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Russell Investment Funds

Filed: 26 Feb 12, 7:00pm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05371

Russell Investment Funds

(Exact name of registrant as specified in charter)

1301 2nd Avenue 18th Floor, Seattle Washington 98101

(Address of principal executive offices) (Zip code)

Mary Beth Rhoden, Secretary and Chief Legal Officer

Russell Investment Funds

1301 2nd Avenue

18th Floor

Seattle, Washington 98101

206-505-4846

(Name and address of agent for service)

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

Date of fiscal year end: December 31

Date of reporting period: January 1, 2011 to December 31, 2011

 

 

 


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Item 1. Reports to Stockholders


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LOGO

 

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

 

LOGO


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

 

   Page 
To Our Shareholders   3  
Market Summary   4  
Multi-Style Equity Fund   12  
Aggressive Equity Fund   24  
Non-U.S. Fund   36  
Core Bond Fund   48  
Global Real Estate Securities Fund   80  
Notes to Schedules of Investments   91  
Statements of Assets and Liabilities   92  
Statements of Operations   94  
Statements of Changes in Net Assets   96  
Financial Highlights   98  
Notes to Financial Highlights   100  
Notes to Financial Statements   101  
Report of Independent Registered Public Accounting Firm   121  
Tax Information   122  
Basis for Approval of Investment Advisory Contracts   123  
Shareholder Requests for Additional Information   128  
Disclosure of Information about Fund Trustees and Officers   129  
Adviser, Money Managers and Service Providers   134  


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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.


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To Our Shareholders

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,

 

LOGO

Sandra Cavanaugh

CEO, Americas Private Client Services

Russell Investment Management Company

 

To Our Shareholders 3


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Russell Investment Funds

Market Summary as of December 31, 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.

 

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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.

 

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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.

 

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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

 

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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.

 

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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.

 

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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


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Russell Investment Funds

Multi-Style Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)

 

 

 

LOGO

 

 

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


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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


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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
 

 

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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.

 

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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.
 

 

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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  
 

 

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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,
Ltd. - ADR

   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
Appreciation
(Depreciation)

$

 
          
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
Assets

 
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


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Table of Contents

Russell Investment Funds

Aggressive Equity Fund

Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)

 

 

 

LOGO

 

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

Aggressive Equity Fund

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
Corp. Class A (Æ)

   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
Trust (×)

   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)

 

 

 

LOGO

 

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

Non-U.S. Fund

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,
Ltd. - ADR

  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

Core Bond Fund

Portfolio Management Discussion and Analysis — December 31, 2011 (Unaudited)

 

 

 

LOGO

 

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

Core Bond Fund

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.
Series 2008-1 Class A
1.718% due 10/27/25 (Ê)

   654      655 

ACE Securities Corp.
Series 2005-SD3 Class A
0.657% due 08/25/45 (Ê)

   60      57 

Ameriquest Mortgage Securities, Inc.
Series 2004-R10 Class A5
0.647% due 11/25/34 (Ê)

            

Series 2005-R11 Class A2C

0.487% due 01/25/36 (Ê)

   766      749 

Asset Backed Securities Corp. Home
Equity
Series 2005-HE5 Class M3
0.737% due 06/25/35 (Ê)

   1,050      647 

Series 2006-HE5 Class A5

0.497% due 07/25/36 (Ê)

   1,200      377 

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

   190      142 

Brazos Higher Education Authority
Series 2005-3 Class A14
0.468% due 09/25/23 (Ê)

   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
Series 2006-NC1 Class A4
0.567% due 01/25/36 (Ê)

   1,900      589 

Centex Home Equity
Series 2006-A Class AV4
0.507% due 06/25/36 (Ê)

   700      368 

CIT Education Loan Trust
Series 2007-1 Class A
0.448% due 03/25/42 (Ê)(Þ)

   526      477 

CIT Mortgage Loan Trust
Series 2007-1 Class 2A1
1.257% due 10/25/37 (Å)(Ê)

   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.
Series 2007-WFH1 Class A3
0.407% due 01/25/37 (Ê)

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

   700      760 

Series 1999-2 Class A5

6.680% due 12/01/30

   604      608 

Countrywide Home Equity Loan Trust
Series 2006-HW Class 2A1B
0.393% due 11/15/36 (Ê)

   286      204 

Educational Funding of the South, Inc.
Series 2011-1 Class A2
1.068% due 04/25/35 (Ê)

   210      193 

EFS Volunteer LLC
Series 2010-1 Class A2
1.268% due 10/25/35 (Ê)(Þ)

   500      472 

First Franklin Mortgage Loan Asset
Backed Certificates
Series 2007-FF1 Class A2B
0.347% due 01/25/38 (Ê)

   641      310 

GCO Education Loan Funding Trust
Series 2006-1 Class A10L
0.696% due 02/27/28 (Ê)

   100      85 

Series 2006-1 Class A11L

0.736% due 05/25/36 (Ê)

   100      83 

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

   40      29 

Series 2007-HE3 Class 2A1

7.000% due 09/25/37

   53      37 

Goal Capital Funding Trust
Series 2010-1 Class A
1.206% due 08/25/48 (Ê)(Þ)

   86      82 

GSAA Trust
Series 2006-2 Class 2A3
0.527% due 12/25/35 (Ê)

   320      281 

HASC 2007 OPT1 2A2
0.404% due 12/25/36

   1,650      909 

HSBC Home Equity Loan Trust
Series 2005-1 Class A
0.545% due 01/20/34 (Ê)

   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
Trust
Series 2006-H2 Class A
0.407% due 06/28/36 (Ê)

   208      91 

IXIS Real Estate Capital Trust
Series 2005-HE1 Class M2
0.992% due 06/25/35 (Ê)

   218      203 

JPMorgan Mortgage Acquisition Corp.
Series 2006-HE1 Class A4
0.547% due 01/25/36 (Ê)

   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
Series 2010-1 Class A
1.456% due 02/25/42 (Ê)

   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
Series 2004-4 Class 1A1
0.817% due 10/25/34 (Ê)

   5      3 

Series 2004-4 Class M1

1.157% due 10/25/34 (Ê)

   1,000      702 

Mastr Asset Backed Securities Trust
Series 2005-WMC1 Class M1
0.677% due 03/25/35 (Ê)

   12      12 

Merrill Lynch First Franklin Mortgage
Loan Trust
Series 2007-1 Class A2B
0.427% due 04/25/37 (Ê)

   154      63 

Series 2007-4 Class 2A2

0.377% due 07/25/37 (Ê)

   1,160      686 

Missouri Higher Education Loan
Authority
Series 2010-1 Class A1
1.456% due 11/26/32 (Ê)

   779      780 

Morgan Stanley ABS Capital I
Series 2006-HE1 Class A4
0.547% due 01/25/36 (Ê)

   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.
Series 2004-1 Class A4
0.615% due 04/29/19 (Ê)

   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
Trust
Series 2005-6 Class A3
5.680% due 01/25/36

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

   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.
Series 2003-RS9 Class AI6A
6.110% due 10/25/33

   381      366 

Series 2003-RS11 Class AI6A

5.980% due 12/25/33

   116      107 

Residential Asset Securities Corp.
Series 2003-KS4 Class AIIB
0.837% due 06/25/33 (Ê)

   30      17 

SG Mortgage Securities Trust
Series 2006-OPT2 Class A3C
0.407% due 10/25/36 (Ê)

   1,500      381 

SLM Student Loan Trust
Series 2006-5 Class A6B
0.538% due 10/25/40 (Ê)

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

   548      600 

Soundview Home Equity Loan Trust
Series 2005-OPT3 Class A4
0.557% due 11/25/35 (Ê)

   471      432 

Structured Asset Securities Corp.
Series 2006-BC6 Class A2
0.337% due 01/25/37 (Ê)

   387      381 

Washington Mutual Asset-Backed
Certificates
Series 2006-HE2 Class A3
0.407% due 05/25/36 (Ê)

   587      262 
      

 

 

 
       29,150 
      

 

 

 
Corporate Bonds and Notes - 17.1%      

ACCO Brands Corp.
10.625% due 03/15/15

   225      250 

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

   200      211 

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

   1,900      1,951 

7.500% due 09/15/20

   100      101 

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

   150      202 

American Airlines 2011-2 Class A Pass
Through Trust
Series A
8.625% due 10/15/21

   625      638 

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

   300      314 

6.000% due 09/13/17 (Ñ)

   400      453 

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

   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.
7.000% due 03/19/18 (Ñ)

   200      242 

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

   700      675 

5.450% due 05/18/17

   1,000      956 

5.850% due 01/16/18

   900      880 

Amgen, Inc.
3.875% due 11/15/21

   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
and CCFC Finance Corp.

      

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
Capital LLC

      

8.500% due 11/15/18

   175      236 

CenterPoint Energy Resources Corp.

      

6.125% due 11/01/17

   50      57 

Charter Communications Operating
LLC / Charter Communications
Operating Capital

      

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
Pass Through Trust

      

Series 991A

      

6.545% due 02/02/19

   182      189 

Continental Airlines 2007-1 Class A
Pass Through Trust

      

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
Through Trust

      

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
Through Trust

      

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
Financing Co., Inc.

      

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
Through Trust Series B

      

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
Trust B

      

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
Holdings III LLC

      

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
Pty, Ltd.

      

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
TransCapitalInvest, Ltd.

      

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
Group, Ltd.

      

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
Institucion de Banca Multiple

      

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
Gazprom

      

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.,
Ltd. III

      

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
Finance Ireland, Ltd. OJSC

      

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.
Term Loan B2

      

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
Trust

      

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
Commercial Mortgage, Inc.

      

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