car-Mart, Inc. (Æ) | 9,400 | 368 | ||||||
Ameristar Casinos, Inc. | 12,500 | 216 | ||||||
Arctic Cat, Inc. (Æ) | 20,691 | 466 | ||||||
Ascena Retail Group, Inc. (Æ) | 10,384 | 309 | ||||||
Avis Budget Group, Inc. (Æ) | 29,200 | 313 | ||||||
Bebe Stores, Inc. | 8,200 | 68 | ||||||
BJ’s Restaurants, Inc. (Æ) | 6,260 | 284 | ||||||
Buffalo Wild Wings, Inc. (Æ)(Ñ) | 3,591 | 242 | ||||||
Build-A-Bear Workshop, Inc. Class A (Æ) | 7,000 | 59 | ||||||
Callaway Golf Co. | 48,198 | 267 | ||||||
Carter’s, Inc. (Æ) | 3,300 | 131 | ||||||
Cenveo, Inc. (Æ) | 24,600 | 84 | ||||||
Charming Shoppes, Inc. (Æ) | 26,400 | 129 | ||||||
Chico’s FAS, Inc. | 42,820 | 477 | ||||||
Christopher & Banks Corp. | 17,096 | 40 | ||||||
Conn’s, Inc. (Æ) | 2,500 | 28 | ||||||
Cooper Tire & Rubber Co. | 25,630 | 359 | ||||||
Courier Corp. | 900 | 11 | ||||||
Cracker Barrel Old Country Store, Inc. | 1,018 | 51 | ||||||
Crocs, Inc. (Æ) | 9,545 | 141 | ||||||
Dick’s Sporting Goods, Inc. | 9,852 | 363 | ||||||
Domino’s Pizza, Inc. (Æ) | 9,500 | 323 | ||||||
DSW, Inc. Class A | 9,299 | 411 | ||||||
Federal-Mogul Corp. (Æ) | 11,500 | 170 | ||||||
Finish Line, Inc. (The) Class A | 7,727 | 149 | ||||||
Foot Locker, Inc. | 26,550 | 633 | ||||||
Fossil, Inc. (Æ) | 2,572 | 204 | ||||||
Fred’s, Inc. Class A | 13,800 | 201 | ||||||
Genesco, Inc. (Æ) | 6,360 | 393 | ||||||
Gentex Corp. | 33,564 | 993 | ||||||
Group 1 Automotive, Inc. | 13,340 | 691 | ||||||
Harman International Industries, Inc. | 8,600 | 327 | ||||||
Hillenbrand, Inc. | 15,300 | 341 | ||||||
HOT Topic, Inc. | 113,100 | 748 | ||||||
Jones Group, Inc. (The) | 75,710 | 799 | ||||||
Kenneth Cole Productions, Inc. Class A (Æ) | 20,509 | 217 | ||||||
Leapfrog Enterprises, Inc. Class A (Æ) | 25,900 | 145 | ||||||
Lear Corp. | 1,500 | 60 | ||||||
Lincoln Educational Services Corp. | 11,600 | 92 | ||||||
Lithia Motors, Inc. Class A | 25,800 | 564 | ||||||
LKQ Corp. (Æ) | 25,421 | 765 | ||||||
Men’s Wearhouse, Inc. (The) | 5,653 | 183 | ||||||
Meredith Corp. (Ñ) | 16,140 | 527 | ||||||
Movado Group, Inc. | 1,900 | 35 | ||||||
Multimedia Games Holding Co., Inc. (Æ) | 10,800 | 86 | ||||||
Newell Rubbermaid, Inc. | 2,000 | 32 | ||||||
NVR, Inc. (Æ) | 270 | 185 | ||||||
Panera Bread Co. Class A (Æ) | 4,462 | 631 | ||||||
Papa John’s International, Inc. (Æ) | 5,800 | 219 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Penn National Gaming, Inc. (Æ) | 8,500 | 324 | ||||||
Polaris Industries, Inc. | 8,220 | 460 | ||||||
Pool Corp. | 7,800 | 235 | ||||||
RadioShack Corp. | 30,220 | 293 | ||||||
Red Robin Gourmet Burgers, Inc. (Æ) | 4,200 | 116 | ||||||
Regis Corp. | 21,340 | 353 | ||||||
Rick’s Cabaret International, Inc. (Æ) | 100 | 1 | ||||||
Rosetta Stone, Inc. (Æ) | 4,200 | 32 | ||||||
Ross Stores, Inc. | 13,960 | 663 | ||||||
Scholastic Corp. | 4,300 | 129 | ||||||
Skechers U.S.A., Inc. Class A (Æ) | 9,730 | 118 | ||||||
Smith & Wesson Holding Corp. (Æ) | 19,600 | 85 | ||||||
Sotheby’s Class A | 15,370 | 439 | ||||||
Standard Motor Products, Inc. | 20,800 | 417 | ||||||
Steven Madden, Ltd. (Æ) | 17,601 | 607 | ||||||
Stewart Enterprises, Inc. Class A | 23,060 | 133 | ||||||
Superior Industries International, Inc. | 9,632 | 159 | ||||||
True Religion Apparel, Inc. (Æ) | 8,300 | 287 | ||||||
Wendy’s Co. (The) | 43,080 | 231 | ||||||
Williams-Sonoma, Inc. | 20,960 | 807 | ||||||
Wolverine World Wide, Inc. | 23,651 | 843 | ||||||
XO Group, Inc. (Æ) | 1,600 | 13 | ||||||
Zale Corp. (Æ)(Ñ) | 20,000 | 76 | ||||||
|
| |||||||
| 22,520 | ||||||||
|
| |||||||
| Consumer Staples - 2.4% | ||||||||
Andersons, Inc. (The) | 7,563 | 330 | ||||||
Cal-Maine Foods, Inc. (Ñ) | 1,390 | 51 | ||||||
Core-Mark Holding Co., Inc. | 700 | 28 | ||||||
Corn Products International, Inc. | 5,100 | 268 | ||||||
Dean Foods Co. (Æ) | 77,700 | 870 | ||||||
Fresh Del Monte Produce, Inc. | 10,325 | 258 | ||||||
Green Mountain Coffee Roasters, Inc. (Æ)(Ñ) | 4,922 | 221 | ||||||
Herbalife, Ltd. | 3,788 | 196 | ||||||
Nash Finch Co. | 3,900 | 114 | ||||||
Pantry, Inc. (The) (Æ) | 5,800 | 69 | ||||||
Ralcorp Holdings, Inc. (Æ) | 3,510 | 300 | ||||||
Rite Aid Corp. (Æ) | 97,500 | 123 | ||||||
Smart Balance, Inc. (Æ) | 48,100 | 258 | ||||||
SUPERVALU, Inc. (Ñ) | 41,100 | 334 | ||||||
Susser Holdings Corp. (Æ) | 5,600 | 127 | ||||||
TreeHouse Foods, Inc. (Æ)(Ñ) | 9,560 | 625 | ||||||
|
| |||||||
| 4,172 | ||||||||
|
| |||||||
| Energy - 6.6% | ||||||||
Alon USA Energy, Inc. | 16,600 | 145 | ||||||
Approach Resources, Inc. (Æ)(Ñ) | 32,650 | 960 | ||||||
Arch Coal, Inc. | 21,200 | 308 | ||||||
Berry Petroleum Co. Class A | 7,034 | 296 | ||||||
Cabot Oil & Gas Corp. | 1,832 | 139 | ||||||
CARBO Ceramics, Inc. | 1,439 | 177 | ||||||
Cloud Peak Energy, Inc. (Æ) | 13,900 | 269 | ||||||
Complete Production Services, Inc. (Æ) | 10,743 | 361 | ||||||
Core Laboratories NV | 4,077 | 465 | ||||||
Crimson Exploration, Inc. (Æ) | 800 | 2 | ||||||
Crosstex Energy, Inc. | 13,900 | 176 | ||||||
Delek US Holdings, Inc. | 29,000 | 331 | ||||||
| 28 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Dril-Quip, Inc. (Æ) | 7,670 | 505 | ||||||
Helix Energy Solutions Group, Inc. (Æ) | 13,400 | 212 | ||||||
Helmerich & Payne, Inc. | 7,745 | 452 | ||||||
Hornbeck Offshore Services, Inc. (Æ) | 16,000 | 496 | ||||||
Lufkin Industries, Inc. | 5,430 | 365 | ||||||
Nabors Industries, Ltd. (Æ) | 13,257 | 230 | ||||||
Newpark Resources, Inc. (Æ) | 54,288 | 515 | ||||||
Oil States International, Inc. (Æ) | 4,100 | 313 | ||||||
Parker Drilling Co. (Æ) | 14,900 | 107 | ||||||
Patterson-UTI Energy, Inc. | 44,485 | 889 | ||||||
Plains Exploration & Production Co. (Æ) | 8,700 | 319 | ||||||
Precision Drilling Corp. (Æ) | 23,559 | 242 | ||||||
Rosetta Resources, Inc. (Æ) | 10,050 | 437 | ||||||
Rowan Cos., Inc. (Æ) | 8,685 | 263 | ||||||
SEACOR Holdings, Inc. (Æ) | 1,800 | 160 | ||||||
SM Energy Co. | 4,300 | 314 | ||||||
Stone Energy Corp. (Æ) | 12,100 | 319 | ||||||
Superior Energy Services, Inc. (Æ)(Ñ) | 31,139 | 885 | ||||||
Tetra Technologies, Inc. (Æ) | 21,172 | 198 | ||||||
Unit Corp. (Æ) | 11,867 | 551 | ||||||
USEC, Inc. (Æ)(Ñ) | 94,700 | 108 | ||||||
Western Refining, Inc. (Æ) | 6,900 | 92 | ||||||
Willbros Group, Inc. (Æ) | 4,395 | 16 | ||||||
|
| |||||||
| 11,617 | ||||||||
|
| |||||||
| Financial Services - 19.5% | ||||||||
Affiliated Managers Group, Inc. (Æ) | 11,476 | 1,102 | ||||||
Allied World Assurance Co. Holdings AG | 6,100 | 384 | ||||||
American Assets Trust, Inc. (ö) | 9,250 | 190 | ||||||
American Campus Communities, Inc. (ö) | 5,900 | 248 | ||||||
American Financial Group, Inc. | 7,100 | 262 | ||||||
Ameriprise Financial, Inc. | 5,352 | 266 | ||||||
Arch Capital Group, Ltd. (Æ) | 2,900 | 108 | ||||||
Ares Capital Corp. | 10,739 | 166 | ||||||
Argo Group International Holdings, Ltd. | 4,500 | 130 | ||||||
Assurant, Inc. | 11,900 | 489 | ||||||
Assured Guaranty, Ltd. | 44,600 | 586 | ||||||
Axis Capital Holdings, Ltd. | 13,300 | 425 | ||||||
Baldwin & Lyons, Inc. Class B | 500 | 11 | ||||||
Banco Latinoamericano de Comercio Exterior SA Class E | 11,800 | 190 | ||||||
Bancorp, Inc. (Æ) | 10,405 | 75 | ||||||
Berkshire Hills Bancorp, Inc. | 4,800 | 107 | ||||||
BioMed Realty Trust, Inc. (ö) | 17,238 | 312 | ||||||
BOK Financial Corp. | 1,400 | 77 | ||||||
Boston Private Financial Holdings, Inc. | 40,397 | 321 | ||||||
Brookline Bancorp, Inc. | 20,790 | 175 | ||||||
Camden Property Trust (ö) | 4,700 | 293 | ||||||
Capital City Bank Group, Inc. | 1,600 | 15 | ||||||
Capitol Federal Financial, Inc. | 35,251 | 407 | ||||||
Cash America International, Inc. | 2,800 | 131 | ||||||
Centerstate Banks, Inc. | 1,100 | 7 | ||||||
Central Pacific Financial Corp. (Æ)(Ñ) | 4,700 | 61 | ||||||
Chesapeake Lodging Trust (ö) | 31,420 | 486 | ||||||
Citizens Republic Bancorp, Inc. (Æ) | 6,800 | 78 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
City National Corp. | 7,700 | 340 | ||||||
Cogdell Spencer, Inc. (ö) | 5,400 | 23 | ||||||
Cohen & Steers, Inc. (Ñ) | 15,470 | 447 | ||||||
Colonial Properties Trust (ö) | 11,162 | 233 | ||||||
Community Bank System, Inc. | 16,562 | 460 | ||||||
Community Trust Bancorp, Inc. | 1,000 | 29 | ||||||
DFC Global Corp. (Æ) | 19,238 | 347 | ||||||
DiamondRock Hospitality Co. (ö) | 32,211 | 311 | ||||||
Dime Community Bancshares, Inc. | 11,890 | 149 | ||||||
East West Bancorp, Inc. | 39,910 | 789 | ||||||
EastGroup Properties, Inc. (ö) | 4,400 | 191 | ||||||
Endurance Specialty Holdings, Ltd. | 5,800 | 222 | ||||||
Evercore Partners, Inc. Class A | 13,540 | 360 | ||||||
Everest Re Group, Ltd. | 2,000 | 168 | ||||||
Extra Space Storage, Inc. (ö) | 6,400 | 155 | ||||||
Factset Research Systems, Inc. | 2,468 | 215 | ||||||
Fair Isaac Corp. | 17,700 | 634 | ||||||
Fidelity National Financial, Inc. Class A | 20,600 | 328 | ||||||
First American Financial Corp. | 27,500 | 348 | ||||||
First Cash Financial Services, Inc. (Æ) | 4,300 | 151 | ||||||
First Industrial Realty Trust, Inc. (Æ)(ö) | 13,500 | 138 | ||||||
First Interstate Bancsystem, Inc. Class A | 1,100 | 14 | ||||||
FirstMerit Corp. | 12,500 | 189 | ||||||
Flagstone Reinsurance Holdings SA | 55,430 | 460 | ||||||
Forestar Group, Inc. (Æ) | 16,243 | 246 | ||||||
Franklin Street Properties Corp. (ö) | 22,243 | 221 | ||||||
Fulton Financial Corp. | 30,900 | 303 | ||||||
FXCM, Inc. Class A (Ñ) | 11,300 | 110 | ||||||
Gain Capital Holdings, Inc. | 1,500 | 10 | ||||||
GFI Group, Inc. | 16,300 | 67 | ||||||
Greenhill & Co., Inc. | 16,565 | 602 | ||||||
Hanmi Financial Corp. (Æ) | 1,700 | 13 | ||||||
Hanover Insurance Group, Inc. (The) | 9,325 | 325 | ||||||
Healthcare Realty Trust, Inc. (ö) | 19,980 | 371 | ||||||
Hercules Technology Growth Capital, Inc. | 28,480 | 269 | ||||||
Horace Mann Educators Corp. | 17,595 | 241 | ||||||
Hospitality Properties Trust (ö) | 30,264 | 695 | ||||||
Hudson Valley Holding Corp. | 855 | 18 | ||||||
Iberiabank Corp. | 5,210 | 257 | ||||||
Inland Real Estate Corp. (ö) | 13,000 | 99 | ||||||
Interactive Brokers Group, Inc. Class A | 19,300 | 288 | ||||||
Invesco Mortgage Capital, Inc. (ö) | 7,200 | 101 | ||||||
Investment Technology Group, Inc. (Æ) | 16,200 | 175 | ||||||
Investors Real Estate Trust (ö) | 6,600 | 48 | ||||||
Jack Henry & Associates, Inc. | 10,800 | 363 | ||||||
JER Investors Trust, Inc. (Æ)(Þ) | 1,771 | — | ||||||
Jones Lang LaSalle, Inc. | 2,500 | 153 | ||||||
KBW, Inc. | 41,917 | 636 | ||||||
KeyCorp | 48,780 | 375 | ||||||
Knight Capital Group, Inc. Class A (Æ) | 47,202 | 558 | ||||||
Kohlberg Capital Corp. | 5,700 | 36 | ||||||
Lakeland Financial Corp. | 9,820 | 254 | ||||||
LaSalle Hotel Properties (ö) | 12,491 | 302 | ||||||
Liberty Property Trust (ö) | 12,700 | 392 | ||||||
Mack-Cali Realty Corp. (ö) | 10,200 | 272 | ||||||
| Aggressive Equity Fund | 29 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Maiden Holdings, Ltd. | 18,700 | 164 | ||||||
Manning & Napier, Inc. Class A (Æ) | 24,470 | 306 | ||||||
MarketAxess Holdings, Inc. | 14,940 | 450 | ||||||
MCG Capital Corp. | 12,800 | 51 | ||||||
Meadowbrook Insurance Group, Inc. | 7,785 | 83 | ||||||
Medical Properties Trust, Inc. (ö) | 26,660 | 263 | ||||||
Medley Capital Corp. | 2,300 | 24 | ||||||
MFA Financial, Inc. (ö) | 12,800 | 86 | ||||||
Mission West Properties, Inc. (ö) | 300 | 3 | ||||||
MPG Office Trust, Inc. (Æ)(ö) | 1,000 | 2 | ||||||
Nelnet, Inc. Class A | 10,800 | 264 | ||||||
New Mountain Finance Corp. | 1,600 | 21 | ||||||
NorthStar Realty Finance Corp. (ö) | 25,500 | 122 | ||||||
OceanFirst Financial Corp. | 1,700 | 22 | ||||||
PennantPark Investment Corp. | 15,622 | 158 | ||||||
Pennsylvania Real Estate Investment Trust (ö) | 4,000 | 42 | ||||||
PennyMac Mortgage Investment Trust (ö) | 10,700 | 178 | ||||||
Piper Jaffray Cos. (Æ) | 11,716 | 237 | ||||||
ProAssurance Corp. | 6,700 | 535 | ||||||
Prosperity Bancshares, Inc. | 25,710 | 1,038 | ||||||
Protective Life Corp. | 21,800 | 492 | ||||||
PS Business Parks, Inc. (ö) | 2,300 | 127 | ||||||
Radian Group, Inc. (Ñ) | 26,800 | 63 | ||||||
Raymond James Financial, Inc. | 19,859 | 614 | ||||||
Reinsurance Group of America, Inc. Class A | 4,000 | 209 | ||||||
Resource Capital Corp. (ö) | 42,213 | 237 | ||||||
RLI Corp. | 3,400 | 248 | ||||||
Sabra Health Care REIT, Inc. (ö) | 12,400 | 150 | ||||||
SCBT Financial Corp. | 200 | 6 | ||||||
Selective Insurance Group, Inc. | 1,200 | 21 | ||||||
Signature Bank NY (Æ) | 20,190 | 1,212 | ||||||
Southside Bancshares, Inc. | 6,400 | 139 | ||||||
State Auto Financial Corp. | 200 | 3 | ||||||
State Bank Financial Corp. (Æ) | 8,600 | 130 | ||||||
StellarOne Corp. | 24,112 | 274 | ||||||
Sterling Bancorp Class N | 22,700 | 196 | ||||||
Sunstone Hotel Investors, Inc. (Æ)(ö) | 36,900 | 301 | ||||||
SVB Financial Group (Æ) | 14,010 | 668 | ||||||
Symetra Financial Corp. | 37,460 | 339 | ||||||
Texas Capital Bancshares, Inc. (Æ) | 26,633 | 815 | ||||||
THL Credit, Inc. | 1,700 | 21 | ||||||
Trustco Bank Corp. NY | 12,000 | 67 | ||||||
UMB Financial Corp. | 7,070 | 263 | ||||||
Umpqua Holdings Corp. | 24,200 | 300 | ||||||
United Financial Bancorp, Inc. | 1,500 | 24 | ||||||
Universal Health Realty Income Trust (ö) | 1,800 | 70 | ||||||
Urstadt Biddle Properties, Inc. Class A (ö) | 2,600 | 47 | ||||||
Walter Investment Management Corp. | 5,000 | 103 | ||||||
Washington Banking Co. | 1,400 | 17 | ||||||
Washington Federal, Inc. | 49,137 | 687 | ||||||
Webster Financial Corp. | 47,900 | 977 | ||||||
WesBanco, Inc. | 600 | 12 | ||||||
Wilshire Bancorp, Inc. (Æ) | 4,700 | 17 | ||||||
Zions Bancorporation | 1,400 | 23 | ||||||
|
| |||||||
| 34,524 | ||||||||
|
| |||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Health Care - 11.4% | ||||||||
Affymetrix, Inc. (Æ) | 39,700 | 162 | ||||||
Alere, Inc. (Æ) | 10,805 | 249 | ||||||
Allos Therapeutics, Inc. (Æ) | 32,600 | 46 | ||||||
Allscripts Healthcare Solutions, Inc. (Æ) | 18,605 | 352 | ||||||
AMERIGROUP Corp. Class A (Æ) | 6,400 | 378 | ||||||
Analogic Corp. | 4,446 | 255 | ||||||
Array Biopharma, Inc. (Æ) | 13,317 | 29 | ||||||
Astex Pharmaceuticals (Æ) | 14,600 | 28 | ||||||
athenahealth, Inc. (Æ)(Ñ) | 1,977 | 97 | ||||||
BioMimetic Therapeutics, Inc. (Æ) | 1,100 | 3 | ||||||
Bio-Rad Laboratories, Inc. Class A (Æ) | 1,750 | 168 | ||||||
Cambrex Corp. (Æ) | 19,800 | 142 | ||||||
Cantel Medical Corp. | 10,800 | 302 | ||||||
Catalyst Health Solutions, Inc. (Æ) | 19,490 | 1,014 | ||||||
Centene Corp. (Æ) | 14,470 | 572 | ||||||
Cerner Corp. (Æ) | 7,000 | 429 | ||||||
Computer Programs & Systems, Inc. | 8,081 | 413 | ||||||
CONMED Corp. (Æ) | 8,966 | 230 | ||||||
Cooper Cos., Inc. (The) | 10,851 | 766 | ||||||
Covance, Inc. (Æ) | 4,643 | 212 | ||||||
CryoLife, Inc. (Æ) | 100 | — | ||||||
Cynosure, Inc. Class A (Æ) | 15,620 | 183 | ||||||
Durect Corp. (Æ) | 14,400 | 17 | ||||||
Dyax Corp. (Æ) | 18,000 | 24 | ||||||
Epocrates, Inc. (Æ)(Ñ) | 6,800 | 53 | ||||||
Greatbatch, Inc. (Æ) | 1,700 | 38 | ||||||
Haemonetics Corp. (Æ) | 2,667 | 163 | ||||||
Harvard Bioscience, Inc. (Æ) | 11,813 | 46 | ||||||
Health Management Associates, Inc. Class A (Æ) | 15,900 | 117 | ||||||
Health Net, Inc. (Æ) | 25,050 | 762 | ||||||
HealthSouth Corp. (Æ) | 8,742 | 154 | ||||||
Henry Schein, Inc. (Æ) | 3,536 | 228 | ||||||
Hill-Rom Holdings, Inc. | 13,500 | 455 | ||||||
HMS Holdings Corp. (Æ) | 26,163 | 837 | ||||||
Hologic, Inc. (Æ) | 19,500 | 341 | ||||||
Human Genome Sciences, Inc. (Æ) | 10,121 | 75 | ||||||
IDEXX Laboratories, Inc. (Æ) | 2,510 | 193 | ||||||
Impax Laboratories, Inc. (Æ) | 11,775 | 238 | ||||||
IPC The Hospitalist Co., Inc. (Æ) | 14,110 | 645 | ||||||
Jazz Pharmaceuticals, Inc. (Æ) | 6,272 | 242 | ||||||
LifePoint Hospitals, Inc. (Æ) | 4,220 | 157 | ||||||
Masimo Corp. (Æ) | 9,004 | 168 | ||||||
Medicines Co. (The) (Æ) | 31,700 | 591 | ||||||
Medicis Pharmaceutical Corp. Class A | 12,557 | 418 | ||||||
Mednax, Inc. (Æ) | 11,469 | 826 | ||||||
Molina Healthcare, Inc. (Æ) | 18,950 | 423 | ||||||
Neurocrine Biosciences, Inc. (Æ) | 8,100 | 69 | ||||||
PerkinElmer, Inc. | 17,500 | 350 | ||||||
Perrigo Co. | 10,144 | 987 | ||||||
PharMerica Corp. (Æ) | 13,600 | 206 | ||||||
Progenics Pharmaceuticals, Inc. (Æ) | 6,300 | 54 | ||||||
Quality Systems, Inc. | 7,440 | 275 | ||||||
ResMed, Inc. (Æ) | 5,311 | 135 | ||||||
RTI Biologics, Inc. (Æ) | 70,300 | 312 | ||||||
STERIS Corp. | 18,250 | 544 | ||||||
| 30 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
SurModics, Inc. (Æ) | 2,700 | 40 | ||||||
SXC Health Solutions Corp. (Æ) | 25,131 | 1,420 | ||||||
Techne Corp. | 3,136 | 214 | ||||||
Triple-S Management Corp. Class B (Æ) | 11,266 | 226 | ||||||
Universal American Corp. | 42,464 | 540 | ||||||
Universal Health Services, Inc. Class B | 3,750 | 146 | ||||||
Varian Medical Systems, Inc. (Æ) | 4,384 | 294 | ||||||
Viropharma, Inc. (Æ) | 7,600 | 208 | ||||||
WellCare Health Plans, Inc. (Æ) | 14,294 | 751 | ||||||
XenoPort, Inc. (Æ) | 12,300 | 47 | ||||||
Zalicus, Inc. (Æ)(Ñ) | 51,100 | 62 | ||||||
|
| |||||||
| 20,121 | ||||||||
|
| |||||||
| Materials and Processing - 6.1% | ||||||||
Airgas, Inc. | 8,615 | 673 | ||||||
AK Steel Holding Corp. (Ñ) | 46,690 | 386 | ||||||
Albemarle Corp. | 8,140 | 419 | ||||||
Apogee Enterprises, Inc. | 23,200 | 284 | ||||||
Buckeye Technologies, Inc. | 8,687 | 290 | ||||||
Cabot Corp. | 34,883 | 1,121 | ||||||
Clarcor, Inc. | 8,255 | 413 | ||||||
Comfort Systems USA, Inc. | 1,400 | 15 | ||||||
Commercial Metals Co. | 38,190 | 528 | ||||||
Crown Holdings, Inc. (Æ) | 7,406 | 249 | ||||||
Cytec Industries, Inc. | 6,485 | 290 | ||||||
Eagle Materials, Inc. | 22,570 | 579 | ||||||
HB Fuller Co. | 18,026 | 417 | ||||||
Headwaters, Inc. (Æ) | 34,300 | 76 | ||||||
Interline Brands, Inc. (Æ) | 10,587 | 165 | ||||||
Kaiser Aluminum Corp. | 2,370 | 109 | ||||||
KapStone Paper and Packaging Corp. (Æ) | 16,600 | 261 | ||||||
Kaydon Corp. | 11,770 | 359 | ||||||
Lennox International, Inc. | 10,930 | 369 | ||||||
Minerals Technologies, Inc. | 2,900 | 164 | ||||||
Neenah Paper, Inc. | 1,800 | 40 | ||||||
OM Group, Inc. (Æ) | 11,223 | 251 | ||||||
Packaging Corp. of America | 13,900 | 351 | ||||||
PH Glatfelter Co. | 11,000 | 155 | ||||||
PolyOne Corp. | 32,670 | 377 | ||||||
Polypore International, Inc. (Æ)(Ñ) | 5,351 | 235 | ||||||
Rockwood Holdings, Inc. (Æ) | 9,970 | 393 | ||||||
RTI International Metals, Inc. (Æ) | 8,692 | 202 | ||||||
Scotts Miracle-Gro Co. (The) Class A (Ñ) | 5,886 | 275 | ||||||
Sensient Technologies Corp. | 8,026 | 304 | ||||||
TPC Group, Inc. (Æ) | 16,670 | 389 | ||||||
Universal Forest Products, Inc. | 10,220 | 315 | ||||||
Watsco, Inc. | 1,031 | 68 | ||||||
Wausau Paper Corp. | 7,620 | 63 | ||||||
WR Grace & Co. (Æ) | 6,500 | 298 | ||||||
|
| |||||||
| 10,883 | ||||||||
|
| |||||||
| Producer Durables - 18.9% | ||||||||
Actuant Corp. Class A | 6,998 | 159 | ||||||
Advisory Board Co. (The) (Æ) | 4,300 | 319 | ||||||
AGCO Corp. (Æ) | 16,395 | 704 | ||||||
Alexander & Baldwin, Inc. | 5,868 | 240 | ||||||
Alliant Techsystems, Inc. | 5,200 | 297 | ||||||
AM Castle & Co. (Æ) | 4,000 | 38 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Ametek, Inc. | 5,902 | 248 | ||||||
AO Smith Corp. | 8,200 | 329 | ||||||
Arkansas Best Corp. | 15,700 | 303 | ||||||
Astec Industries, Inc. (Æ) | 6,703 | 216 | ||||||
Avery Dennison Corp. | 2,100 | 60 | ||||||
Barrett Business Services, Inc. | 700 | 14 | ||||||
BE Aerospace, Inc. (Æ) | 28,933 | 1,120 | ||||||
Booz Allen Hamilton Holding | 13,000 | 224 | ||||||
Brady Corp. Class A | 11,550 | 365 | ||||||
Brink’s Co. (The) | 13,900 | 374 | ||||||
Bristow Group, Inc. | 14,020 | 664 | ||||||
Cascade Corp. | 6,700 | 316 | ||||||
Celadon Group, Inc. | 10,400 | 123 | ||||||
Chart Industries, Inc. (Æ) | 5,310 | 287 | ||||||
Chicago Bridge & Iron Co. NV | 16,984 | 642 | ||||||
CIRCOR International, Inc. | 7,399 | 261 | ||||||
Columbus McKinnon Corp. (Æ) | 3,000 | 38 | ||||||
Consolidated Graphics, Inc. (Æ) | 2,280 | 110 | ||||||
Con-way, Inc. | 25,020 | 730 | ||||||
Corrections Corp. of America (Æ) | 4,400 | 90 | ||||||
CRA International, Inc. (Æ) | 2,300 | 46 | ||||||
Crane Co. | 5,300 | 248 | ||||||
Curtiss-Wright Corp. | 4,700 | 166 | ||||||
Diana Shipping, Inc. (Æ) | 28,485 | 213 | ||||||
Douglas Dynamics, Inc. | 4,900 | 72 | ||||||
DXP Enterprises, Inc. (Æ) | 7,900 | 254 | ||||||
Electro Rent Corp. | 5,099 | 87 | ||||||
Electronics for Imaging, Inc. (Æ) | 21,747 | 310 | ||||||
EMCOR Group, Inc. | 9,900 | 265 | ||||||
EnerSys (Æ) | 12,900 | 335 | ||||||
EnPro Industries, Inc. (Æ) | 7,686 | 253 | ||||||
Esterline Technologies Corp. (Æ) | 6,000 | 336 | ||||||
Exponent, Inc. (Æ) | 6,300 | 290 | ||||||
Flow International Corp. (Æ) | 9,800 | 34 | ||||||
G&K Services, Inc. Class A | 10,760 | 313 | ||||||
Genesee & Wyoming, Inc. Class A (Æ) | 5,402 | 327 | ||||||
GrafTech International, Ltd. (Æ) | 21,947 | 300 | ||||||
Granite Construction, Inc. | 9,751 | 231 | ||||||
Great Lakes Dredge & Dock Corp. | 19,200 | 107 | ||||||
Gulfmark Offshore, Inc. Class A (Æ) | 3,100 | 130 | ||||||
Harsco Corp. | 20,410 | 420 | ||||||
Hawaiian Holdings, Inc. (Æ) | 55,400 | 321 | ||||||
HEICO Corp. (Ñ) | 2,546 | 149 | ||||||
HUB Group, Inc. Class A (Æ) | 17,712 | 575 | ||||||
Hurco Cos., Inc. (Æ) | 800 | 17 | ||||||
Huron Consulting Group, Inc. (Æ) | 11,400 | 441 | ||||||
IHS, Inc. Class A (Æ) | 6,053 | 522 | ||||||
Joy Global, Inc. | 7,833 | 587 | ||||||
Kansas City Southern (Æ) | 4,900 | 333 | ||||||
KBR, Inc. | 18,305 | 510 | ||||||
Kelly Services, Inc. Class A | 6,000 | 82 | ||||||
Kennametal, Inc. | 12,200 | 445 | ||||||
Kirby Corp. (Æ) | 8,584 | 565 | ||||||
Knight Transportation, Inc. | 40,230 | 629 | ||||||
Layne Christensen Co. (Æ) | 11,787 | 285 | ||||||
Lexmark International, Inc. Class A | 5,000 | 165 | ||||||
| Aggressive Equity Fund | 31 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Lincoln Electric Holdings, Inc. | 3,520 | 138 | ||||||
Lydall, Inc. (Æ) | 1,800 | 17 | ||||||
Manpower, Inc. | 1,600 | 57 | ||||||
MAXIMUS, Inc. | 18,957 | 784 | ||||||
McGrath Rentcorp | 10,230 | 297 | ||||||
Middleby Corp. (Æ) | 3,597 | 338 | ||||||
MSC Industrial Direct Co., Inc. Class A | 5,612 | 402 | ||||||
MTS Systems Corp. | 6,000 | 245 | ||||||
NACCO Industries, Inc. Class A | 2,400 | 214 | ||||||
National Instruments Corp. | 14,501 | 376 | ||||||
Navigant Consulting, Inc. (Æ) | 14,800 | 169 | ||||||
Navistar International Corp. (Æ) | 8,400 | 318 | ||||||
Net 1 UEPS Technologies, Inc. (Æ) | 14,300 | 110 | ||||||
Orbital Sciences Corp. (Æ) | 800 | 12 | ||||||
Pall Corp. | 4,089 | 234 | ||||||
Primoris Services Corp. (Ñ) | 5,700 | 85 | ||||||
Quality Distribution, Inc. (Æ) | 6,700 | 75 | ||||||
Quanta Services, Inc. (Æ) | 7,024 | 151 | ||||||
Regal-Beloit Corp. | 8,580 | 437 | ||||||
Resources Connection, Inc. | 52,550 | 557 | ||||||
Roper Industries, Inc. | 5,693 | 495 | ||||||
RSC Holdings, Inc. (Æ)(Ñ) | 12,153 | 225 | ||||||
Ryder System, Inc. | 5,800 | 308 | ||||||
Saia, Inc. (Æ) | 3,500 | 44 | ||||||
SeaCube Container Leasing, Ltd. | 4,800 | 71 | ||||||
Sensata Technologies Holding NV (Æ) | 8,131 | 214 | ||||||
Southwest Airlines Co. | 37,627 | 322 | ||||||
Steelcase, Inc. Class A | 41,650 | 311 | ||||||
Stericycle, Inc. (Æ) | 3,889 | 303 | ||||||
SYKES Enterprises, Inc. (Æ) | 19,400 | 304 | ||||||
Synopsys, Inc. (Æ) | 11,300 | 307 | ||||||
Teledyne Technologies, Inc. (Æ) | 9,314 | 511 | ||||||
Thomas & Betts Corp. (Æ) | 2,900 | 158 | ||||||
Titan International, Inc. (Ñ) | 17,994 | 350 | ||||||
Titan Machinery, Inc. (Æ) | 11,700 | 254 | ||||||
Towers Watson & Co. Class A | 9,300 | 557 | ||||||
TransDigm Group, Inc. (Æ) | 4,223 | 404 | ||||||
Trimas Corp. (Æ) | 5,900 | 106 | ||||||
Trimble Navigation, Ltd. (Æ) | 15,874 | 689 | ||||||
Triumph Group, Inc. | 15,610 | 912 | ||||||
TrueBlue, Inc. (Æ) | 3,500 | 49 | ||||||
Tsakos Energy Navigation, Ltd. | 36,090 | 173 | ||||||
Tutor Perini Corp. (Æ) | 9,787 | 121 | ||||||
URS Corp. (Æ) | 16,402 | 576 | ||||||
UTi Worldwide, Inc. | 3,200 | 43 | ||||||
Wabtec Corp. | 7,100 | 497 | ||||||
Waste Connections, Inc. | 11,145 | 369 | ||||||
Waters Corp. (Æ) | 2,000 | 148 | ||||||
Werner Enterprises, Inc. | 12,700 | 306 | ||||||
Woodward, Inc. | 7,909 | 324 | ||||||
Zebra Technologies Corp. Class A (Æ) | 9,900 | 354 | ||||||
|
| |||||||
| 33,455 | ||||||||
|
| |||||||
| Technology - 15.7% | ||||||||
Acacia Research-Acacia Technologies (Æ) | 18,440 | 673 | ||||||
ACI Worldwide, Inc. (Æ) | 9,600 | 275 | ||||||
Actuate Corp. (Æ) | 4,800 | 28 | ||||||
ADTRAN, Inc. | 13,930 | 420 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Agilysys, Inc. (Æ) | 23,339 | 186 | ||||||
Akamai Technologies, Inc. (Æ) | 10,102 | 326 | ||||||
Allot Communications, Ltd. (Æ) | 29,998 | 456 | ||||||
American Software, Inc. Class A (Æ) | 31,300 | 296 | ||||||
Amphenol Corp. Class A | 5,527 | 251 | ||||||
Anadigics, Inc. (Æ) | 28,000 | 61 | ||||||
Ansys, Inc. (Æ) | 15,056 | 861 | ||||||
Arris Group, Inc. (Æ) | 13,000 | 141 | ||||||
Aruba Networks, Inc. (Æ) | 15,560 | 288 | ||||||
Avago Technologies, Ltd. | 8,456 | 244 | ||||||
Aviat Networks, Inc. (Æ) | 9,700 | 18 | ||||||
Axcelis Technologies, Inc. (Æ) | 27,514 | 37 | ||||||
Brightpoint, Inc. (Æ) | 14,100 | 152 | ||||||
Brooks Automation, Inc. | 26,430 | 271 | ||||||
Ceva, Inc. (Æ) | 17,020 | 515 | ||||||
Cohu, Inc. (Å) | 25,540 | 290 | ||||||
Cray, Inc. (Æ) | 7,300 | 47 | ||||||
Cree, Inc. (Æ) | 8,018 | 177 | ||||||
CSG Systems International, Inc. (Æ) | 7,800 | 115 | ||||||
DSP Group, Inc. (Æ) | 7,700 | 40 | ||||||
Electro Scientific Industries, Inc. | 49,758 | 721 | ||||||
Emulex Corp. (Æ) | 35,100 | 241 | ||||||
Equinix, Inc. (Æ) | 7,698 | 780 | ||||||
Exar Corp. (Æ) | 2,100 | 14 | ||||||
Extreme Networks (Æ) | 22,700 | 66 | ||||||
F5 Networks, Inc. (Æ) | 3,265 | 346 | ||||||
Formfactor, Inc. (Æ) | 3,900 | 20 | ||||||
Fortinet, Inc. (Æ) | 8,769 | 191 | ||||||
Hittite Microwave Corp. (Æ) | 7,630 | 377 | ||||||
IAC/InterActiveCorp | 28,856 | 1,230 | ||||||
Immersion Corp. (Æ) | 6,800 | 35 | ||||||
Informatica Corp. (Æ) | 15,779 | 583 | ||||||
Inphi Corp. (Æ) | 40,140 | 480 | ||||||
Insight Enterprises, Inc. (Æ) | 4,600 | 70 | ||||||
Integrated Device Technology, Inc. (Æ) | 48,800 | 266 | ||||||
Intermec, Inc. (Æ) | 2,800 | 19 | ||||||
International Rectifier Corp. (Æ) | 14,535 | 282 | ||||||
Intersil Corp. Class A | 51,710 | 540 | ||||||
Intevac, Inc. (Æ) | 4,000 | 30 | ||||||
IPG Photonics Corp. (Æ) | 2,445 | 83 | ||||||
JDA Software Group, Inc. (Æ) | 25,600 | 829 | ||||||
Kemet Corp. (Æ) | 56,801 | 400 | ||||||
Kulicke & Soffa Industries, Inc. (Æ) | 32,000 | 296 | ||||||
Lam Research Corp. (Æ) | 9,054 | 335 | ||||||
LSI Corp. (Æ) | 62,500 | 372 | ||||||
LTX-Credence Corp. (Æ) | 14,500 | 78 | ||||||
Manhattan Associates, Inc. (Æ) | 7,300 | 296 | ||||||
Mentor Graphics Corp. (Æ) | 75,500 | 1,024 | ||||||
Methode Electronics, Inc. | 31,870 | 264 | ||||||
Micrel, Inc. | 52,410 | 530 | ||||||
MICROS Systems, Inc. (Æ) | 11,730 | 546 | ||||||
Microsemi Corp. (Æ) | 16,288 | 273 | ||||||
Mindspeed Technologies, Inc. (Æ) | 17,300 | 79 | ||||||
MKS Instruments, Inc. | 11,670 | 325 | ||||||
Molex, Inc. (Ñ) | 13,900 | 332 | ||||||
Monolithic Power Systems, Inc. (Æ) | 5,900 | 89 | ||||||
NCR Corp. (Æ) | 18,100 | 298 | ||||||
| 32 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
NeuStar, Inc. Class A (Æ) | 9,400 | 321 | ||||||
NICE Systems, Ltd.-ADR (Æ) | 16,263 | 560 | ||||||
Novatel Wireless, Inc. (Æ) | 13,000 | 41 | ||||||
Openwave Systems, Inc. (Æ) | 3,800 | 6 | ||||||
Opnet Technologies, Inc. | �� | 8,600 | 315 | |||||
Opnext, Inc. (Æ) | 3,175 | 3 | ||||||
Perficient, Inc. (Æ) | 21,570 | 216 | ||||||
PLX Technology, Inc. (Æ) | 7,700 | 22 | ||||||
PMC-Sierra, Inc. (Æ) | 1,670 | 9 | ||||||
Progress Software Corp. (Æ) | 15,736 | 304 | ||||||
QLIK Technologies, Inc. (Æ) | 11,960 | 289 | ||||||
Quantum Corp. (Æ) | 44,100 | 106 | ||||||
Radisys Corp. (Æ) | 6,000 | 30 | ||||||
RealNetworks, Inc. | 2,775 | 21 | ||||||
Riverbed Technology, Inc. (Æ) | 8,851 | 208 | ||||||
Rovi Corp. (Æ) | 14,450 | 355 | ||||||
Sanmina-SCI Corp. (Æ) | 48,000 | 447 | ||||||
SBA Communications Corp. Class A (Æ)(Ñ) | 13,711 | 589 | ||||||
Seachange International, Inc. (Æ) | 4,800 | 34 | ||||||
Sigma Designs, Inc. (Æ) | 11,600 | 70 | ||||||
Silicon Image, Inc. (Æ) | 26,900 | 126 | ||||||
Silicon Motion Technology Corp. - ADR (Æ) | 24,300 | 498 | ||||||
Skyworks Solutions, Inc. (Æ) | 14,328 | 232 | ||||||
SolarWinds, Inc. (Æ) | 13,600 | 380 | ||||||
Solera Holdings, Inc. | 4,326 | 193 | ||||||
Sourcefire, Inc. (Æ) | 19,210 | 622 | ||||||
Spansion, Inc. Class A (Æ) | 22,400 | 185 | ||||||
Standard Microsystems Corp. (Æ) | 4,600 | 119 | ||||||
Synchronoss Technologies, Inc. (Æ) | 20,040 | 605 | ||||||
SYNNEX Corp. (Æ) | 4,600 | 140 | ||||||
TeleCommunication Systems, Inc. Class A (Æ) | 17,000 | 40 | ||||||
TeleNav, Inc. (Æ) | 4,200 | 33 | ||||||
THQ, Inc. (Æ)(Ñ) | 47,500 | 36 | ||||||
Unisys Corp. (Æ) | 20,800 | 410 | ||||||
United Online, Inc. | 28,600 | 156 | ||||||
VeriFone Systems, Inc. (Æ) | 14,521 | 516 | ||||||
Vishay Intertechnology, Inc. (Æ) | 32,057 | 288 | ||||||
Xyratex, Ltd. | 26,000 | 347 | ||||||
|
| |||||||
| 27,780 | ||||||||
|
| |||||||
| Utilities - 3.3% | ||||||||
Allete, Inc. | 2,830 | 119 | ||||||
Alliant Energy Corp. | 8,500 | 375 | ||||||
American States Water Co. | 2,580 | 90 | ||||||
Black Hills Corp. | 10,119 | 340 | ||||||
California Water Service Group | 32,852 | 600 | ||||||
Chesapeake Utilities Corp. | 1,200 | 52 | ||||||
Connecticut Water Service, Inc. | 1,300 | 35 | ||||||
Idacorp, Inc. | 2,300 | 98 | ||||||
Laclede Group, Inc. (The) | 2,400 | 97 | ||||||
Northwest Natural Gas Co. | 6,130 | 294 | ||||||
NorthWestern Corp. | 13,795 | 493 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
NTELOS Holdings Corp. (Æ) | 5,755 | 117 | ||||||
NV Energy, Inc. | 21,400 | 350 | ||||||
OGE Energy Corp. | 6,000 | 340 | ||||||
Otter Tail Corp. | 5,930 | 131 | ||||||
Pinnacle West Capital Corp. | 8,400 | 405 | ||||||
PNM Resources, Inc. | 52,100 | 949 | ||||||
Portland General Electric Co. | �� | 10,900 | 276 | |||||
Premiere Global Services, Inc. (Æ) | 381 | 3 | ||||||
Questar Corp. | 3,200 | 64 | ||||||
Telephone & Data Systems, Inc. (Ñ) | 14,000 | 362 | ||||||
UGI Corp. | 9,100 | 268 | ||||||
|
| |||||||
| 5,858 | ||||||||
|
| |||||||
| Total Common Stocks (cost $157,949) | 170,930 | |||||||
|
| |||||||
| Short-Term Investments - 3.3% | ||||||||
Russell U.S. Cash Management Fund | 5,927,424 | (¥) | 5,927 | |||||
|
| |||||||
| Total Short-Term Investments (cost $5,927) | 5,927 | |||||||
|
| |||||||
| Other Securities - 3.4% | ||||||||
Russell Investment Funds Liquidating | 212,328 | (¥) | 216 | |||||
Russell U.S. Cash Collateral Fund (×) | 5,834,992 | (¥) | 5,835 | |||||
|
| |||||||
| Total Other Securities (cost $6,047) | 6,051 | |||||||
|
| |||||||
| Total Investments - 103.3% (identified cost $169,923) | 182,908 | |||||||
Other Assets and Liabilities, Net - (3.3%) | (5,873 | ) | ||||||
|
| |||||||
| Net Assets - 100.0% | 177,035 | |||||||
|
| |||||||
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
| Aggressive Equity Fund | 33 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except contract amounts)
| Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||
| Long Positions | ||||||||||||||
S&P Midcap 400 E-Mini Index Futures (CME) | 69 | USD 6,053 | 03/12 | 24 | ||||||||||
|
| |||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 24 | |||||||||||||
|
| |||||||||||||
Presentation of Portfolio Holdings — December 31, 2011
Amounts in thousands
| Market Value | % of Net Assets | |||||||||||||||||||
| Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Consumer Discretionary | $ | 22,520 | $ | — | $ | — | $ | 22,520 | 12.7 | |||||||||||
Consumer Staples | 4,172 | — | — | 4,172 | 2.4 | |||||||||||||||
Energy | 11,617 | — | — | 11,617 | 6.6 | |||||||||||||||
Financial Services | 34,524 | — | — | 34,524 | 19.5 | |||||||||||||||
Health Care | 20,121 | — | — | 20,121 | 11.4 | |||||||||||||||
Materials and Processing | 10,883 | — | — | 10,883 | 6.1 | |||||||||||||||
Producer Durables | 33,455 | — | — | 33,455 | 18.9 | |||||||||||||||
Technology | 27,780 | — | — | 27,780 | 15.7 | |||||||||||||||
Utilities | 5,858 | — | — | 5,858 | 3.3 | |||||||||||||||
Short-Term Investments | — | 5,927 | — | 5,927 | 3.3 | |||||||||||||||
Other Securities | — | 6,051 | — | 6,051 | 3.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 170,930 | 11,978 | — | 182,908 | 103.3 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (3.3 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
| 100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 24 | — | — | 24 | — | * | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 24 | $ | — | $ | — | $ | 24 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| * | Less than .05% of net assets. |
| ** | Other financial instruments reflected, such as futures, forwards, interest rate swaps, and credit default swaps 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.
There were no significant transfers in and out of levels 1, 2 and 3 during the period ending December 31, 2011.
See accompanying notes which are an integral part of the financial statements.
| 34 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Fair Value of Derivative Instruments — December 31, 2011
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* | $ | 24 | ||
|
| |||
| Derivatives not accounted for as hedging instruments | Equity Contracts | |||
| Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | (427 | ) | |
|
| |||
| Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | (98 | ) | |
|
| |||
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statements 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.
| Aggressive Equity Fund | 35 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
| Non-U.S. Fund | ||||
| Total Return | |||
1 Year | (12.88 | )% | ||
5 Years | (4.88 | )%§ | ||
10 Years | 4.31 | %§ | ||
| Russell Developed ex-U.S. Large Cap® Index Net** | ||||
| Total Return | |||
1 Year | (12.35 | )% | ||
5 Years | (3.82 | )%§ | ||
10 Years | 5.23 | %§ | ||
| MSCI EAFE® Index Net (USD)*** | ||||
| Total Return | |||
1 Year | 12.14 | % | ||
5 Years | (4.72 | )%§ | ||
10 Years | 4.67 | %§ | ||
| 36 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Portfolio Management Discussion and Analysis — December 31, 2011 (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 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, 2011?
For the fiscal year ended December 31, 2011, the Non-U.S. Fund lost 12.88%. This is compared to the Fund’s benchmark, the Russell Developed ex-U.S. Large Cap® Index Net, which lost 12.35% 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, 2011, the Lipper® International Core Funds (VIP) Average, a group of funds that Lipper considers to have investment strategies similar to those of the Fund, lost 13.20%. This result serves as a peer comparison and is expressed net of operating expenses.
RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is representative of the aggregate of each money manager’s benchmark index.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The continuously volatile market conditions of 2011 proved difficult for Fund performance. The fiscal year ended December 31, 2011 was best characterized as a period where investors were skeptical of companies with high debt levels and variable earnings streams. Stocks with above average dividend yields were the best performers and the Fund’s underweight to such stocks was detractive to returns during the year. While the money managers generally preferred global franchises with strong cash flows and less levered balance sheets, holdings that were more pro-cyclically geared were penalized on weakening prospects for global economic growth and fears about sovereign defaults in Europe.
During the fiscal year, the Fund allocated approximately 9% of its assets to emerging markets because money managers saw relatively attractive opportunities in these regions. However, this allocation was the key source of Fund underperformance on a regional basis, as emerging markets underperformed developed non-U.S. markets by more than 5.5% during the
year, as measured by the Russell Emerging Markets Index. Concerns about geopolitical unrest, as exemplified by the “Arab spring,” in conjunction with high levels of inflation rates in China and Brazil, weighed upon country returns throughout 2011. These concerns were exacerbated by growing fears late in the year of renewed recession in Europe (a major trading partner and buyer of emerging markets’ exports), which further depressed emerging markets returns. The overweight exposure to emerging markets had a negative impact of roughly 1% on excess returns at the total Fund level.
The Fund’s 3% overweight to continental Europe was modestly beneficial given money managers’ preference for northern European markets such as Germany, the Netherlands, and Switzerland. These gains were entirely offset by holdings within the banking and industrial sectors, which fell sharply in response to the region’s unresolved debt crisis and potential for economic recession. While the Fund held a range of blue chip global companies in Europe, these were not immune to the impact of local events. Greater success was generated in Japan where an avoidance of companies that were impacted by the earthquake and nuclear disaster or the strong Yen helped.
Sector effects were similarly bifurcated with strong stock picking in technology and materials helping to blunt the shortfall generated by holdings in financials and consumer discretionary. Materials companies were the worst performing segment of the market in 2011, so unique holdings proved beneficial relative to mining firms that were under pressure by weaker demand forecasts. The Fund benefited from positive stock selection within technology, which was the second worst performing sector. However, positive stock selection was insufficient to overcome the drag from lackluster holdings in financials, which generally were negatively impacted by the European debt crisis. A number of consumer discretionary stocks also detracted as global consumption trends moderated.
How did the investment strategies and techniques employed by the Fund and its money managers affect its benchmark relative performance?
Investment strategies that favored companies with high historic earnings growth and that paid higher dividends, most of which resided in the defensive sectors of consumer staples and health care, tended to outperform the Fund’s benchmark during the period. Investment strategies that avoided Europe’s financial turmoil also outperformed. As global economic growth faltered, investors became increasingly skeptical of companies with aggressive growth forecasts. The Fund’s money managers were not well positioned on a number of these factors and this acted as a headwind to active returns during the year. For example, the Fund was underweight the top deciles of dividend yield and during a “risk off” year, this detracted from performance. Beyond this, an overweight to the highest forecast growth companies also had a negative impact. At a sector level, it was an overweight to technology coupled with underweights in health care and energy that detracted from the positive impact of stock selection. Country positioning was generally beneficial
| Non-U.S. Fund | 37 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
(i.e., underweight Japan and overweight U.K.), however the 9% allocation to emerging markets more than offset these beneficial weights. Despite a volatile market environment, the money managers’ stock selection within technology and consumer staples was additive, though this effect was moderated by poor stock selection within financials. Over the course of the fiscal year, two of the Fund’s money managers outperformed the Fund’s benchmark and two underperformed, the latter by enough to cause the Fund to lag its benchmark.
Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow Hanley”) outperformed the RGI Developed ex-U.S. Large Cap® Index for the fiscal year. Barrow’s strongest gains came from stock selection within the consumer staples and energy sectors. The manager’s returns were bolstered by a large overweight to stocks with the highest dividend yields.
Marsico Capital Management, LLC (“Marsico”) was the worst performing money manager in the Fund, trailing the RGI Developed ex-U.S. Large Cap® Index for the fiscal year. Notably high exposure to forecast earnings growth, emerging markets and price momentum were impediments to Marsico’s stock picks. In addition to being underweight defensive sectors that outperformed, stock selection was weak in financials, energy and consumer discretionary.
MFS Institutional Advisors, Inc. (“MFS”) outperformed the RGI Developed ex-U.S. Large Cap® Index during the fiscal year and was the best performer in the Fund. Its quality-growth strategy leads to selection of global companies with strong earnings growth and low financial leverage. This investment orientation was rewarded given investor sentiment during 2011. The manager’s strong stock selection in materials and continental Europe, both segments of the market that lagged the broader market, benefited the Fund’s performance.
Pzena Investment Management, LLC (“Pzena”) lagged the RGI Developed ex-U.S. Large Cap® Index during the period. Pzena is the Fund’s deep value manager and the manager with the
greatest exposure to the financials sector. While the allocation effect was not sizable, poor stock picks within that sector fully offset positive stock selection across the broader portfolio. Pzena’s holdings in Europe were generally stocks with higher levels of market beta, and these were most severely sold off by investors seeking safety during the year.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the year.
| Money Managers as of December 31, 2011 | Styles | |
| Barrow, Hanley, Mewhinney & Strauss, LLC | 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. |
| ** | Effective January 1, 2011, RIMCo changed the Fund’s primary benchmark from the Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE®) Index Net (USD) to the Russell Developed ex-U.S. Large Cap® Index Net. RIMCo believes the Russell Developed ex-U.S. Large Cap® Index Net is an appropriate benchmark which more broadly represents the investable universe of stocks. Russell Developed ex-U.S. Large Cap® Index Net is an index which offers investors access to the large-cap segment of the global equity market, excluding companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to accurately reflect the changes in the market over time. |
| *** | 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, 2011 (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, 2011 to December 31, 2011.
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.
| Actual Performance | Hypothetical Performance (5% return before expenses) | ||||||
Beginning Account Value | ||||||||
July 1, 2011 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
December 31, 2011 | $ | 831 .90 | $ | 1,020.06 | ||||
Expenses Paid During Period* | $ | 4 .71 | $ | 5 .19 | ||||
| * | Expenses are equal to the Fund’s annualized expense ratio of 1.02% (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, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Common Stocks - 92.1% | ||||||||
| Australia - 1.0% | ||||||||
Billabong International, Ltd. (Ñ) | 164,300 | 297 | ||||||
QBE Insurance Group, Ltd. | 81,038 | 1,073 | ||||||
Wesfarmers, Ltd. | 35,200 | 1,062 | ||||||
Westpac Banking Corp. (Ñ) | 43,780 | 896 | ||||||
|
| |||||||
| 3,328 | ||||||||
|
| |||||||
| Austria - 0.0% | ||||||||
Erste Group Bank AG | 3,160 | 56 | ||||||
|
| |||||||
| Belgium - 0.8% | ||||||||
Anheuser-Busch InBev NV Class 2 | 37,434 | 2,292 | ||||||
KBC Groep NV | 17,798 | 224 | ||||||
|
| |||||||
| 2,516 | ||||||||
|
| |||||||
| Bermuda - 1.0% | ||||||||
Li & Fung, Ltd. (Ñ) | 1,180,000 | 2,185 | ||||||
RenaissanceRe Holdings, Ltd. | 13,200 | 982 | ||||||
Yue Yuen Industrial Holdings, Ltd. | 18,500 | 58 | ||||||
|
| |||||||
| 3,225 | ||||||||
|
| |||||||
| Brazil - 1.5% | ||||||||
BM&FBovespa SA | 99,900 | 525 | ||||||
BR Malls Participacoes SA | 88,100 | 856 | ||||||
Brookfield Incorporacoes SA | 507,300 | 1,346 | ||||||
Embraer SA - ADR (Æ) | 5,500 | 139 | ||||||
OGX Petroleo e Gas Participacoes SA (Æ) | 209,200 | 1,527 | ||||||
Tim Participacoes SA - ADR (Æ) | 23,210 | 599 | ||||||
|
| |||||||
| 4,992 | ||||||||
|
| |||||||
| Canada - 1.7% | ||||||||
Canadian National Railway Co. (Þ) | 50,619 | 3,977 | ||||||
Imax Corp. (Æ)(Ñ) | 22,055 | 404 | ||||||
Pacific Rubiales Energy Corp. | 31,734 | 583 | ||||||
Potash Corp. of Saskatchewan, Inc. | 16,523 | 682 | ||||||
|
| |||||||
| 5,646 | ||||||||
|
| |||||||
| Cayman Islands - 0.7% | ||||||||
Baidu, Inc. - ADR (Æ) | 12,690 | 1,478 | ||||||
Belle International Holdings, Ltd. Class A | 474,000 | 826 | ||||||
|
| |||||||
| 2,304 | ||||||||
|
| |||||||
| Czech Republic - 0.2% | ||||||||
Komercni Banka AS | 4,254 | 717 | ||||||
|
| |||||||
| Denmark - 1.3% | ||||||||
Danske Bank A/S (Æ) | 156,376 | 1,986 | ||||||
Novo Nordisk A/S Class B | 12,779 | 1,469 | ||||||
Novozymes A/S Class B | 23,289 | 719 | ||||||
|
| |||||||
| 4,174 | ||||||||
|
| |||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
| France - 7.4% | ||||||||
Air Liquide SA Class A | 15,102 | 1,868 | ||||||
Capital Gemini SA | 51,500 | 1,609 | ||||||
Casino Guichard Perrachon SA (Æ) | 4,900 | 413 | ||||||
Credit Agricole SA | 99,985 | 564 | ||||||
Danone | 29,240 | 1,838 | ||||||
Dassault Systemes SA (Ñ) | 6,300 | 505 | ||||||
GDF Suez | 38,400 | 1,050 | ||||||
Lagardere SCA | 28,031 | 740 | ||||||
Legrand SA - ADR | 31,818 | 1,023 | ||||||
LVMH Moet Hennessy Louis Vuitton SA - ADR | 15,796 | 2,237 | ||||||
Natixis | 112,358 | 283 | ||||||
Pernod-Ricard SA | 25,006 | 2,319 | ||||||
Publicis Groupe SA - ADR | 14,442 | 664 | ||||||
Rallye SA | 48,885 | 1,367 | ||||||
Sanofi - ADR | 34,182 | 2,511 | ||||||
Schneider Electric SA | 55,517 | 2,923 | ||||||
SCOR SE - ADR | 20,080 | 469 | ||||||
Total SA | 26,600 | 1,360 | ||||||
UBISOFT Entertainment (Æ) | 110,845 | 742 | ||||||
|
| |||||||
| 24,485 | ||||||||
|
| |||||||
| Germany - 6.4% | ||||||||
Adidas AG | 14,796 | 962 | ||||||
Bayer AG | 25,987 | 1,662 | ||||||
Bayerische Motoren Werke AG | 18,149 | 1,216 | ||||||
Beiersdorf AG (Æ) | 24,348 | 1,381 | ||||||
Deutsche Boerse AG (Æ) | 31,705 | 1,662 | ||||||
E.ON AG | 48,100 | 1,038 | ||||||
Henkel AG & Co. KGaA | 15,787 | 764 | ||||||
Infineon Technologies AG - ADR | 81,783 | 616 | ||||||
Linde AG | 21,395 | 3,182 | ||||||
Merck KGaA | 11,169 | 1,114 | ||||||
MTU Aero Engines Holding AG | 49,471 | 3,166 | ||||||
SAP AG - ADR | 27,041 | 1,430 | ||||||
Siemens AG | 14,925 | 1,428 | ||||||
Volkswagen AG | 11,066 | 1,484 | ||||||
|
| |||||||
| 21,105 | ||||||||
|
| |||||||
| Hong Kong - 1.6% | ||||||||
AIA Group, Ltd. | 246,200 | 769 | ||||||
China Unicom Hong Kong, Ltd. (Ñ) | 1,206,000 | 2,537 | ||||||
CNOOC, Ltd. | 622,000 | 1,088 | ||||||
Hang Lung Properties, Ltd. - ADR | 312,000 | 887 | ||||||
|
| |||||||
| 5,281 | ||||||||
|
| |||||||
| India - 0.6% | ||||||||
ICICI Bank, Ltd. - ADR | 57,525 | 1,521 | ||||||
Infosys, Ltd. - ADR (Ñ) | 11,160 | 573 | ||||||
|
| |||||||
| 2,094 | ||||||||
|
| |||||||
| 40 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Ireland - 0.4% | ||||||||
Accenture PLC Class A | 24,205 | 1,288 | ||||||
|
| |||||||
| Israel - 0.7% | ||||||||
Check Point Software Technologies, Ltd. (Æ)(Ñ) | 12,243 | 643 | ||||||
Teva Pharmaceutical Industries, | 39,650 | 1,601 | ||||||
|
| |||||||
| 2,244 | ||||||||
|
| |||||||
| Italy - 2.3% | ||||||||
Enel SpA | 309,700 | 1,260 | ||||||
ENI SpA - ADR | 146,907 | 3,044 | ||||||
Finmeccanica SpA (Ñ) | 102,046 | 377 | ||||||
Prada SpA (Æ)(Ñ) | 48,600 | 220 | ||||||
Snam Rete Gas SpA | 380,025 | 1,676 | ||||||
Telecom Italia SpA | 978,100 | 1,052 | ||||||
|
| |||||||
| 7,629 | ||||||||
|
| |||||||
| Japan - 13.7% | ||||||||
Amada Co., Ltd. | 190,700 | 1,209 | ||||||
Canon, Inc. (Ñ) | 155,100 | 6,872 | ||||||
Dai-ichi Life Insurance Co., Ltd. (The) (Ñ) | 675 | 664 | ||||||
Denso Corp. | 41,900 | 1,157 | ||||||
FANUC Corp. | 16,500 | 2,525 | ||||||
Honda Motor Co., Ltd. (Ñ) | 63,800 | 1,946 | ||||||
Hoya Corp. | 79,800 | 1,719 | ||||||
Inpex Corp. | 269 | 1,695 | ||||||
ITOCHU Corp. | 266,100 | 2,705 | ||||||
Japan Tobacco, Inc. | 231 | 1,086 | ||||||
Lawson, Inc. (Ñ) | 22,200 | 1,386 | ||||||
Mabuchi Motor Co., Ltd. (Ñ) | 37,300 | 1,553 | ||||||
Marubeni Corp. | 107,000 | 652 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 186,700 | 793 | ||||||
Mori Seiki Co., Ltd. (Ñ) | 94,400 | 841 | ||||||
MS&AD Insurance Group Holdings | 53,100 | 984 | ||||||
Nintendo Co., Ltd. | 8,700 | 1,199 | ||||||
Nissan Motor Co., Ltd. (Ñ) | 61,600 | 554 | ||||||
NTT DoCoMo, Inc. - ADR (Ñ) | 2,050 | 38 | ||||||
NTT DoCoMo, Inc. | 975 | 1,792 | ||||||
Rakuten, Inc. (Ñ) | 518 | 557 | ||||||
Shin-Etsu Chemical Co., Ltd. | 73,700 | 3,629 | ||||||
Sumitomo Corp. (Ñ) | 161,700 | 2,189 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 39,900 | 1,111 | ||||||
Sumitomo Realty & Development Co., Ltd. | 36,000 | 630 | ||||||
THK Co., Ltd. (Ñ) | 61,600 | 1,214 | ||||||
Toshiba TEC Corp. | 109,479 | 390 | ||||||
Toyota Motor Corp. | 27,500 | 916 | ||||||
Yamada Denki Co., Ltd. | 9,540 | 649 | ||||||
Yokogawa Electric Corp. (Ñ) | 273,500 | 2,470 | ||||||
|
| |||||||
| 45,125 | ||||||||
|
| |||||||
| Jersey - 0.8% | ||||||||
Experian PLC | 93,622 | 1,273 | ||||||
WPP PLC | 145,357 | 1,525 | ||||||
|
| |||||||
| 2,798 | ||||||||
|
| |||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Luxembourg - 0.7% | ||||||||
ArcelorMittal | 40,173 | 735 | ||||||
Millicom International Cellular SA | 16,297 | 1,632 | ||||||
|
| |||||||
| 2,367 | ||||||||
|
| |||||||
| Mexico - 0.2% | ||||||||
Wal-Mart de Mexico SAB de CV | 243,900 | 668 | ||||||
|
| |||||||
| Netherlands - 6.4% | ||||||||
Aegon NV | 237,157 | 952 | ||||||
Akzo Nobel NV | 72,534 | 3,507 | ||||||
ASML Holding NV Class G | 43,794 | 1,841 | ||||||
European Aeronautic Defence and Space Co. NV | 32,665 | 1,021 | ||||||
Heineken NV | 55,693 | 2,577 | ||||||
ING Groep NV (Æ) | 545,945 | 3,929 | ||||||
Koninklijke Philips Electronics NV | 94,804 | 1,998 | ||||||
Randstad Holding NV (Æ) | 30,674 | 908 | ||||||
Reed Elsevier NV (Æ) | 95,975 | 1,119 | ||||||
Sensata Technologies Holding NV (Æ) | 42,958 | 1,129 | ||||||
Unilever NV | 36,450 | 1,253 | ||||||
Wolters Kluwer NV | 27,014 | 467 | ||||||
Yandex NV Class A (Æ) | 16,795 | 331 | ||||||
|
| |||||||
| 21,032 | ||||||||
|
| |||||||
| Norway - 1.9% | ||||||||
DNB ASA | 175,200 | 1,715 | ||||||
Orkla ASA | 200,800 | 1,499 | ||||||
Statoil ASA Class N | 55,900 | 1,435 | ||||||
Statoil Fuel & Retail ASA (Æ) | 213,500 | 1,592 | ||||||
|
| |||||||
| 6,241 | ||||||||
|
| |||||||
| Russia - 0.4% | ||||||||
Gazprom OAO - ADR (Æ) | 134,490 | 1,434 | ||||||
|
| |||||||
| Singapore - 1.9% | ||||||||
Jardine Cycle & Carriage, Ltd. (Ñ) | 102,900 | 3,818 | ||||||
Keppel Corp., Ltd. - ADR | 37,200 | 267 | ||||||
Singapore Telecommunications, Ltd. | 235,000 | 560 | ||||||
United Overseas Bank, Ltd. (Ñ) | 142,400 | 1,676 | ||||||
|
| |||||||
| 6,321 | ||||||||
|
| |||||||
| South Africa - 0.2% | ||||||||
MTN Group, Ltd. | 39,432 | 702 | ||||||
|
| |||||||
| South Korea - 1.3% | ||||||||
Samsung Electronics Co., Ltd. | 2,682 | 2,463 | ||||||
Shinhan Financial Group Co., Ltd. (Æ) | 48,371 | 1,669 | ||||||
|
| |||||||
| 4,132 | ||||||||
|
| |||||||
| Spain - 1.8% | ||||||||
Amadeus IT Holding SA Class A (Ñ) | 61,353 | 995 | ||||||
Banco Santander SA - ADR | 345,982 | 2,629 | ||||||
Inditex SA | 13,818 | 1,132 | ||||||
Indra Sistemas SA (Ñ) | 47,450 | 604 | ||||||
Red Electrica Corp. SA (Ñ) | 9,980 | 427 | ||||||
|
| |||||||
| 5,787 | ||||||||
|
| |||||||
| Non-U.S. Fund | 41 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Sweden - 0.5% | ||||||||
Hennes & Mauritz AB Class B | 44,837 | 1,441 | ||||||
Svenska Cellulosa AB Class B | 8,953 | 133 | ||||||
|
| |||||||
| 1,574 | ||||||||
|
| |||||||
| Switzerland - 9.2% | ||||||||
ACE, Ltd. | 17,725 | 1,243 | ||||||
Cie Financiere Richemont SA | 11,035 | 558 | ||||||
Credit Suisse Group AG (Æ) | 32,224 | 757 | ||||||
GAM Holding AG (Æ) | 60,701 | 659 | ||||||
Givaudan SA (Æ) | 774 | 737 | ||||||
Helvetia Holding AG (Æ) | 5,815 | 1,826 | ||||||
Julius Baer Group, Ltd. (Æ) | 88,332 | 3,455 | ||||||
Nestle SA | 92,581 | 5,323 | ||||||
Novartis AG | 74,950 | 4,286 | ||||||
Roche Holding AG | 22,505 | 3,814 | ||||||
Sonova Holding AG (Æ) | 5,622 | 588 | ||||||
Swatch Group AG (The) Class B | 3,595 | 1,345 | ||||||
Swiss Re AG (Æ) | 11,484 | 585 | ||||||
TE Connectivity, Ltd. | 42,900 | 1,322 | ||||||
UBS AG (Æ) | 200,791 | 2,390 | ||||||
Zurich Financial Services AG (Æ) | 6,353 | 1,437 | ||||||
|
| |||||||
| 30,325 | ||||||||
|
| |||||||
| Taiwan - 1.8% | ||||||||
Hon Hai Precision Industry Co., Ltd. | 660,624 | 1,809 | ||||||
Hon Hai Precision Industry Co., Ltd. - GDR | 99,784 | 549 | ||||||
HTC Corp. | 20,700 | 340 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR | 256,719 | 3,314 | ||||||
|
| |||||||
| 6,012 | ||||||||
|
| |||||||
| Thailand - 0.3% | ||||||||
Bangkok Bank PCL | 200,800 | 1,044 | ||||||
|
| |||||||
| United Kingdom - 20.7% | ||||||||
Aegis Group plc (Æ) | 657,547 | 1,475 | ||||||
Anglo American PLC | 55,774 | 2,061 | ||||||
ARM Holdings PLC | 110,556 | 1,016 | ||||||
Aviva PLC | 145,971 | 682 | ||||||
BAE Systems PLC | 422,300 | 1,870 | ||||||
Barclays PLC | 952,910 | 2,605 | ||||||
BG Group PLC | 34,571 | 739 | ||||||
BP PLC | 598,699 | 4,281 | ||||||
BP PLC - ADR | 8,100 | 346 | ||||||
British Sky Broadcasting Group PLC | 144,063 | 1,639 | ||||||
Burberry Group PLC | 28,466 | 524 | ||||||
Carillion PLC | 158,375 | 740 | ||||||
Compass Group PLC | 153,830 | 1,460 | ||||||
Dairy Crest Group PLC | 208,609 | 1,089 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Diageo PLC | 97,498 | 2,130 | ||||||
GlaxoSmithKline PLC - ADR | 55,900 | 1,277 | ||||||
Hays PLC | 265,342 | 264 | ||||||
Home Retail Group PLC | 270,828 | 351 | ||||||
HSBC Holdings PLC | 787,458 | 6,005 | ||||||
Imperial Tobacco Group PLC | 112,747 | 4,264 | ||||||
National Grid PLC | 280,439 | 2,722 | ||||||
Reckitt Benckiser Group PLC | 26,784 | 1,323 | ||||||
Reed Elsevier PLC | 79,951 | 644 | ||||||
Rio Tinto PLC (Æ) | 23,840 | 1,157 | ||||||
Rolls-Royce Holdings PLC (Å)(Æ) | 61,640 | 715 | ||||||
Royal Bank of Scotland Group PLC - ADR (Æ) | 1,407,623 | 441 | ||||||
Royal Dutch Shell PLC Class A | 198,176 | 7,240 | ||||||
Sage Group PLC (The) | 237,721 | 1,086 | ||||||
Shire PLC - ADR (Æ) | 38,152 | 1,329 | ||||||
Smith & Nephew PLC | 122,585 | 1,191 | ||||||
Smiths Group PLC | 57,089 | 811 | ||||||
Standard Chartered PLC | 149,578 | 3,273 | ||||||
Tesco PLC | 260,082 | 1,630 | ||||||
Travis Perkins PLC | 148,200 | 1,831 | ||||||
Tullow Oil PLC | 48,877 | 1,064 | ||||||
Vodafone Group PLC - ADR (Æ) | 1,964,492 | 5,457 | ||||||
Xstrata PLC | 91,435 | 1,389 | ||||||
|
| |||||||
| 68,121 | ||||||||
|
| |||||||
| United States - 2.5% | ||||||||
Citigroup, Inc. | 36,765 | 967 | ||||||
Las Vegas Sands Corp. (Æ) | 14,958 | 639 | ||||||
MercadoLibre, Inc. | 11,135 | 886 | ||||||
Philip Morris International, Inc. | 52,300 | 4,104 | ||||||
Synthes, Inc. (Æ)(Þ) | 2,321 | 389 | ||||||
Wynn Resorts, Ltd. | 10,803 | 1,194 | ||||||
|
| |||||||
| 8,179 | ||||||||
|
| |||||||
| Virgin Islands, British - 0.2% | ||||||||
Arcos Dorados Holdings, Inc. Class A | 32,203 | 661 | ||||||
|
| |||||||
| Total Common Stocks (cost $309,834) | 303,607 | |||||||
|
| |||||||
| Preferred Stocks - 0.3% | ||||||||
| Brazil - 0.2% | ||||||||
Usinas Siderurgicas de Minas Gerais SA (Æ) | 107,300 | 584 | ||||||
|
| |||||||
| Germany - 0.1% | ||||||||
Porsche Automobil Holding SE | 7,250 | 388 | ||||||
|
| |||||||
| Total Preferred Stocks (cost $1,327) | 972 | |||||||
|
| |||||||
| Short-Term Investments - 7.0% | ||||||||
| United States - 7.0% | ||||||||
Russell U.S. Cash Management Fund | 23,155,039 | (¥) | 23,155 | |||||
|
| |||||||
| Total Short-Term Investments (cost $23,155) | 23,155 | |||||||
|
| |||||||
| 42 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Other Securities - 7.5% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 731,421 | (¥) | 743 | |||||
Russell U.S. Cash Collateral Fund (×) | 23,969,002 | (¥) | 23,969 | |||||
|
| |||||||
| Total Other Securities (cost $24,700) | 24,712 | |||||||
|
| |||||||
| Total Investments - 106.9% (identified cost $359,016) | 352,446 | |||||||
| Other Assets and Liabilities, Net - (6.9%) | (22,868 | ) | ||||||
|
| |||||||
| Net Assets - 100.0% | 329,578 | |||||||
|
| |||||||
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, 2011
Amounts in thousands (except contract amounts)
| Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||
| Long Positions | ||||||||||||||||
ASX SPI 200 Index Futures (Australia) | 19 | AUD | 1,909 | 03/12 | (81 | ) | ||||||||||
CAC 40 Index Futures (France) | 70 | EUR | 2,216 | 01/12 | 54 | |||||||||||
DAX Index Futures (Germany) | 12 | EUR | 1,770 | 03/12 | 20 | |||||||||||
EURO STOXX 50 Index Futures (EMU) | 170 | EUR | 3,924 | 03/12 | 73 | |||||||||||
FTSE 100 Index Futures (UK) | 58 | GBP | 3,211 | 03/12 | 100 | |||||||||||
Hang Seng Index Futures (Hong Kong) | 6 | HKD | 5,537 | 01/12 | (6 | ) | ||||||||||
S&P TSE 60 Index Futures (Canada) | 20 | CAD | 2,716 | 03/12 | 4 | |||||||||||
TOPIX Index Futures (Japan) | 51 | JPY | 371,279 | 03/12 | (71 | ) | ||||||||||
|
| |||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 93 | |||||||||||||||
|
| |||||||||||||||
| Foreign Currency Exchange Contracts | ||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||
Barclays Bank PLC | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
Barclays Bank PLC | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
Barclays Bank PLC | USD | 1,739 | EUR | 1,298 | 03/21/12 | (58 | ) | |||||||||||||
Barclays Bank PLC | USD | 778 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
Barclays Bank PLC | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
Barclays Bank PLC | USD | 810 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
Brown Brothers Harriman & Co. | USD | 101 | AUD | 100 | 03/21/12 | — | ||||||||||||||
Brown Brothers Harriman & Co. | USD | 147 | CAD | 150 | 03/21/12 | — | ||||||||||||||
Brown Brothers Harriman & Co. | USD | 402 | EUR | 300 | 03/21/12 | (13 | ) | |||||||||||||
Brown Brothers Harriman & Co. | USD | 235 | GBP | 150 | 03/21/12 | (2 | ) | |||||||||||||
Brown Brothers Harriman & Co. | USD | 39 | HKD | 300 | 03/21/12 | — | ||||||||||||||
Brown Brothers Harriman & Co. | USD | 259 | JPY | 20,000 | 03/21/12 | 2 | ||||||||||||||
Citibank | AUD | 46 | USD | 46 | 01/04/12 | (1 | ) | |||||||||||||
Commonwealth Bank of Australia | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
Commonwealth Bank of Australia | USD | 1,739 | EUR | 1,298 | 03/21/12 | (58 | ) | |||||||||||||
Commonwealth Bank of Australia | USD | 810 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
Credit Suisse First Boston | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
Credit Suisse First Boston | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
Credit Suisse First Boston | USD | 1,739 | EUR | 1,298 | 03/21/12 | (58 | ) | |||||||||||||
Credit Suisse First Boston | USD | 778 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
Deutsche Bank AG | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
Deutsche Bank AG | USD | 1,739 | EUR | 1,298 | 03/21/12 | (59 | ) | |||||||||||||
Deutsche Bank AG | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
HSBC Bank PLC | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
HSBC Bank PLC | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
HSBC Bank PLC | USD | 1,739 | EUR | 1,298 | 03/21/12 | (58 | ) | |||||||||||||
HSBC Bank PLC | USD | 778 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
HSBC Bank PLC | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
HSBC Bank PLC | USD | 809 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
JP Morgan Chase Bank | USD | 324 | AUD | 319 | 03/21/12 | — | ||||||||||||||
JP Morgan Chase Bank | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
JP Morgan Chase Bank | USD | 1,739 | EUR | 1,298 | 03/21/12 | (58 | ) | |||||||||||||
JP Morgan Chase Bank | USD | 779 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
JP Morgan Chase Bank | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
JP Morgan Chase Bank | USD | 810 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
JP Morgan Chase Bank | EUR | 200 | USD | 261 | 03/21/12 | 2 | ||||||||||||||
JP Morgan Chase Bank | GBP | 200 | USD | 309 | 03/21/12 | (1 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | USD | 86 | SEK | 593 | 01/04/12 | — | ||||||||||||||
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, 2011
Amounts in thousands
| Foreign Currency Exchange Contracts | ||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||
Royal Bank of Canada | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
Royal Bank of Canada | USD | 779 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
Royal Bank of Canada | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
Royal Bank of Canada | USD | 810 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
Royal Bank of Scotland PLC | USD | 57 | CHF | 53 | 01/04/12 | — | ||||||||||||||
Royal Bank of Scotland PLC | USD | 94 | DKK | 540 | 01/03/12 | — | ||||||||||||||
Royal Bank of Scotland PLC | USD | 124 | EUR | 96 | 01/03/12 | — | ||||||||||||||
Royal Bank of Scotland PLC | USD | 285 | GBP | 185 | 01/04/12 | 2 | ||||||||||||||
Royal Bank of Scotland PLC | USD | 168 | HKD | 1,306 | 01/03/12 | — | ||||||||||||||
Royal Bank of Scotland PLC | USD | 180 | JPY | 13,957 | 01/05/12 | 2 | ||||||||||||||
Royal Bank of Scotland PLC | USD | 24 | SEK | 166 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 17 | AUD | 17 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 2 | BRL | 4 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 10 | BRL | 18 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 24 | BRL | 46 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 26 | BRL | 49 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 477 | CAD | 483 | 03/21/12 | (4 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 260 | EUR | 200 | 03/21/12 | (1 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 778 | GBP | 496 | 03/21/12 | (9 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 12 | HKD | 94 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 22 | HKD | 169 | 01/04/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 2 | THB | 53 | 01/04/12 | — | ||||||||||||||
State Street Bank & Trust Co. | USD | 1 | THB | 39 | 01/05/12 | — | ||||||||||||||
State Street Bank & Trust Co. | AUD | 9 | USD | 9 | 01/03/12 | — | ||||||||||||||
State Street Bank & Trust Co. | AUD | 105 | USD | 107 | 01/03/12 | (1 | ) | |||||||||||||
State Street Bank & Trust Co. | AUD | — | USD | — | 01/05/12 | — | ||||||||||||||
State Street Bank & Trust Co. | AUD | 31 | USD | 32 | 01/05/12 | — | ||||||||||||||
State Street Bank & Trust Co. | AUD | 100 | USD | 101 | 03/21/12 | (1 | ) | |||||||||||||
State Street Bank & Trust Co. | CAD | 100 | USD | 98 | 03/21/12 | — | ||||||||||||||
State Street Bank & Trust Co. | EUR | 200 | USD | 264 | 03/21/12 | 5 | ||||||||||||||
State Street Bank & Trust Co. | EUR | 200 | USD | 261 | 03/21/12 | 2 | ||||||||||||||
State Street Bank & Trust Co. | JPY | 20,000 | USD | 257 | 03/21/12 | (4 | ) | |||||||||||||
State Street Bank & Trust Co. | THB | 359 | USD | 11 | 01/04/12 | — | ||||||||||||||
State Street Bank & Trust Co. | THB | 522 | USD | 16 | 01/05/12 | — | ||||||||||||||
UBS AG | CHF | 23 | USD | 25 | 01/05/12 | — | ||||||||||||||
Westpac Banking Corp. | USD | 139 | HKD | 1,079 | 03/21/12 | — | ||||||||||||||
Westpac Banking Corp. | USD | 810 | JPY | 62,750 | 03/21/12 | 7 | ||||||||||||||
|
| |||||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (394 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
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, 2011
Amounts in thousands
| Market Value | % of Net Assets | |||||||||||||||||||
| Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Australia | $ | 3,328 | $ | — | $ | — | $ | 3,328 | 1.0 | |||||||||||
Austria | 56 | — | — | 56 | — | * | ||||||||||||||
Belgium | 2,516 | — | — | 2,516 | 0.8 | |||||||||||||||
Bermuda | 3,225 | — | — | 3,225 | 1.0 | |||||||||||||||
Brazil | 4,992 | — | — | 4,992 | 1.5 | |||||||||||||||
Canada | 5,646 | — | — | 5,646 | 1.7 | |||||||||||||||
Cayman Islands | 2,304 | — | — | 2,304 | 0.7 | |||||||||||||||
Czech Republic | 717 | — | — | 717 | 0.2 | |||||||||||||||
Denmark | 4,174 | — | — | 4,174 | 1.3 | |||||||||||||||
France | 24,485 | — | — | 24,485 | 7.4 | |||||||||||||||
Germany | 21,105 | — | — | 21,105 | 6.4 | |||||||||||||||
Hong Kong | 5,281 | — | — | 5,281 | 1.6 | |||||||||||||||
India | 2,094 | — | — | 2,094 | 0.6 | |||||||||||||||
Ireland | 1,288 | — | — | 1,288 | 0.4 | |||||||||||||||
Israel | 2,244 | — | — | 2,244 | 0.7 | |||||||||||||||
Italy | 7,629 | — | — | 7,629 | 2.3 | |||||||||||||||
Japan | 45,125 | — | — | 45,125 | 13.7 | |||||||||||||||
Jersey | 2,798 | — | — | 2,798 | 0.8 | |||||||||||||||
Luxembourg | 2,367 | — | — | 2,367 | 0.7 | |||||||||||||||
Mexico | 668 | — | — | 668 | 0.2 | |||||||||||||||
Netherlands | 21,032 | — | — | 21,032 | 6.4 | |||||||||||||||
Norway | 6,241 | — | — | 6,241 | 1.9 | |||||||||||||||
Russia | 1,434 | — | — | 1,434 | 0.4 | |||||||||||||||
Singapore | 6,321 | — | — | 6,321 | 1.9 | |||||||||||||||
South Africa | 702 | — | — | 702 | 0.2 | |||||||||||||||
South Korea | 4,132 | — | — | 4,132 | 1.3 | |||||||||||||||
Spain | 5,787 | — | — | 5,787 | 1.8 | |||||||||||||||
Sweden | 1,574 | — | — | 1,574 | 0.5 | |||||||||||||||
Switzerland | 30,325 | — | — | 30,325 | 9.2 | |||||||||||||||
Taiwan | 6,012 | — | — | 6,012 | 1.8 | |||||||||||||||
Thailand | 1,044 | — | — | 1,044 | 0.3 | |||||||||||||||
United Kingdom | 68,121 | — | — | 68,121 | 20.7 | |||||||||||||||
United States | 8,179 | — | — | 8,179 | 2.5 | |||||||||||||||
Virgin Islands, British | 661 | — | — | 661 | 0.2 | |||||||||||||||
Preferred Stocks | 972 | — | — | 972 | 0.3 | |||||||||||||||
Short-Term Investments | — | 23,155 | — | 23,155 | 7.0 | |||||||||||||||
Other Securities | — | 24,712 | — | 24,712 | 7.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 304,579 | 47,867 | — | 352,446 | 106.9 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (6.9 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
| 100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 93 | — | — | 93 | — | * | ||||||||||||||
Foreign Currency Exchange Contracts | 2 | (396 | ) | — | (394 | ) | (0.1 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 95 | $ | (396 | ) | $ | — | $ | (301 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| * | Less than .05% of net assets. |
| ** | Other financial instruments reflected, such as futures, forwards, interest rate swaps, and credit default swaps 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.
There were no significant transfers in and out of levels 1, 2 and 3 during the period ending December 31, 2011.
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, 2011
Amounts in thousands
| Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Assets and Liabilities - Assets | ||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 57 | ||||
Daily variation margin on futures contracts* | 251 | — | ||||||
|
|
|
| |||||
Total | $ | 251 | $ | 57 | ||||
|
|
|
| |||||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||
Unrealized depreciation on foreign currency exchange contracts | $ | — | $ | 451 | ||||
Daily variation margin on futures contracts* | 158 | — | ||||||
|
|
|
| |||||
Total | $ | 158 | $ | 451 | ||||
|
|
|
| |||||
| Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||
Futures contracts | $ | (3,234 | ) | $ | — | |||
Foreign currency-related transactions | — | 120 | ||||||
|
|
|
| |||||
Total | $ | (3,234 | ) | $ | 120 | |||
|
|
|
| |||||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||
Futures contracts | $ | 82 | $ | — | ||||
Foreign currency-related transactions | — | (634 | ) | |||||
|
|
|
| |||||
Total | $ | 82 | $ | (634 | ) | |||
|
|
|
| |||||
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statements 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
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
| Core Bond Fund | ||||
| Total Return | |||
1 Year | 4.68 | % | ||
5 Years | 6.64 | %§ | ||
10 Years | 5.84 | %§ | ||
| Barclays Capital U.S. Aggregate Bond Index** | ||||
| Total Return | |||
1 Year | 7.84 | % | ||
5 Years | 6.50 | %§ | ||
10 Years | 5.78 | %§ | ||
| 48 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Portfolio Management Discussion and Analysis — December 31, 2011 (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, 2011?
For the fiscal year ended December 31, 2011, the Core Bond Fund gained 4.68%. This is compared to the Fund’s benchmark, the Barclays Capital U.S. Aggregate Bond Index (the “Index”), which gained 7.84% during the same period. The Fund’s performance includes operating expenses, whereas index returns are unmanaged and do not include expenses of any kind.
For the fiscal year ended December 31, 2011, the Lipper® BBB Rated Corp Debt Funds (VIP) Average, a group of funds that Lipper considers to have investment strategies similar to those of the Fund, gained 6.85%. This result serves as a peer comparison and is expressed net of operating expenses.
RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is representative of the aggregate of each money manager’s benchmark index.
How did the market conditions described in the Market Summary report affect the Fund’s performance?
The Fund’s performance for the fiscal year reflected the up and down market environment that was dominated by the third quarter market sell-off. The Fund was well-positioned for the market rally that continued from 2010 into the first quarter of 2011. Overweight positions in corporate bonds and non-agency mortgages were positive for Fund performance in the first quarter. However, when market sentiment began to turn in May, so did the Fund’s performance. As the market became saturated by the Federal Reserve’s selling of Maiden Lane II assets, non-agency mortgage prices began to fall rapidly and additional sales occurred at distressed prices. In the third quarter, the market sell off became more broad-based, leading most of the Fund’s active credit positions to generate substantial underperformance. Investment grade and high yield corporate bonds, non-agency mortgages, emerging market debt and non-dollar positions all underperformed during this period, to
such an extent that the Fund’s third quarter relative underperformance dominated 2011 results. The Fund was particularly overweight in the financial sector with corporate bonds, but fears of financial contagion stemming from Europe led that segment of the market to substantially underperform, along with other industries within the corporate bond sector. As the market rallied in the fourth quarter, the Fund’s financials exposure continued to lag behind other credit-sensitive assets. The fourth quarter rally was particularly positive for more liquid credit sectors such as large-cap high yield debt, emerging market debt and non-dollar positions, which all benefited the Fund. However, the Fund’s exposure to less liquid segments of the market, like non-agency mortgages, which did not experience the same fourth quarter rally, prevented the Fund from recouping any of its third quarter losses relative to the Index.
With respect to interest rates exposure, the Fund came into the year short duration (i.e., underweight to interest rate risk), which was a positive in the first few month of the year, but similar to the Fund’s credit exposures, ultimately led to underperformance during the latter half of the year. The Fund’s underweight to duration remained substantial going into August when Treasuries and interest rates rallied in spite of an unsatisfactory resolution to the U.S. budget negotiations that led to an S&P downgrade of U.S. government debt. This dynamic was also negative for the Fund from a yield curve perspective, as the Fund was most underweight interest rates in the long end of the curve, which happened to rally the most in the third quarter. This underweight to the long end of the curve was reduced in the fourth quarter, which was beneficial to Fund performance since the long end continued to perform well.
How did the investment strategies and techniques employed by the Fund and its money managers affect its benchmark relative performance?
The Fund’s money managers tend to invest the Fund’s assets in non-Treasury sectors and types of securities that are not found within the Index (e.g., high yield credit, mortgage-backed securities and emerging market debt). As a result of having a more aggressive asset allocation relative to the Index, all three managers underperformed, with the third quarter risk off market environment dominating market returns. The underweight to interest rate risk, particularly on the long end of the yield curve, accounted for nearly half of the Fund’s underperformance, while exposures to non-agency mortgages and investment grade financials accounted for most of the remainder. The Fund did receive some positive performance from its holdings in commercial mortgage-backed securities.
Goldman Sachs Asset Management, L.P. underperformed the Fund’s Index to a lesser degree than the other managers in large part because it was less aggressive in expressing similar active views. It added value through security selection in agency mortgage-backed securities and successfully timed its rotation into and out of high yield corporate debt.
| Core Bond Fund | 49 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)
Metropolitan West Asset Management, LLC (“MetWest”) was consistently underweight to duration and overweight financials and non-agencies. Non-agency mortgage exposure was the most significant detractor from performance.
Pacific Investment Management Company LLC (“PIMCo”) struggled the most among managers in the Fund, as it was overweight financials and non-agency mortgages, and underweight to duration in generally larger magnitudes than the Fund’s other managers. PIMCo was particularly underweight the long end of the yield curve and also held a number of non-dollar positions that underperformed.
Describe any changes to the Fund’s structure or the money manager line-up.
There were no changes to the Fund’s structure or money manager line-up during the fiscal year.
| Money Managers as of December 31, 2011 | 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.
| 50 | Core Bond 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.
Table of Contents
Russell Investment Funds
Core Bond Fund
Shareholder Expense Example — December 31, 2011 (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, 2011 to December 31, 2011.
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.
| Actual Performance | Hypothetical Performance (5% return before expenses) | ||||||
Beginning Account Value July 1, 2011 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value December 31, 2011 | $ | 1,019.30 | $ | 1,022.08 | ||||
Expenses Paid During Period* | $ | 3.16 | $ | 3.16 | ||||
| * | Expenses are equal to the Fund’s annualized expense ratio of 0.62% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 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, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
| Long-Term Investments - 89.7% | ||||||||
| Asset-Backed Securities - 5.3% | ||||||||
Access Group, Inc. | 654 | 655 | ||||||
ACE Securities Corp. | 60 | 57 | ||||||
Ameriquest Mortgage Securities, Inc. | — | — | ||||||
Series 2005-R11 Class A2C 0.487% due 01/25/36 (Ê) | 766 | 749 | ||||||
Asset Backed Securities Corp. Home | 1,050 | 647 | ||||||
Series 2006-HE5 Class A5 0.497% due 07/25/36 (Ê) | 1,200 | 377 | ||||||
Bayview Financial Acquisition Trust | 190 | 142 | ||||||
Brazos Higher Education Authority | 287 | 281 | ||||||
Series 2010-1 Class A1 1.406% due 05/25/29 (Ê) | 262 | 260 | ||||||
Series 2010-1 Class A2 1.706% due 02/25/35 (Ê) | 500 | 469 | ||||||
Series 2011-1 Class A2 1.306% due 02/25/30 (Ê) | 700 | 681 | ||||||
Series 2011-2 Class A2 1.268% due 07/25/29 (Ê) | 800 | 778 | ||||||
Carrington Mortgage Loan Trust | 1,900 | 589 | ||||||
Centex Home Equity | 700 | 368 | ||||||
CIT Education Loan Trust | 526 | 477 | ||||||
CIT Mortgage Loan Trust | 38 | 37 | ||||||
Series 2007-1 Class 2A2 1.507% due 10/25/37 (Å)(Ê) | 130 | 97 | ||||||
Series 2007-1 Class 2A3 1.707% due 10/25/37 (Å)(Ê) | 180 | 72 | ||||||
Citigroup Mortgage Loan Trust, Inc. | 1,045 | 742 | ||||||
Series 2007-WFH1 Class A4 0.457% due 01/25/37 (Ê) | 934 | 392 | ||||||
Series 2007-WFH4 Class A2B 1.307% due 07/25/37 (Ê) | 1,290 | 651 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Conseco Financial Corp. | 700 | 760 | ||||||
Series 1999-2 Class A5 6.680% due 12/01/30 | 604 | 608 | ||||||
Countrywide Home Equity Loan Trust | 286 | 204 | ||||||
Educational Funding of the South, Inc. | 210 | 193 | ||||||
EFS Volunteer LLC | 500 | 472 | ||||||
First Franklin Mortgage Loan Asset | 641 | 310 | ||||||
GCO Education Loan Funding Trust | 100 | 85 | ||||||
Series 2006-1 Class A11L 0.736% due 05/25/36 (Ê) | 100 | 83 | ||||||
GMAC Mortgage Corp. Loan Trust | 40 | 29 | ||||||
Series 2007-HE3 Class 2A1 7.000% due 09/25/37 | 53 | 37 | ||||||
Goal Capital Funding Trust | 86 | 82 | ||||||
GSAA Trust | 320 | 281 | ||||||
HASC 2007 OPT1 2A2 | 1,650 | 909 | ||||||
HSBC Home Equity Loan Trust | 148 | 134 | ||||||
Series 2006-4 Class A3V 0.405% due 03/20/36 (Ê) | 720 | 693 | ||||||
Series 2007-1 Class AS 0.455% due 03/20/36 (Ê) | 490 | 409 | ||||||
Series 2007-2 Class M2 0.625% due 07/20/36 (Ê) | 1,300 | 564 | ||||||
Series 2007-3 Class APT 1.455% due 11/20/36 (Ê) | 214 | 189 | ||||||
Indymac Residential Asset Backed | 208 | 91 | ||||||
IXIS Real Estate Capital Trust | 218 | 203 | ||||||
JPMorgan Mortgage Acquisition Corp. | 2,350 | 791 | ||||||
| 52 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Knowledge Works Foundation | 271 | 262 | ||||||
Lehman XS Trust | ||||||||
Series 2006-9 Class A1B 0.417% due 05/25/46 (Ê) | 210 | 111 | ||||||
Series 2006-13 Class 1A2 0.427% due 09/25/36 (Ê) | 201 | 109 | ||||||
Series 2006-19 Class A2 0.427% due 12/25/36 (Ê) | 222 | 117 | ||||||
Long Beach Mortgage Loan Trust | 5 | 3 | ||||||
Series 2004-4 Class M1 1.157% due 10/25/34 (Ê) | 1,000 | 702 | ||||||
Mastr Asset Backed Securities Trust | 12 | 12 | ||||||
Merrill Lynch First Franklin Mortgage | 154 | 63 | ||||||
Series 2007-4 Class 2A2 0.377% due 07/25/37 (Ê) | 1,160 | 686 | ||||||
Missouri Higher Education Loan | 779 | 780 | ||||||
Morgan Stanley ABS Capital I | 1,950 | 783 | ||||||
Series 2007-HE2 Class A2B 0.347% due 01/25/37 (Ê) | 1,043 | 324 | ||||||
Series 2007-HE5 Class A2C 0.507% due 03/25/37 (Ê) | 800 | 225 | ||||||
Northstar Education Finance, Inc. | 1,000 | 994 | ||||||
Series 2007-1 Class A1 0.525% due 04/28/30 (Ê) | 475 | 434 | ||||||
Series 2007-1 Class A3 0.485% due 01/29/46 (Ê) | 500 | 448 | ||||||
Popular ABS Mortgage Pass-Through | 109 | 94 | ||||||
Series 2006-C Class A4 0.507% due 07/25/36 (Ê) | 1,480 | 717 | ||||||
Series 2006-D Class A3 0.517% due 11/25/46 (Ê) | 1,500 | 711 | ||||||
Renaissance Home Equity Loan Trust | 85 | 65 | ||||||
Series 2006-1 Class AF6 5.746% due 05/25/36 | 166 | 75 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Residential Asset Mortgage Products, Inc. | 381 | 366 | ||||||
Series 2003-RS11 Class AI6A 5.980% due 12/25/33 | 116 | 107 | ||||||
Residential Asset Securities Corp. | 30 | 17 | ||||||
SG Mortgage Securities Trust | 1,500 | 381 | ||||||
SLM Student Loan Trust | 490 | 439 | ||||||
Series 2008-2 Class A1 0.718% due 01/25/15 (Ê) | 10 | 10 | ||||||
Series 2008-7 Class A2 0.918% due 10/25/17 (Ê) | 2,800 | 2,792 | ||||||
Small Business Administration | 548 | 600 | ||||||
Soundview Home Equity Loan Trust | 471 | 432 | ||||||
Structured Asset Securities Corp. | 387 | 381 | ||||||
Washington Mutual Asset-Backed | 587 | 262 | ||||||
|
| |||||||
| 29,150 | ||||||||
|
| |||||||
| Corporate Bonds and Notes - 17.1% | ||||||||
ACCO Brands Corp. | 225 | 250 | ||||||
Allstate Life Global Funding Trusts | 200 | 211 | ||||||
Ally Financial, Inc. | 1,900 | 1,951 | ||||||
7.500% due 09/15/20 | 100 | 101 | ||||||
Altria Group, Inc. | 150 | 202 | ||||||
American Airlines 2011-2 Class A Pass | 625 | 638 | ||||||
American Express Bank FSB | 300 | 314 | ||||||
6.000% due 09/13/17 (Ñ) | 400 | 453 | ||||||
American Express Centurion Bank | 400 | 452 | ||||||
| Core Bond Fund | 53 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
American Express Co. | 200 | 242 | ||||||
American International Group, Inc. | 700 | 675 | ||||||
5.450% due 05/18/17 | 1,000 | 956 | ||||||
5.850% due 01/16/18 | 900 | 880 | ||||||
Amgen, Inc. | 400 | 404 | ||||||
6.900% due 06/01/38 | 1,000 | 1,231 | ||||||
Anadarko Petroleum Corp. | ||||||||
6.375% due 09/15/17 | 325 | 377 | ||||||
8.700% due 03/15/19 | 150 | 192 | ||||||
Anheuser-Busch InBev Worldwide, Inc. | ||||||||
4.125% due 01/15/15 | 225 | 243 | ||||||
Arch Coal, Inc. | ||||||||
8.750% due 08/01/16 | 70 | 76 | ||||||
7.000% due 06/15/19 (Þ) | 350 | 357 | ||||||
Arizona Public Service Co. | ||||||||
5.800% due 06/30/14 (Ñ) | 100 | 111 | ||||||
6.250% due 08/01/16 | 75 | 88 | ||||||
Ashtead Capital, Inc. | ||||||||
9.000% due 08/15/16 (Þ) | 100 | 104 | ||||||
AT&T, Inc. | ||||||||
4.950% due 01/15/13 | 200 | 208 | ||||||
2.950% due 05/15/16 | 350 | 365 | ||||||
5.500% due 02/01/18 | 200 | 232 | ||||||
3.875% due 08/15/21 | 150 | 159 | ||||||
6.300% due 01/15/38 | 900 | 1,104 | ||||||
6.400% due 05/15/38 | 175 | 216 | ||||||
Bank of America Corp. | ||||||||
7.375% due 05/15/14 | 1,310 | 1,357 | ||||||
3.625% due 03/17/16 | 125 | 115 | ||||||
5.625% due 10/14/16 | 450 | 432 | ||||||
6.000% due 09/01/17 | 335 | 327 | ||||||
5.750% due 12/01/17 | 140 | 132 | ||||||
Bank of America NA | ||||||||
Series BKNT | ||||||||
0.627% due 06/15/16 (Ê) | 600 | 485 | ||||||
6.100% due 06/15/17 (Ñ) | 775 | 729 | ||||||
BB&T Corp. | ||||||||
3.200% due 03/15/16 | 325 | 339 | ||||||
Bear Stearns Cos. LLC (The) | ||||||||
7.250% due 02/01/18 | 445 | 522 | ||||||
Berkshire Hathaway, Inc. | ||||||||
3.750% due 08/15/21 (Ñ) | 250 | 260 | ||||||
Boardwalk Pipelines, LP | ||||||||
5.875% due 11/15/16 | 225 | 253 | ||||||
Brandywine Operating Partnership, LP | ||||||||
4.950% due 04/15/18 | 275 | 271 | ||||||
Burlington Northern Santa Fe LLC | ||||||||
6.875% due 12/01/27 | 25 | 32 | ||||||
6.750% due 03/15/29 | 10 | 13 | ||||||
Calpine Construction Finance Co., LP | ||||||||
8.000% due 06/01/16 (Þ) | 800 | 864 | ||||||
Capital One Capital III | ||||||||
7.686% due 08/15/36 | 225 | 224 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Case New Holland, Inc. | ||||||||
7.750% due 09/01/13 | 125 | 133 | ||||||
Cellco Partnership / Verizon Wireless | ||||||||
8.500% due 11/15/18 | 175 | 236 | ||||||
CenterPoint Energy Resources Corp. | ||||||||
6.125% due 11/01/17 | 50 | 57 | ||||||
Charter Communications Operating | ||||||||
10.875% due 09/15/14 (Ø)(Þ) | 125 | 134 | ||||||
Chase Capital III | ||||||||
Series C | ||||||||
1.077% due 03/01/27 (Ê) | 295 | 203 | ||||||
CHS/Community Health Systems, Inc. | ||||||||
8.875% due 07/15/15 (Ñ) | 471 | 486 | ||||||
Chubb Corp. (The) | ||||||||
6.375% due 03/29/67 | 175 | 173 | ||||||
Cigna Corp. | ||||||||
2.750% due 11/15/16 | 175 | 175 | ||||||
Cimarex Energy Co. | ||||||||
7.125% due 05/01/17 | 50 | 52 | ||||||
CIT Group, Inc. | ||||||||
7.000% due 05/01/15 | 285 | 285 | ||||||
7.000% due 05/04/15 (Þ) | 125 | 125 | ||||||
7.000% due 05/01/17 | 198 | 198 | ||||||
7.000% due 05/02/17 (Ñ)(Þ) | 400 | 400 | ||||||
6.625% due 04/01/18 (Ñ)(Þ) | 390 | 404 | ||||||
Series | ||||||||
7.000% due 05/01/16 | 141 | 141 | ||||||
Citigroup Capital XXI | ||||||||
8.300% due 12/21/57 | 830 | 829 | ||||||
Citigroup, Inc. | ||||||||
5.500% due 04/11/13 | 700 | 715 | ||||||
5.850% due 07/02/13 | 100 | 103 | ||||||
2.453% due 08/13/13 (Ê) | 100 | 98 | ||||||
5.000% due 09/15/14 | 400 | 396 | ||||||
4.750% due 05/19/15 | 175 | 177 | ||||||
4.700% due 05/29/15 | 50 | 51 | ||||||
5.850% due 08/02/16 | 220 | 231 | ||||||
6.000% due 08/15/17 | 850 | 891 | ||||||
6.125% due 11/21/17 | 495 | 528 | ||||||
6.125% due 08/25/36 | 300 | 260 | ||||||
6.875% due 03/05/38 | 450 | 494 | ||||||
8.125% due 07/15/39 | 450 | 551 | ||||||
Columbus Southern Power Co. | ||||||||
Series C | ||||||||
5.500% due 03/01/13 | 10 | 10 | ||||||
CommScope, Inc. | ||||||||
8.250% due 01/15/19 (Þ) | 225 | 225 | ||||||
Continental Airlines 1999-1 Class A | ||||||||
Series 991A | ||||||||
6.545% due 02/02/19 | 182 | 189 | ||||||
Continental Airlines 2007-1 Class A | ||||||||
Series 071A | ||||||||
5.983% due 04/19/22 (Ñ) | 139 | 145 | ||||||
| 54 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Continental Airlines 2009-1 Pass | ||||||||
Series 09-1 | ||||||||
9.000% due 07/08/16 | 228 | 251 | ||||||
Credit Suisse USA, Inc. | ||||||||
5.500% due 08/15/13 (Ñ) | 45 | 47 | ||||||
CSC Holdings LLC | ||||||||
8.500% due 04/15/14 | 460 | 509 | ||||||
DCP Midstream LLC | ||||||||
9.750% due 03/15/19 (Þ) | 100 | 130 | ||||||
DDR Corp. | ||||||||
9.625% due 03/15/16 | 85 | 99 | ||||||
7.500% due 04/01/17 | 250 | 270 | ||||||
Dell, Inc. | ||||||||
4.700% due 04/15/13 | 400 | 419 | ||||||
Delta Air Lines 2002-1 Class G-1 Pass | ||||||||
Series 02G1 | ||||||||
6.718% due 01/02/23 | 127 | 126 | ||||||
Delta Air Lines, Inc. | ||||||||
9.500% due 09/15/14 (Ñ)(Þ) | 207 | 213 | ||||||
DIRECTV Holdings LLC / DIRECTV | ||||||||
3.500% due 03/01/16 | 350 | 361 | ||||||
6.000% due 08/15/40 | 100 | 109 | ||||||
Discover Bank | ||||||||
Series BKNT | ||||||||
8.700% due 11/18/19 (Ñ) | 250 | 285 | ||||||
DJO Finance LLC / DJO Finance Corp. | ||||||||
10.875% due 11/15/14 | 135 | 126 | ||||||
Dolphin Subsidiary II, Inc. | ||||||||
7.250% due 10/15/21 (Þ) | 650 | 702 | ||||||
Dow Chemical Co. (The) | ||||||||
7.600% due 05/15/14 | 424 | 479 | ||||||
Duke Realty, LP | ||||||||
6.750% due 03/15/20 | 200 | 219 | ||||||
Dynegy Roseton / Danskammer Pass | ||||||||
Series B | ||||||||
7.670% due 11/08/16 | 700 | 427 | ||||||
Ecolab, Inc. | ||||||||
3.000% due 12/08/16 (Ñ) | 350 | 362 | ||||||
4.350% due 12/08/21 | 325 | 347 | ||||||
Edison Mission Energy | ||||||||
7.000% due 05/15/17 | 675 | 439 | ||||||
El Paso Corp. | ||||||||
Series GMTN | ||||||||
8.050% due 10/15/30 | 200 | 233 | ||||||
El Paso Natural Gas Co. | ||||||||
7.500% due 11/15/26 | 100 | 123 | ||||||
El Paso Pipeline Partners Operating Co. LLC | ||||||||
6.500% due 04/01/20 | 300 | 331 | ||||||
5.000% due 10/01/21 | 650 | 669 | ||||||
Energy Transfer Partners, LP | ||||||||
5.950% due 02/01/15 | 300 | 324 | ||||||
Enterprise Products Operating LLC | ||||||||
6.650% due 04/15/18 | 125 | 148 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Series A | ||||||||
8.375% due 08/01/66 | 100 | 107 | ||||||
ERP Operating LP | ||||||||
4.625% due 12/15/21 | 300 | 306 | ||||||
Farmers Exchange Capital | ||||||||
7.050% due 07/15/28 (Þ) | 500 | 529 | ||||||
7.200% due 07/15/48 (Þ) | 300 | 311 | ||||||
Fifth Third Bancorp | ||||||||
3.625% due 01/25/16 | 125 | 127 | ||||||
8.250% due 03/01/38 | 1,100 | 1,345 | ||||||
Fifth Third Bank | ||||||||
Series BKNT | ||||||||
0.576% due 05/17/13 (Ê) | 250 | 245 | ||||||
First Niagara Financial Group, Inc. | ||||||||
6.750% due 03/19/20 | 125 | 132 | ||||||
FPL Energy Wind Funding LLC | ||||||||
6.876% due 06/27/17 (Þ) | 184 | 152 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | ||||||||
8.375% due 04/01/17 | 300 | 319 | ||||||
Frontier Communications Corp. | ||||||||
6.250% due 01/15/13 (Ñ) | 325 | 332 | ||||||
GE Capital Trust I | ||||||||
6.375% due 11/15/67 (Ñ) | 198 | 195 | ||||||
General Electric Capital Corp. | ||||||||
1.388% due 05/22/13 (Ê) | 75 | 75 | ||||||
5.900% due 05/13/14 (Ñ) | 350 | 383 | ||||||
5.625% due 05/01/18 | 230 | 258 | ||||||
4.375% due 09/16/20 | 300 | 307 | ||||||
5.875% due 01/14/38 | 300 | 318 | ||||||
Series EMTN | ||||||||
0.595% due 03/20/14 (Ê) | 400 | 392 | ||||||
6.375% due 11/15/67 (Ñ) | 1,900 | 1,871 | ||||||
Series GMTN | ||||||||
6.875% due 01/10/39 | 350 | 419 | ||||||
Series MTNA | ||||||||
6.750% due 03/15/32 | 425 | 498 | ||||||
General Electric Co. | ||||||||
5.250% due 12/06/17 | 150 | 172 | ||||||
GenOn REMA LLC | ||||||||
Series B | ||||||||
9.237% due 07/02/17 | 343 | 336 | ||||||
Goldman Sachs Group, Inc. (The) | ||||||||
6.000% due 05/01/14 (Ñ) | 150 | 156 | ||||||
3.625% due 02/07/16 | 285 | 275 | ||||||
6.250% due 09/01/17 | 600 | 627 | ||||||
6.150% due 04/01/18 | 400 | 413 | ||||||
7.500% due 02/15/19 | 550 | 607 | ||||||
6.000% due 06/15/20 | 150 | 154 | ||||||
6.750% due 10/01/37 | 800 | 744 | ||||||
Series MTNB | ||||||||
0.816% due 07/22/15 (Ê) | 100 | 88 | ||||||
Goodyear Tire & Rubber Co. (The) | ||||||||
10.500% due 05/15/16 (Ñ) | 195 | 215 | ||||||
HCA, Inc. | ||||||||
8.500% due 04/15/19 | 300 | 329 | ||||||
7.875% due 02/15/20 | 575 | 621 | ||||||
7.250% due 09/15/20 | 250 | 264 | ||||||
| Core Bond Fund | 55 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
HCP, Inc. | ||||||||
6.000% due 01/30/17 | 175 | 189 | ||||||
6.700% due 01/30/18 | 425 | 472 | ||||||
5.375% due 02/01/21 | 125 | 131 | ||||||
Series MTNE | ||||||||
6.000% due 06/15/14 | 400 | 424 | ||||||
Health Care REIT, Inc. | ||||||||
4.700% due 09/15/17 | 400 | 397 | ||||||
4.950% due 01/15/21 | 300 | 287 | ||||||
5.250% due 01/15/22 | 200 | 196 | ||||||
6.500% due 03/15/41 | 200 | 200 | ||||||
Healthcare Realty Trust, Inc. | ||||||||
6.500% due 01/17/17 | 950 | 1,020 | ||||||
Hewlett-Packard Co. | ||||||||
0.786% due 05/24/13 (Ê)(Ñ) | 700 | 693 | ||||||
3.000% due 09/15/16 | 225 | 227 | ||||||
Historic TW, Inc. | ||||||||
8.050% due 01/15/16 | 195 | 229 | ||||||
HSBC Bank USA | ||||||||
4.875% due 08/24/20 | 250 | 232 | ||||||
Indiantown Cogeneration, LP | ||||||||
Series A-10 | ||||||||
9.770% due 12/15/20 | 248 | 257 | ||||||
International Lease Finance Corp. | ||||||||
6.500% due 09/01/14 (Þ) | 720 | 736 | ||||||
6.750% due 09/01/16 (Þ) | 100 | 103 | ||||||
Ipalco Enterprises, Inc. | ||||||||
5.000% due 05/01/18 | 125 | 123 | ||||||
iPCS, Inc. | ||||||||
2.554% due 05/01/13 (Ê) | 440 | 408 | ||||||
JPMorgan Chase & Co. | ||||||||
5.375% due 01/15/14 (Ñ) | 170 | 181 | ||||||
3.150% due 07/05/16 | 600 | 603 | ||||||
6.000% due 01/15/18 | 200 | 223 | ||||||
4.250% due 10/15/20 | 300 | 302 | ||||||
4.350% due 08/15/21 | 375 | 379 | ||||||
JPMorgan Chase Bank NA | ||||||||
Series BKNT | ||||||||
5.875% due 06/13/16 | 70 | 76 | ||||||
6.000% due 10/01/17 | 945 | 1,016 | ||||||
JPMorgan Chase Capital XIII | ||||||||
Series M | ||||||||
1.319% due 09/30/34 (Ê) | 480 | 329 | ||||||
JPMorgan Chase Capital XXI | ||||||||
Series U | ||||||||
1.379% due 02/02/37 (Ê) | 335 | 237 | ||||||
JPMorgan Chase Capital XXIII | ||||||||
1.457% due 05/15/47 (Ê) | 545 | 373 | ||||||
Kinder Morgan Energy Partners, LP | ||||||||
5.950% due 02/15/18 | 700 | 800 | ||||||
Kraft Foods, Inc. | ||||||||
6.125% due 02/01/18 | 200 | 234 | ||||||
6.125% due 08/23/18 | 125 | 147 | ||||||
6.500% due 02/09/40 | 175 | 228 | ||||||
L-3 Communications Corp. | ||||||||
Series B | ||||||||
6.375% due 10/15/15 | 100 | 103 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Lehman Brothers Holdings, Inc. | ||||||||
5.625% due 01/24/13 (Æ)(Ø) | 200 | 53 | ||||||
6.200% due 09/26/14 (Æ)(Ø) | 200 | 53 | ||||||
Liberty Property, LP | ||||||||
4.750% due 10/01/20 | 275 | 279 | ||||||
Manufacturers & Traders Trust Co. | ||||||||
5.585% due 12/28/20 | 84 | 82 | ||||||
MBNA Corp. | ||||||||
6.125% due 03/01/13 | 200 | 201 | ||||||
Merrill Lynch & Co., Inc. | ||||||||
5.450% due 02/05/13 | 1,000 | 1,007 | ||||||
6.050% due 05/16/16 | 300 | 283 | ||||||
6.400% due 08/28/17 | 325 | 315 | ||||||
6.875% due 04/25/18 | 500 | 493 | ||||||
MetLife, Inc. | ||||||||
4.750% due 02/08/21 | 350 | 379 | ||||||
6.400% due 12/15/36 (Ñ) | 100 | 95 | ||||||
Metropolitan Life Global Funding I | ||||||||
5.125% due 06/10/14 (Þ) | 200 | 215 | ||||||
Mirant Mid Atlantic Pass Through | ||||||||
Series B | ||||||||
9.125% due 06/30/17 | 362 | 372 | ||||||
Morgan Stanley | ||||||||
0.855% due 10/18/16 (Ê) | 435 | 349 | ||||||
5.550% due 04/27/17 | 425 | 410 | ||||||
6.250% due 08/28/17 | 600 | 587 | ||||||
5.950% due 12/28/17 | 125 | 119 | ||||||
6.625% due 04/01/18 | 550 | 543 | ||||||
5.625% due 09/23/19 | 275 | 255 | ||||||
Series GMTN | ||||||||
2.953% due 05/14/13 (Ê) | 200 | 192 | ||||||
5.450% due 01/09/17 | 225 | 217 | ||||||
National City Bank | ||||||||
Series BKNT | ||||||||
0.703% due 06/07/17 (Ê) | 700 | 642 | ||||||
Nationwide Financial Services, Inc. | ||||||||
5.375% due 03/25/21 (Þ) | 375 | 368 | ||||||
NBCUniversal Media LLC | ||||||||
4.375% due 04/01/21 | 525 | 554 | ||||||
NCUA Guaranteed Notes | ||||||||
Series A4 | ||||||||
3.000% due 06/12/19 | 400 | 426 | ||||||
Nevada Power Co. | ||||||||
Series L | ||||||||
5.875% due 01/15/15 | 100 | 112 | ||||||
Newfield Exploration Co. | ||||||||
7.125% due 05/15/18 | 150 | 160 | ||||||
5.750% due 01/30/22 (Ñ) | 50 | 54 | ||||||
News America, Inc. | ||||||||
8.250% due 10/17/96 | 20 | 24 | ||||||
Series WI | ||||||||
6.150% due 02/15/41 | 300 | 346 | ||||||
Nextel Communications, Inc. | ||||||||
Series C | ||||||||
5.950% due 03/15/14 (Ñ) | 205 | 198 | ||||||
Series E | ||||||||
6.875% due 10/31/13 (Ñ) | 260 | 259 | ||||||
| 56 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
11.500% due 05/01/16 | 312 | 357 | ||||||
Nisource Finance Corp. | ||||||||
6.400% due 03/15/18 | 145 | 167 | ||||||
6.125% due 03/01/22 | 335 | 386 | ||||||
NRG Energy, Inc. | ||||||||
7.375% due 01/15/17 (Ñ) | 100 | 104 | ||||||
7.625% due 01/15/18 | 160 | 160 | ||||||
8.500% due 06/15/19 (Ñ) | 155 | 157 | ||||||
7.875% due 05/15/21 (Þ) | 125 | 122 | ||||||
Oncor Electric Delivery Co. LLC | ||||||||
6.800% due 09/01/18 | 550 | 669 | ||||||
Panhandle Eastern Pipeline Co., LP | ||||||||
8.125% due 06/01/19 | 450 | 551 | ||||||
Philip Morris International, Inc. | ||||||||
6.375% due 05/16/38 | 100 | 130 | ||||||
Plains Exploration & Production Co. | ||||||||
7.625% due 06/01/18 | 350 | 371 | ||||||
Plastipak Holdings, Inc. | ||||||||
8.500% due 12/15/15 (Þ) | 100 | 102 | ||||||
PNC Bank NA | ||||||||
Series BKNT | ||||||||
6.875% due 04/01/18 | 175 | 198 | ||||||
Progress Energy, Inc. | ||||||||
5.625% due 01/15/16 | 40 | 46 | ||||||
7.050% due 03/15/19 | 200 | 247 | ||||||
ProLogis, LP | ||||||||
1.875% due 11/15/37 | 150 | 147 | ||||||
Prudential Financial, Inc. | ||||||||
3.875% due 01/14/15 | 375 | 388 | ||||||
4.500% due 11/15/20 (Ñ) | 100 | 101 | ||||||
Prudential Holdings LLC | ||||||||
8.695% due 12/18/23 (Þ) | 550 | 691 | ||||||
Public Service Co. of New Mexico | ||||||||
7.950% due 05/15/18 | 260 | 304 | ||||||
Puget Sound Energy, Inc. | ||||||||
Series A | ||||||||
6.974% due 06/01/67 (Ñ) | 125 | 125 | ||||||
PulteGroup, Inc. | ||||||||
5.250% due 01/15/14 | 1,000 | 980 | ||||||
Qwest Communications International, Inc. | ||||||||
8.000% due 10/01/15 | 365 | 389 | ||||||
Qwest Corp. | ||||||||
7.625% due 06/15/15 | 100 | 111 | ||||||
8.375% due 05/01/16 | 175 | 200 | ||||||
Range Resources Corp. | ||||||||
7.500% due 10/01/17 | 50 | 53 | ||||||
7.250% due 05/01/18 | 100 | 107 | ||||||
Reinsurance Group of America, Inc. | ||||||||
6.750% due 12/15/65 | 275 | 238 | ||||||
Rensselaer Polytechnic Institute | ||||||||
5.600% due 09/01/20 | 325 | 366 | ||||||
Rock-Tenn Co. | ||||||||
5.625% due 03/15/13 | 25 | 26 | ||||||
RSC Equipment Rental, Inc./RSC | ||||||||
10.000% due 07/15/17 (Þ) | 325 | 379 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Sabine Pass LNG, LP | ||||||||
7.250% due 11/30/13 | 780 | 788 | ||||||
7.500% due 11/30/16 (Ñ) | 65 | 65 | ||||||
7.500% due 11/30/16 (Þ) | 380 | 367 | ||||||
Santander Holdings USA, Inc. | ||||||||
4.625% due 04/19/16 | 130 | 125 | ||||||
Simon Property Group, LP | ||||||||
6.100% due 05/01/16 | 130 | 148 | ||||||
5.650% due 02/01/20 | 275 | 315 | ||||||
SLM Corp. | ||||||||
6.250% due 01/25/16 | 2,050 | 1,992 | ||||||
Southern Union Co. | ||||||||
3.447% due 11/01/66 (Ê) | 1,005 | 937 | ||||||
Springleaf Finance Corp. | ||||||||
6.900% due 12/15/17 | 300 | 216 | ||||||
State Street Capital Trust III | ||||||||
5.337% due 01/29/49 (Ê)(ƒ)(Ñ) | 200 | 197 | ||||||
Steel Dynamics, Inc. | ||||||||
7.750% due 04/15/16 | 275 | 287 | ||||||
SunTrust Banks, Inc. | ||||||||
3.600% due 04/15/16 | 200 | 204 | ||||||
Tenet Healthcare Corp. | ||||||||
10.000% due 05/01/18 | 400 | 457 | ||||||
Tennessee Gas Pipeline Co. | ||||||||
8.000% due 02/01/16 | 200 | 236 | ||||||
7.500% due 04/01/17 | 75 | 89 | ||||||
8.375% due 06/15/32 | 100 | 127 | ||||||
Time Warner, Inc. | ||||||||
5.875% due 11/15/16 | 400 | 462 | ||||||
Transatlantic Holdings, Inc. | ||||||||
8.000% due 11/30/39 | 150 | 170 | ||||||
UAL 2009-1 Pass Through Trust | ||||||||
Series 09-1 | ||||||||
10.400% due 11/01/16 | 77 | 85 | ||||||
Union Electric Co. | ||||||||
6.400% due 06/15/17 | 205 | 245 | ||||||
Union Pacific Corp. | ||||||||
4.163% due 07/15/22 | 349 | 379 | ||||||
UnitedHealth Group, Inc. | ||||||||
4.875% due 02/15/13 | 200 | 208 | ||||||
6.000% due 06/15/17 | 3 | 4 | ||||||
6.500% due 06/15/37 | 45 | 57 | ||||||
Verizon Communications, Inc. | ||||||||
3.500% due 11/01/21 | 300 | 312 | ||||||
Wachovia Corp. | ||||||||
5.625% due 10/15/16 | 100 | 109 | ||||||
5.750% due 02/01/18 | 500 | 568 | ||||||
WEA Finance LLC / WT Finance Aust | ||||||||
7.500% due 06/02/14 (Þ) | 205 | 225 | ||||||
6.750% due 09/02/19 (Þ) | 95 | 106 | ||||||
Wells Fargo & Co. | ||||||||
5.625% due 12/11/17 | 300 | 342 | ||||||
Series K | ||||||||
7.980% due 03/29/49 (ƒ)(Ñ) | 3,300 | 3,534 | ||||||
| Core Bond Fund | 57 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Williams Cos., Inc. (The) | ||||||||
7.875% due 09/01/21 | 161 | 198 | ||||||
8.750% due 03/15/32 | 108 | 142 | ||||||
Xylem, Inc. | ||||||||
3.550% due 09/20/16 (Þ) | 250 | 258 | ||||||
ZFS Finance USA Trust II | ||||||||
6.450% due 12/15/65 (Þ) | 300 | 273 | ||||||
|
| |||||||
| 93,408 | ||||||||
|
| |||||||
| International Debt - 9.1% | ||||||||
Abbey National Treasury Services PLC | ||||||||
1.553% due 04/25/13 (ž) | 300 | 299 | ||||||
1.602% due 06/10/13 (ž) | 2,000 | 1,996 | ||||||
3.875% due 11/10/14 (Þ) | 870 | 817 | ||||||
4.000% due 04/27/16 (Ñ) | 275 | 247 | ||||||
Achmea Hypotheekbank NV | ||||||||
3.200% due 11/03/14 (Þ) | 548 | 575 | ||||||
AK Transneft OJSC Via | ||||||||
8.700% due 08/07/18 (Þ) | 100 | 120 | ||||||
ANZ National International, Ltd. | ||||||||
6.200% due 07/19/13 (Þ) | 600 | 636 | ||||||
ARES CLO, Ltd. | ||||||||
Series 2005-10A Class A3 | ||||||||
0.590% due 09/18/17 (Å)(Ê) | 248 | 241 | ||||||
AstraZeneca PLC | ||||||||
5.900% due 09/15/17 (Ñ) | 100 | 121 | ||||||
Australia & New Zealand Banking | ||||||||
1.288% due 05/08/13 (Å)(Ê) | 300 | 300 | ||||||
AWAS Aviation Capital, Ltd. | ||||||||
7.000% due 10/17/16 (Þ) | 330 | 330 | ||||||
Banco Santander Brazil SA | ||||||||
2.450% due 03/18/14 (Ê)(Þ) | 200 | 191 | ||||||
Bank of Montreal | ||||||||
2.850% due 06/09/15 (Þ) | 100 | 104 | ||||||
Bank of New York Mellon SA | ||||||||
9.625% due 05/02/21 (Þ) | 199 | 183 | ||||||
Bank of Scotland PLC | ||||||||
5.250% due 02/21/17 (Þ) | 200 | 209 | ||||||
Barclays Bank PLC | ||||||||
6.050% due 12/04/17 (Þ) | 200 | 181 | ||||||
BBVA Bancomer SA | ||||||||
7.250% due 04/22/20 (Ñ)(Þ) | 300 | 300 | ||||||
6.500% due 03/10/21 (Þ) | 200 | 193 | ||||||
Black Diamond CLO, Ltd. | ||||||||
Series 2007-1A Class AD | ||||||||
0.678% due 04/29/19 (Ê)(Þ) | 750 | 676 | ||||||
BM&FBovespa SA | ||||||||
5.500% due 07/16/20 (Ñ)(Þ) | 100 | 103 | ||||||
BNP Paribas SA | ||||||||
5.186% due 06/29/49 (ƒ)(Þ) | 300 | 198 | ||||||
Series MTn | ||||||||
0.791% due 04/08/13 (Ê) | 680 | 639 | ||||||
Bolivarian Republic of Venezuela | ||||||||
8.250% due 10/13/24 | 70 | 46 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
BP Capital Markets PLC | ||||||||
3.200% due 03/11/16 | 200 | 210 | ||||||
4.500% due 10/01/20 | 350 | 385 | ||||||
Braskem Finance, Ltd. | ||||||||
5.750% due 04/15/21 (Þ) | 300 | 298 | ||||||
BRFkredit AS | ||||||||
2.050% due 04/15/13 (Þ) | 1,400 | 1,426 | ||||||
Chatham Light CLO, Ltd. | ||||||||
Series 2005-2A Class A1 | ||||||||
0.682% due 08/03/19 (Å)(Ê) | 454 | 437 | ||||||
Cie de Financement Foncier | ||||||||
2.125% due 04/22/13 (Ñ)(Þ) | 100 | 99 | ||||||
Colombia Government International Bond | ||||||||
4.375% due 07/12/21 | 550 | 591 | ||||||
Corp. Nacional del Cobre de Chile | ||||||||
7.500% due 01/15/19 (Þ) | 200 | 255 | ||||||
Covidien International Finance SA | ||||||||
4.200% due 06/15/20 | 175 | 192 | ||||||
Credit Suisse NY | ||||||||
6.000% due 02/15/18 | 770 | 759 | ||||||
CSN Islands XI Corp. | ||||||||
6.875% due 09/21/19 (Þ) | 200 | 211 | ||||||
Deutsche Bank AG | ||||||||
6.000% due 09/01/17 | 600 | 670 | ||||||
Dexia Credit Local SA | ||||||||
0.908% due 04/29/14 (Ê)(Þ) | 500 | 454 | ||||||
DnB Boligkreditt AS | ||||||||
2.100% due 10/14/15 (Þ) | 1,600 | 1,586 | ||||||
Dolphin Energy, Ltd. | ||||||||
5.888% due 06/15/19 (Þ) | 110 | 119 | ||||||
Electricite De France | ||||||||
5.500% due 01/26/14 (Þ) | 200 | 214 | ||||||
6.500% due 01/26/19 (Ñ)(Þ) | 200 | 226 | ||||||
6.950% due 01/26/39 (Þ) | 200 | 235 | ||||||
Endurance Specialty Holdings, Ltd. | ||||||||
6.150% due 10/15/15 | 100 | 105 | ||||||
Enel Finance International NV | ||||||||
6.250% due 09/15/17 (Þ) | 300 | 286 | ||||||
Escrow GM Corp | ||||||||
1.000% due 12/31/12 (Å) | 80 | 30 | ||||||
Export-Import Bank of Korea | ||||||||
5.875% due 01/14/15 | 700 | 751 | ||||||
Gazprom International SA for Gazprom | ||||||||
Series regs | ||||||||
7.201% due 02/01/20 | 45 | 48 | ||||||
Gazprom OAO Via Gaz Capital SA | ||||||||
Series REGS | ||||||||
9.250% due 04/23/19 | 110 | 131 | ||||||
HBOS PLC | ||||||||
Series GMTN | ||||||||
6.750% due 05/21/18 (Þ) | 825 | 661 | ||||||
HSBC Bank PLC | ||||||||
3.100% due 05/24/16 (Þ) | 800 | 800 | ||||||
HSBC Bank USA | ||||||||
Series CLN | ||||||||
Zero coupon due 08/15/40 | 590 | 720 | ||||||
| 58 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
HSBC Finance Corp. | ||||||||
1.807% due 04/05/13 (Ê) | 300 | 375 | ||||||
HSBC Holdings PLC | ||||||||
6.500% due 05/02/36 | 100 | 101 | ||||||
6.500% due 09/15/37 | 100 | 99 | ||||||
Indian Oil Corp., Ltd. | ||||||||
4.750% due 01/22/15 | 400 | 402 | ||||||
ING Bank NV | ||||||||
1.397% due 03/15/13 (Ê)(Þ) | 600 | 586 | ||||||
1.737% due 06/09/14 (Ê)(Þ) | 300 | 287 | ||||||
2.375% due 06/09/14 (Þ) | 375 | 366 | ||||||
2.500% due 01/14/16 (Þ) | 700 | 687 | ||||||
Intelsat Jackson Holdings SA | ||||||||
9.500% due 06/15/16 (Ñ) | 580 | 606 | ||||||
7.250% due 04/01/19 (Þ) | 375 | 381 | ||||||
Intesa Sanpaolo SpA | ||||||||
2.906% due 02/24/14 (Ê)(Þ) | 200 | 176 | ||||||
Israel Government AID Bond | ||||||||
5.500% due 09/18/33 | 400 | 529 | ||||||
Jasper CLO, Ltd. | ||||||||
Series 2005-1A Class A | ||||||||
0.699% due 08/01/17 (Ê)(Þ) | 1,871 | 1,716 | ||||||
Korea Electric Power Corp. | ||||||||
5.125% due 04/23/34 (Þ) | 60 | 63 | ||||||
Majapahit Holding BV | ||||||||
Series REGS | ||||||||
7.750% due 10/17/16 | 100 | 112 | ||||||
Mexico Government International Bond | ||||||||
6.050% due 01/11/40 | 260 | 318 | ||||||
Monument Park CDO, Ltd. | ||||||||
Series 2004-1A Class A1 | ||||||||
0.959% due 01/20/16 (Ê)(Þ) | 272 | 267 | ||||||
Morgan Stanley | ||||||||
2.001% due 04/13/16 | 100 | 105 | ||||||
1.752% due 01/16/17 | 200 | 201 | ||||||
Series GMTN | ||||||||
5.750% due 02/14/17 | 300 | 440 | ||||||
Morgan Stanley Bank AG for OAO | ||||||||
Series REGS | ||||||||
9.625% due 03/01/13 | 900 | 959 | ||||||
MUFG Capital Finance 1, Ltd. | ||||||||
6.346% due 07/29/49 (ƒ)(Ñ) | 200 | 203 | ||||||
National Australia Bank, Ltd. | ||||||||
5.350% due 06/12/13 (Þ) | 800 | 835 | ||||||
Newcrest Finance Pty, Ltd. | ||||||||
4.450% due 11/15/21 (Þ) | 300 | 296 | ||||||
Nexen, Inc. | ||||||||
7.500% due 07/30/39 | 150 | 180 | ||||||
Noble Group, Ltd. | ||||||||
6.750% due 01/29/20 (Þ) | 100 | 86 | ||||||
Nordea Eiendomskreditt AS | ||||||||
1.875% due 04/07/14 (Þ) | 1,000 | 1,001 | ||||||
North American Development Bank | ||||||||
4.375% due 02/11/20 | 400 | 449 | ||||||
PE Paper Escrow GmbH | ||||||||
12.000% due 08/01/14 (Þ) | 200 | 213 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
Petrobras International Finance Co. - Pifco | ||||||||
3.875% due 01/27/16 | 400 | 412 | ||||||
7.875% due 03/15/19 | 800 | 955 | ||||||
5.750% due 01/20/20 | 30 | 32 | ||||||
5.375% due 01/27/21 | 420 | 441 | ||||||
Petroleos de Venezuela SA | ||||||||
Series REGS | ||||||||
8.500% due 11/02/17 | 160 | 121 | ||||||
Petroleos Mexicanos | ||||||||
8.000% due 05/03/19 | 320 | 399 | ||||||
PPL WEM Holdings PLC | ||||||||
5.375% due 05/01/21 (Þ) | 230 | 241 | ||||||
Province of Ontario Canada | ||||||||
1.375% due 01/27/14 | 200 | 202 | ||||||
PTTEP Canada International Finance, Ltd. | ||||||||
5.692% due 04/05/21 (Þ) | 210 | 220 | ||||||
Qatar Government International Bond | ||||||||
5.250% due 01/20/20 (Þ) | 520 | 571 | ||||||
QBE Capital Funding III, Ltd. | ||||||||
7.250% due 05/24/41 (Þ) | 250 | 220 | ||||||
Ras Laffan Liquefied Natural Gas Co., | ||||||||
5.838% due 09/30/27 (Þ) | 250 | 266 | ||||||
Series REGS | ||||||||
6.750% due 09/30/19 | 300 | 355 | ||||||
Republic of Venezuela | ||||||||
7.750% due 10/13/19 | 180 | 129 | ||||||
Resona Bank, Ltd. | ||||||||
5.850% due 09/29/49 (ƒ)(Þ) | 100 | 99 | ||||||
Royal Bank of Scotland Group PLC | ||||||||
6.990% due 10/29/49 (ƒ)(Þ) | 300 | 188 | ||||||
Series 1 | ||||||||
9.118% due 03/31/49 (ƒ) | 300 | 201 | ||||||
Royal Bank of Scotland PLC (The) | ||||||||
3.250% due 01/11/14 | 500 | 479 | ||||||
4.875% due 08/25/14 (Þ) | 1,000 | 979 | ||||||
5.625% due 08/24/20 | 200 | 192 | ||||||
RZD Capital, Ltd. | ||||||||
5.739% due 04/03/17 | 500 | 503 | ||||||
Santander US Debt SA Unipersonal | ||||||||
2.991% due 10/07/13 (Þ) | 400 | 382 | ||||||
SLM Corp. | ||||||||
1.044% due 06/17/13 (Ê) | 150 | 183 | ||||||
Sparebank 1 Boligkreditt AS | ||||||||
2.625% due 05/27/16 (Þ) | 1,100 | 1,110 | ||||||
Swedbank AB | ||||||||
2.900% due 01/14/13 (Þ) | 800 | 819 | ||||||
Teck Resources, Ltd. | ||||||||
10.750% due 05/15/19 | 200 | 244 | ||||||
TNK-BP Finance SA | ||||||||
Series REGS | ||||||||
7.500% due 07/18/16 | 120 | 127 | ||||||
TransCanada PipeLines, Ltd. | ||||||||
6.350% due 05/15/67 | 225 | 226 | ||||||
Transocean, Inc. | ||||||||
6.000% due 03/15/18 | 100 | 102 | ||||||
6.500% due 11/15/20 | 325 | 336 | ||||||
6.375% due 12/15/21 (Ñ) | 450 | 478 | ||||||
| Core Bond Fund | 59 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2011
Amounts in thousands (except share amounts)
| Principal Amount ($) or Shares | Market Value $ | |||||||
Turkiye Garanti Bankasi AS | ||||||||
2.909% due 04/20/16 (Ê)(Þ) | 200 | 180 | ||||||
UBS AG | ||||||||
5.850% due 12/31/17 (Å) | 270 | 79 | ||||||
Series BKNT | ||||||||
5.875% due 12/20/17 | 400 | 416 | ||||||
5.750% due 04/25/18 | 100 | 104 | ||||||
Vale Overseas, Ltd. | ||||||||
5.625% due 09/15/19 | 400 | 441 | ||||||
Venezuela Government International Bond | ||||||||
9.000% due 05/07/23 | 40 | 29 | ||||||
9.250% due 05/07/28 | 20 | 14 | ||||||
Vimpel Communications Via VIP | ||||||||
7.748% due 02/02/21 (Ñ)(Þ) | 200 | 171 | ||||||
Virgin Media Finance PLC | ||||||||
Series 1 | ||||||||
9.500% due 08/15/16 (Ñ) | 225 | 253 | ||||||
Vivendi SA | ||||||||
5.750% due 04/04/13 (Þ) | 400 | 418 | ||||||
Weatherford International, Ltd. | ||||||||
9.625% due 03/01/19 (Å) | 250 | 323 | ||||||
Westchester CLO, Ltd. | ||||||||
Zero coupon due 08/01/22 (Å) | 1,282 | 1,143 | ||||||
Westpac Banking Corp. | ||||||||
3.585% due 08/14/14 (Þ) | 700 | 746 | ||||||
WG Horizons CLO | ||||||||
Series 2006-1A Class A1 | ||||||||
0.772% due 05/24/19 (Ê)(Þ) | 800 | 744 | ||||||
White Nights Gazprom | ||||||||
10.500% due 03/08/14 | 200 | 224 | ||||||
10.500% due 03/25/14 | 300 | 336 | ||||||
WPP Finance UK | ||||||||
8.000% due 09/15/14 | 250 | 278 | ||||||
|
| |||||||
| 49,754 | ||||||||
|
| |||||||
| Loan Agreements - 0.3% | ||||||||
Caesars Entertainment Operating Co., Inc. | ||||||||
3.294% due 01/28/15 (Ê) | 175 | 152 | ||||||
3.418% due 01/28/15 | 325 | 282 | ||||||
Chrysler Group LLC Term Loan B | ||||||||
6.000% due 05/24/17 | 499 | 471 | ||||||
HCA, Inc. Extended Term Loan B3 | ||||||||
3.546% due 05/01/18 | 507 | 480 | ||||||
|
| |||||||
| 1,385 | ||||||||
|
| |||||||
| Mortgage-Backed Securities - 38.4% | ||||||||
ABN Amro Mortgage Corp. | ||||||||
Series 2003-13 Class A3 | ||||||||
5.500% due 01/25/34 | 1,319 | 1,330 | ||||||
Adjustable Rate Mortgage Trust | ||||||||
Series 2004-5 Class 2A1 | ||||||||
2.689% due 04/25/35 | 46 | 41 | ||||||
Series 2007-1 Class 1A1 | ||||||||
2.910% due 03/25/37 | 983 | 452 | ||||||
American Home Mortgage Assets | ||||||||
Series 2007-4 Class A2 | ||||||||
0.447% due 08/25/37 (Ê) | 741 | 489 | ||||||
| Principal Amount ($) or Shares | Market Value $ | |||||||
American Home Mortgage Investment | ||||||||
Series 2004-4 Class 4A | ||||||||
2.245% due 02/25/45 (Ê) | 65 | 48 | ||||||
Banc of America Funding Corp. | ||||||||
Series 2005-D Class A1 | ||||||||
2.705% due 05/25/35 (Ê) | 72 | 69 | ||||||
Series 2006-3 Class 5A8 | ||||||||
5.500% due 03/25/36 | 475 | 435 | ||||||
Series 2006-A Class 4A1 | ||||||||
5.445% due 02/20/36 (Ê) | 303 | 215 | ||||||
Series 2006-I Class 5A1 | ||||||||
5.964% due 10/20/46 (Ê) | 1,159 | 872 | ||||||
Series 2007-4 Class 3A1 | ||||||||
0.627% due 06/25/37 (Ê) | 1,194 | 621 | ||||||
Banc of America Large Loan, Inc. | ||||||||
Series 2010-HLTN Class HLTN | ||||||||
1.999% due 11/15/15 (Ê)(Þ) | 96 | 86 | ||||||
Banc of America Merrill Lynch | ||||||||
Series 2002-PB2 Class A4 | ||||||||
6.186% due 06/11/35 | 64 | 64 | ||||||
Series 2005-2 Class A4 | ||||||||
4.783% due 07/10/43 | 30 | 30 | ||||||
Series 2005-2 Class A5 | ||||||||
4.857% due 07/10/43 | 745 | 807 | ||||||
Series 2006-1 Class A4 | ||||||||