497 1 d163313d497.htm FORM 497 Form 497
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Russell Funds: Classes A, C, E, I, S, R6 and Y

RUSSELL INVESTMENT COMPANY

Supplement dated May 25, 2016 to

PROSPECTUS DATED March 1, 2016

As Supplemented March 16, 2016

I.  LIQUIDATION OF THE RUSSELL MULTI-STRATEGY ALTERNATIVE FUND: The following information relates to the liquidation of the Russell Multi-Strategy Alternative Fund (the “Fund”) and supplements the Prospectus listed above:

At a meeting held on May 24, 2016, the Board of Trustees of Russell Investment Company, upon the recommendation of Russell Investment Management Company (“RIMCo”), approved the liquidation of the Fund pursuant to a Plan of Liquidation and Dissolution of Sub-Trust (the “Plan”). Shareholder approval is not required in order to liquidate the Fund. Shareholders of the Fund may redeem their shares prior to the liquidation date. Effective at the close of business on May 25, 2016, the Fund’s Class A and Class C Shares will be closed to new shareholders and will stop accepting orders from existing shareholders to purchase additional shares. Effective at the close of business on July 21, 2016, the Fund’s Class E, Class S, Class R6 and Class Y Shares will be closed to new shareholders and will stop accepting orders from existing shareholders to purchase additional shares.

Effective May 26, 2016, the Fund will no longer pursue its investment objective or engage in any business activities except for the purpose of winding up its business affairs and distributing its investment income, capital gains and remaining assets to shareholders. As a result, the Fund will commence the liquidation of its holdings and the resulting cash will be deposited in a non-interest bearing account with the Fund’s custodian. The Fund intends to have liquidated its holdings and hold only cash as of June 16, 2016.

Effective May 26, 2016 through June 15, 2016, RIMCo will waive 1.10% of its 1.50% advisory fee. Effective June 16, 2016, RIMCo will waive the full amount of its 1.50% advisory fee. In addition, effective May 26, 2016, the Fund’s Class A and Class C Shares will discontinue payments of 12b-1 distribution fees to financial intermediaries. The Fund and, indirectly, its shareholders will bear expenses of the liquidation, including transaction costs and any associated tax consequences.

The Plan provides for the liquidation of the Fund’s assets by July 26, 2016 and a liquidating distribution to be paid to Fund shareholders of all of the proceeds of the liquidation as promptly as possible after the liquidation date. Prior to the liquidating distribution, the Fund will declare and pay to its shareholders of record a net investment income dividend and/or capital gains distribution so that it will have distributed all of its investment company taxable income, if any, and net realized capital gains, if any, for the current taxable year through the liquidation date. The payable date for this income dividend and/or capital gains distribution is June 20, 2016, based on Fund records as of the close of business on June 16, 2016. The Fund may liquidate prior to July 26, 2016 in the event that all shares are redeemed prior to the planned liquidation date.

*        *        *         *        *

This Supplement does not replace any prior Supplements to the Fund’s Prospectus dated March 1, 2016, as supplemented March 16, 2016.

 

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RUSSELL INVESTMENT COMPANY
1301 Second Avenue, 18th Floor
Seattle, Washington 98101
Telephone 1-800-787-7354
STATEMENT OF ADDITIONAL INFORMATION
Non-Fund of Funds
March 1, 2016, as supplemented through May 25, 2016
Russell Investment Company (“RIC”) is a single legal entity organized as a Massachusetts business trust. RIC operates investment portfolios referred to as “Funds.” RIC offers shares of beneficial interest (“Shares”) in the Funds in multiple separate Prospectuses.
This Statement of Additional Information (“SAI”) is not a Prospectus; this SAI should be read in conjunction with the Funds' Prospectus, dated March 1, 2016 and any supplements thereto, which may be obtained without charge by telephoning or writing RIC at the number or address shown above. You should retain this SAI for future reference.
Capitalized terms not otherwise defined in this SAI shall have the meanings assigned to them in the Prospectus.
This SAI incorporates by reference the Funds' Annual Reports to Shareholders for the year ended October 31, 2015. Copies of the Funds' Annual Reports accompany this SAI.
As of the date of this SAI, RIC is comprised of 41 Funds. This SAI relates to 25 of these Funds. Each of the Funds presently offers interests in different classes of Shares as described in the table below. Unless otherwise indicated, this SAI relates to all classes of Shares of the Funds.
Fund Class A Class C Class E Class I Class R6 Class S Class Y
Russell U.S. Core Equity Fund RSQAX REQSX REAEX REASX RUCRX RLISX REAYX
Russell U.S. Defensive Equity Fund1 REQAX REQCX REQEX REDSX RUDRX REQTX REUYX
Russell U.S. Dynamic Equity Fund2 RSGAX RSGCX RSGEX RSGIX RDYRX RSGSX RSGTX
Russell U.S. Strategic Equity Fund RSEAX RSECX RSEEX RESRX RSESX
Russell U.S. Large Cap Equity Fund RLCZX RLCCX RULRX RLCSX
Russell U.S. Mid Cap Equity Fund RMCAX RMCCX RUMRX RMCSX
Russell U.S. Small Cap Equity Fund3 RLACX RLECX REBEX REBSX RSCRX RLESX REBYX
Russell International Developed Markets Fund RLNAX RLNCX RIFEX RINSX RIDRX RINTX RINYX
Russell Global Equity Fund RGEAX RGECX RGEEX RGLRX RGESX RLGYX
Russell Emerging Markets Fund REMAX REMCX REMEX REGRX REMSX REMYX
Russell Tax-Managed U.S. Large Cap Fund RTLAX RTLCX RTLEX RETSX
Russell Tax-Managed U.S. Mid & Small Cap Fund RTSAX RTSCX RTSEX RTSSX
Russell Tax-Managed International Equity Fund RTNAX RTNCX RTNEX RTNSX
Russell Global Opportunistic Credit Fund4 RGCAX RGCCX RCCEX RGCRX RGCSX RGCYX
Russell Strategic Bond Fund RFDAX RFCCX RFCEX RFCSX RSBRX RFCTX RFCYX
Russell Investment Grade Bond Fund RFAAX RFACX RFAEX RFASX RIGRX RFATX RFAYX
Russell Short Duration Bond Fund RSBTX RSBCX RSBEX RDBRX RFBSX RSBYX
Russell Tax Exempt High Yield Bond Fund RTHAX RTHCX RTHEX RTHSX
Russell Tax Exempt Bond Fund RTEAX RTECX RTBEX RLVSX
Russell Commodity Strategies Fund RCSAX RCSCX RCSEX RCSRX RCCSX RCSYX
Russell Global Infrastructure Fund RGIAX RGCIX RGIEX RGIRX RGISX RGIYX
Russell Global Real Estate Securities Fund RREAX RRSCX RREEX RRSRX RRESX RREYX
Russell Multi-Strategy Alternative Fund5 RMSAX RMSCX RMSEX RMSRX RMSSX RMSYX
Russell Multi-Strategy Income Fund RMYAX RMYCX RMYEX RMIRX RMYSX RMYYX
Russell Strategic Call Overwriting Fund ROWAX ROWCX ROWEX ROWRX ROWSX
1 Effective August 15, 2012, the Russell U.S. Quantitative Equity Fund was renamed the Russell U.S. Defensive Equity Fund.
2 Effective August 15, 2012, the Russell U.S. Growth Fund was renamed the Russell U.S. Dynamic Equity Fund.
3 On January 1, 2012, the Russell U.S. Small & Mid Cap Fund was renamed the Russell U.S. Small Cap Equity Fund.
4 On March 1, 2011, the Russell Global Credit Strategies Fund was renamed the Russell Global Opportunistic Credit Fund.
5 At a meeting held on May 24, 2016, the Board of Trustees of RIC approved the liquidation of the Russell Multi-Strategy Alternative Fund pursuant to a Plan of Liquidation and Dissolution of Sub-Trust (the “Plan”). Shareholders of the Fund may redeem their shares

 


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prior to the liquidation date. Effective at the close of business on May 25, 2016, the Fund’s Class A and Class C Shares will be closed to new shareholders and will stop accepting orders from existing shareholders to purchase additional shares. Effective at the close of business on July 21, 2016, the Fund’s Class E, Class S, Class R6 and Class Y Shares will be closed to new shareholders and will stop accepting orders from existing shareholders to purchase additional shares. The Plan provides for the liquidation of the Fund’s assets by July 26, 2016 and a liquidating distribution to be paid to Fund shareholders of all of the proceeds of the liquidation as promptly as possible after the liquidation date. Please see the Supplement dated May 25, 2016 to the Russell Multi-Strategy Alternative Fund’s Prospectus dated March 1, 2016 for additional information.

 


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Structure And Governance
ORGANIZATION AND BUSINESS HISTORY.
RIC commenced business operations as a Maryland corporation on October 15, 1981. On January 2, 1985, RIC reorganized by changing its domicile and legal status to a Massachusetts business trust.
RIC is currently organized and operating under a Second Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (the “Master Trust Agreement”), and the provisions of Massachusetts law governing the operation of a Massachusetts business trust. The Board of Trustees (“Board” or the “Trustees”) may amend the Master Trust Agreement from time to time; provided, however, that any amendment which would materially and adversely affect shareholders of RIC as a whole, or shareholders of a particular Fund, must be approved by the holders of a majority of the Shares of RIC or the Fund, respectively. However, the Trustees may, without the affirmative vote of a majority of the outstanding voting shares (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of RIC or a Fund by a vote of a majority of the Trustees or written instrument executed by a majority of their number then in office, terminate, liquidate or reorganize any Fund or any class of Shares of any such Fund at any time by written notice to affected Shareholders. RIC is a registered open-end management investment company. Each of the Funds is diversified. Under the 1940 Act, a diversified company is defined as a management company which meets the following requirements: at least 75% of the value of its total assets is represented by cash and cash items (including receivables), government securities, securities of other investment companies, and other securities for the purposes of this calculation limited in respect of any one issuer to an amount not greater in value than five percent of the value of the total assets of such management company and to not more than 10% of the outstanding voting securities of such issuer.
RIC is authorized to issue Shares of beneficial interest, and may divide the Shares into two or more series, each of which evidences a pro rata ownership interest in a different investment portfolioa “Fund.” Each Fund is deemed to be a separate trust under Massachusetts law. The Trustees may, without seeking shareholder approval, create additional Funds at any time. The Master Trust Agreement provides that shareholders may be required to redeem their Shares at any time (1) if the Trustees determine in their sole discretion that failure to so redeem may have material adverse consequences to the shareholders of RIC or of any Fund or (2) upon such other conditions as may from time to time be determined by the Trustees and set forth in the Prospectuses with respect to the maintenance of shareholder accounts of a minimum amount. However, shareholders can only be required to redeem their Shares to the extent consistent with the 1940 Act, the rules thereunder and Securities and Exchange Commission (“SEC”) interpretations thereof.
RIC Funds are authorized to issue Shares of beneficial interest in one or more classes. Shares of each class of a Fund have a par value of $0.01 per share, are fully paid and nonassessable, and have no preemptive or conversion rights. Shares of each class of a Fund represent proportionate interests in the assets of that Fund and have the same voting and other rights and preferences as the Shares of other classes of the Fund. Shares of each class of a Fund are entitled to the dividends and distributions earned on the assets belonging to the Fund that the Board declares. Each class of Shares is designed to meet different investor needs. Class A Shares are subject to (1) an initial sales charge and (2) a Rule 12b-1 fee of up to 0.75% (presently limited to 0.25%).  The Class C Shares are subject to a Rule 12b-1 fee of 0.75% and a shareholder services fee of 0.25%.  Class E Shares are subject to a shareholder services fee of 0.25%. The Class I, Class R6, Class S, and Class Y Shares are not subject to either a Rule 12b-1 fee or a shareholder services fee. Unless otherwise indicated, “Shares” in this SAI refers to all classes of Shares of the Funds.
Under certain unlikely circumstances, as is the case with any Massachusetts business trust, a shareholder of a Fund may be held personally liable for the obligations of the Fund. The Master Trust Agreement provides that shareholders shall not be subject to any personal liability for the acts or obligations of a Fund and that every written agreement, obligation or other undertaking of the Funds shall contain a provision to the effect that the shareholders are not personally liable thereunder. The Master Trust Agreement also provides that RIC shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of a Fund and satisfy any judgment thereon. Thus, the risk of any shareholder incurring financial loss beyond his investment on account of shareholder liability is limited to circumstances in which a Fund itself would be unable to meet its obligations.
The Funds' investment adviser is Russell Investment Management Company (“RIMCo” or the “Adviser”). The Funds, other than the Russell Strategic Call Overwriting Fund, divide responsibility for investment advice between RIMCo and a number of money managers unaffiliated with RIMCo. The Russell Strategic Call Overwriting Fund is managed directly by RIMCo and, thus, all references to money managers do not apply to this Fund.
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Pursuant to claims for exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act (“CEA”), the Funds, other than the Russell Commodity Strategies and Russell Multi-Strategy Alternative Funds, are not subject to registration or regulation as commodity pool operators under the CEA. In order to maintain the exclusion, each Fund must annually affirm to the National Futures Association that it has met and will continue to meet the conditions necessary to qualify for the exclusion. In the event that a Fund engages in transactions that require registration as a commodity pool operator in the future, the Fund will comply with applicable regulations with respect to that Fund. If a Fund registers as a commodity pool operator and operates subject to Commodity Futures Trading Commission (“CFTC”) regulation, it may incur additional expenses.
RIMCo is registered as a “commodity pool operator” under the CEA and the rules of the CFTC and is subject to regulation as a commodity pool operator under the CEA with respect to the Russell Commodity Strategies and Russell Multi-Strategy Alternative Funds and with respect to their respective subsidiaries, the Russell Cayman Commodity Strategies Fund Ltd. and the Russell Cayman Multi-Strategy Alternative Fund Ltd. (collectively with the Russell Commodity Strategies and Russell Multi-Strategy Alternative Funds, the “CFTC Registered Funds”). As the CFTC Registered Funds operate subject to CFTC regulation, they may incur additional expenses. The CFTC has neither reviewed nor approved the CFTC Registered Funds, their investment strategies or this SAI.
SHAREHOLDER MEETINGS.
RIC will not hold annual meetings of shareholders, but special meetings may be held. Special meetings may be convened (i) by the Board, (ii) upon written request to the Board by shareholders holding at least 10% of RIC's outstanding Shares, or (iii) upon the Board’s failure to honor the shareholders’ request described above, by shareholders holding at least 10% of the outstanding Shares by giving notice of the special meeting to shareholders. The Board will provide the assistance required by the 1940 Act in connection with any special meeting called by shareholders following a failure of the Board to honor a shareholder request for a special meeting. Each share of a class of a Fund has one vote in Trustee elections and other matters submitted for shareholder vote.  On any matter which affects only a particular Fund or class, only Shares of that Fund or class are entitled to vote. There are no cumulative voting rights.
CONTROLLING SHAREHOLDERS.
The Trustees have the authority and responsibility under applicable state law to direct the management of the business of RIC, and hold office unless they retire (or upon reaching the mandatory retirement age of 75), resign or are removed by, in substance, a vote of two-thirds of the number of Trustees or of RIC Shares outstanding. Under these circumstances, no one person, entity or shareholder “controls” RIC. For a list of shareholders owning 5% or more of any class of any Fund’s Shares or more than 25% of the voting Shares of any Fund, please refer to the Appendix at the end of this SAI.
TRUSTEES AND OFFICERS.
The Board of Trustees is responsible under applicable state law for generally overseeing management of the business and affairs of RIC and does not manage operations on a day-to-day basis. The officers of RIC, all of whom are employed by and are officers of RIMCo or its affiliates, are responsible for the day-to-day management and administration of the Funds' operations. The Board of Trustees carries out its general oversight responsibilities in respect of the Funds' operations by, among other things, meeting with RIC management at the Board's regularly scheduled meetings and as otherwise needed and, with the assistance of RIC management, monitoring or evaluating the performance of the Funds' service providers, including RIMCo, the Funds' custodian and the Funds' transfer agent. As part of this oversight process, the Board of Trustees consults not only with management and RIMCo, but with RIC's independent auditors, Fund counsel and separate counsel to the Independent Trustees. The Board of Trustees monitors Fund performance as well as the quality of services provided to the Funds. As part of its monitoring efforts, the Board of Trustees reviews Fund fees and expenses in light of the nature, scope and overall quality of services provided to the Funds. The Board of Trustees is required under the 1940 Act to review and approve the Funds' contracts with RIMCo and the money managers.
The Trustees are responsible generally for overseeing the management and operations of the Trust. The Trustees and the Trust’s officers may amend the Prospectus, any summary prospectus, the SAI and any contracts to which the Trust or a Fund is a party and interpret the investment objective(s), policies, restrictions and contractual provisions applicable to any Fund without shareholder input or approval, except in circumstances in which shareholder approval is specifically required by law (such as changes to fundamental investment policies) or where a shareholder approval requirement is specifically disclosed in the Prospectus or SAI. Neither the Prospectus, any summary prospectus, the SAI, any contracts filed as exhibits to the Trust’s registration statement, nor any other communications or disclosure documents from or on behalf of the Trust creates a contract between a shareholder of a Fund and: (i) the Trust; (ii) a Fund; (iii) a service provider to the Trust or a Fund; and/or (iv) the Trustees or officers of the Trust.
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Generally, a Trustee may be removed at any time by a vote of two-thirds of the number of Trustees or of RIC Shares outstanding. A vacancy in the Board shall be filled by a vote of a majority of the remaining Trustees so long as after filling such vacancy, two-thirds of the Trustees have been elected by shareholders. There is one Trustee Emeritus. Trustees Emeritus do not have the power to vote on matters coming before the Board, or to direct the vote of any Trustee, and generally are not responsible or accountable in any way for the performance of the Board’s responsibilities.
The Trustees and officers of the Funds also serve in similar positions for funds of funds (the “Funds of Funds”) which invest principally in different combinations of some of the Funds. Thus, if the interests of a Fund and a Fund of Funds were to diverge, it is possible that a conflict of interest could arise. If such a conflict arises, the Trustees and officers of the affected Funds, respectively, will take all steps they believe reasonable to manage, and where possible, minimize the potential conflict, including possibly by disclosing the conflict to shareholders.
The Board of Trustees is currently comprised of eight Trustees, one of whom, Sandra Cavanaugh, is an Interested Trustee. Sandra Cavanaugh is an officer of RIC and, thus, classified as an Interested Trustee. There are seven Independent Trustees on the Board, including Kristianne Blake, who has served as the Chair of the Board since 2005. The Board of Trustees has established a standing Audit Committee, a standing Nominating and Governance Committee and a standing Investment Committee which assist in performing aspects of its role in oversight of the Funds' operations and are described in more detail in the following paragraphs. The Board’s role in risk oversight of the Funds reflects its responsibility under applicable state law to oversee generally, rather than to manage, the operations of the Funds. In line with this oversight responsibility, the Board receives reports and makes inquiry at its regular meetings and as needed regarding the nature and extent of significant Fund risks (including investment, operational, compliance and valuation risks) that potentially could have a material adverse impact on the business operations, investment performance or reputation of the Funds, but relies upon the Funds' management (including the Funds' portfolio managers), the Funds' Chief Compliance Officer (“CCO”), who reports directly to the Board, and the Adviser (including the Adviser’s Chief Risk Officer (“CRO”)) to assist it in identifying and understanding the nature and extent of such risks and determining whether, and to what extent, such risks may be eliminated or mitigated. Under the Funds' multi-manager structure, the Adviser is responsible for oversight, including risk management oversight, of the services provided by the Funds' money managers, and providing reports to the Board with respect to the money managers. In addition to reports and other information received from Fund management and the Adviser regarding the Funds' investment program and activities, the Board as part of its risk oversight efforts meets at its regular meetings and as needed with representatives of the Funds' senior management, including its CCO, to discuss, among other things, risk issues and issues regarding the policies, procedures and controls of the Funds. The Board receives quarterly reports from the CCO and the CRO and other representatives of the Funds' senior management which include information regarding risk issues. The Board may be assisted in performing aspects of its role in risk oversight by the Audit Committee, the Investment Committee and such other standing or special committees as may be established from time to time by the Board. For example, the Audit Committee of the Board regularly meets with the Funds' independent public accounting firm to review, among other things, reports on the Funds' internal controls for financial reporting. The Board believes it is not possible to identify all risks that may affect the Funds; it is not practical or cost-effective to eliminate or mitigate all risks; and it is necessary for the Funds to bear certain risks (such as investment-related risks) to achieve their investment objectives. The processes or controls developed to address risks may be limited in their effectiveness and some risks may be beyond the reasonable control of the Board, the Funds, the Adviser, the Adviser’s affiliates or other service providers. Because the Chairman of the Board and the Chair of each of the Board’s Audit, Investment and Nominating and Governance Committees are Independent Trustees, the manner in which the Board administers its risk oversight efforts is not expected to have any significant impact on the Board’s leadership structure. The Board has determined that its leadership structure, including its role in risk oversight, is appropriate given the characteristics and circumstances of the Funds, including such factors as the number of Funds, the Funds' share classes, the Funds' distribution arrangements and the Funds' manager of managers structure. In addition, the Board believes that its leadership structure facilitates the independent and orderly exercise of its oversight responsibilities.
RIC's Board of Trustees has adopted and approved a formal written charter for the Audit Committee, which sets forth the Audit Committee’s current responsibilities. The Audit Committee’s primary functions are: (1) to assist Board oversight of (a) the integrity of the Funds' financial statements, (b) RIC's compliance with legal and regulatory requirements that relate to financial reporting, as appropriate, (c) the independent registered public accounting firm’s qualifications and independence, and (d) the performance of RIC's independent registered public accounting firm; (2) to oversee the preparation of an Audit Committee report as required by the SEC to be included in RIC's Form N-CSR or any proxy statement, as applicable; (3) to oversee RIC's accounting and financial reporting policies and practices and its internal controls; and (4) to act as a liaison between RIC's independent registered public accounting firm and the full Board. The Audit Committee reviews both the audit and non-audit work of RIC's independent registered public accounting firm, submits a recommendation to the Board as to the selection of the independent registered public accounting firm, and pre-approves (i) all audit and non-audit services to be rendered by the independent registered public accounting firm for RIC, (ii) all audit services provided to RIMCo, or any
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affiliate thereof that provides ongoing services to RIC, relating to the operations and financial reporting of RIC, and (iii) all non-audit services relating to the operations and financial reporting of RIC, provided to RIMCo, or any affiliate thereof that provides ongoing services to RIC, by any auditors with an ongoing relationship with RIC. It is management’s responsibility to maintain appropriate systems for accounting and internal control and the auditor’s responsibility to plan and carry out a proper audit. Currently, the Audit Committee members are Mr. Daniel P. Connealy and Mses. Kristianne Blake and Cheryl Burgermeister, each of whom is an Independent Trustee. For the fiscal year ended October 31, 2015, the Audit Committee held six meetings.
RIC's Board of Trustees has adopted and approved a formal written charter for the Investment Committee, which sets forth the Investment Committee’s current responsibilities. The Investment Committee: (1) shall regularly review and monitor the investment strategies and investment performance of the Funds; (2) shall review the kind, scope, and format of, and the time periods covered by, the investment performance data and related reports provided to the Board; (3) may review the investment performance benchmarks and peer groups used in reports delivered to the Board; (4) may review such matters that are related to the investments, investment strategies and investment performance of the Funds as would be considered by the Board as the Committee may deem to be necessary or appropriate; and (5) may meet with any officer of the Trust, or officer or other representative of RIMCo, any subadviser to a fund or other service provider to the Trust. Currently, the Investment Committee members are Messrs. Thaddas L. Alston, Raymond P. Tennison, Jr. and Jack R. Thompson and Mses. Katherine W. Krysty and Sandra Cavanaugh. For the fiscal year ended October 31, 2015, the Investment Committee held four meetings.
RIC's Board of Trustees has adopted and approved a formal written charter for the Nominating and Governance Committee, which sets forth the Nominating and Governance Committee’s current responsibilities. The primary functions of the Nominating and Governance Committee are to: (1) nominate and evaluate individuals for Trustee membership on the Board, including individuals who are not interested persons of RIC for Independent Trustee membership; (2) supervise an annual assessment by the Trustees taking into account such factors as the Committee may deem appropriate; (3) review the composition of the Board; (4) review Independent Trustee compensation; and (5) make nominations for membership on all Board committees and review the responsibilities of each committee. In identifying and evaluating nominees, the Nominating and Governance Committee considers factors it deems relevant which include: whether or not the person is an “interested person” as defined in the 1940 Act and whether the person is otherwise qualified under applicable laws and regulations to serve on the Board of Trustees of the Trust; whether or not the person has any relationship that might impair his or her independence, such as any business, financial or family relationships with Fund management, the investment adviser of the Funds, Fund service providers or their affiliates; whether or not the person serves on boards of, or is otherwise affiliated with, competing organizations or funds; and the character and integrity of the person and the contribution which the person can make to the Board. The Nominating and Governance Committee does not have a formal diversity policy but it may consider diversity of professional experience, education and skills when evaluating potential nominees. The Committee will not consider nominees recommended by Shareholders of the Funds. Currently, the Nominating and Governance Committee members are Messrs. Raymond P. Tennison, Jr. and Thaddas L. Alston and Mses. Kristianne Blake and Cheryl Burgermeister, each of whom is an Independent Trustee. For the fiscal year ended October 31, 2015, the Nominating and Governance Committee held one meeting.
Trustees are paid an annual retainer plus meeting attendance and chairperson fees, both at the Board and Committee levels, in addition to any travel and other expenses incurred in attending Board and Committee meetings. RIC's officers and employees are paid by RIMCo or its affiliates.
Each Trustee was selected to join the Board based upon a variety of factors, including, but not limited to, the Trustee’s background, business and professional experience, qualifications and skills. No factor, by itself, has been controlling in the selection evaluations.
The following tables provide information, as of the date of this SAI, for each officer and Trustee of the Russell Fund Complex. The Russell Fund Complex consists of RIC, which has 41 funds and Russell Investment Funds (“RIF”), which has nine funds. Each of the Trustees is a trustee of RIC and RIF. The first table provides information for the Interested Trustee. The second table provides information for the Independent Trustees. The third table provides information for the Trustee Emeritus. The fourth table provides information for the officers.
Furthermore, each Trustee possesses the following specific attributes: Mr. Alston has business, financial and investment experience as a senior executive of an international real estate firm and is trained as a lawyer; Ms. Blake has had experience as a certified public accountant and has had experience as a member of boards of directors/trustees of other investment companies; Ms. Burgermeister has had experience as a certified public accountant and as a member of boards of directors/trustees of other investment companies; Mr. Connealy has had experience with other investment companies and their investment advisers, first as a partner in the investment management practice of PricewaterhouseCoopers LLP and, subsequently, as the senior financial executive of two other investment organizations sponsoring and managing investment
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companies, and has been determined by the Board to be an “audit committee financial expert”; Ms. Krysty has had business, financial and investment experience as the founder and senior executive of a registered investment adviser focusing on high net worth individuals as well as a certified public accountant and a member of the boards of other corporations and non-profit organizations; Mr. Tennison has had business, financial and investment experience as a senior executive of a corporation with international activities and was trained as an accountant; and Mr. Thompson has had experience in business, governance, investment and financial reporting matters as a senior executive of an organization sponsoring and managing other investment companies, and, subsequently, has served as a board member of other investment companies. Ms. Cavanaugh has had experience with other financial services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior officer and/or director of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, Age, Address Position(s) Held
With Fund and
Length of
Time Served
Term of Office* Principal Occupation(s)
During the Past 5 Years
No. of
Portfolios
in Russell
Fund Complex
Overseen
by Trustee
Other
Directorships
Held by Trustee During the Past 5 Years
INTERESTED TRUSTEE        
#Sandra Cavanaugh
Born May 10, 1954
1301 Second Avenue,
18th Floor,
Seattle, WA 98101
• President and Chief Executive Officer since 2010
• Trustee since 2010
• Until successor is chosen and qualified by Trustees
• Appointed until successor is duly elected and qualified
• President and CEO, RIC and RIF
• Chairman of the Board, Co-President and CEO, Russell Financial Services, Inc. (“RFS”)
• Chairman of the Board, President and CEO, Russell Fund Services Company (“RFSC”)
• Director, RIMCo
• Chairman of the Board, President and CEO, Russell Insurance Agency, Inc. (“RIA”) (insurance agency)
50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
* Each Trustee is subject to mandatory retirement at age 75.
# Ms. Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore classified as an Interested Trustee. Russell Investments announced on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and help with a smooth transition as Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as long as the rest of 2016 to assist with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. Cavanaugh may resign as a trustee of the Trust, This leadership change is not expected to have an adverse impact on any of the Funds.
   
Name, Age, Address Position(s) Held
With Fund and
Length of
Time Served
Term of Office* Principal Occupation(s)
During the Past 5 Years
No. of Portfolios
in Russell
Fund Complex
Overseen
by Trustee
Other
Directorships
Held by Trustee During the Past 5 Years
INDEPENDENT TRUSTEES        
Thaddas L. Alston
Born April 7, 1945
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2006 • Appointed until successor is duly elected and qualified • Senior Vice President, Larco Investments, Ltd. (real estate firm) 50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
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Name, Age, Address Position(s) Held
With Fund and
Length of
Time Served
Term of Office* Principal Occupation(s)
During the Past 5 Years
No. of Portfolios
in Russell
Fund Complex
Overseen
by Trustee
Other
Directorships
Held by Trustee During the Past 5 Years
INDEPENDENT TRUSTEES        
Kristianne Blake
Born January 22, 1954
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2000


• Chairman since 2005
• Appointed until successor is duly elected and qualified
• Approved annually
• Director and Chairman of the Audit Committee, Avista Corp. (electric utilities)
• Regent, University of Washington
• President, Kristianne Gates Blake, P.S. (accounting services)
• Until June 30, 2014, Director, Ecova (total energy and sustainability management)
• Until December 31, 2013, Trustee and Chairman of the Operations Committee, Principal Investors Funds and Principal Variable Contracts Funds (investment company)
• From April 2004 through December 2012, Director, Laird Norton Wealth Management and Laird Norton Tyee Trust (investment company)
50 • Director, Avista Corp (electric utilities)
• Until June 30, 2014, Director, Ecova (total energy and sustainability management)
• Until December 31, 2013, Trustee, Principal Investors Funds (investment company)
• Until December 31, 2013, Trustee, Principal Variable Contracts Funds (investment company)
• From April 2004 through December 2012, Director, Laird Norton Wealth Management and Laird Norton Tyee Trust (investment company)
          • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
Cheryl Burgermeister
Born June 26, 1951
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2012 • Appointed until successor is duly elected and qualified • Retired
• Trustee and Chairperson of Select Sector SPDR Funds (investment company)
• Until December 31, 2014, Chairperson of Audit Committee, Select Sector SPDR Funds (investment company)
50 • Trustee and Chairperson of Select Sector SPDR Funds (investment company)
• Trustee, ALPS Series Trust (investment company)
• Until December 31, 2014, Chairperson of Audit Committee, Select Sector SPDR Funds (investment company)
• Until October 2015, Trustee, Russell Exchange Traded Funds Trust
Daniel P. Connealy
Born June 6, 1946
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2003 

• Chairman of the Audit Committee since 2015
• Appointed until successor is duly elected and qualified
• Appointed until successor is duly elected and qualified
• Retired
• June 2004 to June 2014, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc. (investment company)
50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
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Name, Age, Address Position(s) Held
With Fund and
Length of
Time Served
Term of Office* Principal Occupation(s)
During the Past 5 Years
No. of Portfolios
in Russell
Fund Complex
Overseen
by Trustee
Other
Directorships
Held by Trustee During the Past 5 Years
INDEPENDENT TRUSTEES        
Katherine W. Krysty
Born December 3, 1951
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2014 • Appointed until successor is duly elected and qualified • Retired
• January 2011 through March 2013, President Emerita, Laird Norton Wealth Management (investment company)
50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
Raymond P. Tennison, Jr.
Born December 21, 1955
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2000


• Chairman of the Nominating and Governance Committee since 2007
• Appointed until successor is duly elected and qualified
• Appointed until successor is duly elected and qualified
• Retired
• From January 2008 to December 2011,Vice Chairman of the Board, Simpson Investment Company (paper and forest products)
50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
Jack R. Thompson
Born March 21, 1949
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee since 2005


• Chairman of the Investment Committee since 2015
• Appointed until successor is duly elected and qualified
• Appointed until successor is duly elected and qualified
• Retired 50 • Until October 2015, Trustee, Russell Exchange Traded Funds Trust
* Each Trustee is subject to mandatory retirement at age 75.
Name, Age, Address Position(s) Held
With Fund and
Length of
Time Served
Term of Office Principal Occupation(s)
During the Past 5 Years
No. of Portfolios
in Russell
Fund Complex
Overseen
by Trustee
Other
Directorships
Held by Trustee During the Past 5 Years
TRUSTEE EMERITUS        
George F. Russell, Jr.
Born July 3, 1932
1301 Second Avenue,
18th Floor
Seattle, WA 98101
• Trustee Emeritus and Chairman Emeritus since 1999 • Until resignation or removal • Director Emeritus, RIMCo 50 None
    
Name, Age, Address Position(s) Held
With Fund
and Length
of Time Served
Term of Office Principal Occupation(s)
During the Past 5 Years
OFFICERS    
Cheryl Wichers
Born December 16, 1966
1301 Second Avenue,
18th Floor
Seattle, WA 98101
Chief Compliance Officer since 2005 Until removed by Independent Trustees • Chief Compliance Officer, RIC and RIF
• Chief Compliance Officer, RFSC and U.S. One Inc.
• 2005 to 2011 Chief Compliance Officer, RIMCo
*Sandra Cavanaugh
Born May 10, 1954
1301 Second Avenue,
18th Floor
Seattle, WA 98101
President and Chief Executive Officer since 2010 Until successor is chosen and qualified by Trustees • CEO, U.S. Private Client Services, Russell Investments
• President and CEO, RIC and RIF
• Chairman of the Board, Co-President and CEO, RFS
• Chairman of the Board, President and CEO, RFSC
• Director, RIMCo
• Chairman of the Board, President and CEO, RIA
Mark E. Swanson
Born November 26, 1963
1301 Second Avenue,
18th Floor
Seattle, WA 98101
Treasurer and Chief Accounting Officer since 1998 Until successor is chosen and qualified by Trustees • Treasurer, Chief Accounting Officer and CFO, RIC and RIF
• Director, RIMCo, RFSC, RTC and RFS
• Global Head of Fund Services, Russell Investments
• October 2011 to December 2013, Head of North America Operations, Russell Investments
• May 2009 to October 2011, Global Head of Fund Operations, Russell Investments
Jeffrey T. Hussey
Born May 2, 1969
1301 Second Avenue,
18th Floor
Seattle, WA 98101
Chief Investment Officer since 2013 Until removed by Trustees • Global Chief Investment Officer, Russell Investments
• Chief Investment Officer, RIC and RIF
• Chairman of the Board, President and CEO, RIMCo
• Director, RTC, RIS and Russell Investments Delaware, Inc.
• Board of Managers, Russell Institutional Funds Management, Inc.
• 2003 to 2013 Chief Investment Officer, Fixed Income, Russell Investments
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Name, Age, Address Position(s) Held
With Fund
and Length
of Time Served
Term of Office Principal Occupation(s)
During the Past 5 Years
OFFICERS    
Mary Beth R. Albaneze
Born April 25, 1969
1301 Second Avenue,
18th Floor
Seattle, WA 98101
Secretary since 2010 Until successor is chosen and qualified by Trustees • Associate General Counsel, Russell Investments
• Secretary, RIMCo, RFSC and RFS
• Secretary and Chief Legal Officer, RIC and RIF
• Assistant Secretary, RFS, RIA and U.S. One Inc.
* Russell Investments announced on February 9, 2016 that Ms. Cavanaugh has decided to retire at the end of June 2016. She will continue to lead the U.S. retail business and help with a smooth transition as Russell Investments selects and names a successor. In addition, Ms. Cavanaugh will be available as necessary in a consulting capacity for as long as the rest of 2016 to assist with the leadership transition. Once Ms. Cavanaugh retires or her successor has been appointed and assumed his or her responsibilities, Ms. Cavanaugh may resign as a trustee of the Trust, This leadership change is not expected to have an adverse impact on any of the Funds.
Trustee Compensation Table
For The Fiscal Year Ended October 31, 2015
  AGGREGATE
COMPENSATION
FROM RIC
  PENSION OR
RETIREMENT
BENEFITS ACCRUED
AS PART OF RIC
EXPENSES
  ESTIMATED ANNUAL
BENEFITS UPON
RETIREMENT
  TOTAL COMPENSATION
FROM RIC AND RUSSELL
FUND COMPLEX
PAID TO TRUSTEES
INTERESTED TRUSTEES              
Sandra Cavanaugh $0   $0   $0   $0
INDEPENDENT TRUSTEES              
Thaddas L. Alston $154,343   $0   $0   $165,300
Kristianne Blake $237,051   $0   $0   $253,900
Cheryl Burgermeister $154,326   $0   $0   $165,300
Daniel P. Connealy $143,317   $0   $0   $153,500
Katherine W. Krysty $150,316   $0   $0   $161,000
Raymond P. Tennison, Jr. $168,804   $0   $0   $180,800
Jack R. Thompson $161,978   $0   $0   $173,500
TRUSTEE EMERITUS              
George F. Russell, Jr. $0   $0   $0   $0
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Table of Contents
Equity Securities Beneficially Owned By Trustees
For The Calendar Year Ended December 31, 2015
  DOLLAR RANGE OF EQUITY
SECURITIES IN EACH FUND
AGGREGATE DOLLAR
RANGE OF
EQUITY SECURITIES
IN ALL REGISTERED
INVESTMENT
COMPANIES
OVERSEEN
BY TRUSTEES
IN RUSSELL
FUND COMPLEX
INTERESTED TRUSTEES
Sandra Cavanaugh Russell U.S. Defensive Equity Fund $1-$10,000 $10,001-$50,000
Russell U.S. Dynamic Equity Fund $1-$10,000
Russell U.S. Small Cap Equity
Fund
$1-$10,000
Russell Global Equity Fund $1-$10,000
Russell Emerging Markets Fund $1-$10,000
Russell Short Duration Bond Fund $10,001-$50,000
Russell Global Infrastructure Fund $1-$10,000
Russell Global Real Estate
Securities Fund
$1-$10,000
Russell Multi-Strategy Alternative
Fund
$1-$10,000
INDEPENDENT TRUSTEES
Thaddas L. Alston Russell Short Duration Bond Fund $50,001-$100,000 Over $100,000
Kristianne Blake Russell Tax-Managed U.S. Mid
& Small Cap Fund
$10,001-$50,000 Over $100,000
Russell Investment
Grade Bond Fund
Over $100,000
Russell Global Infrastructure Fund $50,001-$100,000
Cheryl Burgermeister Russell Global Equity Fund Over $100,000 Over $100,000
Daniel P. Connealy Russell U.S. Core Equity Fund Over $100,000 Over $100,000
Russell U.S. Defensive Equity Fund $10,001-$50,000
Russell U.S. Dynamic Equity Fund $50,001-$100,000
Russell International Developed
Markets Fund
$10,001-$50,000
Russell Emerging Markets Fund $10,001-$50,000
Russell Strategic Bond Fund $10,001-$50,000
Katherine W. Krysty Russell Strategic Bond Fund $1-$10,000 $10,001-$50,000
Russell Short Duration Bond Fund $1-$10,000
Russell Tax Exempt Bond Fund $1-$10,000
Russell Commodity Strategies Fund $1-$10,000
Raymond P. Tennison, Jr. Russell U.S. Core Equity Fund Over $100,000 Over $100,000
Russell U.S. Defensive Equity Fund Over $100,000
Russell Global Real Estate
Securities Fund
$50,001-$100,000
Russell Tax Exempt Bond Fund $50,001-$100,000
Jack R. Thompson Russell U.S. Core Equity Fund $10,001-$50,000 Over $100,000
Russell Global Equity Fund $10,001-$50,000
Russell Tax-Managed U.S. Mid
& Small Cap Fund
$10,001-$50,000
Russell Global Infrastructure Fund $10,001-$50,000
Russell Global Real Estate
Securities Fund
$10,001-$50,000
TRUSTEE EMERITUS
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  DOLLAR RANGE OF EQUITY
SECURITIES IN EACH FUND
AGGREGATE DOLLAR
RANGE OF
EQUITY SECURITIES
IN ALL REGISTERED
INVESTMENT
COMPANIES
OVERSEEN
BY TRUSTEES
IN RUSSELL
FUND COMPLEX
George F. Russell, Jr. None None None
  
Operation Of RIC
SERVICE PROVIDERS.
RIC's principal service providers are:
Adviser Russell Investment Management Company
Administrator and Transfer and Dividend Disbursing Agent Russell Fund Services Company
Money Managers Multiple professional discretionary and/or non-discretionary investment management organizations
Custodian and Portfolio Accountant State Street Bank and Trust Company
Distributor Russell Financial Services, Inc.
The Trustees, on behalf of the Trust, enter into service agreements with RIMCo, RFSC and other service providers in order to provide, and in some cases authorize service providers to procure through other parties, necessary or desirable services on behalf of the Trust and the Funds. Shareholders are not third-party beneficiaries of such agreements.
ADVISER.
The Funds' investment adviser is RIMCo. RIMCo provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including developing the investment program for each Fund and managing each Fund's overall exposures.
RIMCo is a wholly owned subsidiary of Frank Russell Company (“FRC”).
RIMCo’s mailing address is 1301 Second Avenue, 18th Floor, Seattle, WA 98101.
RIMCo pioneered the “multi-style, multi-manager” investment method in mutual funds and, as of December 31, 2015 managed over $38.1 billion in 50 mutual fund portfolios. RIMCo was established in 1982 to serve as the investment management arm of FRC. FRC is an indirect subsidiary of London Stock Exchange Group plc (“LSEG”). LSEG is a diversified international market infrastructure and capital markets business.
RIMCo has advised the Funds that, on October 8, 2015, Emerald Acquisition Limited, a company incorporated under the laws of England and Wales (“Buyer”), entered into an agreement with FRC and LSEG through which Buyer will acquire FRC’s asset management business (“Russell Investments”), including RIMCo, from LSEG (the “Transaction”).  Buyer is a newly formed acquisition vehicle through which the limited partners of certain private equity funds affiliated with TA Associates will indirectly acquire a majority ownership interest and the limited partners of certain private equity funds affiliated with Reverence Capital Partners (“Reverence Capital”) will indirectly acquire a significant minority ownership interest in Russell Investments. RIMCo expects that the Transaction will be consummated in the first half of 2016, subject to regulatory and other approvals and confirmations, and other conditions being satisfied.
RIMCo has advised the Funds of the following information regarding TA Associates and Reverence Capital.  TA Associates is one of the oldest and most experienced global growth private equity firms. TA Associates leads buyouts and minority recapitalizations of profitable growth companies in the technology, financial services, business services, healthcare and consumer industries. Reverence Capital is a private investment firm focused on investing in leading financial services companies.
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As required by the 1940 Act, the consummation of the Transaction would result in the automatic termination of the advisory agreements between RIMCo and RIC, on behalf of the Funds.  At a meeting held on December 16, 2015, the Funds' Board of Trustees unanimously approved a new investment advisory agreement (the “New Advisory Agreement”) between RIC and RIMCo (or a limited liability successor to RIMCo).  The New Advisory Agreement will be submitted to each Fund's shareholders for their approval. Shareholders of the Funds as of February 22, 2016 will be asked to approve the New Advisory Agreement at a special meeting of shareholders which RIMCo expects to be held in the first half of 2016 through a proxy solicitation that will describe the Transaction in greater detail.  Under the New Advisory Agreement, RIMCo would provide investment advisory services to each Fund for fees that do not exceed those that are currently in effect with respect to each Fund.
For all Funds other than the Russell Strategic Call Overwriting Fund, subject to the approval of the Funds’ Board, RIMCo selects, oversees and evaluates the performance results of the Funds’ money managers and allocates a portion of Fund assets among multiple money manager investment strategies. A money manager may have (1) a discretionary asset management assignment pursuant to which it is allocated a portion of Fund assets to manage directly and selects the individual portfolio securities for the assets assigned to it, (2) a non-discretionary assignment pursuant to which it provides a model portfolio to RIMCo representing its investment recommendations, based upon which RIMCo purchases and sells securities for a Fund or (3) both a discretionary and non-discretionary assignment.  RIMCo does not evaluate the investment merits of a money manager’s individual security selections or recommendations.  Money managers are unaffiliated with RIMCo. RIMCo manages Fund assets not allocated to discretionary money managers, which include assets managed by RIMCo to effect a Fund's investment strategies and/or to actively manage the Fund’s overall exposures to seek to achieve the desired risk/return profile for the Fund. RIMCo also manages the portion of Fund assets for which a Fund's non-discretionary money managers provide model portfolios to RIMCo and each Fund’s liquidity reserves. RIMCo may also manage portions of a Fund during transitions between money managers. RIMCo, as agent for RIC, pays the money managers’ fees for the Funds, as a fiduciary for the Funds, out of the advisory fee paid by the Funds to RIMCo. The remainder of the advisory fee is retained by RIMCo as compensation for the services described above and to pay expenses.
Each of the Funds pays an advisory fee directly to RIMCo, billed monthly on a pro rata basis and calculated as a specified percentage of the average daily net assets of each of the Funds. (See the Prospectus for the Funds' annual advisory percentage rates.)
Each Fund invests its cash reserves in an unregistered cash management fund advised by RIMCo. RIMCo has waived its 0.05% advisory fee for the unregistered fund.
Each Fund that lends its portfolio securities invests all or a portion of its collateral received in securities lending transactions in an unregistered cash management fund advised by RIMCo. RIMCo charges a management fee of 0.07% to this unregistered fund. Out of the management fee, RIMCo pays certain expenses of the unregistered fund, including an administrative fee of 0.0025% to RFSC. RIMCo retains the balance of the management fee.
The Funds paid RIMCo the following advisory fees (gross of reimbursements and/or waivers) for the fiscal years ended October 31, 2015, 2014 and 2013, respectively:
    $ Amount Paid   Annual rate
(as a % of average daily net assets)
Fund   2015   2014   2013   2015   2014   2013
Russell U.S. Core Equity Fund   $ 6,972,626   $10,745,659   $11,983,334   0.55%   0.55%   0.55%
Russell U.S. Defensive Equity Fund   6,123,019   7,256,401   6,706,892   0.55%   0.55%   0.55%
Russell U.S. Dynamic Equity Fund   5,219,885   5,797,535   5,491,819   0.80%   0.80%   0.80%
Russell U.S. Strategic Equity Fund   29,744,006   25,305,246   19,700,456   0.75%   0.75%   0.75%
Russell U.S. Large Cap Equity Fund   3,085,821   2,751,674   2,145,624   0.70%   0.70%   0.70%
Russell U.S. Mid Cap Equity Fund   1,697,403   1,475,967   1,218,314   0.80%   0.80%   0.80%
Russell U.S. Small Cap Equity Fund   16,199,391   14,959,132   10,792,911   0.70%   0.70%   0.70%
Russell International Developed Markets Fund   24,179,052   31,273,734   32,244,143   0.70%   0.70%   0.70%
Russell Global Equity Fund   29,725,650   31,900,142   28,128,788   0.95%   0.95%   0.95%
Russell Emerging Markets Fund   31,296,186   31,661,568   22,869,614   1.15%   1.15%   1.15%
Russell Tax-Managed U.S. Large Cap Fund   9,975,712   7,268,062   4,605,770   0.70%   0.70%   0.70%
Russell Tax-Managed U.S. Mid & Small Cap Fund   3,463,360   2,793,443   2,037,687   0.98%   0.98%   0.98%
Russell Tax-Managed International Equity Fund(1)   1,397,805   N/A   N/A   0.85%   N/A   N/A
Russell Global Opportunistic Credit Fund   17,600,386   14,230,320   8,523,164   1.00%   1.00%   1.00%
Russell Strategic Bond Fund   34,224,486   37,416,731   40,683,917   0.50%   0.50%   0.50%
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    $ Amount Paid   Annual rate
(as a % of average daily net assets)
Fund   2015   2014   2013   2015   2014   2013
Russell Investment Grade Bond Fund   3,552,520   4,149,076   4,925,125   0.25%   0.25%   0.25%
Russell Short Duration Bond Fund   4,756,687   5,541,780   5,982,353   0.45%   0.45%   0.45%
Russell Tax Exempt High Yield Bond Fund(1)   450,878   N/A   N/A   0.50%   N/A   N/A
Russell Tax Exempt Bond Fund   4,016,705   3,152,096   2,384,920   0.30%   0.30%   0.30%
Russell Commodity Strategies Fund(2)   11,823,982   14,615,173   15,714,778   1.25%   1.25%   1.25%
Russell Global Infrastructure Fund   19,669,428   20,416,366   12,818,993   1.25%   1.25%   1.25%
Russell Global Real Estate Securities Fund   13,610,324   14,025,485   13,862,876   0.80%   0.80%   0.80%
Russell Multi-Strategy Alternative Fund(2)   10,609,646   14,589,425   12,556,485   1.50%   1.50%   1.50%
Russell Multi-Strategy Income Fund(3)   1,028,553   N/A   N/A   0.75%   N/A   N/A
Russell Strategic Call Overwriting Fund   700,756   678,036   597,051   0.80%   0.80%   0.80%
(1) The Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Does not reflect consolidation of Fund’s Subsidiary.
(3) The Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
RIMCo has contractually agreed to waive and/or reimburse all or a portion of its advisory fees for certain Funds.  These arrangements are not part of the Advisory Agreement with RIC and may be changed or discontinued. The following paragraphs list the current waivers and those that were in effect during the last three fiscal years.
Current Waivers:
For the Russell U.S. Strategic Equity Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.75% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses, excluding dividend and interest expenses on short sales, to the extent such direct Fund-level expenses exceed 0.59% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell U.S. Large Cap Equity Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.70% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.67% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell U.S. Mid Cap Equity Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.80% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent that such direct Fund-level expenses exceed 0.77% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell Tax-Managed U.S. Mid & Small Cap Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.98% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 1.10% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct fund-level expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell Tax-Managed International Equity Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.85% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.89% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
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For the Russell Global Opportunistic Credit Fund, RIMCo has entered into a contractual fee waiver agreement until February 28, 2017, that results in an effective advisory fee not to exceed 0.676%. This waiver may not be terminated during the relevant period except with Board approval.
For the Russell Strategic Bond Fund, RIMCo has entered into a contractual fee waiver agreement, until February 28, 2017, that results in an effective advisory fee not to exceed 0.466%. This waiver may not be terminated during the relevant period except with Board approval.
For the Russell Short Duration Bond Fund, RIMCo has entered into a contractual fee waiver agreement, until February 28, 2017, that results in an effective advisory fee not to exceed 0.368%. This waiver may not be terminated during the relevant period except with Board approval.
For the Russell Tax Exempt High Yield Bond Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.50% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses, excluding extraordinary expenses, to the extent such direct Fund-level expenses exceed 0.44% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell Commodity Strategies Fund, RIMCo has entered into a contractual fee waiver agreement, until February 28, 2017, that results in an effective advisory fee not to exceed 0.8025%. This waiver may not be terminated during the relevant period except with Board approval.
The Russell Cayman Commodity Strategies Fund Ltd., a wholly-owned subsidiary of the Russell Commodity Strategies Fund (the “Commodity Strategies Subsidiary”), organized as a company under the laws of the Cayman Islands, pays RIMCo an advisory fee at the annual rate of 1.25% of the Commodity Strategies Subsidiary’s net assets (the “Commodity Strategies Subsidiary Advisory Fees”). Pursuant to a contractual agreement with the Russell Commodity Strategies Fund, RIMCo has agreed to permanently waive all or a portion of the advisory fees paid by the Russell Commodity Strategies Fund to RIMCo in the amount equal to the amount of the Commodity Strategies Subsidiary Advisory Fees received by RIMCo, if any. This waiver may not be terminated by RIMCo.
For the Russell Global Infrastructure Fund, RIMCo has entered into a contractual fee waiver agreement, until February 28, 2017, that results in an effective advisory fee not to exceed 0.90%. This waiver may not be terminated during the relevant period except with Board approval.
The Russell Cayman Multi-Strategy Alternative Fund Ltd., a wholly-owned subsidiary of the Russell Multi-Strategy Alternative Fund (the “Multi-Strategy Alternative Subsidiary”), organized as a company under the laws of the Cayman Islands, pays RIMCo an advisory fee at the annual rate of 1.50% of the Multi-Strategy Alternative Subsidiary’s net assets (the “Multi-Strategy Alternative Subsidiary Advisory Fees”). Pursuant to a contractual agreement with the Russell Multi-Strategy Alternative Fund, RIMCo has agreed to permanently waive all or a portion of the advisory fees paid by the Russell Multi-Strategy Alternative Fund to RIMCo in the amount equal to the amount of the Multi-Strategy Alternative Subsidiary Advisory Fees received by RIMCo, if any. This waiver may not be terminated by RIMCo.
For the Russell Multi-Strategy Income Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.75% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent such direct Fund-level expenses exceed 0.65% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
For the Russell Strategic Call Overwriting Fund, RIMCo has contractually agreed, until February 28, 2017, to waive up to the full amount of its 0.80% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses, to the extent such direct Fund-level expenses exceed 0.77% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.
Past Waivers:
For the Russell U.S. Dynamic Equity Fund, RIMCo contractually agreed to waive from January 1, 2008 through February 28, 2014 up to the full amount of its 0.80% advisory fees and then to reimburse the Fund for other direct Fund-level expenses, excluding dividend and interest payments on short sales and extraordinary expenses, to the extent that direct Fund-level
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expenses exceed 0.98% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the periods ended October 31, 2013 and 2014 was $0 and $0, respectively. There were no reimbursements for the periods ended October 31, 2013 and 2014. As a result of the waiver, the Fund paid advisory fees of $5,491,819 and $5,797,535 for the fiscal years ended October 31, 2013 and 2014, respectively.
For the Russell U.S. Strategic Equity Fund, RIMCo contractually agreed, from August 6, 2012 until February 29, 2016, to waive, up to the full amount of its 0.75% advisory fee and then to reimburse the Fund for other direct Fund-level expenses, excluding dividend and interest expenses on short sales and extraordinary expenses, to the extent such direct Fund-level expenses exceed 0.67% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the periods ended October 31, 2013, 2014 and 2015 was $4,316,101, $7,664,947 and $9,536,716, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $15,384,355, $17,640,299 and $20,207,290 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell U.S. Large Cap Equity Fund, RIMCo contractually agreed, from January 15, 2012 until February 29, 2016, to waive up to the full amount of its 0.70% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.67% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the periods ended October 31, 2013, 2014 and 2015 was $502,460, $559,659 and $598,906, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $1,643,164, $2,192,015 and $2,486,915 respectively for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell U.S. Mid Cap Equity Fund, RIMCo contractually agreed, from January 15, 2012 until February 29, 2016, to waive, up to the full amount of its 0.80% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent such direct Fund-level expenses exceed 0.77% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the periods ended October 31, 2013, 2014 and 2015 was $340,473, $374,604 and $373,361. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $877,841, $1,101,363 and $1,324,042 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell Tax-Managed U.S. Mid & Small Cap Fund, from January 1, 2008 through February 29, 2016, RIMCo contractually agreed to waive up to the full amount of its 0.98% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 1.10% of the average daily net assets of that Fund on an annual basis. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. RIMCo waived fees in the amount of $26,327, $65,234 and $73,035 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $2,011,360, $2,728,209 and $3,390,325 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell Tax-Managed International Equity Fund, RIMCo has contractually agreed, from June 2, 2015 until February 28, 2017, to waive up to the full amount of its 0.85% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.89% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the period ended October 31, 2015 was $283,441. There were no reimbursements for the period ended October 31, 2015. As a result of the waiver, the Fund paid advisory fees of $1,114,364 for the fiscal year ended October 31, 2015.
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For the Russell Global Opportunistic Credit Fund, RIMCo contractually agreed, until December 31, 2013, to waive 0.27% of its 1.00% advisory fee for the Fund, and from January 1, 2014 until February 28, 2015, 0.28% of its 1.00% advisory fee for the Fund, and from March 1, 2015 until February 29, 2016, 0.324% of its 1.00% advisory fee for the Fund. The total amount of the waivers for the periods ended October 31, 2013, 2014 and 2015 was $2,386,486, $3,984,490 and $5,477,123, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $6,136,678, $10,245,830 and $12,123,263 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell Strategic Bond Fund, from March 1, 2015 until February 29, 2016, RIMCo contractually agreed to waive 0.034% of its 0.50% advisory fee for the Fund. This waiver may not be terminated during the relevant period except with Board approval. RIMCo waived fees in the amount of $1,507,274 for the fiscal year ended October 31, 2015. There were no reimbursements for the period ended October 31, 2015. As a result of the waiver, the Fund paid advisory fees of $32,717,212 for the fiscal year ended October 31, 2015.
For the Russell Short Duration Bond Fund, from October 1, 2010 until February 28, 2015, RIMCo contractually agreed to waive 0.05% of its 0.45% advisory fee for the Fund, and from March 1, 2015 until February 29, 2016, 0.082% of its 0.45% advisory fee for the Fund. The total amount of the waivers for the periods ended October 31, 2013, 2014 and 2015 were $664,706, $615,753 and $744,716, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $5,317,647, $4,926,027 and $4,011,971 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell Tax Exempt High Yield Bond Fund, RIMCo has contractually agreed, from June 2, 2015 until February 28, 2017, to waive up to the full amount of its 0.50% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses, excluding extraordinary expenses, to the extent such direct Fund-level expenses exceed 0.44% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the period ended October 31, 2015 was $266,510. There were no reimbursements for the period ended October 31, 2015. As a result of the waiver, the Fund paid advisory fees of $184,368 for the fiscal year ended October 31, 2015.
For the Russell Commodity Strategies Fund, RIMCo contractually agreed, until December 31, 2013, to waive 0.25% of its 1.25% advisory fee for the Fund, and from January 1, 2014 until February 28, 2015, 0.27% of its 1.25% advisory fee for the Fund, and from March 1, 2015 until February 29, 2016, 0.30% of its 1.25% advisory fee for the Fund. Additionally, the Russell Cayman Commodity Strategies Fund Ltd. (the “Commodity Strategies Subsidiary”) pays RIMCo an advisory fee at the annual rate of 1.25% of its net assets (the “Commodity Strategies Subsidiary Advisory Fee”). RIMCo contractually agreed to waive all or a portion of the advisory fees paid by the Russell Commodity Strategies Fund to RIMCo in an amount equal to the amount of the Commodity Strategies Subsidiary Advisory Fee received by RIMCo, if any. RIMCo waived advisory fees in the amount of $6,401,016, $6,411,067 and $5,540,863 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Russell Commodity Strategies Fund paid advisory fees of $9,313,762, $8,204,106 and $6,283,119 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
For the Russell Global Infrastructure Fund, RIMCo contractually agreed, until December 31, 2013, to waive 0.25% of its 1.25% advisory fee for the Fund, and from January 1, 2014 until February 28, 2015, to waive 0.31% of its 1.25% advisory fee for the Fund, and from March 1, 2015 until February 29, 2016, 0.33% of its 1.25% advisory fee for the Fund. The total amount of the waivers for the periods ended October 31, 2013, 2014 and 2015 was $3,238,726, $5,211,529 and $5,192,729, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Fund paid advisory fees of $9,580,267, $15,204,837 and $14,476,699 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
The Russell Cayman Multi-Strategy Alternative Fund Ltd. (the “Multi-Strategy Alternative Subsidiary”) pays RIMCo an advisory fee at the annual rate of 1.50% of its net assets (the “Multi-Strategy Alternative Subsidiary Advisory Fee”). RIMCo contractually agreed to waive all or a portion of the advisory fees paid by the Russell Multi-Strategy Alternative Fund to RIMCo in an amount equal to the amount of the Multi-Strategy Alternative Subsidiary Advisory Fee received by RIMCo, if any. RIMCo waived advisory fees in the amount of $637,869, $498,916 and $336,176 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Russell Multi-Strategy Alternative Fund paid advisory fees of $11,918,616, $14,090,509 and $10,273,470 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
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For the Russell Multi-Strategy Income Fund, RIMCo has contractually agreed, from May 4, 2015 until February 28, 2017, to waive up to the full amount of its 0.75% advisory fee for the Fund and then to reimburse the Fund for other direct Fund-level expenses to the extent such direct Fund-level expenses exceed 0.65% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, extraordinary expenses or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the period ended October 31, 2015 was $492,335. There were no reimbursements for the period ended October 31, 2015. As a result of the waiver, the Fund paid advisory fees of $536,218 for the fiscal year ended October 31, 2015.
For the Russell Strategic Call Overwriting Fund, RIMCo contractually agreed, from August 15, 2012 until February 29, 2016, to waive, up to the full amount of its 0.80% advisory fee and then to reimburse the Fund for other direct Fund-level expenses, excluding extraordinary expenses, to the extent that direct Fund-level expenses exceed 0.77% of the average daily net assets of the Fund on an annual basis. This waiver and reimbursement may not be terminated during the relevant period except with Board approval. Direct Fund-level expenses for the Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. The total amount of the waiver for the periods ended October 31, 2013, 2014 and 2015 was $360,344, $187,450 and $193,138, respectively. The total amount of reimbursements for the periods ended October 31, 2013, 2014 and 2015 was $0, $0 and $0, respectively. As a result of the waiver, the Fund paid advisory fees of $236,708, $490,586 and $507,618 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
From its advisory fees, RIMCo, as agent for RIC, pays all fees to the money managers for their investment advisory services. The table in the next section entitled “Money Managers” sets forth the fees paid to money managers. The following table sets forth the advisory fees retained by RIMCo net of fees paid to the money managers but does not reflect RIMCo advisory fee waivers and expense reimbursements:
    $ Amount Retained   Annual rate
(as a % of average daily net assets)
Fund   2015   2014   2013   2015   2014   2013
Russell U.S. Core Equity Fund   $ 4,797,394   $ 7,306,150   $ 8,074,903   0.38%   0.37%   0.37%
Russell U.S. Defensive Equity Fund   4,234,952   4,920,517   4,533,914   0.38%   0.37%   0.37%
Russell U.S. Dynamic Equity Fund   3,874,610   4,190,010   4,055,625   0.59%   0.58%   0.59%
Russell U.S. Strategic Equity Fund   22,899,521   19,212,283   15,034,324   0.58%   0.57%   0.57%
Russell U.S. Large Cap Equity Fund   2,225,888   1,992,288   1,554,872   0.50%   0.51%   0.51%
Russell U.S. Mid Cap Equity Fund   1,034,997   877,179   700,722   0.49%   0.48%   0.46%
Russell U.S. Small Cap Equity Fund   7,801,438   6,908,997   4,683,229   0.34%   0.32%   0.30%
Russell International Developed Markets Fund   15,817,848   20,089,086   20,701,573   0.46%   0.45%   0.45%
Russell Global Equity Fund   20,381,912   22,006,600   19,567,446   0.65%   0.66%   0.66%
Russell Emerging Markets Fund   19,883,709   20,530,596   14,883,979   0.73%   0.75%   0.75%
Russell Tax-Managed U.S. Large Cap Fund   7,558,051   5,323,641   3,027,647   0.53%   0.51%   0.46%
Russell Tax-Managed U.S. Mid & Small Cap Fund   2,642,117   1,973,125   1,373,722   0.75%   0.69%   0.66%
Russell Tax-Managed International Equity Fund(1)   1,057,557   N/A   N/A   0.65%   N/A   N/A
Russell Global Opportunistic Credit Fund   11,602,474   9,043,507   5,217,585   0.66%   0.64%   0.61%
Russell Strategic Bond Fund   29,019,074   30,953,456   33,483,294   0.42%   0.41%   0.41%
Russell Investment Grade Bond Fund   2,573,172   2,998,290   3,521,661   0.18%   0.18%   0.18%
Russell Short Duration Bond Fund   4,003,524   4,469,564   4,812,993   0.38%   0.36%   0.36%
Russell Tax Exempt High Yield Bond Fund(1)   236,411   N/A   N/A   0.26%   N/A   N/A
Russell Tax Exempt Bond Fund   2,240,456   1,731,569   1,299,257   0.17%   0.16%   0.16%
Russell Commodity Strategies Fund(2)   9,958,840   12,101,403   12,683,798   1.05%   1.04%   1.01%
Russell Global Infrastructure Fund   15,181,374   15,975,267   10,088,395   0.96%   0.98%   0.98%
Russell Global Real Estate Securities Fund   9,839,000   10,031,433   9,224,528   0.58%   0.57%   0.53%
Russell Multi-Strategy Alternative Fund(2)   3,169,827   4,508,717   4,675,768   0.45%   0.46%   0.56%
Russell Multi-Strategy Income Fund(3)   611,066   N/A   N/A   0.68%   N/A   N/A
Russell Strategic Call Overwriting Fund   700,756   678,036   597,051   0.80%   0.80%   0.80%
(1) The Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Does not reflect consolidation of Fund’s Subsidiary.
(3) The Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
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ADMINISTRATOR.
RFSC, with the assistance of RIMCo and its affiliates, provides the Funds with office space, equipment and the personnel necessary to operate and administer the Funds' business and to supervise the provision of services by certain third parties such as the custodian. RFSC, like Russell Financial Services, Inc. (the Funds' distributor), is a wholly-owned subsidiary of RIMCo (the Funds' adviser).
Each of the Funds pay an administrative fee directly to RFSC, billed monthly on a pro rata basis and calculated as a specified percentage of the average daily net assets of each of the Funds. Services which are administrative in nature are provided by RFSC pursuant to an Administrative Agreement for an annual fee of up to 0.05% of the average daily net asset value of each Fund.
Each Fund invests its cash reserves in an unregistered cash management fund administered by RFSC. RFSC charges a 0.05% administrative fee to the unregistered fund.
Each Fund that lends its portfolio securities invests all or a portion of its collateral received in securities lending transactions in an unregistered cash management fund advised by RIMCo. RIMCo charges a management fee of 0.07% to this unregistered fund. Out of the management fee, RIMCo pays certain expenses of the unregistered fund, including an administrative fee of 0.0025% to RFSC. RIMCo retains the balance of the management fee.
The Funds paid RFSC the following administrative fees (gross of reimbursements and/or waivers) for the fiscal years ended October 31, 2015, 2014 and 2013, respectively.
    $ Amount Paid   Annual rate
(as a % of average daily net assets)
Fund   2015   2014   2013   2015   2014   2013
Russell U.S. Core Equity Fund   $ 603,629   $ 930,574   $1,047,598   0.05%   0.05%   0.05%
Russell U.S. Defensive Equity Fund   530,263   628,342   586,320   0.05%   0.05%   0.05%
Russell U.S. Dynamic Equity Fund   310,779   345,095   330,051   0.05%   0.05%   0.05%
Russell U.S. Strategic Equity Fund   1,889,476   1,606,655   1,262,638   0.05%   0.05%   0.05%
Russell U.S. Large Cap Equity Fund   210,004   187,183   147,341   0.05%   0.05%   0.05%
Russell U.S. Mid Cap Equity Fund   101,087   87,857   73,208   0.05%   0.05%   0.05%
Russell U.S. Small Cap Equity Fund   1,102,330   1,017,466   741,226   0.05%   0.05%   0.05%
Russell International Developed Markets Fund   1,644,896   2,127,992   2,214,472   0.05%   0.05%   0.05%
Russell Global Equity Fund   1,490,399   1,599,125   1,423,460   0.05%   0.05%   0.05%
Russell Emerging Markets Fund   1,296,122   1,310,790   956,068   0.05%   0.05%   0.05%
Russell Tax-Managed U.S. Large Cap Fund   679,070   494,333   316,250   0.05%   0.05%   0.05%
Russell Tax-Managed U.S. Mid & Small Cap Fund   168,386   135,732   99,943   0.05%   0.05%   0.05%
Russell Tax-Managed International Equity Fund(1)   78,497   N/A   N/A   0.05%   N/A   N/A
Russell Global Opportunistic Credit Fund   838,568   677,498   409,773   0.05%   0.05%   0.05%
Russell Strategic Bond Fund   3,260,596   3,564,230   3,912,333   0.05%   0.05%   0.05%
Russell Investment Grade Bond Fund   676,852   790,483   947,266   0.05%   0.05%   0.05%
Russell Short Duration Bond Fund   503,430   586,562   639,194   0.05%   0.05%   0.05%
Russell Tax Exempt High Yield Bond Fund(1)   43,239   N/A   N/A   0.05%   N/A   N/A
Russell Tax Exempt Bond Fund   637,868   500,270   382,181   0.05%   0.05%   0.05%
Russell Commodity Strategies Fund(2)   450,530   556,874   604,488   0.05%   0.05%   0.05%
Russell Global Infrastructure Fund   749,514   777,656   492,977   0.05%   0.05%   0.05%
Russell Global Real Estate Securities Fund   810,368   834,879   833,133   0.05%   0.05%   0.05%
Russell Multi-Strategy Alternative Fund(2)   336,833   463,194   402,433   0.05%   0.05%   0.05%
Russell Multi-Strategy Income Fund(3)   65,527   N/A   N/A   0.05%   N/A   N/A
Russell Strategic Call Overwriting Fund   41,726   40,365   35,879   0.05%   0.05%   0.05%
(1) The Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Does not reflect consolidation of Fund’s Subsidiary.
(3) The Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
RFSC has contractually agreed to waive and/or reimburse all or a portion of its administrative fees for certain Funds. These arrangements are not part of the Administrative Agreement with RIC and may be changed or discontinued. The following paragraphs list the current waivers and those that were in effect during the last three fiscal years.
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Current Waivers:
The Russell Cayman Commodity Strategies Fund Ltd., a wholly-owned subsidiary of the Russell Commodity Strategies Fund (the “Commodity Strategies Subsidiary”), organized as a company under the laws of the Cayman Islands, pays RFSC an administrative fee at the annual rate of 0.05% of the Commodity Strategies Subsidiary’s net assets (the “Commodity Strategies Subsidiary Administrative Fees”). Pursuant to a contractual agreement with the Russell Commodity Strategies Fund, RFSC has agreed to permanently waive all or a portion of the administrative fees paid by the Russell Commodity Strategies Fund to RFSC in the amount equal to the amount of the Commodity Strategies Subsidiary Administrative Fees received by RFSC, if any. This waiver may not be terminated by RFSC.
The Russell Cayman Multi-Strategy Alternative Fund Ltd., a wholly-owned subsidiary of the Russell Multi-Strategy Alternative Fund (the “Multi-Strategy Alternative Subsidiary”), organized as a company under the laws of the Cayman Islands, pays RFSC an administrative fee at the annual rate of 0.05% of the Multi-Strategy Alternative Subsidiary’s net assets (the “Multi-Strategy Alternative Subsidiary Administrative Fees”). Pursuant to a contractual agreement with the Russell Multi-Strategy Alternative Fund, RFSC has agreed to permanently waive all or a portion of the administrative fees paid by the Russell Multi-Strategy Alternative Fund to RFSC, in the amount equal to the amount of the Multi-Strategy Alternative Subsidiary Administrative Fees received by RFSC, if any. This waiver may not be terminated by RFSC.
Past Waivers:
The Russell Cayman Commodity Strategies Fund Ltd. (the “Commodity Strategies Subsidiary”) pays RFSC an administrative fee at the annual rate of 0.05% of its net assets (the “Commodity Strategies Subsidiary Administrative Fee”). RFSC contractually agreed to waive all or a portion of the administrative fees paid by the Russell Commodity Strategies Fund to RFSC in an amount equal to the amount of the Commodity Strategies Subsidiary Administrative Fee received by RFSC, if any. RFSC waived administrative fees in the amount of $120,265, $108,985 and $82,584 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Russell Commodity Strategies Fund paid administrative fees of $484,223, $447,889 and $367,946 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
The Russell Cayman Multi-Strategy Alternative Fund Ltd. (the “Multi-Strategy Alternative Subsidiary”) pays RFSC an administrative fee at the annual rate of 0.05% of its net assets (the “Multi-Strategy Alternative Subsidiary Administrative Fee”). RFSC contractually agreed to waive all or a portion of the administrative fees paid by the Russell Multi-Strategy Alternative Fund to RFSC in an amount equal to the amount of the Multi-Strategy Alternative Subsidiary Administrative Fee received by RFSC, if any. RFSC waived administrative fees in the amount of $21,262, $16,631 and $11,207 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively. There were no reimbursements for the periods ended October 31, 2013, 2014 and 2015. As a result of the waiver, the Russell Multi-Strategy Alternative Fund paid administrative fees of $381,171, $446,563 and $325,626 for the fiscal years ended October 31, 2013, 2014 and 2015, respectively.
ORGANIZATION AND MANAGEMENT OF WHOLLY-OWNED SUBSIDIARIES OF RUSSELL COMMODITY STRATEGIES AND RUSSELL MULTI-STRATEGY ALTERNATIVE FUNDS.
The Russell Commodity Strategies and Russell Multi-Strategy Alternative Funds intend to gain exposure to commodity markets by investing up to 25% of their total assets in the Russell Cayman Commodity Strategies Fund Ltd. and Russell Cayman Multi-Strategy Alternative Fund Ltd., respectively (each, a “Subsidiary”).
Each Subsidiary is a company organized under the laws of the Cayman Islands, whose registered office is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Each Subsidiary’s affairs are overseen by a board consisting of three directors.
Each Subsidiary has entered into separate contracts with RIMCo and RFSC whereby RIMCo and RFSC provide investment advisory and administrative services, respectively, to the Subsidiary. In addition, RIMCo has entered into money manager agreements with certain of the Funds’ money managers to manage the portion of a Subsidiary’s assets assigned to them. Neither RIMCo, RFSC nor the money managers receive separate compensation from a Subsidiary for providing it with investment advisory or administrative services. However, each Fund pays RIMCo and RFSC based on the Fund’s assets, including the assets invested in its respective Subsidiary. Each Subsidiary has also entered into a separate contract for the provision of custody services with the same or with an affiliate of the same service provider that provides those services to the Funds. The Funds are the sole shareholder of their respective Subsidiary, and it is not currently expected that shares of a Subsidiary will be sold or offered to other investors.
Each Subsidiary is managed pursuant to compliance policies and procedures that are the same, in all material respects, as the policies and procedures adopted by the Funds. As a result, RIMCo and the money managers, in managing each Subsidiary, are subject to the same investment policies and restrictions that apply to the management of the Funds, and, in particular, to the
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requirements relating to portfolio leverage, liquidity, industry concentration, brokerage, and the timing and method of the valuation of a Subsidiary’s portfolio investments and shares. These policies and restrictions are described elsewhere in detail in this SAI. The Funds’ CCO oversees implementation of each Subsidiary’s policies and procedures, and makes periodic reports to the Funds’ Board of Trustees regarding each Subsidiary’s compliance with its policies and procedures. The Funds and their respective Subsidiary will test for compliance with certain investment restrictions on a consolidated basis, except that with respect to its investments in certain securities that may involve leverage, each Subsidiary will comply with asset segregation or “earmarking” requirements to the same extent as the Funds.
Please refer to the section in this SAI titled “Additional Information Concerning Taxes” for information about certain tax aspects of the Funds’ investment in their respective Subsidiary.
PORTFOLIO MANAGERS.
The RIMCo Managers (RIMCo’s employees who manage the RIC Funds, oversee the Funds' asset allocations and have primary responsibility for the management of the RIC Funds ) are compensated by RIMCo with salaries, annual incentive awards (paid in cash or awarded as part of a long term incentive plan) and profit sharing contributions. Salaries are fixed annually and are driven by the market place. Although compensation is not directly affected by an increase in fund assets, RIMCo Managers are responsible for aiding in client retention and assistance in RIMCo assets under management growth.
Annual incentive awards for the RIMCo Managers of the RIC Funds are assessed by senior management based on the following:
Qualitative measures, such as a RIMCo Manager’s quality of decisions made for the accounts, contributions to client services efforts and improvement of RIMCo’s investment process. RIMCo Managers are evaluated on the performance of the total portfolio and all related decisions, for example, money manager selection, timing of money manager change decisions, direct investment activities and risk management.
Quantitative measures (fund performance). RIMCo Managers receive a quantitative performance assessment score for the Funds they manage. The score is predominantly based on 1-year and 3-year measurement horizons. A two year horizon may be used for a Fund that does not have 3 years of performance history.
In determining the relevant peer group, senior management assigns the peer group which in their judgment most closely represents the habitat of the Fund.  The RIMCo Manager does not choose the peer group.  With the exception of the Russell Tax-Managed U.S. Large Cap Fund, Russell Tax-Managed U.S. Mid & Small Cap Fund, Russell Tax-Managed International Equity Fund and Russell Multi-Strategy Income Fund, the peer group assigned by senior management matches the assigned Morningstar peer group for the Fund. For the Russell Tax-Managed U.S. Large Cap Fund, Russell Tax-Managed U.S. Mid & Small Cap Fund, Russell Tax-Managed International Equity Fund and Russell Multi-Strategy Income Fund, the peer group is selected by senior management as described below.
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Each Fund, (except the Russell Commodity Strategies Fund, Russell Global Real Estate Securities Fund, Russell Global Infrastructure Fund, Russell Strategic Call Overwriting Fund, Russell Tax-Managed U.S. Large Cap Fund, Russell Tax-Managed U.S. Mid & Small Cap Fund, Russell Tax-Managed International Equity Fund and Russell Multi-Strategy Income Fund) Performance is generally equally assessed relative to the Fund’s primary or secondary index benchmark and relevant peer group.
Russell Commodity Strategies Fund and Russell Global Real Estate Securities Fund Performance is generally assessed 75% relative to the Fund’s index benchmark and 25% relative to the Fund’s relevant peer group.
Russell Global Infrastructure Fund and Russell Strategic Call Overwriting Fund Performance is generally assessed relative to the Fund’s index benchmark.
Russell Tax-Managed U.S. Large Cap Fund, Russell Tax-Managed U.S. Mid & Small Cap Fund and Russell Tax-Managed International Equity Fund Performance is generally assessed 75% relative to a peer passive investment alternative and 25% relative to the average after-tax return of the Fund’s relevant peer group.
The peer passive investment alternative is the average return less average passive tax drag of a group of passively managed mutual funds and exchange-traded funds selected by senior management.
Russell Multi-Strategy Income Fund Performance is generally assessed relative to funds that utilize similar investment strategies as the Fund as selected by senior management (a “Custom Peer Group”).
Fund weightings for each RIMCo Manager are determined at the beginning of each yearly assessment period and signed off by the asset class Chief Investment Officer (“CIO”) or Managing Director (“MD”). These Funds and the assessment weighting for each Fund are recorded in a central system at the beginning of the assessment period. Each Fund may have an equal weight, could be asset weighted, could be a combination of the two, or could be a custom set of applicable weights. Importantly, the assessment weighting for each Fund is approved by the asset class CIO or MD at the beginning of the assessment period. The central system tracks the performance of the allocations throughout the assessment period and delivers a score at the end of the period to be used in the RIMCo Manager’s evaluation.
The market indexes and peer group averages used to evaluate the performance of the Funds are as follows:
Russell U.S. Core Equity Fund Russell 1000® Index
Morningstar Large Blend
Russell U.S. Defensive Equity Fund Russell 1000® Defensive Index
Morningstar Large Blend
Russell U.S. Dynamic Equity Fund Russell 1000® Dynamic Index
Morningstar Large Blend
Russell U.S. Strategic Equity Fund Russell 1000® Index
Morningstar Large Blend
Russell U.S. Large Cap Equity Fund S&P 500® Index
Morningstar Large Blend
Russell U.S. Mid Cap Equity Fund Russell Midcap® Index
Morningstar Mid-Cap Blend
Russell U.S. Small Cap Equity Fund Russell 2000® Index
Morningstar Small Blend
Russell International Developed Markets Fund Russell Developed ex-US Large Cap Index (net)
Morningstar Foreign Large Blend
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Russell Global Equity Fund Russell Developed Large Cap Index (net)
Morningstar World Stock
Russell Emerging Markets Fund Russell Emerging Markets Index (net)
Morningstar Diversified Emerging Mkts
Russell Tax-Managed U.S. Large Cap Fund Peer Passive Investment Alternative
Morningstar Large Blend (after-tax return)
Russell Tax-Managed U.S. Mid & Small Cap Fund Peer Passive Investment Alternative
Morningstar Small Blend (after-tax return)
Russell Tax-Managed International Equity Fund Peer Passive Investment Alternative
Blend of 80% Morningstar Foreign Large Blend and 20% Diversified Emerging Markets (after-tax return)
Russell Global Opportunistic Credit Fund 60% BofAML Global High Yield™/40% JP Morgan Emerging Markets Bond Index Global Diversified™
Morningstar Multisector Bond
Russell Strategic Bond Fund Barclays U.S. Aggregate Bond Index
Morningstar Intermediate-Term Bond
Russell Investment Grade Bond Fund Barclays U.S. Aggregate Bond Index
Morningstar Intermediate-Term Bond
Russell Short Duration Bond Fund BofAML 1-3 Yr U.S. Treasuries Index
Morningstar Short-Term Bond
Russell Tax Exempt High Yield Bond Fund 40% Barclays Municipal Bond Index/60% Barclays
High Yield Municipal Bond Index
Morningstar High Yield Muni
Russell Tax Exempt Bond Fund Barclays Municipal Bond 1-15 Yr Blend (1-17) Index
Morningstar Muni National Interm
Russell Global Real Estate Securities Fund FTSE EPRA/NAREIT Developed Real Estate Index (net)
Morningstar Global Real Estate
Russell Commodity Strategies Fund Bloomberg Commodity Index Total Return (formerly, the Dow Jones UBS Commodity Index Total Return)
Morningstar Commodities Broad Basket
Russell Global Infrastructure Fund S&P Global Infrastructure Index
Russell Multi-Strategy Alternative Fund Barclays U.S. 1-3 Month Treasury Bill Index
Morningstar Multialternative
Russell Multi-Strategy Income Fund Custom Peer Group
Russell Strategic Call Overwriting Fund CBOE S&P 500 BuyWrite Index
RIMCo Manager evaluations, salary and annual incentive award recommendations are conducted and reviewed by RIMCo asset class CIOs or MDs. Russell Investments’ compensation committee approves salaries and annual incentive awards after the asset class CIOs’ or MDs' recommendations have been reviewed by the Global Chief Investment Officer.
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For the profit sharing plan, contributions by Russell Investments will be made at the discretion of Russell Investments’ Board of Directors based on a profitability assessment (which may include factors in addition to achieving the operating profit plan). The annual determination of whether or not Russell’s profitability warrants a discretionary contribution will be solely within the Russell Investments Board’s discretion and not based on a static formula.
The long term incentive plan provides key professionals with future cash payments, the value of which is tied to Russell Investments’ financial performance. Awards under the long term incentive plan are based on expected future contribution to the success of Russell Investments. A long term incentive plan award could be part of a RIMCo Manager’s annual incentive award, which is discretionary. A long term incentive plan award is paid according to a three year vesting schedule from date of grant.
RIMCo Managers earning over a specified amount of cash compensation (salary plus annual incentive awards) are eligible to participate in the deferred compensation plan which allows the RIMCo Manager to elect to defer a portion of her/his cash compensation. Deferred amounts earn the return of an asset allocated mix of RIF Funds selected by the RIMCo Manager.
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Equity Securities Beneficially Owned By Rimco Managers In The Funds
They Manage For The Fiscal Year Ended October 31, 2015
RIMCo Managers Of The Funds Dollar Range Of Equity Securities In The
Funds Managed By The RIMCo Manager
Lance Babbit None Russell Multi-Strategy Alternative Fund
Adam Babson None Russell Global Infrastructure Fund
Rob Balkema $10,001-$50,000 Russell Multi-Strategy Income Fund
Keith Brakebill $10,001-$50,000 Russell Investment Grade Bond Fund
$50,001-$100,000 Russell Global Opportunistic Credit Fund
$10,001-$50,000 Russell Strategic Bond Fund
Jon Eggins $10,001-$50,000 Russell U.S. Small Cap Equity Fund
$10,001-$50,000 Russell Tax-Managed U.S. Mid & Small Cap Fund
$10,001-$50,000 Russell U.S. Mid Cap Equity Fund
$10,001-$50,000 Russell Global Equity Fund
$10,001-$50,000 Russell International Developed Markets Fund
$10,001-$50,000 Russell Tax-Managed International Equity Fund
Bruce A. Eidelson $50,001-$100,000 Russell Global Real Estate Securities Fund
Gerard Fitzpatrick None Russell Strategic Bond Fund
Gustavo Galindo None Russell Emerging Markets Fund
David L. Hintz None Russell U.S. Dynamic Equity Fund
$1-$10,000 Russell U.S. Strategic Equity Fund
None Russell U.S. Core Equity Fund
None Russell U.S. Large Cap Equity Fund
$1-$10,000 Russell Tax-Managed U.S. Large Cap Fund
None Russell U.S. Defensive Equity Fund
Richard F. Johnson, Jr. None Russell U.S. Defensive Equity Fund
Lee Kayser $1-$10,000 Russell Commodity Strategies Fund
Kevin Lo None Russell Short Duration Bond Fund
None Russell Tax Exempt Bond Fund
None Russell Tax Exempt High Yield Bond Fund
Scott A. Maidel $10,001-$50,000 Russell Strategic Call Overwriting Fund
Brian Meath None Russell Multi-Strategy Income Fund
David Pedack None Russell Strategic Call Overwriting Fund
Megan Roach None Russell U.S. Small Cap Equity Fund
None Russell Tax-Managed U.S. Mid & Small Cap Fund
None Russell U.S. Mid Cap Equity Fund
Rafael Zayas None Russell Strategic Call Overwriting Fund
  
RIMCo Managers typically manage multiple portfolios. These portfolios may include mutual funds, separate accounts, unregistered funds and commingled trusts. Russell Investments’ investment process, which includes money manager selection and proprietary asset allocation, is guided by the principle that all portfolios will be treated in a fair and equitable manner. To adhere to this guiding principle, RIMCo Managers follow a process of constructing portfolios in accordance with regulatory and investment guidelines and then selecting money managers to fulfill those needs. Specifically, RIMCo Managers make money manager selection and allocation decisions for each portfolio based on a variety of factors relevant to that portfolio. The investment process dictates that RIMCo Managers utilize RIMCo’s manager research analysis and manager rankings to assist in selecting the most suitable money manager(s) to meet the unique investment needs of the various portfolios they manage.
At the core of Russell Investments’ investment process is a robust oversight and peer review program for money manager selection.  It includes the hiring, termination and retention of money managers. This process is overseen by Russell Investments’ Investment Strategy Committee (“ISC”) and the asset class CIOs or MDs who are responsible for monitoring the portfolio management duties performed within their specific asset class.
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Occasionally, a particular money manager may restrict the total amount of capacity they will allocate to Russell Investments portfolios. If, however, the total allocation is too small to be shared in a meaningful size across all Russell Investments portfolios or if the money manager restricts the absolute number of assignments they will accept from Russell Investments, it is the RIMCo Manager’s responsibility to determine which portfolios receive the allocation. In cases where a RIMCo Manager is managing multiple portfolios and must allocate a manager differently across her/his funds, or multiple RIMCo Managers must allocate the same manager differently across their funds, both the asset class CIO or MD and the ISC must review and ratify the recommendations.
Other Accounts Managed By Rimco Managers
And Assets Under Management In The Accounts
As Of October 31, 2015
RIMCo Manager   Number of
Registered
Investment
Companies
  Assets Under
Management
(in millions)
  Number
of Pooled
Investment
Vehicles
  Assets Under
Management
(in millions)
  Other Types
of Accounts
  Assets Under
Management
(in millions)
  Asset Total
(in millions)
Lance Babbit   --   --   1   $ 305.6   3   $ 529.0   $ 834.6
Adam Babson   --   --   5   1,512.0   --   --   1,512.0
Rob Balkema   9   7,441.3   7   3,797.4   --   --   11,238.7
Keith Brakebill   1   862.4   8   6,012.3   --   --   6,874.7
Jon Eggins   2   1,109.0   4   1,087.8   1   1,172.6   3,369.4
Bruce A. Eidelson   1   805.4   5   2,227.2   --   --   3,032.6
Gerard Fitzpatrick   --   --   8   6,810.5   --   --   6,810.5
Gustavo Galindo   --   --   6   2,434.6   1   55.6   2,490.2
David L. Hintz   2   1,354.4   7   4,734.7   1   708.5   6,797.6
                    1*   708.5   708.5
Richard F. Johnson, Jr.   --   --   5   3,747.7   2   241.0   3,988.7
Lee Kayser   --   --   3   396.1   --   --   396.1
Kevin Lo   --   --   10   7,492.3   2   833.2   8,325.5
Scott A. Maidel   --   --   1   295.8   --   --   295.8
Brian Meath   9   7,441.3   7   3,797.4   --   --   11,238.7
David Pedack   --   --   --   --   --   --   --
Megan Roach   1   231.4   4   2.090.7   1   1.1   2,323.2
Rafael Zayas   --   --   --   --   --   --   --
* These accounts, which are a subset of the preceding row, are those for which the advisory fee is based on the performance of the account.
MONEY MANAGERS.
The Funds’ money managers are not affiliates of RIC or RIMCo, other than as discretionary or non-discretionary managers for a portion of a Fund's portfolio. Some money managers (and their affiliates) may effect brokerage transactions for the Funds (see “Brokerage Allocations” and “Brokerage Commissions”). Money managers may serve as advisers or discretionary and/or non-discretionary managers for Russell Trust Company, other investment vehicles sponsored or advised by RIMCo or its affiliates, other consulting clients of RIMCo, other offshore vehicles and/or for accounts which have no business relationship with RIMCo or its affiliates.
From its advisory fees received from the Funds, RIMCo, as agent for RIC, pays all fees to the money managers for their investment selection services. Money manager fees are determined through arm’s-length negotiations with RIMCo. These negotiations take into account, among other factors, the anticipated nature and quality of services to be rendered, the current and expected future level of business with the money manager, and fees charged by the money manager and other money managers for services provided to funds and accounts with similar investment mandates. Typically, a sliding fee scale corresponding to future levels of assets is agreed upon to reflect economies of scale achieved as a result of cash inflows or
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market appreciation. RIMCo periodically reviews money manager fee levels and renegotiates these agreements as appropriate. Quarterly, each money manager is paid the pro rata portion of an annual fee, based on the average for the quarter of all the assets with respect to which the money manager provides its services. For the Funds’ fiscal years ended October 31, 2015, 2014 and 2013, fees paid to the money managers of the Funds were:
    $ Amount Paid   Annual rate
(as a % of average daily net assets)
Fund   2015   2014   2013   2015   2014   2013
Russell U.S. Core Equity Fund   $ 2,175,232   $ 3,439,509   $ 3,908,431   0.17%   0.18%   0.18%
Russell U.S. Defensive Equity Fund   1,888,067   2,335,884   2,172,978   0.17%   0.18%   0.18%
Russell U.S. Dynamic Equity Fund   1,345,275   1,607,525   1,436,194   0.21%   0.22%   0.21%
Russell U.S. Strategic Equity Fund   6,844,485   6,092,961   4,666,132   0.17%   0.18%   0.18%
Russell U.S. Large Cap Equity Fund   859,933   759,386   590,752   0.20%   0.19%   0.19%
Russell U.S. Mid Cap Equity Fund   662,406   598,787   517,592   0.31%   0.32%   0.34%
Russell U.S. Small Cap Equity Fund   8,397,953   8,050,135   6,109,682   0.36%   0.38%   0.40%
Russell International Developed Markets Fund   8,361,205   11,184,648   11,542,570   0.24%   0.25%   0.25%
Russell Global Equity Fund   9,343,738   9,893,542   8,561,342   0.30%   0.29%   0.29%
Russell Emerging Markets Fund   11,412,477   11,130,972   7,985,635   0.42%   0.40%   0.40%
Russell Tax-Managed U.S. Large Cap Fund   2,417,661   1,944,421   1,578,123   0.17%   0.19%   0.24%
Russell Tax-Managed U.S. Mid & Small Cap Fund   821,244   820,318   663,965   0.23%   0.29%   0.32%
Russell Tax-Managed International Equity Fund(1)   340,249   N/A   N/A   0.09%   N/A   N/A
Russell Global Opportunistic Credit Fund   5,997,912   5,186,813   3,305,579   0.34%   0.36%   0.39%
Russell Strategic Bond Fund   5,205,412   6,463,275   7,200,623   0.08%   0.09%   0.09%
Russell Investment Grade Bond Fund   979,349   1,150,786   1,403,464   0.07%   0.07%   0.07%
Russell Short Duration Bond Fund   753,163   1,072,216   1,169,360   0.07%   0.09%   0.09%
Russell Tax Exempt High Yield Bond Fund(1)   214,467   N/A   N/A   0.10%   N/A   N/A
Russell Tax Exempt Bond Fund   1,776,249   1,420,527   1,085,663   0.13%   0.14%   0.14%
Russell Commodity Strategies Fund(2)   1,865,142   2,513,769   3,030,980   0.21%   0.21%   0.24%
Russell Global Infrastructure Fund   4,488,054   4,441,099   2,730,598   0.29%   0.27%   0.27%
Russell Global Real Estate Securities Fund   3,771,324   3,994,052   4,638,348   0.22%   0.23%   0.27%
Russell Multi-Strategy Alternative Fund(2)   7,439,818   10,080,708   7,880,717   1.05%   1.04%   0.94%
Russell Multi-Strategy Income Fund(3)   417,487   N/A   N/A   0.15%   N/A   N/A
(1) The Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Does not reflect consolidation of Fund’s Subsidiary.
(3) The Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
Each money manager has agreed that it will look only to RIMCo for the payment of the money manager’s fee, after RIC has paid RIMCo. Fees paid to the money managers are not affected by any voluntary or statutory expense limitations. Some money managers may benefit as a result of brokerage commissions received by their broker-dealer affiliates that execute portfolio transactions for the Funds.
CUSTODIAN AND PORTFOLIO ACCOUNTANT.
State Street Bank and Trust Company (“State Street”) serves as the custodian and fund accountant for RIC. As custodian, State Street is responsible for the safekeeping of the Funds' assets and the appointment of any subcustodian banks and clearing agencies. State Street also provides basic portfolio recordkeeping required for each Fund for regulatory and financial reporting purposes. The mailing address for State Street Bank and Trust Company is: 1 Heritage Drive, North Quincy, MA 02171.
DISTRIBUTOR.
Russell Financial Services, Inc. (the “Distributor”) serves as the distributor of RIC Shares. Certain classes of RIC Funds pay for distribution-related services and shareholder services pursuant to RIC’s Rule 12b-1 Distribution Plan and Shareholder Services Plan, respectively.  As permitted by RIC’s Rule 12b-1 Distribution Plan and Shareholder Services Plan, the Distributor has entered into arrangements with Selling Agents and Servicing Agents (each, as defined below) to perform certain distribution and shareholder services for certain classes of RIC.  The distribution fees and shareholder services fees paid by the Funds to the Distributor are then paid by the Distributor to these Selling Agents and Servicing Agents.  The Distributor does not retain any of the distribution fees or shareholder servicing fees paid to it by the Funds.  Any amounts that are unable to be paid to the Selling and Servicing Agents are returned to RIC.  The Distributor keeps a portion of the front-end sales charge imposed on Class A Shares. Financial Intermediaries receive the remaining amount of the front-end
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sales charge imposed on Class A Shares and may be deemed to be underwriters of the relevant Fund as defined in the Securities Act of 1933, as amended (“Securities Act”). Financial Intermediaries that sell Class A Shares may also receive the distribution fee payable under the Funds’ Distribution Plan at an annual rate of up to 0.75% (presently limited to 0.25%) of the average daily net assets represented by the Class A Shares sold by them.
The Distributor distributes shares of the Funds continuously, but reserves the right to suspend or discontinue distribution on that basis. The Distributor is not obligated to sell any specific amount of Fund shares. The Distributor is a wholly owned subsidiary of RIMCo and its mailing address is 1301 Second Avenue, 18th Floor, Seattle, WA 98101.
TRANSFER AND DIVIDEND DISBURSING AGENT.
RFSC serves as transfer and dividend disbursing agent for RIC. For this service, RFSC is paid a fee for transfer agency and dividend disbursing services provided to RIC. RFSC retains a portion of this fee for its services provided to RIC and pays the balance to unaffiliated agents who assist in providing these services. RFSC’s mailing address is 1301 Second Avenue, 18th Floor, Seattle, WA 98101.
RFSC has contractually agreed to waive, through February 28, 2017, a portion of its transfer agency fees for certain classes of certain Funds as set forth below.
Fund and Class   Amount Waived
Russell U.S. Core Equity Fund – Class R6

  0.02%
Russell U.S. Defensive Equity Fund – Class R6

  0.02%
Russell U.S. Dynamic Equity Fund – Class R6

  0.02%
Russell U.S. Strategic Equity Fund – Class A, C, E, R6 & S

  0.02%
Russell U.S. Large Cap Equity Fund – Class R6

  0.02%
Russell U.S. Mid Cap Equity Fund – Class R6

  0.02%
Russell U.S. Small Cap Equity Fund – Class R6

  0.02%
Russell International Developed Markets Fund - Class R6

  0.02%
Russell Global Equity Fund - Class R6

  0.02%
Russell Emerging Markets Fund - Class R6

  0.02%
Russell Tax-Managed U.S. Mid & Small Cap Fund – Class A

  0.02%
Russell Tax-Managed U.S. Mid & Small Cap Fund – Class C, E & S

  0.05%
Russell Global Opportunistic Credit Fund – Class A, C, E & S

  0.12%
Russell Global Opportunistic Credit Fund – Class R6

  0.02%
Russell Strategic Bond Fund – Class A, C, E & S

  0.04%
Russell Strategic Bond Fund – Class R6

  0.02%
Russell Investment Grade Bond Fund – Class R6

  0.02%
Russell Short Duration Bond Fund – Class A, C, E & S

  0.12%
Russell Short Duration Bond Fund – Class R6

  0.02%
Russell Tax Exempt Bond Fund – Class A

  0.02%
Russell Tax Exempt Bond Fund – Class C, E & S

  0.06%
Russell Commodity Strategies Fund - Class A, C, E & S

  0.01%
Russell Commodity Strategies Fund - Class R6

  0.02%
Russell Global Infrastructure Fund – Class A, C, E, R6 & S

  0.02%
Russell Global Real Estate Securities Fund – Class R6

  0.02%
Russell Multi-Strategy Alternative Fund – Class R6

  0.02%
Russell Multi-Strategy Income Fund – Class R6

  0.02%
Russell Strategic Call Overwriting Fund - Class R6

  0.02%
ORDER PLACEMENT DESIGNEES.
The Distributor or its affiliates have authorized certain Financial Intermediaries to accept on its behalf purchase and redemption orders for RIC Shares. Certain Financial Intermediaries are authorized, subject to approval of the Distributor, to designate other intermediaries to accept purchase and redemption orders on RIC’s behalf. With respect to those intermediaries, RIC will be deemed to have received a purchase or redemption order at the time such a Financial Intermediary or, if applicable, an authorized designee, accepts the order. The customer orders will be priced at the applicable Fund’s net asset value next computed after they are accepted by such a Financial Intermediary or an authorized designee, provided that Financial Intermediary or an authorized designee timely transmits the customer order to RIC.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
PricewaterhouseCoopers LLP (“PwC”) serves as the Independent Registered Public Accounting Firm of RIC. PwC is responsible for performing annual audits of the financial statements and financial highlights of the Funds in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and a review of federal tax returns. The mailing address of PwC is 1420 Fifth Avenue, Suite 2800, Seattle, WA 98101.
CODES OF ETHICS.
RIC, RIMCo, the Distributor and each money manager have each adopted a code of ethics which complies in all material respects with applicable law and which is intended to protect the interests of each Fund's shareholders. The codes of ethics are designed to prevent affiliated persons of RIC, RIMCo, the Distributor and the money managers from engaging in deceptive, manipulative, or fraudulent activities in connection with securities held or to be acquired by the Funds (which may also be held by persons subject to a code of ethics). There can be no assurance that the codes of ethics will be effective in preventing such activities. The codes of ethics generally permit investment personnel to trade securities for their own account, including securities that may be purchased or held by a Fund, subject to restrictions on personal securities trading specified in the applicable code of ethics. Each code of ethics has been filed with the SEC and may be viewed by the public.
Because each money manager is an entity not affiliated with RIC or RIMCo, RIMCo relies on each money manager to monitor the personal trading activities of the money manager’s personnel in accordance with that money manager’s code of ethics. Each money manager provides RIMCo with a quarterly certification of the money manager’s compliance with its code of ethics and a report of any significant violations of its code.
PLAN PURSUANT TO RULE 18f-3.
SEC Rule 18f-3 under the 1940 Act permits a registered open-end investment company to issue multiple classes of Shares in accordance with a written plan approved by the investment company’s board of trustees that is filed with the SEC. For purposes of this SAI, because the Funds offer multiple classes of Shares, the Funds will also be referred to as “Multiple Class Funds.” The key features of the Rule 18f-3 plan are as follows: Shares of each class of a Multiple Class Fund represent an equal pro rata interest in the underlying assets of that Fund, and generally have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, except that: (1) each class of Shares offered in connection with a Rule 12b-1 plan may bear certain fees under its respective Rule 12b-1 plan and may have exclusive voting rights on matters pertaining to that plan and any related agreements; (2) each class of Shares may contain a conversion feature; (3) each class of Shares may bear differing amounts of certain class expenses; (4) different policies may be established with respect to the payment of distributions on the classes of Shares of a Multiple Class Fund to equalize the net asset values of the classes or, in the absence of such policies, the net asset value per share of the different classes may differ at certain times; (5) each class of Shares of a Multiple Class Fund may have different exchange privileges from another class; (6) each class of Shares of a Multiple Class Fund may have a different class designation from another class of that Fund; and (7) each class of Shares offered in connection with a shareholder servicing plan would bear certain fees under its respective plan.
DISTRIBUTION PLANS.
Under the 1940 Act, the SEC has adopted Rule 12b-1, which regulates the circumstances under which mutual funds may, directly or indirectly, bear distribution expenses. Rule 12b-1 provides that mutual funds may pay for such expenses only pursuant to a plan adopted in accordance with Rule 12b-1. Each  Multiple Class Fund has adopted a distribution plan (the “Distribution Plan”) in accordance with the Rule.
Description of the Distribution Plan for Multiple Class Funds
In adopting the Distribution Plan for each Multiple Class Fund, a majority of the Trustees, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of RIC and who have no direct or indirect financial interest in the operation of any Distribution Plan or in any agreements entered into in connection with any Distribution Plan (the “Independent Trustees”), have concluded, in conformity with the requirements of the 1940 Act, that there is a reasonable likelihood that the Distribution Plan will benefit each respective Multiple Class Fund and its shareholders. In connection with the Trustees’ consideration of whether to adopt the Distribution Plan for each Multiple Class Fund, the Distributor, as the Multiple Class Funds’ principal underwriter, represented to the Trustees that the Distributor believed that the Distribution Plan was expected to result in increased sales and asset retention for those Multiple Class Funds by enabling those Multiple Class Funds to reach and retain more investors and Financial Intermediaries (such as brokers, banks, financial planners, investment advisers and other financial institutions), although it is impossible to know for certain, in the absence of a Distribution Plan or under an alternative distribution arrangement, the level of sales and asset retention that a particular Multiple Class Fund would have.
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For each Multiple Class Fund offering Class A or Class C Shares, the 12b-1 fees may be used to compensate (a) Selling Agents (as defined below) for sales support services provided, and related expenses incurred with respect to Class A and Class C Shares, by such Selling Agents, and (b) the Distributor for distribution services provided by it, and related expenses incurred, including payments by the Distributor to compensate Selling Agents for providing support services. The Distribution Plan is a compensation-type plan. As such, RIC makes no distribution payments to the Distributor with respect to Class A or Class C Shares except as described above. Therefore, RIC does not pay for unreimbursed expenses of the Distributor, including amounts expended by the Distributor in excess of amounts received by it from RIC, interest, carrying or other financing charges in connection with excess amounts expended, or the Distributor’s overhead expenses. However, the Distributor may be able to recover such amount or may earn a profit from future payments made by RIC under the Distribution Plan.
For each Multiple Class Fund offering Class A or Class C Shares, the Distribution Plan provides that each Multiple Class Fund may spend annually, directly or indirectly, up to 0.75% of the average daily net asset value of its Class A and Class C Shares for any activities or expenses primarily intended to result in the sale of Class A and Class C Shares of such Multiple Class Fund. Such payments by RIC will be calculated daily and paid as billed. Any amendment to increase materially the costs that Shares may bear for distribution pursuant to the Distribution Plan shall be effective upon a vote of the holders of the affected Class of the lesser of (a) more than fifty percent (50%) of the outstanding Shares of the affected Class of a Multiple Class Fund or (b) sixty-seven percent (67%) or more of the Shares of the affected Class of a Multiple Class Fund present at a shareholders’ meeting, if the holders of more than 50% of the outstanding Shares of the affected Class of such Multiple Class Fund are present or represented by proxy (a “1940 Act Vote”) and a vote of the Trustees, including a majority of the Independent Trustees. For the Multiple Class Funds, the Distribution Plan does not provide for those Multiple Class Funds to be charged for interest, carrying or any other financing charges on any distribution expenses carried forward to subsequent years. A quarterly report of the amounts expended under the Distribution Plan, and the purposes for which such expenditures are incurred, must be made to the Trustees for their review. To remain in effect, the Distribution Plan must be approved annually by a vote of the Trustees, including a majority of the Independent Trustees. Also, any material amendments must be approved by a vote of the Trustees, including a majority of the Independent Trustees. While the Distribution Plan is in effect, the selection and nomination of the Independent Trustees shall be committed to the discretion of such Independent Trustees. For each Multiple Class Fund, the Distribution Plan is terminable without penalty at any time by (a) a vote of a majority of the Independent Trustees, or (b) a vote of the holders of the lesser of (i) more than fifty percent (50%) of the outstanding Shares of the affected Class of a Multiple Class Fund or (ii) a 1940 Act Vote.
Selling Agent Agreements for Multiple Class Funds
Under the Distribution Plans, the Distributor may also enter into agreements (“Selling Agent Agreements”) with Financial Intermediaries to provide sales support services with respect to Multiple Class Fund Shares held by or for the customers of the Financial Intermediaries. Financial Intermediaries that have entered into Selling Agent Agreements are referred to in this SAI as “Selling Agents.”
Under the Distribution Plan, the following Multiple Class Funds’ Class C Shares accrued expenses in the following amounts, payable as compensation to the Selling Agents by the Distributor, for the fiscal years ended October 31, 2015, 2014 and 2013 (these amounts were for compensation to dealers):
  10/31/15   10/31/14   10/31/13
Russell U.S. Core Equity Fund $399,858   $413,264   $392,358
Russell U.S. Defensive Equity Fund 369,187   373,434   339,800
Russell U.S. Dynamic Equity Fund 85,179   82,526   44,804
Russell U.S. Strategic Equity Fund 156,630   104,744   50,920
Russell U.S. Large Cap Equity Fund 11,585   9,181   4,400
Russell U.S. Mid Cap Equity Fund 18,224   10,702   3,756
Russell U.S. Small Cap Equity Fund 237,231   250,246   211,842
Russell International Developed Markets Fund 266,562   310,400   311,572
Russell Global Equity Fund 108,002   109,443   99,452
Russell Emerging Markets Fund 184,071   216,713   226,410
Russell Tax-Managed U.S. Large Cap Fund 165,646   130,786   94,463
Russell Tax-Managed U.S. Mid & Small Cap Fund 90,146   88,514   68,311
Russell Tax-Managed International Equity Fund(1) 1,909   N/A   N/A
Russell Global Opportunistic Credit Fund 82,625   96,702   87,124
Russell Strategic Bond Fund 505,622   554,741   730,235
Russell Investment Grade Bond Fund 146,376   170,979   239,673
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  10/31/15   10/31/14   10/31/13
Russell Short Duration Bond Fund 506,702   735,991   1,017,850
Russell Tax Exempt High Yield Bond Fund(1) 739   N/A   N/A
Russell Tax Exempt Bond Fund 206,406   202,309   241,227
Russell Commodity Strategies Fund 47,821   78,124   95,801
Russell Global Infrastructure Fund 66,524   56,733   39,400
Russell Global Real Estate Securities Fund 301,276   311,602   341,209
Russell Multi-Strategy Alternative Fund 48,873   63,897   33,585
Russell Multi-Strategy Income Fund(2) 5,403   N/A   N/A
Russell Strategic Call Overwriting Fund(3) N/A   N/A   N/A
(1) Class C Shares of the Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Class C Shares of the Russell Multi-Strategy Income Fund commenced operation on May 4, 2015.
(3) No Class C Shares of the Russell Strategic Call Overwriting Fund were issued during the fiscal years presented above.
Under the Distribution Plan, the following Multiple Class Funds' Class A Shares accrued expenses in the following amounts, payable as compensation to the Selling Agents by the Distributor, for the fiscal years ended October 31, 2015, 2014 and 2013 (these amounts were for compensation to dealers):
Fund   10/31/15   10/31/14   10/31/13
Russell U.S. Core Equity Fund   $ 89,331   $ 86,194   $ 75,855
Russell U.S. Defensive Equity Fund   62,701   65,703   56,908
Russell U.S. Dynamic Equity Fund   5,683   3,862   1,004
Russell U.S. Strategic Equity Fund   15,639   10,341   3,756
Russell U.S. Large Cap Equity Fund   20,135   14,481   5,961
Russell U.S. Mid Cap Equity Fund   12,575   9,307   4,255
Russell U.S. Small Cap Equity Fund   63,355   61,015   43,429
Russell International Developed Markets Fund   75,714   74,321   63,088
Russell Global Equity Fund   33,749   31,247   25,609
Russell Emerging Markets Fund   49,669   55,255   52,807
Russell Tax-Managed U.S. Large Cap Fund   53,588   37,245   23,166
Russell Tax-Managed U.S. Mid & Small Cap Fund   21,016   12,143   6,012
Russell Tax-Managed International Equity Fund(1)   607   N/A   N/A
Russell Global Opportunistic Credit Fund   13,427   18,272   25,290
Russell Strategic Bond Fund   143,318   159,200   217,122
Russell Investment Grade Bond Fund   21,707   20,875   30,646
Russell Short Duration Bond Fund   72,659   78,042   97,924
Russell Tax Exempt High Yield Bond Fund(1)   1,199   N/A   N/A
Russell Tax Exempt Bond Fund   45,949   39,177   43,515
Russell Commodity Strategies Fund   22,764   45,024   50,611
Russell Global Infrastructure Fund   23,175   21,319   15,459
Russell Global Real Estate Securities Fund   75,623   71,880   74,388
Russell Multi-Strategy Alternative Fund   5,877   7,703   5,907
Russell Multi-Strategy Income Fund(2)   2,065   N/A   N/A
Russell Strategic Call Overwriting Fund(3)   N/A   N/A   N/A
(1) Class A Shares of the Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Class A Shares of the Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
(3) No Class A Shares of the Russell Strategic Call Overwriting Fund were issued during the fiscal years presented above.
SHAREHOLDER SERVICES PLAN.
A majority of the Trustees, including a majority of Independent Trustees, adopted and amended a Shareholder Services Plan for certain classes of Shares of the Funds. This plan is referred to as the “Service Plan.”
Under the Service Plan, RIC may compensate the Distributor or any investment advisers, insurance companies, banks, broker-dealers, financial planners or other financial institutions that are dealers of record or holders of record or that have a servicing relationship with the beneficial owners or record holders of Class C or Class E Shares, offering such Shares (“Servicing Agents”), for any activities or expenses primarily intended to assist, support or service their clients who
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beneficially own or are primarily intended to assist, support or service their clients who beneficially own or are record holders of Class C or Class E Shares. Such payments by RIC will be calculated daily and paid quarterly at a rate or rates set from time to time by the Trustees, provided that no rate set by the Trustees for Class C or Class E Shares may exceed, on an annual basis, 0.25% of the average daily net asset value of that Fund’s Shares.
Among other things, the Service Plan provides that (1) the Distributor shall provide to RIC’s officers and Trustees, and the Trustees shall review at least quarterly, a written report of the amounts expended by it pursuant to the Service Plan, or by Servicing Agents pursuant to Service Agreements, and the purposes for which such expenditures were made; (2) the Service Plan shall continue in effect for so long as its continuance is specifically approved at least annually, and any material amendment thereto is approved by a majority of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose; (3) while the Service Plan is in effect, the selection and nomination of the Independent Trustees shall be committed to the discretion of such Independent Trustees; and (4) the Service Plan is terminable, as to a Multiple Class Fund’s Shares, by a vote of a majority of the Independent Trustees.
Under the Service Plan, the following Multiple Class Funds’ Class C and Class E Shares accrued expenses in the following amounts payable to the Servicing Agents by the Distributor, for the fiscal year ended October 31, 2015:
Fund   Class C   Class E
Russell U.S. Core Equity Fund   $133,286   $ 24,691
Russell U.S. Defensive Equity Fund   123,062   20,812
Russell U.S. Dynamic Equity Fund   28,393   4,108
Russell U.S. Strategic Equity Fund   52,210   262,087
Russell U.S. Large Cap Equity Fund   3,862   N/A
Russell U.S. Mid Cap Equity Fund   6,075   N/A
Russell U.S. Small Cap Equity Fund   79,077   97,457
Russell International Developed Markets Fund   88,854   195,893
Russell Global Equity Fund   36,001   128,483
Russell Emerging Markets Fund   61,357   114,377
Russell Tax-Managed U.S. Large Cap Fund   55,215   122,517
Russell Tax-Managed U.S. Mid & Small Cap Fund   30,049   17,132
Russell Tax-Managed International Equity Fund(1)   636   9,086
Russell Global Opportunistic Credit Fund   27,542   83,942
Russell Strategic Bond Fund   168,541   342,286
Russell Investment Grade Bond Fund   48,792   74,967
Russell Short Duration Bond Fund   168,901   80,822
Russell Tax Exempt High Yield Bond Fund(1)   246   5,235
Russell Tax Exempt Bond Fund   68,802   157,361
Russell Commodity Strategies Fund   15,940   37,064
Russell Global Infrastructure Fund   22,175   62,337
Russell Global Real Estate Securities Fund   100,425   78,825
Russell Multi-Strategy Alternative Fund   16,291   37,823
Russell Multi-Strategy Income Fund(2)   1,801   2,575
Russell Strategic Call Overwriting Fund(3)   N/A   N/A
(1) Class C and Class E shares of the Russell Tax-Managed International Equity and Russell Tax Exempt High Yield Bond Funds commenced operations on June 2, 2015.
(2) Class C and Class E shares of the Russell Multi-Strategy Income Fund commenced operations on May 4, 2015.
(3) As of March 1, 2015, Class C and Class E shares of the Russell Strategic Call Overwriting Fund have not commenced operations.
FUND EXPENSES.
The Funds will pay all their expenses other than those expressly assumed by RIMCo and RFSC. The principal expenses of the Funds are the annual advisory fee and the annual administrative fee, payable to RIMCo and RFSC, respectively. The Funds' other expenses include: fees for independent accountants, legal, transfer agent, registrar, custodian, dividend disbursement, portfolio and shareholder recordkeeping services, and maintenance of tax records; state taxes; brokerage fees and commissions; insurance premiums; association membership dues; fees for filing of reports and registering Shares with regulatory bodies; and such extraordinary expenses as may arise, such as federal taxes and expenses incurred in connection
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with litigation proceedings and claims and the legal obligations of RIC to indemnify the Trustees, officers, employees, shareholders, distributors and agents with respect thereto. Whenever an expense can be attributed to a particular Fund or Class of Shares, the expense is charged to that Fund or Class of Shares. Common expenses are allocated among the RIC funds based primarily upon their relative net assets.
PURCHASE, EXCHANGE AND REDEMPTION OF FUND SHARES.
As described in the Prospectus, the Funds provide you with different classes of shares based upon your individual investment needs.
Each class of shares of a Fund represents an interest in the same portfolio of investments. Each class is identical in all respects except that each class bears its own class expenses, including distribution and service fees, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary for each class of shares. There are no conversion, preemptive or other subscription rights.
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. The expenses that may be borne by specific classes of shares may include (i) payments pursuant to the distribution plan or shareholder services plan for that specific class, (ii) transfer agency fees attributable to a specific class of shares, (iii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iv) SEC and state securities registration fees incurred by a specific class, (v) the expense of administrative personnel and services required to support the shareholders of a specific class of shares, (vi) litigation or other legal expenses relating to a specific class of shares, (vii) audit or accounting expenses relating to a specific class of shares, (viii) the expense of holding meetings solely for shareholders of a specific class and (ix) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
The following classes of shares are available for purchase. See the  applicable Prospectus for a discussion of factors to consider in selecting which class of shares to purchase and for applicable service/distribution fees.
Class A Shares of all Funds
Class A Shares are sold at offering price, which is the net asset value plus a front-end sales charge as follows. The Funds receive the entire net asset value of all Class A Shares that are sold. The Distributor receives the full applicable sales charge from which it pays the broker/dealer commission shown in the table below.
The fixed income Funds and other Funds have different front-end sales charges. The fixed income Funds include the Russell Strategic Bond, Russell Short Duration Bond, Russell Investment Grade Bond, Russell Global Opportunistic Credit, Russell Tax Exempt Bond and Russell Tax Exempt High Yield Bond Funds. The other Funds include the Russell U.S. Core Equity, Russell U.S. Defensive Equity, Russell U.S. Dynamic Equity, Russell U.S. Strategic Equity, Russell U.S. Large Cap Equity, Russell U.S. Mid Cap Equity, Russell U.S. Small Cap Equity, Russell International Developed Markets, Russell Global Equity, Russell Emerging Markets, Russell Global Real Estate Securities, Russell Tax-Managed U.S. Large Cap, Russell Tax-Managed U.S. Mid & Small Cap, Russell Tax-Managed International Equity, Russell Commodity Strategies, Russell Global Infrastructure, Russell Multi-Strategy Alternative, Russell Multi-Strategy Income and Russell Strategic Call Overwriting Funds.
Fixed Income Funds Front-End Sales Charge
Amount of
your investment
  Front-end sales
charge as a %
of offering price
  Front-end sales
charge as a % of
net amount invested
  Broker/Dealer
commission
as a % of
offering price
Less than $50,000

  3.75%   3.90%   3.00%
$50,000 but less than $100,000

  3.50%   3.63%   2.75%
$100,000 but less than $250,000

  2.50%   2.56%   2.00%
$250,000 but less than $500,000