Prospectus
Russell
Investment Company
Class
C1 Shares are not currently being offered to investors and are not available for
sale in any state.
The
Securities and Exchange Commission and the Commodity Futures Trading Commission
have not approved or disapproved of these securities or passed upon the adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense.
800-787-7354
Table
of Contents
| Risk/Return Summary | |
| U.S. Equity Funds | |
|
|
1 |
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|
6 |
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|
12 |
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|
17 |
| International and Global Equity Funds | |
|
|
23 |
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29 |
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|
35 |
| Tax-Managed Equity Funds | |
|
|
41 |
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|
47 |
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52 |
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|
58 |
| Fixed Income Funds | |
|
|
64 |
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|
71 |
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|
78 |
|
|
85 |
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|
91 |
| Tax-Exempt Fixed Income Funds | |
|
|
97 |
|
|
102 |
| Alternative Funds | |
|
|
108 |
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|
114 |
|
|
120 |
| Specialty Funds | |
|
|
126 |
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|
136 |
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|
145 |
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146 |
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149 |
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|
150 |
| U.S. Equity Funds | |
|
|
150 |
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|
152 |
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|
156 |
|
|
159 |
| International and Global Equity Funds | |
|
|
162 |
|
|
165 |
|
|
168 |
| Tax-Managed Equity Funds | |
|
|
171 |
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|
174 |
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177 |
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|
181 |
| Fixed Income Funds | |
|
|
184 |
|
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188 |
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|
192 |
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196 |
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|
199 |
| Tax-Exempt Fixed Income Funds | |
|
|
202 |
|
|
205 |
| Alternative Funds | |
|
|
206 |
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|
209 |
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|
212 |
| Specialty Funds | |
|
|
216 |
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220 |
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225 |
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272 |
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272 |
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272 |
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273 |
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275 |
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|
277 |
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|
278 |
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|
282 |
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|
282 |
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|
283 |
|
|
287 |
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|
288 |
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|
290 |
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|
291 |
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|
292 |
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|
296 |
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|
339 |
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|
345 |
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|
347 |
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|
353 |
Risk/Return
Summary
Equity Income
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth and current
income.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive 0.05% of its 0.55% advisory fee. This waiver may not be terminated during the relevant period except with Board approval. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares, 0.04% of
its transfer agency fees for Class S Shares and 0.02% of its transfer agency
fees for Class R6 Shares. These waivers may not be terminated during the
relevant period except with Board approval.
1
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
19 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund invests principally in common stocks of
dividend-paying large and medium capitalization U.S. companies. The Fund defines
large and medium capitalization stocks as stocks of those companies represented
by the Russell 1000® Index
or within the capitalization range of the Russell 1000® Index.
The Fund may also invest in equity securities economically tied to non-U.S.
countries.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with
RIM pursuant to a multi-style (e.g., value, market-oriented and defensive)
and multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund's money managers have non-discretionary asset management
assignments pursuant to which they provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. For Fund assets not allocated to money manager
strategies, RIM utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use strategies
based on indexes. RIM also manages the Fund's cash balances. The Fund usually,
but not always, pursues a strategy to be fully invested by exposing all or a
portion of its cash to the performance of appropriate markets by
purchasing equity securities and/or derivatives, which typically include index
futures contracts.
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. Equity securities in which the Fund may invest
include common stocks, preferred stocks, partnership interests and
equity-equivalent securities or instruments whose values are based on common
stocks, such as convertible securities, rights and warrants. The Fund’s
investments in convertible securities may include contingent convertible
securities. The Fund may invest in master limited partnerships (“MLPs”). The
Fund may also invest in securities of non-U.S. issuers by
purchasing American Depositary Receipts (“ADRs”) or Global Depositary
Receipts (“GDRs”). The Fund may
also invest
2
a
portion of its assets in securities of companies, known as real estate
investment trusts (“REITs”), that own and/or manage properties. Please refer to
the “Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Convertible Securities. Convertible securities are subject to both the credit and interest rate risks associated with fixed income securities and to the market risk associated with common stocks. Contingent convertible securities generally provide for mandatory conversion into common stock of the issuer under certain circumstances, and therefore are subject to the risk that the Fund could experience a reduced income rate and a worsened standing in the case of an issuer’s insolvency. |
| • | Non-U.S. Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Real Estate Investment Trusts (“REITs”). REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. |
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
3
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
4
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective October 1, 2019, RIM changed the Fund's primary benchmark
from the Russell 1000® Index
to the Russell 1000® Value
Index. The Equity Income Linked Benchmark represents the returns of the Russell
1000® Index
through September 30, 2019 and the returns of the Russell 1000® Value
Index thereafter. The
Equity Income Linked Benchmark provides a means to compare the Fund's
average annual returns to a secondary benchmark that takes into account
historical changes in the Fund's primary benchmark.
After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
5
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Russell 1000®
Value Index (reflects no deduction for fees, expenses or taxes)
|
||||||
|
Equity Income Linked Benchmark (reflects no
deduction for fees, expenses or taxes)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Barrow, Hanley, Mewhinney & Strauss, LLC | • Brandywine Global Investment Management, LLC |
Portfolio
Managers
Kevin
Divney and Megan Roach, each a Senior Portfolio Manager, have primary
responsibility for the management of the Fund. Mr. Divney has managed the Fund
since April 2017 and Ms. Roach has managed the Fund since March 2019.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Sustainable Equity
Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial
6
Intermediary-Specific
Sales Charge Variations, Waivers and Discounts, beginning on pages 278, 282 and
353, respectively, of the Prospectus, and in the Purchase, Exchange and
Redemption of Fund Shares section, beginning on page 34, of the Fund’s Statement
of Additional Information. Please see the Expense Notes section of the Fund’s
Prospectus for further information regarding expenses of the
Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class C, M, R6, S, Y | Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares and Dividend and Interest Expenses on
Short Sales of 0.17%)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee 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 0.66% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares, 0.04% of
its transfer agency fees for Class S Shares and 0.02% of its transfer agency
fees for Class R6 Shares. These waivers may not be terminated during the
relevant period except with Board approval.
7
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
131 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment
purposes in equity securities. The Fund invests principally in common
stocks of large and medium capitalization U.S. companies. The Fund defines
large and medium capitalization stocks as stocks of those companies represented
by the Russell 1000® Index
or within the capitalization range of the Russell 1000® Index.
The Fund pursues a “sustainable” investment strategy that takes into account
environmental, social and governance (“ESG”) considerations. In particular, the
Fund's investment strategy seeks to tilt the portfolio toward companies that are
expected to contribute to, and benefit from, a transition to a low carbon
emission producing economy and away from companies with the greatest exposure to
potential negative impacts of such a transition. The Fund's sustainability goals
are combined in RIM’s proprietary portfolio construction process, which
identifies the combination of securities that best achieves the sustainability
goals while minimizing transaction costs and deviation from the money managers’
security selection. The Fund may employ long-short equity strategies pursuant to
which it sells securities short.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant
to a multi-style (e.g., growth, value, market-oriented and/or defensive)
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund employs discretionary and non-discretionary money managers. The Fund’s
discretionary money managers select the individual portfolio instruments for the
assets assigned to them. The Fund’s non-discretionary money managers provide a
model portfolio to RIM representing their investment recommendations, based upon
which RIM purchases and sells securities for the Fund. RIM manages Fund assets
not allocated to money manager strategies and utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures. RIM may use strategies based on indexes. RIM also manages the
portion of Fund assets for which the Fund's non-discretionary money managers
provide model portfolios and the Fund's cash balances. The Fund usually, but not
always, pursues a strategy to
8
be
fully invested by exposing all or a portion of its cash to the
performance of appropriate markets by purchasing equity securities and/or
derivatives, which typically include index futures contracts. The Fund may
also invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. Please refer to the “Investment Objective and
Investment Strategies” section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Sustainable Investing Risk. Applying sustainability and ESG criteria to the investment process may exclude or reduce exposure to securities of certain issuers for sustainability reasons and, therefore, the Fund may forgo some market opportunities available to funds that do not use sustainability criteria. The Fund’s performance may at times be better or worse than the performance of funds that do not use sustainability criteria. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Short Sales Risk. A short sale will result in a loss if the price of the security sold short increases between the date of the short sale and the date on which the borrowed security must be returned. Short sales may give rise to a form of leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of portfolio securities. Short sales have the potential for unlimited loss. |
| • | Real Estate Investment Trusts (“REITs”). REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar |
9
| investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. | |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and may have a large percentage of its Shares owned by such funds. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
10
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective January 1, 2021, RIM changed the Fund's primary benchmark
from the Russell 1000®
Defensive Index to the Russell 1000® Index.
The Sustainable Equity Linked Benchmark represents the returns of the Russell
1000® Index
through August 14, 2012, the returns of the Russell 1000®
Defensive Index from August 15, 2012 through December 31, 2020 and the returns
of the Russell 1000® Index
thereafter. The
Sustainable Equity Linked Benchmark provides a means to compare the Fund's
average annual returns to a secondary benchmark that takes into account
historical changes in the Fund's primary benchmark.
After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Russell 1000®
Index (reflects no deduction for fees, expenses or taxes)
|
||||||
|
Sustainable Equity Linked Benchmark (reflects no
deduction for fees, expenses or taxes)
|
11
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Coho Partners, Ltd. | • Mar Vista Investment Partners, LLC |
| • Jacobs Levy Equity Management, Inc. | • Sustainable Growth Advisers, LP |
Portfolio
Managers
Megan
Roach, Senior Portfolio Manager, and Nick Haupt, Associate Portfolio Manager,
have primary responsibility for the management of the Fund. Ms. Roach has
managed the Fund since February 2017 and Mr. Haupt has managed the Fund since
March 2021.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
U.S. Strategic Equity
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
12
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent such direct Fund-level expenses exceed 0.56% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.12% of its transfer agency fees for Class M Shares and 0.02%
of its transfer agency fees for Class A, Class C, Class C1, Class R6 and Class S
Shares. These waivers may not be terminated during the relevant period except
with Board approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
38 % of the average value of its
portfolio.
13
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities economically tied to the U.S. The Fund invests principally
in common stocks of medium and large capitalization U.S. companies. The Fund
defines large and medium capitalization stocks as stocks of those companies
represented by the Russell 1000® Index
or within the capitalization range of the Russell 1000®
Index.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-style (e.g., growth, value, market-oriented, defensive
and/or dynamic) and multi-manager approach. RIM may change a Fund's asset
allocation at any time, including not allocating Fund assets to one or more
money manager strategies. The Fund employs discretionary and non-discretionary
money managers. The Fund’s discretionary money managers select the individual
portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use strategies
based on indexes. RIM also manages the portion of Fund assets for which the
Fund's non-discretionary money managers provide model portfolios and the Fund's
cash balances. The Fund usually, but not always, pursues a strategy to be fully
invested by exposing all or a portion of its cash to the performance
of appropriate markets by purchasing equity securities and/or derivatives, which
typically include index futures
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may also invest in securities of
non-U.S. issuers by purchasing American Depositary Receipts (“ADRs”) or
Global Depositary Receipts (“GDRs”). Please refer to the “Investment Objective
and Investment Strategies” section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
14
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
15
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
16
for the periods ended December 31, 2021 |
1 Year | 5 Years | Since Inception | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Russell 1000®
Index (reflects no deduction for fees, expenses or taxes)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Brandywine Global Investment Management, LLC | • Jackson Square Partners, LLC |
| • HS Management Partners, LLC | • Jacobs Levy Equity Management, Inc. |
Although
all of the Fund’s money managers are listed above, RIM may not have allocated
assets to the strategies employed by one or more of these money managers.
Portfolio
Managers
Kevin
Divney and Megan Roach, each a Senior Portfolio Manager, have primary
responsibility for the management of the Fund. Mr. Divney has managed the Fund
since April 2017 and Ms. Roach has managed the Fund since March 2019.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
U.S. Small Cap Equity
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers.
17
More
information about these and other discounts is available from your financial
professional and in the Front-End Sales Charges and More About Deferred Sales
Charges sections and Appendix A: Additional Information About Financial
Intermediary-Specific Sales Charge Variations, Waivers and Discounts, beginning
on pages 278, 282 and 353, respectively, of the Prospectus, and in the Purchase,
Exchange and Redemption of Fund Shares section, beginning on page 34, of the
Fund’s Statement of Additional Information. Please see the Expense Notes section
of the Fund’s Prospectus for further information regarding expenses of the
Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares and Dividend and Interest Expenses on
Short Sales of 0.10%)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
||||||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until
|
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
18
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
110 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment
purposes in small capitalization equity securities economically tied to the
U.S. The Fund invests principally in common stocks of small capitalization
U.S. companies, some of which are also considered micro capitalization U.S.
companies. The Fund defines small capitalization stocks as stocks of those
companies represented by the Russell 2000® Index
or within the capitalization range of the Russell 2000® Index.
The Fund may employ long-short equity strategies pursuant to which it sells
securities short.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant
to a multi-style (e.g., growth, value, market-oriented, defensive and/or
dynamic) and multi-manager approach. RIM may change a Fund's asset allocation at
any time, including not allocating Fund assets to one or more money manager
strategies. The Fund employs discretionary and non-discretionary money managers.
The Fund's discretionary money managers select the individual portfolio
instruments for the assets assigned to them. The Fund's non-discretionary money
managers provide a model portfolio to RIM representing their investment
recommendations, based upon which RIM purchases and sells securities for the
Fund. RIM manages Fund assets not allocated to money manager strategies and
utilizes quantitative and/or rules-based processes and qualitative analysis to
assess Fund characteristics and invest in securities and instruments which
provide the desired exposures. RIM may use strategies based on
indexes. RIM also manages the portion of Fund assets for which the Fund's
non-discretionary money managers provide model portfolios and the Fund's cash
balances. The Fund usually, but not always, pursues a strategy to be fully
invested by exposing all or a portion of its cash to the performance of
appropriate markets by purchasing equity securities and/or derivatives, which
typically include index futures
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may invest a portion of its assets in
securities of companies, known as real estate investment trusts (“REITs”), that
own and/or manage properties. Please refer to the “Investment Objective and
Investment Strategies” section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and micro capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and micro capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Micro capitalization company stocks are also more likely to suffer from significantly diminished market liquidity. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative |
19
| instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. | |
| • | Real Estate Investment Trusts (“REITs”). REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. |
| • | Short Sales Risk. A short sale will result in a loss if the price of the security sold short increases between the date of the short sale and the date on which the borrowed security must be returned. Short sales may give rise to a form of leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of portfolio securities. Short sales have the potential for unlimited loss. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific |
20
| portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. | |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
21
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Russell 2000®
Index (reflects no deduction for fees, expenses or taxes)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Ancora Advisors, LLC | • DePrince, Race & Zollo, Inc. |
| • BAMCO, Inc. | • Jacobs Levy Equity Management, Inc. |
| • Boston Partners Global Investors, Inc. | • Penn Capital Management Company, LLC |
| • Calamos Advisors LLC | • Ranger Investment Management, L.P. |
| • Copeland Capital Management, LLC |
Although
all of the Fund’s money managers are listed above, RIM may not have allocated
assets to the strategies employed by one or more of these money managers.
Portfolio
Manager
Megan
Roach, Senior Portfolio Manager, has primary responsibility for the management
of the Fund. Ms. Roach has managed the Fund since March 2015.
22
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
International Developed Markets
Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level 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 do not include 12b-1 fees, shareholder services fees, transfer agency fees, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
23
| Until
| |
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
34 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in companies that are located in countries (other than the U.S.) with developed
markets or that are economically tied to such countries. The Fund invests
principally in equity securities, including common stocks and preferred stocks,
issued by companies incorporated in developed markets outside the U.S. and in
depositary receipts. The Fund’s securities are denominated principally in
foreign currencies and are typically held outside the U.S. The Fund may invest a
portion of its assets in equity securities of companies that are economically
tied to emerging market countries. The Fund considers the following countries to
have developed markets: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. As a general rule, the
Fund considers emerging market countries to include every other country. The
Fund invests principally in large and medium capitalization companies, but may
also invest in small capitalization companies. The Fund defines large and medium
capitalization stocks as stocks of those companies represented by the MSCI World
ex USA Index or within the capitalization range of the MSCI World ex USA
Index.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant
to a multi-style (e.g., growth, value, market-oriented and defensive) and
multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund's money managers have non-discretionary asset
management
24
assignments
pursuant to which they provide a model portfolio to RIM representing their
investment recommendations, based upon which RIM purchases and sells securities
for the Fund. For Fund assets not allocated to money manager
strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in
securities and instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash balances. The
Fund usually, but not always, pursues a strategy to be fully invested by
exposing all or a portion of its cash to the performance of appropriate
markets by purchasing equity securities and/or derivatives, which typically
include index futures contracts and forward currency contracts. The Fund may use
derivatives, including stock options, country index futures and swaps or
currency forwards, to (1) manage country and currency exposure as a substitute
for holding securities directly or (2) facilitate the implementation of its
investment strategy. The Fund may use derivatives to take both long and short
positions.
The
Fund may at times seek to protect a portion of its investments against adverse
currency exchange rate changes by purchasing forward currency contracts and may
engage in currency transactions for speculative purposes. Please refer to the
“Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
25
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic |
26
| basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective January 1, 2018, RIM changed the Fund’s primary benchmark
from the Russell Developed ex-US Large Cap Index (net of tax on dividends from
foreign holdings) to the MSCI World ex USA Index (net of tax on dividends from
foreign holdings). The International Developed Markets
Linked Benchmark represents the returns of the Russell Developed ex-US Large Cap
Index (net of tax on dividends from foreign holdings) from January 1, 2012
through December 31, 2017, and the returns of the MSCI World ex USA Index
(net of tax on dividends from foreign holdings) thereafter.
The International Developed Markets Linked Benchmark provides a means to compare
the Fund’s average annual returns to a secondary benchmark that takes into
account historical changes in the Fund’s primary benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
27
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
MSCI World ex USA Index (net of tax on dividends
from foreign holdings) (reflects no deduction for fees or expenses)
|
||||||
|
International Developed Markets Linked Benchmark
(net of tax on dividends from foreign holdings) (reflects no deduction for
fees or expenses)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Intermede Investment Partners Limited and Intermede Global Partners Inc. | • Wellington Management Company LLP |
| • Pzena Investment Management LLC |
Portfolio
Manager
Jon
Eggins, Senior Director, Head of Global Equity, has primary responsibility for
the management of the Fund. Mr. Eggins has managed the Fund since February
2015.
28
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Global Equity
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.79% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
29
| Until
| |
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
49 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund invests principally in equity securities,
including common stocks and preferred stocks, of companies economically tied to
a number of countries around the world, including the U.S., and in depositary
receipts, in a globally diversified manner. A portion of the Fund’s securities
are denominated in foreign currencies and are typically held outside the U.S.
The Fund may invest a portion of its assets in equity securities of companies
that are economically tied to emerging market countries. The Fund considers
emerging market countries to include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and
the United States. The Fund invests principally in large and medium
capitalization companies, but may also invest in small capitalization companies.
The Fund defines large and medium capitalization stocks as stocks of those
companies represented by the MSCI World Index or within the capitalization range
of the MSCI World Index.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-style (e.g., growth, value, market-oriented and defensive)
and multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund’s money managers have non-discretionary asset
management
30
assignments
pursuant to which they provide a model portfolio to RIM representing their
investment recommendations, based upon which RIM purchases and sells securities
for the Fund. For Fund assets not allocated to money manager
strategies, RIM utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use strategies based on
indexes. RIM also manages the Fund’s cash balances. The Fund usually, but not
always, pursues a strategy to be fully invested by exposing all or a portion
of its cash to the performance of appropriate markets by purchasing equity
securities and/or derivatives, which typically include index futures contracts
and forward currency contracts. The Fund may use derivatives, including stock
options, country index futures and swaps or currency forwards, to (1) manage
country and currency exposure as a substitute for holding securities directly or
(2) facilitate the implementation of its investment strategy. The Fund may use
derivatives to take both long and short
positions.
The
Fund may at times seek to protect a portion of its investments against adverse
currency exchange rate changes by purchasing forward currency contracts and may
engage in currency transactions for speculative purposes. Please refer to the
“Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
31
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic |
32
| basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective January 1, 2018, RIM changed the Fund’s primary benchmark
from the Russell Developed Large Cap Index (net of tax on dividends from foreign
holdings) to the MSCI World Index (net of tax on dividends from foreign
holdings). The Global Equity Linked Benchmark represents the returns of the
Russell Developed Large Cap Index (net of tax on dividends from foreign
holdings) from January 1, 2012 through December 31, 2017, and the returns of the
MSCI World Index (net of tax on dividends from foreign
holdings) thereafter. The Global Equity Linked Benchmark
provides a means to compare the Fund’s average annual returns to a secondary
benchmark that takes into account historical changes in the Fund’s primary
benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
33
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
MSCI World Index (net of tax on dividends from
foreign holdings) (reflects no deduction for fees or expenses)
|
||||||
|
Global Equity Linked Benchmark (net of tax on
dividends from foreign holdings) (reflects no deduction for fees or
expenses)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Intermede Investment Partners Limited and Intermede Global Partners Inc. | • Wellington Management Company LLP |
| • Sanders Capital, LLC |
Portfolio
Managers
Jon
Eggins, Senior Director, Head of Global Equity and Jordan McCall, Portfolio
Manager, have primary responsibility for the management of the Fund. Mr. Eggins
has managed the Fund since February 2015 and Mr. McCall has managed the Fund
since November 2021.
34
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Emerging Markets
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has entered into a contractual fee waiver agreement that results in an effective advisory fee not to exceed 0.831%. This waiver may not be terminated during the relevant period except with Board approval. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.12% of its transfer agency fees for Class M Shares and 0.02%
of its transfer agency fees for Class A, Class C, Class C1, Class R6 and Class S
Shares. These waivers may not be terminated during the relevant period except
with Board approval.
35
“Less
Fee Waivers and Expense Reimbursements” and “Net Annual Fund Operating Expenses”
have been restated to adjust for waivers that were implemented during the fiscal
period ended October 31, 2021 but did not reflect a full year of
waiver.
“Other
Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating
Expenses” have been restated to reflect expenses expected to be incurred by the
Fund.
“Other
Expenses” for Class C1 Shares are based on estimated amounts for the current
fiscal year as this Share Class did not have any assets during the most recent
fiscal year.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
52 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in emerging market companies. The Fund principally invests in equity securities,
including common stocks and preferred stocks, of companies economically tied to
emerging market countries and in depositary receipts. The Fund considers
emerging market countries to include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and
the United States. The Fund invests in large, medium and small capitalization
companies. The Fund’s securities are denominated principally in foreign
currencies and are typically held outside the U.S. A portion of the Fund’s net
assets may be “illiquid” investments.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-style (e.g., growth, value and market-oriented) and
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers have non-discretionary asset management assignments
pursuant to which they provide a model portfolio to RIM representing their
investment recommendations, based upon which RIM purchases and sells securities
for the Fund. For Fund assets not allocated to money manager strategies, RIM
utilizes quantitative and/or rules-based processes and qualitative analysis to
assess Fund characteristics and invest in securities and instruments which
provide the desired exposures. RIM may use strategies based on
indexes. RIM also
36
manages
the Fund's cash balances. The Fund usually, but not always, pursues a strategy
to be fully invested by exposing all or a portion of its cash to the
performance of appropriate markets by purchasing equity securities and/or
derivatives, which typically include index futures contracts and forward
currency contracts. The Fund may use derivatives, including stock options,
country index futures and swaps or currency forwards, to (1) manage country and
currency exposure as a substitute for holding securities directly or (2)
facilitate the implementation of its investment strategy. The Fund may use
derivatives to take both long and short positions. The Fund may invest in
synthetic foreign equity securities, which may be referred to as international
warrants, local access products, participation notes or low exercise price
warrants. International warrants are a form of derivative security issued by
foreign banks that either give holders the right to buy or sell an underlying
security or securities for a particular price or give holders the right to
receive cash payment relating to the value of the underlying security or
securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
The
Fund may at times seek to protect a portion of its investments against adverse
currency exchange rate changes by purchasing forward currency contracts and may
engage in currency transactions for speculative purposes. The Fund may invest in
other investment companies and pooled investment vehicles. Please refer to the
“Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Emerging Markets Equity Securities. Investing in emerging market equity securities can pose some risks different from, and greater than, risks of investing in U.S. or developed markets equity securities. These risks include: a risk of loss due to political instability; exposure to economic structures that are generally less diverse and mature, and to political systems which may have less stability, than those of more developed countries; smaller market capitalization of securities markets, which may suffer periods of relative illiquidity (including as a result of a significant reduction in the number of market participants or transactions); significant price volatility; restrictions on foreign investment; possible difficulties in the repatriation of investment income and capital including as a result of the closure of securities markets in an emerging market country; and, generally, less stringent investor protection standards as compared with investments in U.S. or other developed market equity securities. In addition, emerging market countries may be subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping and therefore, all material information may not be available or reliable. U.S. regulatory authorities’ ability to enforce legal and/or regulatory obligations against individuals or entities, and shareholders’ ability to bring derivative litigation or otherwise enforce their legal rights, in emerging market countries may be limited. |
| • | Non-U.S. Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Synthetic Foreign Equity Securities. Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In addition, the exercise or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time. |
37
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Securities of Other Investment Companies. Investments in other investment companies expose shareholders to the expenses and risks associated with the investments of the Fund as well as to the expenses and risks of the underlying investment companies. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar |
38
| investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. | |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
39
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective January 1, 2018, RIM changed the Fund’s primary benchmark
from the Russell Emerging Markets Index (net of tax on dividends from foreign
holdings) to the MSCI Emerging Markets Index (net of tax on dividends from
foreign holdings). The Emerging Markets Linked Benchmark represents the returns
of the Russell Emerging Markets Index (net of tax on dividends from foreign
holdings) from January 1, 2012 through December 31, 2017, and
the returns of the MSCI Emerging Markets Index (net of tax on dividends
from foreign holdings) thereafter. The Emerging Markets Linked Benchmark
provides a means to compare the Fund’s average annual returns to a secondary
benchmark that takes into account historical changes in the Fund’s primary
benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will vary.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
40
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
( |
|||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
( |
|||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
MSCI Emerging Markets Index (net of tax on
dividends from foreign holdings) (reflects no deduction for fees or
expenses)
|
( |
|||||
|
Emerging Markets Linked Benchmark (net of tax on
dividends from foreign holdings) (reflects no deduction for fees or
expenses)
|
( |
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • AllianceBernstein L.P. | • Neuberger Berman Investment Advisors LLC |
| • Axiom Investors LLC | • Numeric Investors LLC |
| • Consilium Investment Management, LLC | • Oaktree Fund Advisors, LLC |
Portfolio
Managers
Kathrine
Husvaeg, Senior Portfolio Manager, and Soeren Soerensen, Portfolio Manager, have
primary responsibility for the management of the Fund. Ms. Husvaeg has managed
the Fund since April 2018 and Mr. Soerensen has managed the Fund since June
2019.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Tax-Managed U.S. Large Cap
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax
basis.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for
sales charge discounts if you and your
family
41
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.72% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares. This
waiver may not be terminated during the relevant period except with Board
approval.
“Other
Expenses” for Class C1 Shares are based on estimated amounts for the current
fiscal year as this Share Class did not have any assets during the most recent
fiscal year.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
42
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
22 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in large capitalization companies economically tied to the U.S. The Fund invests
principally in common stocks of large capitalization U.S. companies. The Fund
defines large capitalization stocks as stocks of those companies represented by
the S&P 500® Index
or within the capitalization range of the S&P 500® Index.
The Fund seeks to realize capital growth while considering shareholder tax
consequences arising from its portfolio management activities. The Fund
typically buys stocks with the intention of holding them long enough to qualify
for long-term capital gains tax treatment. Stocks may, however, be sold at a
point where short-term capital gains are realized if the Fund believes it is
appropriate in that case to do so or as a result of redemption
activity.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-style (e.g., growth, value and market-oriented) and multi-manager
approach. RIM may change a Fund's asset allocation at any time. The Fund's money
managers have non-discretionary asset management assignments pursuant to which
they provide a model portfolio to RIM representing their investment
recommendations, based upon which RIM purchases and sells securities for the
Fund. For Fund assets not allocated to money manager strategies, RIM utilizes
quantitative and/or rules-based processes and qualitative analysis to assess
Fund characteristics and invest in securities and instruments which provide the
desired exposures. RIM may use strategies based on indexes. RIM also
manages the Fund's cash balances. The Fund usually, but not always, pursues a
strategy to be fully invested by exposing all or a portion of its
cash to the performance of appropriate markets by purchasing equity
securities and/or derivatives, which typically include index futures
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may also invest in securities of
non-U.S. issuers by purchasing American Depositary Receipts (“ADRs”) or
Global Depositary Receipts (“GDRs”). Please refer to the “Investment Objective
and Investment Strategies” section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Tax-Sensitive Management. Tax-managed strategies may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce the instance of wash sales. To the extent that wash sales occur from time to time, the ability of the Fund to achieve its investment objective may be impacted. Unexpected large redemptions could require the Fund to sell portfolio securities resulting in its realization of net capital gains. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit |
43
| risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. | |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic |
44
| basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement
accounts. If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
45
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
S&P 500®
Index (reflects no deduction for fees, expenses or taxes)
|
S&
P®
is a registered trademark of Standard & Poor's Financial Services
LLC.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Barrow, Hanley, Mewhinney & Strauss, LLC | • Sustainable Growth Advisers, LP |
| • J.P. Morgan Investment Management Inc. |
Portfolio
Managers
Kevin
Divney and Megan Roach, each a Senior Portfolio Manager, have primary
responsibility for the management of the Fund. Mr. Divney has managed the Fund
since April 2017 and Ms. Roach has managed the Fund since March 2019.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
46
Tax-Managed U.S. Mid & Small Cap
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax
basis.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of it advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 1.05% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.15% of its transfer agency fees for Class M Shares, 0.05% of
its transfer agency fees for Class C, Class C1 and Class S Shares and 0.02% of
its transfer agency fees for Class A Shares. These waivers may not be terminated
during the relevant period except with Board approval.
47
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
35 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in medium and small capitalization companies economically tied to the
U.S. The Fund invests principally in common stocks of medium and small
capitalization U.S. companies. The Fund defines medium and small capitalization
stocks as stocks of those companies represented by the Russell 2500™ Index or
within the capitalization range of the Russell 2500™ Index. The Fund seeks to
realize capital growth while considering shareholder tax consequences arising
from its portfolio management activities. The Fund typically buys stocks with
the intention of holding them long enough to qualify for long-term capital gains
tax treatment. Stocks may, however, be sold at a point where short-term capital
gains are realized if the Fund believes it is most appropriate in that case
to do so or as a result of redemption
activity.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The
Fund is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-style (e.g., growth, value, market-oriented, defensive
and/or dynamic) and multi-manager approach. RIM may change a Fund's asset
allocation at any time. The Fund's money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. For Fund assets not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based
processes and qualitative analysis to assess Fund characteristics and invest in
securities and instruments which provide the desired exposures. RIM may
use strategies based on indexes. RIM also manages the Fund's cash balances. The
Fund usually, but not always, pursues a strategy to be fully invested by
exposing all or a portion of its cash to the performance of
appropriate markets by purchasing equity securities and/or derivatives, which
typically include index futures contracts.
48
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may also invest a portion of its
assets in securities of companies, known as real estate investment trusts
(“REITs”), that own and/or manage properties. Please refer to the “Investment
Objective and Investment Strategies” section in the Fund's Prospectus for
further information.
Principal
Risks of Investing in the Fund
| • | Tax-Sensitive Management. Tax-managed strategies may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce the instance of wash sales. To the extent that wash sales occur from time to time, the ability of the Fund to achieve its investment objective may be impacted. Unexpected large redemptions could require the Fund to sell portfolio securities resulting in its realization of net capital gains. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Real Estate Investment Trusts (“REITs”). REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
49
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
50
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Russell 2500TM
Index (reflects no deduction for fees, expenses or taxes)
|
Frank
Russell Company is the source and owner of the trademarks, service marks and
copyrights related to the Russell Indexes. Russell® is a
trademark of Frank Russell Company.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
51
| • Ancora Advisors, LLC | • DePrince, Race & Zollo, Inc |
| • BAMCO, Inc | • Polen Capital Management, LLC |
| • Cardinal Capital Management LLC | • Summit Creek Advisors, LLC |
| • Copeland Capital Management LLC | |
Portfolio
Manager
Megan
Roach, Senior Portfolio Manager, has primary responsibility for the management
of the Fund. Ms. Roach has managed the Fund since March 2015.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Tax-Managed International Equity
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long-term capital growth on an after-tax
basis.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
52
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of it advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.84% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares. This
waiver may not be terminated during the relevant period except with Board
approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
48 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund invests principally in equity securities,
including common stocks and preferred stocks, issued by companies economically
tied to non-U.S. countries, including emerging market countries, and in
depositary receipts. The Fund’s securities are denominated principally in
foreign
53
currencies
and are typically held outside the U.S. The Fund’s investments span most of the
developed nations of the world to maintain a high degree of diversification
among countries and currencies. Under normal market conditions, the Fund will
invest at least 40%, and may invest up to 100%, of its assets in equity
securities economically tied to non-U.S. countries. The Fund may also invest in
equity securities of U.S. companies. The Fund considers the following countries
to have developed markets: Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg,
the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. As a general rule, the
Fund considers emerging market countries to include every other country. The
Fund invests principally in large and medium capitalization companies, but may
also invest in small capitalization companies. The Fund defines large and medium
capitalization stocks as stocks of those companies represented by the MSCI ACWI
ex USA Index or within the capitalization range of the MSCI ACWI ex USA Index.
The Fund seeks to realize capital growth while considering shareholder tax
consequences arising from the Fund’s portfolio management activities. The Fund
typically buys stocks with the intention of holding them long enough to qualify
for long-term capital gains tax treatment. Stocks may, however, be sold at a
point where short-term capital gains are realized if the Fund believes it
is most appropriate in that case to do so or as a result of redemption
activity.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-style (e.g., growth, value, market-oriented, defensive and
dynamic) and multi-manager approach. RIM may change a Fund's asset allocation at
any time. The Fund's money managers have non-discretionary asset management
assignments pursuant to which they provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. For Fund assets not allocated to money manager
strategies, RIM utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use strategies
based on indexes. RIM also manages the Fund's cash balances. The Fund usually,
but not always, pursues a strategy to be fully invested by exposing all or a
portion of its cash to the performance of appropriate markets by purchasing
equity securities and/or derivatives, which typically include index futures
contracts and forward currency
contracts.
The
Fund may use derivatives, including stock options, country index futures and
swaps or currency forwards, to (1) manage country and currency exposure as a
substitute for holding securities directly or (2) facilitate the implementation
of its investment strategy. The Fund may use derivatives to take both long and
short positions. The Fund may at times seek to protect a portion of its
investments against adverse currency exchange rate changes by purchasing forward
currency contracts and may engage in currency transactions for speculative
purposes. Please refer to the “Investment Objective and Investment Strategies”
section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Tax-Sensitive Management. Tax-managed strategies may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce the instance of wash sales. To the extent that wash sales occur from time to time, the ability of the Fund to achieve its investment objective may be impacted. Unexpected large redemptions could require the Fund to sell portfolio securities resulting in its realization of net capital gains. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult |
54
| to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. | |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Financial Services Sector Risk. The Fund may be susceptible to adverse economic or regulatory occurrences affecting the financial services sector, including with respect to U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities. These developments may affect the value of the Fund’s investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to factors such as interest rate, fiscal, regulatory and monetary policy changes. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
55
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
56
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective January 1, 2018, RIM changed the Fund’s primary benchmark
from the Russell Global ex-US Large Cap Index (net of tax on dividends from
foreign holdings) to the MSCI ACWI ex USA Index (net of tax on dividends from
foreign holdings). The Tax-Managed International Equity Linked Benchmark
represents the returns of the Russell Global ex-US Large Cap Index (net of
tax on dividends from foreign holdings) from January 1, 2016 through December
31, 2017 and the returns of the MSCI ACWI ex-USA Index (net of tax on
dividends from foreign holdings) thereafter. The Tax-Managed International Equity
Linked Benchmark provides a means to compare the Fund’s average annual returns
to a secondary benchmark that takes into account historical changes in the
Fund’s primary benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation
and may differ from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund
to its shareholders thereby increasing total returns after taxes on
distributions and total returns after taxes on distributions and sale of Fund
Shares. If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | Since Inception | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
MSCI ACWI ex USA Index (net of tax on dividends
from foreign holdings) (reflects no deduction for fees or expenses)
|
||||||
|
Tax-Managed International Equity Linked Benchmark
(net of tax on dividends from foreign holdings) (reflects no deduction for
fees or expenses)
|
57
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • AllianceBernstein L.P. | • RWC Asset Advisors (US) LLC |
| • Intermede Investment Partners Limited and Intermede Global Partners Inc. | • Wellington Management Company LLP |
| • Pzena Investment Management LLC |
Portfolio
Managers
Jon
Eggins, Senior Director, Head of Global Equity and Jordan McCall, Portfolio
Manager, have primary responsibility for the management of the Fund. Mr. Eggins
has managed the Fund since the Fund’s inception and Mr. McCall has managed the
Fund since November 2021.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Tax-Managed Real Assets
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax
basis.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
58
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that other direct Fund-level expenses exceed 0.88% 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, infrequent and/or unusual expenses, or the expenses of the other investment companies in with the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares. This
waiver may not be terminated during the relevant period except with Board
approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
40 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of its net assets plus borrowings for investment purposes in
investments related to real assets and real asset companies. Real assets are
broadly defined by the Fund and are considered to include any assets that have
physical properties, such as natural resources, real estate, infrastructure and
commodities. In an effort to provide equity-like returns over a market cycle
while mitigating
59
downside
risk relative to equities, Russell Investment Management, LLC (“RIM”) allocates
the Fund’s assets globally across the real assets group of industries, focusing
on real estate, infrastructure and natural resources. RIM intends to shift the
Fund’s assets within the real assets group of industries based on RIM’s outlook
on the business and economic cycle, relative market valuations and market
sentiment. The Fund seeks to realize capital growth while considering
shareholder tax consequences arising from its portfolio management activities.
The Fund typically buys stocks with the intention of holding them long enough to
qualify for long-term capital gains tax treatment. Stocks may, however, be sold
at a point where short-term capital gains are realized if the Fund believes it
is appropriate in that case to do so or as a result of redemption
activity.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a multi-asset, multi-manager
approach. RIM may change a Fund's asset allocation at any time. The Fund's money
managers have non-discretionary asset management assignments pursuant to
which they provide a model portfolio to RIM representing their investment
recommendations, based upon which RIM purchases and sells securities for the
Fund. For Fund assets not allocated to money manager strategies, RIM utilizes
quantitative and/or rules-based processes and qualitative analysis to assess
Fund characteristics and invest in securities and instruments which provide the
desired exposures. RIM may use strategies based on indexes. RIM also
manages the Fund's cash balances. The Fund usually, but not always, pursues a
strategy to be fully invested by exposing all or a portion of its cash to
the performance of certain markets by purchasing equity securities and/or
derivatives, which typically include index futures contracts and
swaps.
The
Fund may invest in equity securities issued by U.S. and non-U.S. (i) real estate
companies, including real estate investment trusts (“REITs”) and similar
REIT-like entities; (ii) infrastructure companies, which are companies that are
engaged in the infrastructure business; and (iii) natural resources and natural
resources-related companies. The Fund will concentrate its investments in equity
securities of companies in the real assets group of industries. The Fund may
also invest in securities of non-U.S. issuers by purchasing American Depositary
Receipts (“ADRs”) or Global Depositary Receipts (“GDRs”). Infrastructure
companies also include energy-related companies organized as master limited
partnerships (“MLPs”) and their
affiliates.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may enter into spot and forward currency
contracts to facilitate settlement of securities
transactions.
Please
refer to the “Investment Objective and Investment Strategies” section in the
Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Tax-Sensitive Management. Tax-managed strategies may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce the instance of wash sales. To the extent that wash sales occur from time to time, the ability of the Fund to achieve its investment objective may be impacted. Unexpected large redemptions could require the Fund to sell portfolio securities resulting in its realization of net capital gains. |
| • | Real Estate Securities. Just as real estate values go up and down, the value of the securities of real estate companies also fluctuates. Real estate securities, including real estate investment trusts (“REITs”), may be affected by changes in the value of the underlying properties owned by the companies and by the quality of tenants’ credit. |
| • | Infrastructure Companies. Infrastructure companies are subject to the risk that: the potential for realized revenue volumes is significantly lower than projected and/or cost overruns; the nature of the concession fundamentally changes during the life of the project (e.g., the state sponsor alters the terms); macroeconomic factors such as low GDP growth or high nominal interest rates raise the average cost of funding; government regulation may affect rates charged to customers; government budgetary constraints impact projects; special tariffs are imposed; and changes in tax laws, regulatory policies or accounting standards could be unfavorable. Other risks include environmental damage due to a company's operations or an accident, changes in market sentiment towards infrastructure and terrorist acts. |
60
| • | Natural Resources Risk. The Fund’s investments in natural resources companies involve risks. The market value of natural resources related securities may be affected by numerous factors, including events occurring in nature, inflationary pressures and international politics. The securities of natural resources companies may experience more price volatility than securities of companies in other industries. Rising interest rates and general economic conditions may also affect the demand for natural resources. |
| • | Industry Concentration Risk. By concentrating in certain industries, the Fund carries much greater risk of adverse developments in those industries than a fund that invests in a wide variety of industries. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or |
61
| settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. | |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is expected to be used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or |
62
| financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. The Tax-Managed Real Assets Blended Benchmark consists of 40% FTSE
NAREIT Equity REIT Index, 30% S&P Global Infrastructure Index and 30%
S&P Global Natural Resources Index. The Tax-Managed Real Assets Blended
Benchmark provides a means to compare the Fund's average annual returns to a
secondary benchmark that is more representative of the investment strategies
pursued by the Fund. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
63
for the periods ended December 31, 2021 |
1 Year | Since Inception | ||
|
Return Before Taxes, Class A
|
||||
|
Return Before Taxes, Class C
|
||||
|
Return Before Taxes, Class C1
|
||||
|
Return Before Taxes, Class M
|
||||
|
Return Before Taxes, Class S
|
||||
|
Return After Taxes on Distributions, Class
S
|
||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||
|
MSCI World Index (net of tax on dividends from
foreign holdings) (reflects no deduction for fees or expenses)
|
||||
|
Tax-Managed Real Assets Blended Benchmark
(reflects no deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • First Sentier Investors (Australia) IM Ltd | • RREEF America L.L.C., operating under the brand name DWS |
| • Grantham Mayo Van Otterloo & Co. LLC |
Portfolio
Manager
Patrick
Nikodem, Portfolio Manager, has primary responsibility for the management of the
Fund. Mr. Nikodem has managed the Fund since its inception.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Opportunistic Credit
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the
64
Prospectus,
and in the Purchase, Exchange and Redemption of Fund Shares section, beginning
on page 34, of the Fund’s Statement of Additional Information. Please see the
Expense Notes section of the Fund's Prospectus for further information regarding
expenses of the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has entered into a contractual fee waiver agreement that results in an effective advisory fee not to exceed 0.581%. This waiver may not be terminated during the relevant period except with Board approval. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.17% of its transfer agency fees for Class M Shares, 0.12% of
its transfer agency fees for Class A, Class C, Class C1 and Class S Shares and
0.02% of its transfer agency fees for Class R6 Shares. These waivers may not be
terminated during the relevant period except with Board approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
65
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
51 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds. The Fund invests in various tactical global bond opportunities
including high yield debt securities, emerging markets debt securities
(including Brady Bonds), U.S. and non-U.S. corporate debt securities, Yankee
Bonds (dollar denominated obligations issued in the U.S. by non-U.S. banks and
corporations), fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality (including emerging markets sovereign debt)
and investment grade securities.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant
to a multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund’s money managers select the individual portfolio instruments for
the assets assigned to them. RIM manages assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash
balances.
The
Fund may invest in debt securities that are rated below investment grade
(commonly referred to as “high yield” or “junk bonds”) and in “distressed” debt
securities. The Fund may invest without limitation in securities denominated in
foreign currencies, in U.S. dollar-denominated securities of foreign issuers and
in developed and emerging markets debt securities. The Fund considers the
following countries to have developed markets: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom and the United States. As a
general rule, the Fund considers emerging market countries to include every
other country. The Fund may invest in currency futures and options on futures,
forward currency contracts, currency swaps and currency options for speculative
purposes or to seek to protect a portion of its investments against adverse
currency exchange rate changes. The Fund may invest in derivative instruments
and may use derivatives to take both long and short positions. The Fund’s use of
derivatives may cause the Fund’s investment returns to be impacted by the
performance of securities the Fund does not own and result in the Fund’s total
investment exposure exceeding the value of its portfolio. The Fund usually, but
not always, exposes a portion of its cash to changes in interest rates
or market/sector returns by purchasing fixed income securities and/or
derivatives, which typically include total return swaps, index credit default
swaps and to be announced (“TBA”) securities. The Fund may also purchase loans
and other direct indebtedness, including bank loans (also called “leveraged
loans”). The Fund may invest in obligations issued or guaranteed by U.S. or
foreign banks. The Fund may enter into repurchase agreements. The Fund may
invest in commercial paper, including asset-backed commercial paper. The Fund
may invest in convertible securities, including contingent convertible
securities. A portion of the Fund’s net assets may be “illiquid” investments.
The Fund may invest in variable and floating rate securities. The Fund may
engage in active and frequent trading of portfolio securities to achieve its
principal investment strategies. Please refer to the “Investment Objective and
Investment Strategies” section in the Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the |
66
| issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. | |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. The highly leveraged nature of many such loans, including bank loans, and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Investments in bank loans are typically subject to the risks of floating rate securities. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Convertible Securities. Convertible securities are subject to both the credit and interest rate risks associated with fixed income securities and to the market risk associated with common stocks. Contingent convertible securities |
67
| generally provide for mandatory conversion into common stock of the issuer under certain circumstances, and therefore are subject to the risk that the Fund could experience a reduced income rate and a worsened standing in the case of an issuer’s insolvency. | |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Synthetic Foreign Equity/Fixed Income Securities. Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In addition, the exercise or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
68
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Through December 31, 2018, the Opportunistic Credit Blended
Benchmark was a secondary benchmark consisting of 60% ICE BofA Global
High Yield Index (USD hedged) and 40% JP Morgan EMBI Global Diversified Index.
Effective January 1, 2019, the secondary benchmark was changed to the
Opportunistic Credit Composite Index, which consists of 50% ICE BofA Developed
Markets High Yield Constrained Index Hedged
(USD
69
hedged),
20% JP Morgan EMBI Global Diversified Index, 20% Bloomberg U.S. 1-3 Month
Treasury Bill Index and 10% Bloomberg U.S. Corporate Index. The Opportunistic
Credit Composite Index provides a means to compare the Fund's average annual
returns to a secondary benchmark that is more representative of the investment
strategies pursued by the Fund. The Opportunistic Credit Linked
Benchmark represents the returns of the Opportunistic Credit Blended Benchmark
through December 31, 2018, and the returns of the Opportunistic Credit
Composite Index thereafter. The Opportunistic Credit Linked
Benchmark provides a means to compare the Fund’s average annual returns to a
secondary benchmark that takes into account historical changes in the Fund’s
secondary benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will vary.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Bloomberg U.S. Universal Index (reflects no
deduction for fees, expenses or taxes)
|
( |
|||||
|
Opportunistic Credit Composite Index (reflects no
deduction for fees, expenses or taxes)
|
||||||
|
Opportunistic Credit Linked Benchmark (reflects
no deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
70
| • Barings LLC and Baring International Investment Limited | • Voya Investment Management Co. LLC |
| • DuPont Capital Management Corporation |
Portfolio
Managers
Albert
Jalso, Director, Senior Portfolio Manager, Fixed Income, and Gregory Nott,
Senior Director, Head of Multi Asset Canada, have primary responsibility for the
management of the Fund. Mr. Jalso and Mr. Nott have managed the Fund since March
2022.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Unconstrained Total Return
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
71
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its 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 do not include 12b-1 fees, shareholder services fees, transfer agency fees, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares and 0.02%
of its transfer agency fees for Class R6 Shares. These waivers may not be
terminated during the relevant period except with Board approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
275 % of the average value of its
portfolio.
72
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund seeks to achieve its objective by opportunistically investing in a broad
range of fixed income securities across sectors, the globe and the credit
quality and maturity spectrums, with an emphasis on higher-yielding securities.
The Fund’s fixed income investments may include U.S. and non-U.S. corporate debt
securities, Yankee Bonds (dollar-denominated obligations issued in the U.S. by
non-U.S. banks and corporations), fixed income securities issued or guaranteed
by the U.S. government (including Treasury Inflation Protected Securities and
zero coupon securities) or by non-U.S. governments, or by any U.S. government or
non-U.S. government agency or instrumentality (including emerging markets
sovereign debt), emerging markets debt securities (including Brady Bonds), high
yield fixed income securities, investment grade fixed income securities,
“distressed” debt securities and mortgage-backed and asset-backed securities.
The Fund may also invest in other asset classes in order to seek to achieve its
objective, including equity securities. The Fund is managed with a benchmark
agnostic approach, meaning that the Fund’s benchmark is not determinative of
what instruments and asset classes are selected for the Fund. As a result, the
Fund’s relative performance may have wider deviation from the benchmark’s
performance than would a fund that seeks to track the performance of its
benchmark.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of
all investment advisory and portfolio management services for the Fund. The Fund
is advised by RIM and multiple money managers unaffiliated with RIM
pursuant to a multi-manager approach. RIM may change a Fund's asset allocation
at any time. The Fund’s money managers select the individual portfolio
instruments for the assets assigned to them. RIM manages assets not allocated to
money manager strategies and utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash
balances.
The
Fund may invest without limitation in securities denominated in foreign
currencies and in U.S. dollar-denominated securities of foreign issuers. The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States. Emerging market countries also include frontier
market countries, which are less developed than traditional emerging market
countries. The Fund may invest in currency futures and options on futures,
forward currency contracts, currency swaps and currency options for speculative
purposes or to seek to protect a portion of its investments against adverse
currency exchange rate changes. The Fund may invest in derivative instruments
and may use derivatives to take both long and short positions. The Fund’s use of
derivatives may cause the Fund’s investment returns to be impacted by the
performance of securities the Fund does not own and result in the Fund’s total
investment exposure exceeding the value of its portfolio. The Fund may also
purchase loans and other direct indebtedness, including bank loans (also called
“leveraged loans”). The Fund may enter into repurchase agreements and reverse
repurchase agreements. The Fund may invest in money market securities and
commercial paper, including asset-backed commercial paper. The Fund may invest
in bank obligations. A portion of the Fund’s net assets may be “illiquid”
investments. The Fund may invest in variable and floating rate securities. The
Fund may invest in puts, stand-by commitments and demand notes, including
variable rate demand notes. The Fund may invest in pooled investment vehicles,
including other investment companies and exchange traded funds. The Fund may
engage in active and frequent trading of portfolio securities to achieve its
principal investment strategies. Depending upon market conditions, RIM may
determine to allocate a significant portion of the Fund's assets to cash in
order to seek to achieve the Fund's objective. The Fund may expose all or a
portion of its cash to changes in interest rates or market/sector
returns by purchasing derivatives. Please refer to the “Investment
Objective and Investment Strategies” section in the Fund's Prospectus for
further information.
Principal
Risks of Investing in the Fund
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the |
73
| issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. | |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. The highly leveraged nature of many such loans, including bank loans, and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Investments in bank loans are typically subject to the risks of floating rate securities. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written |
74
| options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. | |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Reverse Repurchase Agreements. Reverse repurchase agreements are subject to the risk that the other party may fail to return the security in a timely manner or at all. The Fund may lose money if the market value of the security transferred by the Fund declines below the repurchase price. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Synthetic Foreign Equity/Fixed Income Securities. Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In addition, the exercise or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Puts, Stand-by Commitments and Demand Notes. The ability of the Fund to exercise a put or stand-by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand-by commitment is exercised or on certain restrictions in the buy back arrangement. If there is a shortfall in the anticipated proceeds from demand notes, including variable rate demand notes, the notes may not be fully repaid and the Fund may lose money. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Securities of Other Investment Companies. Investments in other investment companies expose shareholders to the expenses and risks associated with the investments of the Fund as well as to the expenses and risks of the underlying investment companies. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
75
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
76
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | Since Inception | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
( |
|||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
( |
|||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
( |
|||||
|
Return Before Taxes, Class S
|
( |
|||||
|
Return After Taxes on Distributions, Class
S
|
( |
|||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
( |
|||||
|
ICE BofA 3-Month U.S. Treasury Bill (reflects no
deduction for fees, expenses or taxes)
|
77
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Ardea Investment Management Pty Ltd | • Hermes Investment Management Limited |
Portfolio
Managers
Gerard
Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager, and Helena Hui
Ravanas, Portfolio Manager, Fixed Income, have primary responsibility for the
management of the Fund. Mr. Fitzpatrick has managed the Fund since November 2021
and Ms. Ravanas has managed the Fund since March 2022.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Strategic Bond
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
78
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that 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 do not include 12b-1 fees, shareholder services fees, transfer agency fees, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.16% of its transfer agency fees for Class M Shares, 0.06% of
its transfer agency fees for Class S Shares, 0.04% of its transfer agency fees
for Class A, Class C and Class C1 Shares and 0.02% of its transfer agency fees
for Class R6 Shares. These waivers may not be terminated during the relevant
period except with Board approval.
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
89 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds.
79
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers select the individual portfolio instruments for the
assets assigned to them. RIM manages assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash
balances.
The
Fund may invest in mortgage related securities, including mortgage-backed
securities. The Fund may also invest in (1) U.S. and non-U.S. corporate
debt securities, (2) Yankee Bonds (dollar-denominated obligations issued in
the U.S. by non-U.S. banks and corporations), (3) fixed income securities
issued or guaranteed by the U.S. government, non-U.S. governments, or by any
U.S. government or non-U.S. government agency or instrumentality and
(4) asset-backed securities. The Fund may invest in debt securities that
are rated below investment grade (commonly referred to as “high-yield” or “junk
bonds”) and in “distressed” debt securities. The Fund may invest in currency
futures and options on futures, forward currency contracts, currency swaps and
currency options for speculative purposes or to seek to protect a portion
of its investments against adverse currency exchange rate changes. The Fund
may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund’s use of derivatives may cause the Fund’s
investment returns to be impacted by the performance of securities the Fund does
not own and result in the Fund’s total investment exposure exceeding the value
of its portfolio. The duration of the Fund's portfolio will typically be
within one year of the duration of the Bloomberg U.S. Aggregate Bond Index,
but may vary up to two years from the Index's duration. A portion of the Fund’s
net assets may be “illiquid” investments. The Fund may invest in variable and
floating rate securities. The Fund may purchase loans and other direct
indebtedness, including bank loans (also called “leveraged loans”). The Fund may
invest in non-U.S. debt securities, including developed and emerging market debt
securities, some of which may be non-U.S. dollar denominated. The Fund considers
the following countries to have developed markets: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom and the United States. As a
general rule, the Fund considers emerging market countries to include every
other country. The Fund may enter into repurchase agreements. The Fund may
invest in commercial paper, including asset-backed commercial paper. The Fund
may engage in active and frequent trading of portfolio securities to achieve its
principal investment strategies. The Fund may invest in obligations issued or
guaranteed by U.S. or foreign banks. The Fund usually, but not always,
exposes a portion of its cash to changes in interest rates or market/sector
returns by purchasing fixed income securities and/or derivatives, which
typically include exchange traded fixed income futures contracts, to be
announced (“TBA”) securities and swaps. Please refer to the “Investment
Objective and Investment Strategies” section in the Fund's Prospectus for
further information.
Principal
Risks of Investing in the Fund
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
80
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. The highly leveraged nature of many such loans, including bank loans, and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Investments in bank loans are typically subject to the risks of floating rate securities. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
81
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative |
82
| analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. | |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund's portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
83
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
( |
|||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
( |
|||||
|
Return Before Taxes, Class R6
|
( |
|||||
|
Return Before Taxes, Class Y
|
( |
|||||
|
Return Before Taxes, Class S
|
( |
|||||
|
Return After Taxes on Distributions, Class
S
|
( |
|||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
( |
|||||
|
Bloomberg U.S. Aggregate Bond Index (reflects no
deduction for fees, expenses or taxes)
|
( |
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • BlueBay Asset Management LLP | • Western Asset Management Company LLC and Western Asset Management Company Limited |
| • Schroder Investment Management North America Inc. |
Portfolio
Managers
Gerard
Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager, Albert Jalso,
Director, Senior Portfolio Manager, Fixed Income, and Gregory Nott, Senior
Director, Head of Multi Asset Canada, have primary responsibility for the
management of the Fund. Mr. Fitzpatrick has managed the Fund since August 2011
and Mr. Jalso and Mr. Nott have managed the Fund since March 2022.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
84
Investment Grade Bond
Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide current income and the preservation of
capital.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.32% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.14% of its transfer agency fees for Class M Shares, 0.04% of
its transfer agency fees for Class S Shares and 0.02% of its transfer agency
fees for Class R6 Shares. These waivers may not be terminated during the
relevant period except with Board approval.
85
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
91 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in investment grade bonds.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers select the individual portfolio instruments for the
assets assigned to them. RIM manages assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash
balances.
The
Fund may invest in mortgage related securities, including mortgage-backed
securities. The Fund may also invest in (1) U.S. and non-U.S. corporate
debt securities, (2) Yankee Bonds (dollar-denominated obligations issued in
the U.S. by non-U.S. banks and corporations), (3) fixed income securities
issued or guaranteed by the U.S. government, non-U.S. governments, or by any
U.S. government or non-U.S. government agency or instrumentality and
(4) asset-backed securities. The Fund will invest principally in securities
of “investment grade” quality at the time of purchase. The Fund may invest in
currency futures and options on futures, forward currency contracts, currency
swaps and currency options for speculative purposes or to seek to protect a
portion of its investments against adverse currency exchange rate changes. The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund’s use of derivatives may cause the
Fund’s investment returns to be impacted by the performance of securities the
Fund does not own and result in the Fund’s total investment exposure exceeding
the value of its portfolio. The duration of the Fund's portfolio will
typically be within one year of the duration of the Bloomberg U.S.
Aggregate Bond Index, but may vary up to two years from the Index's duration. A
portion of the Fund’s net assets may be “illiquid” investments. The Fund may
invest in variable and floating rate securities. The Fund may purchase loans and
other direct indebtedness. The
86
Fund
may invest in non-U.S. debt securities, including developed and emerging market
debt securities, some of which may be non-U.S. dollar denominated. The Fund
considers the following countries to have developed markets: Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel,
Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States.
As a general rule, the Fund considers emerging market countries to include every
other country. The Fund may enter into repurchase agreements. The Fund may
invest in commercial paper, including asset-backed commercial paper. The Fund
may engage in active and frequent trading of portfolio securities to achieve its
principal investment strategies. The Fund may invest in obligations issued or
guaranteed by U.S. or foreign banks. The Fund usually, but not always, exposes a
portion of its cash to changes in interest rates or market/sector
returns by purchasing fixed income securities and/or derivatives, which
typically include exchange traded fixed income futures contracts, to be
announced (“TBA”) securities and swaps. Please refer to the “Investment
Objective and Investment Strategies” section in the Fund's Prospectus for
further information.
Principal
Risks of Investing in the Fund
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
87
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar |
88
| investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. | |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund's portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
89
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation
and may differ from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
( |
|||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
( |
|||||
|
Return Before Taxes, Class R6
|
( |
|||||
|
Return Before Taxes, Class Y
|
( |
|||||
|
Return Before Taxes, Class S
|
( |
|||||
|
Return After Taxes on Distributions, Class
S
|
( |
|||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
( |
|||||
|
Bloomberg U.S. Aggregate Bond Index (reflects no
deduction for fees, expenses or taxes)
|
( |
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • MetLife Investment Management, LLC | • Schroder Investment Management North America Inc. |
Portfolio
Managers
Albert
Jalso, Director, Senior Portfolio Manager, Fixed Income, and Gregory Nott,
Senior Director, Head of Multi Asset Canada, have primary responsibility for the
management of the Fund. Mr. Jalso and Mr. Nott have managed the Fund since March
2022.
90
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Short Duration Bond
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide current income and preservation of capital with a focus on
short duration securities.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has entered into a contractual fee waiver agreement that results in an effective advisory fee not to exceed 0.306%. This waiver may not be terminated during the relevant period except with Board approval. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.17% of its transfer agency fees for Class M Shares, 0.12% of
its transfer agency fees for Class A, Class C, Class C1 and Class S Shares and
0.02% of its transfer agency fees for Class R6 Shares. These waivers may not be
terminated during the relevant period except with Board
approval.
91
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
109 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers select the individual portfolio instruments for the
assets assigned to them. RIM manages assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use
strategies based on indexes. RIM also manages the Fund's cash
balances.
The
Fund invests principally in short duration bonds and defines short duration as a
duration ranging from 0.0 to 3.0 years. The Fund has no restrictions on
individual security duration. The Fund may invest in mortgage related
securities, including mortgage-backed securities. The Fund may also invest in
(1) U.S. and non-U.S. corporate debt securities, (2) Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations), (3) fixed income securities issued or guaranteed by the U.S.
government, non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality and (4) asset-backed securities. The
Fund may invest in debt securities that are rated below investment grade
(commonly referred to as “high-yield” or “junk bonds”). The Fund may invest in
currency futures and options on futures, forward currency contracts, currency
swaps and currency options for speculative purposes or to seek to protect a
portion of its investments against adverse currency exchange rate changes. The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund’s use
of
92
derivatives
may cause the Fund’s investment returns to be impacted by the performance of
securities the Fund does not own and result in the Fund’s total investment
exposure exceeding the value of its portfolio. A portion of the Fund’s net
assets may be “illiquid” investments. The Fund may invest in variable and
floating rate securities. The Fund may invest in non-U.S. debt securities,
including developed and emerging market debt securities, some of which may be
non-U.S. dollar denominated. The Fund considers the following countries to have
developed markets: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. As a general rule, the
Fund considers emerging market countries to include every other country. The
Fund may enter into repurchase agreements. The Fund may invest in commercial
paper, including asset-backed commercial paper. The Fund may engage in active
and frequent trading of portfolio securities to achieve its principal investment
strategies. The Fund may invest in obligations issued or guaranteed by U.S. or
foreign banks. The Fund usually, but not always, exposes a portion of its
cash to changes in interest rates or market/sector returns by
purchasing fixed income securities and/or derivatives, which typically include
exchange traded fixed income futures contracts and swaps. Please refer to the
“Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
93
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers |
94
| expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. | |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund's portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
95
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
( |
|||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
( |
|||||
|
Return Before Taxes, Class R6
|
( |
|||||
|
Return Before Taxes, Class Y
|
( |
|||||
|
Return Before Taxes, Class S
|
( |
|||||
|
Return After Taxes on Distributions, Class
S
|
( |
|||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
( |
|||||
|
ICE BofA 1-3 Yr US Treasuries Index (reflects no
deduction for fees, expenses or taxes)
|
( |
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Scout Investments, Inc. | • Western Asset Management Company LLC and Western Asset Management Company Limited |
Portfolio
Managers
Gerard
Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager, and Gregory Nott,
Senior Director, Head of Multi Asset Canada, have primary responsibility for the
management of the Fund. Mr. Fitzpatrick has managed the Fund since May 2017 and
Mr. Nott has managed the Fund since March 2022.
96
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Tax-Exempt High Yield Bond
Fund
Investment
Objective (Non-Fundamental)
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class C, M, S | Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level 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 do not include 12b-1 fees, shareholder services fees, transfer agency fees, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
97
| Until
| |
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
14 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a fundamental policy to invest, under normal circumstances, at least
80% of the value of its net assets plus borrowings for investment purposes in
fixed income investments the income from which is exempt from federal income
tax. The Fund invests principally in municipal debt obligations providing
federal tax-exempt interest income, but may invest up to 20% of the value of its
net assets plus borrowings for investment purposes in municipal debt securities,
the income on which is subject to federal income tax, including the alternative
minimum tax. The Fund generally intends to invest a substantial portion of its
assets in medium- to low-quality municipal debt securities including those that
are rated in the lowest rating category by a nationally recognized statistical
rating organization (“NRSRO”). The Fund generally expects to invest between 30%
and 60% of its assets in municipal debt securities that are rated below
investment grade by one or more NRSROs (commonly referred to as “high-yield” or
“junk bonds”) or in unrated securities judged to be of comparable quality. The
Fund may invest in industrial development
bonds.
98
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers select the individual portfolio instruments for the
assets assigned to them. RIM manages the Fund’s cash
balances.
The
Fund invests in derivative instruments and may use derivatives to take both long
and short positions. A portion of the Fund’s net assets may be “illiquid”
investments. The Fund may invest in commercial paper. The Fund may also invest
in puts, stand-by commitments and demand notes (including variable rate demand
notes). The Fund may enter into repurchase agreements. The Fund may seek to
limit the effect of holding cash reserves on the Fund’s exposures by investing
in pre-refunded municipal bonds to provide the Fund with longer duration
exposure. Duration is a measure of sensitivity to interest rate changes and not
time. RIM may choose to invest in pre-refunded municipal bonds to manage Fund
exposures. Please refer to the “Investment Objective and Investment Strategies”
section in the Fund’s Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Municipal Obligations. Municipal obligations are subject to interest rate, credit and illiquidity risk and are affected by economic, business or political developments and may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors. |
| • | Alternative Minimum Tax Risk. The Fund may invest in municipal bonds the income on which is subject to federal income tax, including the alternative minimum tax. As a result, taxpayers who are subject to the alternative minimum tax could earn a lower after-tax return. |
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
99
| • | Puts, Stand-by Commitments and Demand Notes. The ability of the Fund to exercise a put or stand-by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand-by commitment is exercised or on certain restrictions in the buy back arrangement. If there is a shortfall in the anticipated proceeds from demand notes, including variable rate demand notes, the notes may not be fully repaid and the Fund may lose money. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital |
100
| gains or losses with respect to the Fund's portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance. | |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
101
for the periods ended December 31, 2021 |
1 Year | 5 Years | Since Inception | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Bloomberg 60% Muni HY Tax-Exempt/40% Muni Bond
Index (reflects no deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Goldman Sachs Asset Management, L.P. | • MacKay Shields LLC |
Portfolio
Managers
Gerard
Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager, and Albert Jalso,
Director, Senior Portfolio Manager, Fixed Income, have primary responsibility
for the management of the Fund. Mr. Fitzpatrick has managed the Fund since May
2017 and Mr. Jalso has managed the Fund since September 2016.
Taxes
The
Fund intends to distribute tax-exempt income. The Fund intends to meet certain
federal tax requirements so that it will continue to qualify to pay
“exempt-interest dividends,” which are exempt from federal income tax. However,
a portion of the dividends may be treated as ordinary income and may be subject
to federal income tax.
For
more information about these and other tax matters relating to the Fund and its
shareholders, please see Additional Information about Taxes in the Fund’s
Prospectus.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Tax-Exempt Bond
Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide federal tax-exempt current income consistent with the
preservation of capital. The Fund will invest, under normal circumstances, at
least 80% of the value of its assets in investments the income from which is
exempt from federal income tax.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for
sales charge discounts if you and your
family
102
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
Advisory Fee
|
|||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( | ||||
|
Net Annual Fund Operating Expenses
|
|||||||||
| # | Until
|
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||
| A | C | C1 | M | S | |||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ | ||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ | ||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ | ||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
103
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
19 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a fundamental policy to invest, under normal circumstances, at least
80% of the value of its net assets plus borrowings for investment purposes in
investments the income from which is exempt from federal income tax. The Fund
invests principally in investment-grade municipal debt obligations providing
federal tax-exempt interest income. The Fund may invest up to 20% of the value
of its net assets plus borrowings for investment purposes in municipal debt
securities the income on which is subject to federal income
tax.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund's asset allocation at any time.
The Fund’s money managers select the individual portfolio instruments for the
assets assigned to them. RIM manages the Fund's cash
balances.
The
Fund invests in derivative instruments and may use derivatives to take both long
and short positions. The Fund may also invest in puts, stand-by commitments and
demand notes (including variable rate demand notes). The Fund may invest in
fixed income securities issued or guaranteed by the U.S. government (including
zero coupon securities). The Fund may invest in municipal debt securities that
are rated below investment grade (commonly referred to as “high-yield” or “junk
bonds”). A portion of the Fund’s net assets may be “illiquid” investments. The
Fund may invest in commercial paper. The Fund may enter into repurchase
agreements. The Fund may seek to limit the effect of holding cash reserves on
the Fund’s exposures by investing in pre-refunded municipal bonds to provide the
Fund with longer duration exposure. RIM may choose to invest in pre-refunded
municipal bonds to manage Fund exposures. Please refer to the “Investment
Objective and Investment Strategies” section in the Fund's Prospectus for
further information.
Principal
Risks of Investing in the Fund
| • | Municipal Obligations. Municipal obligations are subject to interest rate, credit and illiquidity risk and are affected by economic, business or political developments and may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors. |
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. |
104
| Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. | |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
| • | Puts, Stand-by Commitments and Demand Notes. The ability of the Fund to exercise a put or stand-by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand-by commitment is exercised or on certain restrictions in the buy back arrangement. If there is a shortfall in the anticipated proceeds from demand notes, including variable rate demand notes, the notes may not be fully repaid and the Fund may lose money. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation |
105
| of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. | |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund's portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective July 1, 2013, RIM changed the Fund's primary benchmark
from the Bloomberg Municipal 1-10 Yr Blend (1-12) Index to the Bloomberg
Municipal 1-15 Yr Blend (1-17) Index. The Tax Exempt Bond Linked
Benchmark represents the returns of the Bloomberg Municipal 1-10 Yr Blend (1-12)
Index through June 30, 2013 and the returns of the Bloomberg Municipal 1-15 Yr
Blend (1-17) Index thereafter. The Tax Exempt Bond Linked
Benchmark provides a means to compare the Fund's average annual returns to a
secondary benchmark that takes into account historical changes in the Fund's
primary benchmark. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
106
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
( |
|||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
Bloomberg Municipal 1-15 Yr Blend (1-17) Index
(reflects no deduction for fees, expenses or taxes)
|
||||||
|
Tax Exempt Bond Linked Benchmark (reflects no
deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Goldman Sachs Asset Management, L.P. | • MacKay Shields LLC |
Portfolio
Managers
Gerard
Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager, and Albert Jalso,
Director, Senior Portfolio Manager, Fixed Income, have primary responsibility
for the management of the Fund. Mr. Fitzpatrick has managed the Fund since May
2017 and Mr. Jalso has managed the Fund since September 2016.
Taxes
The
Fund intends to distribute tax-exempt income. The Fund intends to meet certain
federal tax requirements so that it will continue to qualify to pay
“exempt-interest dividends,” which are exempt from federal income tax. However,
a portion of the dividends may be treated as ordinary income and may be subject
to federal income tax.
For
more information about these and other tax matters relating to the Fund and its
shareholders, please see Additional Information about Taxes in the Fund’s
Prospectus.
107
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Global Infrastructure
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term growth of capital and current
income.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund's Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.85% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
108
| Until
| |
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
66 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of its net assets plus borrowings for investment purposes in
securities issued by companies that are engaged in the infrastructure business.
Infrastructure refers to the systems and networks of energy, transportation,
communication and other services required for the normal function of society.
Infrastructure companies also include energy-related companies organized as
master limited partnerships (“MLPs”) and their affiliates. The Fund principally
invests in equity securities, including common stocks, of infrastructure
companies economically tied to a number of countries around the world, including
the U.S., in a globally diversified manner. The Fund may invest a significant
portion of its assets in non-U.S. securities, including emerging markets
securities. The Fund considers emerging market countries to include every
country in the world except Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Hong Kong, Iceland, Ireland, Israel, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom and the United States. The Fund may
invest in large, medium or small capitalization
companies.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant
to a multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund’s money
109
managers
have non-discretionary asset management assignments pursuant to which they
provide a model portfolio to RIM representing their investment recommendations,
based upon which RIM purchases and sells securities for the Fund. For Fund
assets not allocated to money manager strategies, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures. RIM may use strategies based on indexes. RIM also manages the
Fund’s cash balances. The Fund usually, but not always, pursues a strategy to be
fully invested by exposing its cash to the performance of appropriate markets by
purchasing equity securities and/or derivatives, which typically include index
futures contracts.
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may enter into spot and forward currency
contracts to facilitate settlement of securities transactions. Please refer to
the “Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Infrastructure Companies. Infrastructure companies are subject to the risk that: the potential for realized revenue volumes is significantly lower than projected and/or cost overruns; the nature of the concession fundamentally changes during the life of the project (e.g., the state sponsor alters the terms); macroeconomic factors such as low GDP growth or high nominal interest rates raise the average cost of funding; government regulation may affect rates charged to customers; government budgetary constraints impact projects; special tariffs are imposed; and changes in tax laws, regulatory policies or accounting standards could be unfavorable. Other risks include environmental damage due to a company's operations or an accident, changes in market sentiment towards infrastructure and terrorist acts. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit |
110
| risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. | |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
111
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
After-tax returns reflect foreign tax credits passed by the Fund to its
shareholders thereby increasing total returns after taxes on distributions and
total returns after taxes on distributions and sale of Fund Shares.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
112
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
S&P®
Global Infrastructure Index (net of tax on dividends from foreign
holdings) (USD) (reflects no deduction for fees or expenses)
|
S&
P®
is a registered trademark of Standard & Poor's Financial Services
LLC.
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Cohen & Steers Capital Management, Inc., Cohen & Steers UK Limited and Cohen & Steers Asia Limited | • Nuveen Asset Management, LLC |
| • First Sentier Investors (Australia) IM Ltd |
Portfolio
Manager
Patrick
Nikodem, Senior Portfolio Manager, has primary responsibility for the management
of the Fund. Mr. Nikodem has managed the Fund since March 2019.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
113
Global Real Estate Securities
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide current income and long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has entered into a contractual fee waiver agreement that results in an effective advisory fee not to exceed 0.75%. This waiver may not be terminated during the relevant period except with Board approval. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares and 0.02%
of its transfer agency fees for Class R6 Shares. These waivers may not be
terminated during the relevant period except with Board approval.
114
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
81 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-manager approach. RIM may change a Fund’s asset allocation at any time.
The Fund’s money managers have non-discretionary asset management assignments
pursuant to which they provide a model portfolio to RIM representing their
investment recommendations, based upon which RIM purchases and sells securities
for the Fund. For Fund assets not allocated to money manager strategies, RIM
utilizes quantitative and/or rules-based processes and qualitative analysis to
assess Fund characteristics and invest in securities and instruments which
provide the desired exposures. RIM may use strategies based on indexes. RIM also
manages the Fund’s cash balances. The Fund usually, but not always, pursues a
strategy to be fully invested by exposing all or a portion of its cash to
the performance of certain real estate securities or, in certain circumstances,
broad global equity markets by purchasing equity securities and/or
derivatives, which typically include index futures contracts and
swaps.
115
The
Fund may invest in derivative instruments and may use derivatives to take
both long and short positions. The Fund may enter into spot or forward currency
contracts to facilitate settlement of securities transactions. The Fund may
invest in large, medium or small capitalization companies. Please refer to the
“Investment Objective and Investment Strategies” section in the Fund's
Prospectus for further information.
Principal
Risks of Investing in the Fund
| • | Real Estate Securities. Just as real estate values go up and down, the value of the securities of real estate companies also fluctuates. Real estate securities, including real estate investment trusts (“REITs”), may be affected by changes in the value of the underlying properties owned by the companies and by the quality of tenants’ credit. |
| • | Industry Concentration Risk. By concentrating in certain industries, the Fund carries much greater risk of adverse developments in those industries than a fund that invests in a wide variety of industries. |
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
116
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of |
117
| unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. The MSCI World Index (net of tax on dividends from foreign
holdings) measures the performance of the investable securities in developed
countries globally. After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
Class
S Calendar Year Total Returns
118
for the periods ended December 31, 2021 |
1 Year | 5 Years | 10 Years | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
FTSE EPRA/NAREIT Developed Real Estate Index (net
of tax on dividends from foreign holdings) (reflects no deduction for fees
or expenses)
|
||||||
|
MSCI World Index (net of tax on dividends from
foreign holdings) (reflects no deduction for fees or expenses)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Cohen & Steers Capital Management, Inc., Cohen & Steers UK Limited and Cohen & Steers Asia Limited | • RREEF America L.L.C., DWS Investments Australia Limited and DWS Alternatives Global Limited, operating under the brand name DWS |
Portfolio
Managers
Bruce
Eidelson, Senior Portfolio Manager, and Patrick Nikodem, Senior Portfolio
Manager, have primary responsibility for the management of the Fund. Mr.
Eidelson has managed the Fund since January 2002 and Mr. Nikodem has managed the
Fund since December 2016.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
119
Real Assets
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital
growth.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||
| A | C | C1 | M | R6 | S | ||||||
|
Advisory Fee
|
|||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||
|
Acquired Fund Fees and Expenses
|
|||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( | |||||
|
Net Annual Fund Operating Expenses
|
|||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC (“RIM”) has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses and expenses of the Fund’s wholly-owned subsidiary (the “Subsidiary”) borne indirectly by the Fund to the extent such expenses exceed 0.74% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
The
Subsidiary, organized as a company under the laws of the Cayman Islands, pays
RIM an advisory fee and pays Russell Investments Fund Services, LLC (“RIFUS”) an
administrative fee at the annual rates of up to 0.75% and 0.05%, respectively,
of the Subsidiary’s net assets (collectively, the “Subsidiary Fees”). Pursuant
to a contractual agreement with the Fund, RIM and RIFUS have agreed to
permanently waive the portion of the advisory fees and the administrative fees
paid by the Fund to RIM and RIFUS, respectively, in the amount equal to the
amount of the Subsidiary Fees received by RIM and RIFUS, if any. This waiver may
not be terminated by RIM or RIFUS.
Until
February 28,
2023 , RIFUS has contractually agreed to waive 0.10% of its
transfer agency fees for Class M Shares and 0.02% of its transfer agency fees
for Class R6 Shares. These waivers may not be terminated during the relevant
period except with Board approval.
“Acquired
Fund Fees and Expenses” does not include direct costs associated with any
over-the-counter derivatives that the Subsidiary invests in. Costs
associated with such derivative instruments include any fees paid to the
Subsidiary’s counterparty, which may include management fees and
performance-based incentive fees, or any other fees and expenses associated with
the investment in such derivative instruments. Such costs are included in the
return of any such derivative instruments and, therefore, represent an indirect
cost of investing in the Fund.
120
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements and permanent fee waivers. The calculation of costs
for the remaining periods takes such contractual fee waivers and/or
reimbursements into account only for the first year of the periods and such
permanent fee waivers into account for all periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||
| A | C | C1 | M | R6 | S | ||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ | |||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ | |||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
Because the Fund is new and has no Shares outstanding, it does not have a
portfolio turnover rate at this time.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of its net assets plus borrowings for investment purposes in
investments related to real assets and real asset companies. Real assets are
broadly defined by the Fund and are considered to include any assets that have
physical properties, such as natural resources, real estate, infrastructure and
commodities. In an effort to provide equity-like returns over a market cycle
while mitigating downside risk relative to equities, Russell Investment
Management, LLC (“RIM”) allocates the Fund’s assets globally across the real
assets group of industries, focusing on real estate, infrastructure, commodities
and natural resources. RIM intends to shift the Fund’s assets within the real
assets group of industries based on RIM’s outlook on the business and economic
cycle, relative market valuations and market
sentiment.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a multi-asset, multi-manager
approach. RIM may change a Fund's asset allocation at any time. The Fund's money
managers have non-discretionary asset management assignments pursuant to which
they provide a model portfolio to RIM representing their investment
recommendations, based upon which RIM purchases and sells securities for the
Fund. For Fund assets not allocated to money manager strategies, RIM utilizes
quantitative and/or rules-based processes and qualitative analysis to assess
Fund characteristics and invest in securities and instruments which provide the
desired exposures. RIM may use strategies based on indexes. RIM also
manages the Fund's cash balances. The Fund usually, but not always, pursues a
strategy to be fully invested by exposing all or a portion of its cash to
the performance of certain markets by purchasing equity securities and/or
derivatives, which typically include index futures contracts and
swaps.
The
Fund may invest in equity securities issued by U.S. and non-U.S. (i) real estate
companies, including real estate investment trusts (“REITs”) and similar
REIT-like entities; (ii) infrastructure companies, which are companies that are
engaged in the infrastructure business; and (iii) natural resources and natural
resources-related companies. The Fund will
121
concentrate
its investments in equity securities of companies in the real assets group of
industries. The Fund may also invest in securities of non-U.S. issuers by
purchasing American Depositary Receipts (“ADRs”) or Global Depositary Receipts
(“GDRs”). Infrastructure companies also include energy-related companies
organized as master limited partnerships (“MLPs”) and their
affiliates.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may enter into spot and forward currency
contracts to facilitate settlement of securities
transactions.
The
Fund may invest up to 25% of its total assets in a wholly-owned subsidiary of
the Fund (the “Subsidiary”) organized as a company under the laws of the Cayman
Islands. The Fund may invest indirectly through the Subsidiary in
commodity-linked derivative instruments (including futures and options contracts
with respect to indexes or individual commodities, options on futures contracts,
swap agreements and swaptions) and commodity-linked securities that provide
exposure to the performance of the commodities
markets.
The
Fund’s or the Subsidiary’s use of derivatives may cause the Fund’s or
Subsidiary’s investment returns to be impacted by the performance of securities
the Fund or the Subsidiary does not own and result in the Fund’s or the
Subsidiary’s total investment exposure exceeding the value of its
portfolio.
The
Fund may invest in corporate debt securities, Yankee Bonds (dollar-denominated
obligations issued in the U.S. by non-U.S. banks and corporations), U.S.
Government securities, variable and floating rate securities, mortgage-backed
securities, asset-backed securities and municipal debt obligations. The fixed
income portion of the portfolio includes debt securities that are considered to
be of “investment grade” quality at the time of purchase, but the Fund may also
invest its assets in debt securities that are rated below investment grade
(commonly referred to as “high-yield” or “junk bonds”) and in “distressed” debt
securities. The Fund may also invest in bank
obligations.
Please
refer to the “Investment Objective and Investment Strategies” section in the
Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Real Estate Securities. Just as real estate values go up and down, the value of the securities of real estate companies also fluctuates. Real estate securities, including real estate investment trusts (“REITs”), may be affected by changes in the value of the underlying properties owned by the companies and by the quality of tenants’ credit. |
| • | Infrastructure Companies. Infrastructure companies are subject to the risk that: the potential for realized revenue volumes is significantly lower than projected and/or cost overruns; the nature of the concession fundamentally changes during the life of the project (e.g., the state sponsor alters the terms); macroeconomic factors such as low GDP growth or high nominal interest rates raise the average cost of funding; government regulation may affect rates charged to customers; government budgetary constraints impact projects; special tariffs are imposed; and changes in tax laws, regulatory policies or accounting standards could be unfavorable. Other risks include environmental damage due to a company's operations or an accident, changes in market sentiment towards infrastructure and terrorist acts. |
| • | Commodity Risk. Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities, particularly if the investments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity and international economic, political and regulatory developments. The use of leveraged commodity-linked derivatives creates an opportunity for increased return, but also creates the possibility for a greater loss. |
| • | Natural Resources Risk. The Fund’s investments in natural resources companies involve risks. The market value of natural resources related securities may be affected by numerous factors, including events occurring in nature, inflationary pressures and international politics. The securities of natural resources companies may experience more price volatility than securities of companies in other industries. Rising interest rates and general economic conditions may also affect the demand for natural resources. |
| • | Industry Concentration Risk. By concentrating in certain industries, the Fund carries much greater risk of adverse developments in those industries than a fund that invests in a wide variety of industries. |
122
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. |
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Subsidiary Risk. By investing in the Subsidiary, the Fund will be indirectly exposed to the risks associated with the Subsidiary’s investments, which are generally similar to those that are permitted to be held by the Fund. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and is generally not subject to all of the provisions of the 1940 Act. |
| • | Tax Risk. The tax treatment of the Fund’s investments may be adversely affected by future legislation, Treasury Regulations and/or guidance issued by the Internal Revenue Service (“IRS”) that could affect whether income derived from such investments is “qualifying income” under Subchapter M of the Internal Revenue Code, or otherwise alter the character, timing and/or amount of the Fund’s taxable income or any gains and distributions made by the Fund. |
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
123
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Municipal Obligations. Municipal obligations are subject to interest rate, credit and illiquidity risk and are affected by economic, business or political developments and may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Yankee Bonds and Yankee CDs. Issuers of Yankee Bonds and Yankee CDs are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
124
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment styles employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is expected to be used as an investment in asset allocation programs and may have a large percentage of its Shares held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of |
125
| unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. | |
| • | New Fund Risk. The Fund is a new Fund. There can be no assurance that the Fund will grow to an economically viable size, in which case the Fund may cease operations. Investors may be required to liquidate or transfer their investments at an inopportune time. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • First Sentier Investors (Australia) IM Ltd | • RREEF America L.L.C., DWS Investments Australia Limited and DWS Alternatives Global Limited, operating under the brand name DWS |
| • Grantham Mayo Van Otterloo & Co. LLC |
Portfolio
Manager
Patrick
Nikodem, Senior Portfolio Manager, has primary responsibility for the management
of the Fund. Mr. Nikodem has managed the Fund since its inception.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
Multi-Strategy Income
Fund
Investment
Objective (Non-Fundamental)
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers.
126
More
information about these and other discounts is available from your financial
professional and in the Front-End Sales Charges and More About Deferred Sales
Charges sections and Appendix A: Additional Information About Financial
Intermediary-Specific Sales Charge Variations, Waivers and Discounts, beginning
on pages 278, 282 and 353, respectively, of the Prospectus, and in the Purchase,
Exchange and Redemption of Fund Shares section, beginning on page 34, of the
Fund’s Statement of Additional Information. Please see the Expense Notes section
of the Fund’s Prospectus for further information regarding expenses of the
Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.57% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , Russell Investments Fund Services, LLC has contractually
agreed to waive 0.10% of its transfer agency fees for Class M Shares and 0.02%
of its transfer agency fees for Class R6 Shares. These waivers may not be
terminated during the relevant period except with Board approval.
127
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements. The calculation of costs for the remaining periods
takes such fee waivers and/or reimbursements into account only for the first
year of the periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
191 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
The
Fund seeks to achieve its investment objective by principally investing in a
range of diversified income-producing investments. The Fund will typically
pursue strategies and invest in instruments which have historically produced a
significant portion of their total return from income. The Fund may invest in a
broad range of instruments, markets and asset classes economically tied to U.S.,
non-U.S. and emerging markets countries. The Fund’s target strategic asset
allocation is 40% to global equity or equity-related securities or instruments,
including equity securities of real assets-related companies, and 60% global
fixed income or fixed income-related securities or instruments, including high
yield and emerging markets debt. However, the Fund is not required to allocate
its investments in any set proportion and RIM will dynamically manage the Fund’s
asset allocation based on market conditions generally by up to plus/minus 10%
from the Fund’s target strategic asset allocations. The Fund’s equity
investments may include equity securities of real assets-related companies,
including real estate- and infrastructure-related companies. A real asset is a
tangible or physical asset that typically has intrinsic value. Examples of real
assets include land, property, equipment, raw materials or infrastructure. The
Fund may also make investments for hedging purposes in order to address
perceived misalignment between the Fund’s investment exposures and current or
anticipated market conditions. The Fund considers emerging market countries to
include every country in the world except Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom and the United
States.
Russell
Investment Management, LLC (“RIM”) provides or oversees the provision of all
investment advisory and portfolio management services for the Fund. The Fund is
advised by RIM and multiple money managers unaffiliated with RIM pursuant to a
multi-asset, multi-manager approach. RIM may change a Fund's asset allocation at
any time. The Fund employs discretionary and non-discretionary money managers.
The Fund’s discretionary money managers select the individual portfolio
instruments for the assets assigned to them. The Fund’s non-discretionary money
managers provide a model portfolio to RIM representing their investment
recommendations, based upon which RIM purchases and
sells
128
securities
for the Fund. RIM manages Fund assets not allocated to money manager strategies,
and utilizes quantitative and/or rules-based processes and qualitative analysis
to assess Fund characteristics and invest in securities and instruments which
provide the desired exposures. RIM may use strategies based on indexes. RIM also
manages the portion of Fund assets for which the Fund’s non-discretionary money
managers provide model portfolios to RIM and the Fund’s cash
balances.
The
Fund may invest in equity securities of issuers of any market capitalization
which are economically tied to U.S. and non-U.S. countries, including emerging
markets countries. These securities may include common stocks, preferred stocks,
stocks of real assets-related companies, rights, warrants, convertible
securities, securities issued in connection with initial public offerings and
depositary receipts. The Fund’s investments in convertible securities may
include contingent convertible securities. The Fund may invest in securities of
companies, known as real estate investment trusts (“REITs”) that own and/or
manage properties. The Fund may invest in infrastructure companies and master
limited partnerships (“MLPs”).
The
Fund may also invest in fixed income securities of any credit quality and
maturity, including fixed income securities that are rated below investment
grade (commonly referred to as “high yield” or “junk bonds”) and in “distressed”
debt securities. The Fund may also invest in (1) U.S. and non-U.S. corporate
fixed income securities, (2) fixed income securities issued or guaranteed by the
U.S. government (including Treasury Inflation Protected Securities) and by
non-U.S. governments, or by their respective agencies and instrumentalities, (3)
emerging markets debt securities, (4) mortgage-backed securities and (5)
asset-backed securities. The Fund may also invest in variable and floating rate
securities. The Fund may invest in demand notes. The Fund may purchase loans and
other direct indebtedness, including bank loans (also called “leveraged loans”).
The Fund may invest in currency futures and options on futures, forward currency
contracts and currency options for speculative purposes or to seek to protect a
portion of its investments against adverse currency exchange rate
changes.
The
Fund may invest in derivative instruments including futures, options, swaps,
swaptions and credit default swaps, and may use derivatives to take both long
and short positions.
The
Fund may invest in other investment companies and pooled investment
vehicles.
A
portion of the Fund’s net assets may be “illiquid”
investments.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment
strategies.
The
Fund may expose all or a portion of its cash to the performance of certain
markets by purchasing equity securities, fixed income securities and/or
derivatives, which typically include index futures contracts or exchange traded
fixed income futures contracts.
Please
refer to the “Investment Objective and Investment Strategies” section in the
Fund’s Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. |
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the |
129
| issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. | |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Real Estate Securities. Just as real estate values go up and down, the value of the securities of real estate companies also fluctuates. Real estate securities, including real estate investment trusts (“REITs”), may be affected by changes in the value of the underlying properties owned by the companies and by the quality of tenants’ credit. |
| • | Infrastructure Companies. Infrastructure companies are subject to the risk that: the potential for realized revenue volumes is significantly lower than projected and/or cost overruns; the nature of the concession fundamentally changes during the life of the project (e.g., the state sponsor alters the terms); macroeconomic factors such as low GDP growth or high nominal interest rates raise the average cost of funding; government regulation may affect rates charged to customers; government budgetary constraints impact projects; special tariffs are imposed; and changes in tax laws, regulatory policies or accounting standards could be unfavorable. Other risks include environmental damage due to a company's operations or an accident, changes in market sentiment towards infrastructure and terrorist acts. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Depositary Receipts. Depositary receipts (including American Depositary Receipts and Global Depositary Receipts) are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company. Depositary receipts are generally subject to the same risks of investing in the foreign securities they evidence or into which they may be converted. |
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
130
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. The highly leveraged nature of many such loans, including bank loans, and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Investments in bank loans are typically subject to the risks of floating rate securities. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Convertible Securities. Convertible securities are subject to both the credit and interest rate risks associated with fixed income securities and to the market risk associated with common stocks. Contingent convertible securities generally provide for mandatory conversion into common stock of the issuer under certain circumstances, and therefore are subject to the risk that the Fund could experience a reduced income rate and a worsened standing in the case of an issuer’s insolvency. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Puts, Stand-by Commitments and Demand Notes. The ability of the Fund to exercise a put or stand-by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand-by commitment is exercised or on certain restrictions in the buy back arrangement. If there is a shortfall in the anticipated proceeds from demand notes, including variable rate demand notes, the notes may not be fully repaid and the Fund may lose money. |
| • | Securities of Other Investment Companies. Investments in other investment companies expose shareholders to the expenses and risks associated with the investments of the Fund as well as to the expenses and risks of the underlying investment companies. |
131
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment strategies employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
132
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective March 1, 2022, RIM began managing the Fund with a
benchmark relative approach rather than a benchmark agnostic approach.
As a
result, effective March 1, 2022, RIM changed the Fund's primary benchmark from
the ICE BofA Global High Yield 2% Constrained Index (USD Hedged) to the 30% FTSE
All-World/70% FTSE US Broad Investment Grade Composite Index
(gross). After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are not
relevant to investors who hold their Shares through tax-deferred arrangements,
such as 401(k) plans or individual retirement accounts.
If the Fund has realized
capital losses, the total return after taxes on distributions and sale of Fund
Shares may be higher than the total return before taxes and the total return
after taxes on distributions. For more information, see the
Performance Notes section in the Fund’s
Prospectus.
133
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | 5 Years | Since Inception | |||
|
Return Before Taxes, Class A
|
||||||
|
Return Before Taxes, Class C
|
||||||
|
Return Before Taxes, Class C1
|
||||||
|
Return Before Taxes, Class M
|
||||||
|
Return Before Taxes, Class R6
|
||||||
|
Return Before Taxes, Class Y
|
||||||
|
Return Before Taxes, Class S
|
||||||
|
Return After Taxes on Distributions, Class
S
|
||||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||||
|
30% FTSE All-World/70% FTSE US Broad Investment
Grade Composite Index (gross)
|
||||||
|
ICE BofA Global High Yield 2% Constrained Index
(USD Hedged) (reflects no deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Berenberg Asset Management LLC | • Man Investments Australia Limited |
| • Boston Partners Global Investors, Inc. | • Oaktree Fund Advisors, LLC |
| • Cohen & Steers Capital Management, Inc., Cohen & Steers UK Limited and Cohen & Steers Asia Limited | • Putnam Investment Management, LLC |
| • Easterly Investment Partners LLC | • RiverPark Advisors, LLC |
| • GLG LLC | • Sompo Asset Management Co., Ltd. |
| • Kopernik Global Investors, LLC |
Portfolio
Managers
Brian
Meath, Managing Director, Head of Portfolio Management, Rob Balkema, Senior
Portfolio Manager, and Venkat Kopanathi, Portfolio Manager, have primary
responsibility for the management of the Fund. Mr. Meath and Mr. Balkema have
managed the Fund since May 2015 and Mr. Kopanathi has managed the Fund since
June 2021.
134
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
135
Multi-Asset Growth Strategy
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term total return with lower volatility than equity
markets.
Fees
and Expenses of the Fund
The
following tables describe the fees and expenses that you may pay if you buy,
hold, and sell Shares of the Fund. In addition to the fees and expenses
described below, you may also be required to pay brokerage commissions on
purchases and sales of Class S Shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Russell Investments
Funds. In addition, certain Financial Intermediaries (as defined
below in the Additional Information section) may impose different sales loads
and waivers. More information about these and other discounts is available from
your financial professional and in the Front-End Sales Charges and More About
Deferred Sales Charges sections and Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers and Discounts,
beginning on pages 278, 282 and 353, respectively, of the Prospectus, and in the
Purchase, Exchange and Redemption of Fund Shares section, beginning on page 34,
of the Fund’s Statement of Additional Information. Please see the Expense Notes
section of the Fund’s Prospectus for further information regarding expenses of
the Fund.
Shareholder
Fees (fees paid directly from your investment)
| Class A | Class
C, M, R6, S, Y |
Class C1 | |||
|
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
|
|||||
|
Maximum Deferred Sales Charge (Load)*
|
|||||
|
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends
|
| * |
Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment)#
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
Advisory Fee
|
|||||||||||||
|
Distribution (12b-1) Fees (including shareholder
services fees of 0.25% for Class C1 Shares)
|
|||||||||||||
|
Other Expenses (including shareholder services
fees of 0.25% for Class C Shares)
|
|||||||||||||
|
Total Annual Fund Operating Expenses
|
|||||||||||||
|
Less Fee Waivers and Expense Reimbursements
|
( |
( |
( |
( |
( |
( |
( | ||||||
|
Net Annual Fund Operating Expenses
|
|||||||||||||
| # | Until February 28, 2023, Russell Investment Management, LLC (“RIM”) has contractually agreed to waive up to the full amount of its advisory fee and then to reimburse the Fund for other direct Fund-level expenses and to the extent such expenses exceed 0.73% 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, infrequent and/or unusual expenses, or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund. |
Until
February 28,
2023 , RIFUS has contractually agreed to waive 0.10% of its
transfer agency fees for Class M Shares and 0.02% of its transfer agency fees
for Class R6 Shares. These waivers may not be terminated during the relevant
period except with Board approval.
136
Example
This
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes your investment has a 5% return each year and that
operating expenses remain the same. The calculation of costs for the one year
period takes into account the effect of any current contractual fee waivers
and/or reimbursements and permanent fee waivers. The calculation of costs
for the remaining periods takes such contractual fee waivers and/or
reimbursements into account only for the first year of the periods and such
permanent fee waivers into account for all periods.
Although
your actual costs may be higher or lower, under these assumptions your costs
would be:
| Share Classes | |||||||||||||
| A | C | C1 | M | R6 | S | Y | |||||||
|
1 Year
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
3 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
5 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
|
10 Years
|
$ |
$ |
$ |
$ |
$ |
$ |
$ | ||||||
For
Class C1 Shares, you would pay the following if you did not redeem your
Shares:
| 1
Year $ |
3
Years $ |
5
Years $ |
10
Years $ |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
207 % of the average value of its
portfolio.
Investments,
Risks and Performance
Principal
Investment Strategies of the Fund
In
an effort to provide equity-like total return over a market cycle while
mitigating downside risk and volatility relative to equities, Russell Investment
Management, LLC (“RIM”) allocates the Fund’s assets across a broad range of
instruments, asset classes and strategies. To seek to achieve the Fund’s
objective, RIM dynamically manages the Fund’s positioning based on RIM’s outlook
on the business and economic cycle, relative market valuations and market
sentiment. By evolving the Fund’s positioning away from sectors with higher
relative valuations and towards those believed to present more attractive
opportunities, RIM attempts to reduce the Fund’s downside risk and enable the
Fund to provide long term total return from a diverse range of potential
investments.
The
Fund’s target strategic asset allocation is 60% to global equity or
equity-related securities or instruments, including equity securities of real
assets-related companies, and 40% global fixed income or fixed income-related
securities or instruments, including high yield debt. However, the Fund is not
required to allocate its investments in any set proportion and RIM will
dynamically manage the Fund’s asset allocation based on market conditions
generally by up to plus/minus 10% from the Fund’s target strategic asset
allocations.
The
Fund’s global equity investments span developed and emerging markets and may
include real estate and infrastructure companies. The Fund’s global fixed income
investments may include government and corporate debt, U.S., non-U.S. and
emerging markets debt, investment grade and high yield debt, and mortgage-backed
and asset-backed securities. The Fund’s fixed income portfolio is expected to
include a significant allocation to return-seeking fixed income investments. The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.
137
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and
multiple money managers unaffiliated with RIM pursuant to a multi-asset,
multi-manager approach. RIM may change a Fund's asset allocation at any
time. The Fund employs discretionary and non-discretionary money managers. The
Fund’s discretionary money managers select the individual
portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies and utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures. RIM may use strategies based on
indexes. RIM also manages the portion of Fund assets for which the Fund’s
non-discretionary money managers provide model portfolios to RIM and the Fund’s
cash balances.
The
Fund may invest in equity securities of issuers of any market capitalization
which are economically tied to U.S. and non-U.S. markets, including emerging
markets. These securities may include common stocks, preferred stocks, rights,
warrants, convertible securities, securities issued in connection with initial
public offerings and depositary receipts. The Fund’s investments in convertible
securities may include contingent convertible securities. The Fund may invest in
securities of companies, known as real estate investment trusts (“REITs”) that
own and/or manage properties. The Fund may invest in infrastructure companies
and master limited partnerships (“MLPs”). Infrastructure refers to the systems
and networks of energy, transportation, communication and other services
required for the normal function of
society.
The
Fund may invest in fixed income securities of any credit quality and maturity,
including fixed income securities that are rated below investment grade
(commonly referred to as “high yield” or “junk bonds”) and in “distressed” debt
securities. The Fund may invest in (1) U.S. and non-U.S. corporate fixed income
securities, (2) fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities) and by non-U.S.
governments, or by their respective agencies and instrumentalities, (3) emerging
markets debt securities, (4) mortgage-backed securities and (5) asset-backed
securities. The Fund may also invest in variable and floating rate securities.
The Fund may purchase loans and other direct indebtedness, including bank loans
(also called “leveraged loans”). The Fund may invest in currency futures and
options on futures, forward currency contracts and currency options for
speculative purposes or to seek to protect a portion of its investments against
adverse currency exchange rate changes. The Fund may enter into repurchase
agreements and reverse repurchase agreements. The Fund may invest in money
market securities and commercial paper, including asset-backed commercial paper,
and in bank obligations.
The
Fund may invest in derivative instruments including futures, forwards, options,
swaps, swaptions and credit default swaps, and may use derivatives to take both
long and short positions. The Fund may invest in credit linked notes and credit
options. The Fund may invest in synthetic foreign fixed income or equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price
warrants.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its
portfolio.
The
Fund may invest in other investment companies and pooled investment
vehicles.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment
strategies.
A
portion of the Fund’s net assets may be “illiquid”
investments.
Depending
upon market conditions, RIM may allocate a significant portion of the Fund's
assets to cash in order to seek to achieve the Fund's objective. The
Fund may expose all or a portion of its cash to changes in interest
rates or market/sector returns by purchasing
derivatives.
Please
refer to the “Investment Objective and Investment Strategies” section in the
Fund's Prospectus for further
information.
Principal
Risks of Investing in the Fund
| • | Equity Securities. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Investments in small and medium capitalization companies may involve greater risks because these companies generally have narrower markets, |
138
| more limited managerial and financial resources and a less diversified product offering than larger, more established companies. Small and some medium capitalization stocks may also be thinly traded, and thus, difficult to buy and sell in the market. Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. | |
| • | Fixed Income Securities. Prices of fixed income securities generally rise and fall in response to, among other things, interest rate changes. Volatility in interest rates and in fixed income markets may increase the risk that the Fund’s investments in fixed income securities could lose money. In addition, the Fund could lose money if the issuer or guarantor of a fixed income security or other issuer of credit support is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Fixed income securities may be downgraded in credit rating or go into default. |
| • | Non-U.S. and Emerging Markets Securities. Non-U.S. securities have risks relating to political, economic, social and regulatory conditions in foreign countries. Non-U.S. securities may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. The risks associated with non-U.S. securities may be amplified for emerging markets securities. |
| • | Currency Risk. Non-U.S. securities that trade in, and receive revenues in, non-U.S. currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Fund. |
| • | Currency Trading Risk. Currency trading strategies may involve instruments that have volatile prices, are illiquid or less liquid or create economic leverage. Forward currency contracts are subject to the risk that, should forward prices increase, a loss will be incurred to the extent that the price of the currency agreed to be purchased exceeds the price of the currency agreed to be sold. |
| • | Real Estate Securities. Just as real estate values go up and down, the value of the securities of real estate companies also fluctuates. Real estate securities, including real estate investment trusts (“REITs”), may be affected by changes in the value of the underlying properties owned by the companies and by the quality of tenants’ credit. |
| • | Infrastructure Companies. Infrastructure companies are subject to the risk that: the potential for realized revenue volumes is significantly lower than projected and/or cost overruns; the nature of the concession fundamentally changes during the life of the project (e.g., the state sponsor alters the terms); macroeconomic factors such as low GDP growth or high nominal interest rates raise the average cost of funding; government regulation may affect rates charged to customers; government budgetary constraints impact projects; special tariffs are imposed; and changes in tax laws, regulatory policies or accounting standards could be unfavorable. Other risks include environmental damage due to a company's operations or an accident, changes in market sentiment towards infrastructure and terrorist acts. |
| • | Derivatives. Investments in a derivative instrument could lose more than the initial amount invested. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests only in conventional securities. The use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in equity or fixed income securities, currencies or other instruments. Derivatives are generally subject to a number of risks such as leveraging risk, liquidity risk, market risk, credit risk, default risk, counterparty risk (the risk that the other party in an agreement will fail to perform its obligations), management risk, operational risk and legal risk. Certain of these risks do not apply to derivative instruments entered into for hedging or cash equitization, certain cleared derivative instruments, and written options contracts. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative instrument may not correlate exactly with the change in the value of the underlying asset, rate or index. |
| • | Synthetic Foreign Equity/Fixed Income Securities. Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In addition, the exercise or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time. |
139
| • | Master Limited Partnerships (“MLPs”). Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. The benefit derived from the Fund’s investment in MLPs is largely dependent on the MLPs being treated as partnerships for U.S. federal income tax purposes. |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities. Bonds issued or guaranteed by a government are subject to inflation risk, price depreciation risk and default risk. |
| • | U.S. and Non-U.S. Corporate Debt Securities Risk. Investments in U.S. and non-U.S. corporate debt securities are subject to interest rate risk and market risk, and are affected by perceptions of the creditworthiness and business prospects of individual issuers. Non-U.S. corporate debt securities may expose the Fund to greater risk than investments in U.S. corporate debt securities. |
| • | Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”). Non-investment grade debt securities involve higher volatility and higher risk of default than investment grade bonds. |
| • | Distressed Securities. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, the Fund may lose all of its investment. |
| • | Mortgage-Backed Securities. Mortgage-backed securities may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The underlying assets may default or decline in quality or value. |
| • | Asset-Backed Securities. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. |
| • | Loans and Other Direct Indebtedness. Loans and other direct indebtedness involve the risk that payment of principal, interest and other amounts due in connection with these investments may not be received. The highly leveraged nature of many such loans, including bank loans, and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Investments in bank loans are typically subject to the risks of floating rate securities. |
| • | Non-U.S. and Emerging Markets Debt. The value of an investment in non-U.S. and emerging markets debt may be affected by political, economic or social conditions or foreign currency exchange rates. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or default by the issuer. Non-U.S. and emerging markets debt may also be subject to risk of loss because of more or less foreign government regulation, less public information and less stringent investor protections and disclosure standards. |
| • | Convertible Securities. Convertible securities are subject to both the credit and interest rate risks associated with fixed income securities and to the market risk associated with common stocks. Contingent convertible securities generally provide for mandatory conversion into common stock of the issuer under certain circumstances, and therefore are subject to the risk that the Fund could experience a reduced income rate and a worsened standing in the case of an issuer’s insolvency. |
| • | Bank Obligations. The banking industry may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. The banking industry may also be impacted by legal and regulatory developments. |
| • | Money Market Securities (Including Commercial Paper). Prices of money market securities generally rise and fall in response to interest rate changes. |
| • | Asset-Backed Commercial Paper. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. |
| • | Repurchase Agreements. Repurchase agreements are subject to the risk that the sellers may not be able to pay the agreed-upon repurchase price on the repurchase date. |
140
| • | Reverse Repurchase Agreements. Reverse repurchase agreements are subject to the risk that the other party may fail to return the security in a timely manner or at all. The Fund may lose money if the market value of the security transferred by the Fund declines below the repurchase price. |
| • | Variable and Floating Rate Securities Risk. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. |
| • | Volatility Strategies Risk. Volatility strategies depend on mispricings based upon market anticipated volatility and realized volatility of an underlying asset. If anticipated and realized volatility are incorrectly estimated, the strategy may result in losses. |
| • | Securities of Other Investment Companies. Investments in other investment companies expose shareholders to the expenses and risks associated with the investments of the Fund as well as to the expenses and risks of the underlying investment companies. |
| • | Illiquid Investments. An illiquid or less liquid investment may be difficult to sell quickly and at a fair price, which could cause the Fund to realize a loss on the investment if it was sold at a lower price than that at which it had been valued. |
| • | Liquidity Risk. The market for certain investments may become illiquid or less liquid (i.e., there may be a significant reduction in trading activity, including in the number of market participants or transactions, in such investments) under adverse or volatile market or economic conditions, making those investments difficult to sell. The market price of certain investments may fall dramatically if there is no liquid trading market. For derivatives, this also includes the risk involving liquidity demands that derivatives can create to make payments of margin or settlement payments to counterparties. Such events and conditions may adversely affect the value of the Fund’s investments, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
| • | Counterparty Risk. Counterparty risk is the risk that the other party or parties to an agreement or a participant to a transaction, such as a broker, might default on a contract or fail to perform by failing to pay amounts due or failing to fulfill the obligations of the contract or transaction. |
| • | High Portfolio Turnover Risk. The Fund may engage in active and frequent trading, which may result in higher portfolio turnover rates, higher transaction costs and realization of short-term capital gains that will generally be taxable to shareholders as ordinary income. |
| • | Active Management. Despite strategies designed to achieve the Fund’s investment objective, the value of investments will change with market conditions, and so will the value of any investment in the Fund and you could lose money. The securities selected for the portfolio may not perform as RIM or the Fund's money managers expect. Additionally, securities selected may cause the Fund to underperform relative to other funds with similar investment objectives and strategies. There is no guarantee that RIM will effectively assess the Fund's portfolio characteristics and it is possible that its judgments regarding the Fund's exposures may prove incorrect. In addition, actions taken to manage Fund exposures, including risk, may be ineffective and/or cause the Fund to underperform. |
| • | Multi-Manager Approach. While the investment strategies employed by the money managers are intended to be complementary, they may not in fact be complementary. A multi-manager approach could result in more exposure to certain types of securities and higher portfolio turnover. |
| • | Index-Based Investing. Index-based strategies (including index replication which seeks to purchase the securities in an index or a blend of indexes and optimized index sampling which seeks to purchase a sampling of securities using optimization and risk models), which may be used to gain desired Fund exposures, may cause the Fund's returns to be lower than if the Fund employed a fundamental investment approach to security selection with respect to that portion of its portfolio. Additionally, index-based strategies are subject to “tracking error” risk, which is the risk that the performance of the portion of the Fund's portfolio utilizing an index-based strategy will differ from the performance of the index it seeks to track. |
| • | Fundamental Investing Risk. A fundamental investment approach uses research and analysis of a variety of factors to create a forecast of company results, which is used to select securities. The process may result in an evaluation |
141
| of a security’s value that may be incorrect or, if correct, may not be reflected by the market. Security or instrument selection using a fundamental investment approach may also cause the Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. | |
| • | Quantitative Investing. Quantitative inputs and models use historical company, economic and/or industry data to evaluate prospective investments or to generate forecasts which could result in incorrect assessments of the specific portfolio characteristics or ineffective adjustments to the Fund’s exposures. Securities selected using quantitative analysis may perform differently than analysis of their historical trends would suggest. Inputs or models may be flawed or not work as anticipated and may cause the Fund to underperform other funds with similar investment objectives and strategies. |
| • | Non-Discretionary Implementation Risk. With respect to the portion of the Fund that is managed pursuant to model portfolios provided by non-discretionary money managers, it is expected that trades will be effected on a periodic basis and therefore less frequently than would typically be the case if discretionary money managers were employed. Given that values of investments change with market conditions, this could cause the Fund's return to be lower than if the Fund employed discretionary money managers with respect to that portion of its portfolio. |
| • | Impact of Large Redemptions (Including Possible Fund Liquidation). The Fund is used as an investment by certain funds of funds and in asset allocation programs and may have a large percentage of its Shares owned by such funds or held in such programs. Large redemption activity could result in the Fund incurring additional costs and being forced to sell portfolio securities at a loss to meet redemptions. Large redemptions may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to the Fund’s portfolio securities, higher Fund cash levels, higher brokerage commissions and other transaction costs, among other negative consequences such as reduced liquidity in the Fund’s portfolio. As a result, large redemption activity could adversely affect the Fund’s ability to conduct its investment program which, in turn, could adversely impact the Fund’s performance or may result in the Fund no longer remaining at an economically viable size, in which case the Fund may cease operations. |
| • | Global Financial Markets Risk. Global economies and financial markets are becoming increasingly interconnected and conditions (including recent volatility and instability) and events (including natural disasters, pandemics and epidemics) in one country, region or financial market may adversely impact issuers in a different country, region or financial market. In addition, governmental and quasi-governmental organizations have taken a number of unprecedented actions designed to support the markets. Such events and conditions may adversely affect the value of the Fund’s securities, result in greater market or liquidity risk or cause difficulty valuing the Fund’s portfolio instruments or achieving the Fund’s objective. |
Please
refer to the “Risks” section in the Fund’s Prospectus for further
information.
Performance
The
table accompanying the bar chart further illustrates the risks of investing in
the Fund by showing how the Fund’s average annual total returns for the periods
shown compare with the returns of one or more indexes that measure broad market
performance. Effective March 1, 2022, RIM began managing the Fund with a
benchmark relative approach rather than a benchmark agnostic approach.
As a
result, effective March 1, 2022, RIM changed the Fund's primary benchmark from
the S&P 500® Index
to the 60% FTSE All-World/40% FTSE US Broad Investment Grade Composite Index
(gross). After-tax returns are shown
only for one class. The after-tax returns for other classes will
vary. After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. After-tax returns are
not relevant to investors who hold their Shares through tax-deferred
arrangements, such as
142
Class
S Calendar Year Total Returns
for the periods ended December 31, 2021 |
1 Year | Since Inception | ||
|
Return Before Taxes, Class A
|
||||
|
Return Before Taxes, Class C
|
||||
|
Return Before Taxes, Class C1
|
||||
|
Return Before Taxes, Class M
|
||||
|
Return Before Taxes, Class R6
|
||||
|
Return Before Taxes, Class Y
|
||||
|
Return Before Taxes, Class S
|
||||
|
Return After Taxes on Distributions, Class
S
|
||||
|
Return After Taxes on Distributions and Sale of
Fund Shares, Class S
|
||||
|
60% FTSE All-World/40% FTSE US Broad Investment
Grade Composite Index (gross)
|
||||
|
S&P 500®
Index (reflects no deduction for fees, expenses or taxes)
|
Management
Investment
Adviser
The
Fund's investment adviser is RIM. The Fund's money managers are:
| • Atlantic Investment Management, Inc. | • Hermes Investment Management Limited |
| • Berenberg Asset Management LLC | • Kopernik Global Investors, LLC |
| • Boston Partners Global Investors, Inc. | • Man Investments Australia Limited |
| • Cohen & Steers Capital Management, Inc., Cohen & Steers UK Limited and Cohen & Steers Asia Limited | • Oaktree Fund Advisors, LLC |
| • Easterly Investment Partners LLC | • Putnam Investment Management, LLC |
| • First Sentier Investors (Australia) IM Ltd | • RiverPark Advisors, LLC |
| • GLG LLC | • Sompo Asset Management Co., Ltd. |
143
Portfolio
Managers
Rob
Balkema, Senior Portfolio Manager, Brian Meath, Managing Director, Head of
Portfolio Management, and Venkat Kopanathi, Portfolio Manager have primary
responsibility for the management of the Fund. Mr. Balkema and Mr. Meath have
managed the Fund since March 2017 and Mr. Kopanathi has managed the Fund since
June 2021.
Additional
Information
For
important information about:
| • | Purchase of Fund Shares, please see How to Purchase Shares on page 145. |
| • | Redemption of Fund Shares, please see How to Redeem Shares on page 145. |
| • | Taxes, please see Taxes on page 145. |
| • | Financial Intermediary Compensation, please see Payments to Broker-Dealers and Other Financial Intermediaries on page 145. |
144
Additional
Information
How
to Purchase Shares
Unless
you are eligible to participate in a Russell Investments employee investment
program, Shares are only available through a select network of banks (including
bank trust departments), registered investment advisers, broker-dealers and
other financial services organizations (collectively, “Financial
Intermediaries”). Certain Classes of Shares may only be purchased by specified
categories of investors and are only offered by certain Financial
Intermediaries. There is currently no required minimum initial investment for
Class A, Class C, Class C1, Class M, Class R6 or Class S Shares. For Class
Y Shares, there is a $10 million minimum initial investment for each
account in each Fund. However, for Class Y Shares there is no required
minimum initial investment for specified categories of investors. Each Fund
reserves the right to close any account whose balance falls below $500 and to
change the categories of investors eligible to purchase its Shares.
For
more information about how to purchase Shares, please see Additional Information
about How to Purchase Shares in the Funds' Prospectus.
How
to Redeem Shares
Shares
may be redeemed through your Financial Intermediary on any business day of the
Funds (defined as a day on which the New York Stock Exchange (“NYSE”) is open
for regular trading). Redemption requests are processed at the next net asset
value per share calculated after a Fund receives an order in proper form as
determined by your Financial Intermediary. Redemption requests must normally be
received by a Fund or a Fund agent prior to the close of regular trading on the
NYSE (normally 4:00 p.m., Eastern Time) on a business day of the Funds, in order
to be processed at the net asset value calculated on that day. Because Financial
Intermediaries and Fund agents may have earlier redemption order cut off times
to allow them to deliver redemption orders to the Funds prior to the Funds'
order transmission cut off time, please ask your Financial Intermediary what the
cut off time is. Please contact your Financial Intermediary for instructions on
how to place redemption requests.
For
more information about how to redeem Shares, please see Additional Information
about How to Redeem Shares in the Funds' Prospectus.
Taxes
Unless
you are investing through an IRA, 401(k) or other tax-advantaged retirement
account, distributions from a Fund are generally taxable to you as
either ordinary income or capital gains.
For
more information about these and other tax matters relating to each Fund and its
shareholders, please see Additional Information about Taxes in the Funds'
Prospectus.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Shares of a Fund through a broker-dealer or other Financial
Intermediary (such as a bank), a Fund and its related companies may pay the
intermediary for the sale of Fund Shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend a Fund over another investment.
Ask your salesperson or visit your Financial Intermediary’s website for more
information.
For
more information about payments to broker-dealers and other Financial
Intermediaries please see Distribution and Shareholder Services Arrangements and
Payments to Financial Intermediaries in the Funds' Prospectus.
145
MANAGEMENT
OF THE Funds
The
Funds' investment adviser is RIM, 1301 Second Avenue, 18th Floor, Seattle,
Washington 98101. RIM was established in 1982 and pioneered the “multi-style,
multi-manager” investment method in mutual funds and, as of December 31, 2021,
managed over $41.9 billion in 40 mutual fund portfolios. RIM is an indirect,
wholly-owned subsidiary of Russell Investments Group, Ltd., through which the
limited partners of certain private equity funds affiliated with TA Associates
Management, L.P. (“TA Associates”) indirectly hold a majority ownership interest
and the limited partners of certain private equity funds affiliated with
Reverence Capital Partners, L.P. (“Reverence Capital”) indirectly hold a
significant minority ownership interest in RIM and its affiliates (“Russell
Investments”). Russell Investments’ employees and Hamilton Lane Advisors, LLC,
also hold minority, non-controlling positions in Russell Investments Group, Ltd.
TA Associates is one of the oldest and most experienced global growth private
equity firms. Reverence Capital is a private investment firm, focused on
investing in leading financial services companies.
The
RIC funds (“RIC Funds”) are offered through certain banks (including bank trust
departments), registered investment advisers, broker-dealers and other financial
services organizations (collectively, “Financial Intermediaries”) that have
been selected by RIM or Russell Investments Financial Services, LLC (the
“Distributor”). Most RIC Funds are designed to be used within multi-asset
portfolios to gain exposure to a globally diverse mix of asset classes and
styles and to combine traditional securities, such as equities and bonds,
with non-traditional approaches, such as alternative investments. RIM's
multi-asset approach combines diversification, research and selection of
unaffiliated money managers and dynamic portfolio management. RIM uses its
core capabilities (capital markets insights, manager research, asset allocation,
portfolio implementation and factor exposures) to manage the Funds by combining
various money managers and strategies into a single Fund.
Most
Funds' assets are invested using a “multi-style, multi-manager diversification”
technique. Unlike most investment companies that have a single organization that
acts as investment adviser, the Funds divide responsibility for investment
advice between RIM and a number of money managers unaffiliated with RIM. RIM’s
money manager research services include evaluating and recommending professional
investment advisory and management organizations (“money managers”) to make
specific portfolio investments or recommendations for each asset class,
according to designated investment objectives, styles and strategies.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Funds. Subject to the approval of the Funds'
Board of Trustees (the “Board”), RIM selects, oversees and evaluates the
performance results of the Funds' money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time, including not allocating Fund assets to one or
more money manager 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 instruments for
the assets assigned to it, (2) a non-discretionary assignment pursuant to which
it provides a model portfolio to RIM representing its investment
recommendations, based upon which RIM purchases and sells securities for a
Fund or (3) both a discretionary and non-discretionary assignment. RIM does
not evaluate the investment merits of a money manager’s individual security
selections or recommendations. RIM manages Fund assets not allocated to
discretionary money managers. RIM also manages the portion of Fund assets for
which a Fund’s non-discretionary money managers provide model portfolios to RIM
and each Fund’s cash balances. RIM may also manage portions of a Fund
during transitions between money managers.
The
Funds' administrator and transfer agent is Russell Investments Fund Services,
LLC (“RIFUS”), a wholly-owned subsidiary of RIM. RIFUS, in its capacity as
the Funds' administrator, provides or oversees the provision of all
administrative services for the Funds. The Funds' custodian, State Street Bank
and Trust Company (“State Street”), maintains custody of the Funds' assets and
establishes and monitors subcustodial relationships with banks and certain other
financial institutions in the foreign countries in which the Funds invest.
RIFUS, in its capacity as the Funds' transfer agent, is responsible for
maintaining the Funds' shareholder records and carrying out shareholder
transactions. As described above, each Fund conducts its business through a
number of service providers who act on its behalf. When a Fund acts in one of
these areas, it does so through the service provider responsible for that
area.
RIM’s
employees who manage the RIC Funds, oversee the money managers of the RIC Funds
and have primary responsibility for the management of the RIC Funds (the “RIM
Managers”) are:
146
| • | Rob Balkema, Senior Portfolio Manager since May 2016. Mr. Balkema shares primary responsibility for the management of the Multi-Strategy Income and Multi-Asset Growth Strategy Funds with Mr. Kopanathi and Mr. Meath. |
| • | Kevin Divney, Senior Portfolio Manager since April 2017. Prior to joining Russell Investments, Mr. Divney was the Founder and Chief Investment Officer of Beaconcrest Capital Management, a registered investment adviser providing absolute return, long-short, and long-only concentrated equity portfolios. Mr. Divney shares primary responsibility for the management of the Equity Income, U.S. Strategic Equity and Tax-Managed U.S. Large Cap Funds with Ms. Roach. |
| • | Jon Eggins, Senior Director, Head of Global Equity since September 2020. From November 2013 to August 2020, Mr. Eggins was a Senior Portfolio Manager. Mr. Eggins has primary responsibility for the management of the International Developed Markets Fund and shares primary responsibility for the management of the Global Equity and Tax-Managed International Equity Funds with Mr. McCall. |
| • | Bruce Eidelson, Senior Portfolio Manager since November 2013. Mr. Eidelson shares primary responsibility for the management of the Global Real Estate Securities Fund with Mr. Nikodem. |
| • | Gerard Fitzpatrick, Head of Fixed Income, Senior Portfolio Manager since March 2019. Mr. Fitzpatrick was Chief Investment Officer of Fixed Income from November 2013 to March 2019. Mr. Fitzpatrick shares primary responsibility for the management of the Unconstrained Total Return Fund with Ms. Ravanas, shares primary responsibility for the management of the Strategic Bond Fund with Mr. Jalso and Mr. Nott, shares primary responsibility for the management of the Short Duration Bond Fund with Mr. Nott and shares primary responsibility for the management of the Tax-Exempt High Yield Bond and Tax-Exempt Bond Funds with Mr. Jalso. |
| • | Nick Haupt, Associate Portfolio Manager since March 2021. Mr. Haupt was a Senior Portfolio Analyst from March 2016 to February 2021. Mr. Haupt shares primary responsibility for the management of the Sustainable Equity Fund with Ms. Roach. |
| • | Kathrine Husvaeg, Senior Portfolio Manager since March 2016. Ms. Husvaeg shares primary responsibility for the management of the Emerging Markets Fund with Mr. Soerensen. |
| • | Albert Jalso, Director, Senior Portfolio Manager, Fixed Income since September 2020. From March 2012 to August 2020, Mr. Jalso was a Senior Portfolio Manager. Mr. Jalso shares primary responsibility for the management of the Investment Grade Bond and Opportunistic Credit Funds with Mr. Nott, shares primary responsibility for the management of the Tax-Exempt High Yield Bond and Tax-Exempt Bond Funds with Mr. Fitzpatrick, and shares primary responsibility for the management of the Strategic Bond fund with Mr. Fitzpatrick and Mr. Nott. |
| • | Venkat Kopanathi, Portfolio Manager – Multi-Asset Solutions since March 2016. Mr. Kopanathi shares primary responsibility for the management of the Multi-Strategy Income and Multi-Asset Growth Strategy Funds with Mr. Balkema and Mr. Meath. |
| • | Brian Meath, Managing Director, Head of Portfolio Management since March 2019. Mr. Meath was Chief Investment Officer of Multi-Asset Solutions from May 2016 to March 2019. Mr. Meath was a Senior Portfolio Manager from 2013 to April 2016. Mr. Meath shares primary responsibility for the management of the Multi-Strategy Income and Multi-Asset Growth Strategy Funds with Mr. Balkema and Mr. Kopanathi. |
| • | Jordan McCall, Portfolio Manager since 2019. Mr. McCall was an Associate Portfolio Manager from 2015 to 2019. Mr. McCall shares primary responsibility for the management of the Global Equity and Tax-Managed International Equity Funds with Mr. Eggins. |
| • | Patrick Nikodem, Senior Portfolio Manager since March 2021. Mr. Nikodem was a Portfolio Manager from March 2015 to March 2021. Mr. Nikodem has primary responsibility for the management of the Global Infrastructure, Tax-Managed Real Assets and Real Assets Funds and shares primary responsibility for the management of the Global Real Estate Securities Fund with Mr. Eidelson. |
| • | Gregory Nott, Senior Director, Head of Multi Asset Canada since December 2020. From March 2020 to December 2020, Mr. Nott was Director, Senior Portfolio Manager Multi-Asset and from June 2011 to February 2020 Mr. Nott was Chief Investment Officer Russell Investments Canada Ltd. Mr. Nott shares primary responsibility for the |
147
| management of the Investment Grade Bond and Opportunistic Credit Funds with Mr. Jalso, shares primary responsibility for the management of the Short Duration Bond Fund with Mr. Fitzpatrick and shares responsibility for the management of the Strategic Bond Fund with Mr. Jalso and Mr. Fitzpatrick. | |
| • | Helena Hui Ravanas, Portfolio Manager, Fixed Income since April 2020. From March 2017 to March 2020, Ms. Ravanas was a Senior Research Analyst, Fixed Income. Ms. Ravanas shares primary responsibility for the management of the Unconstrained Total Return Fund with Mr. Fitzpatrick. |
| • | Megan Roach, Senior Portfolio Manager since March 2018. Ms. Roach was a Portfolio Manager from March 2015 to March 2018. Ms. Roach has primary responsibility for the management of the U.S. Small Cap Equity and Tax-Managed U.S. Mid & Small Cap Equity Funds, shares primary responsibility for the Sustainable Equity Fund with Mr. Haupt and shares primary responsibility for the management of the Equity Income, U.S. Strategic Equity and Tax-Managed U.S. Large Cap Funds with Mr. Divney. |
| • | Soeren Soerensen, Portfolio Manager since March 2020. Mr. Soerensen was an Associate Portfolio Manager from May 2019 to March 2020. From March 2016 to May 2019, Mr. Soerensen was an Implementation Portfolio Manager. Mr. Soerensen shares primary responsibility for the management of the Emerging Markets Fund with Ms. Husvaeg. |
Please
see the Funds' Statement of Additional Information (“SAI”) for additional
information about the RIM Managers' compensation, other accounts managed by the
RIM Managers and the RIM Managers' ownership of securities in the Funds.
In
the last fiscal year, the aggregate annual rate of advisory fees paid to RIM as
a percentage of average daily net assets was: Equity Income Fund, 0.50%;
Sustainable Equity Fund, 0.51%; U.S. Strategic Equity Fund, 0.48%; U.S.
Small Cap Equity Fund, 0.70%; International Developed Markets Fund, 0.68%;
Global Equity Fund, 0.71%; Emerging Markets Fund, 0.84%; Tax-Managed U.S. Large
Cap Fund, 0.65%; Tax-Managed U.S. Mid & Small Cap Fund, 0.96%; Tax-Managed
International Equity Fund, 0.74%; Tax-Managed Real Assets Fund, 0.76%;
Opportunistic Credit Fund, 0.60%; Unconstrained Total Return Fund, 0.49%;
Strategic Bond Fund, 0.35%; Investment Grade Bond Fund, 0.20%; Short Duration
Bond Fund, 0.31%; Tax-Exempt High Yield Bond Fund, 0.35%; Tax-Exempt Bond Fund,
0.30%; Global Infrastructure Fund, 0.55%; Global Real Estate Securities Fund,
0.75%; Multi-Strategy Income Fund, 0.42%; and Multi-Asset Growth Strategy Fund,
0.61%. The annual advisory fee as a percentage of average daily net assets for
the Real Assets Fund is 0.85%.
Each
Fund invests its cash in an unregistered cash management fund advised by RIM.
RIM has waived its 0.05% advisory fee for the unregistered fund. RIFUS 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 RIM. RIM charges a management
fee of 0.12% to this unregistered fund. Out of the management fee, RIM
pays certain expenses of the unregistered fund, including an administrative
fee of 0.025% to RIFUS. RIM retains the balance of the management
fee.
A
discussion regarding the basis for approval by the Board of the investment
advisory contract between RIM and the Funds is available in the Funds' annual
report to shareholders covering the period ended October 31, 2021.
The
Trustees are responsible generally for overseeing the management and operations
of RIC. The Trustees and RIC’s officers may amend the Prospectus, any summary
prospectus, the SAI and any contracts to which RIC 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 RIC’s registration statement, nor any other communications or disclosure
documents from or on behalf of RIC creates a contract between a shareholder of a
Fund and: (i) RIC; (ii) a Fund; (iii) a service provider to RIC or a Fund;
and/or (iv) the Trustees or officers of RIC.
The
Trustees, on behalf of RIC, enter into service agreements with RIM, RIFUS 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 RIC and the Funds. Shareholders are not third-party beneficiaries of
such agreements.
148
THE
MONEY MANAGERS
RIM
allocates most of each Fund's assets among multiple money manager investment
strategies. RIM, as the Funds' adviser, may change a Fund's asset allocation at
any time, including not allocating Fund assets to one or more money manager
strategies. Money managers are unaffiliated with RIM and are listed under “Money
Manager Information” at the end of this Prospectus.
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, (2) a
non-discretionary assignment pursuant to which it provides a model portfolio to
RIM representing its investment recommendations, based upon which RIM purchases
and sells securities for a Fund or (3) both a discretionary and
non-discretionary assignment. Assets not allocated to discretionary money
managers are managed by RIM.
Each
discretionary money manager has complete discretion to select portfolio
securities for its segment of a Fund's assets. Each non-discretionary money
manager provides RIM with a model portfolio, based upon which RIM purchases and
sells securities for a Fund. Each money manager must operate within each Fund's
investment objectives, restrictions and policies. Additionally, each money
manager must operate within more specific parameters developed from time to time
by RIM. RIM develops such parameters for each money manager based on a Fund's
investment program and RIM’s assessment of the money manager’s expertise and
investment style. By assigning more specific parameters to each money manager,
RIM attempts to capitalize on the strengths of each money manager and to combine
their investment activities in a complementary fashion. Although, under the
Funds' multi-manager structure, RIM is responsible for oversight of the services
provided by the Funds' money managers and for providing reports to the Board
regarding the money managers’ activities, the Board, the officers, RIM and
Russell Investments do not evaluate the investment merits of a money manager’s
individual security selections.
The
Funds received an exemptive order from the U.S. Securities and Exchange
Commission (“SEC”) that permits RIM to engage or terminate a money manager at
any time, subject to the approval by the Funds' Board, without a shareholder
vote. A Fund is required to notify its shareholders within 90 days after a money
manager begins providing services. Each Fund selects money managers based upon
the research and recommendations of RIM. RIM evaluates quantitatively and
qualitatively the money managers’ investment style and process, performance
record and portfolio characteristics in managing assets for specific asset
classes, investment styles and strategies. Short-term investment performance, by
itself, is not a controlling factor in the selection or termination of any money
manager.
In
accordance with an SEC order providing temporary relief from certain in-person
meeting requirements in the 1940 Act (the “Temporary Relief”), the Funds’ Board
may approve a new money manager contract or a material amendment to an existing
money manager contract at a meeting that is not in person. Once the Temporary
Relief has ended, the Funds intend to rely on a separate exemptive order that
the Funds have obtained from the SEC, stating that the Funds' Board may approve
a new money manager contract or a material amendment to an existing money
manager contract at a meeting that is not in person, provided that the Funds'
Trustees are able to participate in the meeting using a means of communication
that allows them to hear each other simultaneously during the
meeting.
149
INVESTMENT
OBJECTIVE AND INVESTMENT STRATEGIES
Each
of the following Funds has either a fundamental or a non-fundamental investment
objective as noted below. A fundamental investment objective may only be changed
with shareholder approval. A non-fundamental investment objective may be changed
by the Board of that Fund without shareholder approval. If a Fund’s investment
objective is changed, the Prospectus will be supplemented to reflect the new
investment objective. To the extent that there is a material change in a Fund’s
investment objective, shareholders will be provided with reasonable
notice.
The
Board may, if it deems appropriate to do so, authorize the liquidation or merger
of a Fund without shareholder approval in circumstances where shareholder
approval is not otherwise required by the 1940 Act. Unless Fund Shares are held
in a tax-deferred account, liquidation or merger may result in a taxable event
for shareholders of the liquidated Fund. In addition, RIM may make material
changes to a Fund's principal investment strategies without shareholder
approval.
RIM
or the money managers may or may not use all of the securities and investment
strategies listed below. This Prospectus does not describe all of the various
types of securities and investment strategies that may be used by the Funds. The
Funds may invest in other types of securities and use other investment
strategies that are not described in this Prospectus. Such securities and
investment strategies may subject the Funds to additional risks. Please see the
Statement of Additional Information for additional information about the
securities and investment strategies described in this Prospectus and about
additional securities and non-principal investment strategies that may be used
by the Funds.
Unless
otherwise stated, all percentage and credit quality limitations on Fund
investments listed in this Prospectus apply at the time of investment. There
would be no violation of any of these limitations unless a Fund fails to comply
with any such limitation immediately after and as a result of an investment. A
later change in circumstances will not require the sale of an investment if it
was proper at the time it was made.
Equity Income Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth and current income.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund is required to provide 60 days’ notice to its
shareholders prior to a change in this policy. The 80% investment requirement
applies at the time the Fund invests its assets. The Fund invests principally in
common stocks of dividend-paying large and medium capitalization U.S. companies.
The Fund may also invest in equity securities economically tied to non-U.S.
countries.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
150
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
Because
the Fund invests principally in dividend-paying U.S. equity securities, it is
anticipated that the Fund will have greater exposure to the value style and
therefore may exhibit lower volatility than U.S. equities over a market
cycle.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry or
sector). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
Equity
securities in which the Fund may invest include common stocks, preferred stocks,
partnership interests and equity-equivalent securities or instruments whose
values are based on common stocks, such as convertible securities, rights,
warrants or options (stock or stock index), futures contracts (stock or stock
index) and index swaps. Convertible securities can be bonds, notes, debentures,
preferred stock or other securities that entitle the holder to acquire the
issuer’s common stock by exchange or purchase for a predetermined rate. The Fund
may invest in contingent convertible securities, which provide for mandatory
conversion into common stock of the issuer under certain circumstances. The Fund
may invest in master limited partnerships (“MLPs”).
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
151
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM may use the cash equitization process to manage Fund exposures. RIM may not
equitize all or a portion of the Fund's cash or use the cash equitization
process to reduce market exposure. With respect to cash that is not equitized,
RIM may sell equity index put options to seek gains from premiums (cash)
received from their sale. RIM invests any remaining cash in short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income.
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the Russell 1000® Index
or within the capitalization range of the Russell 1000® Index.
On May 28, 2021, the day on which capitalization data was used for the annual
reconstitution of the Russell indexes, the market capitalization of such large
capitalization companies ranged from approximately $3.6 billion to $2.17
trillion and the market capitalization of such medium capitalization companies
ranged from approximately $3.6 billion to $46.4 billion. The market
capitalization of these companies will change with market conditions and these
capitalization ranges may vary significantly between an index reconstitution and
at the time of the next index reconstitution. The Fund may invest in companies
not included within the Russell 1000®
Index.
Non-Principal
Investment Strategies
The
Fund may invest in small capitalization stocks. The Fund may invest in pooled
investment vehicles, such as other investment companies and exchange traded
funds. The Fund may also invest in emerging markets equity securities
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Sustainable Equity Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide long term capital growth.
152
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund is required to provide 60 days’ notice to its
shareholders prior to a change in this policy. The 80% investment requirement
applies at the time the Fund invests its assets. The Fund invests principally in
common stocks of large and medium capitalization U.S. companies.
The
Fund pursues a “sustainable” investment strategy that takes into account
environmental, social and governance (“ESG”) considerations. In particular, the
Fund's investment strategy seeks to tilt the portfolio toward companies that are
expected to contribute to, and benefit from, a transition to a low carbon
emission producing economy and away from companies with the greatest exposure to
potential negative impacts of such a transition.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple
money managers unaffiliated with RIM pursuant to a “multi-style,
multi-manager” approach. Subject to the approval of the Fund’s Board of
Trustees, RIM selects, oversees and evaluates the Fund’s money managers and
allocates Fund assets among itself and multiple money manager investment
strategies. RIM may change a Fund's asset allocation at any time. The Fund
employs discretionary and non-discretionary money managers. The Fund’s
discretionary money managers select the individual portfolio instruments for the
assets assigned to them. The Fund’s non-discretionary money managers provide a
model portfolio to RIM representing their investment recommendations, based upon
which RIM purchases and sells securities for the Fund. RIM manages Fund assets
not allocated to money manager strategies. RIM also manages the portion of Fund
assets for which the Fund’s non-discretionary money managers provide model
portfolios to RIM and the Fund’s cash balances. RIM may also manage portions of
the Fund during transitions between money managers.
With
respect to the portion of the Fund that RIM manages, RIM incorporates the
following ESG-related sustainability goals into its portfolio construction
process:
| • | Environmental: including a reduction in the Fund’s exposure to companies with a relatively higher carbon footprint, higher fossil fuel reserves and/or significant revenue from coal-related activities and an increase in the Fund’s exposure to companies that generate renewable (“green”) energy. |
| • | Social: including an increase in the Fund’s exposure to companies with transparent labor policies, best practices in employee retention, health and safety and disclosure of supply chain monitoring systems and reduced exposure to companies involved in controversies. |
| • | Governance: including an increase in the Fund’s exposure to companies with strong board quality such as independence and diversity and compensation practices in line with regional market practice and reduced exposure to companies involved in governance incidents, for example involving bribery, lobbying and/or lack of auditor independence. |
These
sustainability goals are combined in RIM’s proprietary portfolio construction
process, which identifies the combination of securities that best achieves the
sustainability goals while minimizing transaction costs and deviation from the
money managers’ security selection. The Fund’s sustainability goals are analyzed
relative to the Russell 1000® Index
and are measured using RIM’s proprietary metrics and methodologies. RIM may
utilize third-party data in its analysis. RIM may modify the Fund’s
sustainability goals from time to time, including the consideration of
additional sustainability goals in its management of the Fund’s portfolio.
In
considering the ESG characteristics of a company, RIM employs an ESG rating
system based on its own and third-party methodologies that generally analyze a
company’s preparedness and performance on ESG issues that are material to their
business. Preparedness reflects a company’s preparedness to manage the material
ESG issues it faces via appropriate institutional structures, policies and
programs; and performance reflects quantitative outcomes and the company’s
involvement in controversies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM's allocation to each money manager's
strategy. RIM then optimizes the portfolio based upon RIM’s proprietary
portfolio construction process. Optimization typically includes the analysis of
tradeoffs between various risk and return factors as well as turnover and
transaction costs in order to estimate optimal portfolio positioning. For this
portion of the Fund, RIM purchases and sells
153
securities
at the times and in the manner considered by RIM to be efficient for the Fund
and it is expected that, generally, trades will be effected on a periodic basis,
unless RIM determines that more frequent trading is appropriate due to changing
market conditions or other significant factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to one or both of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
The
Fund may employ long-short equity strategies pursuant to which it enters into
short sales. The Fund will take long positions in securities believed to offer
attractive return potential and sell short securities expected to underperform.
The Fund’s long-short strategies may include (i) 115/15 or 130/30 strategies,
which are long-biased strategies that use the proceeds of short sales to
purchase long positions in other securities, (ii) market neutral strategies,
which seek to be neutral to market movements through equivalent long and short
exposures, and (iii) other types of long-short strategies, which seek varying
long and short exposures and may be long- or short-biased. The Fund may use
derivatives to take long and short positions relative to the Fund’s long-short
equity strategies with the objective of keeping the Fund’s net exposure to the
market at a level similar to a traditional “long-only” strategy.
Short
sales are transactions in which the Fund sells a security it does not own in
anticipation of a decline in the market value of that security. The Fund borrows
the security and sells it to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing the security at its market price at the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. The Fund will incur a loss as a result
of the short sale if the price of the security increases between the date of the
short sale and the date on which the Fund must return the borrowed security. The
Fund will realize a gain if the security declines in price between those dates.
This result is the opposite of what one would expect from a cash purchase of a
long position in a security. The Fund may also make short sales “against the
box.” In this type of short sale, at the time of the sale, the Fund owns or has
the immediate and unconditional right to acquire the identical security at no
additional cost. Although short selling may constitute a form of leverage, the
Fund maintains a special custody account to ensure that short sales are fully
collateralized.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models
154
(mathematical
formulas based on statistical analyses) and mathematical techniques to rank the
relative attractiveness of securities versus their benchmarks and uses
quantitative techniques to construct its portfolio. A money manager using a
fundamental investment approach selects stocks based upon its research and
analysis of a variety of factors, including, but not limited to, future earnings
potential, security valuations, financial quality and business momentum, and may
also incorporate quantitative investment models in its process. Certain of the
Fund's money managers may incorporate ESG considerations into their security
selection processes.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry or
sector). RIM also optimizes this portion of the Fund’s portfolio based upon the
Fund’s sustainability goals. RIM may use strategies based on indexes, including
optimized index sampling (strategies that seek to purchase a sampling of
securities using optimization and risk models) and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, exposes all or a portion of its cash to the
performance of certain markets by purchasing equity securities and/or
derivatives (also known as “equitization”), which typically include index
futures contracts. This is intended to cause the Fund to perform as though its
cash were actually invested in those markets. This exposure may or may not match
the Fund’s benchmark and RIM may use the cash equitization process to manage
Fund exposures. RIM may not equitize all or a portion of the Fund's cash or use
the cash equitization process to reduce market exposure. RIM invests any
remaining cash in short-term investments, including the U.S. Cash Management
Fund, an unregistered fund advised by RIM whose investment objective is to seek
to preserve principal and provide liquidity and current income.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the Russell 1000® Index
or within the capitalization range of the Russell 1000® Index.
On May 28, 2021, the day on which capitalization data was used for the annual
reconstitution of the Russell indexes, the market capitalization of such large
capitalization companies ranged from approximately $3.6 billion to $2.17
trillion and the market capitalization of such medium capitalization companies
ranged from approximately $3.6 billion to $46.4 billion. The market
capitalization of these companies will change with market conditions and these
capitalization ranges may vary significantly between an index reconstitution and
at the time of the next index reconstitution. The Fund may invest in companies
not included within the Russell 1000®
Index.
Equity
securities in which the Fund invests include common stocks, preferred stocks,
partnership interests and equity-equivalent securities or instruments whose
values are based on common stocks, such as convertible securities, rights,
warrants or options (stock or stock index), futures contracts (stock or stock
index) and index swaps.
Non-Principal
Investment Strategies
The
Fund may invest in preferred stocks, small capitalization stocks, rights,
warrants and convertible securities. The Fund may invest in pooled investment
vehicles, such as other investment companies and exchange traded funds. The Fund
may also invest a limited amount in equity securities of non-U.S. companies,
including emerging markets equity securities.
155
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
U.S. Strategic Equity Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities economically tied to the U.S. The Fund is required to
provide 60 days’ notice to its shareholders prior to a change in this policy.
The 80% investment requirement applies at the time the Fund invests its assets.
The Fund invests principally in common stocks of large and medium capitalization
U.S. companies.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund's
asset allocation at any time, including not allocating Fund assets to one or
more money manager strategies. The Fund employs discretionary and
non-discretionary money managers. The Fund’s discretionary money managers select
the individual portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies. RIM also manages the portion of Fund assets for which the Fund’s
non-discretionary money managers provide model portfolios to RIM and the Fund’s
cash balances. RIM may also manage portions of the Fund during transitions
between money managers.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM's allocation to each money manager's
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
156
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
| • | Dynamic Style emphasizes investments in equity securities of companies believed to have higher than average stock price volatility and higher than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry or
sector). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM may use the cash equitization process to manage Fund exposures. RIM may not
equitize all or a portion of the Fund's cash or use the cash equitization
process to reduce market exposure. With respect to cash that is not equitized,
RIM may sell equity index put options to seek gains from premiums (cash)
received from their sale. RIM invests any remaining cash in short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income.
157
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the Russell 1000® Index
or within the capitalization range of the Russell 1000® Index.
On May 28, 2021, the day on which capitalization data was used for the annual
reconstitution of the Russell indexes, the market capitalization of such large
capitalization companies ranged from approximately $3.6 billion to $2.17
trillion and the market capitalization of such medium capitalization companies
ranged from approximately $3.6 billion to $46.4 billion. The market
capitalization of these companies will change with market conditions and these
capitalization ranges may vary significantly between an index reconstitution and
at the time of the next index reconstitution. The Fund may invest in companies
not included within the Russell 1000®
Index.
In
determining if a security is economically tied to the U.S., the Fund generally
looks to the country of incorporation of the issuer. However, the Fund’s
portfolio manager may determine a security is economically tied to the U.S.
based on other factors, such as an issuer’s country of domicile, where more than
50% of an issuer’s revenues are generated or where an issuer’s primary exchange
is located. As a result, a security may be economically tied to more than one
country. With respect to derivative instruments, the Fund generally considers
such instruments to be economically tied to the U.S. if the underlying
instruments of the derivatives are (i) U.S. currency (or baskets or indexes of
such currency); (ii) instruments or securities that are issued by the U.S.
government or by an issuer economically tied to the U.S.; or (iii) for certain
money market instruments, if either the issuer or the guarantor of such money
market instrument is an issuer economically tied to the U.S. as described above.
Equity securities in which the Fund invests include common stocks, preferred
stocks, partnership interests and equity-equivalent securities or instruments
whose values are based on common stocks, such as convertible securities, rights,
warrants or options (stock or stock index), futures contracts (stock or stock
index) and index swaps.
Non-Principal
Investment Strategies
The
Fund may invest in preferred stocks, small capitalization stocks, rights,
warrants and convertible securities. The Fund may invest in pooled investment
vehicles, such as other investment companies and exchange traded funds. The Fund
may also invest a limited amount in equity securities of non-U.S. companies,
including emerging markets equity securities.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
158
U.S. Small Cap Equity Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in small capitalization equity securities economically tied to the U.S. The Fund
is required to provide 60 days’ notice to its shareholders prior to a change in
this policy. The 80% investment requirement applies at the time the Fund invests
its assets. The Fund invests principally in common stocks of small
capitalization U.S. companies, some of which are also considered micro
capitalization U.S. companies.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund's
asset allocation at any time, including not allocating Fund assets to one or
more money manager strategies. The Fund employs discretionary and
non-discretionary money managers. The Fund’s discretionary money managers select
the individual portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies. RIM also manages the portion of Fund assets for which the Fund’s
non-discretionary money managers provide model portfolios to RIM and the Fund’s
cash balances. RIM may also manage portions of the Fund during transitions
between money managers.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM's allocation to each money manager's
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
| • | Dynamic Style emphasizes investments in equity securities of companies believed to have higher than average stock price volatility and higher than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price
volatility
159
statistics.
RIM also considers the manner in which money managers’ historical and expected
investment returns correlate with one another. In addition, RIM may adjust
allocations based on the Fund’s overall exposures and forecasted portfolio
risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
The
Fund may employ long-short equity strategies pursuant to which it enters into
short sales. The Fund will take long positions in securities believed to offer
attractive return potential and sell short securities expected to underperform.
The Fund’s long-short strategies may include (i) 115/15 or 130/30 strategies,
which are long-biased strategies that use the proceeds of short sales to
purchase long positions in other securities, (ii) market neutral strategies,
which seek to be neutral to market movements through equivalent long and short
exposures, and (iii) other types of long-short strategies, which seek varying
long and short exposures and may be long- or short-biased. The Fund may use
derivatives to take long and short positions relative to the Fund’s long-short
equity strategies with the objective of keeping the Fund’s net exposure to the
market at a level similar to a traditional “long-only” strategy.
Short
sales are transactions in which the Fund sells a security it does not own in
anticipation of a decline in the market value of that security. The Fund borrows
the security and sells it to the buyer. The Fund then is obligated to replace
the security borrowed by purchasing the security at its market price at the time
of replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. The Fund will incur a loss as a result
of the short sale if the price of the security increases between the date of the
short sale and the date on which the Fund must return the borrowed security. The
Fund will realize a gain if the security declines in price between those dates.
This result is the opposite of what one would expect from a cash purchase of a
long position in a security. The Fund may also make short sales “against the
box.” In this type of short sale, at the time of the sale, the Fund owns or has
the immediate and unconditional right to acquire the identical security at no
additional cost. Although short selling may constitute a form of leverage, the
Fund maintains a special custody account to ensure that short sales are fully
collateralized.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as value, momentum, quality, capitalization size, lower
volatility, growth, industry or sector). For example, RIM may utilize tools
such as optimization, which involves the analysis of tradeoffs between various
risk and return factors as well as turnover and transaction costs, in order to
estimate optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM
160
may
use the cash equitization process to manage Fund exposures. RIM may not equitize
all or a portion of the Fund's cash or use the cash equitization process to
reduce market exposure. With respect to cash that is not equitized, RIM may sell
equity index put options to seek gains from premiums (cash) received from their
sale. RIM invests any remaining cash in short-term investments, including the
U.S. Cash Management Fund, an unregistered fund advised by RIM whose investment
objective is to seek to preserve principal and provide liquidity and current
income.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines small capitalization stocks as stocks of those
companies represented by the Russell 2000® Index
or within the capitalization range of the Russell 2000® Index.
The smallest 1,000 stocks in the Russell 2000® Index
and stocks of companies within the capitalization range of the smallest 1,000
companies in the Russell 2000® Index
as measured at its most recent reconstitution are also considered micro
capitalization stocks. On May 28, 2021, the day on which capitalization data was
used for the annual reconstitution of the Russell indexes, the market
capitalization of these companies ranged from approximately $257.1 million to
$7.3 billion. The market capitalization of these companies will change with
market conditions and these capitalization ranges may vary significantly between
an index reconstitution and at the time of the next index reconstitution. The
Fund may invest in companies not included within the Russell 2000® Index.
The Fund’s investments may include companies that have been publicly traded for
less than five years.
In
determining if a security is economically tied to the U.S., the Fund generally
looks to the country of incorporation of the issuer. However, the Fund’s
portfolio manager may determine a security is economically tied to the U.S.
based on other factors, such as an issuer’s country of domicile, where more than
50% of an issuer’s revenues are generated or where an issuer’s primary exchange
is located. As a result, a security may be economically tied to more than one
country. With respect to derivative instruments, the Fund generally considers
such instruments to be economically tied to the U.S. if the underlying
instruments of the derivatives are (i) U.S. currency (or baskets or indexes of
such currency); (ii) instruments or securities that are issued by the U.S.
government or by an issuer economically tied to the U.S.; or (iii) for certain
money market instruments, if either the issuer or the guarantor of such money
market instrument is an issuer economically tied to the U.S. as described above.
Equity securities in which the Fund invests include common stocks, preferred
stocks, partnership interests and equity-equivalent securities or instruments
whose values are based on common stocks, such as convertible securities, rights,
warrants or options (stock or stock index), futures contracts (stock or stock
index) and index swaps.
Non-Principal
Investment Strategies
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
The
Fund may invest in stocks of companies with market capitalization smaller than
that of companies included in the Russell 2000® Index,
medium capitalization stocks, preferred stocks, rights, warrants and convertible
securities. The Fund may invest in pooled investment vehicles, such as other
investment companies and exchange traded funds. The Fund may also invest a
limited amount in equity securities of non-U.S. companies, including emerging
markets equity securities.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
161
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
International Developed Markets
Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in companies that are located in countries (other than the U.S.) with developed
markets or that are economically tied to such countries. The Fund is required to
provide 60 days’ notice to its shareholders prior to a change in this policy.
The 80% investment requirement applies at the time the Fund invests its assets.
The Fund invests principally in equity securities, including common stocks and
preferred stocks, issued by companies economically tied to or located in
developed markets countries, other than the U.S., and in depositary receipts.
The Fund’s securities are denominated principally in foreign currencies and may
be held outside the U.S. The Fund’s investments span most of the developed
nations of the world to maintain a high degree of diversification among
countries and currencies. The Fund may invest in equity securities of companies
that are economically tied to emerging market countries.
The
Fund invests principally in large and medium capitalization companies, but may
also invest in small capitalization companies. However, stocks are not selected
based on the capitalization size of a company but rather on the relative
attractiveness of the investment opportunity.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
162
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry, sector,
country or region). For example, RIM may utilize tools such as
optimization, which involves the analysis of tradeoffs between various risk and
return factors as well as turnover and transaction costs, in order to estimate
optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and
forward currency contracts. This is intended to cause the Fund to perform as
though its cash were actually invested in those markets. This exposure may or
may not match the Fund’s benchmark and RIM may use the cash equitization process
to manage Fund exposures. RIM may not equitize all or a portion of the Fund's
cash or use the cash equitization process to reduce market exposure. With
respect to cash that is not equitized, RIM may sell equity index put options to
seek gains from premiums (cash) received from their sale. RIM invests any
remaining cash in short-term investments, including the U.S. Cash Management
Fund, an unregistered fund advised by RIM whose investment objective is to seek
to preserve principal and provide liquidity and current income.
163
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
The
Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency contracts.
The Fund may also purchase or sell foreign currencies, mainly through the use of
forward currency contracts, for speculative purposes based on judgments
regarding the direction of the market for a particular foreign currency or
currencies.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the MSCI World ex USA Index or within the
capitalization range of the MSCI World ex USA Index. As of December 31, 2021,
the market capitalization of such large and medium capitalization companies
ranged from approximately $1.5 billion to $393.7 billion. The market
capitalization of these companies will change with market conditions and these
capitalization ranges may vary significantly between an index reconstitution and
at the time of the next index reconstitution. The Fund may invest in companies
and countries not included within the MSCI World ex USA Index.
In
determining if a security is economically tied to or located in a developed
market country, the Fund generally looks to the country of incorporation of the
issuer. However, the Fund’s portfolio manager may determine a security is
economically tied to a developed market country based on other factors, such as
an issuer’s country of domicile, where more than 50% of an issuer’s revenues are
generated or where an issuer’s primary exchange is located. As a result, a
security may be economically tied to more than one country. With respect to
derivative instruments, the Fund generally considers such instruments to be
economically tied to developed market countries if the underlying instruments of
the derivatives are (i) foreign currencies (or baskets or indexes of such
currencies); (ii) instruments or securities that are issued by foreign
governments or by an issuer economically tied to a developed market country as
described above; or (iii) for certain money market instruments, if either the
issuer or the guarantor of such money market instrument is an issuer
economically tied to a developed market country as described above.
Non-Principal
Investment Strategies
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
164
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
The
Fund may invest in equity securities of U.S. companies, rights, warrants and
convertible securities. The Fund may also invest in pooled investment vehicles,
such as other investment companies and exchange traded funds.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Global Equity Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund is required to provide 60 days’ notice to its
shareholders prior to a change in this policy. The 80% investment requirement
applies at the time the Fund invests its assets. The Fund invests principally in
equity securities, including common stocks and preferred stocks, of companies
economically tied to a number of countries around the world, including the U.S.,
in a globally diversified manner. While the Fund spreads its investments across
the globe, the Fund selects securities of companies believed to have favorable
growth prospects and/or attractive valuations based on current and expected
earnings or cash flow, not based on the country a company is economically tied
to. Under normal market conditions, the Fund will invest at least 30%, and may
invest up to 100%, of its assets in equity securities economically tied to
countries other than the U.S. The Fund may invest in equity securities of
companies that are economically tied to emerging market countries. The Fund
invests principally in large and medium capitalization companies, but also
invests in small capitalization companies. However, stocks are not selected
based on the capitalization size of a company but rather on the relative
attractiveness of the investment opportunity. A portion of the Fund’s securities
are denominated principally in foreign currencies and typically are held outside
the U.S.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
165
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as value, momentum, quality, capitalization size, lower
volatility, growth, industry, sector, country or region). For example, RIM
may utilize tools such as optimization, which involves the analysis of tradeoffs
between various risk and return factors as well as turnover and transaction
costs, in order to estimate optimal portfolio positioning. RIM may use
strategies based on indexes, including optimized index sampling (strategies that
seek to purchase a sampling of securities using optimization and risk models)
and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
166
“equitization”), which
typically include index futures contracts and forward currency contracts.
This is intended to cause the Fund to perform as though its cash were actually
invested in those markets. This exposure may or may not match the Fund’s
benchmark and RIM may use the cash equitization process to manage Fund
exposures. RIM may not equitize all or a portion of the Fund's cash or use the
cash equitization process to reduce market exposure. With respect to cash that
is not equitized, RIM may sell equity index put options to seek gains from
premiums (cash) received from their sale. RIM invests any remaining cash in
short-term investments, including the U.S. Cash Management Fund, an unregistered
fund advised by RIM whose investment objective is to seek to preserve principal
and provide liquidity and current income.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
The
Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency contracts.
The Fund may also purchase or sell foreign currencies, mainly through the use of
forward currency contracts, for speculative purposes based on judgments
regarding the direction of the market for a particular foreign currency or
currencies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the MSCI World Index or within the capitalization
range of the MSCI World Index. As of December 31, 2021, the market
capitalization of such large and medium capitalization companies ranged from
approximately $1.5 billion to $2.9 trillion. The market capitalization of these
companies will change with market conditions and these capitalization ranges may
vary significantly between an index reconstitution and at the time of the next
index reconstitution. The Fund may invest in companies and countries not
included within the MSCI World Index.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.
In
determining if a security is economically tied to a non-U.S. country, the Fund
generally looks to the country of incorporation of the issuer. However, the
Fund’s portfolio manager may determine a security is economically tied to a
non-U.S. country based on other factors, such as an issuer’s country of
domicile, where more than 50% of an issuer’s revenues are generated or where an
issuer’s primary exchange is located. As a result, a security may be
economically tied to more than one country. With respect to derivative
instruments, the Fund generally considers such instruments to be economically
tied to non-U.S. countries if the underlying assets of the derivatives are (i)
foreign currencies (or baskets or indexes of such currencies); (ii) instruments
or securities that are issued by foreign governments or by an issuer
economically tied to a non-U.S. country as described above; or (iii) for certain
money market instruments, if either the issuer or the guarantor of such money
market instrument is an issuer economically tied to a non-U.S. country as
described above. Equity securities in which the Fund invests include common
stocks, preferred stocks, partnership interests,
167
depositary
receipts and equity-equivalent securities or instruments whose value is based on
common stocks, such as synthetic foreign equity securities, convertible
securities, rights, warrants or options to purchase common stock, futures
contracts (stock or stock index) and index swaps.
Non-Principal
Investment Strategies
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
The
Fund may invest in rights, warrants and convertible securities. The Fund may
also invest in pooled investment vehicles, such as other investment companies
and exchange traded funds.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Emerging Markets Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in emerging market companies. The Fund is required to provide 60 days’ notice to
its shareholders prior to a change in this policy. The 80% investment
requirement applies at the time the Fund invests its assets. The Fund
principally invests in equity securities, including common stock and preferred
stock, of companies that are economically tied to countries with emerging
markets, and in depositary receipts. These companies are referred to as
“emerging market companies.” The Fund invests in large, medium and small
capitalization companies. However, stocks are not selected based on the
capitalization size of a company but rather on the relative attractiveness of
the investment opportunity. The Fund’s securities are denominated principally in
foreign currencies and are typically held outside the U.S. The Fund seeks to
maintain a broadly diversified exposure to emerging market countries and
ordinarily will invest in the securities of issuers economically tied to at
least ten different emerging market countries.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies.
168
RIM
may change a Fund’s asset allocation at any time. The Fund’s money managers have
non-discretionary asset management assignments pursuant to which they provide a
model portfolio to RIM representing their investment recommendations, based upon
which RIM purchases and sells securities for the Fund. RIM also manages Fund
assets not allocated to money manager strategies and the Fund’s cash balances
and may manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
When
determining how to allocate the Fund’s assets among itself and the money
managers’ strategies, RIM considers a variety of factors. These factors include
the Fund’s overall exposures, a money manager’s investment style, investment
approach, investment substyle and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include
capitalization size, growth and profitability measures, valuation measures,
economic sector weightings, country weightings, and earnings and price
volatility statistics. RIM also considers the manner in which money managers’
historical and expected investment returns correlate with one another. In
addition, RIM may adjust allocations based on the Fund’s overall exposures and
forecasted portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry, sector,
country or region). For example, RIM may utilize tools such as
optimization, which involves the analysis of tradeoffs between various risk and
return factors as well as turnover and transaction costs, in order to estimate
optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
169
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and
forward currency contracts. This is intended to cause the Fund to perform as
though its cash were actually invested in those markets. This exposure may or
may not match the Fund’s benchmark and RIM may use the cash equitization process
to manage Fund exposures. RIM may not equitize all or a portion of the Fund's
cash or use the cash equitization process to reduce market exposure. RIM invests
any remaining cash in short-term investments, including the U.S. Cash Management
Fund, an unregistered fund advised by RIM whose investment objective is to seek
to preserve principal and provide liquidity and current income.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
The
Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency contracts.
The Fund may also purchase or sell foreign currencies, mainly through the use of
forward currency contracts, for speculative purposes based on judgments
regarding the direction of the market for a particular foreign currency or
currencies.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may invest in pooled investment vehicles, such as other investment
companies and exchange traded funds, which have broader or more efficient access
to shares of emerging market companies in certain countries.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States. Emerging market countries also include frontier
market countries, which are less developed than traditional emerging market
countries.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
170
As
of December 31, 2021, the market capitalization of companies in the Fund’s
benchmark, the MSCI Emerging Markets Index, an index which includes large,
medium and small capitalization companies, ranged from approximately $18.3
million to $547.6 billion. The Fund may invest in companies and countries not
included within the MSCI Emerging Markets Index.
In
determining if a security is economically tied to an emerging market country,
the Fund generally looks to the country of incorporation of the issuer. However,
the Fund’s portfolio manager may determine a security is economically tied to an
emerging market country based on other factors, such as an issuer’s country of
domicile, where more than 50% of an issuer’s revenues are generated, where an
issuer’s primary exchange is located or more than 50% of the company’s assets
are located. As a result, a security may be economically tied to more than one
country. With respect to derivative instruments, the Fund generally considers
such instruments to be economically tied to emerging market countries if the
underlying assets of the derivatives are (i) foreign currencies (or baskets or
indexes of such currencies); (ii) instruments or securities that are issued by
foreign governments or by an issuer economically tied to an emerging market
country as described above; or (iii) for certain money market instruments, if
either the issuer or the guarantor of such money market instrument is
economically tied to an emerging market country as described above.
Non-Principal
Investment Strategies
The
Fund may invest in micro capitalization stocks, equity securities of U.S. or
other developed market companies, rights, warrants and convertible
securities.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Tax-Managed U.S. Large Cap Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax basis.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in large capitalization companies economically tied to the U.S. The Fund is
required to provide 60 days’ notice to its shareholders prior to a change in
this policy. The 80% investment requirement applies at the time the Fund invests
its assets. The Fund invests principally in common stocks of large
capitalization U.S. companies.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
171
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation primarily for the
purpose of increasing the Fund’s tax-efficiency. RIM may also deviate from such
aggregation for the purposes of exposure and transaction cost management. For
this portion of the Fund, RIM purchases and sells securities at the times and in
the manner considered by RIM to be efficient for the Fund and it is expected
that, generally, trades will be effected on a periodic basis, unless RIM
determines that more frequent trading is appropriate due to changing market
conditions or other significant factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another, and attempts to
choose money managers and allocate portfolio holdings to money managers in a way
which is expected to help the Fund to provide long-term capital growth on an
after-tax basis. In addition, RIM may adjust allocations based on the Fund’s
overall exposures and forecasted portfolio risk and in order to respond to
changes in market risks and opportunities.
The
Fund seeks to realize capital growth while considering shareholder tax
consequences arising from its portfolio management activities. In its attention
to the tax consequences of its investment decisions, the Fund differs from most
equity mutual funds, which are managed to maximize pre-tax total return without
regard to whether their portfolio management activities result in taxable
distributions to shareholders.
The
Fund is designed for long-term investors who seek to reduce the impact of taxes
on their investment returns. The Fund is not designed for short-term investors
or for tax-deferred investment vehicles such as IRAs and 401(k) plans.
The
Fund selects and holds portfolio securities based on its assessment of their
potential for long-term total returns. The Fund principally strives to realize
the majority of its returns as long-term capital gains under U.S. tax laws. To
do so, the Fund typically buys stocks with the intention of holding them long
enough to qualify for long-term capital gains tax treatment. Stocks may,
however, be sold at a point where short-term capital gains are realized if the
Fund believes it is most appropriate in that case to do so or as a result of
redemption activity.
RIM
seeks to manage the impact of taxes through the use of active tax management
strategies. The active tax management strategies employed by RIM in its
management of the Fund include taxable gain and loss harvesting activities (“tax
loss harvesting”), capital gain deferral, tax lot management (which generally
includes selling stocks with the highest tax cost first) and minimization of
wash sales, where possible.
If
large shareholder redemptions occur unexpectedly, the Fund could be required to
sell portfolio securities resulting in its realization of net capital gains.
This could temporarily reduce the Fund’s tax efficiency. Over time, the Fund may
hold individual securities that have appreciated so significantly that it would
be difficult for the Fund to sell them without
172
realizing
net capital gains. Transitions between money manager strategies may also require
the sale of portfolio securities resulting in the Fund realizing net capital
gains. Corporate actions, such as mergers or acquisitions, related to portfolio
securities held by the Fund may also result in the realization of capital
gains.
When
a shareholder redeems the Fund’s Shares, the Fund could be required to sell
portfolio securities resulting in its realization of net capital gains,
impacting all shareholders. The Fund believes that multiple purchases and
redemptions of Fund Shares by individual shareholders could adversely affect the
Fund’s strategy of tax-efficiency and could reduce its ability to contain costs.
The Fund further believes that short-term investments in the Fund are
inconsistent with its long-term strategy. For this reason, the Fund will apply
its general right to refuse any purchases by rejecting purchase orders from
investors whose patterns of purchases and redemptions in the Fund are
inconsistent with the Fund’s strategy.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry or
sector). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM may use the cash equitization process to manage Fund exposures. RIM may not
equitize all or a portion of the Fund's cash or use the cash equitization
process to reduce market exposure. RIM invests any remaining cash in short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income.
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, generate offsetting losses, to make funds available for other
investment opportunities or to meet redemption requests. The Fund may also sell
a security if there is a significant change to the security’s characteristics or
if the security is no longer consistent with the Fund’s investment
strategies.
173
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large capitalization stocks as stocks of those
companies represented by the S&P 500® Index
or within the capitalization range of the S&P 500® Index.
On December 31, 2021, the market capitalization of these companies ranged from
approximately $3.98 billion to $2.91 trillion. The market capitalization of
these companies will change with market conditions and these capitalization
ranges may vary significantly between an index reconstitution and at the time of
the next index reconstitution. The Fund may invest in companies not included
within the S&P 500®
Index.
In
determining if a security is economically tied to the U.S., the Fund generally
looks to the country of incorporation of the issuer. However, the Fund’s
portfolio manager may determine a security is economically tied to the U.S.
based on other factors, such as an issuer’s country of domicile, where more than
50% of an issuer’s revenues are generated or where an issuer’s primary exchange
is located. As a result, a security may be economically tied to more than one
country. With respect to derivative instruments, the Fund generally considers
such instruments to be economically tied to the U.S. if the underlying assets of
the derivatives are (i) U.S. currency (or baskets or indexes of such currency);
(ii) instruments or securities that are issued by the U.S. government or by an
issuer economically tied to the U.S.; or (iii) for certain money market
instruments, if either the issuer or the guarantor of such money market
instrument is an issuer economically tied to the U.S. as described above.
Non-Principal
Investment Strategies
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may invest in preferred stocks, small capitalization stocks, rights,
warrants and convertible securities. The Fund may invest in pooled investment
vehicles, such as other investment companies and exchange traded funds. The Fund
may also invest a limited amount in equity securities of non-U.S. companies,
including emerging markets equity securities.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Tax-Managed U.S. Mid & Small Cap
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax basis.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in medium and small capitalization companies economically tied to the U.S. The
Fund is required to provide 60 days’ notice to its shareholders prior to a
change in this policy. The 80% investment requirement applies at the time the
Fund invests its assets. The Fund invests principally in common stocks of medium
and small capitalization U.S. companies.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
174
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation primarily for
the purpose of increasing the Fund’s tax-efficiency. RIM may also deviate from
such aggregation for the purposes of exposure and transaction cost
management. For this portion of the Fund, RIM purchases and sells securities at
the times and in the manner considered by RIM to be efficient for the Fund and
it is expected that, generally, trades will be effected on a periodic basis,
unless RIM determines that more frequent trading is appropriate due to changing
market conditions or other significant factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
| • | Dynamic Style emphasizes investments in equity securities of companies believed to have higher than average stock price volatility and higher than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another, and attempts to
choose money managers and allocate portfolio holdings to money managers in a way
which is expected to help the Fund to provide long-term capital growth on an
after-tax basis. In addition, RIM may adjust allocations based on the Fund’s
overall exposures and forecasted portfolio risk and in order to respond to
changes in market risks and opportunities.
The
Fund seeks to realize capital growth while considering shareholder tax
consequences arising from its portfolio management activities. In its attention
to the tax consequences of its investment decisions, the Fund differs from most
equity mutual funds, which are managed to maximize pre-tax total return without
regard to whether their portfolio management activities result in taxable
distributions to shareholders.
The
Fund is designed for long-term investors who seek to reduce the impact of taxes
on their investment returns. The Fund is not designed for short-term investors
or for tax-deferred investment vehicles such as IRAs and 401(k) plans.
The
Fund selects and holds portfolio securities based on its assessment of their
potential for long-term total returns. The Fund principally strives to realize
the majority of its returns as long-term capital gains under U.S. tax laws. To
do so, the Fund typically buys stocks with the intention of holding them long
enough to qualify for long-term capital gains tax treatment. Stocks may,
however, be sold at a point where short-term capital gains are realized if the
Fund believes it is most appropriate in that case to do so or as a result of
redemption activity.
RIM
seeks to manage the impact of taxes through the use of active tax management
strategies. The active tax management strategies employed by RIM in its
management of the Fund include taxable gain and loss harvesting activities (“tax
loss harvesting”), capital gain deferral, tax lot management (which generally
includes selling stocks with the highest tax cost first) and minimization of
wash sales, where possible.
If
large shareholder redemptions occur unexpectedly, the Fund could be required to
sell portfolio securities resulting in its realization of net capital gains.
This could temporarily reduce the Fund’s tax efficiency. Over time, the Fund may
hold individual securities that have appreciated so significantly that it would
be difficult for the Fund to sell them without
175
realizing
net capital gains. Transitions between money manager strategies may also require
the sale of portfolio securities resulting in the Fund realizing net capital
gains. Corporate actions, such as mergers or acquisitions, related to portfolio
securities held by the Fund may also result in the realization of capital
gains.
When
a shareholder redeems the Fund’s Shares, the Fund could be required to sell
portfolio securities resulting in its realization of net capital gains,
impacting all shareholders. The Fund believes that multiple purchases and
redemptions of Fund Shares by individual shareholders could adversely affect the
Fund’s strategy of tax-efficiency and could reduce its ability to contain costs.
The Fund further believes that short-term investments in the Fund are
inconsistent with its long-term strategy. For this reason, the Fund will apply
its general right to refuse any purchases by rejecting purchase orders from
investors whose patterns of purchases and redemptions in the Fund are
inconsistent with the Fund’s strategy.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry or
sector). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM may use the cash equitization process to manage Fund exposures. RIM may not
equitize all or a portion of the Fund's cash or use the cash equitization
process to reduce market exposure. RIM invests any remaining cash in short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, generate offsetting losses, to make funds available for other
investment opportunities or to meet redemption requests. The Fund may also sell
a security if there is a significant change to the security’s characteristics or
if the security is no longer consistent with the Fund’s investment
strategies.
176
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines medium and small capitalization stocks as stocks of
those companies represented by the Russell 2500™ Index or within the
capitalization range of the Russell 2500™ Index. On May 28, 2021, 2021, the day
on which capitalization data was used for the annual reconstitution of the
Russell indexes, the market capitalization of such medium capitalization
companies ranged from approximately $257.1 million to $18.4 billion and the
market capitalization of such small capitalization companies ranged from
approximately $257.1 million to $7.3 billion. The market capitalization of these
companies will change with market conditions and these capitalization ranges may
vary significantly between an index reconstitution and at the time of the next
index reconstitution. The Fund may invest in companies not included within the
Russell 2500™ Index.
In
determining if a security is economically tied to the U.S., the Fund generally
looks to the country of incorporation of the issuer. However, the Fund’s
portfolio manager may determine a security is economically tied to the U.S.
based on other factors, such as an issuer’s country of domicile, where more than
50% of an issuer’s revenues are generated or where an issuer’s primary exchange
is located. As a result, a security may be economically tied to more than one
country. With respect to derivative instruments, the Fund generally considers
such instruments to be economically tied to the U.S. if the underlying assets of
the derivatives are (i) U.S. currency (or baskets or indexes of such currency);
(ii) instruments or securities that are issued by the U.S. government or by an
issuer economically tied to the U.S.; or (iii) for certain money market
instruments, if either the issuer or the guarantor of such money market
instrument is an issuer economically tied to the U.S. as described above.
Non-Principal
Investment Strategies
The
Fund may invest in non-U.S. issuers by purchasing American Depositary Receipts
(“ADRs”) or Global Depositary Receipts (“GDRs”). An ADR is a stock that trades
in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that
trades in one or more global markets but represents shares of a company
domiciled in a different country. The Fund typically invests in sponsored ADRs
or GDRs but may also invest in unsponsored ADRs or GDRs.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may invest in preferred stocks, micro capitalization stocks, rights,
warrants and convertible securities. The Fund may invest in pooled investment
vehicles, such as other investment companies and exchange traded funds. The Fund
may also invest a limited amount in equity securities of non-U.S. companies,
including emerging markets equity securities.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Tax-Managed International Equity
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long-term capital growth on an after-tax basis.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in equity securities. The Fund is required to provide 60 days’ notice to its
shareholders prior to a change in this policy. The 80% investment requirement
applies at the time the Fund invests its assets.
177
The
Fund invests principally in equity securities, including common stocks and
preferred stocks, issued by companies economically tied to non-U.S. countries,
including emerging market countries, and in depositary receipts. The Fund’s
securities are denominated principally in foreign currencies and are typically
held outside the U.S. The Fund’s investments span most of the developed nations
of the world to maintain a high degree of diversification among countries and
currencies. Under normal market conditions, the Fund will invest at least 40%,
and may invest up to 100%, of its assets in equity securities economically tied
to non-U.S. countries. The Fund may also invest in equity securities of U.S.
companies.
The
Fund invests principally in large and medium capitalization companies, but may
also invest in small capitalization companies. However, securities are not
selected based on the capitalization size of a company but rather on the
relative attractiveness of the investment opportunity.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-style, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may vary from such aggregation primarily for the
purpose of increasing the Fund’s tax-efficiency. This may include the purchase
of depositary receipts as a substitute for recommended common stocks. RIM may
also deviate from such aggregation for the purposes of exposure and transaction
cost management. For this portion of the Fund, RIM purchases and sells
securities at the times and in the manner considered by RIM to be efficient for
the Fund and it is expected that, generally, trades will be effected on a
periodic basis, unless RIM determines that more frequent trading is appropriate
due to changing market conditions or other significant factors.
Based
on RIM’s analysis of the portfolio, RIM may determine that the Fund should, at
any given time, have exposure to some or all of the following principal
investment styles which are intended to complement one another:
| • | Growth Style emphasizes investments in equity securities of companies believed to have above-average earnings growth prospects. |
| • | Value Style emphasizes investments in equity securities of companies believed to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures. |
| • | Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market. |
| • | Defensive Style emphasizes investments in equity securities of companies believed to have lower than average stock price volatility (i.e., the amount by which a stock’s price rises and falls over short-term time periods) and lower than average earnings variability. |
| • | Dynamic Style emphasizes investments in equity securities of companies believed to have higher than average stock price volatility and higher than average earnings variability. |
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include overall portfolio characteristics, a money manager’s
investment style, investment approach, investment substyle and expected return
potential of a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, economic sector weightings and earnings and price volatility
statistics. RIM also considers the manner in which money managers’ historical
and expected investment returns correlate with one another, and attempts to
choose money managers and allocate the Fund’s assets to money managers’
strategies in
178
a
way which is expected to help the Fund to provide long-term capital growth on an
after-tax basis. In addition, RIM may adjust allocations based on the Fund’s
overall portfolio exposures and forecasted portfolio risk and in order to
respond to changes in market risks and opportunities.
The
Fund seeks to realize capital growth while considering shareholder tax
consequences arising from its portfolio management activities. In its attention
to the tax consequences of its investment decisions, the Fund differs from most
equity mutual funds, which are managed to maximize pre-tax total return without
regard to whether their portfolio management activities result in taxable
distributions to shareholders.
The
Fund is designed for long-term investors who seek to reduce the impact of taxes
on their investment returns. The Fund is not designed for short-term investors
or for tax-deferred investment vehicles such as IRAs and 401(k) plans.
The
Fund selects and holds portfolio securities based on its assessment of their
potential for long-term total returns. The Fund principally strives to realize
the majority of its returns as long-term capital gains under U.S. tax laws. To
do so, the Fund typically buys stocks with the intention of holding them long
enough to qualify for long-term capital gains tax treatment. Stocks may,
however, be sold at a point where short-term capital gains are realized if the
Fund believes it is most appropriate in that case to do so or as a result of
redemption activity.
RIM
seeks to manage the impact of taxes through the use of active tax management
strategies. The active tax management strategies employed by RIM in its
management of the Fund include taxable gain and loss harvesting activities (“tax
loss harvesting”), capital gain deferral, tax lot management (which generally
includes selling stocks with the highest tax cost first) and minimization of
wash sales, where possible.
If
large shareholder redemptions occur unexpectedly, the Fund could be required to
sell portfolio securities resulting in its realization of net capital gains.
This could temporarily reduce the Fund’s tax efficiency. Over time, the Fund may
hold individual securities that have appreciated so significantly that it would
be difficult for the Fund to sell them without realizing net capital gains.
Transitions between money manager strategies may also require the sale of
portfolio securities resulting in the Fund realizing net capital gains.
Corporate actions, such as mergers or acquisitions, related to portfolio
securities held by the Fund may also result in the realization of capital
gains.
When
a shareholder redeems the Fund’s Shares, the Fund could be required to sell
portfolio securities resulting in its realization of net capital gains,
impacting all shareholders. The Fund believes that multiple purchases and
redemptions of Fund Shares by individual shareholders could adversely affect the
Fund’s strategy of tax-efficiency and could reduce its ability to contain costs.
The Fund further believes that short-term investments in the Fund are
inconsistent with its long-term strategy. For this reason, the Fund will apply
its general right to refuse any purchases by rejecting purchase orders from
investors whose patterns of purchases and redemptions in the Fund are
inconsistent with the Fund’s strategy.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
Money
managers may employ a fundamental investment approach, a quantitative investment
approach or a combination of both. A quantitative money manager selects stocks
using a variety of quantitative investment models (mathematical formulas based
on statistical analyses) and mathematical techniques to rank the relative
attractiveness of securities versus their benchmarks and uses quantitative
techniques to construct its portfolio. A money manager using a fundamental
investment approach selects stocks based upon its research and analysis of a
variety of factors, including, but not limited to, future earnings potential,
security valuations, financial quality and business momentum, and may also
incorporate quantitative investment models in its process.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry, sector,
country or region). For example, RIM may utilize tools such as
optimization, which involves the analysis of tradeoffs between various risk and
return factors as well as turnover and transaction costs, in order to estimate
optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1)
as
179
a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager strategy or large redemptions resulting from rebalancing by asset
allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and
forward currency contracts. This is intended to cause the Fund to perform as
though its cash were actually invested in those markets. This exposure may or
may not match the Fund’s benchmark and RIM may use the cash equitization process
to manage Fund exposures. RIM may not equitize all or a portion of the Fund's
cash or use the cash equitization process to reduce market exposure. RIM invests
any remaining cash in short-term investments, including the U.S. Cash Management
Fund, an unregistered fund advised by RIM whose investment objective is to seek
to preserve principal and provide liquidity and current income.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency contracts.
The Fund may also purchase or sell foreign currencies, mainly through the use of
forward currency contracts, for speculative purposes based on judgments
regarding the direction of the market for a particular foreign currency or
currencies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund defines large and medium capitalization stocks as stocks of
those companies represented by the MSCI ACWI ex USA Index or within the
capitalization range of the MSCI ACWI ex USA Index. As of December 31, 2021, the
market capitalization of such large and medium capitalization companies ranged
from approximately $18.3 million to $547.6 billion. The market capitalization of
these companies will change with market conditions and these capitalization
ranges may vary significantly between an index reconstitution and at the time of
the next index reconstitution. The Fund may invest in companies and countries
not included within the MSCI ACWI ex USA Index.
In
determining if a security is economically tied to a non-U.S. country, the Fund
generally looks to the country of incorporation of the issuer. However, the
Fund’s portfolio manager may determine a security is economically tied to a
non-U.S. country based on other factors, such as an issuer’s country of
domicile, where more than 50% of an issuer’s revenues are generated or where an
issuer’s primary exchange is located. As a result, a security may be
economically tied to more than one country. With respect to derivative
instruments, the Fund generally considers such instruments to be economically
tied to non-U.S. countries if the underlying assets of the derivatives are (i)
foreign currencies (or baskets or
180
indexes
of such currencies); (ii) instruments or securities that are issued by foreign
governments or by an issuer economically tied to a non-U.S. country as described
above; or (iii) for certain money market instruments, if either the issuer or
the guarantor of such money market instrument is an issuer economically tied to
a non-U.S. country as described above. Equity securities in which the Fund
invests include common stocks, preferred stocks, partnership interests,
depositary receipts and equity-equivalent securities or instruments whose value
is based on common stocks, such as synthetic foreign equity securities,
convertible securities, rights, warrants or options to purchase common stock,
futures contracts (stock or stock index) and index swaps.
Non-Principal
Investment Strategies
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
The
Fund may invest in rights, warrants and convertible securities. The Fund may
also invest in pooled investment vehicles, such as other investment companies
and exchange traded funds.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Tax-Managed Real Assets Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth on an after-tax basis.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in investments related to real assets and real asset companies. The Fund is
required to provide 60 days’ notice to its shareholders prior to a change in
this policy. The 80% investment requirement applies at the time the Fund invests
its assets. The Fund considers an investment to be related to (i) real assets if
at least 50% of the investment’s value is based on real assets; and (ii) a real
asset company if at least 50% of the company’s assets, gross income or net
profits are attributable to real assets. Real assets are broadly defined by the
Fund and are considered to include any assets that have physical properties,
such as natural resources, real estate, infrastructure and commodities.
In
an effort to provide equity-like returns over a market cycle while mitigating
downside risk relative to equities, RIM allocates the Fund’s assets globally
across the real assets group of industries, focusing on real estate,
infrastructure, and natural resources. RIM intends to shift the Fund’s assets
among the real asset group of industries based on RIM’s outlook on the business
and economic cycle, relative market valuations and market sentiment. The Fund
will concentrate its investments in equity securities of companies in the real
assets group of industries.
181
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-asset, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation primarily for
the purpose of increasing the Fund’s tax-efficiency. This may include the
purchase of depositary receipts as a substitute for recommended common stocks.
RIM may also deviate from such aggregation for the purposes of exposure
and transaction cost management. For this portion of the Fund, RIM purchases and
sells securities at the times and in the manner considered by RIM to be
efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
When
determining how to allocate the Fund’s assets among itself and the money
managers’ strategies, RIM considers a variety of factors. These factors include
the Fund’s overall exposures, a money manager’s investment style, investment
approach, investment substyle and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include
capitalization size, growth and profitability measures, valuation measures,
economic sector weightings, country weightings, and earnings and price
volatility statistics. RIM also considers the manner in which money managers’
historical and expected investment returns correlate with one another, and
attempts to choose money managers and allocate the Fund’s assets to money
managers’ strategies in a way which is expected to help the Fund to provide
long-term capital growth on an after-tax basis. In addition, RIM may adjust
allocations based on the Fund’s overall exposures and forecasted portfolio risk
and in order to respond to changes in market risks and opportunities.
The
Fund seeks to realize capital growth while considering shareholder tax
consequences arising from its portfolio management activities. In its attention
to the tax consequences of its investment decisions, the Fund differs from most
equity mutual funds, which are managed to maximize pre-tax total return without
regard to whether their portfolio management activities result in taxable
distributions to shareholders.
The
Fund is designed for long-term investors who seek to reduce the impact of taxes
on their investment returns. The Fund is not designed for short-term investors
or for tax-deferred investment vehicles such as IRAs and 401(k) plans.
The
Fund selects and holds portfolio securities based on its assessment of their
potential for long-term total returns. The Fund principally strives to realize
the majority of its returns as long-term capital gains under U.S. tax laws. To
do so, the Fund typically buys stocks with the intention of holding them long
enough to qualify for long-term capital gains tax treatment. Stocks may,
however, be sold at a point where short-term capital gains are realized if the
Fund believes it is most appropriate in that case to do so or as a result of
redemption activity.
RIM
seeks to manage the impact of taxes through the use of active tax management
strategies. The active tax management strategies employed by RIM in its
management of the Fund include taxable gain and loss harvesting activities (“tax
loss harvesting”), capital gain deferral, tax lot management (which generally
includes selling stocks with the highest tax cost first), minimization of wash
sales and dividend yield management, where possible.
If
large shareholder redemptions occur unexpectedly, the Fund could be required to
sell portfolio securities resulting in its realization of net capital gains.
This could temporarily reduce the Fund’s tax efficiency. Over time, the Fund may
hold individual securities that have appreciated so significantly that it would
be difficult for the Fund to sell them without realizing net capital gains.
Transitions between money manager strategies may also require the sale of
portfolio securities resulting in the Fund realizing net capital gains.
Corporate actions, such as mergers or acquisitions, related to portfolio
securities held by the Fund may also result in the realization of capital
gains.
When
a shareholder redeems the Fund’s Shares, the Fund could be required to sell
portfolio securities resulting in its realization of net capital gains,
impacting all shareholders. The Fund believes that multiple purchases and
redemptions of
182
Fund
Shares by individual shareholders could adversely affect the Fund’s strategy of
tax-efficiency and could reduce its ability to contain costs. The Fund further
believes that short-term investments in the Fund are inconsistent with its
long-term strategy. For this reason, the Fund will apply its general right to
refuse any purchases by rejecting purchase orders from investors whose patterns
of purchases and redemptions in the Fund are inconsistent with the Fund’s
strategy.
The
Fund may invest in equity securities issued by U.S. and non-U.S. real estate
companies, including real estate investment trusts (“REITs”) and similar
REIT-like entities. REITs are companies that own interests in real estate or in
real estate-related loans or other interests, and their revenue principally
consists of rent derived from owned, income producing real estate properties and
capital gains from the sale of such properties or from interest payments on real
estate-related loans. A REIT in the U.S. is generally not taxed on income
distributed to shareholders so long as it meets certain tax related
requirements, including the requirement that it distribute substantially all its
taxable income to such shareholders. REIT-like entities organized outside of the
U.S. have operations and receive entity-level tax treatment similar to that of
U.S. REITs. By investing in REITs and REIT–like entities indirectly through the
Fund, a shareholder will bear expenses of the REITs and REIT-like entities in
addition to expenses of the Fund. The Fund may also invest in equity securities
of other types of real estate-related companies.
The
Fund may invest in equity securities issued by U.S. and non-U.S. infrastructure
companies, which are companies that are engaged in the infrastructure business.
A company is considered to be engaged in the infrastructure business if it
derives at least 50% of its revenues or earnings from, or devotes at least 50%
of its assets to, infrastructure-related activities. Infrastructure refers to
the systems and networks of energy, transportation, communication and other
services required for the normal function of society. Companies in the
infrastructure business are involved in (1) the generation, transmission and
distribution of electric energy; (2) the storage, transportation and
distribution of natural resources, such as natural gas, used to produce energy;
(3) alternative energy sources; (4) the building, operation and maintenance of
highways, toll roads, tunnels, bridges and parking lots; (5) the building,
operation and maintenance of airports and ports, railroads and mass transit
systems; (6) telecommunications, including wireless and cable networks; (7)
water treatment and distribution; and (8) other public services such as health
care and education. Infrastructure companies also include energy-related
companies organized as master limited partnerships (“MLPs”) and their
affiliates.
The
Fund may invest in equity securities issued by U.S. and non-U.S. natural
resources and natural resources-related companies. Generally, these are
companies principally engaged in owning or developing natural resources, or
supplying goods, technology and services relating to natural resources. These
companies may include, for example, companies involved either directly or
through subsidiaries in exploring, mining, drilling, refining, processing,
transporting, distributing, fabricating, dealing in, or owning natural
resources, and companies providing environmental services. The Fund normally
invests in companies in a variety of natural resource related fields, such as
energy, chemicals, oil, gas, paper, mining, steel or agricultural
products.
A
portion of the Fund’s securities are denominated principally in foreign
currencies and typically are held outside the U.S. With respect to non-U.S.
securities, the Fund may enter into spot and forward currency contracts to
facilitate settlement of securities transactions and may enter into these
contracts in order to “lock in” the U.S. dollar price of a security that it
plans to buy or sell. The Fund may at times seek to protect a portion of its
investments against adverse currency exchange rate changes by purchasing forward
currency contracts.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
183
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry, sector,
country, region, currency or commodity). For example, RIM may utilize tools such
as optimization, which involves the analysis of tradeoffs between various risk
and return factors as well as turnover and transaction costs, in order to
estimate optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager strategy or large redemptions resulting from rebalancing by asset
allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and
swaps. This is intended to cause the Fund to perform as though its cash were
actually invested in those markets. This exposure may or may not match the
Fund’s benchmark and RIM may use the cash equitization process to manage Fund
exposures. RIM may not equitize all or a portion of the Fund’s cash or use the
cash equitization process to reduce market exposure. RIM invests any remaining
cash in short-term investments, including the U.S. Cash Management Fund, an
unregistered fund advised by RIM whose investment objective is to seek to
preserve principal and provide liquidity and current income.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may invest in preferred stocks, rights, warrants and convertible
securities. The Fund may also invest in pooled investment vehicles, such as
other investment companies and exchange traded funds.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Opportunistic Credit Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
184
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds. The Fund is required to provide 60 days’ notice to its shareholders
prior to a change in this policy. The 80% investment requirement applies at the
time the Fund invests its assets. Bonds are fixed income and floating rate
securities representing debt obligations that typically require the issuer to
repay the bondholders the principal amount borrowed and generally to pay
interest. The Fund considers bonds to include fixed income equivalent
instruments, which may be represented by forwards or derivatives such as
options, futures contracts, or swap agreements.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund's asset
allocation at any time. RIM may hire money managers to pursue a particular
investment focus, such as specialization in certain sectors or strategies, or
may hire money managers to invest across multiple sectors or strategies. The
Fund’s money managers select the individual portfolio instruments for the assets
assigned to them. RIM allocates most of the Fund’s assets to multiple money
managers unaffiliated with RIM. RIM manages Fund assets not allocated to money
manager strategies. RIM also manages the Fund's cash balances and may manage
portions of the Fund during transitions between money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, credit quality allocations, magnitude of sector shifts and duration
movements. Duration is a measure of sensitivity to interest rate changes and not
time. RIM also considers the manner in which money managers’ historical and
expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
The
Fund invests in various tactical global bond opportunities including high yield
fixed income securities, emerging markets debt securities (including Brady
Bonds), U.S. and non-U.S. corporate debt securities, Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations), fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality (including emerging markets sovereign debt)
and investment grade fixed income securities. The Fund invests across the globe
and selects instruments believed to have favorable risk/return characteristics
regardless of the country an issuer is economically tied to. The Fund may invest
without limitation in securities denominated in foreign currencies, in U.S.
dollar-denominated securities of foreign issuers and in developed and emerging
markets debt securities. Although the Fund expects to maintain an intermediate-
to long-weighted average maturity, there are no maturity restrictions on the
overall portfolio or on individual securities.
The
Fund may also purchase loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such investments
are generally rated below investment grade and are expected to exhibit credit
risks similar to “high yield” or “junk” bonds. Such investments may also be
unrated, in which case the Fund relies primarily on its own evaluation of a
borrower’s credit quality rather than on any available independent sources. The
Fund may invest in senior secured floating rate loans or debt and second lien or
other subordinated or unsecured floating rate loans or debt. Senior secured
loans or debt are secured by specific collateral of the borrower and are senior
to most other securities of the borrower in the event the borrower goes
bankrupt. Second lien and subordinated loans or debt rank after senior
obligations of the borrower in the event of bankruptcy and typically have a
lower credit rating and therefore higher yield than senior secured loans.
Unsecured loans or debt are not secured by specific collateral of the borrower
in the event of bankruptcy. Bank loans are often issued in connection with
acquisitions, leveraged buyouts, bankruptcy proceedings or financial
restructurings and borrowers may have defaulted in the payment of interest or
principal or in the performance of certain covenants or agreements and/or have
uncertain financial conditions.
185
The
Fund may invest, without limitation, in debt securities that are rated below
investment grade, (commonly referred to as “high-yield” or “junk bonds”) as
determined by one or more nationally recognized statistical rating organizations
(“NRSROs”) or in unrated securities judged to be of comparable quality. Junk
bonds, and to a lesser extent other types of bonds, may be purchased at a
discount and thereby provide opportunities for capital appreciation. The Fund’s
investments may include debt securities that are the subject of bankruptcy
proceedings, that are in default as to the payment of principal or interest, or
that are rated in the lowest rating category by an NRSRO (“distressed
securities”).
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies. The Fund’s currency
investments may seek returns through the identification of global macroeconomic
and investment themes that impact financial markets, including themes specific
to the currency market (e.g., exchange rate valuation), themes from other
markets (such as equity, interest rate or commodity markets), or themes that
relate to domestic or global economic events or external shocks (such as
political events or natural disasters), or through the identification of
currency market factors that are expected to result in positive returns over
time. The Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency contracts.
The Fund may use correlated currencies or a basket of correlated currencies to
hedge currency exposure that may be too costly to hedge directly or otherwise
difficult to hedge for reasons such as capital controls.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and Treasury futures,
and enter into options, when-issued transactions (also called forward
commitments), swap agreements (including interest rate, index and currency
swaps) or swaptions (1) as a substitute for holding securities directly, (2) for
hedging purposes, (3) to take a net short position with respect to certain
issuers, sectors or markets, (4) to facilitate the implementation of its
investment strategy, or (5) to adjust the interest rate sensitivity and duration
of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other
credit derivatives as an alternative to buying or selling the debt securities
themselves or otherwise to increase the Fund’s total return. Credit default
swaps resemble insurance contracts in that the seller of the swap provides the
buyer with protection against specific risks of the issuer, such as defaults and
bankruptcies, in exchange for a premium from the buyer. Credit default swaps may
include index credit default swaps, which are contracts on baskets or indices of
credit instruments, which may include tranches of commercial mortgage-backed
securities (“CMBX”). The Fund may invest in STRIPS (Separate Trading of
Registered Interest and Principal of Securities). STRIPS are created by
separating the interest and the principal components of an outstanding U.S.
Treasury or agency note or bond and selling them as individual securities. The
Fund may also enter into spot and forward currency contracts to facilitate
settlement of securities transactions.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as sector, industry, currency, credit or mortgage
exposure or country risk, yield curve positioning or interest rates). For
example, RIM may utilize tools such as optimization, which involves the analysis
of tradeoffs between various risk and return factors as well as turnover and
transaction costs, in order to estimate optimal portfolio positioning. RIM may
use strategies based on indexes, including optimized index sampling (strategies
that seek to purchase a sampling of securities using optimization and risk
models) and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs. An increase in the Fund's cash balances in
anticipation of a transition to a new money manager or large redemptions may be
significant and may persist for an extended period of time. The Fund may have a
relatively high cash reserve balance to enable effective management of cash
flows in light of anticipated relatively high price volatility of the Fund’s
holdings. The Fund may hold additional cash in connection with its investment
strategy.
186
The Fund
usually, but not always, exposes a portion of its cash to changes in
interest rates or market/sector returns by purchasing fixed income securities
and/or derivatives (also known as “equitization”), which typically include total
return swaps, index credit default swaps and to be announced (“TBA”)
securities. This exposure may or may not match the Fund’s benchmark and RIM may
use the cash equitization process to manage Fund exposures. RIM may not equitize
a portion of the Fund’s cash or use the cash equitization process to reduce
market exposure. RIM invests any remaining cash in (1) short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income, and (2) fixed income securities with a
typical average portfolio duration of one year and individual effective
maturities of up to five years, which may include U.S. and non-U.S. corporate
debt securities, asset-backed securities (which may include, among others,
credit card and automobile loan receivables) and money market securities similar
to those invested in by the U.S. Cash Management Fund.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign fixed income
securities, which may be referred to as local access products, credit linked
notes or participation notes. Local access products are similar
to options in that they are exercisable by the holder for an underlying security
or the value of that security, but are generally exercisable over a longer term
than typical options.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund’s investments may include variable and floating rate securities. A floating
rate security is one whose terms provide for the automatic adjustment of an
interest rate whenever the specified interest rate changes. A variable rate
security is one whose terms provide for the automatic establishment of a new
interest rate on set dates.
The
Fund may invest in convertible securities, which can be bonds, notes,
debentures, preferred stock or other securities that entitle the holder to
acquire the issuer’s common stock by exchange or purchase for a predetermined
rate. The Fund may invest in contingent convertible securities, which provide
for mandatory conversion into common stock of the issuer under certain
circumstances. In connection with its investments in convertible securities, the
Fund may invest in equity-related derivatives for hedging purposes.
The
Fund may invest in asset-backed securities, which may include, among others,
credit card, automobile loan and/or home equity line of credit receivables, and
collateralized loan obligations.
The
Fund may invest in obligations issued or guaranteed by U.S. or foreign banks.
Bank obligations, including time deposits, bankers' acceptances and certificates
of deposit, may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulations.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
The
Fund may invest in commercial paper, including asset-backed commercial
paper.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
187
Non-Principal
Investment Strategies
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced (“TBA”)
securities, interest only and inverse interest only mortgage-backed securities,
principal only mortgage-backed securities and mortgage dollar rolls, that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A dollar roll is the sale of a
security by the Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. By investing in mortgage related securities, the Fund has exposure to
non-agency mortgage backed securities, which may include Alternative A (“Alt-A”)
paper, subprime and/or non-conforming mortgages.
The
Fund may invest in preferred stocks, rights and warrants. Also, in connection
with reorganizing or restructuring of an issuer or its capital structure, an
issuer may issue common stock or other securities to holders of debt
instruments. The Fund may hold such common stock and other securities even
though it does not ordinarily purchase such securities. In addition, the Fund
may invest in debtor-in-possession loans or facilities with respect to issuers
that are the subject of bankruptcy proceedings.
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may also invest in municipal debt
obligations.
The
Fund may invest in credit linked notes, which are obligations between two or
more parties where the payment of principal and/or interest is based on the
performance of some obligation, basket of obligations, index or economic
indicator (a “reference instrument”).
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Unconstrained Total Return Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
Principal
Investment Strategies
The
Fund seeks to achieve its objective by opportunistically investing in a broad
range of fixed income securities across sectors, the globe and credit quality
and maturity spectrums, with an emphasis on higher-yielding securities. The
Fund’s fixed income investments may include U.S. and non-U.S. corporate debt
securities, Yankee Bonds (dollar-denominated obligations issued in the U.S. by
non-U.S. banks and corporations), fixed income securities issued or guaranteed
by the U.S. government (including Treasury Inflation Protected Securities and
zero coupon securities) or by non-U.S. governments, or by any U.S. government or
non-U.S. government agency or instrumentality (including emerging markets
sovereign debt), emerging markets debt securities (including Brady Bonds), high
yield fixed income securities, investment grade fixed income securities and
mortgage-backed and asset-backed securities. The Fund may also invest in other
asset classes in order to seek to achieve its objective, including equity
securities. The Fund may invest without limitation in securities denominated in
foreign currencies and in U.S. dollar-denominated securities of foreign issuers.
The Fund is managed with a benchmark agnostic approach, meaning that the Fund’s
benchmark is not determinative of what instruments and asset classes are
selected for the Fund. As a result, the Fund’s relative performance may have
wider deviation from the benchmark’s performance than would a fund that seeks to
track the performance of its benchmark.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money
188
managers
and allocates Fund assets among itself and multiple money manager investment
strategies. RIM may change a Fund's asset allocation at any time. RIM may hire
money managers to pursue a particular investment focus, such as specialization
in certain sectors or strategies, or may hire money managers to invest across
multiple sectors or strategies. The Fund’s money managers select the individual
portfolio instruments for the assets assigned to them. RIM allocates most of the
Fund’s assets to multiple money managers unaffiliated with RIM. RIM manages Fund
assets not allocated to money manager strategies. RIM also manages the Fund's
cash balances and may manage portions of the Fund during transitions between
money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, credit quality allocations, magnitude of sector shifts and duration
movements. Duration is a measure of sensitivity to interest rate changes and not
time. RIM also considers the manner in which money managers’ historical and
expected investment returns correlate with one another. In addition, RIM may
adjust allocations based on the Fund’s overall exposures and forecasted
portfolio risk and in order to respond to changes in market risks and
opportunities.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced (“TBA”)
securities, interest only and inverse interest only mortgage-backed securities,
principal only mortgage-backed securities and mortgage dollar rolls, that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A dollar roll is the sale of a
security by the Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. By investing in mortgage related securities, the Fund may also have
exposure to non-agency mortgage-backed securities, including to Alternative A
(“Alt-A”) paper, subprime and/or non-conforming mortgages. The Fund may also
invest in asset-backed securities, which may include, among others, credit card,
automobile loan and/or home equity line of credit receivables and collateralized
loan obligations (“CLOs”). CLOs are special purpose entities that are
collateralized mainly by a pool of loans, which may include, among others,
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans.
The
Fund may purchase loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such
investments are generally rated below investment grade and are expected to
exhibit credit risks similar to “high yield” or “junk” bonds. Such
investments may also be unrated, in which case the Fund relies primarily on its
own evaluation of a borrower’s credit quality rather than on any available
independent sources. The Fund may invest in senior secured floating rate loans
or debt and second lien or other subordinated or unsecured floating rate loans
or debt. Senior secured loans or debt are secured by specific collateral
of the borrower and are senior to most other securities of the borrower in the
event the borrower goes bankrupt. Second lien and subordinated loans or debt
rank after senior obligations of the borrower in the event of bankruptcy and
typically have a lower credit rating and therefore higher yield than senior
secured loans. Unsecured loans or debt are not secured by specific
collateral of the borrower in the event of bankruptcy. Bank loans are
often issued in connection with acquisitions, leveraged buyouts, bankruptcy
proceedings or financial restructurings and borrowers may have defaulted in the
payment of interest or principal or in the performance of certain covenants or
agreements and/or have uncertain financial conditions.
The
Fund may invest in convertible securities, which can be bonds, notes,
debentures, preferred stock or other securities that entitle the holder to
acquire the issuer’s common stock by exchange or purchase for a predetermined
rate. The Fund may invest in contingent convertible securities, which provide
for mandatory conversion into common stock of the issuer under certain
circumstances. In connection with its investments in convertible securities, the
Fund may invest in equity-related derivatives for hedging purposes. Also, in
connection with reorganizing or restructuring of an issuer or its capital
structure, an issuer may issue common stock or other securities to holders of
debt instruments. The Fund may hold such common stock and other securities even
though it may not ordinarily purchase such securities.
The
Fund may invest, without limitation, in debt securities that are rated below
investment grade, (commonly referred to as “high-yield” or “junk bonds”) as
determined by one or more nationally recognized statistical rating organizations
(“NRSROs”) or in unrated securities judged to be of comparable quality. Junk
bonds, and to a lesser extent
189
other
types of bonds, may be purchased at a discount and thereby provide opportunities
for capital appreciation. The Fund’s investments may include debt securities
that are the subject of bankruptcy proceedings, that are in default as to the
payment of principal or interest, or that are rated in the lowest rating
category by an NRSRO (“distressed securities”).
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and foreign currency,
Treasury and equity index futures, and enter into options, when-issued
transactions (also called forward commitments), swap agreements (including
interest rate, index and currency swaps) and swaptions. The Fund may invest in
derivatives (1) as a substitute for holding securities directly, (2) to
facilitate the implementation of its investment strategy, (3) for hedging
purposes, (4) to take a net short position with respect to certain issuers,
sectors or markets, or (5) to adjust the interest rate sensitivity and duration
of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other
credit derivatives, including credit linked notes and credit options, as an
alternative to buying or selling the fixed income securities themselves or
otherwise to increase the Fund’s total return. Credit default swaps resemble
insurance contracts in that the seller of the swap provides the buyer with
protection against specific risks of the issuer, such as defaults and
bankruptcies, in exchange for a premium from the buyer. Credit default swaps may
include index credit default swaps, which are contracts on baskets or indices of
credit instruments, which may include tranches of commercial mortgage-backed
securities (CMBX). Credit linked notes are obligations between two or more
parties where the payment of principal and/or interest is based on the
performance of some obligation, basket of obligations, index or economic
indicator (a “reference instrument”). Credit options, which are options whereby
the purchaser has the right, but not the obligation, to enter into a transaction
involving either an asset with inherent credit risk or a credit derivative, at
terms specified at the initiation of the option. The Fund may invest in STRIPS
(Separate Trading of Registered Interest and Principal of Securities). STRIPS
are created by separating the interest and the principal components of an
outstanding U.S. Treasury or agency note or bond and selling them as individual
securities.
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies or to manage the
Fund’s currency exposures. The Fund’s currency investments may seek returns
through the identification of global macroeconomic and investment themes that
impact financial markets, including themes specific to the currency market
(e.g., exchange rate valuation), themes from other markets (such as equity,
interest rate or commodity markets), or themes that relate to domestic or global
economic events or external shocks (such as political events or natural
disasters), or through the identification of currency market factors that are
expected to result in positive returns over time. The Fund will enter into spot
and forward currency contracts to facilitate settlement of securities
transactions and may enter into these contracts in order to “lock in” the U.S.
dollar price of a security that it plans to buy or sell. The Fund may at times
seek to protect a portion of its investments against adverse currency exchange
rate changes by purchasing forward currency contracts. The Fund may use
correlated currencies or a basket of correlated currencies to hedge currency
exposure that may be too costly to hedge directly or otherwise difficult to
hedge for reasons such as capital controls.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
The
Fund may invest in equity securities of issuers of any market capitalization
economically tied to U.S. and non-U.S. markets, including emerging markets.
Equity securities in which the Fund may invest include common stock, preferred
stock and master limited partnerships.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may enter into repurchase agreements and reverse repurchase agreements. A
repurchase agreement is an agreement under which the Fund acquires a fixed
income security from a commercial bank, broker or dealer and simultaneously
agrees to resell such security to the seller at an agreed upon price and date
(normally the next business day). A reverse repurchase agreement is a
transaction whereby the Fund transfers possession of a portfolio security to a
commercial bank, broker or dealer and simultaneously agrees to repurchase such
security at an agreed upon price and date.
190
The
Fund may invest in commercial paper, including asset-backed commercial
paper. The Fund may invest in money market securities. The Fund may
invest in obligations issued or guaranteed by U.S. or foreign banks. Bank
obligations, including time deposits, bankers' acceptances and certificates of
deposit, may be general obligations of the parent bank or may be limited to the
issuing branch by the terms of the specific obligations or by government
regulations.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign fixed income
securities, which may be referred to as local access products, credit linked
notes or participation notes. Local access products are similar to
options in that they are exercisable by the holder for an underlying security or
the value of that security, but are generally exercisable over a longer term
than typical options.
The
Fund may invest in puts, stand-by commitments and demand notes (including
variable rate demand notes).
The
Fund’s investments may include variable and floating rate securities. A floating
rate security is one whose terms provide for the automatic adjustment of an
interest rate whenever the specified interest rate changes. A variable rate
security is one whose terms provide for the automatic establishment of a new
interest rate on set dates.
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as sector, industry, currency, credit or mortgage
exposure or country risk, yield curve positioning or interest rates). For
example, RIM may utilize tools such as optimization, which involves the analysis
of tradeoffs between various risk and return factors as well as turnover and
transaction costs, in order to estimate optimal portfolio positioning. RIM may
use strategies based on indexes, including optimized index sampling (strategies
that seek to purchase a sampling of securities using optimization and risk
models) and/or index replication.
Depending
upon market conditions, RIM may allocate a significant portion of the Fund’s
assets to cash, all or a portion of which may be “equitized” as described below.
The Fund, like any mutual fund, also maintains cash reserves (i.e., cash
awaiting investment or cash held to meet redemption requests or to pay
expenses). RIM may increase or decrease the Fund’s cash balances to seek to
achieve the desired exposures for the Fund, or in anticipation of a transition
to a new money manager or large redemptions resulting from rebalancing by funds
of funds or asset allocation programs. An increase in the Fund’s cash balances
in anticipation of a transition to a new money manager or large redemptions may
be significant and may persist for an extended period of time.
The
Fund may expose all or a portion of its cash to changes in interest
rates and/or market/sector returns by purchasing derivatives, as described
herein (also known as “equitization”). RIM may use the cash equitization process
to manage Fund exposures. RIM may also use the cash equitization process to
reduce market exposure. RIM invests any remaining cash in (1) short-term
investments, including the U.S. Cash Management Fund, an unregistered fund
advised by RIM whose investment objective is to seek to preserve principal and
provide liquidity and current income, and (2) fixed income securities with a
typical average portfolio duration of one year and individual effective
maturities of up to five years, which may include U.S. and non-U.S. corporate
debt securities, asset-backed securities (which may include, among others,
credit card and automobile loan receivables) and money market securities similar
to those invested in by the U.S. Cash Management Fund.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the
191
Netherlands,
New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States. Emerging market countries also include frontier
market countries, which are less developed than traditional emerging market
countries.
Non-Principal
Investment Strategies
The
Fund may invest in municipal debt obligations.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may also invest in convertible securities, rights and warrants.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Strategic Bond Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide total return.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds. The Fund is required to provide 60 days’ notice to its shareholders
prior to a change in this policy. The 80% investment requirement applies at the
time the Fund invests its assets. Bonds are fixed income and floating rate
securities representing debt obligations that typically require the issuer to
repay the bondholders the principal amount borrowed and generally to pay
interest. The Fund considers bonds to include fixed income equivalent
instruments, which may be represented by forwards or derivatives such as
options, futures contracts or swap agreements.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund's asset
allocation at any time. RIM may hire money managers to pursue a particular
investment focus, such as specialization in certain sectors or strategies, or
may hire money managers to invest across multiple sectors or strategies. The
Fund’s money managers select the individual portfolio instruments for the assets
assigned to them. RIM allocates most of the Fund’s assets to multiple money
managers unaffiliated with RIM. RIM manages Fund assets not allocated to money
manager strategies. RIM also manages the Fund's cash balances and may manage
portions of the Fund during transitions between money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of
the
192
money
manager’s typical investment portfolio. These characteristics include portfolio
biases, magnitude of sector shifts and duration movements. Duration is a measure
of sensitivity to interest rate changes and not time. RIM also considers the
manner in which money managers’ historical and expected investment returns
correlate with one another. In addition, RIM may adjust allocations based on the
Fund’s overall exposures and forecasted portfolio risk and in order to respond
to changes in market risks and opportunities.
The
Fund invests in securities of issuers in a variety of sectors of the fixed
income market. For example, the Fund may identify sectors of the fixed income
market believed to be undervalued and focus its investments in those sectors.
These sectors will differ over time. The Fund may attempt to anticipate shifts
in interest rates and hold securities it expects to perform well in relation to
market indexes as a result of such shifts.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced (“TBA”)
securities, interest only and inverse interest only mortgage-backed securities,
principal only mortgage-backed securities and mortgage dollar rolls, that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A dollar roll is the sale of a
security by the Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. By investing in mortgage related securities, the Fund has exposure to
non-agency mortgage backed securities, which may include Alternative A (“Alt-A”)
paper, subprime and/or non-conforming mortgages. The Fund also invests in
asset-backed securities, which may include, among others, credit card,
automobile loan and/or home equity line of credit receivables, and
collateralized loan obligations.
The
Fund may invest in U.S. and non-U.S. corporate debt securities, Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations), fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality. Zero coupon securities are notes, bonds
and debentures that (1) do not pay current interest and are issued at a
substantial discount from par value, (2) have been stripped of their
unmatured interest coupons and receipts or (3) pay no interest until a
stated date one or more years into the future.
The
Fund may invest in debt securities that are rated below investment grade,
(commonly referred to as “high-yield” or “junk bonds”) as determined by one or
more nationally recognized statistical rating organizations (“NRSROs”) or in
unrated securities judged to be of comparable quality. Junk bonds, and to a
lesser extent other types of bonds, may be purchased at a discount and thereby
provide opportunities for capital appreciation. The Fund’s investments may
include debt securities that are the subject of bankruptcy proceedings, that are
in default as to the payment of principal or interest, or that are rated in the
lowest rating category by an NRSRO (“distressed securities”).
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies. The Fund’s currency
investments may seek returns through the identification of global macroeconomic
and investment themes that impact financial markets, including themes specific
to the currency market (e.g., exchange rate valuation), themes from other
markets (such as equity, interest rate or commodity markets), or themes that
relate to domestic or global economic events or external shocks (such as
political events or natural disasters), or through the identification of
currency market factors that are expected to result in positive returns over
time. The Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and Treasury futures,
and enter into options, when-issued transactions (also called forward
commitments), swap agreements (including interest rate, index and
currency swaps) or swaptions (1) as a substitute for holding securities
directly, (2) for hedging purposes, (3) to take a net short position with
respect to certain issuers, sectors or markets, (4) to facilitate the
implementation of its investment strategy, or (5) to adjust the interest rate
sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell
credit default swaps or other credit derivatives as an alternative to buying or
selling the debt securities themselves or otherwise to increase the Fund’s total
return. Credit default swaps resemble insurance contracts in that the seller of
the swap provides the buyer with protection against specific risks of the
issuer, such as defaults and
193
bankruptcies,
in exchange for a premium from the buyer. Credit default swaps may include index
credit default swaps, which are contracts on baskets or indices of credit
instruments, which may include tranches of commercial mortgage-backed securities
(“CMBX”). The Fund may invest in STRIPS (Separate Trading of Registered Interest
and Principal of Securities). STRIPS are created by separating the interest and
the principal components of an outstanding U.S. Treasury or agency note or bond
and selling them as individual securities.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
The
duration of the Fund’s portfolio will typically be within one year of the
duration of the Bloomberg U.S. Aggregate Bond Index, which was 6.49 years as of
December 31, 2021, but may vary up to two years from the Index’s duration.
The Fund has no restrictions on individual security duration. Interest rates
have recently been increased from historical lows and may continue to increase
in the future, though the timing or magnitude of future increases are difficult
to predict. In general, as interest rates rise, the value of the bonds held in
the Fund will tend to decline, and, as interest rates fall, the value of the
bonds held in the Fund will tend to rise. Bonds with longer durations tend to be
more sensitive to changes in interest rates than those with shorter durations.
Variable and floating rate securities are generally less sensitive to interest
rate changes.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund’s investments may include variable and floating rate securities. A floating
rate security is one whose terms provide for the automatic adjustment of an
interest rate whenever the specified interest rate changes. A variable rate
security is one whose terms provide for the automatic establishment of a new
interest rate on set dates.
The
Fund purchases loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such
investments are generally rated below investment grade and are expected to
exhibit credit risks similar to “high yield” or “junk” bonds. Such
investments may also be unrated, in which case the Fund relies primarily on its
own evaluation of a borrower’s credit quality rather than on any available
independent sources. The Fund may invest in senior secured floating rate loans
or debt and second lien or other subordinated or unsecured floating rate loans
or debt. Senior secured loans or debt are secured by specific collateral
of the borrower and are senior to most other securities of the borrower in the
event the borrower goes bankrupt. Second lien and subordinated loans or debt
rank after senior obligations of the borrower in the event of bankruptcy and
typically have a lower credit rating and therefore higher yield than senior
secured loans. Unsecured loans or debt are not secured by specific
collateral of the borrower in the event of bankruptcy. Bank loans are
often issued in connection with acquisitions, leveraged buyouts, bankruptcy
proceedings or financial restructurings and borrowers may have defaulted in the
payment of interest or principal or in the performance of certain covenants or
agreements and/or have uncertain financial conditions.
The
Fund may invest in non-U.S. debt securities, including developed and emerging
market debt securities, some of which may be non-U.S. dollar denominated.
The
Fund may invest in obligations issued or guaranteed by U.S. or foreign banks.
Bank obligations, including time deposits, bankers' acceptances and certificates
of deposit, may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulations.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
The
Fund may invest in commercial paper, including asset-backed commercial
paper.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as sector, industry, currency, credit or mortgage
exposure or country risk, yield curve positioning or
194
interest
rates). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs. An increase in the Fund's cash balances in
anticipation of a transition to a new money manager or large redemptions may be
significant and may persist for an extended period of time. The Fund may hold
additional cash in connection with its investment strategy.
The
Fund usually, but not always, exposes a portion of its cash to changes
in interest rates or market/sector returns by purchasing fixed income
securities and/or derivatives (also known as “equitization”), which typically
include exchange traded fixed income futures contracts, TBAs and swaps.
This exposure may or may not match the Fund’s benchmark and RIM may use the cash
equitization process to manage Fund exposures. RIM may not equitize a portion of
the Fund’s cash or use the cash equitization process to reduce market exposure.
RIM invests any remaining cash in (1) short-term investments, including the
U.S. Cash Management Fund, an unregistered fund advised by RIM whose investment
objective is to seek to preserve principal and provide liquidity and current
income, and (2) fixed income securities with a typical average portfolio
duration of one year and individual effective maturities of up to five years,
which may include U.S. and non-U.S. corporate debt securities, asset-backed
securities (which may include, among others, credit card and automobile loan
receivables) and money market securities similar to those invested in by the
U.S. Cash Management Fund.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
Non-Principal
Investment Strategies
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may invest in municipal debt
obligations.
The
Fund may invest in non-U.S. debt securities and bonds issued through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring, also known as Brady
Bonds.
The
Fund may invest in convertible securities, which can be bonds, notes,
debentures, preferred stock or other securities that entitle the holder to
acquire the issuer’s common stock by exchange or purchase for a predetermined
rate. The Fund may invest in contingent convertible securities, which provide
for mandatory conversion into common stock of the issuer under certain
circumstances. In connection with its investments in convertible securities, the
Fund may invest in equity-related derivatives for hedging purposes.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
195
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Investment Grade Bond Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide current income and the preservation of capital.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in investment grade bonds. The Fund is required to provide 60 days’ notice to
its shareholders prior to a change in this policy. The 80% investment
requirement applies at the time the Fund invests its assets. Bonds are fixed
income and floating rate securities representing debt obligations that typically
require the issuer to repay the bondholders the principal amount borrowed and
generally to pay interest. The Fund considers bonds to include fixed income
equivalent instruments, which may be represented by forwards or derivatives such
as options, futures contracts, or swap agreements.
The
Fund will invest principally in securities of “investment grade” quality at the
time of purchase, meaning either that a nationally recognized statistical rating
organization (“NRSRO”) (for example, Moody’s Investor Service, Inc.,
Standard & Poor’s Rating Service, or Fitch Investors Service, Inc.) has
rated the securities Baa3 or BBB- (or the equivalent) or better, or the
securities have been determined to be of comparable quality. However, higher
rated debt securities, including investment grade bonds, are also subject to
volatility and a risk of default. As a result, the Fund may hold debt securities
that are the subject of bankruptcy proceedings, that are in default as to the
payment of principal or interest, or that are rated in the lowest rating
category by an NRSRO (“distressed securities”).
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund's asset
allocation at any time. RIM may hire money managers to pursue a particular
investment focus, such as specialization in certain sectors or strategies, or
may hire money managers to invest across multiple sectors or strategies. The
Fund’s money managers select the individual portfolio instruments for the assets
assigned to them. RIM allocates most of the Fund’s assets to multiple money
managers unaffiliated with RIM. RIM manages Fund assets not allocated to money
manager strategies. RIM also manages the Fund's cash balances and may manage
portions of the Fund during transitions between money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, magnitude of sector shifts and duration movements. Duration is a measure
of sensitivity to interest rate changes and not time. RIM also considers the
manner in which money managers’ historical and expected investment returns
correlate with one another. In addition, RIM may adjust allocations based on the
Fund’s overall exposures and forecasted portfolio risk and in order to respond
to changes in market risks and opportunities.
The
Fund invests in securities of issuers in a variety of sectors of the fixed
income market. For example, the Fund may focus its investments in sectors of the
fixed income market that RIM or the money managers believe are undervalued.
These sectors will differ over time. The Fund may attempt to anticipate shifts
in interest rates and hold securities that the Fund expects to perform well in
relation to market indexes as a result of such shifts.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced (“TBA”)
securities, interest only and inverse interest only mortgage-backed securities,
principal only mortgage-backed securities
196
and
mortgage dollar rolls, that directly or indirectly represent a participation in,
or are secured by and payable from, mortgage loans on real property. A dollar
roll is the sale of a security by the Fund and its agreement to repurchase the
instrument at a specified time and price, and may be considered a form of
borrowing for some purposes. By investing in mortgage related securities, the
Fund has exposure to non-agency mortgage backed securities, which may include
Alternative A (“Alt-A”) paper, subprime and/or non-conforming mortgages. The
Fund also invests in asset-backed securities, which may include, among others,
credit card, automobile loan and/or home equity line of credit receivables, and
collateralized loan obligations.
The
Fund may invest in U.S. and non-U.S. corporate debt securities, Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations), fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality. Zero coupon securities are notes, bonds
and debentures that (1) do not pay current interest and are issued at a
substantial discount from par value, (2) have been stripped of their
unmatured interest coupons and receipts or (3) pay no interest until a
stated date one or more years into the future.
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies. The Fund’s currency
investments may seek returns through the identification of global macroeconomic
and investment themes that impact financial markets, including themes specific
to the currency market (e.g., exchange rate valuation), themes from other
markets (such as equity, interest rate or commodity markets), or themes that
relate to domestic or global economic events or external shocks (such as
political events or natural disasters), or through the identification of
currency market factors that are expected to result in positive returns over
time. The Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and Treasury
futures, and enter into options, when-issued transactions (also called forward
commitments), swap agreements (including interest rate, index and currency
swaps) or swaptions (1) as a substitute for holding securities directly, (2) for
hedging purposes, (3) to take a net short position with respect to certain
issuers, sectors or markets, (4) to facilitate the implementation of its
investment strategy, or (5) to adjust the interest rate sensitivity and duration
of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other
credit derivatives as an alternative to buying or selling the debt securities
themselves or otherwise to increase the Fund’s total return. Credit default
swaps resemble insurance contracts in that the seller of the swap provides the
buyer with protection against specific risks of the issuer, such as defaults and
bankruptcies, in exchange for a premium from the buyer. Credit default swaps may
include index credit default swaps, which are contracts on baskets or indices of
credit instruments, which may include tranches of commercial mortgage-backed
securities (“CMBX”). The Fund may invest in STRIPS (Separate Trading of
Registered Interest and Principal of Securities). STRIPS are created by
separating the interest and the principal components of an outstanding U.S.
Treasury or agency note or bond and selling them as individual securities.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
The
duration of the Fund’s portfolio will typically be within one year of the
duration of the Bloomberg U.S. Aggregate Bond Index, which was 6.49 years as of
December 31, 2021, but may vary up to two years from the Index’s duration.
The Fund has no restrictions on individual security duration. Interest rates
have recently been increased from historical lows and may continue to increase
in the future, though the timing or magnitude of future increases is difficult
to predict. In general, as interest rates rise, the value of the bonds held in
the Fund will tend to decline, and, as interest rates fall, the value of the
bonds held in the Fund will tend to rise. Bonds with longer durations tend to be
more sensitive to changes in interest rates than those with shorter durations.
Variable and floating rate securities are generally less sensitive to interest
rate changes.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
197
The
Fund’s investments may include variable and floating rate securities. A floating
rate security is one whose terms provide for the automatic adjustment of an
interest rate whenever the specified interest rate changes. A variable rate
security is one whose terms provide for the automatic establishment of a new
interest rate on set dates.
The
Fund purchases loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness.
The
Fund may invest in non-U.S. debt securities, including developed and emerging
market debt securities, some of which may be non-U.S. dollar denominated.
The
Fund may invest in obligations issued or guaranteed by U.S. or foreign banks.
Bank obligations, including time deposits, bankers' acceptances and certificates
of deposit, may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulations.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
The
Fund may invest in commercial paper, including asset-backed commercial
paper.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as sector, industry, currency, credit or mortgage
exposure or country risk, yield curve positioning or interest rates). For
example, RIM may utilize tools such as optimization, which involves the analysis
of tradeoffs between various risk and return factors as well as turnover and
transaction costs, in order to estimate optimal portfolio positioning. RIM may
use strategies based on indexes, including optimized index sampling (strategies
that seek to purchase a sampling of securities using optimization and risk
models) and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs. An increase in the Fund's cash balances in
anticipation of a transition to a new money manager or large redemptions may be
significant and may persist for an extended period of time. The Fund may hold
additional cash in connection with its investment strategy.
The
Fund usually, but not always, exposes a portion of its cash to changes in
interest rates or market/sector returns by purchasing fixed income
securities and/or derivatives (also known as “equitization”), which typically
include exchange traded fixed income futures contracts, TBAs and swaps.
This exposure may or may not match the Fund’s benchmark and RIM may use the cash
equitization process to manage Fund exposures. RIM may not equitize a portion of
the Fund’s cash or use the cash equitization process to reduce market exposure.
RIM invests any remaining cash in (1) short-term investments, including the
U.S. Cash Management Fund, an unregistered fund advised by RIM whose investment
objective is to seek to preserve principal and provide liquidity and current
income, and (2) fixed income securities with a typical average portfolio
duration of one year and individual effective maturities of up to five years,
which may include U.S. and non-U.S. corporate debt securities, asset-backed
securities (which may include, among others, credit card and automobile loan
receivables) and money market securities similar to those invested in by the
U.S. Cash Management Fund.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
198
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
Non-Principal
Investment Strategies
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may invest in municipal debt
obligations.
The
Fund may invest in non-U.S. debt securities and bonds issued through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring, also known as Brady
Bonds.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Short Duration Bond Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide current income and preservation of capital with a focus on
short duration securities.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in bonds. The Fund is required to provide 60 days’ notice to its shareholders
prior to a change in this policy. The 80% investment requirement applies at the
time the Fund invests its assets. Bonds are fixed income and floating rate
securities representing debt obligations that typically require the issuer to
repay the bondholders the principal amount borrowed and generally to pay
interest. The Fund considers bonds to include fixed income equivalent
instruments, which may be represented by forwards or derivatives such as
options, futures contracts or swap agreements.
The
Fund invests principally in short duration bonds and defines short duration as a
duration ranging from 0.0 to 3.0 years. The duration of the Fund’s portfolio
will typically be within one year of the duration of the ICE BofA 1-3 Yr US
Treasuries Index, which was 1.82 years as of December 31, 2021, but may
vary up to two years from the Index’s duration. The Fund has no restrictions on
individual security duration. Duration is a measure of a bond price’s
sensitivity to a change in interest rates. Interest rates have recently been
increased from historical lows and may continue to increase in the future,
though the timing or magnitude of future increases is difficult to predict. In
general, as interest rates rise, the value of the bonds held in the Fund will
tend to decline, and, as interest rates fall, the value of the bonds in the Fund
will tend to rise. Bonds with longer durations tend to be more sensitive to
changes in interest rates than those with shorter durations. Variable and
floating rate securities are generally less sensitive to interest rate
changes.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund's asset
allocation at any time. RIM may hire money managers to pursue a particular
investment focus, such as specialization in certain sectors or strategies, or
may hire money managers to invest across multiple sectors or strategies. The
Fund’s money managers select the individual portfolio instruments for the assets
assigned to them. RIM allocates most of the Fund’s assets to multiple money
managers unaffiliated with RIM. RIM manages Fund assets not allocated to money
manager strategies. RIM also manages the Fund's cash balances and may manage
portions of the Fund during transitions between money managers.
199
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, magnitude of sector shifts and duration movements. Duration is a measure
of sensitivity to interest rate changes and not time. RIM also considers the
manner in which money managers’ historical and expected investment returns
correlate with one another. In addition, RIM may adjust allocations based on the
Fund’s overall exposures and forecasted portfolio risk and in order to respond
to changes in market risks and opportunities.
The
Fund invests in securities of issuers in a variety of sectors of the fixed
income market. For example, the Fund may focus its investments in sectors of the
fixed income market believed to be undervalued. These sectors will differ over
time. The Fund may attempt to anticipate shifts in interest rates and hold
securities that the Fund expects to perform well in relation to market indexes
as a result of such shifts.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced (“TBA”)
securities, interest only and inverse interest only mortgage-backed securities,
principal only mortgage-backed securities and mortgage dollar rolls, that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A dollar roll is the sale of a
security by the Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. By investing in mortgage related securities, the Fund has exposure to
non-agency mortgage backed securities, which may include Alternative A (“Alt-A”)
paper, subprime and/or non-conforming mortgages. The Fund also invests in
asset-backed securities, which may include, among others, credit card,
automobile loan and/or home equity line of credit receivables, and
collateralized loan obligations.
The
Fund may invest in U.S. and non-U.S. corporate debt securities, Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations), fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by any U.S. government or non-U.S.
government agency or instrumentality. Zero coupon securities are notes, bonds
and debentures that (1) do not pay current interest and are issued at a
substantial discount from par value, (2) have been stripped of their
unmatured interest coupons and receipts or (3) pay no interest until a
stated date one or more years into the future.
The
Fund may invest in debt securities that are rated below investment grade,
(commonly referred to as “high-yield” or “junk bonds”) as determined by one or
more nationally recognized statistical rating organizations (“NRSROs”) or in
unrated securities judged to be of comparable quality. Junk bonds, and to a
lesser extent other types of bonds, may be purchased at a discount and thereby
provide opportunities for capital appreciation.
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies. The Fund’s currency
investments may seek returns through the identification of global macroeconomic
and investment themes that impact financial markets, including themes specific
to the currency market (e.g., exchange rate valuation), themes from other
markets (such as equity, interest rate or commodity markets), or themes that
relate to domestic or global economic events or external shocks (such as
political events or natural disasters), or through the identification of
currency market factors that are expected to result in positive returns over
time. The Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency
contracts.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and foreign
currency and Treasury futures, and enter into options, when-issued
transactions (also called forward commitments), forward foreign currency
contracts, swap agreements (including interest rate, index and
currency swaps) or swaptions (1) as a substitute for holding securities
directly, (2) for hedging purposes, (3) to take a net short position with
respect to certain issuers, sectors or markets, (4) to facilitate the
implementation of its investment strategy, or (5) to adjust the interest rate
sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell
credit default swaps or other credit
200
derivatives
as an alternative to buying or selling the debt securities themselves or
otherwise to increase the Fund’s total return. Credit default swaps resemble
insurance contracts in that the seller of the swap provides the buyer with
protection against specific risks of the issuer, such as defaults and
bankruptcies, in exchange for a premium from the buyer. Credit default swaps may
include index credit default swaps, which are contracts on baskets or indices of
credit instruments, which may include tranches of commercial mortgage-backed
securities (“CMBX”). The Fund may invest in STRIPS (Separate Trading of
Registered Interest and Principal of Securities). STRIPS are created by
separating the interest and the principal components of an outstanding U.S.
Treasury or agency note or bond and selling them as individual securities.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund’s investments may include variable and floating rate securities. A floating
rate security is one whose terms provide for the automatic adjustment of an
interest rate whenever the specified interest rate changes. A variable rate
security is one whose terms provide for the automatic establishment of a new
interest rate on set dates.
The
Fund may invest in non-U.S. debt securities, including developed and emerging
market debt securities, some of which may be non-U.S. dollar denominated.
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
The
Fund may invest in obligations issued or guaranteed by U.S. or foreign banks.
Bank obligations, including time deposits, bankers' acceptances and certificates
of deposit, may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulations.
The
Fund may invest in commercial paper, including asset-backed commercial
paper.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as sector, industry, currency, credit or mortgage
exposure or country risk, yield curve positioning or interest rates). For
example, RIM may utilize tools such as optimization, which involves the analysis
of tradeoffs between various risk and return factors as well as turnover and
transaction costs, in order to estimate optimal portfolio positioning. RIM may
use strategies based on indexes, including optimized index sampling (strategies
that seek to purchase a sampling of securities using optimization and risk
models) and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs. An increase in the Fund's cash balances in
anticipation of a transition to a new money manager or large redemptions may be
significant and may persist for an extended period of time.
The
Fund usually, but not always, exposes a portion of its cash to changes in
interest rates or market/sector returns by purchasing fixed income securities
and/or derivatives (also known as “equitization”), which typically include
exchange traded fixed income futures contracts and swaps. This exposure may or
may not match the Fund’s benchmark and RIM may use the cash equitization process
to manage Fund exposures. RIM may not equitize a portion of the Fund’s cash or
use the cash equitization process to reduce market exposure. RIM invests any
remaining cash in (1) short-term investments, including the U.S. Cash
Management Fund, an unregistered fund advised by RIM whose investment objective
is to seek to preserve principal and provide liquidity and current income, and
(2) fixed income securities with a
201
typical average
portfolio duration of approximately two years and individual effective
maturities of up to six years, which may include U.S. and non-U.S.
corporate debt securities, asset-backed securities (which may include, among
others, credit card and automobile loan receivables) and money market securities
similar to those invested in by the U.S. Cash Management Fund.
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
The
Fund considers the following countries to have developed markets: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. As a general rule, the Fund considers emerging market countries
to include every other country.
Non-Principal
Investment Strategies
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may invest in municipal debt
obligations. The Fund’s investments may include debt securities that are
the subject of bankruptcy proceedings, that are in default as to the payment of
principal or interest, or that are rated in the lowest rating category by an
NRSRO (“distressed securities”).
The
Fund purchases loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such
investments are generally rated below investment grade and are expected to
exhibit credit risks similar to “high yield” or “junk” bonds. Such
investments may also be unrated, in which case the Fund relies primarily on its
own evaluation of a borrower’s credit quality rather than on any available
independent sources. The Fund may invest in senior secured floating rate loans
or debt and second lien or other subordinated or unsecured floating rate loans
or debt. Senior secured loans or debt are secured by specific collateral
of the borrower and are senior to most other securities of the borrower in the
event the borrower goes bankrupt. Second lien and subordinated loans or debt
rank after senior obligations of the borrower in the event of bankruptcy and
typically have a lower credit rating and therefore higher yield than senior
secured loans. Unsecured loans or debt are not secured by specific
collateral of the borrower in the event of bankruptcy. Bank loans are
often issued in connection with acquisitions, leveraged buyouts, bankruptcy
proceedings or financial restructurings and borrowers may have defaulted in the
payment of interest or principal or in the performance of certain covenants or
agreements and/or have uncertain financial conditions.
The
Fund may invest in non-U.S. debt securities and bonds issued through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring, also known as Brady
Bonds.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Tax-Exempt High Yield Bond Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide a high level of current income that is exempt from federal
tax, and as a secondary objective, total return.
202
Principal
Investment Strategies
The
Fund has a fundamental policy to invest, under normal circumstances, at least
80% of the value of its net assets plus borrowings for investment purposes in
fixed income investments the income from which is exempt from federal income
tax. This fundamental policy can only be changed by a vote of the shareholders
of the Fund. The 80% investment requirement applies at the time the Fund invests
its assets.
The
Fund invests principally in municipal debt obligations providing federal
tax-exempt interest income. Specifically, these obligations are debt obligations
issued by states, territories and possessions of the U.S. and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multi-state agencies or authorities to obtain funds to support special
government needs or special projects. The Fund may invest up to 20% of the value
of its net assets plus borrowings for investment purposes in municipal debt
securities, the income on which is subject to federal income tax, including the
alternative minimum tax. Most of the Fund's earnings may be subject to state and
local taxes.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach for the
Fund. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund's
asset allocation at any time. The Fund’s money managers select the individual
portfolio instruments for the assets assigned to them. RIM allocates most of the
Fund’s assets to multiple money managers unaffiliated with RIM. RIM manages the
Fund’s cash balances and may manage portions of the Fund during transitions
between money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, magnitude of sector shifts and duration movements. Duration is a measure
of sensitivity to interest rate changes and not time. RIM also considers the
manner in which money managers’ historical and expected investment returns
correlate with one another. In addition, RIM may adjust allocations based on the
Fund’s overall exposures and forecasted portfolio risk and in order to respond
to changes in market risks and opportunities.
The
Fund generally intends to invest a substantial portion of its assets in medium-
to low-quality municipal debt securities (including below investment grade
municipal debt securities) as rated by one or more nationally recognized
statistical rating organizations (“NRSROs”) (municipal debt securities rated
BBB+ or lower by Standard & Poor’s Ratings Services (“S&P”) or Fitch
Ratings, Inc. (“Fitch”), or Baa1 or lower by Moody’s Investors Service, Inc.
(“Moody’s”)), or, if unrated, judged to be of comparable quality. The Fund
reserves the right to invest a lesser amount of its net assets in medium to
low-quality municipal debt securities if it is determined that there is
insufficient supply of such obligations available for investment.
The
Fund generally expects to invest between 20% and 80% of its assets in municipal
debt securities that are rated below investment grade by one or more NRSROs
(municipal debt securities rated below BBB- by S&P or Fitch, or below Baa3
by Moody’s and commonly referred to as “high-yield” or “junk bonds”) or in
unrated securities judged to be of comparable quality. Junk bonds, and to a
lesser extent other types of bonds, may be purchased at a discount and thereby
provide opportunities for capital appreciation.
The
Fund may also invest in industrial development bonds. Such bonds are usually
revenue bonds issued to pay for facilities with a public purpose operated by
private corporations. The credit quality of industrial development bonds is
usually directly related to the credit standing of the owner or user of the
facilities. Industrial development bonds issued after the effective date of the
Tax Reform Act of 1986, as well as certain other bonds, are now classified as
“private activity bonds.” Some, but not all, private activity bonds issued after
that date qualify to pay tax-exempt interest.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may invest in commercial paper.
The
Fund may invest in puts, stand-by commitments and demand notes (including
variable rate demand notes).
203
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and Treasury futures,
and enter into options, when-issued transactions (also called forward
commitments), swap agreements (including interest rate, index and currency
swaps) or swaptions (1) as a substitute for holding securities directly, (2) for
hedging purposes, (3) to take a net short position with respect to certain
issuers, sectors or markets, (4) to facilitate the implementation of its
investment strategy, or (5) to adjust the interest rate sensitivity and duration
of the Fund’s portfolio.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by asset allocation
programs. An increase in the Fund's cash balances in anticipation of a
transition to a new money manager or large redemptions may be significant and
may persist for an extended period of time. RIM invests the Fund’s cash in
short-term investments, including the U.S. Cash Management Fund, an unregistered
fund advised by RIM whose investment objective is to seek to preserve principal
and provide liquidity and current income. Dividends from the Fund’s investments
in the unregistered fund and other taxable instruments are treated as taxable
income by the Fund’s shareholders.
The
Fund may seek to limit the effect of holding cash reserves on the Fund’s
exposures by investing in pre-refunded municipal bonds to provide the Fund with
longer duration exposure. RIM may invest in pre-refunded municipal bonds to
manage Fund exposures. Pre-refunded municipal bonds are tax-exempt bonds that
have been refunded to a call date prior to the maturity of principal (or to the
final maturity of principal, in the case of pre-refunded municipal bonds known
as “escrowed-to-maturity bonds”) and remain outstanding in the municipal market.
Principal and interest payments on pre-refunded municipal bonds are funded from
securities in designated escrow accounts holding U.S. Treasury securities or
other obligations of the U.S. government and its agencies and
instrumentalities.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds.
The
Fund may invest in municipal debt securities that are the subject of bankruptcy
proceedings, that are in default as to the payment of principal or interest, or
that are rated in the lowest rating category by an NRSRO (“distressed
securities”).
The
Fund may invest in tender option bonds. Typically, a tender option bond
transaction begins when a third-party sponsor deposits fixed-rate tax-exempt or
other bonds in a trust (“TOB Trust”) created by the sponsor. The TOB Trust
issues two types of securities: short-term floating rate securities (“Floaters”)
and residual securities junior to the Floater (“Inverse Floaters”). The Fund
does not currently intend to deposit bonds into a TOB Trust, but may invest in
the Floaters and Inverse Floaters issued by TOB Trusts.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
204
Tax-Exempt Bond Fund
Investment
Objective (Fundamental)
The
Fund seeks to provide federal tax-exempt current income consistent with the
preservation of capital. The Fund will invest, under normal circumstances, at
least 80% of the value of its assets in investments the income from which is
exempt from federal income tax.
Principal
Investment Strategies
The
Fund has a fundamental policy to invest, under normal circumstances, at least
80% of the value of its net assets plus borrowings for investment purposes in
investments the income from which is exempt from federal income tax. This
fundamental policy can only be changed by a vote of the shareholders of the
Fund. The 80% investment requirement applies at the time the Fund invests its
assets.
The
Fund invests principally in investment grade municipal debt obligations
providing federal tax-exempt interest income. Specifically, these obligations
are debt obligations issued by states, territories and possessions of the U.S.
and the District of Columbia and their political subdivisions, agencies and
instrumentalities, or multi-state agencies or authorities to obtain funds to
support special government needs or special projects. An investment grade
quality obligation is one that either a nationally recognized statistical rating
organization (for example, Moody’s Investor Service, Inc, Standard & Poor’s
Rating Service or Fitch Investors Service, Inc.) has rated the securities Baa3
or BBB- (or the equivalent) or better, or the securities have been determined to
be of comparable quality. However, higher rated debt obligations, including
investment grade municipal debt obligations, may also be subject to volatility
and a risk of default. The Fund may invest up to 20% of the value of its net
assets plus borrowings for investment purposes in municipal debt securities, the
income on which is subject to federal income tax. Most of the Fund’s earnings
may be subject to state and local taxes.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach for the
Fund. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund's
asset allocation at any time. The Fund’s money managers select the individual
portfolio instruments for the assets assigned to them. RIM allocates most of the
Fund’s assets to multiple money managers unaffiliated with RIM. RIM manages the
Fund’s cash balances and may manage portions of the Fund during transitions
between money managers.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
expertise, investment approach, and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include portfolio
biases, magnitude of sector shifts and duration movements. Duration is a measure
of sensitivity to interest rate changes and not time. RIM also considers the
manner in which money managers’ historical and expected investment returns
correlate with one another. In addition, RIM may adjust allocations based on the
Fund’s overall exposures and forecasted portfolio risk and in order to respond
to changes in market risks and opportunities.
The
Fund may invest in municipal debt securities that are rated below investment
grade (commonly referred to as “high-yield” or “junk bonds”) as determined by
one or more nationally recognized statistical rating organizations (“NRSROs”) or
in unrated securities judged to be of comparable quality.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may invest in commercial paper.
The
Fund may invest in puts, stand-by commitments and demand notes (including
variable rate demand notes). The Fund may invest in fixed income securities
issued or guaranteed by the U.S. government (including zero coupon securities).
Zero coupon securities are notes, bonds and debentures that (1) do not pay
current interest and are issued at a substantial discount from par value, (2)
have been stripped of their unmatured interest coupons and receipts or (3) pay
no interest until a stated date one or more years into the future.
205
The
Fund may enter into repurchase agreements. A repurchase agreement is an
agreement under which the Fund acquires a fixed income security from a
commercial bank, broker or dealer and simultaneously agrees to resell such
security to the seller at an agreed upon price and date (normally the next
business day).
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and Treasury futures,
and enter into options, when-issued transactions (also called forward
commitments), swap agreements (including interest rate, index and currency
swaps) or swaptions (1) as a substitute for holding securities directly, (2) for
hedging purposes, (3) to take a net short position with respect to certain
issuers, sectors or markets, (4) to facilitate the implementation of its
investment strategy, or (5) to adjust the interest rate sensitivity and duration
of the Fund’s portfolio.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by asset allocation
programs. An increase in the Fund's cash balances in anticipation of a
transition to a new money manager or large redemptions may be significant and
may persist for an extended period of time. RIM invests the Fund’s cash in
short-term investments, including the U.S. Cash Management Fund, an unregistered
fund advised by RIM whose investment objective is to seek to preserve principal
and provide liquidity and current income. Dividends from the Fund’s investments
in the unregistered fund and other taxable instruments are treated as taxable
income by the Fund’s shareholders.
The
Fund may seek to limit the effect of holding cash reserves on the Fund’s
exposures by investing in pre-refunded municipal bonds to provide the Fund with
longer duration exposure. RIM may invest in pre-refunded municipal bonds to
manage Fund exposures. Pre-refunded municipal bonds are tax-exempt bonds that
have been refunded to a call date prior to the maturity of principal (or to the
final maturity of principal, in the case of pre-refunded municipal bonds known
as “escrowed-to-maturity bonds”) and remain outstanding in the municipal market.
Principal and interest payments on pre-refunded municipal bonds are funded from
securities in designated escrow accounts holding U.S. Treasury securities or
other obligations of the U.S. government and its agencies and
instrumentalities.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds.
The
Fund may invest in municipal debt securities, the income on which is subject to
the federal alternative minimum tax. The Fund may also invest in municipal
debt securities that are the subject of bankruptcy proceedings, that are in
default as to the payment of principal or interest, or that are rated in the
lowest rating category by an NRSRO (“distressed securities”).
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Global Infrastructure Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term growth of capital and current
income.
206
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of its net assets plus borrowings for investment purposes in
securities issued by companies that are engaged in the infrastructure business.
The Fund is required to provide 60 days’ notice to its shareholders prior to a
change in this policy. The 80% investment requirement applies at the time the
Fund invests its assets. A company is considered to be engaged in the
infrastructure business if it derives at least 50% of its revenues or earnings
from, or devotes at least 50% of its assets to, infrastructure-related
activities. Infrastructure refers to the systems and networks of energy,
transportation, communication and other services required for the normal
function of society. Companies in the infrastructure business are involved in
(1) the generation, transmission and distribution of electric energy; (2) the
storage, transportation and distribution of natural resources, such as natural
gas, used to produce energy; (3) alternative energy sources; (4) the building,
operation and maintenance of highways, toll roads, tunnels, bridges and parking
lots; (5) the building, operation and maintenance of airports and ports,
railroads and mass transit systems; (6) telecommunications, including wireless
and cable networks; (7) water treatment and distribution; and (8) other public
services such as health care and education. Infrastructure companies also
include energy-related companies organized as master limited partnerships
(“MLPs”) and their affiliates.
The
Fund invests principally in equity securities, including common stocks, of
listed infrastructure companies economically tied to a number of countries
around the world, including the U.S., in a globally diversified manner. While
the Fund spreads its investments across the globe, the Fund selects securities
of companies believed to have favorable growth prospects and/or attractive
valuations based on current and expected earnings or cash flow, not based on the
country in which a company is located. Under normal market conditions, the Fund
will invest at least 40%, and may invest up to 100%, of its assets in securities
of issuers economically tied to non-U.S. countries. The Fund may invest in
equity securities of companies that are economically tied to emerging market
countries. The Fund may invest in large, medium or small capitalization
companies. The Fund does not select stocks based on the capitalization size of
the company but rather on the relative attractiveness of the investment
company.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund’s asset
allocation at any time. The Fund’s money managers have non-discretionary asset
management assignments pursuant to which they provide a model portfolio to RIM
representing their investment recommendations, based upon which RIM purchases
and sells securities for the Fund. RIM also manages Fund assets not allocated to
money manager strategies and the Fund’s cash balances and may manage portions of
the Fund during transitions between money managers.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, infrastructure sector weightings and earnings and price
volatility statistics. RIM also considers the manner in which money managers’
historical and expected investment returns correlate with one another. In
addition, RIM may adjust allocations based on the Fund’s overall exposures and
forecasted portfolio risk and in order to respond to changes in market risks and
opportunities.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
207
A
portion of the Fund’s securities are denominated principally in foreign
currencies and typically are held outside the U.S.
With
respect to non-U.S. securities, the Fund may enter into spot and forward
currency contracts to facilitate settlement of securities transactions and may
enter into these contracts in order to “lock in” the U.S. dollar price of a
security that it plans to buy or sell. The Fund may at times seek to protect a
portion of its investments against adverse currency exchange rate changes by
purchasing forward currency contracts.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as value, momentum, quality, capitalization size, lower
volatility, growth, industry, sector, country or region). For example, RIM
may utilize tools such as optimization, which involves the analysis of tradeoffs
between various risk and return factors as well as turnover and transaction
costs, in order to estimate optimal portfolio positioning. RIM may use
strategies based on indexes, including optimized index sampling (strategies that
seek to purchase a sampling of securities using optimization and risk models)
and/or index replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of broad global
equity markets by purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts. This
exposure will not be specific to infrastructure companies as there is no
appropriate derivative instrument available that represents exposure to the
Fund's benchmark. This is intended to cause the Fund to perform as though its
cash were actually invested in the broad global equity markets. This
exposure may or may not match the Fund’s benchmark and RIM may use the cash
equitization process to manage Fund exposures. RIM may not equitize all or a
portion of the Fund’s cash or use the cash equitization process to reduce market
exposure. RIM invests any remaining cash in short-term investments, including
the U.S. Cash Management Fund, an unregistered fund advised by RIM whose
investment objective is to seek to preserve principal and provide liquidity and
current income.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
In
determining if a security is economically tied to a non-U.S. country, the Fund
generally looks to the country of incorporation of the issuer. However, the
Fund’s portfolio manager may determine a security is economically tied to a
non-U.S. country based on other factors, such as an issuer’s country of
domicile, where more than 50% of an issuer’s revenues are generated or where an
issuer’s primary exchange is located. As a result, a security may be
economically tied to more than one country. With respect to derivative
instruments, the Fund generally considers such instruments to be economically
tied to non-U.S. countries if the underlying assets of the derivatives are (i)
foreign currencies (or baskets or indexes of such currencies); (ii) instruments
or securities that are issued by foreign governments or by an issuer
economically tied to a non-U.S. country as described above; or (iii) for certain
money market instruments, if either the issuer or the guarantor of such money
market instrument is an issuer economically tied to a non-U.S. country as
described above.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.
208
Non-Principal
Investment Strategies
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may invest a portion of its assets in securities of companies, known as
real estate investment trusts (“REITs”), that own and/or manage properties. By
investing in REITs indirectly through the Fund, a shareholder will bear the
expenses of the REITs in addition to expenses of the Fund.
The
Fund may invest in preferred stocks, rights, warrants and convertible
securities.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Global Real Estate Securities
Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide current income and long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in real estate securities. The Fund is required to provide 60 days’ notice to
its shareholders prior to a change in this policy. The 80% investment
requirement applies at the time the Fund invests its assets. The Fund seeks to
achieve its objective by concentrating its investments in equity securities of
real estate companies (“real estate securities”) economically tied to a number
of countries around the world, including the U.S., in a globally diversified
manner. The Fund considers a company to be a real estate company if at least 50%
of its assets, gross income or net profits are attributable to the ownership,
construction, development, financing, management or sale of residential,
commercial or industrial real estate.
The
Fund invests principally in common stocks and other equity securities issued by
U.S. and non-U.S. real estate companies, including real estate investment trusts
(“REITs”) and similar REIT-like entities. REITs are companies that
own
209
interests
in real estate or in real estate-related loans or other interests, and their
revenue principally consists of rent derived from owned, income producing real
estate properties and capital gains from the sale of such properties or from
interest payments on real estate-related loans. A REIT in the U.S. is generally
not taxed on income distributed to shareholders so long as it meets certain tax
related requirements, including the requirement that it distribute substantially
all its taxable income to such shareholders. REIT-like entities organized
outside of the U.S. have operations and receive entity-level tax treatment
similar to that of U.S. REITs. By investing in REITs and REIT–like entities
indirectly through the Fund, a shareholder will bear expenses of the REITs and
REIT-like entities in addition to expenses of the Fund. The Fund may also invest
in equity securities of other types of real estate-related companies. The Fund
may invest in large, medium or small capitalization companies. Stocks are not
selected based on the capitalization size of a company but rather on the
relative attractiveness of the individual opportunity.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-manager” approach. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund’s asset
allocation at any time. The Fund’s money managers have non-discretionary asset
management assignments pursuant to which they provide a model portfolio to RIM
representing their investment recommendations, based upon which RIM purchases
and sells securities for the Fund. RIM also manages Fund assets not allocated to
money manager strategies and the Fund’s cash balances and may manage portions of
the Fund during transitions between money manager strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the Fund, RIM
purchases and sells securities at the times and in the manner considered by RIM
to be efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
When
constructing the Fund’s portfolio, determining how to allocate the Fund’s assets
among itself and the money managers’ strategies, RIM considers a variety of
factors that impact the Fund’s return potential and portfolio risks. These
factors include the Fund’s overall exposures, a money manager’s investment
style, investment approach, investment substyle and expected return potential of
a money manager relative to its assigned benchmark, as well as the
characteristics of the money manager’s typical investment portfolio. These
characteristics include capitalization size, growth and profitability measures,
valuation measures, property type and geographic weightings and earnings and
price volatility statistics. RIM also considers the manner in which money
managers’ historical and expected investment returns correlate with one another.
In addition, RIM may adjust allocations based on the Fund’s overall exposures
and forecasted portfolio risk and in order to respond to changes in market risks
and opportunities.
A
portion of the Fund’s securities are denominated principally in foreign
currencies and typically are held outside the U.S. While the Fund spreads its
investments across the globe, the Fund selects securities of companies believed
to have favorable growth prospects and/or attractive valuations based on current
and expected earnings or cash flow, not based on the country in which a company
is located.
The
Fund invests in companies economically tied to a number of countries around the
world, including the U.S., in a globally diversified manner. Under normal market
conditions, the Fund will invest at least 30%, and may invest up to 100%, of its
assets in securities of issuers economically tied to non-U.S. countries. The
Fund may also invest in equity securities of companies that are economically
tied to emerging market countries.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
With
respect to the portion of the Fund managed by RIM, RIM utilizes quantitative
and/or rules-based processes and qualitative analysis to assess Fund
characteristics and invest in securities and instruments which provide the
desired exposures (such as value, momentum, quality, capitalization size, lower
volatility, growth, industry, sector, country or region). For example, RIM
may utilize tools such as optimization, which involves the analysis of tradeoffs
between
210
various
risk and return factors as well as turnover and transaction costs, in order to
estimate optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1) as a
substitute for holding securities directly, (2) for hedging purposes, (3) to
take a net short position with respect to certain issuers, sectors or markets or
(4) to facilitate the implementation of its investment strategy.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain real estate
securities markets or, where there is no appropriate instrument that represents
exposure to the various components of the Fund's benchmark, broad global equity
markets by purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and swaps. This
is intended to cause the Fund to perform as though its cash were actually
invested in these markets. Due to the lack of availability of appropriate
instruments for certain markets, this exposure will result in returns that are
different than that of the Fund's benchmark for the cash portion of the
portfolio. RIM may use the cash equitization process to manage Fund exposures.
RIM may not equitize all or a portion of the Fund’s cash or use the cash
equitization process to reduce market exposure. RIM invests any remaining cash
in short-term investments, including the U.S. Cash Management Fund, an
unregistered fund advised by RIM whose investment objective is to seek to
preserve principal and provide liquidity and current income.
With
respect to non-U.S. real estate securities, the Fund may enter into spot and
forward currency contracts to facilitate settlement of securities transactions
and may enter into these contracts in order to “lock in” the U.S. dollar price
of a security that it plans to buy or sell. The Fund may at times seek to
protect a portion of its investments against adverse currency exchange rate
changes by purchasing forward currency contracts.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
In
determining if a security is economically tied to a non-U.S. country, the Fund
generally looks to the country of incorporation of the issuer. However, the
Fund’s portfolio manager may determine a security is economically tied to a
non-U.S. country based on other factors, such as an issuer’s country of
domicile, where more than 50% of an issuer’s revenues are generated or where an
issuer’s primary exchange is located. As a result, a security may be
economically tied to more than one country. With respect to derivative
instruments, the Fund generally considers such instruments to be economically
tied to non-U.S. countries if the underlying instruments of the derivatives are
(i) foreign currencies (or baskets or indexes of such currencies); (ii)
instruments or securities that are issued by foreign governments or by an issuer
economically tied to a non-U.S. country as described above; or (iii) for certain
money market instruments, if either the issuer or the guarantor of such money
market instrument is classified as an issuer economically tied to a non-U.S.
country as described above.
Non-Principal
Investment Strategies
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a
211
company
domiciled in a different country. An EDR is issued in Europe typically by
foreign banks and trust companies and evidences ownership of either foreign or
domestic securities. The Fund typically invests in sponsored ADRs, GDRs and EDRs
but may also invest in unsponsored ADRs, GDRs and EDRs.
The
Fund may invest in preferred stocks, rights, warrants and convertible
securities. The Fund may also invest in pooled investment vehicles, such as
other investment companies and exchange traded funds.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Real Assets Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term capital growth.
Principal
Investment Strategies
The
Fund has a non-fundamental policy to invest, under normal circumstances, at
least 80% of the value of its net assets plus borrowings for investment purposes
in investments related to real assets and real asset companies. The Fund is
required to provide 60 days’ notice to its shareholders prior to a change in
this policy. The 80% investment requirement applies at the time the Fund invests
its assets. The Fund considers an investment to be related to (i) real assets if
at least 50% of the investment’s value is based on real assets; and (ii) a real
asset company if at least 50% of the company’s assets, gross income or net
profits are attributable to real assets. Real assets are broadly defined by the
Fund and are considered to include any assets that have physical properties,
such as natural resources, real estate, infrastructure and commodities.
In
an effort to provide equity-like returns over a market cycle while mitigating
downside risk relative to equities, RIM allocates the Fund’s assets globally
across the real assets group of industries, focusing on real estate,
infrastructure, commodities, and natural resources. RIM intends to shift the
Fund’s assets among the real asset group of industries based on RIM’s outlook on
the business and economic cycle, relative market valuations and market
sentiment. The Fund will concentrate its investments in equity securities of
companies in the real assets group of industries.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-asset, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund’s
asset allocation at any time. The Fund’s money managers have non-discretionary
asset management assignments pursuant to which they provide a model portfolio to
RIM representing their investment recommendations, based upon which RIM
purchases and sells securities for the Fund. RIM also manages Fund assets not
allocated to money manager strategies and the Fund’s cash balances and may
manage portions of the Fund during transitions between money manager
strategies.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may deviate from such aggregation for the purposes of
exposure and transaction cost management. For this portion of the
212
Fund,
RIM purchases and sells securities at the times and in the manner considered by
RIM to be efficient for the Fund and it is expected that, generally, trades will
be effected on a periodic basis, unless RIM determines that more frequent
trading is appropriate due to changing market conditions or other significant
factors.
When
determining how to allocate the Fund’s assets among itself and the money
managers’ strategies, RIM considers a variety of factors. These factors include
the Fund’s overall exposures, a money manager’s investment style, investment
approach, investment substyle and expected return potential of a money manager
relative to its assigned benchmark, as well as the characteristics of the money
manager’s typical investment portfolio. These characteristics include
capitalization size, growth and profitability measures, valuation measures,
economic sector weightings, country weightings, and earnings and price
volatility statistics. RIM also considers the manner in which money managers’
historical and expected investment returns correlate with one another. In
addition, RIM may adjust allocations based on the Fund’s overall exposures and
forecasted portfolio risk and in order to respond to changes in market risks and
opportunities.
The
Fund may invest in equity securities issued by U.S. and non-U.S. real estate
companies, including real estate investment trusts (“REITs”) and similar
REIT-like entities. REITs are companies that own interests in real estate or in
real estate-related loans or other interests, and their revenue principally
consists of rent derived from owned, income producing real estate properties and
capital gains from the sale of such properties or from interest payments on real
estate-related loans. A REIT in the U.S. is generally not taxed on income
distributed to shareholders so long as it meets certain tax related
requirements, including the requirement that it distribute substantially all its
taxable income to such shareholders. REIT-like entities organized outside of the
U.S. have operations and receive entity-level tax treatment similar to that of
U.S. REITs. By investing in REITs and REIT–like entities indirectly through the
Fund, a shareholder will bear expenses of the REITs and REIT-like entities in
addition to expenses of the Fund. The Fund may also invest in equity securities
of other types of real estate-related companies.
The
Fund may invest in equity securities issued by U.S. and non-U.S. infrastructure
companies, which are companies that are engaged in the infrastructure business.
A company is considered to be engaged in the infrastructure business if it
derives at least 50% of its revenues or earnings from, or devotes at least 50%
of its assets to, infrastructure-related activities. Infrastructure refers to
the systems and networks of energy, transportation, communication and other
services required for the normal function of society. Companies in the
infrastructure business are involved in (1) the generation, transmission and
distribution of electric energy; (2) the storage, transportation and
distribution of natural resources, such as natural gas, used to produce energy;
(3) alternative energy sources; (4) the building, operation and maintenance of
highways, toll roads, tunnels, bridges and parking lots; (5) the building,
operation and maintenance of airports and ports, railroads and mass transit
systems; (6) telecommunications, including wireless and cable networks; (7)
water treatment and distribution; and (8) other public services such as health
care and education. Infrastructure companies also include energy-related
companies organized as master limited partnerships (“MLPs”) and their
affiliates.
The
Fund may invest in equity securities issued by U.S. and non-U.S. natural
resources and natural resources-related companies. Generally, these are
companies principally engaged in owning or developing natural resources, or
supplying goods, technology and services relating to natural resources. These
companies may include, for example, companies involved either directly or
through subsidiaries in exploring, mining, drilling, refining, processing,
transporting, distributing, fabricating, dealing in, or owning natural
resources, and companies providing environmental services. The Fund normally
invests in companies in a variety of natural resource related fields, such as
energy, chemicals, oil, gas, paper, mining, steel or agricultural
products.
A
portion of the Fund’s securities are denominated principally in foreign
currencies and typically are held outside the U.S. With respect to non-U.S.
securities, the Fund may enter into spot and forward currency contracts to
facilitate settlement of securities transactions and may enter into these
contracts in order to “lock in” the U.S. dollar price of a security that it
plans to buy or sell. The Fund may at times seek to protect a portion of its
investments against adverse currency exchange rate changes by purchasing forward
currency contracts.
The
Fund may invest indirectly through a wholly-owned subsidiary of the Fund (the
“Subsidiary”) in commodity-linked securities and derivative instruments that
provide exposure to the performance of the commodities markets, including
futures and options contracts with respect to indexes or individual commodities,
options on futures contracts, swap agreements and swaptions. The Subsidiary may
also invest in fixed income instruments. The Fund may invest up to 25% of its
total assets in the Subsidiary. Shares of the Subsidiary will not be offered to
any investors other than the Fund. Investing in the Subsidiary will allow the
Fund to achieve greater exposure to the commodities markets than would otherwise
be possible because of U.S. tax law requirements. The Subsidiary will be advised
by RIM and may have certain of the same money managers as the Fund. Employees of
RIM and its affiliates will serve as directors of the
213
Subsidiary.
Although the Subsidiary will otherwise be subject to the same fundamental,
non-fundamental and certain other investment restrictions as the Fund, the
investment programs of the Fund and the Subsidiary will not be identical. The
Subsidiary will be organized as a company under the laws of the Cayman
Islands.
The
Fund’s or the Subsidiary’s use of derivatives may cause the Fund’s or the
Subsidiary’s investment returns to be impacted by the performance of securities
the Fund or the Subsidiary does not own and result in the Fund’s or the
Subsidiary’s total investment exposure exceeding the value of its
portfolio.
The
Fund may invest in U.S. and non-U.S. corporate debt securities, Yankee Bonds
(dollar-denominated obligations issued in the U.S. by non-U.S. banks and
corporations) and fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities and zero coupon
securities) or by non-U.S. governments, or by their respective agencies and
instrumentalities, as well as in emerging markets debt securities (including
Brady Bonds). The Fund’s investments may include variable and floating rate
securities. A floating rate security is one whose terms provide for the
automatic adjustment of an interest rate whenever the specified interest rate
changes. A variable rate security is one whose terms provide for the automatic
establishment of a new interest rate on set dates. The Fund may invest in STRIPS
(Separate Trading of Registered Interest and Principal of Securities). STRIPS
are created by separating the interest and the principal components of an
outstanding U.S. Treasury or agency note or fixed income security and selling
them as individual securities. The Fund may invest in municipal debt
obligations.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, collateralized loan
obligations, commercial mortgage-backed securities, mortgage pass-through
securities, to be announced (“TBA”) securities, interest only mortgage-backed
securities, principal only mortgage-backed securities and mortgage dollar rolls,
that directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A dollar roll is the sale of a
security by the Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. By investing in mortgage related securities, the Fund may also have
exposure to non-agency mortgage-backed securities, including to Alternative A
(“Alt-A”) paper, subprime and/or non-conforming mortgages. The Fund may also
invest in asset-backed securities, which may include, among others, credit card,
automobile loan and/or home equity line of credit receivables.
The
Fund will invest principally in securities of “investment grade” quality at the
time of purchase, meaning either that a nationally recognized statistical rating
organization (“NRSRO”) (for example, Moody’s Investor Service, Inc., Standard
& Poor’s Rating Service, or Fitch Investors Service, Inc.) has rated the
securities Baa3 or BBB- (or the equivalent) or better, or the securities have
been determined to be of comparable quality. However, higher rated debt
securities, including investment grade bonds, are also subject to volatility and
a risk of default. The Fund may invest in debt securities that are rated below
investment grade, (commonly referred to as “high-yield” or “junk bonds”) as
determined by one or more NRSROs or in unrated securities judged to be of
comparable quality. Junk bonds and to a lesser extent other types of bonds, may
be purchased at a discount and thereby provide opportunities for capital
appreciation. The Fund’s investments may include debt securities that are the
subject of bankruptcy proceedings, that are in default as to the payment of
principal or interest, or that are rated in the lowest rating category by an
NRSRO (“distressed securities”).
The
Fund may invest in obligations issued or guaranteed by U.S. or foreign banks.
Bank obligations, including time deposits, bankers' acceptances and certificates
of deposit, may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulations.
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell futures and forwards
contracts and enter into options, swap agreements and swaptions (1)
as
214
a
substitute for holding securities directly, (2) to manage country and currency
exposure, (3) for hedging purposes, (4) to take a net short position with
respect to certain issuers, sectors or markets or (5) to facilitate the
implementation of its investment strategy.
With
respect to the portion of the Fund managed by RIM and not allocated to
money manager strategies, RIM utilizes quantitative and/or rules-based processes
and qualitative analysis to assess Fund characteristics and invest in securities
and instruments which provide the desired exposures (such as value, momentum,
quality, capitalization size, lower volatility, growth, industry, sector,
country, region, currency or commodity). For example, RIM may utilize tools such
as optimization, which involves the analysis of tradeoffs between various risk
and return factors as well as turnover and transaction costs, in order to
estimate optimal portfolio positioning. RIM may use strategies based on indexes,
including optimized index sampling (strategies that seek to purchase a sampling
of securities using optimization and risk models) and/or index
replication.
RIM
may utilize a quantitative model that selects and weights exposure to individual
commodities based upon their relative attractiveness.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager strategy or large redemptions resulting from rebalancing by asset
allocation programs.
The
Fund usually, but not always, pursues a strategy of being fully invested by
exposing all or a portion of its cash to the performance of certain markets by
purchasing equity securities and/or derivatives (also known as
“equitization”), which typically include index futures contracts and
swaps. This is intended to cause the Fund to perform as though its cash were
actually invested in those markets. This exposure may or may not match the
Fund’s benchmark and RIM may use the cash equitization process to manage Fund
exposures. RIM may not equitize all or a portion of the Fund’s cash or use the
cash equitization process to reduce market exposure. RIM invests any remaining
cash in short-term investments, including the U.S. Cash Management Fund, an
unregistered fund advised by RIM whose investment objective is to seek to
preserve principal and provide liquidity and current income.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may invest in preferred stocks, rights, warrants and convertible
securities. The Fund may also invest in pooled investment vehicles, such as
other investment companies and exchange traded funds.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign equity
securities, which may be referred to as international warrants, local access
products, participation notes or low exercise price warrants, or may invest in
equity linked notes. International warrants are a form of derivative security
issued by foreign banks that either give holders the right to buy or sell an
underlying security or securities for a particular price or give holders the
right to receive cash payment relating to the value of the underlying security
or securities. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or the value of that
security, but are generally exercisable over a longer term than typical
options.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
215
Multi-Strategy Income Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide a high level of current income and, as a secondary
objective, long-term capital growth.
Principal
Investment Strategies
The
Fund seeks to achieve its objective by principally investing in a range of
diversified income-producing investments. The Fund will typically pursue
strategies and invest in instruments which have historically produced a
significant portion of their total return from income. The Fund may invest in a
broad range of instruments, markets and asset classes economically tied to U.S.,
non-U.S. and emerging markets countries.
The
Fund’s target strategic asset allocation is 40% to global equity or
equity-related securities or instruments, including equity securities of real
assets-related companies, and 60% global fixed income or fixed income-related
securities or instruments, including high yield and emerging markets debt.
However, the Fund is not required to allocate its investments in any set
proportion and RIM will dynamically manage the Fund’s asset allocation based on
market conditions generally by up to plus/minus 10% from the Fund’s target
strategic asset allocations.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-asset, multi-manager”
approach. Subject to the approval of the Fund’s Board of Trustees, RIM selects,
oversees and evaluates the Fund’s money managers and allocates Fund assets among
itself and multiple money manager investment strategies. RIM may change a Fund's
asset allocation at any time. The Fund employs discretionary and
non-discretionary money managers. The Fund’s discretionary money managers select
the individual portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies. RIM also manages the portion of Fund assets which the Fund’s
non-discretionary money managers provide model portfolios to RIM and the Fund’s
cash balances. RIM may also manage portions of the Fund during transitions
between money managers.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may vary from such aggregation primarily for the
purpose of increasing trading efficiencies. RIM may also deviate from such
aggregation for the purposes of exposure and transaction cost management. For
this portion of the Fund, RIM purchases and sells securities at the times and in
the manner considered by RIM to be efficient for the Fund and it is expected
that, generally, trades will be effected on a periodic basis, unless RIM
determines that more frequent trading is appropriate due to changing market
conditions or other significant factors.
When
constructing the Fund’s portfolio, including determining how to allocate the
Fund’s assets among itself and the money managers’ strategies, RIM considers a
variety of factors that impact the Fund’s return potential and portfolio risks.
These factors include asset class allocations, preferred asset class positioning
and contribution to overall portfolio characteristics. These characteristics
include capitalization size, growth and profitability measures, valuation
measures, economic sector weightings, country weightings, earnings and price
volatility statistics, yield, liquidity, credit quality, and duration. The Fund
also considers the manner in which money managers’ historical and expected
investment returns, as well as the historical and expected returns of asset
classes, correlate with one another. In addition, RIM may adjust allocations
based on the Fund’s overall exposures and forecasted portfolio risk and in order
to respond to changes in market risks and opportunities.
The
Fund invests in equity securities of issuers of any market capitalization
economically tied to U.S. and non-U.S. countries, including emerging markets
countries. Equity securities in which the Fund invests include common stocks,
preferred stocks, stocks of real assets-related companies, depositary receipts
and equity-related securities or instruments whose value is based on common
stocks, such as convertible securities, rights, warrants or options to purchase
common stock and futures contracts (stock or stock index).
Real
assets-related companies include real estate- (both equity and mortgage real
estate investment trusts (“REITs”)) and infrastructure-related companies. A real
asset is a tangible or physical asset that typically has intrinsic value.
Examples of real assets include land, property, equipment, raw materials or
infrastructure. Infrastructure companies are
216
companies
that are engaged in the infrastructure business. A company is considered to be
engaged in the infrastructure business if it derives at least 50% of its
revenues or earnings from, or devotes at least 50% of its assets to,
infrastructure-related activities. Infrastructure refers to the systems and
networks of energy, transportation, communication and other services required
for the normal function of society. Companies in the infrastructure business are
involved in (1) the generation, transmission and distribution of electric
energy; (2) the storage, transportation and distribution of natural resources,
such as natural gas, used to produce energy; (3) alternative energy sources; (4)
the building, operation and maintenance of highways, toll roads, tunnels,
bridges and parking lots; (5) the building, operation and maintenance of
airports and ports, railroads and mass transit systems; (6) telecommunications,
including wireless and cable networks; (7) water treatment and distribution; and
(8) other public services such as health care and education. Infrastructure
companies also include energy-related companies organized as master limited
partnerships (“MLPs”) and their affiliates.
Convertible
securities can be bonds, notes, debentures, preferred stock or other securities
that entitle the holder to acquire the issuer’s common stock by exchange or
purchase for a predetermined rate. The Fund may invest in contingent convertible
securities, which provide for mandatory conversion into common stock of the
issuer under certain circumstances.
The
Fund may also invest in fixed income securities of any credit quality and
maturity. The Fund may invest in U.S. and non-U.S. corporate fixed income
securities and fixed income securities issued or guaranteed by the U.S.
government (including Treasury Inflation Protected Securities) or by non-U.S.
governments, or by their respective agencies and instrumentalities, as well as
in emerging markets debt securities. The Fund may invest, without limitation, in
fixed income securities or instruments that are rated below investment grade
(commonly referred to as “high-yield” or “junk bonds”), in unrated securities
judged to be of comparable quality, and in the lowest-rated fixed income
securities. The Fund’s investments may include debt securities that are the
subject of bankruptcy proceedings, that are in default as to the payment of
principal or interest, or that are rated in the lowest rating category by a
nationally recognized statistical rating organization (“distressed securities”).
The Fund’s investments may include variable and floating rate securities. A
floating rate security is one whose terms provide for the automatic adjustment
of an interest rate whenever the specified interest rate changes. A variable
rate security is one whose terms provide for the automatic establishment of a
new interest rate on set dates. The Fund may also invest in demand notes.
The
Fund may purchase loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such investments
are generally rated below investment grade and are expected to exhibit credit
risks similar to “high yield” or “junk” bonds. Such investments may also be
unrated, in which case the Fund relies primarily on its own evaluation of a
borrower’s credit quality rather than on any available independent sources. The
Fund may invest in senior secured floating rate loans or debt and second lien or
other subordinated or unsecured floating rate loans or debt. Senior secured
loans or debt are secured by specific collateral of the borrower and are senior
to most other securities of the borrower in the event the borrower goes
bankrupt. Second lien and subordinated loans or debt rank after senior
obligations of the borrower in the event of bankruptcy and typically have a
lower credit rating and therefore higher yield than senior secured loans.
Unsecured loans or debt are not secured by specific collateral of the borrower
in the event of bankruptcy. Bank loans are often issued in connection with
acquisitions, leveraged buyouts, bankruptcy proceedings or financial
restructurings and borrowers may have defaulted in the payment of interest or
principal or in the performance of certain covenants or agreements and/or have
uncertain financial conditions.
The
Fund may invest a portion of its assets in mortgage related securities including
mortgage-backed securities, collateralized mortgage obligations, commercial
mortgage-backed securities, mortgage pass-through securities, to be announced
(“TBA”) securities, interest only mortgage-backed securities, principal only
mortgage-backed securities and mortgage dollar rolls, that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property. A dollar roll is the sale of a security by the
Fund and its agreement to repurchase the instrument at a specified time and
price, and may be considered a form of borrowing for some purposes. By investing
in mortgage related securities, the Fund may also have exposure to non-agency
mortgage-backed securities, including to Alternative A (“Alt-A”) paper, subprime
and/or non-conforming mortgages. The Fund may also invest in asset-backed
securities, which may include, among others, credit card, automobile loan and/or
home equity line of credit receivables and collateralized loan obligations
(“CLOs”). CLOs are special purpose entities that are collateralized mainly by a
pool of loans, which may include, among others, domestic and foreign senior
secured loans, senior unsecured loans, and subordinate corporate loans,
including loans that may be rated below investment grade or equivalent unrated
loans.
217
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and foreign currency and
Treasury futures, and enter into options, swaps and swaptions. The Fund may
invest in derivatives (1) as a substitute for holding securities directly, (2)
to facilitate the implementation of its investment strategy, (3) for hedging
purposes, (4) to take a net short position with respect to certain issuers,
sectors or markets, (5) to adjust the interest rate sensitivity and duration of
the Fund’s portfolio, or (6) to manage the Fund’s asset class exposures. The
Fund may buy or sell credit default swaps or other credit derivatives as an
alternative to buying or selling the debt securities themselves or otherwise to
increase the Fund’s total return or to manage Fund risks. Credit default swaps
resemble insurance contracts in that the seller of the swap provides the buyer
with protection against specific risks of the issuer, such as defaults and
bankruptcies, in exchange for a premium from the buyer. Credit default swaps may
include index credit default swaps, which are contracts on baskets or indices of
credit instruments, which may include tranches of commercial mortgage-backed
securities (CMBX). The Fund may invest in STRIPS (Separate Trading of Registered
Interest and Principal of Securities). STRIPS are created by separating the
interest and the principal components of an outstanding U.S. Treasury or agency
note or bond and selling them as individual securities. The Fund may purchase
and sell foreign currency forward contracts for hedging purposes or to manage
the Fund’s currency exposures.
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies. The Fund’s
currency investments may seek returns through the identification of currency
market factors that are expected to result in positive returns over time. The
Fund will enter into spot and forward currency contracts to facilitate
settlement of securities transactions and may enter into these contracts in
order to “lock in” the U.S. dollar price of a security that it plans to buy or
sell. The Fund may at times seek to protect a portion of its investments against
adverse currency exchange rate changes by purchasing forward currency
contracts.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may also invest in affiliated
investment companies.
RIM
may assign a money manager a specific benchmark other than the Fund’s index.
However, the Fund’s primary index remains the benchmark for the Fund and is
intended to be representative of the aggregate of the money managers’ benchmark
indices.
With
respect to the portion of the Fund managed by RIM and not allocated to money
manager strategies, RIM utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures (such as volatility, momentum,
value, growth, quality, capitalization size, industry, sector, region, currency,
credit or mortgage exposure, country risk, yield curve positioning or interest
rates). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
The
Fund, like any mutual fund, maintains cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses). RIM may
increase or decrease the Fund’s cash reserves to seek to achieve the desired
exposures for the Fund, or in anticipation of a transition to a new money
manager or large redemptions resulting from rebalancing by funds of funds or
asset allocation programs.
The
Fund may expose all or a portion of its cash to the performance of certain
markets by purchasing equity securities, fixed income securities and/or
derivatives (also known as “equitization”), which typically include index
futures contracts or exchange traded fixed income futures contracts. This is
intended to cause the Fund to perform as though its cash were actually invested
in those markets. This exposure may or may not match the Fund’s benchmark and
RIM may use the cash equitization process to manage Fund exposures. RIM may also
use the cash equitization process to reduce market exposure. With respect to
cash that is not equitized, RIM may sell equity index put options to seek gains
from premiums (cash) received from their sale. RIM invests any remaining cash in
(1) short-term investments, including the U.S. Cash Management Fund, an
unregistered fund advised by RIM whose investment objective is to seek to
preserve principal and provide liquidity and current income, and (2) fixed
income securities with an average portfolio duration of
218
one
year and individual effective maturities of up to five years, which may include
U.S. and non-U.S. corporate debt securities, asset-backed securities (which may
include, among others, credit card and automobile loan receivables) and money
market securities similar to those invested in by the U.S. Cash Management
Fund.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States. Emerging market countries also include frontier
market countries, which are less developed than traditional emerging market
countries.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR
provides better access to markets and more liquidity (including with respect to
the number of market participants and/or transactions) than the underlying
security. An ADR is a stock that trades in the U.S. but represents shares in a
non-U.S. company. A GDR is a stock that trades in one or more global markets but
represents shares of a company domiciled in a different country. An EDR is
issued in Europe typically by foreign banks and trust companies and evidences
ownership of either foreign or domestic securities. The Fund typically invests
in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs
and EDRs.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign fixed income
securities, which may be referred to as local access products, credit linked
notes or participation notes. Local access products are similar to options
in that they are exercisable by the holder for an underlying security or the
value of that security, but are generally exercisable over a longer term than
typical options.
The
Fund may invest in non-U.S. debt securities and bonds issued through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring, also known as Brady Bonds.
The Fund may invest in Yankee Bonds (dollar denominated obligations issued by
the US and non-U.S. corporations).
The
Fund may invest in credit linked notes, which are obligations between two or
more parties where the payment of principal and/or interest is based on the
performance of some obligation, basket of obligations, index or economic
indicator (a “reference instrument”).
The
Fund may enter into repurchase agreements and reverse repurchase agreements. A
repurchase agreement is an agreement under which the Fund acquires a fixed
income security from a commercial bank, broker or dealer and simultaneously
agrees to resell such security to the seller at an agreed upon price and date
(normally the next business day). A reverse repurchase agreement is a
transaction whereby the Fund transfers possession of a portfolio security to a
commercial bank, broker or dealer and simultaneously agrees to repurchase such
security at an agreed upon price and date.
The
Fund may invest in money market securities and municipal debt obligations.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
219
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
Multi-Asset Growth Strategy Fund
Investment
Objective (Non-Fundamental)
The
Fund seeks to provide long term total return with lower volatility than equity
markets.
Principal
Investment Strategies
In
an effort to provide equity-like total return over a market cycle while
mitigating downside risk and volatility relative to equities, RIM allocates the
Fund’s assets across a broad range of instruments, asset classes and strategies.
To seek to achieve the Fund’s objective, RIM dynamically manages the Fund’s
positioning based on RIM’s outlook on the business and economic cycle, relative
market valuations and market sentiment. By evolving the Fund’s positioning away
from sectors with higher relative valuations and towards those believed to
present more attractive opportunities, RIM attempts to reduce the Fund’s
downside risk and enable the Fund to provide long term total return from a
diverse range of potential investments.
The
Fund’s target strategic asset allocation is 60% to global equity or
equity-related securities or instruments, including equity securities of real
assets-related companies, and 40% global fixed income or fixed income-related
securities or instruments, including high yield debt. However, the Fund is not
required to allocate its investments in any set proportion and RIM will
dynamically manage the Fund’s asset allocation based on market conditions
generally by up to plus/minus 10% from the Fund’s target strategic asset
allocations.
The
Fund’s global equity investments span developed and emerging markets and may
include real estate and infrastructure companies. The Fund’s global fixed income
investments may include government and corporate debt, U.S., non-U.S. and
emerging markets debt, investment grade and high yield debt, and mortgage-backed
and asset-backed securities. The Fund’s fixed income portfolio is expected to
include a significant allocation to return-seeking fixed income
investments.
RIM
provides or oversees the provision of all investment advisory and portfolio
management services for the Fund. The Fund is advised by RIM and multiple money
managers unaffiliated with RIM pursuant to a “multi-asset, multi-manager”
approach. When constructing the Fund's portfolio, including determining how to
allocate the Fund's assets among itself and the money managers' strategies, RIM
considers a variety of factors that impact the Fund's return potential and
portfolio risks. These factors include asset class allocations, preferred asset
class positioning and contribution to overall portfolio characteristics. Subject
to the approval of the Fund’s Board of Trustees, RIM selects, oversees and
evaluates the Fund’s money managers and allocates Fund assets among itself and
multiple money manager investment strategies. RIM may change a Fund's asset
allocation at any time. The Fund employs discretionary and non-discretionary
money managers. The Fund’s discretionary money managers select the individual
portfolio instruments for the assets assigned to them. The Fund’s
non-discretionary money managers provide a model portfolio to RIM representing
their investment recommendations, based upon which RIM purchases and sells
securities for the Fund. RIM manages Fund assets not allocated to money manager
strategies. RIM also manages the portion of Fund assets for which the Fund’s
non-discretionary money managers provide model portfolios to RIM and the Fund’s
cash balances. RIM may also manage portions of the Fund during transitions
between money managers.
With
respect to the portion of the Fund that RIM manages based upon money manager
model portfolios, RIM constructs a portfolio that represents the aggregation of
the model portfolios based upon RIM’s allocation to each money manager’s
strategy. RIM then implements the portfolio consistent with the aggregation of
the model portfolios, but may vary from such aggregation primarily for the
purpose of increasing trading efficiencies. RIM may also deviate from such
aggregation for the purposes of exposure and transaction cost management. For
this portion of the Fund, RIM purchases
220
and
sells securities at the times and in the manner considered by RIM to be
efficient for the Fund and it is expected that, generally, trades will be
effected on a periodic basis, unless RIM determines that more frequent trading
is appropriate due to changing market conditions or other significant
factors.
The
Fund may invest in equity securities of issuers of any market capitalization
economically tied to U.S. and non-U.S. countries, including emerging markets
countries. Equity securities in which the Fund invests include common stocks,
preferred stocks, equity and mortgage real estate investment trusts (“REITs”),
depositary receipts and equity-related securities or instruments whose value is
based on common stocks, such as convertible securities, rights, warrants or
options to purchase common stock and futures contracts (stock or stock index).
Convertible securities can be bonds, notes, debentures, preferred stock or other
securities that entitle the holder to acquire the issuer’s common stock by
exchange or purchase for a predetermined rate. The Fund may invest in contingent
convertible securities, which provide for mandatory conversion into common stock
of the issuer under certain circumstances.
The
Fund may invest in infrastructure companies, which are companies that are
engaged in the infrastructure business. A company is considered to be engaged in
the infrastructure business if it derives at least 50% of its revenues or
earnings from, or devotes at least 50% of its assets to, infrastructure-related
activities. Infrastructure refers to the systems and networks of energy,
transportation, communication and other services required for the normal
function of society. Companies in the infrastructure business are involved in
(1) the generation, transmission and distribution of electric energy; (2) the
storage, transportation and distribution of natural resources, such as natural
gas, used to produce energy; (3) alternative energy sources; (4) the building,
operation and maintenance of highways, toll roads, tunnels, bridges and parking
lots; (5) the building, operation and maintenance of airports and ports,
railroads and mass transit systems; (6) telecommunications, including wireless
and cable networks; (7) water treatment and distribution; and (8) other public
services such as health care and education. Infrastructure companies also
include energy-related companies organized as master limited partnerships
(“MLPs”) and their affiliates.
The
Fund may invest in fixed income securities of any credit quality and maturity.
The Fund may invest in U.S. and non-U.S. corporate fixed income securities and
fixed income securities issued or guaranteed by the U.S. government (including
Treasury Inflation Protected Securities) or by non-U.S. governments, or by their
respective agencies and instrumentalities, as well as in emerging markets debt
securities. The Fund may invest, without limitation, in fixed income securities
or instruments that are rated below investment grade (commonly referred to as
“high-yield” or “junk bonds”), in unrated securities judged to be of comparable
quality, and in the lowest-rated fixed income securities. The Fund’s investments
may include debt securities that are the subject of bankruptcy proceedings, that
are in default as to the payment of principal or interest, or that are rated in
the lowest rating category by a nationally recognized statistical rating
organization (“distressed securities”). The Fund’s investments may include
variable and floating rate securities. A floating rate security is one whose
terms provide for the automatic adjustment of an interest rate whenever the
specified interest rate changes. A variable rate security is one whose terms
provide for the automatic establishment of a new interest rate on set
dates.
Some
of the securities in which the Fund invests may be supported by credit and
liquidity enhancements from third parties. These enhancements may include
letters of credit from foreign or domestic banks.
The
Fund may purchase loans and other direct indebtedness entitling the Fund to
payments of interest, principal and/or other amounts due under the structure of
the loan or other indebtedness. This may include investments in floating rate
“bank loans” or “leveraged loans,” which are generally loans issued to below
investment grade companies that carry floating coupon payments. Such
investments are generally rated below investment grade and are expected to
exhibit credit risks similar to “high yield” or “junk” bonds. Such
investments may also be unrated, in which case the Fund relies primarily on its
own evaluation of a borrower’s credit quality rather than on any available
independent sources. The Fund may invest in senior secured floating rate loans
or debt and second lien or other subordinated or unsecured floating rate loans
or debt. Senior secured loans or debt are secured by specific collateral
of the borrower and are senior to most other securities of the borrower in the
event the borrower goes bankrupt. Second lien and subordinated loans or debt
rank after senior obligations of the borrower in the event of bankruptcy and
typically have a lower credit rating and therefore higher yield than senior
secured loans. Unsecured loans or debt are not secured by specific
collateral of the borrower in the event of bankruptcy. Bank loans are
often issued in connection with acquisitions, leveraged buyouts, bankruptcy
proceedings or financial restructurings and borrowers may have defaulted in the
payment of interest or principal or in the performance of certain covenants or
agreements and/or have uncertain financial conditions.
The
Fund may invest in mortgage related securities including mortgage-backed
securities, collateralized mortgage obligations, commercial mortgage-backed
securities, mortgage pass-through securities, to be announced
(“TBA”)
221
securities,
interest only and inverse interest only mortgage-backed securities, principal
only mortgage-backed securities and mortgage dollar rolls, that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property. A dollar roll is the sale of a security by the
Fund and its agreement to repurchase the instrument at a specified time and
price, and may be considered a form of borrowing for some purposes. By investing
in mortgage related securities, the Fund may also have exposure to non-agency
mortgage-backed securities, including to Alternative A (“Alt-A”) paper, subprime
and/or non-conforming mortgages. The Fund may also invest in asset-backed
securities, which may include, among others, credit card, automobile loan and/or
home equity line of credit receivables and collateralized loan obligations
(“CLOs”). CLOs are special purpose entities that are collateralized mainly by a
pool of loans, which may include, among others, domestic and foreign senior
secured loans, senior unsecured loans, and subordinate corporate loans,
including loans that may be rated below investment grade or equivalent unrated
loans.
The
Fund may invest in derivative instruments and may use derivatives to take both
long and short positions. The Fund may purchase and sell forward and futures
contracts, including interest rate forwards and futures and foreign currency,
Treasury futures and equity index futures, and enter into forwards, options,
when-issued transactions (also called forward commitments), swap agreements
(including interest rate, index and currency swaps) and swaptions. The Fund may
invest in derivatives (1) as a substitute for holding securities directly, (2)
to facilitate the implementation of its investment strategy, (3) for hedging
purposes, (4) to take a net short position with respect to certain issuers,
sectors or markets, (5) to adjust the interest rate sensitivity and duration of
the Fund’s portfolio or (6) to manage the Fund’s asset class exposures. The Fund
may buy or sell credit default swaps or other credit derivatives, including
credit linked notes and credit options, as an alternative to buying or selling
the fixed income securities themselves or otherwise to increase the Fund’s total
return or to manage Fund risks. Credit default swaps resemble insurance
contracts in that the seller of the swap provides the buyer with protection
against specific risks of the issuer, such as defaults and bankruptcies, in
exchange for a premium from the buyer. Credit default swaps may include index
credit default swaps, which are contracts on baskets or indices of credit
instruments, which may include tranches of commercial mortgage-backed securities
(CMBX). Credit linked notes are obligations between two or more parties where
the payment of principal and/or interest is based on the performance of some
obligation, basket of obligations, index or economic indicator (a “reference
instrument”). Credit options, which are options whereby the purchaser has the
right, but not the obligation, to enter into a transaction involving either an
asset with inherent credit risk or a credit derivative, at terms specified at
the initiation of the option. The Fund may invest in STRIPS (Separate Trading of
Registered Interest and Principal of Securities). STRIPS are created by
separating the interest and the principal components of an outstanding U.S.
Treasury or agency note or bond and selling them as individual securities.
The
Fund may purchase and sell currency futures and options on currency futures,
forward currency contracts, currency swaps and currency spot and options
contracts for speculative purposes based on judgments regarding the direction of
the market for a particular foreign currency or currencies or to manage the
Fund’s currency exposures. The Fund’s currency investments may seek returns
through the identification of currency market factors that are expected to
result in positive returns over time. The Fund will enter into spot and forward
currency contracts to facilitate settlement of securities transactions and may
enter into these contracts in order to “lock in” the U.S. dollar price of a
security that it plans to buy or sell. The Fund may at times seek to protect a
portion of its investments against adverse currency exchange rate changes by
purchasing forward currency contracts.
The
Fund’s use of derivatives may cause the Fund’s investment returns to be impacted
by the performance of securities the Fund does not own and result in the Fund’s
total investment exposure exceeding the value of its portfolio.
The
Fund may invest in pooled investment vehicles, including other investment
companies and exchange traded funds. The Fund may also invest in affiliated
investment companies.
With
respect to the portion of the Fund managed by RIM and not allocated to money
manager strategies, RIM utilizes quantitative and/or rules-based processes and
qualitative analysis to assess Fund characteristics and invest in securities and
instruments which provide the desired exposures (such as volatility, momentum,
value, growth, quality, capitalization size, industry, sector, region, currency,
credit or mortgage exposure, country risk, yield curve positioning or interest
rates). For example, RIM may utilize tools such as optimization, which involves
the analysis of tradeoffs between various risk and return factors as well as
turnover and transaction costs, in order to estimate optimal portfolio
positioning. RIM may use strategies based on indexes, including optimized index
sampling (strategies that seek to purchase a sampling of securities using
optimization and risk models) and/or index replication.
Depending
upon market conditions, RIM may determine to allocate a significant portion of
the Fund’s assets to cash, all or a portion of which may be “equitized” as
described below. The Fund, like any mutual fund, also maintains cash
222
reserves
(i.e., cash awaiting investment or cash held to meet redemption requests or to
pay expenses). RIM may increase or decrease the Fund’s cash balances to seek to
achieve the desired exposures for the Fund, or in anticipation of a transition
to a new money manager or large redemptions resulting from rebalancing by funds
of funds or asset allocation programs.
The
Fund may expose all or a portion of its cash to the performance of certain
markets by purchasing equity securities, fixed income securities and/or
derivatives (also known as “equitization”), which typically include index
futures contracts or fixed income futures contracts. This is intended to cause
the Fund to perform as though its cash were actually invested in those markets.
This exposure may or may not match the Fund’s benchmark and RIM may use the cash
equitization process to manage Fund exposures. RIM may also use the cash
equitization process to reduce market exposure. With respect to cash that is not
equitized, RIM may sell equity index put options to seek gains from premiums
(cash) received from their sale. RIM invests any remaining cash in (1)
short-term investments, including the U.S. Cash Management Fund, an unregistered
fund advised by RIM whose investment objective is to seek to preserve principal
and provide liquidity and current income, and (2) fixed income securities with a
typical average portfolio duration of one year and individual effective
maturities of up to five years, which may include U.S. and non-U.S. corporate
debt securities, asset-backed securities (which may include, among others,
credit card and automobile loan receivables) and money market securities similar
to those invested in by the U.S. Cash Management Fund.
Some
emerging market countries do not permit foreigners to participate directly in
their securities markets or otherwise present difficulties for efficient foreign
investment. Therefore, the Fund may invest in synthetic foreign fixed income
and/or equity securities, which may be referred to as international warrants,
local access products, participation notes or low exercise price warrants, or
may invest in equity linked notes. International warrants are a form of
derivative security issued by foreign banks that either give holders the right
to buy or sell an underlying security or securities for a particular price or
give holders the right to receive cash payment relating to the value of the
underlying security or securities. Local access products are similar to options
in that they are exercisable by the holder for an underlying security or the
value of that security, but are generally exercisable over a longer term than
typical options.
The
Fund may enter into repurchase agreements and reverse repurchase agreements. A
repurchase agreement is an agreement under which the Fund acquires a fixed
income security from a commercial bank, broker or dealer and simultaneously
agrees to resell such security to the seller at an agreed upon price and date
(normally the next business day). A reverse repurchase agreement is a
transaction whereby the Fund transfers possession of a portfolio security to a
commercial bank, broker or dealer and simultaneously agrees to repurchase such
security at an agreed upon price and date.
The
Fund may invest in commercial paper, including asset-backed commercial
paper. The Fund may invest in money market securities. The Fund may
invest in obligations issued or guaranteed by U.S. or foreign banks. Bank
obligations, including time deposits, bankers' acceptances and certificates of
deposit, may be general obligations of the parent bank or may be limited to the
issuing branch by the terms of the specific obligations or by government
regulations.
A
portion of the Fund’s net assets may be “illiquid” investments (i.e.,
investments that are not reasonably expected to be sold or disposed of in
current market conditions in seven calendar days or less without significantly
changing the market value of the investment).
The
Fund may engage in active and frequent trading of portfolio securities to
achieve its investment strategies.
The
Fund considers emerging market countries to include every country in the world
except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom and the United States. Emerging market countries also include frontier
market countries, which are less developed than traditional emerging market
countries.
The
Fund may sell securities for a variety of reasons including to realize gains,
limit losses, to make funds available for other investment opportunities or to
meet redemption requests. The Fund may also sell a security if there is a
significant change to the security’s characteristics or if the security is no
longer consistent with the Fund’s investment strategies.
Non-Principal
Investment Strategies
The
Fund may purchase depositary receipts, including American Depositary Receipts
(“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts
(“EDRs”). The Fund may purchase depositary receipts where an
223
ADR,
GDR or EDR provides better access to markets and more liquidity (including with
respect to the number of market participants and/or transactions) than the
underlying security. An ADR is a stock that trades in the U.S. but represents
shares in a non-U.S. company. A GDR is a stock that trades in one or more global
markets but represents shares of a company domiciled in a different country. An
EDR is issued in Europe typically by foreign banks and trust companies and
evidences ownership of either foreign or domestic securities. The Fund typically
invests in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored
ADRs, GDRs and EDRs.
The
Fund may invest in non-U.S. debt securities and bonds issued through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring, also known as Brady Bonds.
The Fund may invest in Yankee Bonds (dollar denominated obligations issued by
the US and non-U.S. corporations).
The
Fund may invest in puts, stand-by commitments and demand notes (including
variable rate demand notes). The Fund may also invest in municipal debt
obligations.
The
Fund may lend its portfolio securities in an amount up to one-third of its total
assets to earn income. These loans may be terminated at any time. The Fund will
receive either cash (which is invested at its own risk by the Fund), securities
issued or guaranteed by the United States government or its agencies or
instrumentalities or sovereign debt to secure the obligations of the
borrower.
On
rare occasions, the Fund may take a temporary defensive position that may be
inconsistent with its long-term principal investment strategies in an attempt to
respond to adverse market, economic, political or other conditions. If this
occurs, the Fund may not achieve its investment objective during such times. The
Fund may take a defensive position by raising cash levels and/or reducing or
eliminating the strategy to expose its cash to the performance of appropriate
markets.
224
RISKS
An
investment in the Funds, like any investment, has risks. The value of a Fund
fluctuates and you could lose money. The following table lists the Funds and the
types of principal and non-principal risks the Funds are subject to. Please
refer to the discussion following the chart and the Funds' Statement of
Additional Information for a discussion of risks associated with types of
securities held by the Funds and the investment practices employed by the
Funds.
| Fund | Principal Risks | Non-Principal Risks |
| Equity Income Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Preferred Stocks • Value Stocks • Defensive Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Real Estate Investment Trusts (“REITs”) • Master Limited Partnerships (“MLPs”) • Depositary Receipts • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Small Capitalization Companies • Emerging Markets Securities • Currency Risk • Securities of Other Investment Companies • Securities Lending • Operational Risk |
225
| Fund | Principal Risks | Non-Principal Risks |
| Sustainable Equity Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Sustainable Investing Risk • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Short Sales • Real Estate Investment Trusts (“REITs”) • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Small Capitalization Companies • Preferred Stocks • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Securities of Other Investment Companies • Depositary Receipts • Securities Lending • Operational Risk |
| U.S. Strategic Equity Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Dynamic Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Depositary Receipts • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Small Capitalization Companies • Preferred Stocks • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Securities Lending • Operational Risk |
226
| Fund | Principal Risks | Non-Principal Risks |
| U.S. Small Cap Equity Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Dynamic Stocks • Momentum Stocks • Securities of Small Capitalization Companies • Securities of Micro Capitalization Companies and Companies with Capitalization Smaller than the Russell 2000® Index • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Real Estate Investment Trusts (“REITs”) • Counterparty Risk • Short Sales • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Medium Capitalization Companies • Preferred Stocks • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Depositary Receipts • Securities of Other Investment Companies • Illiquid Investments • Securities Lending • Operational Risk |
227
| Fund | Principal Risks | Non-Principal Risks |
| International Developed Markets Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Preferred Stocks • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Depositary Receipts • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Rights, Warrants and Convertible Securities • Synthetic Foreign Equity/Fixed Income Securities • Equity Linked Notes • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Illiquid Investments • Securities Lending • Operational Risk |
228
| Fund | Principal Risks | Non-Principal Risks |
| Global Equity Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Preferred Stocks • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Depositary Receipts • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Rights, Warrants and Convertible Securities • Synthetic Foreign Equity/Fixed Income Securities • Equity Linked Notes • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Illiquid Investments • Securities Lending • Operational Risk |
229
| Fund | Principal Risks | Non-Principal Risks |
| Emerging Markets Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Preferred Stocks • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Investments in Frontier Markets • Currency Risk • Synthetic Foreign Equity/Fixed Income Securities • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Securities of Other Investment Companies • Depositary Receipts • Illiquid Investments • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Micro Capitalization Companies and Companies with
Capitalization Smaller than the Russell 2000®
Index • Rights, Warrants and Convertible Securities • Equity Linked Notes • Real Estate Investment Trusts (“REITs”) • Securities Lending • Operational Risk |
230
| Fund | Principal Risks | Non-Principal Risks |
| Tax-Managed U.S. Large Cap Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Momentum Stocks • Tax-Sensitive Management • Use of Multiple Money Managers in a Tax-Sensitive Fund • Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Depositary Receipts • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Small Capitalization Companies • Preferred Stocks • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Operational Risk |
231
| Fund | Principal Risks | Non-Principal Risks |
| Tax-Managed U.S. Mid & Small Cap Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Dynamic Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Tax-Sensitive Management • Use of Multiple Money Managers in a Tax-Sensitive Fund • Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Real Estate Investment Trusts (“REITs”) • Counterparty Risk • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Securities of Micro Capitalization Companies and Companies with
Capitalization Smaller than the Russell 2000®
Index • Preferred Stocks • Rights, Warrants and Convertible Securities • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Depositary Receipts • Securities of Other Investment Companies • Illiquid Investments • Securities Lending • Operational Risk |
232
| Fund | Principal Risks | Non-Principal Risks |
| Tax-Managed International Equity Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Value Stocks • Growth Stocks • Defensive Stocks • Dynamic Stocks • Momentum Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Preferred Stocks • Rights, Warrants and Convertible Securities • Tax-Sensitive Management • Use of Multiple Money Managers in a Tax-Sensitive Fund • Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Depositary Receipts • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Financial Services Sector Risk • Cash Management |
•
Synthetic Foreign Equity/Fixed Income Securities • Equity Linked Notes • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Illiquid Investments • Operational Risk |
233
| Fund | Principal Risks | Non-Principal Risks |
| Tax-Managed Real Assets Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Tax-Sensitive Management • Use of Multiple Money Managers in a Tax-Sensitive Fund • Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Real Estate Securities • Real Estate Investment Trusts (“REITs”) • Infrastructure Companies • Master Limited Partnerships (“MLPs”) • Natural Resources Risk • Depositary Receipts • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Industry Concentration Risk • Cash Management |
•
Preferred Stocks • Rights, Warrants and Convertible Securities • Synthetic Foreign Equity/Fixed Income Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants) • Equity Linked Notes • Securities of Other Investment Companies • Illiquid Investments • Operational Risk |
234
| Fund | Principal Risks | Non-Principal Risks |
| Opportunistic Credit Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Rights, Warrants and Convertible Securities • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk •• Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Loans and Other Direct Indebtedness • Non-U.S. Securities • Non-U.S. Fixed Income Securities • Emerging Markets Debt • Brady Bonds • Yankee Bonds and Yankee CDs • Currency Risk • Synthetic Foreign Equity/Fixed Income Securities • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Illiquid Investments • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • High Portfolio Turnover Risk • Global Financial Markets Risk • Cash Management • Distressed Securities |
•
Common Stocks • Preferred Stocks • Municipal Obligations • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Credit Linked Notes, Credit Options and Similar Investments • Securities of Other Investment Companies • Securities Lending • Operational Risk |
235
| Fund | Principal Risks | Non-Principal Risks |
| Unconstrained Total Return Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Securities of Micro Capitalization Companies and Companies with Capitalization Smaller than the Russell 2000® Index • Preferred Stocks • Volatility Strategies Risk • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Reverse Repurchase Agreements • Puts, Stand-by Commitments and Demand Notes • Dollar Rolls • Loans and Other Direct Indebtedness • Credit Linked Notes, Credit Options and Similar Investments • Non-U.S. Securities • Non-U.S. Equity Securities • Non-U.S. Fixed Income Securities • Emerging Markets Securities • Emerging Markets Debt • Brady Bonds • Yankee Bonds and Yankee CDs • Currency Risk • Synthetic Foreign Equity/Fixed Income Securities • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Securities of Other Investment Companies • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management • Distressed Securities |
•
Rights, Warrants and Convertible Securities • Municipal Obligations • Real Estate Investment Trusts (“REITs”) • Depositary Receipts • Operational Risk |
236
| Fund | Principal Risks | Non-Principal Risks |
| Strategic Bond Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Dollar Rolls • Loans and Other Direct Indebtedness • Non-U.S. Securities • Non-U.S. Fixed Income Securities • Emerging Markets Debt • Yankee Bonds and Yankee CDs • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management • Distressed Securities |
•
Rights, Warrants and Convertible Securities • Municipal Obligations • Brady Bonds • Securities of Other Investment Companies • Securities Lending • Operational Risk |
237
| Fund | Principal Risks | Non-Principal Risks |
| Investment Grade Bond | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Fixed Income Securities Risk • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Dollar Rolls • Loans and Other Direct Indebtedness • Non-U.S. Securities • Non-U.S. Fixed Income Securities • Emerging Markets Debt • Yankee Bonds and Yankee CDs • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management |
•
Municipal Obligations • Brady Bonds • Securities of Other Investment Companies • Securities Lending • Distressed Securities • Operational Risk |
238
| Fund | Principal Risks | Non-Principal Risks |
| Short Duration Bond Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Dollar Rolls • Non-U.S. Securities • Non-U.S. Fixed Income Securities • Emerging Markets Debt • Yankee Bonds and Yankee CDs • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management |
•
Municipal Obligations • Loans and Other Direct Indebtedness • Distressed Securities • Brady Bonds • Securities of Other Investment Companies • Operational Risk |
239
| Fund | Principal Risks | Non-Principal Risks |
| Tax-Exempt High Yield Bond Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High-Yield” or “Junk Bonds”) • Government Issued or Guaranteed Securities, U.S. Government Securities • Municipal Obligations • Money Market Securities (Including Commercial Paper) • Credit and Liquidity Enhancements • Repurchase Agreements • Puts, Stand-by Commitments and Demand Notes • Derivatives (Futures Contracts, Options and Swaps) • Counterparty Risk • Illiquid Investments • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management • Alternative Minimum Tax Risk |
•
Asset-Backed Commercial Paper • Tender Option Bonds • Securities of Other Investment Companies • Distressed Securities • Operational Risk |
| Tax-Exempt Bond Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High-Yield” or “Junk Bonds”) • Government Issued or Guaranteed Securities, U.S. Government Securities • Money Market Securities (Including Commercial Paper) • Municipal Obligations • Credit and Liquidity Enhancements • Repurchase Agreements • Puts, Stand-By Commitments and Demand Notes • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Illiquid Investments • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management |
•
Securities of Other Investment Companies • Distressed Securities • Operational Risk • Alternative Minimum Tax Risk |
240
| Fund | Principal Risks | Non-Principal Risks |
| Global Infrastructure Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Currency Trading Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Counterparty Risk • Infrastructure Companies • Master Limited Partnerships (“MLPs”) • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management |
•
Preferred Stocks • Rights, Warrants and Convertible Securities • Synthetic Foreign Equity/Fixed Income Securities • Equity Linked Notes • Securities of Other Investment Companies • Real Estate Investment Trusts (“REITs”) • Depositary Receipts • Illiquid Investments • Securities Lending • Operational Risk |
| Global Real Estate Securities Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Non-U.S. Securities • Non-U.S. Equity Securities • Emerging Markets Securities • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Real Estate Securities • Real Estate Investment Trusts (“REITs”) • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Industry Concentration Risk • Cash Management |
•
Preferred Stocks • Rights, Warrants and Convertible Securities • Securities of Other Investment Companies • Depositary Receipts • Illiquid Investments • Securities Lending • Operational Risk |
241
| Fund | Principal Risks | Non-Principal Risks |
| Real Assets Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • Distressed Securities • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Municipal Obligations • Money Market Securities (Including Commercial Paper) • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Asset-Backed Securities • Dollar Rolls • Non-U.S. Securities • Non-U.S. Equity Securities • Non-U.S. Fixed Income Securities • Emerging Markets Securities • Emerging Markets Debt • Brady Bonds • Yankee Bonds and Yankee CDs • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Commodity Risk • Tax Risk • Subsidiary Risk • Real Estate Securities • Real Estate Investment Trusts (“REITs”) • Infrastructure Companies • Master Limited Partnerships (“MLPs”) • Natural Resources Risk • Depositary Receipts • Liquidity Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Industry Concentration Risk • Cash Management • New Fund Risk |
•
Preferred Stocks • Rights, Warrants and Convertible Securities • Synthetic Foreign Equity/Fixed Income Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants) • Equity Linked Notes • Securities of Other Investment Companies • Illiquid Investments • Operational Risk |
242
| Fund | Principal Risks | Non-Principal Risks |
| Multi-Strategy Income Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Fundamental Investing • Quantitative Investing • Non-Discretionary Implementation Risk • Equity Securities Risk • Common Stocks • Preferred Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Rights, Warrants and Convertible Securities • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Put, Stand-by Commitments and Demand Notes • Dollar Rolls • Loans and Other Direct Indebtedness • Non-U.S. Securities • Non-U.S. Equity Securities • Non-U.S. Fixed Income Securities • Emerging Markets Securities • Emerging Markets Debt • Currency Risk • Derivatives (Futures Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Securities of Other Investment Companies • Real Estate Securities • Real Estate Investment Trusts (“REITs”) • Infrastructure Companies • Master Limited Partnerships (“MLPs”) • Depositary Receipts • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management • Distressed Securities |
•
Municipal Obligations • Money Market Securities (Including Commercial Paper) • Privately-Issued Mortgage-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Reverse Repurchase Agreements • Credit Linked Notes, Credit Options and Similar Investments • Brady Bonds • Yankee Bonds and Yankee CDs • Synthetic Foreign Equity/Fixed Income Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants) • Equity Linked Notes • Securities Lending • Operational Risk |
243
| Fund | Principal Risks | Non-Principal Risks | |
| Multi-Asset Growth Strategy Fund | •
Multi-Manager Approach • Active Management Risk • Security Selection • Exposure Tilts and Management of Fund Exposures • Index-Based Investing • Non-Discretionary Implementation Risk • Fundamental Investing • Quantitative Investing • Equity Securities Risk • Common Stocks • Securities of Medium Capitalization Companies • Securities of Small Capitalization Companies • Securities of Micro Capitalization Companies and Companies with Capitalization Smaller than the Russell 2000 Index • Preferred Stocks • Rights, Warrants and Convertible Securities • Volatility Strategies Risk • Fixed Income Securities Risk • Non-Investment Grade Debt Securities (“High-Yield” or “Junk Bonds”) • U.S. and Non-U.S. Corporate Debt Securities Risk • Government Issued or Guaranteed Securities, U.S. Government Securities • Bank Obligations • Money Market Securities (Including Commercial Paper) • Asset-Backed Commercial Paper • Variable and Floating Rate Securities • Mortgage-Backed Securities • Agency Mortgage-Backed Securities • Privately-Issued Mortgage-Backed Securities • Reverse Mortgages • Asset-Backed Securities • Credit and Liquidity Enhancements • Repurchase Agreements • Reverse Repurchase Agreements • Dollar Rolls |
•
Loans and Other Direct Indebtedness • Credit Linked Notes, Credit Options and Similar Investments • Non-U.S. Securities • Non-U.S. Equity Securities • Non-U.S. Fixed Income Securities • Emerging Markets Securities • Emerging Markets Debt • Currency Risk • Synthetic Foreign Equity/Fixed Income Securities • Equity Linked Notes • Derivatives (Future Contracts, Options, Forwards and Swaps) • Currency Trading Risk • Counterparty Risk • Securities of Other Investment Companies • Real Estate Securities • Real Estate Investment Trusts (“REITs”) • Infrastructure Companies • Master Limited Partnerships (“MLPs”) • Illiquid Investments • Liquidity Risk • High Portfolio Turnover Risk • Impact of Large Redemptions (Including Possible Fund Liquidation) • Global Financial Markets Risk • Cash Management • Distressed Securities |
•
Municipal Obligations • Puts, Stand-by Commitments and Demand Notes • Brady Bonds • Yankee Bonds and Yankee CDs • Depositary Receipts • Securities Lending • Operational Risk |
In
order to determine which risks are principal or non-principal risks for a Fund,
please refer to the table above.
244
Multi-Manager
Approach
While
the investment strategies employed by a Fund's money managers are intended to be
complementary, they may not in fact be complementary. The interplay of the
various strategies employed by a Fund's multiple money managers may result in a
Fund holding a significant amount of certain types of securities. This may be
beneficial or detrimental to a Fund's performance depending upon the performance
of those securities and the overall economic environment. The money managers
selected for a Fund may underperform the market generally or other money
managers that could have been selected for that Fund. The multi-manager approach
could increase a Fund's portfolio turnover rates which may result in higher
levels of realized capital gains or losses with respect to a Fund's portfolio
securities, higher brokerage commissions and other transaction costs. The
success of a Fund's investment strategy depends on, among other things, both
RIM’s skill in selecting money managers and allocating assets to those money
managers and on a money manager’s skill in executing the relevant investment
strategy and selecting investments for the Fund.
Active
Management Risk
Actively
managed investment portfolios are subject to active management risk. Despite
strategies designed to achieve a Fund's investment objective, the values of
investments will change with market conditions, and so will the value of any
investment in a Fund and you could lose money. Investments in a Fund could be
lost or a Fund could underperform other investments.
| • | Security Selection |
| The securities or instruments chosen by RIM or a money manager to be in a Fund's portfolio may not perform as RIM or the Fund's money managers expect. Security or instrument selection risk may cause a Fund to underperform other funds with similar investment objectives and investment strategies even in a rising market. There are two types of methods to select securities, fundamental analysis and quantitative analysis. For more information about these methods, see Fundamental Investing and Quantitative Investing risks in this Prospectus. |
| • | Exposure Tilts and Management of Fund Exposures |
| In order to respond to changes in market risks and opportunities, RIM implements tilts or shifts in a Fund's exposures by over or underweighting certain of the portfolio’s investment characteristics relative to its index over the short, intermediate or long term. Such tilts or shifts may be ineffective, RIM’s judgments regarding perceived market risks and opportunities may be incorrect and there is no guarantee that RIM will effectively manage a Fund's overall exposures, which could cause the Fund to underperform other funds with similar investment objectives and investment strategies in the short- and/or long-term. RIM may utilize a variety of quantitative models and a variety of quantitative inputs and qualitative investment information and analysis in the management of a Fund's overall exposures. For more information about quantitative investing, see the Quantitative Investing risk in this Prospectus. To seek to gain desired overall Fund exposures, RIM may use index-based strategies, including index replication and optimized index sampling. For more information about these strategies, see the Index-Based Investing risk in this Prospectus. |
Index-Based
Investing
The
Funds may use index-based strategies, including index replication and optimized
index sampling, for certain purposes, including to seek to gain
desired Fund exposures. Index replication strategies seek to purchase the
securities in an index or a blend of indexes (the “reference index”) in order to
track the reference index’s performance. Optimized index sampling strategies do
not attempt to purchase every security in the reference index, but instead
purchase a sampling of securities using optimization and risk models. This
process involves the analysis of tradeoffs between various factors as well as
turnover and transaction costs in order to estimate optimal portfolio holdings
based upon the reference index in order to achieve desired Fund exposures.
Unlike index replication strategies, optimized index sampling strategies do not
seek to fully replicate the reference index and a Fund may not hold all the
securities and may hold securities not included in the reference index. A Fund
may hold constituent securities of the reference index regardless of the current
or projected performance of a specific security or a particular industry or
market sector. Maintaining investments in securities regardless of the
performance of individual securities or market conditions could cause a Fund's
return to be lower than if the Fund employed a fundamental investment approach
to security selection with respect to that portion of its portfolio.
Additionally, the portion of a Fund's portfolio utilizing an index-based
strategy is subject to “tracking error”
245
risk,
which is the risk that the performance of the portion of a Fund's portfolio
utilizing an index-based strategy will differ from the performance of the
reference index it seeks to track due to differences in security holdings,
operating expenses, transaction costs, cash flows, operational inefficiencies
and tax considerations.
Non-Discretionary
Implementation Risk
With
respect to the portion of a Fund that is managed pursuant to model portfolios
provided by non-discretionary money managers, it is expected that trades will be
effected on a periodic basis and therefore less frequently than would typically
be the case if discretionary money managers were employed. Given that values of
investments change with market conditions, this could cause a Fund's return to
be lower than if the Fund employed discretionary money managers with respect to
that portion of its portfolio. In addition, RIM may deviate, subject to certain
limitations, from the model portfolios provided by non-discretionary money
managers for various purposes and this may cause a Fund's return to be lower
than if RIM had implemented the model portfolio as provided by the money
manager.
Fundamental
Investing
A
fundamental investment approach uses research and analysis of a variety of
factors to create a forecast of company results, which is used to select
securities. The process may result in an evaluation of a security’s value that
may be incorrect or, if correct, may not be reflected by the market. Security or
instrument selection made on the basis of a fundamental investment approach are
subject to significant losses when the actual market prices of securities are
materially different than from the prices predicted by the forecast resulting
from the fundamental analysis. Fundamental analysis is inherently subject to the
risk of not having identified all the relevant factors. In addition, the
macro-economic factors considered by a money manager may be difficult to
evaluate or implement. Fundamental investing is also inherently subject to the
unpredictable duration of periods during which market prices and actual value as
determined by such analysis will change. Security or instrument selection using
a fundamental investment approach may cause a Fund to underperform other funds
with similar investment objectives and investment strategies even in a rising
market.
Quantitative
Investing
Quantitative
inputs and models use historical company, economic and/or industry data to
evaluate prospective investments or to generate forecasts. This could result in
incorrect assessments of the specific portfolio characteristics or ineffective
adjustments to a Fund's exposures. Securities selected using quantitative
analysis may perform differently than analysis of their historical trends would
suggest as a result of the factors used in the analysis, the weight placed on
each factor, and changes in underlying market conditions. As market dynamics
shift over time, a previously successful input or model may become outdated and
result in losses. Inputs or models may be flawed or not work as anticipated and
cause a Fund to underperform other funds with similar objectives and strategies.
Certain inputs and models may utilize third-party data and models that RIM
believes to be reliable. However, RIM does not guarantee the accuracy of
third-party data or models.
Sustainable
Investing Risk
Applying
sustainability and ESG criteria to the investment process may exclude or reduce
exposure to securities of certain issuers for sustainability reasons and,
therefore, the Sustainable Equity Fund may forgo some market opportunities
available to funds that do not use sustainability criteria. Securities of
companies with sustainable practices may shift into and out of favor depending
on market and economic conditions, and the Fund’s performance may at times be
better or worse than the performance of funds that do not use sustainability
criteria. RIM’s evaluation of sustainability metrics in connection with its
management of the Fund may also cause the Fund’s performance to differ from
funds that do not use such metrics. Sustainability data, including
sustainability data obtained from third party providers, may be incomplete,
inaccurate, inconsistent or unavailable, which could adversely affect the
analysis of a particular investment. It is possible that the investments
identified by RIM as being aligned with its sustainability criteria will not
operate as expected or that, because the assessment of whether an issuer meets
the sustainability criteria is conducted at the time of investment, an issuer
initially meeting the sustainability criteria will not continue to do so over
time. As a result, RIM could be required to sell such positions at a
disadvantageous time. Investors may differ in their view of whether a
particular investment fits within the sustainability criteria and, as a result,
the Fund may invest in issuers that do not reflect the beliefs and/or values of
any particular investor. The decision not to invest in certain investments
as a result of the sustainability criteria may adversely affect Fund performance
at times when such investments are performing well. The regulatory
landscape
246
with
respect to sustainable investing in the U.S. is still under development and, as
a result, future regulations and/or rules adopted by applicable regulators could
require the Fund to change or adjust its investment process with respect to
sustainable investing.
Equity
Securities Risk
The
value of equity securities fluctuates in response to general market and economic
conditions (market risk) and in response to the performance of individual
companies (company risk). Therefore, the value of an investment in the Funds may
decrease. The market as a whole can decline for many reasons, including adverse
political or economic developments in the U.S. or abroad, changes in investor
psychology, or heavy institutional selling. Also, certain unanticipated events,
such as natural disasters, pandemics, epidemics, terrorist attacks, war, and
other geopolitical events, can have a dramatic adverse effect on stock markets.
Changes in the financial condition of a company or other issuer, changes in
specific market, economic, political, and regulatory conditions that affect a
particular type of investment or issuer, and changes in general market,
economic, political, and regulatory conditions can adversely affect the price of
equity securities. These developments and changes can affect a single issuer,
issuers within a broad market sector, industry or geographic region, or the
market in general.
| • | Common Stocks |
| The value of common stocks will rise and fall in response to the activities of the company that issued the stock, general market conditions and/or economic conditions. If an issuer is liquidated or declares bankruptcy, the claims of owners of the issuer’s debt instruments will take precedence over the claims of owners of common stocks. | |
| • | Value Stocks |
| Investments in value stocks are subject to the risks of common stocks, as well as the risks that (i) their intrinsic values may never be realized by the market or (ii) such stock may turn out not to have been undervalued. | |
| • | Growth Stocks |
| Investments in growth stocks are subject to the risks of common stocks. Growth company stocks generally provide minimal dividends which could otherwise offset the impact of a market decline. The value of growth company stocks may rise and fall significantly based, in part, on investors’ perceptions of the company, rather than on fundamental analysis of the stocks. | |
| • | Defensive Stocks |
| Investments in defensive stocks are subject to the risks of common stocks. In rising markets, defensive stocks are likely to underperform growth, value and dynamic stocks. Defensive stocks may also underperform the broad market in declining markets and over various market periods. The relative performance of stocks selected pursuant to a defensive style may fluctuate over time. Defensive stocks may not consistently exhibit the defensive characteristics for which they were selected and may not have lower than average stock price volatility or provide less volatile returns than the broad equity market. | |
| • | Dynamic Stocks |
| Investments in dynamic stocks are subject to the risks of common stocks. In declining markets, dynamic stocks are likely to underperform growth, value and defensive stocks. Dynamic stocks have higher than average stock price volatility and may experience sharp declines in value. Generally, securities with higher price volatility are considered riskier investments than securities with lower price volatility. Dynamic companies may be subject to a heightened risk of bankruptcy. There is no guarantee that a company’s potential for stock price appreciation will be effectively assessed and it is possible that such judgments may prove incorrect. Dynamic investing tends to result in an overweight to medium capitalization stocks. | |
| • | Momentum Stocks |
| Momentum stocks are stocks of companies that exhibit positive price trends. Investments in momentum stocks are subject to the risks of common stocks. Momentum stocks are likely to underperform the broad market in declining markets and over various market periods. The relative performance of momentum stocks may fluctuate over time. |
247
| • | Securities of Medium Capitalization Companies |
| Investments in securities of medium capitalization companies are subject to the risks of common stocks. However, investments in medium capitalization companies may involve greater risks than those associated with larger, more established companies. Securities of such issuers may be thinly traded, and thus, difficult to buy and sell in the market. These companies often have narrower markets, more limited operating or business history, more limited product lines, and more limited managerial or financial resources than larger, more established companies. As a result, their performance can be more volatile and they face greater risk of business failure and bankruptcy, which could increase the volatility of a Fund's portfolio. | |
| • | Securities of Small Capitalization Companies |
| Investments in securities of small capitalization companies are subject to the risks of common stocks, including the risks of investing in securities of medium capitalization companies. However, investments in small capitalization companies may involve greater risks, as, generally, the smaller the company size, the greater these risks. | |
| • | Securities of Micro Capitalization Companies and Companies with Capitalization Smaller than the Russell 2000® Index |
| Investments in securities of micro capitalization companies and companies with capitalizations smaller than the Russell 2000® Index are subject to the risks of common stocks, including the risks of investing in securities of medium and small capitalization companies. However, investments in such companies may involve greater risks, as, generally, the smaller the company size, the greater these risks. In addition, micro capitalization companies and companies with capitalization smaller than the Russell 2000® Index may be newly formed with more limited track records and less publicly available information. | |
| • | Preferred Stocks |
| Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors resulting in a decline in price. Preferred stock does not usually have voting rights. The absence of voting rights may result in approval by the holders of the common stock of a corporate action to restructure a company for the benefit of the holders of the common stock to the detriment of the holders of the preferred stocks. | |
| • | Rights, Warrants and Convertible Securities |
| Rights and warrants are instruments which entitle the holder to buy an equity security at a specific price for a specific period of time. Rights are similar to warrants but rights typically have shorter durations and are offered to current stockholders of the issuer. Changes in the value of a right or a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a right or a warrant may be more volatile than the price of its underlying security, and a right or a warrant may offer greater potential for capital loss. | |
| Convertible securities can be bonds, notes, debentures, preferred stocks or other securities which are convertible into common stock. Convertible securities are subject to both the credit and interest rate risks associated with fixed income securities and to the market risk associated with common stocks. Unlike traditional convertible securities, contingent convertible securities generally provide for mandatory conversion into common stock of the issuer under certain circumstances. The mandatory conversion might be automatically triggered, for instance, if a company fails to meet the minimum amount of capital described in the security, the company's regulator makes a determination that the security should convert or the company receives specified levels of extraordinary public support. Since the common stock of the issuer may not pay a dividend, a Fund could experience a reduced income rate, potentially to zero. Conversion would deepen the subordination of a Fund, hence worsening the Fund’s standing in the case of an issuer’s insolvency. In addition, some contingent convertible securities have a set stock conversion rate that would cause a reduction in value of the security if the price of the stock is below the conversion price on the conversion date. |
Tax-Sensitive
Management
A
Fund’s tax-managed equity investment strategy may provide a lower return before
consideration of federal income tax consequences than other mutual funds that
are not tax-managed. A tax-sensitive investment strategy involves active
management and a Fund may, at times, take steps to postpone the realization of
capital gains that other mutual funds that
248
are
not tax-managed may not. This may lead to a difference in pre-tax returns. While
a Fund’s investment approaches typically result in the realization of long-term
capital gains, short-term capital gains will be realized from time to time when
the Fund believes it is appropriate or as a result of corporate actions. In
addition, a Fund may also at times engage in active tax management through
taxable gain and loss harvesting activities (“tax loss harvesting”), whereby
securities may be sold in order to generate capital losses to offset current and
future capital gains. There are certain risks inherent with tax loss harvesting,
including the possibility that such activity does not improve a Fund’s after-tax
returns. In some cases, the Fund may repurchase the securities sold at a higher
price or the Fund may purchase substitute securities that do not perform as well
as the securities that were sold. In other cases, the Fund may purchase
additional shares of securities already held by the Fund at a lower cost than
the shares held by the Fund with the intent to sell the Fund’s higher cost
shares, which is subject to the risk that the value of the securities may
decrease prior to their sale. In addition, tax loss harvesting may increase the
Fund’s portfolio turnover rates. At times, it may also be impossible to
implement the tax-managed strategy if, for example, a Fund does not have any
capital losses to offset capital gains.
| • | Use of Multiple Money Managers in a Tax-Sensitive Fund |
| A tax-managed Fund which also uses a multi-manager approach is subject to unique risks. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce wash sales. A wash sale occurs if a security is sold by the Fund at a loss and the Fund acquires a substantially identical security 30 days before or after the date of the sale. Capital losses from wash sales are not tax-deductible. However, the Fund’s multi-manager approach does not guarantee that wash sales will not occur from time to time. To the extent that they do occur from time to time, the ability of the Fund to achieve its investment objective may be impacted. Additionally, transitions between money manager strategies may require the sale of portfolio securities resulting in the Fund realizing net capital gains. | |
| • | Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund |
| If large shareholder redemptions occur unexpectedly, a Fund could be required to sell portfolio securities resulting in its realization of net capital gains. If a Fund holds individual securities that have significantly appreciated over a long period of time, it may be difficult for the Fund to sell them without realizing net capital gains. The realization of such capital gains could prevent the Fund from meeting its investment objective. |
Volatility
Strategies Risk
Volatility
strategies depend on mispricings based upon market anticipated volatility and
realized volatility of an underlying asset. Price movements are influenced by
many unpredictable factors, such as market sentiment, inflation rates, interest
rate movements and general economic and political conditions. If anticipated and
realized volatility are incorrectly estimated, the strategy may result in
losses.
Fixed
Income Securities Risk
Fixed
income securities generally are subject to the following risks: (i) Interest
rate risk which is the risk that prices of fixed income securities generally
rise and fall in response to interest rate changes. Generally, when interest
rates rise, prices of fixed income securities fall and when interest rates fall,
prices of fixed income securities rise. A sharp and unexpected rise in interest
rates could impair a Fund's ability to maintain a stable net asset value. Very
low or negative interest rates may magnify interest rate risk. Expectations of
higher inflation generally cause interest rates to rise. The longer the duration
of the security, the more sensitive the security is to this risk. A 1% increase
in interest rates would reduce the value of a $100 note by approximately one
dollar if it had a one-year duration. The effect of changing interest rates on
financial markets, including negative interest rates, cannot be known with
certainty but may expose fixed-income and related markets to heightened
volatility and illiquidity. To the extent a Fund holds an investment with
a negative interest rate to maturity, the Fund would generate a
negative return on that investment. If negative interest rates become more
prevalent in the market and/or if negative interest rates persist for a
sustained period of time, investors may seek to reallocate assets to
higher-yielding assets which, among other potential consequences, could result
in increases in the yield and decreases in the prices of fixed-income
investments over time; (ii) Market risk which is the risk that the value of
fixed income securities fluctuates in response to general market and economic
conditions. Fixed income markets have experienced volatility, which may result
in increased shareholder redemptions; (iii) Company risk which is the risk that
the value of fixed income securities fluctuates in response to the performance
of individual companies; (iv) Credit and default risk which is the risk that a
Fund could lose money if the issuer or guarantor of a fixed income security or
other
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issuer
of credit support is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are subject
to varying degrees of credit risk which are often reflected in credit ratings.
Fixed income securities may be downgraded in credit rating or go into default.
While all fixed income securities are subject to credit risk, lower-rated bonds
and bonds with longer final maturities generally have higher credit risks and
higher risk of default; (v) Inflation risk which is the risk that the present
value of a security will be less in the future if inflation decreases the value
of money; and (vi) LIBOR risk which is the risk that artificially low
submissions to the London Interbank Offered Rate (“LIBOR”) rate setting process
during the global financial crisis could adversely affect the interest rates on
securities whose payments were determined by reference to LIBOR. In 2017, the
United Kingdom’s Financial Conduct Authority (“FCA”) announced that after 2021
it will cease its active encouragement of banks to provide the quotations needed
to sustain LIBOR. On March 5, 2021, the FCA announced that
all LIBOR settings will either cease to be provided by any
administrator, or no longer be representative immediately after December 31,
2021, for all four LIBOR settings (Great British Pound (“GBP”), Euro,
Swiss Franc and Japanese Yen) and one-week and two-month US
dollar LIBOR settings, and immediately after June 30, 2023 for the
remaining US dollar LIBOR settings, including three-month US
dollar LIBOR. Replacement rates that have been identified include the
Secured Overnight Financing Rate (“SOFR”), which is intended to replace US
dollar LIBOR and measures the cost of overnight borrowings through
repurchase agreement transactions collateralized with US Treasury securities,
and the Sterling Overnight Index Average Rate (“SONIA”), which is intended to
replace GBP LIBOR and measures the overnight interest rate paid by
banks for unsecured transactions in the sterling market, although other
replacement rates could be adopted by market participants. Certain instruments
held by the Funds rely in some fashion upon LIBOR. Although the transition
process away from LIBOR has become increasingly well-defined in advance of the
anticipated discontinuation date, there remains uncertainty regarding the nature
of any replacement rate, and any potential effects of the transition away from
LIBOR on a Fund or on certain instruments in which a Fund invests can be
difficult to ascertain. The transition process may involve, among other things,
increased volatility or illiquidity in markets for instruments that currently
rely on LIBOR and may result in a reduction in value of certain instruments held
by a Fund. The unavailability of LIBOR may affect the value, liquidity or return
on certain Fund investments and may result in additional costs in connection
with closing out positions and entering into new trades. Pricing adjustments to
a Fund's investments resulting from a substitute reference rate may adversely
affect the Fund's performance and/or NAV. The usefulness of LIBOR as a benchmark
could deteriorate during the transition period and, at this time, it is not
possible to predict the effect of the establishment of SOFR, SONIA or any other
replacement rates or any other reforms to LIBOR. The impact of any substitute
reference rate, if any, will vary on an investment-by-investment basis. RIM or a
money manager may have discretion to determine a substitute reference rate,
including any price or other adjustments to account for differences between the
substitute reference rate and the previous rate. The substitute reference rate
and any adjustments selected could negatively impact a Fund's investment
performance or financial condition, including in ways unforeseen by RIM or a
money manager. In addition, certain fixed income transactions may give rise to a
form of leverage including, among others, when-issued, delayed delivery or
forward commitment transactions, reverse repurchase agreements, dollar rolls and
other transactions that may be considered a form of borrowing. A Fund will
segregate or “earmark” liquid assets or otherwise cover the transactions that
may give rise to such risk. This may cause a Fund to liquidate portfolio
positions when it may not be advantageous to do so to satisfy its obligations or
to meet segregation requirements.
Specific
types of fixed income securities are also subject to additional risks which are
described below.
| • | Non-Investment Grade Debt Securities (“High-Yield” or “Junk Bonds”) |
| Although lower rated debt securities generally offer a higher yield than higher rated debt securities, they involve higher risks, higher volatility and higher risk of default than investment grade bonds. They are especially subject to: |
| • | Adverse changes in general economic conditions and in the industries in which their issuers are engaged; |
| • | Changes in the financial condition of their issuers; |
| • | Price fluctuations in response to changes in interest rates; and |
| • | Reduced liquidity compared to higher rated securities. |
As
a result, issuers of lower rated debt securities are more likely than other
issuers to miss principal and interest payments or to default, which could
result in a loss to a Fund. In the event of an issuer’s bankruptcy, the claims
of other creditors may have priority over the claims of lower rated debt
holders, leaving insufficient assets to repay the holders of lower rated debt
securities.
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| • | U.S. and Non-U.S. Corporate Debt Securities Risk |
| U.S. and non-U.S. corporate debt securities are subject to the same risks as other fixed income securities, including interest rate risk and market risk. U.S. and non-U.S. corporate debt securities are also affected by perceptions of the creditworthiness and business prospects of individual issuers. The underlying company may be unable to pay interest or repay principal upon maturity, which could adversely affect the security’s market value. In addition, due to less publicly available financial and other information, less stringent securities regulation, war, and other adverse governmental actions, investments in non-U.S. corporate debt securities may expose a Fund to greater risk than investments in U.S. corporate debt securities. | |
| • | Government Issued or Guaranteed Securities, U.S. Government Securities |
| Bonds guaranteed by a government are subject to the same risks as other fixed income securities, including inflation risk, price depreciation risk and default risk. No assurance can be given that the U.S. government will provide financial support to certain U.S. government agencies or instrumentalities since it is not obligated to do so by law. Accordingly, bonds issued by U.S. government agencies or instrumentalities may involve risk of loss of principal and interest. | |
| • | Distressed Securities |
| Distressed securities are securities of issuers that are experiencing significant financial or business difficulties. Investments in distressed securities may be considered speculative and may involve substantial risks not normally associated with investments in healthier companies, including the increased possibility that adverse business, financial or economic conditions will cause the issuer to default or initiate insolvency proceedings. Investments in distressed securities inherently have more credit risk than investments in non-distressed issuers, and the degree of risk associated with particular distressed securities may be difficult or impossible to determine. Distressed securities may also be illiquid, difficult to value and experience extreme price volatility. In the event that an issuer of distressed securities defaults or initiates insolvency proceedings, a Fund may lose all of its investment, or it may be required to accept cash or securities with a value less than a Fund's original investment. | |
| • | Bank Obligations |
| An adverse development in the banking industry may affect the value of a Fund's investments. Banks may be particularly susceptible to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy and general economic cycles. Banks are subject to extensive but different government regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. The profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry. The banking industry may also be impacted by legal and regulatory developments. The specific effects of such developments are not yet fully known. | |
| • | Municipal Obligations |
| Municipal obligations are subject to interest rate, credit and illiquidity risk and are affected by economic, business and political developments. Lower rated municipal obligations are subject to greater credit and market risk than higher quality municipal obligations. The value of these securities, or an issuer’s ability to make payments, may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors, or may become subject to future laws extending the time for payment of principal and/or interest, or limiting the rights of municipalities to levy taxes. Timely payments by issuers of industrial development bonds are dependent on the money earned by the particular facility or amount of revenues from other sources, and may be negatively affected by the general credit of the user of the facility. | |
| Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders. In addition, the perceived increased likelihood of default among issuers of municipal bonds has resulted in increased illiquidity, increased price volatility and credit downgrades of such issuers. In addition, the current economic climate and the perceived increased likelihood of default among issuers of municipal bonds has resulted in increased illiquidity, increased price volatility and credit downgrades of such issuers. A lack of information regarding certain issuers may make their municipal securities more difficult to assess. Additionally, |
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| uncertainties in the municipal securities market could negatively affect a Fund's net asset value and/or the distributions paid by a Fund. Certain municipal obligations in which a Fund invests may pay interest that is subject to the alternative minimum tax. | |
| To be tax exempt, municipal bonds must meet certain regulatory requirements. The failure of a municipal bond to meet these requirements may cause the interest received by a Fund from such bonds to be taxable. Interest on a municipal bond may be declared taxable after the issuance of the bond, and such a determination could be applied retroactively to the date of the issuance of the bond, causing a portion of prior distributions made by a Fund to be taxable to shareholders in the year of receipt. Additionally, income from municipal bonds may be declared taxable due to unfavorable changes in tax law, adverse interpretations by the Internal Revenue Service or noncompliant conduct of a bond issuer. | |
| From time to time, a Fund may invest a substantial amount of its assets in municipal bonds the interest from which is paid from revenues of similar projects. If its investments are concentrated in this manner, a Fund will assume the legal and economic risks relating to such projects which may significantly impact a Fund's performance. Additionally, a Fund may invest more heavily in bonds from certain cities, states or regions than others, which may increase a Fund's exposure to losses resulting from economic, political, or regulatory occurrences impacting these particular cities, states or regions. | |
| A Fund may invest in various types of municipal securities that are subject to different risks. These risks may include the following: |
| • | General Obligation Bonds Risk. Timely payments on general obligation bonds depend on the issuer’s credit quality, ability to raise tax revenues and ability to maintain an adequate tax base. |
| • | Revenue Bonds (including Industrial Development Bonds) Risk. Timely payments on revenue bonds, including industrial development bonds, depend on the money earned by the particular facility, or the amount of revenues derived from another source, and may be negatively affected by the general credit of the user of the facility. |
| • | Private Activities Bonds Risk. Private activities bonds are issued by municipalities and other public authorities to finance development of industrial facilities for use by a private enterprise, which is solely responsible for paying the principal and interest on the bond, and payment under these bonds depends on the private enterprise’s ability to do so. |
| • | Moral Obligation Bonds Risk. Moral obligation bonds are generally issued by special purpose public authorities of a state or municipality. If the issuer is unable to meet its obligations, repayment of these bonds becomes a moral commitment, but not a legal obligation, of the state or municipality. |
| • | Municipal Notes Risk. Municipal notes are shorter-term municipal debt obligations that pay interest that is, in the opinion of bond counsel, generally excludable from gross income for federal income tax purposes (although the interest may be includable in taxable income for purposes of the alternative minimum tax) and that have a maturity that is generally one year or less. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, construction loan notes, tax free commercial paper, project notes, variable rate demand notes, and tax free participation certificates. If there is a shortfall in the anticipated proceeds, the notes may not be fully repaid and a Fund may lose money. |
| • | Municipal Lease Obligations Risk. In a municipal lease obligation, the issuer agrees to make payments when due on the lease obligation. Although the issuer does not pledge its unlimited taxing power for payment of the lease obligation, the lease obligation is secured by the leased property. |
| • | Pre-Refunded Municipal Bonds Risk. In the event a Fund sells a pre-refunded municipal bond prior to its maturity, the price received may be less than the bond’s original cost, depending on market conditions at the time of sale. |
| • | Money Market Securities (Including Commercial Paper) |
| Prices of money market securities rise and fall in response to interest rate changes. Generally, when interest rates rise, prices of money market securities fall. Money market securities are also subject to reinvestment risk. As interest rates decline, a money market fund’s dividends (income) may decline because the fund must then invest in lower-yielding instruments. A Fund’s ability to redeem shares of a money market fund may be impacted by recent regulatory changes relating to money market funds which permit the potential imposition |
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| of liquidity fees and redemption gates under certain circumstances. There is also a risk that money market securities will be downgraded in credit rating or go into default. Lower-rated securities, and securities with longer final maturities, generally have higher credit risks. | |
| • | Asset-Backed Commercial Paper |
| Asset-backed commercial paper is a fixed income obligation generally issued by a corporate-sponsored special purpose entity to which the corporation has contributed cash-flowing receivables such as credit card receivables or auto and equipment leases. Investment in asset-backed commercial paper is subject to the risk that insufficient proceeds from the projected cash flows of the contributed receivables are available to repay the commercial paper. Asset-backed commercial paper is usually unregistered and, therefore, transfer of these securities is restricted by the Securities Act of 1933. | |
| • | Variable and Floating Rate Securities |
| A variable rate security is one whose terms provide for the automatic establishment of a new interest rate on set dates. A floating rate security is one whose terms provide for the automatic adjustment of an interest rate whenever the specified interest rate changes. The interest rate on floating rate securities is ordinarily tied to, and is a specified margin above or below, the prime rate of a specified bank or some similar objective standard, such as the yield on the 90–day U.S. Treasury Bill rate, and may change as often as daily. Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline. Inverse floating rate securities may decrease in value if the interest rates increase. Inverse floating rate securities, which are securities whose interest rate bears an inverse relationship to the interest rate on another security, may also exhibit greater price volatility than a fixed rate obligation with similar credit quality. | |
| • | Mortgage-Backed Securities |
| The value of mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the mortgages underlying the securities. The mortgages underlying the securities may default or decline in quality or value. Through its investments in MBS, a Fund has exposure to prime loans, subprime loans, Alt-A loans and/or non-conforming loans as well as to the mortgage and credit markets generally. Underlying collateral related to prime, subprime, Alt-A and non-conforming mortgage loans has become increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole. | |
| MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice, however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of a Fund's portfolio at the time resulting in reinvestment risk. | |
| Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk. | |
| MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities. | |
| Residential mortgages are subject to the risks of delinquencies, defaults and losses, which may increase substantially over certain periods and affect the performance of the MBS in which certain Funds may invest. Mortgage loans backing non-agency MBS are more sensitive to economic factors that could affect the ability of borrowers to pay their obligations under the mortgage loans backing these securities. | |
| As with other delayed-delivery transactions, a seller agrees to issue a to-be-announced MBS (a “TBA”) at a future date. At the time of purchase, the seller does not specify the particular MBS to be delivered. Instead, a |
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| Fund agrees to accept any MBS that meets specified terms agreed upon between the Fund and the seller. TBAs are subject to the risk that the underlying mortgages may be less favorable than anticipated by a Fund. | |
| Collateralized mortgage obligations (“CMOs”) are MBS that are collateralized by mortgage loans or mortgage pass-through securities. CMOs are issued in multiple classes, often referred to as “tranches,” with each tranche having specific risk characteristics, payment structures and maturity dates. This creates different prepayment and market risks for each CMO class. The primary risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages and from the structure of the particular CMO transaction (that is, the priority of the individual tranches). The principal and interest payments on the underlying mortgages may be allocated among the several tranches of a CMO in varying ways including “principal only,” “interest only” and “inverse interest only” tranches. These tranche structures affect the amount and timing of principal and interest received by each tranche from the underlying collateral. For example, an inverse interest-only class CMO entitles holders to receive no payments of principal and to receive interest at a rate that will vary inversely with a specified index or a multiple thereof. Under certain structures, particular classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the investment may be subject to a greater or lesser risk of prepayment than other types of MBS. | |
| Commercial mortgage-backed securities (“CMBS”) include securities that reflect an interest in, and are secured by, mortgage loans on commercial real property. Many of the risks of investing in CMBS reflect the risks of investing in the real estate securing the underlying mortgage loans, including the effects of local and other economic conditions on real estate markets, the ability of property owners to make loan payments, the ability of tenants to make lease payments, and the ability of a property to attract and retain tenants. Investments in CMBS are also subject to the risks of asset-backed securities generally and may be particularly sensitive to prepayment and extension risks. CMBS securities may be less liquid and exhibit greater price volatility than other types of asset-backed securities. | |
| Adverse changes in market conditions and regulatory climate may reduce the cash flow which a Fund, to the extent it invests in MBS or other asset-backed securities, receives from such securities and increase the incidence and severity of credit events and losses in respect of such securities. In the event that interest rate spreads for MBS and other asset-backed securities widen following the purchase of such assets by a Fund, the market value of such securities is likely to decline and, in the case of a substantial spread widening, could decline by a substantial amount. Furthermore, adverse changes in market conditions may result in reduced liquidity in the market for MBS and other asset-backed securities and an unwillingness by banks, financial institutions and investors to extend credit to servicers, originators and other participants in the market for MBS and other asset-backed securities. As a result, the liquidity and/or the market value of any MBS or asset-backed securities that are owned by a Fund may experience declines after they are purchased by a Fund. |
| • | Agency Mortgage-Backed Securities |
| Certain MBS may be issued or guaranteed by the U.S. government or a government-sponsored entity, such as Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Although these instruments may be guaranteed by the U.S. government or a government-sponsored entity, many such MBS are not backed by the full faith and credit of the United States and are still exposed to the risk of non-payment. Under the direction of the Federal Housing Finance Administration (“FHFA”), Fannie Mae and Freddie Mac have entered into a joint initiative to develop a common securitization platform for the issuance of a uniform mortgage-backed security (the “Single Security Initiative”) that aligns the characteristics of Fannie Mae and Freddie Mac certificates. The Single Security Initiative was implemented in June 2019, and the effects it may have on the market for mortgage-backed securities are uncertain. Since 2008, Fannie Mae and Freddie Mac have been operating under FHFA conservatorship and are dependent upon the continued support of the U.S. Department of the Treasury and FHFA in order to continue their business operations. The FHFA and Trump Administration have made public statements regarding plans to consider ending the conservatorships. In the event that Fannie Mae and Freddie Mac are taken out of conservatorship, it is unclear how their respective capital structures would be constructed and what impact, if any, there would be on Fannie Mae’s or Freddie Mac’s creditworthiness and guarantees of certain mortgage-backed securities. Should the conservatorships end, there could be an adverse impact on the value of Fannie Mae or Freddie Mac securities, which could cause losses to a Fund. |
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| • | Privately-Issued Mortgage-Backed Securities |
| MBS held by a Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or SPVs) and other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-governmental MBS may offer higher yields than those issued by government entities, but also may be subject to greater price changes and other risks than governmental issues. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or non-conforming loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a level of risk exists for all loans. | |
| Unlike MBS issued or guaranteed by the U.S. government or a government-sponsored entity, MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans. | |
| Privately-issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in a Fund's portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans. | |
| • | Reverse Mortgages |
| Certain Funds may invest in mortgage-related securities that reflect an interest in reverse mortgages. Due to the unique nature of the underlying loans, reverse mortgage-related securities may be subject to risks different than other types of mortgage-related securities. The date of repayment for such loans is uncertain and may occur sooner or later than anticipated. The timing of payments for the corresponding mortgage-related security may be uncertain. |
| • | Asset-Backed Securities |
| Asset-backed securities may include MBS, loans (such as auto loans or home equity lines of credit), receivables or other assets. The value of a Fund's asset-backed securities may be affected by, among other things, actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the market’s assessment of the quality of underlying assets or actual |
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| or perceived changes in the creditworthiness of the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support. | |
| Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities. Rising or high interest rates tend to extend the duration of asset-backed securities, making them more volatile and more sensitive to changes in interest rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may lower its return. Defaults on loans underlying asset-backed securities have become an increasing risk for asset-backed securities that are secured by home-equity loans related to subprime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market. | |
| Asset-backed securities (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. A Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of asset-backed securities may be affected by legislative or regulatory developments. It is possible that such developments may require a Fund to dispose of any then existing holdings of such securities. Collateralized loan obligations (“CLOs”) carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments and one or more tranches may be subject to up to 100% loss of invested capital; (ii) the quality of the collateral may decline in value or default; (iii) a Fund may invest in CLOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. | |
| • | Credit and Liquidity Enhancements |
| Third parties may issue credit and/or liquidity enhancements, including letters of credit, for certain fixed income or money market securities held by a Fund. Liquidity enhancements may be used to shorten the maturity of the debt obligation through a demand feature. Adverse changes in the credit quality of the entity issuing the enhancement, if contemporaneous with adverse changes in the enhanced security, could cause losses to a Fund and may affect its net asset value. The use of credit and liquidity enhancements exposes a Fund to counterparty risk, which is the risk that the entity issuing the credit and/or liquidity enhancement may not be able to honor its financial commitments. | |
| • | Repurchase Agreements |
| Repurchase agreements may be considered a form of borrowing for some purposes and their use involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, a Fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under bankruptcy or other laws, a court may determine that the underlying securities that are collateral for a loan by a Fund are not within its control and therefore the realization by a Fund on such collateral may be automatically stayed. Finally, it is possible that a Fund may not be able to |
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| substantiate its interest in the underlying securities and may be deemed an unsecured creditor of the other party to the agreement. | |
| • | Reverse Repurchase Agreements |
| A reverse repurchase agreement is a transaction whereby a Fund transfers possession of a portfolio security to a bank or broker-dealer in return for a percentage of the portfolio security’s market value. The Fund retains record ownership of the security involved including the right to receive interest and principal payments. At an agreed upon future date, the Fund repurchases the security by paying an agreed upon purchase price plus interest. Liquid assets of the Fund, equal in value to the repurchase price, including any accrued interest, will be segregated on the Fund’s records while a reverse repurchase agreement is in effect. Reverse repurchase agreements are generally subject to a number of risks such as leverage risk, liquidity risk, operational risk and legal risk (i.e., the risk of insufficient documentation, insufficient capacity or authority of the counterparty, or legality or enforceability of a contract). Reverse repurchase agreements are also subject to the risk that the other party may fail to return the security in a timely manner or at all. The Fund may lose money if the market value of the security transferred by the Fund declines below the repurchase price. Reverse repurchase agreements may be considered a form of borrowing for some purposes. | |
| • | Puts, Stand-by Commitments and Demand Notes |
| Demand notes are obligations with the right to a “put.” Variable rate demand notes are floating rate instruments with terms of as much as 40 years which pay interest monthly or quarterly based on a floating rate that is reset daily or weekly based on an index of short term municipal rates. A stand-by commitment gives the holder the right to sell the underlying security to the seller at an agreed-upon price or yield on certain dates or within a specified period prior to maturity. The ability of a Fund to exercise a put or stand-by commitment may depend on the seller’s ability to purchase the securities at the time the put or stand-by commitment is exercised or on certain restrictions in the buy back arrangement. Such restrictions may prohibit a Fund from exercising the put or stand-by commitment except to maintain portfolio flexibility and liquidity. In the event the seller is unable to honor a put or stand-by commitment for financial reasons, a Fund may be a general creditor of the seller. There may be certain restrictions in the buy back arrangement which may not obligate the seller to repurchase the securities. If there is a shortfall in the anticipated proceeds from demand notes, including variable rate demand notes, the notes may not be fully repaid and a Fund may lose money. | |
| • | Tender Option Bonds |
| Typically, a tender option bond transaction begins when a third-party sponsor deposits fixed-rate tax-exempt or other bonds in a trust (“TOB Trust”) created by the sponsor. The TOB Trust issues two types of securities: short-term floating rate securities that represent a senior interest in the underlying bonds (“Floaters”) and residual securities junior to the Floaters (“Inverse Floaters”). Inverse Floaters have increased sensitivity to changes in interest rates and to the market value of the underlying bonds. As a result, changes in the value of the Inverse Floaters are more significant than changes in the market value of the related underlying bonds. The return on Inverse Floaters is inversely related to changes in short-term interest rates. Therefore, Inverse Floaters are also subject to the risk that, if short-term interest rates rise after the issuance of the Inverse Floater, the Inverse Floater will produce less current income and, in certain extreme cases, may pay no income. Further, tender option bonds typically provide for the automatic termination of a TOB Trust if certain adverse events occur, such as a credit ratings downgrade of the underlying bonds below a specified level or a decrease in the market value of the underlying bonds below a specified amount. In such an event, the underlying bonds are generally sold for current market value and the proceeds distributed to holders of the Floaters and Inverse Floaters. However, the holder of the Inverse Floaters will generally receive proceeds of the sale only after the holders of the Floaters have received proceeds equal to the purchase price of their securities. This could result in a loss of a substantial portion, and potentially all, of an investment in the Inverse Floaters. Inverse Floaters are generally also subject to a number of other risks such as leverage risk, liquidity risk, counterparty risk, operational risk and legal risk. | |
| • | Dollar Rolls |
| A Fund may enter into dollar rolls subject to its limitations on borrowings. A dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. A Fund will segregate or “earmark” liquid assets to cover |
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| its obligations under dollar rolls. Dollar rolls are generally subject to a number of risks such as leverage risk, liquidity risk, market risk, counterparty risk, operational risk and legal risk. | |
| • | Loans and Other Direct Indebtedness |
| Loans and other direct indebtedness involve the risk that a Fund will not receive payment of principal, interest and other amounts due in connection with these investments, which depend primarily on the financial condition of the borrower. Default or an increased risk of default in the payment of interest or principal on a loan results in a reduction in income to a Fund, a reduction in the value of the loan and a potential decrease in a Fund's net asset value. The risk of default increases in the event of an economic downturn or a substantial increase in interest rates. If a borrower defaults on its obligations, a Fund may end up owning any underlying collateral securing the loan and there is no assurance that sale of the collateral would raise enough cash to satisfy the borrower’s payment obligation or that the collateral can be liquidated. If the terms of a loan do not require the borrower to pledge additional collateral in the event of a decline in the value of the original collateral, a Fund will be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the borrower’s obligations under the loan. To the extent that a loan is collateralized by stock in the borrower or its subsidiaries, such stock may lose all of its value in the event of bankruptcy of the borrower. Senior loans are subject to the risk that a court may not give lenders the full benefit of their senior positions. In addition, there is less readily available, reliable information about most senior loans than is the case for many other types of securities. With limited exceptions, a Fund will generally take steps intended to ensure that it does not receive material non-public information about the issuers of senior or floating rate loans who also issue publicly-traded securities and, therefore, a Fund may have less information than other investors about certain of the senior or floating rate loans in which the Fund seeks to invest. A Fund’s intentional or unintentional receipt of material non-public information about such issuers could limit the Fund’s ability to sell certain investments held by the Fund or pursue certain investment opportunities, potentially for a substantial period of time. Loans and other forms of direct indebtedness are not registered under the federal securities laws and, therefore, do not offer securities law protections against fraud and misrepresentation. Each Fund relies on RIM’s and/or the money manager(s)' research in an attempt to avoid situations where fraud or misrepresentation could adversely affect a Fund. Certain of the loans and the other direct indebtedness acquired by a Fund may involve revolving credit facilities or other standby financing commitments which obligate a Fund to pay additional cash on a certain date or on demand. The market for loan obligations may be subject to extended trade settlement periods (which may exceed seven (7) days). Because transactions in many loans are subject to extended trade settlement periods, a Fund may not receive the proceeds from the sale of a loan for a period after the sale. As a result, sale proceeds related to the sale of loans may not be available to make additional investments or to meet a Fund's redemption obligations for a period after the sale of the loans, and, as a result, a Fund may have to sell other investments or take other actions if necessary to raise cash to meet its obligations. | |
| The highly leveraged nature of many such loans, including floating rate “bank loans” or “leveraged loans,” and other direct indebtedness may make such loans and other direct indebtedness especially vulnerable to adverse changes in economic or market conditions and/or changes in the financial condition of the debtor. Bank loans have recently experienced significant investment inflows and if inflows reverse, bank loans could be subject to liquidity risk and lose value. Bank loans generally are subject to legal or contractual restrictions on resale and to illiquidity risk, including potential illiquidity resulting from extended trade settlement periods. In addition, investments in bank loans are typically subject to the risks of floating rate securities and “high yield” or “junk bonds.” Investments in such loans and other direct indebtedness may involve additional risk to a Fund. Senior loans made in connection with highly leveraged transactions are subject to greater risks than other senior loans. For example, the risks of default or bankruptcy of the borrower or the risks that other creditors of the borrower may seek to nullify or subordinate a Fund's claims on any collateral securing the loan are greater in highly leveraged transactions. | |
| In addition, covenants contained in loan documentation are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower’s operations or assets and by providing certain information and consent rights to lenders. In addition to operational covenants, loans and other debt obligations often contain financial covenants which require a borrower to satisfy certain financial tests at periodic intervals or to maintain compliance with certain financial metrics. The Funds are exposed to loans and other similar debt obligations that are sometimes referred to as “covenant-lite” loans or obligations, which |
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| are generally subject to more risk than investments that contain traditional financial maintenance covenants and financial reporting requirements. | |
| A Fund’s investment in “leveraged loans” may include an investment in “covenant lite” loans. Covenant lite loans, the terms and conditions of which may vary by instrument, may contain fewer or less restrictive financial maintenance covenants or restrictions compared to other loans that might otherwise enable an investor to proactively enforce financial covenants or prevent undesired actions by the borrower. As a result, the Fund may experience relatively greater difficulty or delays in enforcing its rights on its holdings of covenant lite loans than its holdings of loans or debt securities with more restrictive covenants, which may result in losses to the Fund. | |
| As a Fund may be required to rely upon an interposed bank or other financial intermediary to collect and pass on to the Fund amounts payable with respect to the loan and to enforce the Fund’s rights under the loan and other direct indebtedness, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the Fund from receiving such amounts. In purchasing loans or loan participations, a Fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with the interposed bank or other financial intermediary. | |
| • | Credit Linked Notes, Credit Options and Similar Investments |
| Credit linked notes are obligations between two or more parties where the payment of principal and/or interest is based on the performance of some obligation, basket of obligations, index or economic indicator (a “reference instrument”). In addition to the credit risk associated with the reference instrument and interest rate risk, the buyer and seller of a credit linked note or similar structured investment are subject to counterparty risk. Credit options are options whereby the purchaser has the right, but not the obligation, to enter into a transaction involving either an asset with inherent credit risk or a credit derivative, at terms specified at the initiation of the option. These transactions involve counterparty risk. |
Non-U.S.
Securities
A
Fund’s return and net asset value may be significantly affected by political or
economic conditions and regulatory requirements in a particular country.
Non-U.S. markets, economies and political systems may be less stable than U.S.
markets, and changes in exchange rates of foreign currencies can affect the
value of a Fund's foreign assets. Non-U.S. laws and accounting standards in some
cases may not be as comprehensive as they are in the U.S. and there may be less
public information available about foreign companies. Non-U.S. securities
markets may be less liquid and have fewer transactions than U.S. securities
markets and taxes and transaction costs may be higher. Additionally,
international markets may experience delays and disruptions in securities
settlement procedures for a Fund's portfolio securities. Investments in foreign
countries could be affected by potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods or restrictions
affecting the prompt return of capital to the U.S.
| • | Non-U.S. Equity Securities |
| Non-U.S. equity securities are subject to all of the risks of equity securities generally, but can involve additional risks relating to political, economic or regulatory conditions in foreign countries. Less information may be available about foreign companies than about domestic companies, and foreign companies generally may not be subject to the same uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic companies. | |
| • | Non-U.S. Fixed Income Securities |
| A Fund’s non-U.S. fixed income securities are typically obligations of sovereign governments and corporations. They may also be issued by non-U.S. government agencies or instrumentalities. No assurance can be given that a non-U.S. government will provide financial support to government agencies or instrumentalities and therefore bonds issued by non-U.S. government agencies or instrumentalities may involve risk of loss of principal and interest. As with any fixed income securities, non-U.S. fixed income securities are subject to the risk of being downgraded in credit rating and to the risk of default. To the extent that a Fund invests a significant portion of its assets in a concentrated geographic area like Eastern Europe or Asia, the Fund will generally have more exposure to regional economic risks associated with these foreign investments. |
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| • | Emerging Markets Securities |
| Investing in emerging markets securities can pose some risks different from, and greater than, risks of investing in U.S. or developed markets securities. These risks include: a risk of loss due to political instability; exposure to economic structures that are generally less diverse and mature, and to political systems which may have less stability, than those of more developed countries; smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible difficulties in the repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Funds. Emerging market securities may be subject to currency transfer restrictions and may experience delays and disruptions in securities settlement procedures for a Fund's portfolio securities. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Emerging market countries typically have less established legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers. Emerging market countries may also be more likely to experience the imposition of economic sanctions by foreign governments. For more information about sanctions, see the Global Financial Markets Risk in this Prospectus. |
| • | Investments in Frontier Markets |
| Investments in frontier markets are generally subject to all of the risks of investments in non-U.S. and emerging markets securities, but to a heightened degree. Because frontier markets are among the smallest, least developed, least liquid, and most volatile of the emerging markets, investments in frontier markets are generally subject to a greater risk of loss than investments in developed or traditional emerging markets. Many frontier market countries operate with relatively new and unsettled securities laws and are heavily dependent on commodities, foreign trade and/or foreign aid. Compared to developed and traditional emerging market countries, frontier market countries typically have less political and economic stability, face greater risk of a market shutdown, and impose greater governmental restrictions on foreign investments. | |
| • | Emerging Markets Debt |
| A Fund’s emerging markets debt securities may include obligations of governments and corporations. As with any fixed income securities, emerging markets debt securities are subject to the risk of being downgraded in credit rating and to the risk of default. In the event of a default on any investments in foreign debt obligations, it may be more difficult for a Fund to obtain or to enforce a judgment against the issuers of such securities. With respect to debt issued by emerging market governments, such issuers may be unwilling to pay interest and repay principal when due, either due to an inability to pay or submission to political pressure not to pay, and as a result may default, declare temporary suspensions of interest payments or require that the conditions for payment be renegotiated. |
| • | Brady Bonds |
| Brady Bonds involve various risk factors including residual risk (i.e., the risk of losing the uncollateralized interest and principal amounts on the bonds) and the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds will not be subject to restructuring arrangements or to requests for new credit, which may cause a loss of interest or principal on any of the holdings. | |
| • | Yankee Bonds and Yankee CDs |
| Non-U.S. corporations and banks issuing dollar denominated instruments in the U.S. (Yankee Bonds or Yankee CDs) are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks, such as accounting, auditing and recordkeeping standards, the public availability of information and, for banks, reserve requirements, loan limitations and examinations. This complicates efforts to analyze |
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| these securities, and may increase the possibility that a non-U.S. corporation or bank may become insolvent or otherwise unable to fulfill its obligations on these instruments. | |
| • | Currency Risk |
| Foreign (non-U.S.) securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time due to market events, actions of governments or their central banks or political developments in the U.S. or abroad. As a result, investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of a Fund. Securities held by a Fund which are denominated in U.S. dollars are still subject to currency risk. | |
| • | Synthetic Foreign Equity/Fixed Income Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants) |
| Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, currency risk and the risks associated with investments in non-U.S. securities. In the case of any exercise of these instruments, there may be a time delay between the time a holder gives instructions to exercise and the time the price of the security or the settlement date is determined, during which time the price of the underlying security could change significantly. In addition, the exercise and/or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time. | |
| • | Equity Linked Notes |
| An equity linked note is a note, typically issued by a company or financial institution, whose performance is tied to a single stock or a basket of stocks. Generally, upon the maturity of the note, the holder receives a return of principal based on the capital appreciation of the underlying linked securities. The terms of an equity linked note may also provide for the periodic interest payments to holders at either a fixed or floating rate. Equity linked notes are generally subject to the risks associated with the debt securities of foreign issuers and with securities denominated in foreign currencies and, because they are equity linked, may return a lower amount at maturity because of a decline in value of the linked security or securities. Equity linked notes are also subject to default risk and counterparty risk. |
Derivatives
(Futures Contracts, Options, Forwards and Swaps)
Derivatives
are financial contracts whose value depends on, or is derived from, the value of
an underlying instrument. Various derivative instruments are described in more
detail under “Other Financial Instruments Including Derivatives” in the
Statement of Additional Information. Derivatives may be used as a substitute for
taking a position in the underlying instrument and/or as part of a strategy
designed to reduce exposure to other risks, such as currency risk. Derivatives
may also be used for leverage, to facilitate the implementation of an investment
strategy or to take a net short position with respect to certain issuers,
sectors or markets. A Fund may also use derivatives to pursue a strategy to
be fully invested or to seek to manage portfolio risk.
Investments
in a derivative instrument could lose more than the initial amount invested, and
certain derivatives have the potential for unlimited loss. Compared to
conventional securities, derivatives can be more sensitive to changes in
interest rates or to sudden fluctuations in market prices, and thus a Fund's
losses may be greater if it invests in derivatives than if it invests only in
conventional securities. Certain Funds' use of derivatives may cause the Fund’s
investment returns to be impacted by the performance of securities the Fund does
not own and result in the Fund’s total investment exposure exceeding the value
of its portfolio. Investments in derivatives can cause a Fund's performance to
be more volatile. Leverage tends to exaggerate the effect of any increase or
decrease in the value of a security, which exposes a Fund to a heightened risk
of loss.
The
use of derivative instruments involves risks different from, or possibly greater
than, the risks associated with investing directly in conventional securities,
physical commodities or other investments. Derivatives are generally subject to
a number of risks such as leverage risk, liquidity risk, market risk, credit
risk, default risk, counterparty risk, management risk, operational risk and
legal risk. Certain of these risks do not apply to derivative instruments
entered into
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for
hedging or cash equitization, certain cleared derivative instruments, and
written options contracts. Derivatives also involve the risk of mispricing or
improper valuation and the risk that changes in the value of the derivative may
not correlate exactly with the change in the value of the underlying asset, rate
or index.
Participation
in the options or futures markets, as well as the use of various swap
instruments and forward contracts, involves investment risks and transaction
costs to which a Fund would not be subject absent the use of these strategies.
If a Fund's predictions of the direction of movements of the prices of the
underlying instruments are inaccurate, the adverse consequences to a Fund may
leave the Fund in a worse position than if such strategies were not used. Risks
inherent in the use of options, futures contracts, options on futures contracts,
forwards and swaps include: (i) dependence on the ability to predict
correctly the direction of movements of the prices of the underlying
instruments; (ii) imperfect correlation between the price of the derivative
instrument and the underlying instrument and the risk of mispricing or improper
valuation; (iii) the fact that skills needed to use these strategies are
different from those needed for traditional portfolio management; (iv) the
absence of a liquid secondary market for any particular instrument at any time,
which risk is heightened for highly customized derivatives, including swaps;
(v) the possible need to defer closing out certain hedged positions to
avoid adverse tax consequences; (vi) for over-the-counter (“OTC”)
derivative products and structured notes, additional credit risk, the risk of
counterparty default and the risk of failing to correctly evaluate the
creditworthiness of the company on which the derivative is based; (vii) the
possible inability of a Fund to purchase or sell a portfolio holding at a time
that otherwise would be favorable for it to do so, or the possible need to sell
the holding at a disadvantageous time, due to the requirement that the Fund
maintain such holdings as “cover” or collateral securities in connection with
use of certain derivatives; and (viii) for options, the change in volatility of
the underlying instrument due to general market and economic conditions or other
factors, which may negatively affect the value of such option.
There
is no assurance that a liquid secondary market will exist for certain
derivatives in which a Fund may invest. Participation in the option or futures
markets, as well as the use of various forward contracts, involves investment
risks and transaction costs to which a Fund would not be subject absent the use
of these strategies. In many cases, a relatively small price movement in a
futures or option contract may result in immediate and substantial loss or gain
to the holder relative to the size of a required margin deposit or premium
received. There is also the risk of loss by a Fund of margin deposits in the
event of bankruptcy of a broker with whom the Fund has an open position in an
option, forward, swap or futures contract.
Although
a Fund will not borrow money in order to increase its trading activities,
leveraged swap transactions may experience substantial gains or losses in value
as a result of relatively small changes in the value or level of an underlying
or related market factor. A swap transaction may be modified or terminated only
by mutual consent of the original parties, subject to agreement on individually
negotiated terms. Therefore, it may not be possible for a Fund to modify,
terminate or offset the Fund’s obligations or the Fund's exposure to the risks
associated with a transaction prior to its scheduled termination date.
Credit
default swap contracts may involve greater risks than if a Fund invested in the
reference obligation (the underlying debt upon which a credit derivative is
based) directly since, in addition to the risks relating to the reference
obligation, credit default swaps are subject to the risks inherent in the use of
swaps, including illiquidity risk and counterparty risk. The Funds may act as
either the buyer or the seller of a credit default swap. A Fund will generally
incur a greater degree of risk when selling a credit default swap than when
purchasing a credit default swap. As a buyer of a credit default swap, a Fund
may lose its investment and recover nothing should a credit event fail to occur
and the swap is held to its termination date. As seller of a credit default
swap, if a credit event were to occur, the value of any deliverable obligation
received by a Fund, coupled with the upfront or periodic payments previously
received, may be less than what the Fund pays to the buyer, resulting in a loss
of value to the Fund. Certain standardized swaps, including certain credit
default swaps, are subject to mandatory clearing, and more are expected to be
subject to mandatory clearing in the future. In addition, there may be disputes
between the buyer and seller of a credit default swap agreement, or within the
swaps market as a whole, as to whether a credit event has occurred or what the
payment should be. Such disputes could result in litigation or other delays, and
the outcome could be adverse for the buyer or seller. The counterparty risk for
cleared derivatives is generally lower than for uncleared derivatives, but
cleared contracts are not risk-free. Clearing may subject a Fund to increased
costs and/or margin requirements. Credit default swaps may include index credit
default swaps, which are contracts on baskets or indices of credit instruments,
which may include tranches of commercial mortgage-backed securities
(“CMBX”).
Certain
derivatives, including swaps, may be subject to fees and expenses, and by
investing in such derivatives indirectly through a Fund, a shareholder will bear
the expenses of such derivatives in addition to expenses of the
Fund.
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If
a put or call option purchased by a Fund is not sold when it has remaining
value, and if, on the option expiration date, the market price of the underlying
security or index, in the case of a purchased put, remains equal to or greater
than the exercise price or, in the case of a purchased call, remains less than
or equal to the exercise price, the Fund will lose its entire investment (i.e.,
the premium paid) on the option. When a Fund sells (i.e., writes) an option on a
security or index, movements in the price of the underlying security or value of
the index may result in a loss to the Fund, which may be unlimited for uncovered
call positions.
Furthermore,
current regulatory requirements to set aside liquid assets to meet obligations
with respect to derivatives may result in a Fund being unable to purchase or
sell securities or instruments when it would otherwise be favorable to do so, or
in a Fund needing to sell holdings at a disadvantageous time. A Fund may also be
unable to close out its positions when desired.
Because
the markets for certain derivative instruments (including markets located in
foreign countries) are relatively new and still developing, appropriate
derivatives transactions may not be available in all circumstances for risk
management or other purposes. Upon the expiration of a particular contract, RIM
or the money manager may wish to retain a Fund's position in the derivative
instrument by entering into a similar contract, but may be unable to do so if
the counterparty to the original contract is unable or unwilling to enter into
the new contract and no other appropriate counterparty can be found. There is no
assurance that a Fund will engage in derivatives transactions at any time or
from time to time. The ability to use derivatives may also be limited by certain
regulatory and tax considerations.
The
Commodity Futures Trading Commission (the “CFTC”) and the various exchanges have
established limits referred to as “speculative position limits” on the maximum
net long or net short positions that any person may hold or control in a
particular futures contract. Trading limits are imposed on the number of
contracts that any person may trade on a particular trading day. An exchange or
the CFTC may order the liquidation of positions found to be in violation of
these limits and may impose sanctions or restrictions. In addition, the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)
required the CFTC to establish speculative position limits on listed futures and
options on physical commodities (including certain energy, metals and
agricultural products) and economically equivalent OTC derivatives. The
Dodd-Frank Act also required the CFTC to establish position limits for swap
transactions that are economically equivalent to futures or options contracts on
physical commodities. The CFTC in October 2020 adopted amendments establishing
such limits for 25 physical commodity derivatives contracts, which will be
effective in 2022 and 2023. Such action taken by the CFTC to establish these
additional position limits may adversely affect the market liquidity of the
futures, options and economically equivalent derivatives in which the Funds may
invest. It is possible that positions held by a Fund may have to be liquidated
in order to avoid exceeding such limits. Such modification or liquidation, if
required, could adversely affect the operations and performance of a Fund.
In
October 2020, the SEC adopted a final rule related to the use of derivatives,
reverse repurchase agreements and certain other transactions by registered
investment companies that will rescind and withdraw the guidance of the SEC and
its staff regarding asset segregation and cover transactions. The final rule
requires funds to trade derivatives and other transactions that create future
payment or delivery obligations (except reverse repurchase agreements and
similar financing transactions) subject to a value-at-risk leverage limit and
certain derivatives risk management program and reporting requirements.
Compliance with these new requirements will be required in August 2022.
Following the compliance date, these requirements may limit the ability of a
Fund to use derivatives and reverse repurchase agreements and similar financing
transactions as part of its investment strategies.
Currency
Trading Risk
Certain
Funds may engage in foreign currency transactions to hedge against uncertainty
in the level of future exchange rates and/or to effect investment transactions
to generate returns consistent with a Fund's investment objectives and
strategies (i.e., speculative currency trading strategies). Foreign currency
exchange transactions will be conducted on either a spot (i.e., cash) basis at
the rate prevailing in the currency exchange market, or through entering into
forward currency exchange contracts to purchase or sell currency at a future
date. Certain Funds may also enter into options on foreign currencies. Currency
spot, forward and option prices are highly volatile, and may be illiquid. Such
prices are influenced by, among other things: (i) changing supply and demand
relationships; (ii) government trade, fiscal, monetary and exchange control
programs and policies; (iii) national and international political and economic
events; and (iv) changes in interest rates. From time to time, governments
intervene directly in these markets with the specific intention of influencing
such prices. Currency trading may also involve economic leverage (i.e., the Fund
may have the right to a return on its investment that exceeds the return that
the Fund would expect to receive based on the amount contributed to the
investment), which can increase the gain or the loss associated with changes in
the value of the underlying instrument.
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Forward
currency contracts are subject to the risk that should forward prices increase,
a loss will be incurred to the extent that the price of the currency agreed to
be purchased exceeds the price of the currency agreed to be sold. Due to the tax
treatment of gains and losses on certain currency forward and options contracts,
the use of such instruments may cause fluctuations in a Fund's income
distributions, including the inability of a Fund to distribute investment income
for any given period. As a result, a Fund's use of currency trading
strategies may adversely impact a Fund's ability to meet its investment
objective of providing current income. Many foreign currency forward contracts
will eventually be exchange-traded and cleared. Although these changes are
expected to decrease the credit risk associated with bi-laterally negotiated
contracts, exchange-trading and clearing would not make the contracts
risk-free.
Counterparty
Risk
Counterparty
risk is the risk that the other party(s) in an agreement or a participant to a
transaction, such as a broker or swap counterparty, might default on a contract
or fail to perform by failing to pay amounts due or failing to fulfill the
delivery conditions of the contract or transaction and the related risk of
having concentrated exposure to a counterparty. Counterparty risk is inherent in
many transactions, including, but not limited to, transactions involving
over-the-counter derivatives, repurchase agreements, securities lending, short
sales, credit and liquidity enhancements and equity or commodity-linked
notes.
Short
Sales
The
Sustainable Equity and U.S. Small Cap Equity Funds may enter into short sale
transactions. In a short sale, the seller sells a security that it does not own,
typically a security borrowed from a broker or dealer. Because the seller
remains liable to return the underlying security that it borrowed from the
broker or dealer, the seller must purchase the security prior to the date on
which delivery to the broker or dealer is required. A Fund will incur a loss as
a result of the short sale if the price of the security increases between the
date of the short sale and the date on which the Fund must return the borrowed
security. A Fund will realize a gain if the security declines in price between
those dates. Short sales expose a Fund to the risk of liability for the fair
value of the security that is sold (the amount of which increases as the fair
value of the underlying security increases), in addition to the costs associated
with establishing, maintaining and closing out the short position. Short sales
and short sales “against the box” are generally subject to a number of risks
such as leverage risk, liquidity risk, market risk, counterparty risk,
operational risk and legal risk.
Although
a Fund’s potential for gain as a result of a short sale is limited to the price
at which it sold the security short less the cost of borrowing the security, its
potential for loss is theoretically unlimited because there is no limit to the
cost of replacing the borrowed security. When a Fund makes a short sale, the
Fund may use all or a portion of the cash proceeds of short sales to purchase
other securities or for any other permissible Fund purpose. Each of the
Sustainable Equity Fund and U.S. Small Cap Equity Fund currently engage in short
sale transactions that are effected through State Street but reserve the right
to engage in short sale transactions through one or more other counterparties.
For short sale transactions effected through State Street, the Funds typically
expect to collateralize short sale transactions through the Funds’ respective
reciprocal lending activity with State Street (i.e., short sale transactions are
collateralized by securities loaned to State Street for purposes of securities
lending activities). The Funds may also deliver cash to State Street for
purposes of collateralizing their short sales transactions or “memo pledge”
securities as collateral, whereby assets are designated as collateral by State
Street on State Street's books but remain in a Fund’s custody
account. Similar to the risks generally applicable to securities lending
arrangements, participation in the reciprocal lending program subjects these
Funds to the risk that State Street could fail to return a security lent to it
by a Fund, or fail to return the Fund’s cash collateral, a risk which would
increase with any decline in State Street’s credit profile. However, the impact
of State Street’s failure to return a security lent to it by a Fund, or failure
to return a Fund’s cash collateral, would be mitigated by the Fund’s right
under such circumstances to decline to return the securities the Fund initially
borrowed from State Street with respect to its short sale
transactions. This risk may be heightened during periods of market stress
and volatility, particularly if the type of collateral provided is different
than the type of security borrowed (e.g., cash is provided as collateral for a
loan of an equity security). For a further discussion of the risks associated
with securities lending, see “Securities Lending” risk description below. To the
extent necessary to meet collateral requirements associated with a short sale
transaction involving a counterparty other than State Street, the Funds are
required to pledge assets in a segregated account maintained by the Funds'
custodian for the benefit of the broker. The Funds may also use securities they
own to meet any such collateral obligations. Until the Funds replace a borrowed
security in connection with a short sale, the Funds will: (a) maintain
daily a segregated account, containing liquid assets at such a level that the
amount deposited in the segregated account will equal the current requirement
under Regulation T promulgated by the Board of Governors of the Federal Reserve
System under the authority of Sections 7 and 8 of the Securities Exchange Act of
1934,
264
as
amended; or (b) otherwise cover their short positions in accordance with
positions taken by the staff of the Securities and Exchange Commission (e.g.,
taking an offsetting long position in the security sold short). These
requirements may result in the Funds being unable to purchase or sell securities
or instruments when it would otherwise be favorable to do so, or in the Funds
needing to sell holdings at a disadvantageous time to satisfy their obligations
or to meet segregation requirements.
If
the Fund’s prime broker fails to make or take delivery of a security as part of
a short sale transaction, or fails to make a cash settlement payment, the
settlement of the transaction may be delayed and the Fund may lose money.
Commodity
Risk
Exposure
to the commodities markets may subject certain Funds to greater volatility than
investments in traditional securities, particularly if the investments involve
leverage. The value of commodity-linked derivative instruments may be affected
by changes in overall market movements, commodity index volatility, changes in
interest rates or factors affecting a particular industry or commodity (such as
drought, floods, weather, livestock disease, public health emergencies,
embargoes or tariffs) and international economic, political and regulatory
developments. An unexpected surplus of a commodity caused by one of the
aforementioned factors, for example, may cause a significant decrease in the
value of the commodity (and a decrease in the value of any investments directly
correlated to the commodity). Conversely, an unexpected shortage of a commodity
caused by one of the aforementioned factors may cause a significant increase in
the value of the commodity (and a decrease in the value of any investments
inversely correlated to that commodity). The commodity markets are subject to
temporary distortions and other disruptions due to, among other factors, lack of
liquidity, the participation of speculators, international economic, political
and regulatory developments and other actions. Use of leveraged commodity-linked
derivatives creates an opportunity for increased return but, at the same time,
creates the possibility for greater loss (including the likelihood of greater
volatility of the Funds' net asset value), and there can be no assurance that
the Funds' use of leverage will be successful. Different sectors of commodities,
including precious metals, base metals, energy and agricultural commodities, may
have very different risk characteristics and different levels of volatility.
Even within a given sector of a commodity (e.g., energy commodities), there can
be significant differences in volatility and correlation between different
commodity contracts (e.g., crude oil vs. natural gas), and similarly there can
be significant differences in volatility and correlation between contracts
expiring at different dates. In addition, the purchase of derivative instruments
linked to one type of commodity and the sale of another (i.e., “basis spreads”
or “product spreads”), or the purchase of contracts expiring at one date and the
sale of contracts expiring at another (i.e., “calendar spreads”) may expose the
Fund to additional risk, which could cause the Fund to underperform other funds
with similar investment objectives and investment strategies even in a rising
market.
| • | Tax Risk |
| The Real Assets Fund intends to gain exposure indirectly to commodities markets by investing in its Subsidiary, which may invest in commodity index-linked swaps and other commodity-linked derivative instruments and securities. In order for the Fund to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”), the Fund must derive at least 90 percent of its gross income each taxable year from certain qualifying sources of income. The Internal Revenue Service (“IRS”) has issued a revenue ruling which holds that income derived from commodity-linked swaps is not qualifying income under Subchapter M of the Code. However, the IRS has also issued private letter rulings to other taxpayers in which the IRS specifically concluded that income from certain commodity-linked notes is qualifying income and that income derived from a wholly-owned subsidiary will also constitute qualifying income, even if a subsidiary itself owns commodity-linked swaps and other commodity-linked derivative instruments. Although those private letter rulings can be relied on only by the taxpayers to whom they were issued, based on the reasoning in such rulings, the Fund intends to seek to gain exposure to the commodity markets primarily through investments in commodity-linked notes and through investments in its Subsidiary. The IRS subsequently issued a revenue procedure, which states that the IRS will not in the future issue private letter rulings that would require a determination of whether an asset (such as a commodity index-linked note) is a “security” under the 1940 Act. In connection with the issuance of this revenue procedure, the IRS revoked its previously issued commodity index-linked notes private letter rulings. The IRS also issued proposed regulations that, if finalized, would generally have treated the Fund’s income inclusion with respect to a subsidiary as qualifying income only if there was a distribution out of the earnings and profits of a subsidiary that was attributable to such income inclusion. Final regulations, applicable to taxable years beginning on or after September 28, 2016, also treat the Fund’s income inclusions with respect to a |
265
| subsidiary as qualifying income, without requiring a corresponding distribution, if such inclusions are derived with respect to the Fund’s business of investing in stock, securities or currencies. There can be no assurance that the IRS will not change its position that income derived from commodity-linked notes and wholly-owned subsidiaries is qualifying income. The ability of the Fund to qualify for favorable regulated investment company status under the Code could be jeopardized if the Fund were unable to treat its respective income from commodity-linked notes and its Subsidiary as qualifying income. Furthermore, the tax treatment of commodity-linked notes, other commodity-linked derivatives and the Fund’s investments in its Subsidiary may otherwise be adversely affected by future legislation, Treasury Regulations and/or guidance issued by the IRS that could affect the character, timing and/or amount of the Fund’s taxable income or any gains and distributions made by the Fund. | |
| • | Subsidiary Risk |
| By investing in its Subsidiary, the Real Assets Fund is indirectly exposed to the risks associated with its Subsidiary's investments, although the investment program followed by the Fund and its Subsidiary are not identical. The derivatives and other investments that are held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund. There can be no assurance that the investment objective of the Subsidiary will be achieved. The Subsidiary is not registered under the 1940 Act, although the Subsidiary is maintained in accordance with the custody requirements of Section 17(f) of the 1940 Act. The Subsidiary is subject to the same fundamental, non-fundamental and certain other investment restrictions as the Fund; however, the Subsidiary is not subject to all the investor protection of the 1940 Act. Furthermore, changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in this Prospectus and the Statement of Additional Information and could adversely affect the Fund. |
Securities
of Other Investment Companies
If
a Fund invests in other investment companies, including exchange traded funds
(“ETFs”), shareholders will bear not only their proportionate share of the
Fund’s expenses (including operating expenses and the fees of the adviser), but
also, indirectly, the similar expenses of the underlying investment companies.
Shareholders would also be exposed to the risks associated not only to the
investments of a Fund but also to the portfolio investments of the underlying
investment companies. Unlike shares of typical mutual funds or unit investment
trusts, shares of ETFs are bought and sold based on market values throughout
each trading day, and not at net asset value. For this reason, shares can trade
at either a premium or discount to net asset value. If an ETF held by a Fund
trades at a discount to net asset value, the Fund could lose money even if the
securities in which the ETF invests go up in value.
Real
Estate Securities
Just
as real estate values go up and down, the value of the securities of real estate
companies in which a Fund invests also fluctuates. A Fund that invests in real
estate securities is also indirectly subject to the risks associated with direct
ownership of real estate. Additional risks include declines in the value of real
estate, changes in general and local economic and real estate market conditions,
changes in debt financing availability and terms, increases in property taxes or
other operating expenses, environmental damage and changes in tax laws and
interest rates. The value of securities of companies that service the real
estate industry may also be affected by such risks.
| • | Real Estate Investment Trusts (“REITs”) |
| REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. Moreover, the underlying portfolios of REITs may not be diversified, and therefore subject to the risk of investing in a limited number of properties. REITs are also dependent upon management skills and are subject to heavy cash flow dependency, defaults by tenants, self-liquidation and the possibility of failing to maintain their exemption from certain federal securities laws. The value of a REIT may also be affected by changes in interest rates. In general, during periods of high interest rates, REITs may lose some of their appeal for investors who may be able to obtain higher yields from other income-producing investments, such as long-term bonds. Rising interest rates generally increase the cost of financing for real estate projects, which could cause the value of an equity REIT to decline. During periods of declining interest rates, mortgagors may elect to prepay mortgages held by mortgage REITs, which could lower or diminish the yield |
266
| on the REIT. By investing in REITs indirectly through the Fund, a shareholder will bear expenses of the REITs in addition to expenses of the Fund. |
Infrastructure
Companies
Investments
in infrastructure companies have greater exposure to the potential adverse
economic, regulatory, political, environmental and other changes affecting such
entities. Infrastructure companies are subject to a variety of factors that may
adversely affect their business or operations including high interest costs in
connection with capital construction programs, costs associated with compliance
with and changes in environmental and other regulations, difficulty in raising
capital in adequate amounts on reasonable terms in periods of high inflation and
unsettled capital markets, the effects of surplus capacity, increased
competition from other providers of services in a developing deregulatory
environment, uncertainties concerning the availability of fuel at reasonable
prices, the effects of energy conservation policies, the effects of
environmental damage and other factors. Additionally, infrastructure-related
entities may be subject to regulation by various governmental authorities and
may also be affected by governmental regulation of rates charged to customers,
government budgetary constraints, service interruption due to environmental,
operational or other mishaps and the imposition of special tariffs and changes
in tax laws, regulatory policies and accounting standards.
Other
factors that may affect the operations of infrastructure companies include
innovations in technology that could render the way in which a company delivers
a product or service obsolete, significant changes to the number of ultimate
end-users of a company's products, increased susceptibility to terrorist acts or
political actions, risks of environmental damage due to a company's operations
or an accident, and general changes in market sentiment towards infrastructure
and utilities assets.
Master
Limited Partnerships (“MLPs”)
An
investment in MLP units involves some risks that differ from an investment in
the common stock of a corporation. Holders of MLP units have limited control on
matters affecting the partnership. Investing in MLPs involves certain risks
related to investing in the underlying assets of the MLPs and risks associated
with pooled investment vehicles. MLPs that concentrate in a particular industry
or a particular geographic region are subject to risks associated with such
industry or region. The benefit derived from a Fund's investment in MLPs is
largely dependent on the MLPs being treated as partnerships for Federal income
tax purposes.
Depositary
Receipts
Depositary
receipts are securities traded on a local stock exchange that represent
interests in securities issued by a foreign publicly-listed company. Depositary
receipts have the same currency and economic risks as the underlying shares they
represent. They are affected by the risks associated with the underlying
non-U.S. securities, such as changes in political or economic conditions of
other countries and changes in the exchange rates of foreign currencies. The
value of depositary receipts will rise and fall in response to the activities of
the company that issued the securities represented by the depositary receipts,
general market conditions and/or economic conditions. Also, if there is a rise
in demand for the underlying security and it becomes less available to the
market, the price of the depositary receipt may rise, causing a Fund to pay a
premium in order to obtain the desired depositary receipt. Conversely, changes
in foreign market conditions or access to the underlying securities could result
in a decline in the value of the depositary receipt. The Funds may invest in
both sponsored and unsponsored depositary receipts, which are purchased through
“sponsored” and “unsponsored” facilities, respectively. A sponsored facility is
established jointly by the issuer of the underlying security and a depositary,
whereas a depositary may establish an unsponsored facility without the
participation of the issuer of the underlying security. Unsponsored depositary
receipts may not provide as much information about the underlying issuer and may
not carry the same voting privileges as sponsored depositary receipts.
Illiquid
Investments
An
illiquid investment is one that is not reasonably expected to be sold or
disposed of in current market conditions in seven calendar days or less without
significantly changing the market value of the investment. A Fund may not be
able to sell an illiquid or less liquid investment quickly and at a fair price,
which could cause the Fund to realize losses on the investment if the investment
is sold at a price lower than that at which it had been valued. An illiquid
investment may also have large price volatility.
267
Liquidity
Risk
Liquidity
risk exists when particular investments are difficult to purchase or sell. The
market for certain investments may become illiquid or less liquid (i.e., there
may be a significant reduction in trading activity, including in the number of
market participants or transactions, in such investments) under adverse market
or economic conditions independent of any specific adverse changes in the
conditions of a particular issuer or a security’s underlying collateral. In such
cases, due to limitations on investments in illiquid investments and the
difficulty in purchasing and selling such investments or instruments, a Fund may
be unable to achieve its desired level of exposure to a certain sector. In
addition, to the extent a Fund trades in illiquid or less liquid markets, it may
be unable to dispose of or purchase investments at favorable prices in order to
satisfy redemptions or subscriptions. Also, the market price of certain
investments may fall dramatically if there is no liquid trading market. For
derivatives, this also includes the risk involving liquidity demands that
derivatives can create to make payments of margin or settlement payments to
counterparties. Such events and conditions may adversely affect the value of a
Fund's investments, result in greater market or liquidity risk or cause
difficulty valuing a Fund's portfolio instruments or achieving a Fund's
objective. To the extent that a Fund's principal investment strategies involve
foreign (non-U.S.) securities, derivatives or securities with substantial market
and/or credit risk, a Fund will tend to have the greatest exposure to liquidity
risk. Additionally, fixed income securities can become difficult to sell, or
less liquid, for a variety of reasons, such as a lack of a liquid trading
market.
High
Portfolio Turnover Risk
Certain
Funds may engage in active and frequent trading, which may result in higher
portfolio turnover rates and higher transaction costs than that of a typical
mutual fund and realization of short-term capital gains that will generally be
taxable to shareholders as ordinary income. These effects of higher than normal
portfolio turnover may adversely affect Fund performance. Higher portfolio
turnover rates may also increase a Fund's operational risk.
Impact
of Large Redemptions (Including Possible Fund Liquidation)
Large
redemption activity could result in a Fund being forced to sell portfolio
securities at a loss or before RIM or its money managers would otherwise decide
to do so. Periods of market illiquidity may exacerbate this risk for fixed
income and money market funds. To the extent a Fund is invested in a money
market fund, regulations applicable to money market funds may subject the Fund’s
redemption from such money market fund to liquidity fees and/or redemption gates
under certain circumstances, including in periods of market illiquidity. Large
redemptions in a Fund may also result in increased expense ratios (including as
a result of the Fund’s expenses being allocated over a smaller asset base),
higher and/or accelerated levels of realized capital gains or losses with
respect to a Fund's portfolio securities, higher Fund cash levels in
anticipation of the redemption (which may persist for an extended period of
time), higher brokerage commissions and other transaction costs. Large
redemptions can also affect the liquidity of the Fund’s portfolio because the
Fund may be unable to sell illiquid securities at its desired time or price or
the price at which the securities have been valued for purposes of the Fund’s
net asset value. As a result, the large redemption activity could adversely
affect the Fund’s ability to conduct its investment program which, in turn,
could adversely impact the Fund’s performance.
Certain
of the Funds are used as investments for funds of funds that have the same
investment adviser as the Funds. Certain of the Funds are also used as
investments in asset allocation programs sponsored by certain Financial
Intermediaries, including pursuant to model strategies provided by RIM. Under
these circumstances, these Funds may have (and certain of the Funds currently do
have) a large percentage of their Shares owned by such funds of funds or through
such asset allocation programs. Should RIM or such Financial Intermediary change
investment strategies or investment allocations such that fewer assets are
invested in a Fund or a Fund is no longer used as an investment, the Fund could
experience large redemptions of its Shares up to, and including, the entire
investment held by the funds of funds or asset allocation program(s). Large
redemptions may result in a Fund no longer remaining at an economically viable
size, in which case, the Fund may cease operations. In such an event, investors
may be required to liquidate or transfer their investments in the Fund at an
inopportune time.
Global
Financial Markets Risk
Global
economies and financial markets are becoming increasingly interconnected and
political and economic conditions (including recent instability and volatility
due to international trade disputes) and events (including natural disasters,
pandemics, epidemics, social unrest and government shutdowns) in one country,
region or financial market may adversely impact issuers in a different country,
region or financial market. As a result, issuers of securities held by a
Fund
268
may
experience significant declines in the value of their assets and even cease
operations. This could occur whether or not the Funds invest in securities of
issuers located in or with significant exposure to the countries directly
affected. Such conditions and/or events may not have the same impact on all
types of securities and may expose a Fund to greater market and liquidity risk
and potential difficulty in valuing portfolio instruments held by a Fund. This
could cause a Fund to underperform other types of investments.
The
severity or duration of such conditions and/or events may be affected by policy
changes made by governments or quasi-governmental organizations. During the
recent global financial crisis, instability in the financial markets has led
governments across the globe to take a number of unprecedented actions designed
to support the financial markets. More recently, instability in financial
markets has caused governments across the globe to again take certain actions
designed to support financial markets as well as financial and other
institutions in light of extreme financial market volatility. There is no
guarantee that these actions will have their intended effect on financial
markets. Future government regulation and/or intervention could also change the
way in which a Fund is regulated, affect the expenses incurred directly by the
Fund and the value of its investments, and limit and/or preclude a Fund's
ability to achieve its investment objective. For example, uncertainty regarding
the status of the euro could also create volatility in currency and the general
financial markets, which may affect the liquidity and value of a Fund's
investments. In addition, governments or their agencies may acquire distressed
assets from financial institutions and acquire ownership interests in those
institutions, which may affect a Fund's investments in ways that are
unforeseeable.
Furthermore,
a country’s economic conditions, political events, military action and/or other
conditions may lead to foreign government intervention and the imposition of
economic sanctions. Such sanctions may include (i) the prohibition, limitation
or restriction of investment, the movement of currency, securities or other
assets; (ii) the imposition of exchange controls or confiscations; and (iii)
barriers to registration, settlement or custody. Sanctions may impact the
ability of the Fund to buy, sell, transfer, receive, deliver or otherwise obtain
exposure to, foreign securities or currency, which may negatively impact the
value and/or liquidity of such investments.
In
certain countries, including the U.S., total public debt as a percentage of
gross domestic product has grown rapidly since the beginning of the global
financial crisis. High levels of national debt may raise concerns that a
government will be unable to pay investors at maturity, may cause declines in
currency valuations or prevent such government from implementing effective
fiscal policy. In 2011, Standard & Poor’s Ratings Services (“S&P”)
lowered its long-term sovereign credit rating on the U.S., citing, among other
reasons, controversy over raising the statutory debt ceiling and growth in
public spending. Because certain Funds invest in securities supported by the
full faith and credit of the U.S. government, the market prices and yields of
such securities may be adversely affected by any actual or potential downgrade
in the rating of U.S. long-term sovereign debt.
From
time to time, outbreaks of infectious illness, public health emergencies and
other similar issues (“public health events”) may occur in one or more countries
around the globe. Such public health events have had significant impacts on both
the country in which the event is first identified as well as other countries in
the global economy. Public health events have reduced consumer demand and
economic output in one or more countries subject to the public health event,
resulted in restrictions on trading and market closures (including for extended
periods of time), increased substantially the volatility of financial markets,
and, more generally, have had a significant negative impact on the economy of
the country or countries subject to the public health event. Public health
events have also adversely affected the global economy, global supply chains and
the securities in which the Funds invest across a number of industries, sectors
and asset classes. The extent of the impact depends on, among other factors, the
scale and duration of any such public health event. Public health events have
resulted in the governments of affected countries taking potentially significant
measures to seek to mitigate the transmission of the infectious illness or other
public health issue including, among other measures, imposing travel
restrictions and/or quarantines and limiting the operations of non-essential
businesses. Any of these events could adversely affect a Fund's investments and
performance, including by exacerbating other pre-existing political, social and
economic risks. Governmental authorities and other entities may respond to such
events with fiscal and/or monetary policy changes. It is not guaranteed that
these policy changes will have their intended effect and it is possible that the
implementation of or subsequent reversal of such policy changes could increase
volatility in financial markets, which could adversely affect a Fund's
investments and performance.
RIM
will monitor developments in financial markets and seek to manage each Fund in a
manner consistent with achieving each Fund's investment objective, but there can
be no assurance that it will be successful in doing so. In addition, RIC has
established procedures to value instruments for which market prices may not be
readily available.
269
Industry
Concentration Risk
Funds
that concentrate their investments in certain industries carry a much greater
risk of adverse developments in those industries than funds that invest in a
wide variety of industries. Companies in the same or similar industries may
share common characteristics and are more likely to react similarly to
industry-specific market or economic developments.
Financial
Services Sector Risk
Certain
Funds may be susceptible to adverse economic or regulatory occurrences affecting
the financial services sector, including with respect to U.S. and foreign banks,
broker-dealers, insurance companies, finance companies (e.g., automobile
finance) and related asset-backed securities. These developments may affect the
value of a Fund's investments more than if the Fund were not invested to such a
degree in this sector. Companies in the financial services sector may be
particularly susceptible to factors such as interest rate, fiscal, regulatory
and monetary policy changes. For example, challenging economic and business
conditions can significantly impact financial services companies due to
increased defaults on payments by borrowers. Political and regulatory changes
may affect the operations and financial results of financial services companies,
potentially imposing additional costs and expenses or restricting their business
activities.
Cash
Management
A
Fund may expose its cash to the performance of certain markets by purchasing
equity securities (in the case of equity funds) or fixed income securities (in
the case of fixed income funds) and/or derivatives. This approach increases a
Fund's performance if the particular market rises in value and reduces a Fund's
performance if the particular market declines in value. However, the performance
of these instruments may not correlate precisely to the performance of the
corresponding market and RIM or a money manager may not effectively select
instruments to gain market exposure. As a result, while the goal is to achieve
market returns, this strategy may underperform the applicable market. In
addition, the sale of equity index put options with respect to a Fund's cash may
reduce a Fund's performance if equity markets decline.
Securities
Lending
If
a borrower of a Fund's securities fails financially, the Fund’s recovery of the
loaned securities may be delayed or the Fund may lose its rights to the
collateral, which could result in a loss to the Fund. While securities are on
loan, a Fund is subject to: the risk that the borrower may default on the loan
and that the collateral could be inadequate in the event the borrower defaults,
the risk that the earnings on the collateral invested may not be sufficient to
pay fees incurred in connection with the loan, the risk that the principal value
of the collateral invested may decline and may not be sufficient to pay back the
borrower for the amount of the collateral posted, the risk that the borrower may
use the loaned securities to cover a short sale which may place downward
pressure on the market prices of the loaned securities, the risk that the return
of loaned securities could be delayed and could interfere with portfolio
management decisions and the risk that any efforts to recall the securities for
purposes of voting may not be effective.
Operational
Risk
An
investment in a Fund, like any fund, can involve operational risks arising from
factors such as processing errors, human errors, inadequate or failed internal
or external processes, failure in systems and technology, changes in personnel
and errors caused by third-party service providers. Other disruptive events may
include, but are not limited to, natural disasters, public health events, labor
shortages, supply chain interruptions and overall economic and financial market
instability that adversely affect a Fund’s ability to conduct business by, among
other things, inhibiting the ability of employees of affiliates of the Funds or
third-party service providers from performing their responsibilities. While the
Funds seek to minimize such events through controls and oversight, there may
still be events or failures that could cause losses to a Fund. In addition, as
the use of technology increases, the Funds may be more susceptible to
operational risks through breaches in cyber security. A breach in cyber security
refers to both intentional and unintentional events that may cause the Funds to
lose proprietary information or operational capacity or suffer data corruption.
As a result, the Funds may incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures, and/or
financial loss. Cyber security breaches of the Funds' third-party service
providers or issuers in which the Funds invest may also subject the Funds to
many of the same risks associated with direct cyber security breaches. The Funds
and the Funds' third-party service providers may also maintain sensitive
information (including relating to personally identifiable information of
investors) and a cyber security breach may cause such information to be lost,
improperly accessed, used or disclosed.
270
The
Funds have established business continuity plans and risk management systems
designed to reduce the risks associated with cyber security breaches and
disruptive events. However, there are inherent limitations in these plans and
systems, including that certain risks may not have been identified, primarily
because unknown threats and events may emerge in the future. There is no
guarantee that such business continuity plans will be effective in reducing the
risks associated with disruptive events or prevent cyber security breaches,
especially because the Funds do not directly control the systems or operations
of issuers in which a Fund may invest, trading counterparties or third-party
service providers. There is also a risk that cyber security breaches may not be
detected. The Funds and their shareholders could be negatively impacted by such
disruptive events or cyber security incidents.
Alternative
Minimum Tax Risk
The
Tax-Exempt High-Yield Bond and Tax-Exempt Bond Funds may invest in municipal
debt securities, the income on which is subject to federal income tax, including
the alternative minimum tax. As a result, taxpayers who are subject to the
alternative minimum tax could earn a lower after-tax return.
New
Fund Risk
The
Real Assets Fund is a new fund which may result in additional risk. There can be
no assurance that the Fund will grow to an economically viable size, in which
case the Fund may cease operations. In such an event, investors may be required
to liquidate or transfer their investments at an inopportune time. You should
consider your own investment goals, time horizon and risk tolerance before
investing in the Fund.
271
PORTFOLIO
TURNOVER
Portfolio
turnover measures how frequently securities held by a fund are bought and sold.
The portfolio turnover rates for multi-manager funds are likely to be somewhat
higher than the rates for comparable mutual funds with a single money manager.
Each of the Funds' money managers makes decisions or recommendations to buy or
sell securities independently from other money managers. Thus, one money manager
for a Fund may be selling or recommending selling a security when another money
manager for the Fund is purchasing or recommending purchasing the same security.
Also, when a Fund replaces a money manager, the new money manager may
significantly restructure the investment portfolio. Certain investment
practices, including those listed above, may increase a Fund's portfolio
turnover rate which may result in higher levels of realized gains or losses with
respect to a Fund’s portfolio securities, higher brokerage commissions and other
transaction costs. Brokerage commissions and transaction costs will reduce Fund
performance. The annual portfolio turnover rates for each of the Funds, which in
certain cases exceed 100%, are shown in the Financial Highlights tables in this
Prospectus, except for the Real Assets Fund, which is a new Fund and had no
Shares outstanding as of October 31, 2021. The annual portfolio turnover rate
for the Real Assets Fund will be shown in the Financial Highlights
tables in this Prospectus when it is available.
PORTFOLIO
HOLDINGS
A
description of the Funds' policies and procedures with respect to the disclosure
of each Fund’s portfolio securities is available in the Funds' Statement of
Additional Information.
DIVIDENDS
AND DISTRIBUTIONS
Each
Fund distributes substantially all of its net investment income and net capital
gains to shareholders each year.
Income
Dividends
The
amount and frequency of distributions are not guaranteed; all distributions are
at the Board’s discretion. Currently, the Board intends to declare dividends
from net investment income, if any, according to the following schedule:
| Declared | Payable | Funds | ||
|
Monthly
|
Early in the following month (December distribution paid mid-December) | Opportunistic Credit, Unconstrained Total Return, Strategic Bond, Investment Grade Bond, Short Duration Bond, Tax-Exempt Bond and Tax-Exempt High Yield Bond Funds | ||
|
Quarterly
|
April, July, October and December | Equity Income, Sustainable Equity, U.S. Strategic Equity, Global Real Estate Securities, Global Infrastructure, Multi-Strategy Income and Multi-Asset Growth Strategy Funds | ||
|
Annually
|
Mid-December | U.S. Small Cap Equity, International Developed Markets, Global Equity, Emerging Markets, Tax-Managed U.S. Large Cap, Tax-Managed U.S. Mid & Small Cap, Tax-Managed International Equity, Tax-Managed Real Assets and Real Assets Funds |
An
additional distribution of net investment income may be declared and paid by a
Fund if required to avoid the imposition of a federal tax on the Fund.
Capital
Gains Distributions
The
Board will declare capital gains distributions (both short-term and long-term)
once a year in mid-December to reflect any net short-term and net long-term
capital gains, if any, realized by a Fund in the prior fiscal year. An
additional
272
distribution
may be declared and paid by a Fund if required to avoid the imposition of a
federal tax on the Fund. Distributions that are declared in October, November or
December to shareholders of record in such months, and paid in January of the
following year, will be treated for tax purposes as if received on
December 31 of the year in which they were declared.
Buying
a Dividend
If
you purchase Shares just before a distribution, you will pay the full price for
the Shares and receive a portion of the purchase price back as a taxable
distribution. This is called “buying a dividend.” Unless your account is a
tax-deferred account, dividends paid to you would be included in your gross
income for tax purposes even though you may not have participated in the
increase of the net asset value of a Fund, regardless of whether you reinvested
the dividends. To avoid “buying a dividend,” check a Fund’s distribution dates
before you invest.
Automatic
Reinvestment
Your
dividends and other distributions will be automatically reinvested at the
closing net asset value on the record date, in additional Fund Shares, unless
you elect to have the dividends or distributions paid in cash or invested in
another RIC Fund. You may change your election by delivering written notice no
later than ten days prior to the record date to your Financial
Intermediary.
additional
information about TAXES
Unless
you are investing through an IRA, 401(k) or other tax-advantaged retirement
account, distributions from a Fund are generally taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional Shares or receive them in cash. Any long-term
capital gains distributed by a Fund are taxable to you as long-term capital
gains no matter how long you have owned your Shares. Early each year, you will
receive a statement that shows the tax status of distributions you received for
the previous year.
Foreign
exchange gain or loss arising from a Fund’s foreign currency-denominated
investments may increase or reduce the amount of ordinary income distributions
made to investors.
If
you are an individual investor, a portion of the dividends you receive from a
Fund may be treated as “qualified dividend income” which is taxable to
individuals at the same rates that are applicable to long-term capital gains. A
Fund distribution is treated as qualified dividend income to the extent that the
Fund receives dividend income from taxable domestic corporations and certain
qualified foreign corporations, provided that certain holding period and other
requirements are met. Fund distributions generally will not qualify as qualified
dividend income to the extent attributable to interest, capital gains, REIT
distributions and, in some cases, distributions from non-U.S. corporations.
There can be no assurance that any portion of the dividends you receive from a
Fund will qualify as qualified dividend income.
When
you sell or exchange Shares, you may have capital gains or losses. Any losses
you incur if you sell or exchange Shares that you have held for six months or
less will be treated as long-term capital losses, but only to the extent that
the Fund has paid you long-term capital gains dividends with respect to those
Shares during that period. The tax rate on any gains from the sale or exchange
of your Shares depends on how long you have held your Shares.
No
Fund makes any representation as to the amount or variability of its capital
gains distributions which may vary as a function of several factors including,
but not limited to, gains and losses related to the sale of securities,
prevailing dividend yield levels, general market conditions, shareholders’
redemption patterns and Fund cash equitization activity.
Fund
distributions and gains from the sale or exchange of your Shares will generally
be subject to state and local income tax. Non-U.S. investors may be subject to
U.S. withholding and estate taxes. A portion of Fund distributions received
by a non-U.S. investor may be exempt from U.S. withholding tax to the extent
attributable to U.S. source interest income and short-term capital gains earned
by the Fund if properly reported by the Fund. The Funds will be required to
withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to
certain non-U.S. entities that fail to comply (or be deemed compliant) with
extensive reporting and withholding requirements designed to inform the U.S.
Department of the Treasury of U.S.-owned foreign investment accounts.
Shareholders may be requested to provide additional information to the Funds to
enable the Funds to determine whether withholding is required. You should
consult your tax professional about federal, state, local or foreign tax
consequences of holding Shares.
273
When
a Fund invests in securities of certain foreign issuers, the Fund may have taxes
withheld on the income received from these securities. If more than 50% of the
total fair market value of a Fund’s assets at the close of its taxable year
is made up of foreign securities, the Fund may elect to pass through such
taxes to shareholders who may then (subject to limitations) claim a foreign tax
credit or deduction.
For
taxable years beginning after 2017 and before 2026, non-corporate taxpayers
generally may deduct 20% of “qualified business income” derived either directly
or through partnerships or S corporations. For this purpose, “qualified business
income” generally includes ordinary REIT dividends and income derived from MLP
investments. A Fund may pass through to shareholders the
character of ordinary REIT dividends so as to allow non-corporate shareholders
to claim this deduction. There currently is no mechanism for a Fund that invests
in MLPs to similarly pass through to non-corporate shareholders the character
of income derived from MLP investments. It is uncertain whether future
legislation or other guidance will enable the Funds to pass through to
non-corporate shareholders the ability to claim this deduction with respect
to income derived from MLP investments.
If
you are a corporate investor, a portion of the dividends from net investment
income paid by Equity Income Fund, Sustainable Equity Fund, U.S. Strategic
Equity Fund, U.S. Small Cap Equity Fund, Global Equity Fund,
Tax-Managed U.S. Large Cap Fund, Tax-Managed U.S. Mid & Small Cap Fund,
Tax-Managed Real Assets Fund, Global Infrastructure Fund, Real Assets Fund,
Multi-Strategy Income Fund or Multi-Asset Growth Strategy Fund will generally
qualify, in part, for the corporate dividends-received deduction. However,
the portion of the dividends so qualified depends on the aggregate qualifying
dividend income received by each Fund from domestic (U.S.) sources. Certain
holding period and debt financing restrictions may apply to corporate investors
seeking to claim the deduction. There can be no assurance that any portion of
the dividends paid by these Funds will qualify for the corporate
dividends-received deduction. You should consult your tax professional
with respect to the applicability of these rules.
Although
the Tax-Managed U.S. Large Cap, Tax-Managed U.S. Mid & Small Cap,
Tax-Managed International Equity and Tax-Managed Real Assets Funds consider the
tax consequences of portfolio trading activity among other factors during a
particular year, the realization of capital gains is not entirely within either
RIM’s or the money managers’ control. Shareholder purchase and redemption
activity, as well as the Fund’s performance, will impact the amount of capital
gains realized. Capital gains distributions by the Tax-Managed U.S. Large Cap
Fund, the Tax-Managed U.S. Mid & Small Cap Fund, the Tax-Managed
International Equity Fund and the Tax-Managed Real Assets Fund may vary
considerably from year to year.
The
Tax-Exempt Bond and Tax-Exempt High Yield Bond Funds intend to continue to
qualify to pay “exempt-interest dividends” to their shareholders by maintaining,
as of the close of each quarter of their taxable years, at least 50% of the
value of their total assets in municipal obligations. If a Fund satisfies this
requirement, distributions from net investment income to the Fund’s shareholders
will be exempt from federal income taxation, including the alternative minimum
tax, to the extent that net investment income is represented by interest on
municipal obligations. However, to the extent dividends are derived from taxable
income from temporary investments, short-term capital gains, or income derived
from the sale of bonds purchased with market discount, the dividends are treated
as ordinary income, whether paid in cash or reinvested in additional Shares. If
the Funds invest in private activity bonds, a portion of any dividends derived
from income from such investments may be treated as a preference item in
determining your alternative minimum tax. For taxable years beginning after
2017, the federal alternative minimum tax is repealed for corporate
taxpayers.
By
law, a Fund must withhold the legally required amount of your distributions and
proceeds if you do not provide your correct taxpayer identification number, or
certify that such number is correct, or if the IRS instructs the Fund to do
so.
The
following information is specific to the Real Assets Fund. One of the
requirements for favorable tax treatment as a regulated investment company under
the Code is that the Fund derive at least 90% of its gross income from certain
qualifying sources of income. The IRS has issued a revenue ruling which holds
that income derived from commodity-linked swaps is not qualifying income under
Subchapter M of the Code. As such, the Fund's ability to utilize
commodity-linked swaps as part of its investment strategy is limited to a
maximum of 10 percent of its gross income. However, the IRS has also issued
private letter rulings to other taxpayers in which the IRS specifically
concluded that income from certain commodity index-linked notes is qualifying
income and that income derived from a wholly-owned subsidiary will also
constitute qualifying income, even if the subsidiary itself owns
commodity-linked swaps and other commodity-linked derivative instruments.
Although those private letter rulings can be relied on only by the taxpayers to
whom they were issued, based on the reasoning in such rulings, the Fund intends
to seek to gain exposure to the commodity markets primarily through investments
in commodity index-linked notes and through investments in its
274
Subsidiary.
The IRS subsequently issued a revenue procedure, which states that the IRS will
not in the future issue private letter rulings that would require a
determination of whether an asset (such as a commodity index-linked note) is a
“security” under the 1940 Act. In connection with the issuance of this revenue
procedure, the IRS revoked its previously issued commodity index-linked notes
private letter rulings. The IRS also issued proposed regulations that, if
finalized, would generally have treated the Fund's income inclusions with
respect to a subsidiary as qualifying income only if there was a
distribution out of the earnings and profits of a subsidiary that was
attributable to such income inclusion. Final regulations, applicable
to taxable years beginning on or after September 28, 2016, also treat a Fund’s
income inclusions with respect to a subsidiary as qualifying income, without
requiring a corresponding distribution, if such inclusions are derived with
respect to the Fund’s business of investing in stock, securities or currencies.
There can be no assurance that the IRS will not change its position that income
derived from commodity-linked notes and wholly-owned subsidiaries is qualifying
income. The ability of the Fund to qualify for favorable regulated
investment company status under the Code could be jeopardized if the Fund were
unable to treat its income from commodity-linked notes and its Subsidiary
as qualifying income. Furthermore, the tax treatment of commodity-linked notes,
other commodity-linked derivatives and the Fund's investments in its Subsidiary
may otherwise be adversely affected by future legislation, Treasury Regulations
and/or guidance issued by the IRS that could affect the character, timing and/or
amount of the Fund's taxable income or any gains and distributions made by the
Fund.
The
tax discussion set forth above is included for general information only. You
should consult your own tax adviser concerning the federal, state, local or
foreign tax consequences of an investment in a Fund.
Additional
information on these and other tax matters relating to each Fund and its
shareholders is included in the section entitled “Taxes” in the Funds' Statement
of Additional Information.
Cost
Basis Reporting
Effective
January 1, 2012, Department of the Treasury regulations mandate cost basis
reporting to shareholders and the IRS for redemptions of Fund shares acquired on
or after January 1, 2012 (“post-effective date shares”). If you acquire and hold
shares directly with the Funds and not through a Financial Intermediary, RIFUS
will use a default average cost basis methodology for tracking and reporting
your cost basis on post-effective date shares, unless you request, in writing,
another cost basis reporting methodology.
Additionally,
for redemptions of shares held directly with the Funds on or after January 1,
2012, unless you select specific share lots in writing at the time of
redemption, RIFUS will first relieve (i.e., identify the shares to be redeemed
for purposes of determining cost basis) all shares acquired prior to January 1,
2012 (“pre-effective date shares”), before relieving any post-effective date
shares. You continue to be responsible for tracking cost basis, and
appropriately reporting sales of pre-effective date shares to the IRS. If
RIFUS has historically provided cost basis reporting on these pre-effective date
shares, RIFUS will continue to provide those reports. However, no cost
basis reporting will be provided to the IRS on the sale of pre-effective date
shares.
If
you acquire and hold shares through a Financial Intermediary, please contact
your Financial Intermediary for information related to cost basis defaults, cost
basis selection, and cost basis reporting.
You
should consult your own tax advisor(s) when selecting your cost basis tracking
and relief methodology.
HOW
NET ASSET VALUE IS DETERMINED
Net
Asset Value Per Share
The
net asset value per share is calculated for Shares of each Class of each Fund on
each business day on which Shares are offered or redemption orders are tendered.
For each Fund, a business day is one on which the New York Stock Exchange
(“NYSE”) is open for regular trading. Each Fund will normally determine net
asset value as of the close of regular trading on the NYSE (normally 4:00 p.m.
Eastern Time). If the NYSE has an unscheduled early closing on a day it has
opened for business, the Funds reserve the right to treat such day as a business
day of the Funds and calculate a Fund’s net asset value as of the
normally-scheduled close of regular trading on the NYSE for that day, so long as
the Funds' management believes there remains an adequate market to meet purchase
and redemption orders for that day. Market volatility regulations provide for
circuit breakers which represent the thresholds at which trading is halted
market-wide for single-day declines in the S&P 500® Index.
Circuit breakers halt trading on the nation's stock markets
275
during
dramatic drops and are set at 7%, 13% and 20% of the closing price for the
previous day. For a Level 3 halt (20% decline), trading will halt for the
remainder of the trading day and each Fund will determine net asset value as of
the early close of trading on the NYSE.
A
Fund reserves the right to close, and therefore not calculate a Fund’s net asset
value for that day, if the primary trading markets of the Fund’s portfolio
instruments are closed (such as holidays on which such markets are closed) and
the Fund’s management believes that there is not an adequate market to meet
purchase or redemption requests on such day.
The
price of Fund Shares is based on a Fund’s net asset value and is computed by
dividing the current value of a Fund’s assets (less liabilities) by the number
of Shares of the Fund outstanding and rounding to the nearest cent. Share value
for purchase, redemption or exchange will be based on the net asset value next
calculated after your order is received in good form (i.e., when all required
documents and your check or wired funds are received) by a Fund or a Fund agent.
Investments in other open-end management investment companies registered under
the 1940 Act (if any), are valued based upon the net asset value of those
open-end management investment companies. The prospectuses for these
companies explain the circumstances under which fair value pricing will be used
and the effects of using fair value pricing. Investments in ETFs will
generally be valued at the last sale price or official closing price on the
exchange on which they are principally traded. See “Additional Information About
How to Purchase Shares,” “Additional Information About How to Redeem Shares” and
“Exchange Privilege” for more information. Information regarding each Fund’s
current net asset value per Share is available at
https://russellinvestments.com.
Valuation
of Portfolio Securities
The
Funds value portfolio instruments according to Board-approved securities
valuation procedures and pricing services, which include market value
procedures, fair value procedures, other key valuation procedures and a
description of the pricing services used by the Funds. Under the Board-approved
securities valuation procedures, the Board has delegated the day-to-day
valuation functions to RIFUS, RIFUS’s Oversight Committee and the Funds'
custodian. However, the Board retains oversight over the valuation
process.
Ordinarily,
the Funds value each portfolio instrument based on market quotations provided by
pricing services or brokers (when permitted by the market value procedures).
Equity securities (including exchange traded funds) are generally valued at the
last quoted sale price or the official closing price as of the close of the
exchange’s or other market’s regular trading hours on the day the valuation is
made. Listed options are valued on the basis of the closing mean price and
exchange listed futures contracts are valued on the basis of settlement price.
Swaps may be valued at the closing price, clean market price or clean exchange
funded price provided by a pricing service or broker depending on the type of
swap being valued. Listed fixed income securities that have greater than 60
days remaining until maturity at the time of purchase are generally valued at
the last quoted sale price as of the close of the exchange’s or other market’s
regular trading hours on the day the valuation is made. Non-listed fixed income
securities that have greater than 60 days remaining until maturity at the time
of purchase are generally valued using the price supplied by a pricing service
or broker, which may be an evaluated bid. Evaluated bids are derived from
a matrix, formula or other objective method that takes into consideration actual
trading activity and volume, market indexes, credit quality, maturity, yield
curves or other specific adjustments. Fixed income securities that have 60 days
or less remaining until maturity at the time of purchase are valued using the
amortized cost method of valuation, unless it is determined that the amortized
cost method would result in a price that would be deemed to be not reliable.
Issuer-specific conditions (e.g., creditworthiness of the issuer and the
likelihood of full repayment at maturity) and conditions in the relevant market
(e.g., credit, liquidity and interest rate conditions) are among the factors
considered in this determination. While amortized cost provides certainty in
valuation, it may result in periods when the value of an instrument is higher or
lower than the price a Fund would receive if it sold the instrument.
If
market quotations are not readily available for an instrument or are considered
not reliable because of market and/or issuer-specific information, the
instrument will be valued at fair value, as determined in accordance with the
fair value procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any sales,
at the closing bid price, on the primary exchange on which the security is
traded. The fair value procedures may involve subjective judgments as to the
fair value of securities. The effect of fair value pricing is that securities
may not be priced on the basis of quotations from the primary market in which
they are traded, but rather may be priced by another method that the Board
believes reflects fair value. The use of fair value pricing by a Fund may cause
the net asset value of its Shares
276
to
differ significantly from the net asset value that would be calculated using
current market values. Fair value pricing could also cause discrepancies between
the daily movement of the value of Fund Shares and the daily movement of the
benchmark index if the index is valued using another pricing method.
This
policy is intended to assure that the Funds' net asset values fairly reflect
portfolio instrument values as of the time of pricing. Events or circumstances
affecting the values of portfolio instruments that occur between the closing of
the principal markets on which they trade and the time the net asset value of
Fund Shares is determined may be reflected in the calculation of the net asset
values for each applicable Fund when the Fund deems that the particular event or
circumstance would materially affect such Fund’s net asset value. Funds that
invest primarily in frequently traded exchange listed securities will use fair
value pricing in limited circumstances since reliable market quotations will
often be readily available. Funds that invest in foreign securities will use
fair value pricing more often (typically daily) since significant events may
occur between the close of foreign markets and the time of pricing which would
trigger fair value pricing of the foreign securities. Examples of significant
events that generally trigger fair value pricing of one or more securities are:
any market movement of the U.S. securities market (defined in the fair value
procedures as the movement of a single major U.S. Index); a company development
such as a material business development; a natural disaster, a public health
emergency affecting one or more countries in the global economy (including an
emergency which results in the closure of financial markets) or other emergency
situation; or an armed conflict. Funds that invest in low rated debt securities
are also likely to use fair value pricing more often since the markets in which
such securities are traded are generally thinner, more limited and less active
than those for higher rated securities.
Because
foreign securities can trade on non-business days, the net asset value of a
Fund’s portfolio that includes foreign securities may change on days when
shareholders will not be able to purchase or redeem Fund Shares.
CHOOSING
A CLASS OF SHARES TO BUY
The
Funds offer more than one Class of Shares. Each Class of Shares has different
sales charges and expenses, allowing you to choose the Class that best meets
your needs. Each Class of Shares is offered by one or more Financial
Intermediaries. A Financial Intermediary may choose to offer a particular Class
of Shares based on, among other factors, its assessment of the appropriateness
of a Class’ attributes in light of its customer base. Your Financial
Intermediary may not offer all of the Classes of Shares offered in this
Prospectus and, therefore, you may not benefit from certain Fund policies,
including those regarding sales charge waivers and reduction of sales charges
through reinstatement, rights of accumulation, letters of intent and share class
conversions. You may need to invest through another Financial Intermediary in
order to take advantage of these Fund policies. Please see Appendix A:
Additional Information About Financial Intermediary-Specific Sales Charge
Variations, Waivers And Discounts for additional information regarding Financial
Intermediary-specific sales charge waivers or reductions. Please contact your
Financial Intermediary to determine which Classes of Shares your Financial
Intermediary offers. For more information about the Financial Intermediaries
that currently offer Shares of the Funds, please call 800-787-7354 for
assistance in contacting an investment professional near you.
Comparing
the Funds' Classes
Your
Financial Intermediary can help you decide which Class of Shares meets your
goals. Your Financial Intermediary may receive different compensation depending
upon which Class of Shares you choose.
Each
Class of Shares has its own sales charge and expense structure, which enables
you to choose the Class of Shares (and pricing) that best meets your specific
needs and circumstances. In making your decision regarding which Class of Shares
may be best for you to invest in, please keep in mind that your Financial
Intermediary may receive different compensation depending on the Class of Shares
that you invest in and you may receive different services in connection with
investments in different Classes of Shares. You should consult with your
Financial Intermediary about the comparative pricing and features of each Class,
the services available for shareholders in each Class, the compensation that
will be received by the Financial Intermediary in connection with each Class
(including whether you qualify for any
277
reduction
or waiver of a sales charge, as discussed below in Appendix A: Additional
Information About Financial Intermediary-Specific Sales Charge Variations,
Waivers And Discounts), and other factors that may be relevant to your decision
as to which Class of Shares to buy.
| Share Class |
Front-End Sales Charge |
Deferred Sales Charge |
Annual 12b-1 Fees (including Annual Shareholder Service Fee of 0.25% of average daily assets for Class C1 Shares) |
Annual Shareholder Service Fees |
| Class A | Up to 2.50% for the Short Duration Bond Fund, up to 3.75% for the fixed income Funds (except for Short Duration Bond Fund) and up to 5.75% for the other Funds (as set forth below); reduced, waived or deferred for large purchases and certain investors* | 0.75% on redemptions of Class A Shares of Short Duration Bond Fund and 1.00% on redemptions of Class A Shares of all other RIC Funds made within one year of a purchase on which no front-end sales charge was paid and your Financial Intermediary was paid a commission by the Funds’ Distributor | 0.25% of average daily assets | None |
| Class C | None | None | 0.75% of average daily assets | 0.25% of average daily assets |
| Class C1 | None | 1.00% on redemptions of Class C1 Shares made within one year of purchase | 1.00% of average daily assets | None |
| Class M | None | None | None | None |
| Class R6 | None | None | None | None |
| Class S | None | None | None | None |
| Class Y | None | None | None | None |
*
You may also be eligible for a waiver of the front-end sales charge as set forth
below in Appendix A: Additional Information About Financial
Intermediary-Specific Sales Charge Variations, Waivers And Discounts.
FRONT-END
SALES CHARGES
Class
C, C1, M, R6, S, and Y Shares
Class
C, C1, M, R6, S, and Y Shares of all Funds offered in this Prospectus are
sold without a front-end sales charge.
Class A
Shares
Class A
Shares are sold at the offering price, which is the net asset value plus a
front-end sales charge. With respect to Class A Shares, you pay a lower
front-end sales charge as the size of your investment increases to certain
levels. With respect to Class A Shares, you do not pay a front-end sales charge
on the Funds' distributions of dividends or capital gains you reinvest in
additional Class A Shares of the same Fund or another RIC Fund.
The
tables below show the rate of front-end sales charge that you pay, depending on
the amount of your investment or transaction. The tables below also show the
amount of compensation that is paid to your Financial Intermediary out of the
front-end sales charge. This compensation includes commissions to Financial
Intermediaries that sell Class A Shares. Financial Intermediaries may also
receive the distribution fee payable on Class A Shares at an annual rate of
up to 0.25% of the average daily net assets represented by the Class A
Shares serviced by them.
278
Class
A Shares
The
Short Duration Bond Fund, fixed income Funds and the other Funds have different
front-end sales charges. A sales charge may be reduced or eliminated for larger
purchases of Class A Shares, as described below, or as described in Appendix
A: Additional Information About Financial Intermediary-Specific Sales
Charge Variations, Waivers And Discounts.
Short
Duration Bond Fund:
| Short Duration Bond Fund Front-End Sales Charges for Class A Shares | Front-end sales charge as % of |
Financial Intermediary commission as % of offering price | ||||
| Amount of Investment | Offering Price | Net
amount Invested |
||||
|
Less than $500,000
|
2.50% | 2.56% | 2.00% | |||
|
$500,000 or more
|
-0- | -0- | up to 0.75% | |||
Fixed
Income Funds (except for Short Duration Bond Fund):
The
fixed income Funds include the Opportunistic Credit, Unconstrained Total Return,
Strategic Bond, Investment Grade Bond, Tax-Exempt High Yield Bond and Tax-Exempt
Bond Funds.
| Fixed Income Funds Front-End Sales Charges for Class A Shares | Front-end sales charge as % of |
Financial Intermediary commission as % of offering price | ||||
| Amount of Investment | Offering Price | Net
amount Invested |
||||
|
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
|
2.00% | 2.04% | 1.60% | |||
|
$500,000 but less than $1,000,000
|
1.50% | 1.52% | 1.20% | |||
|
$1,000,000 or more
|
-0- | -0- | up to 1.00% | |||
Other
Funds:
The
other Funds include the Equity Income, Sustainable Equity, U.S. Strategic
Equity, U.S. Small Cap Equity, International Developed Markets, Global
Equity, Emerging Markets, Tax-Managed U.S. Large Cap, Tax-Managed U.S. Mid &
Small Cap, Tax-Managed International Equity, Tax-Managed Real Assets, Global
Infrastructure, Global Real Estate Securities, Real Assets, Multi-Strategy
Income and Multi-Asset Growth Strategy Funds.
| Other Funds Front-End Sales Charges for Class A Shares | Front-end sales charge as % of |
Financial Intermediary commission as % of offering price | ||||
| Amount of Investment | Offering Price | Net amount Invested |
||||
|
Less than $50,000
|
5.75% | 6.10% | 5.00% | |||
|
$50,000 but less than $100,000
|
4.50% | 4.71% | 3.75% | |||
|
$100,000 but less than $250,000
|
3.50% | 3.63% | 2.75% | |||
|
$250,000 but less than $500,000
|
2.50% | 2.56% | 2.00% | |||
|
$500,000 but less than $1,000,000
|
2.00% | 2.04% | 1.60% | |||
|
$1,000,000 or more
|
-0- | -0- | up to 1.00% | |||
Investments
of $1,000,000 or more (Class A Shares, except for Short Duration Bond
Fund). With respect to Class A Shares, you do
not pay a front-end sales charge when you buy $1,000,000 or more of Shares of
RIC Funds. However, if your Financial Intermediary was paid a commission by the
Funds' Distributor on those Class A Shares and you redeem those
Class A Shares within one year of purchase, you will pay a deferred sales
charge of 1.00%. Additional information on commissions paid to your Financial
Intermediary on purchases of $1,000,000 or more is available in the Funds'
Statement of Additional Information.
Investments
of $500,000 or more of Short Duration Bond Fund (Class A Shares). With respect to Short Duration Bond Fund Class A
Shares, you do not pay a front-end sales charge when you buy $500,000 or more
Shares. However, if your Financial Intermediary was paid a commission by
the Funds’ Distributor on those Class A Shares and you redeem
279
those
Class A Shares within one year of purchase, you will pay a deferred sales charge
of 0.75%. Additional information on commissions paid to your Financial
Intermediary on purchases of $500,000 or more is available in the Funds’
Statement of Additional Information.
Reducing
Your Front-End Sales Charge (Class A Shares). To receive a reduced front-end sales charge on
purchases of Class A Shares as described below, you must notify your
Financial Intermediary of your ability to qualify for a reduced front-end sales
charge at the time your order for Class A Shares is placed. Your Financial
Intermediary may require certain records, such as account statements, to verify
that the purchase qualifies for a reduced front-end sales charge.
Additionally, you should retain any records necessary to substantiate historical
costs of your Class A Share purchases because the Funds, RIFUS and your
Financial Intermediary may not maintain this information.
Front-end
Sales Charge Waivers (Class A Shares).
Purchases of Class A Shares may be made at net asset value without a
front-end or deferred sales charge in the following circumstances. There is no
commission paid to Financial Intermediaries for Class A Shares purchased under
the following circumstances:
| 1. | Sales to RIC trustees and employees of Russell Investments (including retired trustees and employees), to the immediate families (as defined below) of such persons, or to a pension, profit-sharing or other benefit plan for such persons |
| 2. | Sales to current/retired registered representatives of broker-dealers having sales agreements with the Funds' Distributor to sell Class A Shares of the Funds and sales to a current spouse or the equivalent thereof, child, step-child (with respect to current union only), parent, step-parent or parent-in-law of such registered representative or to a family trust in the name of such registered representative |
| 3. | Accounts managed by a member of Russell Investments |
| 4. | Conversion of Class C or Class C1 Shares held for eight years to Class A Shares. Depending on the policies of your Financial Intermediary, in certain circumstances you may convert Class C or Class C1 Shares held for less than eight years to Class A Shares, without the incurrence of a front-end sales charge |
You
may also be eligible for a waiver of the front-end sales charge as set forth
below in Appendix A: Additional Information About Financial
Intermediary-Specific Sales Charge Variations, Waivers And Discounts.
Prior
to March 1, 2016, sales of Class A Shares to multi-participant employer
sponsored Defined Contribution plans held in plan level accounts, excluding SEP
IRAs and SIMPLE IRAs, qualified for a front-end sales charge waiver. Sales of
Class A Shares to plans that previously purchased, and continue to hold, Class A
Shares without a front-end sales charge pursuant to this waiver may continue to
qualify for the waiver if the policies and procedures of your Financial
Intermediary provide for the continued application of the waiver. Please contact
your Financial Intermediary for more information.
Moving
Between Accounts (Class A Shares). Under
certain circumstances, if supported by your Financial Intermediary, you may
transfer Class A Shares of a Fund from an account with one registration to
an account with another registration within 90 days without incurring a
front-end sales charge. For example, you may transfer Shares without paying a
front-end sales load in the following cases:
| • | From a non-retirement account to an IRA or other individual retirement account |
| • | From an IRA or other individual retirement account, such as a required minimum distribution, to a non-retirement account |
In
some cases, due to operational limitations or reporting requirements, your
Financial Intermediary must redeem Shares from one account and purchase Shares
in another account to achieve this type of transfer.
If
you want to learn more about front-end sales charge waivers, contact your
Financial Intermediary and see Appendix A: Additional Information About
Financial Intermediary-Specific Sales Charge Variations, Waivers And Discounts
below.
Aggregated
Investments (Class A Shares). The
following types of accounts may be combined to qualify for reduced front-end
sales charge including purchases made pursuant to rights of accumulation or
letter of intent as described below:
The
following accounts owned by you and/or a member of your immediate family (as
defined below):
| a. | Accounts held individually or jointly |
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| b. | Those established under the Uniform Gift to Minors Act or Uniform Transfer to Minors Act |
| c. | IRA accounts, certain single participant retirement plan accounts, and SEP IRA, SIMPLE IRA or similar accounts held in individual registration. |
| d. | Solely controlled business accounts |
| e. | Trust accounts benefiting you or a member of your immediate family |
For
purposes of aggregated investments, your immediate family includes your spouse,
or the equivalent thereof, and your children and step-children under the age of
21.
Purchases
made in nominee or street name accounts may NOT be aggregated with those made
for other accounts and may NOT be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
You
may only combine accounts held with one Financial Intermediary for purposes of
aggregated investments.
Rights
of Accumulation (“ROA”) (Class A Shares).
Subject to the limitations described in the aggregation policy, you may combine
current purchases of any RIC Fund with your existing holdings of all RIC Funds
to determine your current front-end sales charge for Class A Shares.
Subject to your Financial Intermediary’s capabilities, your accumulated holdings
will be calculated as the higher of (a) the current value of your existing
holdings or (b) the amount you invested (including reinvested dividends and
capital gains, but excluding capital appreciation) less any withdrawals (the
“cost value”). You must notify your Financial Intermediary at the time an order
is placed for a purchase or purchases which would qualify for the reduced
front-end sales charge due to existing investments or other purchases. The
reduced front-end sales charge may not be applied if such notification is not
furnished at the time of the order.
The
value of all of your holdings in accounts established in calendar year 2007 or
earlier will be assigned an initial cost value equal to the market value of
those holdings as of the last business day of 2007. Thereafter, the cost value
of such accounts will increase or decrease according to actual investments or
withdrawals.
For
purchases to be aggregated for the purpose of qualifying for the ROA, they must
be made on the same day through one Financial Intermediary. The right of
accumulation is subject to modification or discontinuance at any time with
respect to all Shares purchased thereafter. Additional information is available
from your Financial Intermediary.
Letter
of Intent (“LOI”) (Class A Shares). A
non-binding LOI allows you to combine purchases of Shares of any RIC Funds you
intend to make over a 13-month period with the market value of your current RIC
Fund holdings to determine the applicable front-end sales charge. Any
appreciation of your current RIC Fund holdings and any Shares issued from
reinvestment of dividends or capital gains will not be considered purchases made
during the 13-month period. A portion of your account (up to 5%) will be held in
escrow to cover additional Class A front-end sales charges that may be due.
If you purchase less than the amount specified in the LOI and the LOI period
expires or a full-balance redemption is requested during the LOI period, Shares
in your account will be automatically redeemed to pay additional front-end sales
charges that may be due. Class A Shares of the Funds held in plan or omnibus
accounts are not eligible for an LOI unless the plan or omnibus account can
maintain the LOI on their record keeping system. If the shareholder dies within
the 13-month period, no additional front-end sales charges are required to be
paid.
Exchange
Privilege (Class A Shares). Generally,
exchanges between Class A Shares of the RIC Funds are not subject to a
front-end sales charge. Exchanges may have the same tax consequences as ordinary
sales and purchases. Please contact your Financial Intermediary and/or tax
adviser for more detailed information.
Reinstatement
Privilege (Class A Shares). You may
reinvest proceeds from a redemption or distribution of Class A Shares into
Class A Shares of any RIC Fund without paying a front-end sales charge if
such reinvestment is made within 90 days after the redemption or distribution
date and the proceeds are invested in any related account eligible to be
aggregated for Rights of Accumulation purposes. Proceeds will be reinvested at
the net asset value next determined after receipt of your purchase order in
proper form. For purposes of this Reinstatement Privilege, automatic
transactions (including, for example, automatic purchases, withdrawals and
payroll deductions) and ongoing individual retirement plan contributions are not
eligible for reinstatement without a sales charge. The privilege may not be
exercised if proceeds are subject to a purchase restriction as described in the
section entitled “Frequent Trading Policies and Limitations on Trading Activity”
and certain other restrictions may apply. Contingent deferred sales charges will
be credited to your account at current net asset value following notification to
the Fund by your Financial Intermediary.
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Information
about sales charges and sale charge waivers is available free of charge, on the
Funds' website at https://russellinvestments.com. Please also see Appendix A:
Additional Information About Financial Intermediary-Specific Sales Charge
Variations, Waivers And Discounts below for additional information regarding
Financial Intermediary-specific sales charge waivers and reductions.
MORE
ABOUT DEFERRED SALES CHARGES
You
do not pay a front-end sales charge when you buy $1,000,000 or more of Class A
Shares of RIC Funds (except for Short Duration Bond Fund), or $500,000 or more
of Short Duration Bond Fund, Class A Shares. However, if your Financial
Intermediary was paid a commission by the Funds' Distributor on Class A
Shares and you redeem those Class A Shares within one year of purchase, you
will pay a deferred sales charge of 1.00%, except for Short Duration Bond Fund,
you will pay a deferred sales charge of 0.75%. With respect to Class C1 Shares,
if you redeem Class C1 Shares within one year of purchase, you will pay a
deferred sales charge of 1.00%. The deferred sales charge is charged on the
lesser of the purchase price of the Shares being redeemed or the net asset value
of those Shares at the time of redemption. Shares not subject to a deferred
sales charge (those issued upon reinvestment of dividends or capital gains) are
redeemed first followed by the Shares you have held the longest. Exchanges
between Class A and Class C1 Shares you own in one Fund for the same
Class of any other Fund are not subject to a deferred sales charge; however, you
will pay a deferred sales charge of 1.00% upon redemption if you redeem Class
A Shares (except for Short Duration Bond Fund) or Class C1 Shares within
one year of your original purchase. You will pay a deferred sales charge
of 0.75% upon redemption if you redeem Short Duration Bond Fund Class A Shares
within one year of your original purchase.
The
deferred sales charge may be waived on:
| • | shares sold within 12 months following the death or disability of a shareholder |
| • | redemptions of Class A Shares only, made in connection with the minimum required distribution from retirement plans or IRAs pursuant to the Internal Revenue Code |
| • | a systematic withdrawal plan for Class A Shares only, equaling no more than 1% of the account value per any monthly redemption |
| • | involuntary redemptions |
| • | redemptions of Class A or Class C1 Shares to effect a combination of a Fund with any investment company by merger, acquisition of assets or otherwise |
All
waivers of deferred sales charges are subject to confirmation of your status or
holdings.
The
availability of deferred sales charge waivers may depend on the particular
Financial Intermediary or type of account through which you purchase Class A or
Class C1 Shares. Please see Appendix A: Additional Information About Financial
Intermediary-Specific Sales Charge Variations, Waivers And Discounts for more
information.
If
you want to learn more about deferred sales charges, contact your Financial
Intermediary.
DISTRIBUTION
AND SHAREHOLDER SERVICES ARRANGEMENTS AND PAYMENTS TO FINANCIAL
INTERMEDIARIES
The
Funds offer multiple Classes of Shares in this Prospectus: Class A, Class
C, Class C1, Class M, Class R6, Class S and Class Y Shares. Class A and
Class C1 Shares are discussed in the sections entitled “Choosing a Class of
Shares to Buy,” “Front-End Sales Charges,” and “More About Deferred Sales
Charges.”
Class A
Shares participate in the Funds' Rule 12b-1 distribution plan. Under the
distribution plan, the Funds' Class A Shares pay distribution fees of 0.25%
annually for the sale and distribution of Class A Shares. The distribution
fees are paid out of the Funds' Class A Shares assets on an ongoing
basis, and over time these fees will increase the cost of your investment in the
Funds, and the distribution fee may cost an investor more than paying other
types of sales charges.
Class
C Shares participate in the Funds’ Rule 12b-1 distribution plan and in the
Funds’ shareholder services plan. Under the distribution plan, the Funds’ Class
C Shares pay distribution fees of 0.75% annually for the sale and distribution
of Class C Shares. Under the shareholder services plan, the Funds’ Class C
Shares pay shareholder services
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fees
of 0.25% on an annualized basis for services provided to Class C shareholders.
Because both of these fees are paid out of the Funds’ Class C Share assets on an
ongoing basis, over time these fees will increase the cost of your investment in
Class C Shares of the Funds, and the distribution fee may cost an investor more
than paying other types of sales charges.
Class
C1 Shares participate in the Funds’ Rule 12b-1 distribution and shareholder
services plan. Class C1 Shares pay distribution fees of 0.75% annually
for the sale and distribution of Class C1 Shares and shareholder services
fees of 0.25% on an annualized basis for services provided to Class C1
shareholders. Because both of these fees are paid out of the Funds' Class
C1 Share assets on an ongoing basis, over time these fees will increase the cost
of your investment in Class C1 Shares of the Funds, and the distribution
fee may cost an investor more than paying other types of sales charges.
Class
M, Class R6, Class S and Class Y Shares do not participate in either the Funds'
distribution plan or the Funds' shareholder services plan.
Pursuant
to the Funds' Rule 12b-1 distribution and shareholder services plans,
Financial Intermediaries may receive: distribution compensation from
the Funds' Distributor with respect to Class A Shares of
the Funds; and/or distribution compensation and shareholder services
compensation from the Funds' Distributor with respect to Class C and Class C1
Shares of the Funds. These payments are reflected in the fees and expenses
listed in the annual fund operating expenses table earlier in the
Prospectus.
In
addition to the foregoing payments, the Funds' Distributor may make cash
payments, from its own resources, to key Financial Intermediaries (including
those who may offer Fund Shares through specialized programs such as tax
deferred retirement programs) in connection with distribution, which may include
providing services intended to result in the sale of Fund Shares, or to pay for
services such as marketing support, education and/or administrative services
support. These compensation arrangements may vary by Financial Intermediary and
may increase as the dollar value of Fund Shares held through a particular
Financial Intermediary increases. Because these payments are not made by the
Funds, these payments are not reflected in the fees and expenses listed in the
annual fund operating expenses table. Some of these payments are commonly
referred to as “revenue sharing.” At times, such payments may create an
incentive for a Financial Intermediary to recommend or make Shares of the Funds
available to its customers and may allow the Funds greater access to the
customers of the Financial Intermediary.
RIFUS
may also make cash payments, from its own resources, to key Financial
Intermediaries and their service providers (including those who may offer Fund
Shares through specialized programs such as tax deferred retirement programs) to
pay for services such as account consolidation, transaction processing and/or
administrative services support. These compensation arrangements may vary by
Financial Intermediary and may fluctuate based on the dollar value of Fund
Shares held through a particular Financial Intermediary. Because these payments
are not made by the Funds, these payments are not reflected in the fees and
expenses listed in the annual fund operating expenses table. At times, such
payments may create an incentive for a Financial Intermediary to recommend or
make Shares of the Funds available to its customers and may allow the Funds
greater access to the customers of the Financial Intermediary.
The
Funds' Distributor may pay or allow other promotional incentive payments to
Financial Intermediaries to the extent permitted by the rules adopted by the SEC
and the Financial Industry Regulatory Authority relating to the sale of mutual
fund shares.
To
enable Financial Intermediaries to provide a higher level of service and
information to prospective and current Fund shareholders, the Funds' Distributor
also offers them a range of complimentary software tools and educational
services. The Funds' Distributor provides such tools and services from its own
resources.
Ask
your Financial Intermediary for additional information as to what compensation,
if any, it receives from the Funds, the Funds' Distributor or RIM.
additional
information about HOW TO PURCHASE SHARES
Unless
you are eligible to participate in a Russell Investments employee investment
program, Shares are only available through a select network of Financial
Intermediaries. If you are not currently working with one of these Financial
Intermediaries, please call 800-787-7354 for assistance in contacting an
investment professional near you.
Class
S Shares may only be purchased by:
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| (1) | clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, or other similar fee for their services for the shareholder account in which the Class S Shares are held or clients of Financial Intermediaries where the Financial Intermediary would typically charge such a brokerage commission or other similar fee but has determined to waive its fee in a particular instance as the result of a potential conflict of interest; |
| (2) | employee benefit and other plans, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans, HSAs (Health Savings Accounts), profit sharing plans, money purchase plans, defined benefit plans and non-qualified deferred compensation plans, that consolidate and hold all Fund Shares in plan level or omnibus accounts on behalf of participants. SEP IRA, SIMPLE IRA and individual 403(b) Plans are not considered plans for purposes of this paragraph; |
| (3) | clients of Financial Intermediaries who are members of Russell Investments; |
| (4) | individuals pursuant to employee investment programs of Russell Investments or its affiliates; or |
| (5) | current/retired registered representatives of broker-dealers having sales agreements with the Funds' Distributor to sell Class S Shares of the Funds and current spouses or the equivalent thereof, children, step-children (with respect to current union only), parents, step-parents or parents-in-law of such registered representative or to a family trust in the name of such registered representative. |
Class
S Shares may also be available on brokerage platforms of firms that have
agreements with the Funds' Distributor to
offer such Shares when acting as an agent for the investor for the purchase or
sale of such Shares. If you transact in Class S Shares through one of
these brokerage programs, you may be required to pay a commission and/or other
forms of compensation to the broker, which are not reflected in the tables under
the Choosing A Class of Shares To Buy or
Front-End Sales Charges sections above.
The Funds' Distributor does not receive any portion of the commission or
compensation.
Class
R6 Shares are available only to employee benefit and other plans with multiple
participants, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans,
HSAs (Health Savings Accounts), profit sharing plans, money purchase plans,
defined benefit plans and non-qualified deferred compensation plans, that
consolidate and hold all Fund Shares in plan level accounts on behalf of
participants. Class R6 Shares are not available for any other category of
investor, including, for example, retail non-retirement accounts, traditional or
Roth IRA accounts, Coverdell Education Savings Accounts, SEP-IRAs, SAR-SEPs,
SIMPLE IRAs, individual 401(k) or individual 403(b) plan accounts.
Class
M Shares may only be purchased by:
| (1) | clients of certain Financial Intermediaries who charge an advisory fee, management fee, consulting fee, or other similar fee for their services for the shareholder account in which the Class M Shares are held; or |
| (2) | clients of certain Financial Intermediaries where the Financial Intermediary would typically charge a brokerage commission or other similar fee but has determined to waive its fee in a particular instance as the result of a potential conflict of interest; or |
| (3) | current/retired registered representatives of broker-dealers having sales agreements with the Funds' Distributor to sell Class M Shares of the Funds and current spouses or the equivalent thereof, children, step-children (with respect to current union only), parents, step-parents or parents-in-law of such registered representative or to a family trust in the name of such registered representative. |
In
addition, Class M Shares are available only to shareholders who transact on or
through advisory platforms in which the Financial Intermediary charges a
transaction fee to shareholders (which may be paid or otherwise directly or
indirectly satisfied, in whole or in part, by the Financial Intermediary) for
transactions in Shares of the Funds. Financial Intermediaries must have an
agreement with the Funds' Distributor to offer Class M Shares.
The
Funds generally do not have the ability to enforce these limitations on access
to Share Classes with eligibility requirements. It is the sole responsibility of
each Financial Intermediary to ensure that it only makes Share Classes with
eligibility requirements available to those categories of investors listed above
that qualify for access to such Share Classes. However, the Funds will not
knowingly sell Share Classes with eligibility requirements to any investor not
meeting one of the foregoing criteria.
284
There
is currently no required minimum initial investment for Class A, Class C, Class
C1, Class M, Class R6 or Class S Shares of the Funds. However, each Fund
reserves the right to close any account whose balance falls below $500 and to
change the categories of investors eligible to purchase its Shares.
For
Class Y Shares, there is a $10 million required minimum initial investment for
each account in the Funds. However, there is no required minimum initial
investment for (i) any Russell Investment Company or Russell Investment
Funds fund of funds, (ii) for investment companies that have entered into a
contractual arrangement with a Fund or its service providers to acquire Class Y
Shares or (iii) shares acquired by any collective vehicle or other
discretionary account actively managed by Russell Investments.
If
a Fund detects a pattern of trading that appears to be designed to evade the
minimum initial investment requirement for Class Y Shares, the Fund reserves the
right to close the account(s). Each Fund reserves the right to close any account
whose balance falls below $500 and to change the categories of investors
eligible to purchase its Shares or the required minimum investment amounts.
Prior to closing an account, the Funds will provide reasonable notice and in
certain cases, the Funds may offer an opportunity to increase the account
balance. You may be eligible to purchase Shares if you do not meet the required
initial minimum investment. You should consult your Financial Intermediary for
details, which are summarized in the Funds' Statement of Additional
Information.
If
you purchase, redeem, exchange, convert or hold Shares through a Financial
Intermediary, your Financial Intermediary may charge you transaction-based fees,
activity based fees and other fees for its services based upon its own policies
and procedures. Those fees are retained entirely by your Financial Intermediary
and no part of those fees are paid to RIM, the Funds' Distributor or the Funds.
Please contact your Financial Intermediary for more information about these fees
as they may apply to your investments and your accounts.
You
may purchase Shares through a Financial Intermediary on any business day of the
Funds (defined as a day on which the NYSE is open for regular trading). Purchase
orders are processed at the next net asset value per share calculated after a
Fund receives your order in proper form (as determined by your Financial
Intermediary). Certain authorized Fund agents have entered into agreements with
the Funds' Distributor or its affiliates to receive and accept orders for the
purchase and redemption of Shares of the Funds on behalf of Financial
Intermediaries. Some, but not all, Financial Intermediaries are Fund agents, and
some, but not all, Fund agents are Financial Intermediaries. Purchase orders
must normally be received by a Fund or a Fund agent prior to the close of
regular trading on the NYSE (normally 4:00 p.m. Eastern Time) in order to be
processed at the net asset value calculated on that day. Any purchase order
received after the purchase order cut-off time will be processed on the
following business day at the next calculated net asset value per share.
If
the NYSE has an unscheduled early closing on a day it has opened for business,
the Funds reserve the right to treat such day as a business day of the Funds and
accept purchase orders until the normally-scheduled close of regular trading on
the NYSE for that day, so long as the Funds' management believes there remains
an adequate market to meet purchase and redemption orders for that day. Market
volatility regulations provide for circuit breakers which represent the
thresholds at which trading is halted market-wide for single-day declines in the
S&P 500® Index.
Circuit breakers halt trading on the nation's stock markets during dramatic
drops and are set at 7%, 13% and 20% of the closing price for the previous day.
For a Level 3 halt (20% decline), trading will halt for the remainder of the
trading day. If this were to occur, the Funds' management believes there will
not be an adequate market to meet purchase orders for that day and the Funds
will close when trading is halted. Any purchase orders received before the
Funds close due to a Level 3 halt will be processed at that day’s calculated net
asset value per share. Any purchase orders received after the Funds close due to
a Level 3 halt will be processed on the following business day at the next
calculated net asset value per share.
A
Fund reserves the right to close, and therefore not accept purchase orders for
that day, if the primary trading markets of the Fund’s portfolio instruments are
closed (such as holidays on which such markets are closed) and the Fund’s
management believes that there is not an adequate market to meet purchase or
redemption requests on such day.
Because
Financial Intermediaries and Fund agents may have earlier purchase order cut off
times to allow them to deliver purchase orders to the Funds prior to the Funds'
order transmission cut off time, please ask your Financial Intermediary what the
cut off time is.
You
must place purchase orders for Fund Shares through a Financial Intermediary
in U.S. dollars. Specific payment arrangements should be made with your
Financial Intermediary. However, exceptions may be made by prior special
arrangement. For certain investment programs where your account is held directly
with the Funds' Transfer Agent, you must consult with the investment program to
determine the requirements for investing. If your account is held
directly
285
with
the Funds through certain investment programs, you may purchase Shares by mail,
internet or telephone. For such investment programs, cash, checks drawn on
credit card accounts, cashiers checks, money orders, travelers checks and other
cash equivalents will not be accepted by the Funds' Transfer Agent. Certain
investors whose accounts are held directly with the Funds may be prohibited from
purchasing additional Shares of the Funds.
Customer
Identification Program: To help the government
fight the funding of terrorism and money laundering activities, federal law
requires financial institutions to obtain, verify, and record information that
identifies each person who opens an account and to determine whether such
person’s name appears on government lists of known or suspected terrorists and
terrorist organizations. When you open a new account to buy Shares of the Funds,
the Funds or your Financial Intermediary will ask your name, address, date of
birth, taxpayer identification or other government identification number and
other information that will allow the Funds to identify you. If the Funds or
your Financial Intermediary are unable to adequately identify you within the
time frames set forth in the law, your Shares may be automatically redeemed. If
the net asset value per share has decreased since your purchase, you will lose
money as a result of this redemption.
Foreign
Investors: A Financial Intermediary may offer
and sell the Funds to non-resident aliens and non-U.S. entities, if (1) the
Financial Intermediary can fulfill the due diligence and other requirements of
the USA PATRIOT ACT and applicable Treasury or SEC rules, regulation and
guidance applicable to foreign investors, and (2) the offer and sale occur
in a jurisdiction where a Fund is authorized to be offered and sold, currently
the 50 states of the United States and certain U.S. territories.
Without
the prior approval of a Fund’s Chief Compliance Officer, non-resident aliens and
entities not formed under U.S. law may not purchase Shares of a Fund where the
Fund is responsible for the due diligence and other requirements of the USA
PATRIOT ACT and applicable Treasury or SEC rules, regulation and guidance
applicable to foreign investors. If you invest directly through the Funds and a
foreign address is added onto your account, the Funds will not be able to accept
additional purchases and will discontinue any automated purchases into the
account.
Offering
Dates and Times
Purchase
orders must normally be received by a Fund or a Fund agent prior to the close of
regular trading on the NYSE (normally 4:00 p.m. Eastern Time) in order to be
processed at the net asset value calculated on that day. Purchases can be made
on any day when Shares are offered. Because Financial Intermediaries and Fund
agents may have earlier purchase order cut off times to allow them to deliver
purchase orders to the Funds prior to the Funds' order transmission cut off
time, please ask your Financial Intermediary what the cut off time is.
Order
and Payment Procedures
Generally,
you must place purchase orders for Shares through your Financial Intermediary.
You may pay for your purchase by mail or funds transfer. Please contact your
Financial Intermediary for instructions on how to place orders and make payment
to the Funds.
If
your account is held directly with the Funds through certain investment
programs, you may purchase, redeem or exchange Fund Shares by mail, internet or
telephone. In order for your instructions by mail to be considered in proper
form, the instructions must be received at one of the following addresses:
Regular
Mail: Russell Investments, PO Box 219430, Kansas City, MO 64121-9430
Overnight
Mail: Russell Investments, 430 W 7th
Street, STE 219430, Kansas City, MO 64105-1407
Automated
Investment Program
Your
Financial Intermediary may offer an automated investment program whereby you may
choose to make regular investments in an established account. With the exception
of initial purchases (in certain Share Classes), the Funds do not require
minimum investment amounts or specific dates for automated purchases; however,
your Financial Intermediary may set certain restrictions for this option. If you
would like to establish an automated investment program or for further
information, please contact your Financial Intermediary.
You
may discontinue the automated investment program, or change the amount and
timing of your investments by contacting your Financial
Intermediary.
286
EXCHANGE
and conversion PRIVILEGE
How
to Exchange or Convert Shares
Exchanges
Between Funds. Depending on the Share Class you
are invested in and your Financial Intermediary’s policies, you may exchange
Shares you own in one Fund for Shares of any other Fund offered by RIC if you
meet any applicable initial minimum investment and investor eligibility
requirements stated in the Prospectus for that Fund. For additional information,
including Prospectuses for other RIC Funds, contact your Financial
Intermediary.
An
exchange between Funds involves the redemption of Shares, which is treated as a
sale for income tax purposes. Thus, capital gains or losses may be realized.
Please consult your tax adviser for more information.
Share
Class Conversions. Depending on the Share Class
you are invested in and your Financial Intermediary’s policies, you may convert
certain Classes of Shares you own of a Fund for Shares of a different Class of
Shares of that Fund. You must meet any applicable initial minimum investment
requirement and investor eligibility requirements stated in the Prospectus or
required by your Financial Intermediary.
Depending
upon the policies of your Financial Intermediary, in certain circumstances you
may convert Class C Shares or Class C1 Shares to Class A Shares without the
incurrence of a front-end sales charge.
Conversion
of Class C or Class C1 Shares. The Funds will
convert Class C or Class C1 Shares held for eight years to Class A Shares
without the incurrence of a front-end sales charge. If your account is
held through a Financial Intermediary, your Financial Intermediary may be
responsible for this conversion. As of January 1, 2019 (the “Effective
Date”), the Funds and certain Financial Intermediaries may not have been
tracking such holding periods and therefore may not be able to process such
conversions for Shares acquired prior to the Effective Date. In such
instances, the automatic conversion of Class C or Class C1 Shares to Class A
Shares will occur no later than eight years after the Effective
Date.
Please
contact your Financial Intermediary for information related to their conversion
policies.
RIFUS
believes that a conversion between Classes of the same Fund is not a taxable
event; however, you must check with your Financial Intermediary to determine if
they will process the conversion as non-taxable. Please consult with your
Financial Intermediary and your tax adviser for more information.
Contact
your Financial Intermediary for assistance in exchanging or converting Shares
and, because Financial Intermediaries’ processing times may vary, to find out
when your account will be credited or debited. To request an exchange or
conversion in writing, please contact your Financial Intermediary.
For
all Classes of Shares, exchanges and conversions must be made through your
Financial Intermediary.
If
your account is held directly with the Funds through certain investment
programs, you may request an exchange of Fund Shares by mail, internet or
telephone. In order for your instructions by mail to be considered in proper
form, the instructions must be received at one of the following addresses:
Regular
Mail: Russell Investments, PO Box 219430, Kansas City, MO 64121-9430
Overnight
Mail: Russell Investments, 430 W 7th
Street, STE 219430, Kansas City, MO 64105-1407
Systematic
Exchange Program
Your
Financial Intermediary may offer a systematic exchange program which allows you
to redeem Shares from one or more Funds and purchase Shares of certain other RIC
Funds in an established account. With the exception of initial purchases (for
certain Share Classes), the Funds do not require minimum exchange amounts or
specific dates for systematic exchanges; however, your Financial Intermediary
may set certain restrictions for this option. If you would like to establish a
systematic exchange program or for further information, please contact your
Financial Intermediary.
A
systematic exchange involves the redemption of Shares, which is treated as a
sale for income tax purposes. Thus, capital gains or losses may be realized.
Please consult your tax adviser for more information.
You
may discontinue a systematic exchange program, or change the amount and timing
of exchanges, by contacting your Financial Intermediary.
287
RIGHT
TO REJECT OR RESTRICT PURCHASE AND EXCHANGE ORDERS
The
Board has adopted frequent trading policies and procedures which are described
below. The Funds will apply these policies uniformly. The Funds discourage
frequent purchases and redemptions of Fund Shares by Fund shareholders. The
Funds do not accommodate frequent purchases and redemptions of Fund Shares by
Fund shareholders.
Each
Fund reserves the right to restrict or reject, without prior notice, any
purchase or exchange order for any reason. A Fund may, in its discretion,
restrict or reject a purchase or exchange order even if the transaction is not
subject to the specific limitations on frequent trading described below if the
Fund or its agents (i.e., RIM or RIFUS) determine that accepting the order could
interfere with the efficient management of a Fund’s portfolio or otherwise not
be in a Fund’s best interests.
In
the event that a Fund rejects an exchange request, the Fund will seek additional
instructions from the Financial Intermediary regarding whether or not to proceed
with the redemption side of the exchange.
Frequent
Trading Policies and Limitations on Trading Activity
Frequent
trading of Fund Shares, often in response to short-term fluctuations in the
market, also known as “market timing,” is not knowingly permitted by the Funds.
Frequent traders and market-timers should not invest in the Funds. The Funds are
intended for long-term investors. The Funds, subject to the limitations
described below, take steps reasonably designed to curtail frequent trading
practices by investors or Financial Intermediaries.
Each
Fund monitors for “substantive” round trip trades over a certain dollar
threshold that each Fund determines, in its discretion, could adversely affect
the management of the Fund. A single substantive round trip is a purchase and
redemption or redemption and purchase of Shares of a Fund within a rolling 60
day period. Each Fund permits two substantive round trip trades within a 60 day
period.
While
the Funds monitor for substantive trades over a certain dollar threshold, a Fund
may deem any round trip trade to be substantive depending on the potential
impact to the applicable Fund or Funds.
If
after two “substantive” round trips, an additional purchase or redemption
transaction is executed within that rolling 60 day period, future purchase
transactions will be rejected or restricted for 60 days. If after expiration of
such 60 day period, there are two “substantive” round trips followed by an
additional purchase or redemption transaction within that rolling 60 day period,
that shareholder’s right to purchase Shares of any Fund advised by RIM will be
permanently revoked.
If
the Funds do not have direct access to the shareholder's account to implement
the purchase revocation, the Funds will require the shareholder’s Financial
Intermediary to impose similar revocation of purchase privileges on the
shareholder. In the event that the shareholder’s Financial Intermediary cannot,
due to regulatory or legal obligations, impose a revocation of purchase
privileges, the Funds may accept an alternate trading restriction reasonably
designed to protect the Funds from improper trading practices.
Any
exception to the permanent revocation of a shareholder’s purchase privileges, or
an alternative trading restriction designed to protect the Funds from improper
trading practices, must be approved by the Funds' Chief Compliance Officer
(“CCO”).
The
Funds, through their agents, will use their best efforts to exercise the Funds'
right to restrict or reject purchase and exchange orders as described
above.
In
certain circumstances, with prior agreement between a Financial Intermediary and
the Funds, the Funds may rely on a Financial Intermediary's frequent trading
policies if it is determined that the Financial Intermediary’s policies are
sufficient to detect and deter improper frequent trading. Any reliance by the
Funds on a Financial Intermediary's frequent trading policies must be approved
by the Funds' CCO after a determination that such policies are sufficient to
detect and deter improper frequent trading. Therefore, with respect to frequent
trading, shareholders who invest through a Financial Intermediary should be
aware that they may be subject to the policies and procedures of their Financial
Intermediary which may be more or less restrictive than the Funds' policies and
procedures.
288
This
policy will not apply to:
| • | Money Market Funds. The Board of Trustees believes that it is unnecessary for any money market fund to have frequent trading policies because these funds may be used as short term investments. |
| • | Transactions in a Fund by certain other funds (i.e., funds of funds), including any Russell Investment Company and Russell Investment Funds funds of funds, and any other approved unaffiliated fund of funds. RIM and the Board of Trustees believe these transactions do not offer the opportunity for price arbitrage. |
| • | Institutional accounts, including but not limited to, foundations, endowments or defined benefit plans, where the transactions are a result of the characteristics of the account (e.g., donor directed activity or funding or disbursements of defined benefit plan payments) rather than a result of implementation of an investment strategy, so long as such transactions do not interfere with the efficient management of a Fund’s portfolio or are otherwise not in a Fund’s best interests. |
| • | Trading associated with asset allocated programs where the asset allocation has been developed by RIM or an affiliate of RIM and RIM has transparency into the amount of trading and the ability to monitor and assess the impact to the Funds or scheduled rebalancing of asset allocated programs based on set trading schedules within specified limits. |
| • | Systematic purchase or redemption programs, and transactions not directed by the shareholder or participant, such as payroll contributions and distribution reinvestments. |
In
applying the policy on limitations on trading activity, the Funds consider the
information available at the time and reserve the right to consider trading
history in any Fund including trading history in other accounts under common
ownership or control in determining whether to suspend or terminate trading
privileges.
This
policy will not affect any shareholder’s redemption rights.
Risks
of Frequent Trading
Short-term
or excessive trading into and out of a Fund may harm a Fund’s performance by
disrupting portfolio management strategies and by increasing expenses. These
expenses are borne by all Fund shareholders, including long-term investors who
do not generate such costs. Frequent trading may interfere with the efficient
management of a Fund’s portfolio, and may result in the Fund engaging in certain
activities to a greater extent than it otherwise would, such as maintaining
higher cash balances, using interfund lending and engaging in portfolio
transactions. Increased portfolio transactions and use of interfund lending
would correspondingly increase the Fund’s operating expenses and decrease the
Fund’s performance. For Funds that use hedging strategies to ensure that each
Fund is fully invested, maintenance of a higher level of cash balances would not
decrease a Fund’s exposure to market moves but would decrease the proportion of
the Fund that is actively managed.
Additionally,
to the extent that a Fund invests significantly in foreign securities traded on
markets which may close prior to when the Fund determines its net asset value
(referred to as the valuation time), frequent trading by certain shareholders
may cause dilution in the value of Fund Shares held by other shareholders.
Because events may occur after the close of these foreign markets and before the
valuation time of the Funds that influence the value of these foreign
securities, investors may seek to trade Fund Shares in an effort to benefit from
their understanding of the value of these foreign securities as of the Fund’s
valuation time (referred to as price arbitrage). These Funds have procedures
designed to adjust closing market prices of foreign securities under certain
circumstances to better reflect what are believed to be the fair values of the
foreign securities as of the valuation time. To the extent that a Fund does not
accurately value foreign securities as of its valuation time, investors engaging
in price arbitrage may cause dilution in the value of Fund Shares held by other
shareholders.
Because
certain small capitalization equity securities may be traded infrequently, to
the extent that a Fund invests significantly in small capitalization equity
securities, investors may seek to trade Fund Shares in an effort to benefit from
their understanding of the value of these securities (referred to as price
arbitrage). Any such frequent trading strategies may interfere with efficient
management of a Fund’s portfolio to a greater degree than Funds which invest in
highly liquid securities, in part because the Fund may have difficulty selling
these small capitalization portfolio securities at advantageous times or prices
to satisfy large and/or frequent redemption requests. Any successful price
arbitrage may also cause dilution in the value of Fund Shares held by other
shareholders.
289
Limitations
on the Ability to Detect and Curtail Frequent Trading
The
Funds will use reasonable efforts to detect frequent trading activity but may
not be able to detect such activity in certain circumstances. While the Funds
have the authority to request and analyze data on shareholders in omnibus
accounts and will use their best efforts to enforce the policy described above,
there may be limitations on the ability of the Funds to detect and curtail
frequent trading practices and the Funds may still not be able to completely
eliminate the possibility of improper trading under all circumstances.
Shareholders seeking to engage in frequent trading activities may use a variety
of strategies to avoid detection and, despite the efforts of the Funds to
prevent frequent trading, there is no guarantee that the Funds or their agents
will be able to identify each such shareholder in an omnibus account or curtail
their trading practices.
Any
exceptions to this policy may only be made by the CCO after a determination that
the transaction does not constitute improper trading or other trading activity
that may be harmful to the Funds.
additional
information about HOW TO REDEEM SHARES
Shares
may be redeemed through your Financial Intermediary on any business day of the
Funds (defined as a day on which the NYSE is open for regular trading).
Redemption requests are processed at the next net asset value per share
calculated after a Fund receives an order in proper form as determined by your
Financial Intermediary. Redemption orders must normally be received by a Fund or
a Fund agent prior to the close of regular trading on the NYSE (normally 4:00
p.m. Eastern Time) in order to be processed at the net asset value calculated on
that day. Any redemption requests received after the redemption order cut-off
time will be processed on the following business day at the next calculated net
asset value per share.
If
the NYSE has an unscheduled early closing on a day it has opened for business,
the Funds reserve the right to treat such day as a business day of the Funds and
accept redemption orders until the normally-scheduled close of regular trading
on the NYSE for that day, so long as the Funds' management believes there
remains an adequate market to meet purchase and redemption orders for that day.
Market volatility regulations provide for circuit breakers which represent the
thresholds at which trading is halted market-wide for single-day declines in the
S&P 500® Index.
Circuit breakers halt trading on the nation's stock markets during dramatic
drops and are set at 7%, 13% and 20% of the closing price for the previous day.
For a Level 3 halt (20% decline), trading will halt for the remainder of the
trading day. If this were to occur, the Funds' management believes there will
not be an adequate market to meet redemption orders for that day and the Funds
will close when trading is halted. Any redemption orders received before
the Funds close due to a Level 3 halt will be processed at that day’s calculated
net asset value per share. Any redemption orders received after the Funds close
due to a Level 3 halt will be processed on the following business day at the
next calculated net asset value per share.
A
Fund reserves the right to close, and therefore not accept redemption orders for
that day, if the primary trading markets of the Fund’s portfolio instruments are
closed (such as holidays on which such markets are closed) and the Fund’s
management believes that there is not an adequate market to meet purchase or
redemption requests on such day.
Shares
recently purchased by check or Automated Clearing House (“ACH”) directly to the
Fund may not be available for redemption for 7 days following the purchase or
until the check or ACH clears, whichever occurs first, to assure that a Fund has
received payment for your purchase.
Redemption
Dates and Times
Redemption
requests must normally be received by a Fund or a Fund agent prior to the close
of regular trading on the NYSE (normally 4:00 p.m. Eastern Time) in order to be
processed at the net asset value calculated on that day. Please contact your
Financial Intermediary for instructions on how to place redemption requests.
Because Financial Intermediaries and Fund agents may have earlier redemption
order cut off times to allow them to deliver redemption orders to the Funds
prior to the Funds' order transmission cut off time, please ask your Financial
Intermediary what the cut off time is.
If
your account is held directly with the Funds through certain investment
programs, you may redeem Fund Shares by mail, internet or telephone subject to
certain limitations. In order for your instructions by mail to be considered in
proper form, the instructions must be received at one of the following
addresses:
Regular
Mail: Russell Investments, PO Box 219430, Kansas City, MO 64121-9430
Overnight
Mail: Russell Investments, 430 W 7th
Street, STE 219430, Kansas City, MO 64105-1407
290
Systematic
Withdrawal Program
Your
Financial Intermediary may offer a systematic withdrawal program whereby you may
choose to redeem your Shares and receive regular payments from your account. The
Funds do not require specific redemption amounts or specific dates for
systematic withdrawals; however, your Financial Intermediary may set certain
restrictions for this option. Please contact your Financial Intermediary for
further information.
When
you redeem your Shares under a systematic withdrawal program, it may be a
taxable transaction.
For
Class A Shares, if your Financial Intermediary was paid a commission by the
Funds' Distributor on your Class A Shares and you redeem those Class A Shares
within one year of purchase, you may pay a deferred sales charge of up to
1%.
For
Class C1 Shares, if you redeem your Class C1 Shares within one year of purchase,
you may pay a deferred sales charge of 1%.
You
may discontinue the systematic withdrawal program, or change the amount and
timing of withdrawal payments by contacting your Financial Intermediary.
PAYMENT
OF REDEMPTION PROCEEDS
Payment
will ordinarily be made within seven days of receipt of your request in proper
form. Each Fund reserves the right to suspend redemptions or postpone the date
of payment for more than seven days if an emergency condition (as determined by
the SEC) exists.
When
you redeem your Shares, a Fund will ordinarily pay your redemption proceeds to
your Financial Intermediary for your benefit on the next business day after the
Fund receives the redemption request in proper form or as otherwise requested by
your Financial Intermediary. Your Financial Intermediary is then responsible for
settling the redemption with you as agreed between you and your Financial
Intermediary. For certain investment programs where your account is held
directly with the Funds' Transfer Agent, the length of time that the Funds
typically pay redemption proceeds from redemption requests varies based on the
method by which you elect to receive the proceeds. Your redemption proceeds will
be paid in one of the following manners: (1) a check for the redemption
proceeds may be sent to the shareholder(s) of record at the address of record on
the next business day after the Funds receive a redemption request in proper
form; or (2) if you have established the electronic redemption option, your
redemption proceeds can be (a) wired to your predesignated bank account on
the next business day after a Fund receives your redemption request in proper
form or (b) sent by Electronic Funds Transfer (“EFT”) to your predesignated
bank account on the second business day after a Fund receives your redemption
request in proper form. On Federal Reserve holidays, funds will settle on the
next day the Federal Reserve is open. Each Fund may charge a fee to cover the
cost of sending a wire transfer for redemptions, and your bank may charge an
additional fee to receive the wire. The Funds will always charge a fee when
sending an international wire transfer. The Funds reserve the right to charge a
fee when sending a domestic wire transfer for redemptions. The Funds do not
charge for EFT though your bank may charge a fee to receive the EFT. Wire
transfers and EFTs can be sent to U.S. financial institutions that are members
of the Federal Reserve System. Payment of redemption proceeds may take longer
than the time the Funds typically expect and may take up to seven days, as
permitted by law. The Funds reserve the right to temporarily hold redemption
proceeds from a natural person age 65 or older or age 18 and older who the
Transfer Agent reasonably believes has a mental or physical impairment that
renders the individual unable to protect his or her own financial interests from
actual or attempted exploitation. The Transfer Agent is not required to hold
redemption proceeds in these circumstances and does not assume any obligation to
do so.
Under
normal market conditions, the Funds expect to meet redemption orders by using
holdings of cash/cash equivalents and/or proceeds from the sale of portfolio
holdings. The Funds maintain cash reserves and RIM may increase or decrease a
Fund’s cash reserves in anticipation of redemption activity. Under stressed
market conditions, a Fund may be forced to sell securities in order to meet
redemption requests, which may result in a Fund selling such securities at an
inopportune time and/or for a price below the price a Fund would expect to
receive under normal market conditions. While the Funds do not routinely use
redemptions in-kind, each Fund reserves the right to use redemptions in-kind to
manage the impact of larger redemptions on a Fund. See “OTHER INFORMATION ABOUT
SHARE TRANSACTIONS – Redemption In-Kind,” below for additional information on a
Fund’s use of redemptions in-kind.
291
OTHER
INFORMATION ABOUT SHARE TRANSACTIONS
Written
Instructions
Written
instructions must be in proper form as determined by your Financial
Intermediary. For certain investment programs where your account is held
directly with the Funds' Transfer Agent, the Funds require that written
instructions be in proper form and reserve the right to reject any written
instructions that are not in proper form. Your Financial Intermediary will
assist you in preparing and submitting transaction instructions to the Funds to
insure proper form. Generally, your instructions must include:
| • | The Fund name and account number |
| • | Details related to the transaction including type and amount |
| • | Signatures of all owners exactly as registered on the account |
| • | Any supporting legal documentation that may be required |
If
your account is held directly with the Funds, in order for your instructions by
mail to be considered in proper form, the instructions must be received at one
of the following addresses:
Regular
Mail: Russell Investments, PO Box 219430, Kansas City, MO 64121-9430
Overnight
Mail: Russell Investments, 430 W 7th
Street, STE 219430, Kansas City, MO 64105-1407
Telephone
or Internet Instructions
Contact
your Financial Intermediary to determine their policy and requirements regarding
telephone or internet transactions.
If
your account is held directly with the Fund, through certain investment
programs, you may purchase, exchange or redeem shares by telephone or internet.
Generally, through certain investment programs, you are automatically eligible
to redeem or exchange shares by telephone or the internet, unless you notify us
in writing that you do not want any or all of these services. You may reinstate
these services at any time.
RIC
and RIFUS are not liable for any loss, cost, expense or other liability
resulting from complying with telephone or internet instructions that are deemed
to be genuine. RIC and RIFUS will employ reasonable procedures to confirm that
telephone or internet instructions received from any person with appropriate
account information are genuine. If reasonable procedures are not employed, RIC
and/or RIFUS may be liable for losses due to unauthorized or fraudulent
instructions.
Telephone
conversations you have with the Funds may be monitored or recorded for quality
assurance, verification, and recordkeeping purposes. By speaking to the Funds on
the telephone, you consent to such monitoring and recording.
Responsibility
for Fraud
Please
take precautions to protect yourself from fraud. Keep your account information
private and immediately review any account confirmations or statements that the
Funds or your Financial Intermediary send you. Contact your Financial
Intermediary immediately about any transactions that you believe to be
unauthorized.
Signature
Guarantee
Each
Fund reserves the right to require a signature guarantee for any request related
to your account including, but not limited to, requests for transactions or
account changes. A signature guarantee verifies the authenticity of your
signature and helps protect your account against fraud or unauthorized
transactions. You should be able to obtain a signature guarantee from a bank,
broker, credit union, savings association, clearing agency, or securities
exchange or association with which you have a banking or investment
relationship. A notary public cannot provide a signature guarantee. Contact your
Financial Intermediary for assistance in obtaining a signature guarantee.
In-Kind
Exchange of Securities
A
Fund may, at its discretion, permit you to acquire Shares in exchange for
securities you currently own. Any securities exchanged must meet the investment
objective, policies, and limitations of the appropriate Fund; have a readily
ascertainable market value; be liquid; and not be subject to restrictions on
resale.
292
Shares
purchased in exchange for securities generally may not be redeemed or exchanged
for 15 days following the purchase by exchange or until the transfer has
settled, whichever comes first. If you are a taxable investor, you will
generally realize gains or losses on the exchange for federal income tax
purposes. If you are contemplating an in-kind exchange you should consult your
tax adviser.
The
price at which the exchange will take place will depend upon the relative net
asset value of the Shares purchased and securities exchanged. Securities
accepted by a Fund will be valued in the same way the Fund values its assets.
Any interest earned on the securities following their delivery to a Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
becomes the property of the Funds, along with the securities. Please contact
your Financial Intermediary for further information.
Redemption
In-Kind
The
Funds have elected to be governed by Rule 18f-1 under the 1940 Act. Under that
rule, redemptions by a shareholder of up to the lesser of $250,000 or 1% of a
Fund’s net assets during any 90-day period must be redeemed solely in cash
unless otherwise agreed to by the redeeming shareholder. If operationally
possible (typically only when a Fund is notified in advance of a large
redemption), a Fund may, at its discretion, pay for any portion of a redemption
exceeding such amount by a distribution of in-kind securities from the Fund’s
portfolio, instead of in cash. There are also operational limitations on the
ability of the Funds to make an in-kind distribution of most non-U.S.
securities. An in-kind distribution of portfolio securities could include
illiquid or less liquid securities. Illiquid or less liquid securities may not
be able to be sold quickly or at a price that reflects full value, or there may
not be a market for such securities, which could cause you to realize losses on
the security if the security is sold at a price lower than that at which it had
been valued. If you receive an in-kind distribution of portfolio securities, and
choose to sell them, you will incur brokerage charges and continue to be subject
to tax consequences and market risk pending any sale.
Escheatment
and Inactivity
For
any accounts held directly at the Funds, the Funds will comply with all federal
search and notification requirements, as defined in section 17AD-17 of the
Securities Exchange Act of 1934, as amended. Should the assets be determined to
be abandoned, then the Funds are legally obligated to escheat said abandoned
property to the appropriate state’s unclaimed property administrator, as
determined by the owner’s last known address of record.
Furthermore,
the Funds will comply with any and all state regulations regarding “inactivity.”
Broadly described, state inactivity rules define time periods during which, and
specific means by which, shareholders must “contact” their assets, i.e. the
Funds, the Funds' agent and/or their Financial Intermediary. The Funds are
legally obligated to escheat inactive assets to the state of jurisdiction as
identified by the owner’s address of record.
It
is the intention of the Funds to comply with the appropriate regulative body for
each given instance. For additional information, questions, or concerns
regarding these regulations, please contact the Abandoned/Unclaimed Property
division of your state of residence, or please contact your Financial
Intermediary.
Texas
state residents may designate a representative for purposes of escheatment
notification. Please contact your Financial Intermediary for additional
information.
Uncashed
Checks
Please
make sure you promptly cash checks issued to you by the Funds. If you do not
cash a dividend, distribution, or redemption check, the Funds will act to
protect themselves and you. This may include restricting certain activities in
your account until the Funds are sure that they have a valid address for you.
After 180 days, the Funds will no longer honor the issued check and, after
attempts to locate you, the Funds will follow governing escheatment regulations
in disposition of check proceeds. No interest will accrue on amounts represented
by uncashed checks.
If
you have elected to receive dividends and/or distributions in cash, and the
postal or other delivery service is unable to deliver checks to your address of
record, or you do not respond to mailings from the Funds with regards to
uncashed checks, the Funds may convert your distribution option to have all
dividends and/or other distributions reinvested in additional
Shares.
293
Registration
of Fund Accounts
Many
brokers, employee benefit plans and bank trusts combine their clients’ holdings
in a single omnibus account with the Funds held in the brokers’, plans’, or bank
trusts’ own name or “street name.” Therefore, if you hold Shares through a
brokerage account, employee benefit plan or bank trust fund, a Fund may have
records only of that Financial Intermediary’s omnibus account. In this case,
your broker, employee benefit plan or bank is responsible for keeping track of
your account information. This means that you may not be able to request
transactions in your Shares directly through the Funds, but can do so only
through your broker, plan administrator or bank. Ask your Financial Intermediary
for information on whether your Shares are held in an omnibus
account.
294
FINANCIAL
HIGHLIGHTS
The
following financial highlights tables are intended to help you understand the
Funds' financial performance for at least the past 60 months (or, if a Fund
or Class has not been in operation for 60 months, since the beginning of
operations for that Fund or Class). Certain information reflects financial
results for a single Fund Share throughout each of the periods shown below. The
total returns in the tables represent how much your investment in a Fund would
have increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Funds' annual report, which is available upon
request.
The
information in the following tables represents the Financial Highlights for all
Funds' Share Classes that had Shares outstanding as of October 31, 2021.
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Equity Income Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 23.86 | .22 | 10.11 | 10.33 | (.24) | (.57) | — |
| October 31, 2020 | 24.71 | .32 | (.83) | (.51) | (.34) | — | — |
| October 31, 2019 | 32.27 | .35 | 1.22 | 1.57 | (.37) | (8.76) | — |
| October 31, 2018 | 35.18 | .32 | 1.31 | 1.63 | (.30) | (4.24) | — |
| October 31, 2017 | 31.65 | .26 | 6.46 | 6.72 | (.27) | (2.92) | — |
| Class C | |||||||
| October 31, 2021 | 23.00 | (.01) | 9.75 | 9.74 | (.06) | (.57) | — |
| October 31, 2020 | 23.82 | .14 | (.80) | (.66) | (.16) | — | — |
| October 31, 2019 | 31.45 | .16 | 1.15 | 1.31 | (.18) | (8.76) | — |
| October 31, 2018 | 34.41 | .07 | 1.28 | 1.35 | (.07) | (4.24) | — |
| October 31, 2017 | 31.05 | .02 | 6.31 | 6.33 | (.05) | (2.92) | — |
| Class S | |||||||
| October 31, 2021 | 23.75 | .30 | 10.08 | 10.38 | (.33) | (.57) | |
| October 31, 2020 | 24.60 | .39 | (.83) | (.44) | (.41) | — | — |
| October 31, 2019 | 32.18 | .43 | 1.20 | 1.63 | (.45) | (8.76) | — |
| October 31, 2018 | 35.10 | .43 | 1.29 | 1.72 | (.40) | (4.24) | — |
| October 31, 2017 | 31.60 | .33 | 6.47 | 6.80 | (.38) | (2.92) | — |
| Class Y | |||||||
| October 31, 2021 | 23.71 | .35 | 10.06 | 10.41 | (.38) | (.57) | |
| October 31, 2020 | 24.57 | .42 | (.83) | (.41) | (.45) | — | — |
| October 31, 2019 | 32.15 | .45 | 1.22 | 1.67 | (.49) | (8.76) | — |
| October 31, 2018 | 35.07 | .48 | 1.30 | 1.78 | (.46) | (4.24) | — |
| October 31, 2017(1) | 32.22 | .06 | 3.10 | 3.16 | (.31) | — | — |
See
Notes to Financial Highlights at the end of this section.
296
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.81) | 33.38 | 44.01 | 23,189 | 1.16 | 1.11 | .71 | 19 |
| (.34) | 23.86 | (2.02) | 17,484 | 1.18 | 1.13 | 1.35 | 33 |
| (9.13) | 24.71 | 10.55 | 21,159 | 1.14 | 1.09 | 1.44 | 28 |
| (4.54) | 32.27 | 4.65 | 29,572 | 1.11 | 1.09 | .97 | 118 |
| (3.19) | 35.18 | 22.63 | 30,614 | 1.11 | 1.11 | .79 | 90 |
| (.63) | 32.11 | 42.96 | 23,097 | 1.91 | 1.86 | (.04) | 19 |
| (.16) | 23.00 | (2.75) | 18,971 | 1.93 | 1.88 | .60 | 33 |
| (8.94) | 23.82 | 9.71 | 26,017 | 1.89 | 1.84 | .69 | 28 |
| (4.31) | 31.45 | 3.85 | 35,110 | 1.86 | 1.84 | .21 | 118 |
| (2.97) | 34.41 | 21.73 | 41,162 | 1.86 | 1.86 | .05 | 90 |
| (.90) | 33.23 | 44.45 | 187,082 | .91 | .82 | 1.00 | 19 |
| (.41) | 23.75 | (1.73) | 150,164 | .93 | .84 | 1.64 | 33 |
| (9.21) | 24.60 | 10.86 | 211,753 | .90 | .81 | 1.75 | 28 |
| (4.64) | 32.18 | 4.95 | 395,755 | .86 | .80 | 1.25 | 118 |
| (3.30) | 35.10 | 22.94 | 486,964 | .86 | .83 | 1.01 | 90 |
| (.95) | 33.17 | 44.67 | 20,411 | .71 | .66 | 1.17 | 19 |
| (.45) | 23.71 | (1.60) | 22,038 | .73 | .68 | 1.79 | 33 |
| (9.25) | 24.57 | 11.08 | 28,270 | .70 | .65 | 1.86 | 28 |
| (4.70) | 32.15 | 5.12 | 29,845 | .66 | .64 | 1.42 | 118 |
| (.31) | 35.07 | 9.86 | 33,664 | .66 | .66 | 1.16 | 90 |
297
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Sustainable Equity Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 51.21 | .11 | 16.63 | 16.74 | (.33) | (7.64) | — |
| October 31, 2020 | 54.96 | .25 | 2.34 | 2.59 | (.25) | (6.09) | — |
| October 31, 2019 | 52.52 | .35 | 6.46 | 6.81 | (.33) | (4.04) | — |
| October 31, 2018 | 53.93 | .29 | 3.46 | 3.75 | (.34) | (4.82) | — |
| October 31, 2017 | 49.22 | .34 | 8.20 | 8.54 | (.30) | (3.53) | — |
| Class C | |||||||
| October 31, 2021 | 50.27 | (.29) | 16.27 | 15.98 | (.19) | (7.64) | — |
| October 31, 2020 | 54.23 | (.13) | 2.30 | 2.17 | (.04) | (6.09) | — |
| October 31, 2019 | 52.01 | (.04) | 6.38 | 6.34 | (.08) | (4.04) | — |
| October 31, 2018 | 53.53 | (.11) | 3.43 | 3.32 | (.02) | (4.82) | — |
| October 31, 2017 | 48.98 | (.04) | 8.15 | 8.11 | (.03) | (3.53) | — |
| Class S | |||||||
| October 31, 2021 | 51.29 | .28 | 16.65 | 16.93 | (.47) | (7.64) | — |
| October 31, 2020 | 55.06 | .39 | 2.33 | 2.72 | (.40) | (6.09) | — |
| October 31, 2019 | 52.60 | .50 | 6.47 | 6.97 | (.47) | (4.04) | — |
| October 31, 2018 | 54.01 | .44 | 3.47 | 3.91 | (.50) | (4.82) | — |
| October 31, 2017 | 49.29 | .47 | 8.23 | 8.70 | (.45) | (3.53) | — |
| Class Y | |||||||
| October 31, 2021 | 51.18 | .37 | 16.60 | 16.97 | (.56) | (7.64) | — |
| October 31, 2020 | 54.95 | .33 | 2.47 | 2.80 | (.48) | (6.09) | — |
| October 31, 2019 | 52.51 | .57 | 6.46 | 7.03 | (.55) | (4.04) | — |
| October 31, 2018 | 53.93 | .52 | 3.46 | 3.98 | (.58) | (4.82) | — |
| October 31, 2017 | 49.22 | .57 | 8.21 | 8.78 | (.54) | (3.53) | — |
See Notes to Financial Highlights at the end of this section.
298
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross |
% Ratio of Expenses to Average Net Assets, Net(d)(g) |
% Ratio of Net Investment Income to Average Net Assets(d) |
% Portfolio Turnover Rate |
| (7.97) | 59.98 | 35.97 | 24,380 | 1.33 | 1.28 | .21 | 131 |
| (6.34) | 51.21 | 4.75 | 19,682 | 1.42 | 1.38 | .48 | 90 |
| (4.37) | 54.96 | 14.69 | 21,731 | 1.43 | 1.43 | .68 | 71 |
| (5.16) | 52.52 | 7.17 | 23,608 | 1.44 | 1.44 | .54 | 67 |
| (3.83) | 53.93 | 18.25 | 26,181 | 1.37 | 1.37 | .67 | 99 |
| (7.83) | 58.42 | 34.97 | 31,130 | 2.08 | 2.03 | (.54) | 131 |
| (6.13) | 50.27 | 3.96 | 26,788 | 2.17 | 2.13 | (.27) | 90 |
| (4.12) | 54.23 | 13.80 | 31,720 | 2.18 | 2.18 | (.08) | 71 |
| (4.84) | 52.01 | 6.36 | 34,361 | 2.19 | 2.19 | (.21) | 67 |
| (3.56) | 53.53 | 17.36 | 41,987 | 2.12 | 2.12 | (.08) | 99 |
| (8.11) | 60.11 | 36.37 | 225,751 | 1.08 | 0.99 | .50 | 131 |
| (6.49) | 51.29 | 5.03 | 201,214 | 1.17 | 1.09 | .77 | 90 |
| (4.51) | 55.06 | 15.03 | 242,569 | 1.19 | 1.15 | .97 | 71 |
| (5.32) | 52.60 | 7.49 | 274,932 | 1.19 | 1.15 | .83 | 67 |
| (3.98) | 54.01 | 18.57 | 311,079 | 1.12 | 1.09 | .91 | 99 |
| (8.20) | 59.95 | 36.57 | 11,331 | .88 | .83 | .66 | 131 |
| (6.57) | 51.18 | 5.21 | 10,941 | .90 | .87 | .64 | 90 |
| (4.59) | 54.95 | 15.19 | 142,970 | .99 | .99 | 1.10 | 71 |
| (5.40) | 52.51 | 7.65 | 154,392 | .99 | .99 | .99 | 67 |
| (4.07) | 53.93 | 18.79 | 203,480 | .92 | .92 | 1.11 | 99 |
299
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| U.S. Strategic Equity Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 12.88 | .02 | 5.02 | 5.04 | (.04) | — | — |
| October 31, 2020 | 12.18 | .07 | 1.23 | 1.30 | (.07) | (.53) | — |
| October 31, 2019 | 13.46 | .10 | .93 | 1.03 | (.10) | (2.21) | — |
| October 31, 2018 | 14.19 | .09 | .43 | .52 | (.11) | (1.14) | — |
| October 31, 2017 | 12.10 | .11 | 2.64 | 2.75 | (.12) | (.54) | — |
| Class C | |||||||
| October 31, 2021 | 12.80 | (.10) | 4.99 | 4.89 | (.01) | — | — |
| October 31, 2020 | 12.12 | (.02) | 1.23 | 1.21 | — (f) | (.53) | — |
| October 31, 2019 | 13.41 | .01 | .93 | .94 | (.02) | (2.21) | — |
| October 31, 2018 | 14.14 | .01 | .40 | .41 | — | (1.14) | — |
| October 31, 2017 | 12.07 | .01 | 2.63 | 2.64 | (.03) | (.54) | — |
| Class M | |||||||
| October 31, 2021 | 12.88 | .08 | 5.04 | 5.12 | (.10) | — | — |
| October 31, 2020 | 12.19 | .11 | 1.23 | 1.34 | (.12) | (.53) | — |
| October 31, 2019 | 13.48 | .13 | .94 | 1.07 | (.15) | (2.21) | — |
| October 31, 2018 | 14.21 | .16 | .41 | .57 | (.16) | (1.14) | — |
| October 31, 2017(3) | 13.10 | .07 | 1.13 | 1.20 | (.09) | — | — |
| Class S | |||||||
| October 31, 2021 | 12.90 | .07 | 5.03 | 5.10 | (.08) | — | — |
| October 31, 2020 | 12.20 | .10 | 1.23 | 1.33 | (.10) | (.53) | — |
| October 31, 2019 | 13.49 | .13 | .92 | 1.05 | (.13) | (2.21) | — |
| October 31, 2018 | 14.21 | .15 | .42 | .57 | (.15) | (1.14) | — |
| October 31, 2017 | 12.13 | .14 | 2.63 | 2.77 | (.15) | (.54) | — |
| Class Y | |||||||
| October 31, 2018(6) | 14.27 | .02 | (.77) | (.75) | (.04) | — | — |
See
Notes to Financial Highlights at the end of this section.
300
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e)(g) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.04) | 17.88 | 39.21 | 12,928 | 1.25 | .99 | .15 | 38 |
| (.60) | 12.88 | 11.04 | 7,696 | 1.25 | .99 | .61 | 60 |
| (2.31) | 12.18 | 11.40 | 7,769 | 1.37 | 1.09 | .88 | 130 |
| (1.25) | 13.46 | 3.59 | 10,011 | 1.33 | 1.05 | .74 | 144 |
| (.66) | 14.19 | 23.47 | 5,560 | 1.30 | 1.05 | .85 | 88 |
| (.01) | 17.68 | 38.18 | 7,142 | 2.00 | 1.74 | (.60) | 38 |
| (.53) | 12.80 | 10.27 | 5,116 | 2.00 | 1.74 | (.15) | 60 |
| (2.23) | 12.12 | 10.53 | 5,630 | 2.13 | 1.85 | .11 | 130 |
| (1.14) | 13.41 | 2.80 | 6,437 | 2.07 | 1.80 | .06 | 144 |
| (.57) | 14.14 | 22.48 | 12,867 | 2.05 | 1.80 | .11 | 88 |
| (.10) | 17.90 | 39.83 | 704,072 | .99 | .64 | .50 | 38 |
| (.65) | 12.88 | 11.38 | 310,844 | 1.00 | .64 | .94 | 60 |
| (2.36) | 12.19 | 11.73 | 226,988 | 1.10 | .72 | 1.14 | 130 |
| (1.30) | 13.48 | 3.94 | 94,519 | 1.08 | .70 | 1.13 | 144 |
| (.09) | 14.21 | 9.43 | 96,138 | 1.03 | .70 | .78 | 88 |
| (.08) | 17.92 | 39.62 | 3,565,540 | .99 | .74 | .40 | 38 |
| (.63) | 12.90 | 11.34 | 2,543,965 | 1.00 | .74 | .86 | 60 |
| (2.34) | 12.20 | 11.59 | 2,514,082 | 1.12 | .84 | 1.13 | 130 |
| (1.29) | 13.49 | 3.91 | 2,621,727 | 1.08 | .80 | 1.04 | 144 |
| (.69) | 14.21 | 23.64 | 2,901,736 | 1.05 | .80 | 1.11 | 88 |
| (.04) | 13.48 | (5.27) | 1,151 | .90 | .62 | .69 | 144 |
301
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| U.S. Small Cap Equity Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 24.25 | (.05) | 14.65 | 14.60 | (.09) | — | — |
| October 31, 2020 | 27.44 | (—)(f) | (2.07) | (2.07) | (.13) | (.99) | — |
| October 31, 2019 | 31.39 | .07 | .23 | .30 | (.08) | (4.17) | — |
| October 31, 2018 | 34.30 | .05 | .92 | .97 | — | (3.88) | — |
| October 31, 2017 | 27.32 | (.01) | 7.14 | 7.13 | (.09) | (.06) | — |
| Class C | |||||||
| October 31, 2021 | 22.12 | (.29) | 13.38 | 13.09 | — | — | — |
| October 31, 2020 | 25.19 | (.17) | (1.91) | (2.08) | — | (.99) | — |
| October 31, 2019 | 29.30 | (.12) | .18 | .06 | — | (4.17) | — |
| October 31, 2018 | 32.48 | (.20) | .90 | .70 | — | (3.88) | — |
| October 31, 2017 | 26.00 | (.24) | 6.78 | 6.54 | — | (.06) | — |
| Class M | |||||||
| October 31, 2021 | 24.58 | .09 | 14.84 | 14.93 | (.19) | — | — |
| October 31, 2020 | 27.82 | .09 | (2.09) | (2.00) | (.25) | (.99) | — |
| October 31, 2019 | 31.79 | .16 | .26 | .42 | (.22) | (4.17) | — |
| October 31, 2018 | 34.66 | .17 | .94 | 1.11 | (.10) | (3.88) | — |
| October 31, 2017(3) | 31.94 | .01 | 2.71 | 2.72 | — | — | — |
| Class R6 | |||||||
| October 31, 2021 | 24.60 | .10 | 14.85 | 14.95 | (.17) | — | — |
| October 31, 2020 | 27.83 | .16 | (2.15) | (1.99) | (.25) | (.99) | — |
| October 31, 2019 | 31.81 | .17 | .25 | .42 | (.23) | (4.17) | — |
| October 31, 2018 | 34.67 | .19 | .93 | 1.12 | (.10) | (3.88) | — |
| October 31, 2017 | 27.61 | .09 | 7.24 | 7.33 | (.21) | (.06) | — |
| Class S | |||||||
| October 31, 2021 | 24.59 | .05 | 14.85 | 14.90 | (.16) | — | — |
| October 31, 2020 | 27.82 | .07 | (2.09) | (2.02) | (.22) | (.99) | — |
| October 31, 2019 | 31.78 | .15 | .24 | .39 | (.18) | (4.17) | — |
| October 31, 2018 | 34.64 | .15 | .93 | 1.08 | (.06) | (3.88) | — |
| October 31, 2017 | 27.57 | .07 | 7.22 | 7.29 | (.16) | (.06) | — |
| Class Y | |||||||
| October 31, 2021 | 24.61 | .12 | 14.85 | 14.97 | (.20) | — | — |
| October 31, 2020 | 27.84 | .11 | (2.09) | (1.98) | (.26) | (.99) | — |
| October 31, 2019 | 31.83 | .19 | .23 | .42 | (.24) | (4.17) | — |
| October 31, 2018 | 34.69 | .21 | .92 | 1.13 | (.11) | (3.88) | — |
| October 31, 2017 | 27.61 | .13 | 7.23 | 7.36 | (.22) | (.06) | — |
See
Notes to Financial Highlights at the end of this section.
302
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e)(g) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.09) | 38.76 | 60.30 | 19,963 | 1.35 | 1.35 | (.15) | 110 |
| (1.12) | 24.25 | (8.05) | 12,998 | 1.42 | 1.42 | (.01) | 132 |
| (4.25) | 27.44 | 3.30 | 15,692 | 1.33 | 1.33 | .24 | 116 |
| (3.88) | 31.39 | 2.75 | 20,511 | 1.24 | 1.24 | .14 | 73 |
| (.15) | 34.30 | 26.15 | 18,935 | 1.25 | 1.25 | (.04) | 109 |
| — | 35.21 | 59.18 | 11,220 | 2.10 | 2.10 | (.89) | 110 |
| (.99) | 22.12 | (8.78) | 8,005 | 2.17 | 2.17 | (.75) | 132 |
| (4.17) | 25.19 | 2.55 | 12,149 | 2.08 | 2.08 | (.49) | 116 |
| (3.88) | 29.30 | 1.99 | 16,921 | 1.99 | 1.99 | (.61) | 73 |
| (.06) | 32.48 | 25.19 | 21,072 | 2.00 | 2.00 | (.79) | 109 |
| (.19) | 39.32 | 60.95 | 167,700 | 1.10 | .96 | .24 | 110 |
| (1.24) | 24.58 | (7.72) | 87,186 | 1.17 | 1.03 | .36 | 132 |
| (4.39) | 27.82 | 3.76 | 71,254 | 1.09 | .95 | .58 | 116 |
| (3.98) | 31.79 | 3.15 | 33,061 | .99 | .85 | .53 | 73 |
| — | 34.66 | 8.52 | 28,644 | 1.00 | .86 | .03 | 109 |
| (.17) | 39.38 | 60.96 | 912 | .95 | .93 | .27 | 110 |
| (1.24) | 24.60 | (7.67) | 395 | .98 | .96 | .56 | 132 |
| (4.40) | 27.83 | 3.80 | 13,541 | .94 | .92 | .61 | 116 |
| (3.98) | 31.81 | 3.18 | 2,312 | .84 | .82 | .56 | 73 |
| (.27) | 34.67 | 26.69 | 2,788 | .85 | .83 | .28 | 109 |
| (.16) | 39.33 | 60.76 | 1,147,967 | 1.10 | 1.06 | .15 | 110 |
| (1.21) | 24.59 | (7.78) | 934,202 | 1.17 | 1.13 | .28 | 132 |
| (4.35) | 27.82 | 3.64 | 1,158,269 | 1.08 | 1.04 | .54 | 116 |
| (3.94) | 31.78 | 3.04 | 1,376,020 | .99 | .95 | .43 | 73 |
| (.22) | 34.64 | 26.51 | 1,488,373 | 1.00 | .97 | .22 | 109 |
| (.20) | 39.38 | 61.06 | 166,076 | .90 | .90 | .33 | 110 |
| (1.25) | 24.61 | (7.64) | 225,968 | .97 | .97 | .44 | 132 |
| (4.41) | 27.84 | 3.76 | 301,373 | .89 | .89 | .68 | 116 |
| (3.99) | 31.83 | 3.20 | 323,283 | .79 | .79 | .59 | 73 |
| (.28) | 34.69 | 26.74 | 428,472 | .80 | .80 | .40 | 109 |
303
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| International Developed Markets Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 32.08 | .67 | 11.99 | 12.66 | (.33) | — | — |
| October 31, 2020 | 36.64 | .33 | (3.89) | (3.56) | (1.00) | — | — |
| October 31, 2019 | 36.91 | .73 | 1.67 | 2.40 | (.68) | (1.99) | — |
| October 31, 2018 | 40.97 | .68 | (4.05) | (3.37) | (.69) | — | — |
| October 31, 2017 | 33.92 | .53 | 7.22 | 7.75 | (.70) | — | — |
| Class C | |||||||
| October 31, 2021 | 32.24 | .35 | 12.09 | 12.44 | (.02) | — | — |
| October 31, 2020 | 36.74 | .08 | (3.95) | (3.87) | (.63) | — | — |
| October 31, 2019 | 36.91 | .48 | 1.69 | 2.17 | (.35) | (1.99) | — |
| October 31, 2018 | 40.93 | .37 | (4.04) | (3.67) | (.35) | — | — |
| October 31, 2017 | 33.87 | .25 | 7.24 | 7.49 | (.43) | — | — |
| Class M | |||||||
| October 31, 2021 | 32.13 | .87 | 11.96 | 12.83 | (.47) | — | — |
| October 31, 2020 | 36.71 | .47 | (3.89) | (3.42) | (1.16) | — | — |
| October 31, 2019 | 37.03 | .96 | 1.57 | 2.53 | (.86) | (1.99) | — |
| October 31, 2018 | 41.09 | .82 | (4.03) | (3.21) | (.85) | — | — |
| October 31, 2017(3) | 36.02 | .40 | 4.67 | 5.07 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 32.14 | .78 | 12.02 | 12.80 | (.43) | — | — |
| October 31, 2020 | 36.71 | .43 | (3.88) | (3.45) | (1.12) | — | — |
| October 31, 2019 | 37.02 | .82 | 1.68 | 2.50 | (.82) | (1.99) | — |
| October 31, 2018 | 41.07 | .79 | (4.05) | (3.26) | (.79) | — | — |
| October 31, 2017 | 34.00 | .62 | 7.24 | 7.86 | (.79) | — | — |
| Class Y | |||||||
| October 31, 2021 | 32.17 | .86 | 12.02 | 12.88 | (.49) | — | — |
| October 31, 2020 | 36.75 | .50 | (3.90) | (3.40) | (1.18) | — | — |
| October 31, 2019 | 37.07 | .89 | 1.66 | 2.55 | (.88) | (1.99) | — |
| October 31, 2018 | 41.12 | .85 | (4.05) | (3.20) | (.85) | — | — |
| October 31, 2017 | 34.05 | .85 | 7.08 | 7.93 | (.86) | — | — |
See
Notes to Financial Highlights at the end of this section.
304
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.33) | 44.41 | 39.61 | 23,364 | 1.25 | 1.22 | 1.60 | 34 |
| (1.00) | 32.08 | (10.08) | 18,028 | 1.26 | 1.22 | 1.00 | 57 |
| (2.67) | 36.64 | 7.49 | 23,726 | 1.25 | 1.21 | 2.07 | 58 |
| (.69) | 36.91 | (8.38) | 30,305 | 1.25 | 1.22 | 1.67 | 75 |
| (.70) | 40.97 | 23.30 | 30,412 | 1.26 | 1.26 | 1.43 | 104 |
| (.02) | 44.66 | 38.59 | 9,663 | 2.00 | 1.97 | .83 | 34 |
| (.63) | 32.24 | (10.78) | 8,434 | 2.01 | 1.97 | .24 | 57 |
| (2.34) | 36.74 | 6.67 | 14,310 | 2.00 | 1.96 | 1.36 | 58 |
| (.35) | 36.91 | (9.06) | 19,144 | 2.00 | 1.97 | .90 | 75 |
| (.43) | 40.93 | 22.37 | 26,085 | 2.01 | 2.01 | .68 | 104 |
| (.47) | 44.49 | 40.15 | 364,171 | 1.00 | .83 | 2.06 | 34 |
| (1.16) | 32.13 | (9.74) | 190,629 | 1.01 | .83 | 1.41 | 57 |
| (2.85) | 36.71 | 7.90 | 194,243 | 1.01 | .83 | 2.73 | 58 |
| (.85) | 37.03 | (8.00) | 86,461 | 1.00 | .83 | 2.02 | 75 |
| — | 41.09 | 14.08 | 65,546 | .99 | .87 | 1.60 | 104 |
| (.43) | 44.51 | 40.02 | 1,578,103 | 1.00 | .93 | 1.85 | 34 |
| (1.12) | 32.14 | (9.82) | 1,396,894 | 1.01 | .93 | 1.29 | 57 |
| (2.81) | 36.71 | 7.79 | 1,880,108 | 1.00 | .92 | 2.34 | 58 |
| (.79) | 37.02 | (8.11) | 2,514,298 | 1.00 | .93 | 1.93 | 75 |
| (.79) | 41.07 | 23.64 | 2,736,737 | 1.01 | .98 | 1.67 | 104 |
| (.49) | 44.56 | 40.26 | 61,501 | .80 | .77 | 2.05 | 34 |
| (1.18) | 32.17 | (9.69) | 48,009 | .81 | .77 | 1.53 | 57 |
| (2.87) | 36.75 | 7.96 | 20,712 | .81 | .77 | 2.54 | 58 |
| (.85) | 37.07 | (7.96) | 20,546 | .80 | .77 | 2.08 | 75 |
| (.86) | 41.12 | 23.84 | 27,034 | .81 | .81 | 2.25 | 104 |
305
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Global Equity Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 8.89 | .05 | 3.18 | 3.23 | (.07) | (2.36) | — |
| October 31, 2020 | 9.98 | .05 | .14 | .19 | (.41) | (.87) | — |
| October 31, 2019 | 10.44 | .13 | .73 | .86 | (.10) | (1.22) | — |
| October 31, 2018 | 11.81 | .06 | (.02) | .04 | (.06) | (1.35) | — |
| October 31, 2017 | 10.35 | .06 | 2.21 | 2.27 | (.12) | (.69) | — |
| Class C | |||||||
| October 31, 2021 | 8.72 | (.02) | 3.11 | 3.09 | — | (2.36) | — |
| October 31, 2020 | 9.80 | (.02) | .15 | .13 | (.34) | (.87) | — |
| October 31, 2019 | 10.25 | .06 | .72 | .78 | (.01) | (1.22) | — |
| October 31, 2018 | 11.64 | (.02) | (.02) | (.04) | — | (1.35) | — |
| October 31, 2017 | 10.21 | (.02) | 2.18 | 2.16 | (.04) | (.69) | — |
| Class M | |||||||
| October 31, 2021 | 8.99 | .08 | 3.21 | 3.29 | (.10) | (2.36) | — |
| October 31, 2020 | 10.03 | .09 | .14 | .23 | (.40) | (.87) | — |
| October 31, 2019 | 10.50 | .16 | .73 | .89 | (.14) | (1.22) | — |
| October 31, 2018 | 11.88 | .10 | (.02) | .08 | (.11) | (1.35) | — |
| October 31, 2017(3) | 10.64 | .04 | 1.20 | 1.24 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 8.99 | .07 | 3.22 | 3.29 | (.09) | (2.36) | — |
| October 31, 2020 | 10.05 | .07 | .15 | .22 | (.41) | (.87) | — |
| October 31, 2019 | 10.51 | .16 | .73 | .89 | (.13) | (1.22) | — |
| October 31, 2018 | 11.87 | .09 | (.02) | .07 | (.08) | (1.35) | — |
| October 31, 2017 | 10.40 | .09 | 2.22 | 2.31 | (.15) | (.69) | — |
| Class Y | |||||||
| October 31, 2021 | 8.96 | .10 | 3.18 | 3.28 | (.11) | (2.36) | — |
| October 31, 2020 | 10.06 | .09 | .15 | .24 | (.47) | (.87) | — |
| October 31, 2019 | 10.52 | .17 | .74 | .91 | (.15) | (1.22) | — |
| October 31, 2018 | 11.90 | .11 | (.03) | .08 | (.11) | (1.35) | — |
| October 31, 2017 | 10.42 | .11 | 2.23 | 2.34 | (.17) | (.69) | — |
See
Notes to Financial Highlights at the end of this section.
306
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (2.43) | 9.69 | 41.83 | 9,215 | 1.50 | 1.27 | .57 | 49 |
| (1.28) | 8.89 | 1.44 | 7,422 | 1.55 | 1.36 | .56 | 77 |
| (1.32) | 9.98 | 10.57 | 10,217 | 1.48 | 1.44 | 1.39 | 53 |
| (1.41) | 10.44 | .01 | 13,032 | 1.50 | 1.48 | .52 | 60 |
| (.81) | 11.81 | 23.41 | 13,331 | 1.49 | 1.49 | .58 | 90 |
| (2.36) | 9.45 | 40.73 | 4,098 | 2.25 | 2.02 | (.19) | 49 |
| (1.21) | 8.72 | .75 | 3,805 | 2.30 | 2.11 | (.18) | 77 |
| (1.23) | 9.80 | 9.71 | 6,091 | 2.23 | 2.19 | .65 | 53 |
| (1.35) | 10.25 | (.73) | 7,417 | 2.24 | 2.23 | (.23) | 60 |
| (.73) | 11.64 | 22.47 | 10,011 | 2.24 | 2.24 | (.15) | 90 |
| (2.46) | 9.82 | 42.21 | 7,717 | 1.25 | .92 | .90 | 49 |
| (1.27) | 8.99 | 1.84 | 8,150 | 1.27 | 1.01 | .97 | 77 |
| (1.36) | 10.03 | 10.90 | 117,840 | 1.25 | 1.10 | 1.66 | 53 |
| (1.46) | 10.50 | .37 | 51,267 | 1.24 | 1.13 | .90 | 60 |
| — | 11.88 | 11.65 | 61,922 | 1.24 | 1.14 | .57 | 90 |
| (2.45) | 9.83 | 42.12 | 117,789 | 1.25 | 1.02 | .81 | 49 |
| (1.28) | 8.99 | 1.73 | 118,994 | 1.29 | 1.11 | .81 | 77 |
| (1.35) | 10.05 | 10.83 | 643,089 | 1.23 | 1.19 | 1.64 | 53 |
| (1.43) | 10.51 | .28 | 901,342 | 1.24 | 1.23 | .79 | 60 |
| (.84) | 11.87 | 23.74 | 1,184,587 | 1.24 | 1.24 | .87 | 90 |
| (2.47) | 9.77 | 42.30 | 1,202,793 | 1.04 | .82 | 1.10 | 49 |
| (1.34) | 8.96 | 1.90 | 437,655 | 1.10 | .91 | 1.01 | 77 |
| (1.37) | 10.06 | 11.15 | 675,073 | 1.04 | 1.00 | 1.83 | 53 |
| (1.46) | 10.52 | .39 | 739,946 | 1.05 | 1.03 | .98 | 60 |
| (.86) | 11.90 | 24.05 | 908,284 | 1.04 | 1.04 | .99 | 90 |
307
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Emerging Markets Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 18.13 | .27 | 3.49 | 3.76 | (.08) | — | — |
| October 31, 2020 | 18.46 | .14 | (.03) | .11 | (.35) | (.09) | — |
| October 31, 2019 | 17.56 | .23 | 1.39 | 1.62 | (.25) | (.47) | — |
| October 31, 2018 | 20.68 | .17 | (3.10) | (2.93) | (.19) | — | — |
| October 31, 2017 | 16.51 | .13 | 4.17 | 4.30 | (.13) | — | — |
| Class C | |||||||
| October 31, 2021 | 16.77 | .09 | 3.24 | 3.33 | — | — | — |
| October 31, 2020 | 17.07 | .01 | (.05) | (.04) | (.17) | (.09) | — |
| October 31, 2019 | 16.26 | .08 | 1.29 | 1.37 | (.09) | (.47) | — |
| October 31, 2018 | 19.15 | .02 | (2.87) | (2.85) | (.04) | — | — |
| October 31, 2017 | 15.30 | (.01) | 3.88 | 3.87 | (.02) | — | — |
| Class M | |||||||
| October 31, 2021 | 18.27 | .35 | 3.51 | 3.86 | (.15) | — | — |
| October 31, 2020 | 18.61 | .21 | (.04) | .17 | (.42) | (.09) | — |
| October 31, 2019 | 17.71 | .37 | 1.32 | 1.69 | (.32) | (.47) | — |
| October 31, 2018 | 20.86 | .25 | (3.14) | (2.89) | (.26) | — | — |
| October 31, 2017(3) | 17.92 | .04 | 2.90 | 2.94 | — | — | — |
| Class R6 | |||||||
| October 31, 2021 | 18.33 | .14 | 3.73 | 3.87 | (.15) | — | — |
| October 31, 2020 | 18.66 | .22 | (.03) | .19 | (.43) | (.09) | — |
| October 31, 2019 | 17.75 | .38 | 1.33 | 1.71 | (.33) | (.47) | — |
| October 31, 2018 | 20.89 | .29 | (3.17) | (2.88) | (.26) | — | — |
| October 31, 2017 | 16.68 | .29 | 4.12 | 4.41 | (.20) | — | — |
| Class S | |||||||
| October 31, 2021 | 18.28 | .31 | 3.53 | 3.84 | (.13) | — | — |
| October 31, 2020 | 18.62 | .18 | (.03) | .15 | (.40) | (.09) | — |
| October 31, 2019 | 17.71 | .27 | 1.41 | 1.68 | (.30) | (.47) | — |
| October 31, 2018 | 20.85 | .23 | (3.14) | (2.91) | (.23) | — | — |
| October 31, 2017 | 16.65 | .18 | 4.19 | 4.37 | (.17) | — | — |
| Class Y | |||||||
| October 31, 2021 | 18.32 | .23 | 3.65 | 3.88 | (.16) | — | — |
| October 31, 2020 | 18.65 | .21 | (.02) | .19 | (.43) | (.09) | — |
| October 31, 2019 | 17.75 | .32 | 1.39 | 1.71 | (.34) | (.47) | — |
| October 31, 2018 | 20.89 | .26 | (3.13) | (2.87) | (.27) | — | — |
| October 31, 2017 | 16.68 | .20 | 4.21 | 4.41 | (.20) | — | — |
See
Notes to Financial Highlights at the end of this section.
308
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.08) | 21.81 | 20.76 | 13,526 | 1.74 | 1.42 | 1.22 | 52 |
| (.44) | 18.13 | .44 | 12,044 | 1.78 | 1.55 | .80 | 58 |
| (.72) | 18.46 | 9.65 | 13,696 | 1.77 | 1.64 | 1.30 | 86 |
| (.19) | 17.56 | (14.31) | 16,590 | 1.76 | 1.68 | .85 | 65 |
| (.13) | 20.68 | 26.30 | 20,888 | 1.76 | 1.71 | .71 | 50 |
| — | 20.10 | 19.86 | 6,121 | 2.49 | 2.17 | .45 | 52 |
| (.26) | 16.77 | (.32) | 6,036 | 2.53 | 2.30 | .03 | 58 |
| (.56) | 17.07 | 8.80 | 8,300 | 2.51 | 2.39 | .47 | 86 |
| (.04) | 16.26 | (14.92) | 12,089 | 2.50 | 2.43 | .11 | 65 |
| (.02) | 19.15 | 25.31 | 17,349 | 2.51 | 2.46 | (.04) | 50 |
| (.15) | 21.98 | 21.16 | 157,235 | 1.49 | 1.07 | 1.56 | 52 |
| (.51) | 18.27 | .78 | 110,034 | 1.53 | 1.20 | 1.17 | 58 |
| (.79) | 18.61 | 10.07 | 95,567 | 1.53 | 1.30 | 2.07 | 86 |
| (.26) | 17.71 | (14.02) | 38,157 | 1.50 | 1.33 | 1.23 | 65 |
| — | 20.86 | 16.41 | 43,506 | 1.50 | 1.35 | .33 | 50 |
| (.15) | 22.05 | 21.18 | 308 | 1.35 | 1.03 | .64 | 52 |
| (.52) | 18.33 | .85 | 1,550 | 1.38 | 1.15 | 1.25 | 58 |
| (.80) | 18.66 | 10.12 | 1,954 | 1.38 | 1.25 | 2.10 | 86 |
| (.26) | 17.75 | (13.95) | 1,239 | 1.35 | 1.28 | 1.40 | 65 |
| (.20) | 20.89 | 26.82 | 4,231 | 1.35 | 1.30 | 1.48 | 50 |
| (.13) | 21.99 | 21.01 | 1,006,019 | 1.49 | 1.17 | 1.41 | 52 |
| (.49) | 18.28 | .66 | 1,049,372 | 1.53 | 1.30 | 1.03 | 58 |
| (.77) | 18.62 | 9.97 | 1,251,846 | 1.52 | 1.39 | 1.50 | 86 |
| (.23) | 17.71 | (14.11) | 1,529,970 | 1.50 | 1.43 | 1.11 | 65 |
| (.17) | 20.85 | 26.58 | 1,990,644 | 1.51 | 1.46 | .97 | 50 |
| (.16) | 22.04 | 21.23 | 96,275 | 1.29 | .99 | 1.04 | 52 |
| (.52) | 18.32 | .87 | 209,678 | 1.33 | 1.12 | 1.21 | 58 |
| (.81) | 18.65 | 10.15 | 324,234 | 1.33 | 1.22 | 1.76 | 86 |
| (.27) | 17.75 | (13.94) | 342,802 | 1.31 | 1.25 | 1.27 | 65 |
| (.20) | 20.89 | 26.84 | 438,776 | 1.31 | 1.27 | 1.12 | 50 |
309
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Tax-Managed U.S. Large Cap Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 49.07 | (.03) | 19.54 | 19.51 | (.16) | — | — |
| October 31, 2020 | 45.09 | .15 | 4.11 | 4.26 | (.28) | — | — |
| October 31, 2019 | 40.57 | .30 | 4.46 | 4.76 | (.24) | — | — |
| October 31, 2018 | 39.23 | .24 | 1.42 | 1.66 | (.22) | (.10) | — |
| October 31, 2017 | 32.20 | .25 | 6.99 | 7.24 | (.21) | — | — |
| Class C | |||||||
| October 31, 2021 | 46.25 | (.46) | 18.40 | 17.94 | — | — | — |
| October 31, 2020 | 42.57 | (.18) | 3.86 | 3.68 | — | — | — |
| October 31, 2019 | 38.34 | (.01) | 4.24 | 4.23 | — | — | — |
| October 31, 2018 | 37.16 | (.07) | 1.35 | 1.28 | — | (.10) | — |
| October 31, 2017 | 30.54 | (.02) | 6.64 | 6.62 | — | — | — |
| Class M | |||||||
| October 31, 2021 | 49.65 | .18 | 19.77 | 19.95 | (.33) | — | — |
| October 31, 2020 | 45.61 | .32 | 4.15 | 4.47 | (.43) | — | — |
| October 31, 2019 | 41.05 | .42 | 4.52 | 4.94 | (.38) | — | — |
| October 31, 2018 | 39.70 | .38 | 1.45 | 1.83 | (.38) | (.10) | — |
| October 31, 2017(3) | 36.49 | .17 | 3.04 | 3.21 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 49.65 | .12 | 19.76 | 19.88 | (.26) | — | — |
| October 31, 2020 | 45.60 | .28 | 4.15 | 4.43 | (.38) | — | — |
| October 31, 2019 | 41.04 | .41 | 4.49 | 4.90 | (.34) | — | — |
| October 31, 2018 | 39.67 | .34 | 1.45 | 1.79 | (.32) | (.10) | — |
| October 31, 2017 | 32.55 | .34 | 7.07 | 7.41 | (.29) | — | — |
See
Notes to Financial Highlights at the end of this section.
310
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.16) | 68.42 | 39.83 | 100,109 | 1.18 | 1.17 | (.05) | 22 |
| (.28) | 49.07 | 9.47 | 69,634 | 1.19 | 1.17 | .32 | 40 |
| (.24) | 45.09 | 11.86 | 50,571 | 1.19 | 1.16 | .71 | 34 |
| (.32) | 40.57 | 4.23 | 42,644 | 1.21 | 1.19 | .57 | 24 |
| (.21) | 39.23 | 22.58 | 38,659 | 1.22 | 1.22 | .69 | 35 |
| — | 64.19 | 38.79 | 43,968 | 1.93 | 1.92 | (.80) | 22 |
| — | 46.25 | 8.64 | 32,342 | 1.94 | 1.92 | (.41) | 40 |
| — | 42.57 | 11.03 | 29,681 | 1.94 | 1.91 | (.03) | 34 |
| (.10) | 38.34 | 3.44 | 30,544 | 1.96 | 1.94 | (.18) | 24 |
| — | 37.16 | 21.68 | 30,529 | 1.97 | 1.97 | (.06) | 35 |
| (.33) | 69.27 | 40.33 | 1,518,925 | .93 | .82 | .29 | 22 |
| (.43) | 49.65 | 9.84 | 620,317 | .94 | .82 | .68 | 40 |
| (.38) | 45.61 | 12.23 | 470,160 | .95 | .82 | .97 | 34 |
| (.48) | 41.05 | 4.62 | 167,377 | .96 | .84 | .90 | 24 |
| — | 39.70 | 8.80 | 89,387 | .97 | .87 | .71 | 35 |
| (.26) | 69.27 | 40.18 | 4,617,227 | .93 | .92 | .20 | 22 |
| (.38) | 49.65 | 9.74 | 3,341,841 | .94 | .92 | .59 | 40 |
| (.34) | 45.60 | 12.12 | 3,038,276 | .94 | .91 | .97 | 34 |
| (.42) | 41.04 | 4.51 | 2,685,454 | .96 | .94 | .82 | 24 |
| (.29) | 39.67 | 22.89 | 2,238,737 | .97 | .97 | .94 | 35 |
311
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Tax-Managed U.S. Mid & Small Cap Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 26.66 | (.15) | 12.85 | 12.70 | (.05) | — | — |
| October 31, 2020 | 27.19 | (.04) | (.46) | (.50) | (.03) | — | — |
| October 31, 2019 | 25.58 | (.03) | 1.64 | 1.61 | — | — | — |
| October 31, 2018 | 24.96 | (.10) | .87 | .77 | — | (.15) | — |
| October 31, 2017 | 20.15 | (.07) | 4.88 | 4.81 | — | — | — |
| Class C | |||||||
| October 31, 2021 | 22.42 | (.35) | 10.81 | 10.46 | — | — | — |
| October 31, 2020 | 23.01 | (.19) | (.40) | (.59) | — | — | — |
| October 31, 2019 | 21.80 | (.19) | 1.40 | 1.21 | — | — | — |
| October 31, 2018 | 21.45 | (.25) | .75 | .50 | — | (.15) | — |
| October 31, 2017 | 17.44 | (.20) | 4.21 | 4.01 | — | — | — |
| Class M | |||||||
| October 31, 2021 | 28.11 | (.01) | 13.52 | 13.51 | (.15) | — | — |
| October 31, 2020 | 28.64 | .05 | (.46) | (.41) | (.12) | — | — |
| October 31, 2019 | 26.84 | .06 | 1.74 | 1.80 | — | — | — |
| October 31, 2018 | 26.09 | —(f) | .90 | .90 | — | (.15) | — |
| October 31, 2017(3) | 23.84 | (.04) | 2.29 | 2.25 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 28.03 | (.05) | 13.49 | 13.44 | (.12) | — | — |
| October 31, 2020 | 28.56 | .03 | (.47) | (.44) | (.09) | — | — |
| October 31, 2019 | 26.79 | .05 | 1.72 | 1.77 | — | — | — |
| October 31, 2018 | 26.06 | (.03) | .91 | .88 | — | (.15) | — |
| October 31, 2017 | 20.98 | (.01) | 5.09 | 5.08 | — | — | — |
See
Notes to Financial Highlights at the end of this section.
312
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.05) | 39.31 | 47.69 | 29,140 | 1.52 | 1.48 | (.40) | 35 |
| (.03) | 26.66 | (1.86) | 18,270 | 1.54 | 1.48 | (.16) | 81 |
| — | 27.19 | 6.29 | 15,657 | 1.53 | 1.47 | (.11) | 66 |
| (.15) | 25.58 | 3.07 | 13,046 | 1.54 | 1.50 | (.38) | 45 |
| — | 24.96 | 23.87 | 12,824 | 1.55 | 1.53 | (.32) | 48 |
| — | 32.88 | 46.65 | 16,259 | 2.27 | 2.20 | (1.13) | 35 |
| — | 22.42 | (2.56) | 10,666 | 2.29 | 2.20 | (.86) | 81 |
| — | 23.01 | 5.55 | 12,271 | 2.29 | 2.20 | (.83) | 66 |
| (.15) | 21.80 | 2.31 | 13,359 | 2.29 | 2.22 | (1.10) | 45 |
| — | 21.45 | 22.99 | 13,668 | 2.30 | 2.25 | (1.03) | 48 |
| (.15) | 41.47 | 48.19 | 308,276 | 1.27 | 1.10 | (.03) | 35 |
| (.12) | 28.11 | (1.45) | 134,435 | 1.30 | 1.10 | .20 | 81 |
| — | 28.64 | 6.71 | 81,546 | 1.30 | 1.10 | .20 | 66 |
| (.15) | 26.84 | 3.48 | 26,676 | 1.29 | 1.12 | (.01) | 45 |
| — | 26.09 | 9.40 | 14,762 | 1.30 | 1.15 | (.25) | 48 |
| (.12) | 41.35 | 48.05 | 1,020,504 | 1.27 | 1.20 | (.12) | 35 |
| (.09) | 28.03 | (1.55) | 714,752 | 1.29 | 1.20 | .13 | 81 |
| — | 28.56 | 6.61 | 651,086 | 1.29 | 1.20 | .17 | 66 |
| (.15) | 26.79 | 3.37 | 589,875 | 1.29 | 1.22 | (.10) | 45 |
| — | 26.06 | 24.21 | 503,713 | 1.30 | 1.25 | (.04) | 48 |
313
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Tax-Managed International Equity Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 9.53 | .18 | 2.92 | 3.10 | (.15) | — | — |
| October 31, 2020 | 10.53 | .13 | (.90) | (.77) | (.23) | — | — |
| October 31, 2019 | 9.86 | .20 | .58 | .78 | (.11) | — | — |
| October 31, 2018 | 11.18 | .16 | (1.35) | (1.19) | (.13) | — | — |
| October 31, 2017 | 9.19 | .13 | 2.05 | 2.18 | (.19) | — | — |
| Class C | |||||||
| October 31, 2021 | 9.41 | .08 | 2.89 | 2.97 | (.08) | — | — |
| October 31, 2020 | 10.41 | .05 | (.90) | (.85) | (.15) | — | — |
| October 31, 2019 | 9.75 | .12 | .59 | .71 | (.05) | — | — |
| October 31, 2018 | 11.09 | .07 | (1.34) | (1.27) | (.07) | — | — |
| October 31, 2017 | 9.11 | .05 | 2.06 | 2.11 | (.13) | — | — |
| Class M | |||||||
| October 31, 2021 | 9.57 | .23 | 2.94 | 3.17 | (.19) | — | — |
| October 31, 2020 | 10.58 | .16 | (.91) | (.75) | (.26) | — | — |
| October 31, 2019 | 9.92 | .26 | .56 | .82 | (.16) | — | — |
| October 31, 2018 | 11.25 | .19 | (1.35) | (1.16) | (.17) | — | — |
| October 31, 2017(3) | 9.77 | .08 | 1.40 | 1.48 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 9.57 | .20 | 2.94 | 3.14 | (.17) | — | — |
| October 31, 2020 | 10.57 | .15 | (.90) | (.75) | (.25) | — | — |
| October 31, 2019 | 9.91 | .22 | .59 | .81 | (.15) | — | — |
| October 31, 2018 | 11.23 | .18 | (1.35) | (1.17) | (.15) | — | — |
| October 31, 2017 | 9.21 | .15 | 2.07 | 2.22 | (.20) | — | — |
| Tax-Managed Real Assets Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 9.11 | .17 | 4.18 | 4.35 | (.18) | — | — |
| October 31, 2020 | 10.40 | .13 | (1.33) | (1.20) | (.09) | — | — |
| October 31, 2019(7) | 10.00 | .07 | .33 | .40 | — | — | — |
| Class C | |||||||
| October 31, 2021 | 9.04 | .08 | 4.16 | 4.24 | (.13) | — | — |
| October 31, 2020 | 10.37 | .06 | (1.33) | (1.27) | (.06) | — | — |
| October 31, 2019(7) | 10.00 | .04 | .33 | .37 | — | — | — |
| Class M | |||||||
| October 31, 2021 | 9.13 | .22 | 4.20 | 4.42 | (.22) | — | — |
| October 31, 2020 | 10.41 | .17 | (1.34) | (1.17) | (.11) | — | — |
| October 31, 2019(7) | 10.00 | .08 | .33 | .41 | — | — | — |
| Class S | |||||||
| October 31, 2021 | 9.13 | .20 | 4.19 | 4.39 | (.20) | — | — |
| October 31, 2020 | 10.41 | .16 | (1.34) | (1.18) | (.10) | — | — |
| October 31, 2019(7) | 10.00 | .08 | .33 | .41 | — | — | — |
See
Notes to Financial Highlights at the end of this section.
314
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.15) | 12.48 | 32.74 | 27,480 | 1.38 | 1.29 | 1.45 | 48 |
| (.23) | 9.53 | (7.59) | 19,622 | 1.41 | 1.29 | 1.40 | 100 |
| (.11) | 10.53 | 8.10 | 14,323 | 1.40 | 1.28 | 1.99 | 77 |
| (.13) | 9.86 | (10.79) | 12,333 | 1.41 | 1.32 | 1.43 | 47 |
| (.19) | 11.18 | 24.26 | 10,216 | 1.43 | 1.34 | 1.24 | 25 |
| (.08) | 12.30 | 31.65 | 9,172 | 2.13 | 2.04 | .68 | 48 |
| (.15) | 9.41 | (8.34) | 6,309 | 2.16 | 2.04 | .55 | 100 |
| (.05) | 10.41 | 7.34 | 5,698 | 2.15 | 2.03 | 1.25 | 77 |
| (.07) | 9.75 | (11.54) | 5,068 | 2.16 | 2.07 | .60 | 47 |
| (.13) | 11.09 | 23.54 | 4,362 | 2.18 | 2.09 | .46 | 25 |
| (.19) | 12.55 | 33.29 | 776,828 | 1.13 | .94 | 1.86 | 48 |
| (.26) | 9.57 | (7.37) | 318,990 | 1.16 | .94 | 1.66 | 100 |
| (.16) | 10.58 | 8.44 | 264,934 | 1.16 | .94 | 2.60 | 77 |
| (.17) | 9.92 | (10.52) | 88,807 | 1.17 | .97 | 1.74 | 47 |
| — | 11.25 | 15.15 | 58,830 | 1.19 | .99 | 1.23 | 25 |
| (.17) | 12.54 | 33.04 | 2,032,628 | 1.13 | 1.04 | 1.68 | 48 |
| (.25) | 9.57 | (7.38) | 1,486,075 | 1.16 | 1.04 | 1.54 | 100 |
| (.15) | 10.57 | 8.33 | 1,472,807 | 1.15 | 1.03 | 2.22 | 77 |
| (.15) | 9.91 | (10.58) | 1,210,778 | 1.16 | 1.07 | 1.60 | 47 |
| (.20) | 11.23 | 24.69 | 1,021,782 | 1.18 | 1.09 | 1.52 | 25 |
| (.18) | 13.28 | 48.29 | 5,370 | 1.42 | 1.33 | 1.44 | 40 |
| (.09) | 9.11 | (11.65) | 2,642 | 1.47 | 1.33 | 1.43 | 81 |
| — | 10.40 | 4.00 | 950 | 1.51 | 1.30 | 1.75 | 29 |
| (.13) | 13.15 | 47.21 | 531 | 2.17 | 2.08 | .65 | 40 |
| (.06) | 9.04 | (12.35) | 392 | 2.22 | 2.08 | .66 | 81 |
| — | 10.37 | 3.70 | 171 | 2.25 | 2.04 | .99 | 29 |
| (.22) | 13.33 | 48.95 | 255,918 | 1.17 | .98 | 1.79 | 40 |
| (.11) | 9.13 | (11.39) | 95,547 | 1.22 | .98 | 1.80 | 81 |
| — | 10.41 | 4.10 | 80,142 | 1.25 | .94 | 2.10 | 29 |
| (.20) | 13.32 | 48.63 | 532,442 | 1.17 | 1.08 | 1.66 | 40 |
| (.10) | 9.13 | (11.44) | 353,896 | 1.22 | 1.08 | 1.70 | 81 |
| — | 10.41 | 4.10 | 346,625 | 1.25 | 1.04 | 2.01 | 29 |
315
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Opportunistic Credit Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 8.95 | .31 | .46 | .77 | (.29) | — | — |
| October 31, 2020 | 9.50 | .36 | (.44) | (.08) | (.47) | — | — |
| October 31, 2019 | 9.30 | .50 | .19 | .69 | (.49) | — | — |
| October 31, 2018 | 10.03 | .44 | (.63) | (.19) | (.54) | — | — |
| October 31, 2017 | 9.69 | .48 | .21 | .69 | (.35) | — | — |
| Class C | |||||||
| October 31, 2021 | 8.89 | .24 | .44 | .68 | (.22) | — | — |
| October 31, 2020 | 9.43 | .29 | (.43) | (.14) | (.40) | — | — |
| October 31, 2019 | 9.24 | .43 | .18 | .61 | (.42) | — | — |
| October 31, 2018 | 9.97 | .37 | (.63) | (.26) | (.47) | — | — |
| October 31, 2017 | 9.64 | .40 | .22 | .62 | (.29) | — | — |
| Class M | |||||||
| October 31, 2021 | 8.99 | .34 | .46 | .80 | (.32) | — | — |
| October 31, 2020 | 9.54 | .39 | (.44) | (.05) | (.50) | — | — |
| October 31, 2019 | 9.33 | .50 | .23 | .73 | (.52) | — | — |
| October 31, 2018 | 10.07 | .47 | (.65) | (.18) | (.56) | — | — |
| October 31, 2017(3) | 9.60 | .31 | .28 | .59 | (.12) | — | — |
| Class S | |||||||
| October 31, 2021 | 9.00 | .34 | .45 | .79 | (.31) | — | — |
| October 31, 2020 | 9.54 | .39 | (.44) | (.05) | (.49) | — | — |
| October 31, 2019 | 9.34 | .53 | .18 | .71 | (.51) | — | — |
| October 31, 2018 | 10.07 | .47 | (.64) | (.17) | (.56) | — | — |
| October 31, 2017 | 9.72 | .50 | .22 | .72 | (.37) | — | — |
| Class Y | |||||||
| October 31, 2021 | 8.99 | .36 | .44 | .80 | (.32) | — | — |
| October 31, 2020 | 9.54 | .38 | (.43) | (.05) | (.50) | — | — |
| October 31, 2019 | 9.33 | .53 | .20 | .73 | (.52) | — | — |
| October 31, 2018 | 10.07 | .48 | (.65) | (.17) | (.57) | — | — |
| October 31, 2017 | 9.72 | .51 | .22 | .73 | (.38) | — | — |
See
Notes to Financial Highlights at the end of this section.
316
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.29) | 9.43 | 8.65 | 3,100 | 1.60 | 1.08 | 3.33 | 51 |
| (.47) | 8.95 | (.90) | 2,772 | 1.61 | 1.16 | 4.03 | 63 |
| (.49) | 9.50 | 7.65 | 4,734 | 1.63 | 1.19 | 5.33 | 65 |
| (.54) | 9.30 | (2.01) | 5,442 | 1.62 | 1.17 | 4.57 | 82 |
| (.35) | 10.03 | 7.32 | 5,799 | 1.57 | 1.13 | 4.89 | 81 |
| (.22) | 9.35 | 7.73 | 2,686 | 2.35 | 1.83 | 2.60 | 51 |
| (.40) | 8.89 | (1.54) | 2,912 | 2.36 | 1.91 | 3.29 | 63 |
| (.42) | 9.43 | 6.79 | 3,722 | 2.38 | 1.94 | 4.59 | 65 |
| (.47) | 9.24 | (2.73) | 4,401 | 2.37 | 1.92 | 3.81 | 82 |
| (.29) | 9.97 | 6.56 | 6,094 | 2.32 | 1.88 | 4.14 | 81 |
| (.32) | 9.47 | 8.91 | 102,177 | 1.35 | .78 | 3.61 | 51 |
| (.50) | 8.99 | (.58) | 58,359 | 1.37 | .86 | 4.36 | 63 |
| (.52) | 9.54 | 8.06 | 44,339 | 1.38 | .89 | 5.36 | 65 |
| (.56) | 9.33 | (1.82) | 25,104 | 1.36 | .87 | 4.83 | 82 |
| (.12) | 10.07 | 6.20 | 33,399 | 1.33 | .83 | 5.05 | 81 |
| (.31) | 9.48 | 8.85 | 624,965 | 1.35 | .83 | 3.56 | 51 |
| (.49) | 9.00 | (.52) | 491,951 | 1.37 | .91 | 4.30 | 63 |
| (.51) | 9.54 | 7.89 | 530,369 | 1.38 | .94 | 5.60 | 65 |
| (.56) | 9.34 | (1.76) | 466,060 | 1.37 | .92 | 4.79 | 82 |
| (.37) | 10.07 | 7.64 | 643,262 | 1.32 | .88 | 5.13 | 81 |
| (.32) | 9.47 | 8.93 | 3,352 | 1.14 | .75 | 3.81 | 51 |
| (.50) | 8.99 | (.56) | 10,395 | 1.16 | .83 | 4.16 | 63 |
| (.52) | 9.54 | 8.09 | 124,322 | 1.18 | .86 | 5.67 | 65 |
| (.57) | 9.33 | (1.89) | 143,090 | 1.17 | .84 | 4.88 | 82 |
| (.38) | 10.07 | 7.72 | 421,474 | 1.13 | .80 | 5.22 | 81 |
317
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Unconstrained Total Return Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 9.44 | .06 | .09 | .15 | (.18) | — | — |
| October 31, 2020 | 10.01 | .10 | (.41) | (.31) | (.26) | — | — |
| October 31, 2019 | 9.93 | .21 | .14 | .35 | (.27) | — | — |
| October 31, 2018 | 9.96 | .26 | (.04) | .22 | (.24) | (.01) | — |
| October 31, 2017 | 10.04 | .19 | (.01) | .18 | (.21) | (.05) | — |
| Class C | |||||||
| October 31, 2021 | 9.38 | (.01) | .09 | .08 | (.14) | — | — |
| October 31, 2020 | 9.98 | .02 | (.40) | (.38) | (.22) | — | — |
| October 31, 2019 | 9.91 | .14 | .13 | .27 | (.20) | — | — |
| October 31, 2018 | 9.94 | .20 | (.05) | .15 | (.17) | (.01) | — |
| October 31, 2017 | 10.03 | .10 | .02 | .12 | (.16) | (.05) | — |
| Class M | |||||||
| October 31, 2021 | 9.45 | .09 | .09 | .18 | (.20) | — | — |
| October 31, 2020 | 10.01 | .16 | (.43) | (.27) | (.29) | — | — |
| October 31, 2019 | 9.94 | .25 | .12 | .37 | (.30) | — | — |
| October 31, 2018 | 9.96 | .30 | (.04) | .26 | (.27) | (.01) | — |
| October 31, 2017(3) | 9.87 | .13 | .05 | .18 | (.09) | — | — |
| Class S | |||||||
| October 31, 2021 | 9.45 | .09 | .09 | .18 | (.20) | — | — |
| October 31, 2020 | 10.02 | .14 | (.43) | (.29) | (.28) | — | — |
| October 31, 2019 | 9.94 | .23 | .14 | .37 | (.29) | — | — |
| October 31, 2018 | 9.97 | .29 | (.05) | .24 | (.26) | (.01) | — |
| October 31, 2017 | 10.05 | .14 | .07 | .21 | (.24) | (.05) | — |
| Class Y | |||||||
| October 31, 2021 | 9.46 | .15 | .05 | .20 | (.21) | — | — |
| October 31, 2020 | 10.03 | .14 | (.41) | (.27) | (.30) | — | — |
| October 31, 2019 | 9.95 | .25 | .14 | .39 | (.31) | — | — |
| October 31, 2018 | 9.97 | .31 | (.04) | .27 | (.28) | (.01) | — |
| October 31, 2017 | 10.04 | .21 | .02 | .23 | (.25) | (.05) | — |
See
Notes to Financial Highlights at the end of this section.
318
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.18) | 9.41 | 1.54 | 36 | 1.68 | 1.12 | .64 | 275 |
| (.26) | 9.44 | (3.15) | 225 | 1.63 | 1.12 | 1.04 | 186 |
| (.27) | 10.01 | 3.55 | 391 | 1.62 | 1.13 | 2.09 | 166 |
| (.25) | 9.93 | 2.24 | 462 | 1.62 | 1.17 | 2.66 | 132 |
| (.26) | 9.96 | 1.87 | 251 | 1.69 | 1.17 | 1.91 | 171 |
| (.14) | 9.32 | .85 | 193 | 2.43 | 1.87 | (.07) | 275 |
| (.22) | 9.38 | (3.92) | 224 | 2.38 | 1.87 | .22 | 186 |
| (.20) | 9.98 | 2.74 | 239 | 2.38 | 1.88 | 1.38 | 166 |
| (.18) | 9.91 | 1.51 | 151 | 2.37 | 1.92 | 1.96 | 132 |
| (.21) | 9.94 | 1.17 | 293 | 2.43 | 1.92 | .99 | 171 |
| (.20) | 9.43 | 1.92 | 29,701 | 1.44 | .77 | .91 | 275 |
| (.29) | 9.45 | (2.79) | 15,397 | 1.37 | .77 | 1.69 | 186 |
| (.30) | 10.01 | 3.81 | 48,515 | 1.39 | .79 | 2.48 | 166 |
| (.28) | 9.94 | 2.66 | 22,231 | 1.37 | .82 | 3.02 | 132 |
| (.09) | 9.96 | 1.87 | 19,392 | 1.48 | .82 | 2.16 | 171 |
| (.20) | 9.43 | 1.84 | 71,579 | 1.43 | .87 | .89 | 275 |
| (.28) | 9.45 | (2.96) | 81,559 | 1.37 | .87 | 1.44 | 186 |
| (.29) | 10.02 | 3.80 | 214,408 | 1.37 | .88 | 2.34 | 166 |
| (.27) | 9.94 | 2.46 | 264,718 | 1.37 | .92 | 2.92 | 132 |
| (.29) | 9.97 | 2.09 | 244,842 | 1.42 | .92 | 1.44 | 171 |
| (.21) | 9.45 | 2.09 | 69,803 | 1.17 | .67 | 1.59 | 275 |
| (.30) | 9.46 | (2.80) | 602,327 | 1.18 | .67 | 1.43 | 186 |
| (.31) | 10.03 | 4.00 | 348,085 | 1.18 | .69 | 2.52 | 166 |
| (.29) | 9.95 | 2.74 | 394,315 | 1.17 | .72 | 3.09 | 132 |
| (.30) | 9.97 | 2.36 | 397,434 | 1.23 | .72 | 2.13 | 171 |
319
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Strategic Bond Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 11.64 | .12 | (.07) | .05 | (.14) | (.59) | — |
| October 31, 2020 | 11.27 | .22 | .43 | .65 | (.20) | (.08) | — |
| October 31, 2019 | 10.29 | .27 | .94 | 1.21 | (.23) | — | — |
| October 31, 2018 | 10.82 | .23 | (.55) | (.32) | (.21) | — | — |
| October 31, 2017 | 11.18 | .18 | (.15) | .03 | (.09) | (.30) | — |
| Class C | |||||||
| October 31, 2021 | 11.57 | .04 | (.06) | (.02) | (.08) | (.59) | — |
| October 31, 2020 | 11.22 | .13 | .42 | .55 | (.12) | (.08) | — |
| October 31, 2019 | 10.24 | .19 | .94 | 1.13 | (.15) | — | — |
| October 31, 2018 | 10.77 | .15 | (.55) | (.40) | (.13) | — | — |
| October 31, 2017 | 11.16 | .10 | (.14) | (.04) | (.05) | (.30) | — |
| Class M | |||||||
| October 31, 2021 | 11.69 | .16 | (.07) | .09 | (.17) | (.59) | — |
| October 31, 2020 | 11.31 | .26 | .44 | .70 | (.24) | (.08) | — |
| October 31, 2019 | 10.33 | .31 | .94 | 1.25 | (.27) | — | — |
| October 31, 2018 | 10.86 | .27 | (.55) | (.28) | (.25) | — | — |
| October 31, 2017(3) | 10.55 | .14 | .20 | .34 | (.03) | — | — |
| Class R6 | |||||||
| October 31, 2021 | 11.54 | .16 | (.06) | .10 | (.18) | (.59) | — |
| October 31, 2020 | 11.18 | .26 | .43 | .69 | (.25) | (.08) | — |
| October 31, 2019 | 10.21 | .31 | .93 | 1.24 | (.27) | — | — |
| October 31, 2018 | 10.74 | .27 | (.55) | (.28) | (.25) | — | — |
| October 31, 2017 | 11.09 | .22 | (.15) | .07 | (.12) | (.30) | — |
| Class S | |||||||
| October 31, 2021 | 11.70 | .15 | (.07) | .08 | (.16) | (.59) | — |
| October 31, 2020 | 11.33 | .25 | .43 | .68 | (.23) | (.08) | — |
| October 31, 2019 | 10.34 | .30 | .95 | 1.25 | (.26) | — | — |
| October 31, 2018 | 10.88 | .26 | (.56) | (.30) | (.24) | — | — |
| October 31, 2017 | 11.21 | .21 | (.13) | .08 | (.11) | (.30) | — |
| Class Y | |||||||
| October 31, 2021 | 11.52 | .15 | (.05) | .10 | (.18) | (.59) | — |
| October 31, 2020 | 11.16 | .27 | .42 | .69 | (.25) | (.08) | — |
| October 31, 2019 | 10.19 | .31 | .93 | 1.24 | (.27) | — | — |
| October 31, 2018 | 10.72 | .28 | (.56) | (.28) | (.25) | — | — |
| October 31, 2017 | 11.07 | .22 | (.15) | .07 | (.12) | (.30) | — |
See
Notes to Financial Highlights at the end of this section.
320
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.73) | 10.96 | .33 | 26,257 | 1.01 | .86 | 1.10 | 89 |
| (.28) | 11.64 | 5.90 | 29,108 | 1.02 | .85 | 1.91 | 88 |
| (.23) | 11.27 | 11.85 | 29,853 | 1.00 | .85 | 2.49 | 112 |
| (.21) | 10.29 | (3.00) | 33,094 | 1.01 | .85 | 2.16 | 114 |
| (.39) | 10.82 | .43 | 44,107 | 1.00 | .93 | 1.70 | 133 |
| (.67) | 10.88 | (.32) | 15,321 | 1.76 | 1.61 | .36 | 89 |
| (.20) | 11.57 | 5.02 | 18,403 | 1.77 | 1.60 | 1.16 | 88 |
| (.15) | 11.22 | 11.07 | 20,388 | 1.75 | 1.60 | 1.75 | 112 |
| (.13) | 10.24 | (3.73) | 25,022 | 1.76 | 1.60 | 1.38 | 114 |
| (.35) | 10.77 | (.28) | 40,482 | 1.75 | 1.69 | .94 | 133 |
| (.76) | 11.02 | .74 | 657,098 | .75 | .49 | 1.41 | 89 |
| (.32) | 11.69 | 6.36 | 343,916 | .77 | .48 | 2.28 | 88 |
| (.27) | 11.31 | 12.22 | 341,184 | .75 | .48 | 2.86 | 112 |
| (.25) | 10.33 | (2.63) | 164,734 | .76 | .48 | 2.55 | 114 |
| (.03) | 10.86 | 3.21 | 133,381 | .74 | .54 | 2.15 | 133 |
| (.77) | 10.87 | .75 | 1,744 | .61 | .48 | 1.45 | 89 |
| (.33) | 11.54 | 6.26 | 1,471 | .62 | .47 | 2.27 | 88 |
| (.27) | 11.18 | 12.28 | 996 | .61 | .47 | 2.85 | 112 |
| (.25) | 10.21 | (2.65) | 730 | .61 | .47 | 2.55 | 114 |
| (.42) | 10.74 | .78 | 696 | .61 | .57 | 2.07 | 133 |
| (.75) | 11.03 | .64 | 2,500,018 | .76 | .59 | 1.35 | 89 |
| (.31) | 11.70 | 6.15 | 2,409,082 | .77 | .58 | 2.19 | 88 |
| (.26) | 11.33 | 12.20 | 2,776,038 | .75 | .58 | 2.77 | 112 |
| (.24) | 10.34 | (2.81) | 3,425,436 | .76 | .58 | 2.43 | 114 |
| (.41) | 10.88 | .88 | 3,880,447 | .76 | .68 | 1.95 | 133 |
| (.77) | 10.85 | .77 | 831,475 | .55 | .45 | 1.41 | 89 |
| (.33) | 11.52 | 6.30 | 382,779 | .57 | .44 | 2.38 | 88 |
| (.27) | 11.16 | 12.33 | 719,574 | .56 | .44 | 2.90 | 112 |
| (.25) | 10.19 | (2.63) | 767,994 | .56 | .44 | 2.62 | 114 |
| (.42) | 10.72 | .80 | 759,787 | .56 | .54 | 2.09 | 133 |
321
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Investment Grade Bond Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 22.98 | .28 | (.20) | .08 | (.23) | (.81) | — |
| October 31, 2020 | 22.16 | .39 | .98 | 1.37 | (.55) | — | — |
| October 31, 2019 | 20.38 | .52 | 1.76 | 2.28 | (.50) | — | — |
| October 31, 2018 | 21.36 | .44 | (1.07) | (.63) | (.35) | — | — |
| October 31, 2017 | 22.32 | .35 | (.35) | — | (.34) | (.62) | — |
| Class C | |||||||
| October 31, 2021 | 22.75 | .11 | (.19) | (.08) | (.08) | (.81) | — |
| October 31, 2020 | 21.94 | .22 | .97 | 1.19 | (.38) | — | — |
| October 31, 2019 | 20.19 | .36 | 1.73 | 2.09 | (.34) | — | — |
| October 31, 2018 | 21.17 | .28 | (1.05) | (.77) | (.21) | — | — |
| October 31, 2017 | 22.13 | .18 | (.34) | (.16) | (.18) | (.62) | — |
| Class M | |||||||
| October 31, 2021 | 22.95 | .36 | (.19) | .17 | (.32) | (.81) | — |
| October 31, 2020 | 22.13 | .47 | .98 | 1.45 | (.63) | — | — |
| October 31, 2019 | 20.36 | .61 | 1.74 | 2.35 | (.58) | — | — |
| October 31, 2018 | 21.34 | .53 | (1.08) | (.55) | (.43) | — | — |
| October 31, 2017(3) | 20.87 | .27 | .40 | .67 | (.20) | — | — |
| Class R6 | |||||||
| October 31, 2021 | 23.04 | .37 | (.19) | .18 | (.33) | (.81) | — |
| October 31, 2020 | 22.21 | .48 | .99 | 1.47 | (.64) | — | — |
| October 31, 2019 | 20.43 | .61 | 1.76 | 2.37 | (.59) | — | — |
| October 31, 2018 | 21.41 | .53 | (1.07) | (.54) | (.44) | — | — |
| October 31, 2017 | 22.37 | .44 | (.35) | .09 | (.43) | (.62) | — |
| Class S | |||||||
| October 31, 2021 | 22.95 | .34 | (.19) | .15 | (.30) | (.81) | — |
| October 31, 2020 | 22.13 | .45 | .98 | 1.43 | (.61) | — | — |
| October 31, 2019 | 20.36 | .58 | 1.75 | 2.33 | (.56) | — | — |
| October 31, 2018 | 21.34 | .50 | (1.07) | (.57) | (.41) | — | — |
| October 31, 2017 | 22.29 | .41 | (.34) | .07 | (.40) | (.62) | — |
| Class Y | |||||||
| October 31, 2021 | 23.00 | .37 | (.19) | .18 | (.33) | (.81) | — |
| October 31, 2020 | 22.17 | .49 | .99 | 1.48 | (.65) | — | — |
| October 31, 2019 | 20.40 | .62 | 1.74 | 2.36 | (.59) | — | — |
| October 31, 2018 | 21.38 | .54 | (1.08) | (.54) | (.44) | — | — |
| October 31, 2017 | 22.33 | .44 | (.33) | .11 | (.44) | (.62) | — |
See
Notes to Financial Highlights at the end of this section.
322
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (1.04) | 22.02 | .32 | 6,911 | .82 | .77 | 1.24 | 91 |
| (.55) | 22.98 | 6.27 | 8,549 | .82 | .77 | 1.71 | 109 |
| (.50) | 22.16 | 11.32 | 6,209 | .80 | .76 | 2.45 | 68 |
| (.35) | 20.38 | (2.97) | 9,973 | .80 | .77 | 2.13 | 177 |
| (.96) | 21.36 | .15 | 9,736 | .82 | .82 | 1.63 | 143 |
| (.89) | 21.78 | (.41) | 6,041 | 1.57 | 1.52 | .50 | 91 |
| (.38) | 22.75 | 5.50 | 7,641 | 1.57 | 1.52 | .97 | 109 |
| (.34) | 21.94 | 10.45 | 8,294 | 1.55 | 1.51 | 1.72 | 68 |
| (.21) | 20.19 | (3.67) | 9,493 | 1.55 | 1.52 | 1.36 | 177 |
| (.80) | 21.17 | (.60) | 11,756 | 1.57 | 1.57 | .87 | 143 |
| (1.13) | 21.99 | .72 | 59,008 | .57 | .38 | 1.60 | 91 |
| (.63) | 22.95 | 6.70 | 26,564 | .57 | .38 | 2.06 | 109 |
| (.58) | 22.13 | 11.72 | 15,216 | .56 | .38 | 2.85 | 68 |
| (.43) | 20.36 | (2.59) | 7,692 | .56 | .38 | 2.57 | 177 |
| (.20) | 21.34 | 3.20 | 3,560 | .56 | .43 | 2.07 | 143 |
| (1.14) | 22.08 | .75 | 1,045 | .42 | .35 | 1.65 | 91 |
| (.64) | 23.04 | 6.75 | 1,063 | .42 | .35 | 2.13 | 109 |
| (.59) | 22.21 | 11.76 | 842 | .41 | .35 | 2.86 | 68 |
| (.44) | 20.43 | (2.76) | 711 | .40 | .35 | 2.53 | 177 |
| (1.05) | 21.41 | .57 | 844 | .42 | .40 | 2.06 | 143 |
| (1.11) | 21.99 | .62 | 648,787 | .57 | .48 | 1.53 | 91 |
| (.61) | 22.95 | 6.59 | 703,995 | .57 | .48 | 2.02 | 109 |
| (.56) | 22.13 | 11.61 | 738,420 | .56 | .48 | 2.75 | 68 |
| (.41) | 20.36 | (2.69) | 882,507 | .55 | .48 | 2.42 | 177 |
| (1.02) | 21.34 | .47 | 958,946 | .56 | .54 | 1.92 | 143 |
| (1.14) | 22.04 | .78 | 48,672 | .37 | .32 | 1.66 | 91 |
| (.65) | 23.00 | 6.79 | 43,698 | .37 | .32 | 2.17 | 109 |
| (.59) | 22.17 | 11.75 | 102,126 | .36 | .32 | 2.90 | 68 |
| (.44) | 20.40 | (2.54) | 111,364 | .36 | .32 | 2.56 | 177 |
| (1.06) | 21.38 | .64 | 134,877 | .38 | .37 | 2.08 | 143 |
323
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Short Duration Bond Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 19.74 | .15 | (.15) | —(f) | (.18) | — | — |
| October 31, 2020 | 19.39 | .29 | .46 | .75 | (.40) | — | — |
| October 31, 2019 | 18.91 | .40 | .50 | .90 | (.42) | — | — |
| October 31, 2018 | 19.15 | .35 | (.26) | .09 | (.33) | — | — |
| October 31, 2017 | 19.26 | .25 | (.12) | .13 | (.24) | — | — |
| Class C | |||||||
| October 31, 2021 | 19.55 | (—)(f) | (.14) | (.14) | (.10) | — | — |
| October 31, 2020 | 19.21 | .14 | .46 | .60 | (.26) | — | — |
| October 31, 2019 | 18.73 | .25 | .51 | .76 | (.28) | — | — |
| October 31, 2018 | 18.99 | .21 | (.27) | (.06) | (.20) | — | — |
| October 31, 2017 | 19.10 | .10 | (.11) | (.01) | (.10) | — | — |
| Class M | |||||||
| October 31, 2021 | 19.77 | .20 | (.14) | .06 | (.24) | — | — |
| October 31, 2020 | 19.42 | .35 | .46 | .81 | (.46) | — | — |
| October 31, 2019 | 18.94 | .45 | .51 | .96 | (.48) | — | — |
| October 31, 2018 | 19.17 | .41 | (.26) | .15 | (.38) | — | — |
| October 31, 2017(3) | 19.11 | .24 | (.03) | .21 | (.15) | — | — |
| Class R6 | |||||||
| October 31, 2021 | 19.80 | .20 | (.15) | .05 | (.24) | — | — |
| October 31, 2020 | 19.44 | .35 | .47 | .82 | (.46) | — | — |
| October 31, 2019 | 18.96 | .45 | .51 | .96 | (.48) | — | — |
| October 31, 2018 | 19.20 | .42 | (.28) | .14 | (.38) | — | — |
| October 31, 2017 | 19.30 | .31 | (.11) | .20 | (.30) | — | — |
| Class S | |||||||
| October 31, 2021 | 19.76 | .19 | (.14) | .05 | (.23) | — | — |
| October 31, 2020 | 19.41 | .34 | .46 | .80 | (.45) | — | — |
| October 31, 2019 | 18.93 | .44 | .51 | .95 | (.47) | — | — |
| October 31, 2018 | 19.16 | .40 | (.26) | .14 | (.37) | — | — |
| October 31, 2017 | 19.27 | .30 | (.12) | .18 | (.29) | — | — |
| Class Y | |||||||
| October 31, 2021 | 19.77 | .21 | (.14) | .07 | (.25) | — | — |
| October 31, 2020 | 19.42 | .35 | .47 | .82 | (.47) | — | — |
| October 31, 2019 | 18.93 | .46 | .51 | .97 | (.48) | — | — |
| October 31, 2018 | 19.17 | .42 | (.28) | .14 | (.38) | — | — |
| October 31, 2017 | 19.28 | .32 | (.13) | .19 | (.30) | — | — |
See
Notes to Financial Highlights at the end of this section.
324
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.18) | 19.56 | .01 | 13,720 | 1.06 | .80 | .75 | 109 |
| (.40) | 19.74 | 3.93 | 17,805 | 1.06 | .82 | 1.47 | 116 |
| (.42) | 19.39 | 4.82 | 10,661 | 1.06 | .86 | 2.08 | 99 |
| (.33) | 18.91 | .45 | 16,997 | 1.04 | .84 | 1.87 | 122 |
| (.24) | 19.15 | .68 | 20,303 | 1.03 | .83 | 1.31 | 156 |
| (.10) | 19.31 | (.74) | 19,621 | 1.81 | 1.55 | (.01) | 109 |
| (.26) | 19.55 | 3.15 | 24,160 | 1.81 | 1.57 | .74 | 116 |
| (.28) | 19.21 | 4.09 | 23,058 | 1.81 | 1.61 | 1.31 | 99 |
| (.20) | 18.73 | (.34) | 26,975 | 1.79 | 1.59 | 1.11 | 122 |
| (.10) | 18.99 | (.06) | 35,838 | 1.78 | 1.58 | .55 | 156 |
| (.24) | 19.59 | .31 | 18,909 | .81 | .50 | 1.01 | 109 |
| (.46) | 19.77 | 4.24 | 14,069 | .81 | .52 | 1.80 | 116 |
| (.48) | 19.42 | 5.14 | 22,751 | .81 | .56 | 2.35 | 99 |
| (.38) | 18.94 | .78 | 20,030 | .79 | .54 | 2.18 | 122 |
| (.15) | 19.17 | 1.09 | 15,084 | .79 | .53 | 2.07 | 156 |
| (.24) | 19.61 | .26 | 177 | .66 | .50 | 1.03 | 109 |
| (.46) | 19.80 | 4.29 | 466 | .66 | .52 | 1.78 | 116 |
| (.48) | 19.44 | 5.13 | 181 | .66 | .56 | 2.36 | 99 |
| (.38) | 18.96 | .73 | 214 | .64 | .54 | 2.21 | 122 |
| (.30) | 19.20 | 1.04 | 107 | .63 | .53 | 1.62 | 156 |
| (.23) | 19.58 | .26 | 221,213 | .81 | .55 | .99 | 109 |
| (.45) | 19.76 | 4.19 | 242,018 | .81 | .57 | 1.74 | 116 |
| (.47) | 19.41 | 5.09 | 312,047 | .81 | .61 | 2.31 | 99 |
| (.37) | 18.93 | .73 | 387,636 | .79 | .59 | 2.12 | 122 |
| (.29) | 19.16 | .93 | 463,696 | .78 | .58 | 1.56 | 156 |
| (.25) | 19.59 | .33 | 129,318 | .61 | .47 | 1.06 | 109 |
| (.47) | 19.77 | 4.27 | 138,332 | .61 | .49 | 1.82 | 116 |
| (.48) | 19.42 | 5.22 | 150,550 | .61 | .53 | 2.38 | 99 |
| (.38) | 18.93 | .75 | 156,012 | .59 | .51 | 2.19 | 122 |
| (.30) | 19.17 | 1.01 | 179,765 | .58 | .50 | 1.64 | 156 |
325
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Tax-Exempt High Yield Bond Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 10.69 | .29 | .61 | .90 | (.33) | — | — |
| October 31, 2020 | 11.00 | .27 | (.23) | .04 | (.35) | — | — |
| October 31, 2019 | 10.38 | .39 | .63 | 1.02 | (.39) | (.01) | — |
| October 31, 2018 | 10.40 | .39 | (.03) | .36 | (.38) | — | — |
| October 31, 2017 | 10.58 | .37 | (.17) | .20 | (.36) | (.02) | — |
| Class C | |||||||
| October 31, 2021 | 10.67 | .20 | .62 | .82 | (.25) | — | — |
| October 31, 2020 | 10.98 | .19 | (.23) | (.04) | (.27) | — | — |
| October 31, 2019 | 10.37 | .31 | .63 | .94 | (.32) | (.01) | — |
| October 31, 2018 | 10.39 | .31 | (.03) | .28 | (.30) | — | — |
| October 31, 2017 | 10.56 | .29 | (.16) | .13 | (.28) | (.02) | — |
| Class M | |||||||
| October 31, 2021 | 10.70 | .33 | .60 | .93 | (.36) | — | — |
| October 31, 2020 | 11.00 | .31 | (.22) | .09 | (.39) | — | — |
| October 31, 2019 | 10.39 | .42 | .63 | 1.05 | (.43) | (.01) | — |
| October 31, 2018 | 10.40 | .43 | (.03) | .40 | (.41) | — | — |
| October 31, 2017(3) | 10.13 | .26 | .24 | .50 | (.23) | — | — |
| Class S | |||||||
| October 31, 2021 | 10.70 | .32 | .61 | .93 | (.35) | — | — |
| October 31, 2020 | 11.00 | .30 | (.22) | .08 | (.38) | — | — |
| October 31, 2019 | 10.39 | .42 | .62 | 1.04 | (.42) | (.01) | — |
| October 31, 2018 | 10.41 | .42 | (.04) | .38 | (.40) | — | — |
| October 31, 2017 | 10.59 | .40 | (.17) | .23 | (.39) | (.02) | — |
See
Notes to Financial Highlights at the end of this section.
326
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.33) | 11.26 | 8.45 | 21,752 | 1.05 | .89 | 2.57 | 14 |
| (.35) | 10.69 | .47 | 11,594 | 1.06 | .89 | 2.55 | 40 |
| (.40) | 11.00 | 10.04 | 5,097 | 1.05 | .88 | 3.67 | 35 |
| (.38) | 10.38 | 3.48 | 4,674 | 1.05 | .89 | 3.71 | 47 |
| (.38) | 10.40 | 2.00 | 3,681 | 1.08 | .89 | 3.60 | 71 |
| (.25) | 11.24 | 7.69 | 6,804 | 1.80 | 1.64 | 1.81 | 14 |
| (.27) | 10.67 | (.30) | 3,961 | 1.80 | 1.64 | 1.81 | 40 |
| (.33) | 10.98 | 9.18 | 3,207 | 1.80 | 1.63 | 2.89 | 35 |
| (.30) | 10.37 | 2.71 | 1,902 | 1.80 | 1.64 | 2.95 | 47 |
| (.30) | 10.39 | 1.29 | 1,668 | 1.83 | 1.64 | 2.85 | 71 |
| (.36) | 11.27 | 8.81 | 472,832 | .80 | .54 | 2.92 | 14 |
| (.39) | 10.70 | .89 | 204,017 | .80 | .54 | 2.90 | 40 |
| (.44) | 11.00 | 10.33 | 148,084 | .81 | .54 | 3.88 | 35 |
| (.41) | 10.39 | 3.93 | 53,312 | .81 | .54 | 4.07 | 47 |
| (.23) | 10.40 | 4.97 | 28,974 | .82 | .54 | 4.00 | 71 |
| (.35) | 11.28 | 8.80 | 1,104,233 | .79 | .63 | 2.84 | 14 |
| (.38) | 10.70 | .79 | 921,426 | .80 | .64 | 2.81 | 40 |
| (.43) | 11.00 | 10.22 | 790,868 | .80 | .63 | 3.94 | 35 |
| (.40) | 10.39 | 3.73 | 687,947 | .81 | .64 | 3.96 | 47 |
| (.41) | 10.41 | 2.25 | 496,012 | .83 | .64 | 3.84 | 71 |
327
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Tax-Exempt Bond Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 23.67 | .40 | .36 | .76 | (.49) | — | — |
| October 31, 2020 | 23.75 | .36 | .12 | .48 | (.56) | — | — |
| October 31, 2019 | 22.56 | .61 | 1.19 | 1.80 | (.61) | — | — |
| October 31, 2018 | 23.19 | .59 | (.65) | (.06) | (.57) | — | — |
| October 31, 2017 | 23.45 | .55 | (.27) | .28 | (.54) | — | — |
| Class C | |||||||
| October 31, 2021 | 23.53 | .23 | .34 | .57 | (.32) | — | — |
| October 31, 2020 | 23.61 | .19 | .12 | .31 | (.39) | — | — |
| October 31, 2019 | 22.43 | .45 | 1.17 | 1.62 | (.44) | — | — |
| October 31, 2018 | 23.05 | .42 | (.63) | (.21) | (.41) | — | — |
| October 31, 2017 | 23.32 | .39 | (.28) | .11 | (.38) | — | — |
| Class M | |||||||
| October 31, 2021 | 23.58 | .49 | .36 | .85 | (.58) | — | — |
| October 31, 2020 | 23.67 | .45 | .11 | .56 | (.65) | — | — |
| October 31, 2019 | 22.49 | .70 | 1.18 | 1.88 | (.70) | — | — |
| October 31, 2018 | 23.11 | .67 | (.63) | .04 | (.66) | — | — |
| October 31, 2017(3) | 22.68 | .40 | .40 | .80 | (.37) | — | — |
| Class S | |||||||
| October 31, 2021 | 23.58 | .47 | .35 | .82 | (.56) | — | — |
| October 31, 2020 | 23.66 | .43 | .12 | .55 | (.63) | — | — |
| October 31, 2019 | 22.48 | .68 | 1.17 | 1.85 | (.67) | — | — |
| October 31, 2018 | 23.10 | .65 | (.63) | .02 | (.64) | — | — |
| October 31, 2017 | 23.37 | .62 | (.28) | .34 | (.61) | — | — |
See
Notes to Financial Highlights at the end of this section.
328
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.49) | 23.94 | 3.22 | 39,060 | .84 | .82 | 1.67 | 19 |
| (.56) | 23.67 | 2.06 | 34,384 | .84 | .82 | 1.53 | 43 |
| (.61) | 23.75 | 8.06 | 27,045 | .82 | .80 | 2.64 | 35 |
| (.57) | 22.56 | (.26) | 23,575 | .83 | .81 | 2.56 | 51 |
| (.54) | 23.19 | 1.24 | 23,840 | .83 | .81 | 2.40 | 45 |
| (.32) | 23.78 | 2.44 | 26,500 | 1.59 | 1.53 | .96 | 19 |
| (.39) | 23.53 | 1.35 | 23,071 | 1.59 | 1.53 | .82 | 43 |
| (.44) | 23.61 | 7.30 | 22,469 | 1.58 | 1.52 | 1.93 | 35 |
| (.41) | 22.43 | (.92) | 23,819 | 1.58 | 1.52 | 1.85 | 51 |
| (.38) | 23.05 | .48 | 25,982 | 1.58 | 1.52 | 1.70 | 45 |
| (.58) | 23.85 | 3.63 | 1,168,245 | .59 | .43 | 2.04 | 19 |
| (.65) | 23.58 | 2.43 | 509,715 | .59 | .43 | 1.92 | 43 |
| (.70) | 23.67 | 8.46 | 425,788 | .58 | .42 | 2.99 | 35 |
| (.66) | 22.49 | .17 | 151,219 | .58 | .42 | 2.96 | 51 |
| (.37) | 23.11 | 3.55 | 82,303 | .58 | .42 | 2.80 | 45 |
| (.56) | 23.84 | 3.49 | 3,006,439 | .59 | .53 | 1.96 | 19 |
| (.63) | 23.58 | 2.37 | 2,575,388 | .59 | .53 | 1.82 | 43 |
| (.67) | 23.66 | 8.35 | 2,464,168 | .58 | .52 | 2.92 | 35 |
| (.64) | 22.48 | .07 | 2,212,775 | .58 | .52 | 2.85 | 51 |
| (.61) | 23.10 | 1.50 | 1,803,607 | .58 | .52 | 2.69 | 45 |
329
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Global Infrastructure Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 8.75 | .19 | 1.97 | 2.16 | (.26) | (.49) | — |
| October 31, 2020 | 11.47 | .17 | (1.40) | (1.23) | (.24) | (1.25) | — |
| October 31, 2019 | 10.34 | .25 | 1.72 | 1.97 | (.36) | (.48) | — |
| October 31, 2018 | 12.38 | .25 | (1.04) | (.79) | (.32) | (.93) | — |
| October 31, 2017 | 11.42 | .26 | 1.37 | 1.63 | (.24) | (.43) | — |
| Class C | |||||||
| October 31, 2021 | 8.64 | .12 | 1.94 | 2.06 | (.18) | (.49) | — |
| October 31, 2020 | 11.36 | .09 | (1.38) | (1.29) | (.18) | (1.25) | — |
| October 31, 2019 | 10.25 | .17 | 1.70 | 1.87 | (.28) | (.48) | — |
| October 31, 2018 | 12.29 | .16 | (1.02) | (.86) | (.25) | (.93) | — |
| October 31, 2017 | 11.36 | .17 | 1.37 | 1.54 | (.18) | (.43) | — |
| Class M | |||||||
| October 31, 2021 | 8.76 | .20 | 1.99 | 2.19 | (.29) | (.49) | — |
| October 31, 2020 | 11.47 | .22 | (1.41) | (1.19) | (.27) | (1.25) | — |
| October 31, 2019 | 10.35 | .32 | 1.68 | 2.00 | (.40) | (.48) | — |
| October 31, 2018 | 12.39 | .31 | (1.06) | (.75) | (.36) | (.93) | — |
| October 31, 2017(3) | 11.40 | .17 | 1.04 | 1.21 | (.22) | — | — |
| Class S | |||||||
| October 31, 2021 | 8.78 | .20 | 1.99 | 2.19 | (.28) | (.49) | — |
| October 31, 2020 | 11.49 | .19 | (1.39) | (1.20) | (.26) | (1.25) | — |
| October 31, 2019 | 10.36 | .29 | 1.71 | 2.00 | (.39) | (.48) | — |
| October 31, 2018 | 12.40 | .28 | (1.04) | (.76) | (.35) | (.93) | — |
| October 31, 2017 | 11.43 | .29 | 1.38 | 1.67 | (.27) | (.43) | — |
| Class Y | |||||||
| October 31, 2021 | 8.77 | .24 | 1.98 | 2.22 | (.30) | (.49) | — |
| October 31, 2020 | 11.49 | .20 | (1.41) | (1.21) | (.26) | (1.25) | — |
| October 31, 2019 | 10.36 | .30 | 1.72 | 2.02 | (.41) | (.48) | — |
| October 31, 2018 | 12.40 | .29 | (1.03) | (.74) | (.37) | (.93) | — |
| October 31, 2017 | 11.43 | .30 | 1.39 | 1.69 | (.29) | (.43) | — |
See
Notes to Financial Highlights at the end of this section.
330
| $ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| (.75) | 10.16 | 25.50 | 4,719 | 2.00 | 1.30 | 1.99 | 66 |
| (1.49) | 8.75 | (12.52) | 4,250 | 2.06 | 1.33 | 1.75 | 79 |
| (.84) | 11.47 | 20.50 | 6,450 | 1.91 | 1.36 | 2.36 | 91 |
| (1.25) | 10.34 | (7.09) | 6,686 | 1.86 | 1.38 | 2.23 | 92 |
| (.67) | 12.38 | 15.10 | 9,380 | 1.83 | 1.44 | 2.19 | 84 |
| (.67) | 10.03 | 24.65 | 2,547 | 2.75 | 2.05 | 1.23 | 66 |
| (1.43) | 8.64 | (13.17) | 2,453 | 2.81 | 2.08 | .99 | 79 |
| (.76) | 11.36 | 19.54 | 3,654 | 2.66 | 2.11 | 1.61 | 91 |
| (1.18) | 10.25 | (7.73) | 4,680 | 2.61 | 2.13 | 1.45 | 92 |
| (.61) | 12.29 | 14.23 | 6,426 | 2.58 | 2.19 | 1.43 | 84 |
| (.78) | 10.17 | 25.91 | 8,775 | 1.78 | .95 | 2.07 | 66 |
| (1.52) | 8.76 | (12.17) | 13,151 | 1.81 | .98 | 2.20 | 79 |
| (.88) | 11.47 | 20.81 | 33,800 | 1.67 | 1.02 | 2.92 | 91 |
| (1.29) | 10.35 | (6.76) | 16,704 | 1.60 | 1.03 | 2.71 | 92 |
| (.22) | 12.39 | 10.66 | 26,352 | 1.55 | 1.09 | 2.16 | 84 |
| (.77) | 10.20 | 25.84 | 73,700 | 1.77 | 1.05 | 2.10 | 66 |
| (1.51) | 8.78 | (12.23) | 108,464 | 1.82 | 1.08 | 2.02 | 79 |
| (.87) | 11.49 | 20.76 | 212,221 | 1.66 | 1.11 | 2.68 | 91 |
| (1.28) | 10.36 | (6.85) | 459,247 | 1.61 | 1.13 | 2.53 | 92 |
| (.70) | 12.40 | 15.44 | 744,039 | 1.58 | 1.19 | 2.45 | 84 |
| (.79) | 10.20 | 26.21 | 6,380 | 1.54 | .87 | 2.44 | 66 |
| (1.51) | 8.77 | (12.27) | 4,810 | 1.49 | .90 | 1.91 | 79 |
| (.89) | 11.49 | 20.98 | 77,547 | 1.47 | .94 | 2.78 | 91 |
| (1.30) | 10.36 | (6.67) | 86,064 | 1.41 | .95 | 2.61 | 92 |
| (.72) | 12.40 | 15.65 | 143,796 | 1.38 | 1.01 | 2.57 | 84 |
331
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Global Real Estate Securities Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 26.92 | .63 | 9.99 | 10.62 | (.45) | — | — |
| October 31, 2020 | 35.83 | .42 | (6.97) | (6.55) | (1.75) | (.61) | — |
| October 31, 2019 | 30.94 | .45 | 5.45 | 5.90 | (.72) | (.29) | — |
| October 31, 2018 | 33.65 | .77 | (.41) | .36 | (1.26) | (1.81) | — |
| October 31, 2017 | 34.94 | .37 | 1.55 | 1.92 | (1.12) | (2.09) | — |
| Class C | |||||||
| October 31, 2021 | 25.77 | .35 | 9.55 | 9.90 | (.33) | — | — |
| October 31, 2020 | 34.40 | .19 | (6.66) | (6.47) | (1.55) | (.61) | — |
| October 31, 2019 | 29.74 | .20 | 5.23 | 5.43 | (.48) | (.29) | — |
| October 31, 2018 | 32.46 | .51 | (.40) | .11 | (1.02) | (1.81) | — |
| October 31, 2017 | 33.82 | .11 | 1.49 | 1.60 | (.87) | (2.09) | — |
| Class M | |||||||
| October 31, 2021 | 27.71 | .84 | 10.22 | 11.06 | (.53) | — | — |
| October 31, 2020 | 36.81 | .54 | (7.17) | (6.63) | (1.86) | (.61) | — |
| October 31, 2019 | 31.76 | .58 | 5.60 | 6.18 | (.84) | (.29) | — |
| October 31, 2018 | 34.46 | .94 | (.45) | .49 | (1.38) | (1.81) | — |
| October 31, 2017(3) | 33.36 | .22 | 1.37 | 1.59 | (.49) | — | — |
| Class R6 | |||||||
| October 31, 2021 | 27.74 | .78 | 10.32 | 11.10 | (.55) | — | — |
| October 31, 2020 | 36.86 | .56 | (7.18) | (6.62) | (1.89) | (.61) | — |
| October 31, 2019 | 31.79 | .62 | 5.60 | 6.22 | (.86) | (.29) | — |
| October 31, 2018 | 34.49 | .94 | (.43) | .51 | (1.40) | (1.81) | — |
| October 31, 2017 | 35.74 | .51 | 1.60 | 2.11 | (1.27) | (2.09) | — |
| Class S | |||||||
| October 31, 2021 | 27.75 | .74 | 10.29 | 11.03 | (.50) | — | — |
| October 31, 2020 | 36.86 | .51 | (7.18) | (6.67) | (1.83) | (.61) | — |
| October 31, 2019 | 31.79 | .55 | 5.61 | 6.16 | (.80) | (.29) | — |
| October 31, 2018 | 34.49 | .89 | (.44) | .45 | (1.34) | (1.81) | — |
| October 31, 2017 | 35.74 | .46 | 1.58 | 2.04 | (1.20) | (2.09) | — |
| Class Y | |||||||
| October 31, 2021 | 27.73 | .88 | 10.22 | 11.10 | (.55) | — | — |
| October 31, 2020 | 36.84 | .57 | (7.18) | (6.61) | (1.89) | (.61) | — |
| October 31, 2019 | 31.78 | .61 | 5.61 | 6.22 | (.87) | (.29) | — |
| October 31, 2018 | 34.48 | .94 | (.42) | .52 | (1.41) | (1.81) | — |
| October 31, 2017 | 35.73 | .54 | 1.57 | 2.11 | (1.27) | (2.09) | — |
See
Notes to Financial Highlights at the end of this section.
332
| $ Distributions In Excess |
$ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| — | (.45) | 37.09 | 39.58 | 16,012 | 1.38 | 1.33 | 1.87 | 81 |
| — | (2.36) | 26.92 | (18.98) | 12,554 | 1.40 | 1.36 | 1.43 | 88 |
| — | (1.01) | 35.83 | 19.51 | 18,684 | 1.38 | 1.35 | 1.36 | 74 |
| — | (3.07) | 30.94 | .86 | 19,019 | 1.38 | 1.37 | 2.37 | 81 |
| — | (3.21) | 33.65 | 6.10 | 23,285 | 1.39 | 1.39 | 1.10 | 92 |
| — | (.33) | 35.34 | 38.50 | 11,271 | 2.13 | 2.08 | 1.09 | 81 |
| — | (2.16) | 25.77 | (19.56) | 10,102 | 2.15 | 2.11 | .68 | 88 |
| — | (.77) | 34.40 | 18.62 | 17,584 | 2.13 | 2.10 | .61 | 74 |
| — | (2.83) | 29.74 | .10 | 20,146 | 2.13 | 2.12 | 1.61 | 81 |
| — | (2.96) | 32.46 | 5.28 | 25,114 | 2.14 | 2.14 | .35 | 92 |
| — | (.53) | 38.24 | 40.07 | 123,210 | 1.13 | .98 | 2.36 | 81 |
| — | (2.47) | 27.71 | (18.69) | 38,678 | 1.15 | 1.01 | 1.79 | 88 |
| — | (1.13) | 36.81 | 19.92 | 62,478 | 1.15 | 1.01 | 1.68 | 74 |
| — | (3.19) | 31.76 | 1.23 | 34,715 | 1.13 | 1.02 | 2.84 | 81 |
| — | (.49) | 34.46 | 4.81 | 16,339 | 1.14 | 1.04 | 1.01 | 92 |
| — | (.55) | 38.29 | 40.16 | 2,888 | .98 | .91 | 2.22 | 81 |
| — | (2.50) | 27.74 | (18.65) | 2,205 | 1.00 | .94 | 1.86 | 88 |
| — | (1.15) | 36.86 | 20.03 | 2,659 | .99 | .94 | 1.82 | 74 |
| — | (3.21) | 31.79 | 1.30 | 5,941 | .98 | .95 | 2.84 | 81 |
| — | (3.36) | 34.49 | 6.52 | 4,707 | .99 | .97 | 1.50 | 92 |
| — | (.50) | 38.28 | 39.90 | 542,275 | 1.13 | 1.08 | 2.12 | 81 |
| — | (2.44) | 27.75 | (18.78) | 406,795 | 1.15 | 1.11 | 1.68 | 88 |
| — | (1.09) | 36.86 | 19.83 | 712,519 | 1.13 | 1.10 | 1.62 | 74 |
| — | (3.15) | 31.79 | 1.12 | 923,857 | 1.13 | 1.12 | 2.66 | 81 |
| — | (3.29) | 34.49 | 6.33 | 845,726 | 1.14 | 1.14 | 1.34 | 92 |
| — | (.55) | 38.28 | 40.20 | 126,027 | .93 | .88 | 2.46 | 81 |
| — | (2.50) | 27.73 | (18.61) | 49,121 | .96 | .91 | 1.88 | 88 |
| — | (1.16) | 36.84 | 20.05 | 65,565 | .94 | .91 | 1.80 | 74 |
| — | (3.22) | 31.78 | 1.32 | 73,909 | .93 | .92 | 2.82 | 81 |
| — | (3.36) | 34.48 | 6.55 | 79,371 | .94 | .94 | 1.57 | 92 |
333
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Multi-Strategy Income Fund | |||||||
| Class A | |||||||
| October 31, 2021 | 9.39 | .03 | 1.79 | 1.82 | (.10) | — | — |
| October 31, 2020 | 10.03 | .12 | (.51) | (.39) | (.23) | (.02) | — |
| October 31, 2019 | 9.67 | .29 | .30 | .59 | (.23) | — | — |
| October 31, 2018 | 10.26 | .36 | (.53) | (.17) | (.33) | (.09) | — |
| October 31, 2017 | 9.66 | .34 | .57 | .91 | (.31) | — | — |
| Class C | |||||||
| October 31, 2021 | 9.33 | (.05) | 1.77 | 1.72 | (.06) | — | — |
| October 31, 2020 | 10.00 | .04 | (.50) | (.46) | (.19) | (.02) | — |
| October 31, 2019 | 9.64 | .21 | .30 | .51 | (.15) | — | — |
| October 31, 2018 | 10.23 | .27 | (.52) | (.25) | (.25) | (.09) | — |
| October 31, 2017 | 9.64 | .26 | .57 | .83 | (.24) | — | — |
| Class M | |||||||
| October 31, 2021 | 9.40 | .08 | 1.79 | 1.87 | (.12) | — | — |
| October 31, 2020 | 10.05 | .14 | (.52) | (.38) | (.25) | (.02) | — |
| October 31, 2019 | 9.68 | .33 | .30 | .63 | (.26) | — | — |
| October 31, 2018 | 10.27 | .39 | (.52) | (.13) | (.37) | (.09) | — |
| October 31, 2017(3) | 10.00 | .25 | .27 | .52 | (.25) | — | — |
| Class S | |||||||
| October 31, 2021 | 9.41 | .06 | 1.79 | 1.85 | (.11) | — | — |
| October 31, 2020 | 10.05 | .13 | (.51) | (.38) | (.24) | (.02) | — |
| October 31, 2019 | 9.69 | .31 | .30 | .61 | (.25) | — | — |
| October 31, 2018 | 10.28 | .38 | (.53) | (.15) | (.35) | (.09) | — |
| October 31, 2017 | 9.68 | .36 | .58 | .94 | (.34) | — | — |
| Class Y | |||||||
| October 31, 2021 | 9.43 | .09 | 1.77 | 1.86 | (.12) | — | — |
| October 31, 2020 | 10.06 | .15 | (.50) | (.35) | (.26) | (.02) | — |
| October 31, 2019 | 9.70 | .33 | .30 | .63 | (.27) | — | — |
| October 31, 2018 | 10.29 | .39 | (.52) | (.13) | (.37) | (.09) | — |
| October 31, 2017 | 9.68 | .39 | .58 | .97 | (.36) | — | — |
See
Notes to Financial Highlights at the end of this section.
334
| $ Distributions In Excess |
$ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| — | (.10) | 11.11 | 19.41 | 5,074 | 1.35 | 1.02 | .29 | 191 |
| — | (.25) | 9.39 | (4.04) | 4,800 | 1.37 | 1.02 | 1.28 | 174 |
| — | (.23) | 10.03 | 6.18 | 9,939 | 1.34 | 1.01 | 2.95 | 128 |
| — | (.42) | 9.67 | (1.78) | 8,808 | 1.35 | 1.02 | 3.55 | 112 |
| — | (.31) | 10.26 | 9.63 | 13,283 | 1.36 | 1.09 | 3.37 | 146 |
| — | (.06) | 10.99 | 18.45 | 5,081 | 2.10 | 1.77 | (.46) | 191 |
| — | (.21) | 9.33 | (4.71) | 5,172 | 2.12 | 1.77 | .40 | 174 |
| — | (.15) | 10.00 | 5.39 | 7,247 | 2.09 | 1.76 | 2.17 | 128 |
| — | (.34) | 9.64 | (2.48) | 8,024 | 2.10 | 1.77 | 2.73 | 112 |
| — | (.24) | 10.23 | 8.73 | 8,242 | 2.12 | 1.84 | 2.64 | 146 |
| — | (.12) | 11.15 | 19.93 | 54,260 | 1.10 | .67 | .79 | 191 |
| — | (.27) | 9.40 | (3.85) | 55,626 | 1.12 | .67 | 1.48 | 174 |
| — | (.26) | 10.05 | 6.58 | 59,481 | 1.09 | .67 | 3.30 | 128 |
| — | (.46) | 9.68 | (1.39) | 31,567 | 1.10 | .67 | 3.83 | 112 |
| — | (.25) | 10.27 | 5.31 | 29,335 | 1.05 | .73 | 3.94 | 146 |
| — | (.11) | 11.15 | 19.74 | 390,872 | 1.10 | .77 | .59 | 191 |
| — | (.26) | 9.41 | (3.83) | 565,161 | 1.12 | .77 | 1.40 | 174 |
| — | (.25) | 10.05 | 6.43 | 707,676 | 1.09 | .76 | 3.19 | 128 |
| — | (.44) | 9.69 | (1.50) | 941,557 | 1.10 | .77 | 3.75 | 112 |
| — | (.34) | 10.28 | 9.89 | 1,020,873 | 1.11 | .83 | 3.64 | 146 |
| — | (.12) | 11.17 | 19.82 | 159,725 | .90 | .57 | .81 | 191 |
| — | (.28) | 9.43 | (3.57) | 189,747 | .92 | .57 | 1.60 | 174 |
| — | (.27) | 10.06 | 6.63 | 247,995 | .90 | .57 | 3.37 | 128 |
| — | (.46) | 9.70 | (1.31) | 282,173 | .91 | .57 | 3.88 | 112 |
| — | (.36) | 10.29 | 10.19 | 248,299 | .92 | .64 | 3.87 | 146 |
335
FINANCIAL
HIGHLIGHTS, continued
| $ Net Asset Value, Beginning of Period |
$ Net Investment Income (Loss)(a)(d) |
$ Net Realized and Unrealized Gain (Loss) |
$ Total from Investment Operations |
$ Distributions from Net Investment Income |
$ Distributions from Net Realized Gain |
$ Return of Capital | |
| Multi-Asset Growth Strategy Fund (†) | |||||||
| Class A | |||||||
| October 31, 2021 | 9.54 | —(f) | 1.81 | 1.81 | (.03) | — | — |
| October 31, 2020 | 10.33 | .04 | (.53) | (.49) | (.26) | — | (.04) |
| October 31, 2019 | 10.07 | .17 | .30 | .47 | (.16) | (.05) | — |
| October 31, 2018 | 10.59 | .17 | (.47) | (.30) | (.14) | (.08) | — |
| October 31, 2017(5) | 10.48 | .02 | .09 | .11 | — | — | — |
| Class C | |||||||
| October 31, 2021 | 9.46 | (.07) | 1.78 | 1.71 | (.01) | — | — |
| October 31, 2020 | 10.30 | (.04) | (.52) | (.56) | (.25) | — | (.03) |
| October 31, 2019 | 10.05 | .10 | .28 | .38 | (.08) | (.05) | — |
| October 31, 2018 | 10.58 | .10 | (.48) | (.38) | (.07) | (.08) | — |
| October 31, 2017(5) | 10.48 | .01 | .09 | .10 | — | — | — |
| Class M | |||||||
| October 31, 2021 | 9.55 | .05 | 1.79 | 1.84 | (.05) | — | — |
| October 31, 2020 | 10.31 | .10 | (.53) | (.43) | (.28) | — | (.05) |
| October 31, 2019 | 10.06 | .22 | .27 | .49 | (.19) | (.05) | — |
| October 31, 2018 | 10.57 | .21 | (.47) | (.26) | (.17) | (.08) | — |
| October 31, 2017(3) | 10.08 | .12 | .39 | .51 | (.02) | — | — |
| Class S | |||||||
| October 31, 2021 | 9.54 | .04 | 1.79 | 1.83 | (.04) | — | — |
| October 31, 2020 | 10.31 | .09 | (.54) | (.45) | (.27) | — | (.05) |
| October 31, 2019 | 10.05 | .20 | .29 | .49 | (.18) | (.05) | — |
| October 31, 2018 | 10.57 | .20 | (.48) | (.28) | (.16) | (.08) | — |
| October 31, 2017(2) | 10.00 | .10 | .49 | .59 | (.02) | — | — |
| Class Y | |||||||
| October 31, 2021 | 9.55 | .04 | 1.82 | 1.86 | (.05) | — | — |
| October 31, 2020 | 10.32 | .10 | (.54) | (.44) | (.28) | — | (.05) |
| October 31, 2019 | 10.06 | .22 | .29 | .51 | (.20) | (.05) | — |
| October 31, 2018 | 10.58 | .22 | (.48) | (.26) | (.18) | (.08) | — |
| October 31, 2017(4) | 10.44 | .04 | .12 | .16 | (.02) | — | — |
See
Notes to Financial Highlights at the end of this section.
336
| $ Distributions In Excess |
$ Total Distributions |
$ Net Asset Value, End of Period |
% Total Return(b)(c) |
$ Net Assets, End of Period (000) |
% Ratio of Expenses to Average Net Assets, Gross(e) |
% Ratio of Expenses to Average Net Assets, Net(d)(e) |
% Ratio of Net Investment Income to Average Net Assets(d)(e) |
% Portfolio Turnover Rate(b) |
| — | (.03) | 11.32 | 19.03 | 1,980 | 1.44 | 1.20 | .03 | 207 |
| — | (.30) | 9.54 | (4.85) | 1,668 | 1.46 | 1.18 | .45 | 195 |
| — | (.21) | 10.33 | 4.70 | 2,092 | 1.46 | 1.18 | 1.68 | 172 |
| — | (.22) | 10.07 | (2.93) | 1,760 | 1.47 | 1.18 | 1.61 | 135 |
| — | — | 10.59 | 1.05 | 641 | 1.55 | 1.17 | 1.87 | 85 |
| — | (.01) | 11.16 | 18.11 | 271 | 2.19 | 1.95 | (.69) | 207 |
| — | (.28) | 9.46 | (5.63) | 289 | 2.21 | 1.93 | (.40) | 195 |
| — | (.13) | 10.30 | 3.84 | 324 | 2.21 | 1.93 | 1.01 | 172 |
| — | (.15) | 10.05 | (3.66) | 236 | 2.22 | 1.93 | .91 | 135 |
| — | — | 10.58 | .95 | 101 | 2.34 | 1.96 | .44 | 85 |
| — | (.05) | 11.34 | 19.24 | 164,993 | 1.19 | .85 | .48 | 207 |
| — | (.33) | 9.55 | (4.34) | 176,565 | 1.20 | .83 | 1.00 | 195 |
| — | (.24) | 10.31 | 4.97 | 236,943 | 1.22 | .84 | 2.16 | 172 |
| — | (.25) | 10.06 | (2.54) | 103,129 | 1.22 | .83 | 2.01 | 135 |
| — | (.02) | 10.57 | 5.11 | 43,713 | 1.35 | .91 | 1.80 | 85 |
| — | (.04) | 11.33 | 19.22 | 656,179 | 1.20 | .95 | .37 | 207 |
| — | (.32) | 9.54 | (4.52) | 1,179,071 | 1.21 | .93 | .91 | 195 |
| — | (.23) | 10.31 | 4.96 | 1,656,511 | 1.21 | .93 | 1.93 | 172 |
| — | (.24) | 10.05 | (2.74) | 2,128,773 | 1.21 | .93 | 1.91 | 135 |
| — | (.02) | 10.57 | 5.93 | 1,572,829 | 1.29 | 1.01 | 1.49 | 85 |
| — | (.05) | 11.36 | 19.48 | 154,330 | .99 | .75 | .39 | 207 |
| — | (.33) | 9.55 | (4.36) | 108,567 | 1.01 | .73 | 1.03 | 195 |
| — | (.25) | 10.32 | 5.16 | 10,330 | 1.01 | .74 | 2.15 | 172 |
| — | (.26) | 10.06 | (2.56) | 9,892 | 1.02 | .73 | 2.07 | 135 |
| — | (.02) | 10.58 | 1.56 | 46,594 | 1.09 | .73 | 1.97 | 85 |
337
Notes
to Financial Highlights—October 31, 2021
| (1) | For the period February 28, 2017 (inception date) to October 31, 2017. |
| (2) | For the period March 7, 2017 (inception date) to October 31, 2017. |
| (3) | For the period March 16, 2017 (inception date) to October 31, 2017. |
| (4) | For the period August 30, 2017 (inception date) to October 31, 2017. |
| (5) | For the period September 28, 2017 (inception date) to October 31, 2017. |
| (6) | For the period July 30, 2018 (inception date) to October 31, 2018. |
| (7) | For the period June 10, 2019 (inception date) to October 31, 2019. |
| (a) | Average daily shares outstanding were used for this calculation. |
| (b) | The ratios or returns for periods less than one year are not annualized. |
| (c) | Total return for Class A Shares does not reflect a front-end sales charge. If sales charges were included, the total return would be lower. This includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Periods less than one year are not annualized, if applicable. |
| (d) | May reflect amounts waived and/or reimbursed by RIM and/or RIFUS. |
| (e) | The ratios for periods less than one year are annualized. |
| (f) | Less than $.01 per share. |
| (g) | For the Sustainable Equity Fund, the respective annualized net expense ratios, not including the dividend and interest expense from short sales, were as follows: |
| For the period ended | Class A | Class C | Class S | Class Y | ||||
|
October 31, 2021
|
1.11% | 1.86% | 0.82% | 0.66% | ||||
|
October 31, 2020
|
1.12% | 1.87% | 0.83% | 0.67% | ||||
|
October 31, 2019
|
1.13% | 1.88% | 0.84% | 0.69% | ||||
|
October 31, 2018
|
1.11% | 1.86% | 0.82% | 0.66% | ||||
|
October 31, 2017
|
1.11% | 1.86% | 0.83% | 0.67% |
For
the U.S. Strategic Equity Fund, the respective annualized net expense ratios,
not including the dividend and interest expense from short sales, were as
follows:
| For the period ended | Class A | Class C | Class M | Class S | Class Y | |||||
|
October 31, 2021
|
N/A | N/A | N/A | N/A | N/A | |||||
|
October 31, 2020
|
N/A | N/A | N/A | N/A | N/A | |||||
|
October 31, 2019
|
0.98% | 1.74% | 0.64% | 0.73% | 0.57% | |||||
|
October 31, 2018
|
0.99% | 1.74% | 0.64% | 0.74% | 0.58% | |||||
|
October 31, 2017
|
1.01% | 1.76% | 0.68% | 0.76% | - |
For
the U.S. Small Cap Fund, the respective annualized net expense ratios, not
including the dividend and interest expense from short sales, were as
follows:
| For the period ended | Class A | Class C | Class M | Class R6 | Class S | Class Y | ||||||
|
October 31, 2021
|
1.26% | 2.01% | 0.87% | 0.84% | 0.97% | 0.80% | ||||||
|
October 31, 2020
|
1.26% | 2.01% | 0.87% | 0.81% | 0.97% | 0.82% | ||||||
|
October 31, 2019
|
1.25% | 2.00% | 0.84% | 0.83% | 0.96% | 0.81% | ||||||
|
October 31, 2018
|
N/A | N/A | N/A | N/A | N/A | N/A | ||||||
|
October 31, 2017
|
N/A | N/A | N/A | N/A | N/A | N/A |
| (h) | Distributions in excess of accumulated earnings and profits but not in excess of current earnings and profits computed on a tax basis. |
| (i) | Less than .005% of average net assets. |
| (†) | For the Multi-Asset Growth Strategy Fund, the Financial Highlights are consolidated and include the balances of the Cayman Multi-Asset Growth Strategy Fund Ltd. (wholly-owned subsidiary). Accordingly, all interfund balances and transactions have been eliminated. |
338
MONEY
MANAGER INFORMATION
The
money managers are not affiliates of the Funds, RIM, RIFUS or the Distributor
other than as a result of their management of Fund assets. Each money manager is
principally engaged in managing institutional investment accounts. These
managers may also serve as managers or advisers to other investment companies
unaffiliated with RIC, other RIC Funds, or to other clients of RIM or its
affiliates, including Russell Investments Trust Company. Investments in the
Funds are not deposits with or other liabilities of any of the money managers
and are subject to investment risk, including loss of income and principal
invested and possible delays in payment of redemption proceeds. The money
managers do not guarantee the performance of a Fund or any particular rate of
return.
The
Funds may engage or terminate a money manager at any time, subject to the
approval of the Funds' Board, without a shareholder vote. RIM may change a
Fund’s asset allocation at any time, including not allocating Fund assets to one
or more money manager strategies. Although all of the Funds' money managers are
listed below, RIM may not have allocated assets to the strategies employed by
one or more of these money managers. A complete list of current money managers
for the Funds can also be found at https://russellinvestments.com. Assets not
allocated to money managers are managed by RIM.
Equity
Income Fund
Barrow,
Hanley, Mewhinney & Strauss, LLC, JP Morgan Chase Tower, 2200 Ross Avenue,
31st Floor, Dallas, TX 75201.
Brandywine
Global Investment Management, LLC, 1735 Market Street, Suite 1800, Philadelphia,
PA 19103.
Sustainable
Equity Fund
Coho
Partners, Ltd., 300 Berwyn Park, 801 Cassatt Road, Suite 100, Berwyn, PA
19312.
Jacobs
Levy Equity Management, Inc., 100 Campus Drive, 4th Floor
East, Florham Park, NJ 07932-0650.
Mar
Vista Investment Partners, LLC, 11150 Santa Monica Boulevard, Suite 320, Los
Angeles, CA 90025.
Sustainable
Growth Advisers, LP, 301 Tresser Boulevard, Suite 1310, Stamford, CT
06901.
U.S.
Strategic Equity Fund
Brandywine
Global Investment Management, LLC, 1735 Market Street, Suite 1800, Philadelphia,
PA 19103.
HS
Management Partners, LLC, 640 Fifth Avenue, 18th Floor,
New York, NY 10019.
Jackson
Square Partners, LLC, One Letterman Drive, Building A, Suite A3-200, San
Francisco, CA, 94129-1492.
Jacobs
Levy Equity Management, Inc., 100 Campus Drive, 4th Floor East, Florham Park, NJ
07932-0650.
U.S.
Small Cap Equity Fund
Ancora
Advisors, LLC, 6060 Parkland Boulevard, Suite 200, Mayfield Heights, OH
44124.
BAMCO,
Inc., 767 Fifth Avenue, 49th Floor,
New York, NY 10153.
Boston
Partners Global Investors, Inc., 1 Beacon Street, 30th Floor,
Boston, MA 02108.
Calamos
Advisors LLC, 2020 Calamos Court, Naperville, IL 60563-2787.
Copeland
Capital Management, LLC, Eight Tower Bridge, 161 Washington St., Suite 1325,
Conshohocken, PA 19428.
DePrince,
Race & Zollo, Inc., 250 Park Avenue South, Suite 250, Winter Park, FL
32789.
Jacobs
Levy Equity Management, Inc., 100 Campus Drive, 4th Floor East, Florham Park, NJ
07932-0650.
Penn
Capital Management Company, LLC, 1200 Intrepid Avenue, Suite 400, Philadelphia,
PA 19112.
Ranger
Investment Management, L.P., 8115 Preston Road, Suite 590, Dallas, TX
75225.
339
International
Developed Markets Fund
Intermede
Investment Partners Limited, 6 Warwick Street, London W1B 5LU, United Kingdom
and Intermede Global Partners Inc., 650 California Street, Floor 7, San
Francisco, CA 94108.
Pzena
Investment Management LLC, 320 Park Avenue, 8th Floor, New York, NY 10022.
Wellington
Management Company LLP, 280 Congress Street, Boston, MA 02210.
Global
Equity Fund
Intermede
Investment Partners Limited, 6 Warwick Street, London W1B 5LU, United Kingdom
and Intermede Global Partners Inc., 650 California Street, Floor 7, San
Francisco, CA 94108.
Sanders
Capital, LLC, 390 Park Avenue, 17th Floor,
New York, NY 10022.
Wellington
Management Company LLP, 280 Congress Street, Boston, MA 02210.
Emerging
Markets Fund
AllianceBernstein
L.P., 501 Commerce Street, Nashville, TN 37203.
Axiom
Investors LLC, 33 Benedict Place, 2nd Floor,
Greenwich, CT 06830.
Consilium
Investment Management, LLC, 2400 E Commercial Blvd., Suite 900, Fort Lauderdale,
FL 33308.
Neuberger
Berman Investment Advisors LLC, 1290 Avenue of the Americas, New York, NY
10104.
Numeric
Investors LLC, 200 Pier 4 Boulevard, 5th Floor, Boston, MA 02210.
Oaktree
Fund Advisors, LLC, 333 South Grand Avenue, 28th Floor, Los Angeles, CA
90071.
Tax-Managed
U.S. Large Cap Fund
Barrow,
Hanley, Mewhinney & Strauss, LLC, JP Morgan Chase Tower, 2200 Ross Avenue,
31st
Floor, Dallas, TX 75201.
J.P.
Morgan Investment Management Inc., 383 Madison Ave., New York, NY
10179-0001.
Sustainable
Growth Advisers, LP, 301 Tresser Boulevard, Suite 1310, Stamford, CT
06901.
Tax-Managed
U.S. Mid & Small Cap Fund
Ancora
Advisors, LLC, 6060 Parkland Boulevard, Suite 200, Mayfield Heights, OH
44124.
BAMCO,
Inc., 767 Fifth Avenue, 49th Floor,
New York, NY 10153.
Cardinal
Capital Management L.L.C., Four Greenwich Office Park, 3rd Floor,
Greenwich, CT 06831.
Copeland
Capital Management, LLC, Eight Tower Bridge, 161 Washington St. Suite 1325,
Conshohocken, PA 19428.
DePrince,
Race & Zollo, Inc., 250 Park Avenue South, Suite 250, Winter Park, FL
32789.
Polen
Capital Management, LLC, 1825 NW Corporate Blvd., Suite 300 Boca Raton, FL
33431.
Summit
Creek Advisors, LLC, 120 South Sixth Street, Suite 2200, Minneapolis, MN
55402.
340
Tax-Managed
International Equity Fund
AllianceBernstein
L.P., 501 Commerce Street, Nashville, TN 37203.
Intermede
Investment Partners Limited, 6 Warwick Street, London W1B 5LU, United Kingdom
and Intermede Global Partners Inc., 650 California Street, Floor 7, San
Francisco, CA 94108.
Pzena
Investment Management LLC, 320 Park Ave. 8th Floor, New York, NY 10022.
RWC
Asset Advisors (US) LLC, 2640 South Bayshore Drive, Suite 201, Miami, FL
33133.
Wellington
Management Company LLP, 280 Congress Street, Boston, MA 02210.
Tax-Managed
Real Assets Fund
First
Sentier Investors (Australia) IM Ltd, Level 5, Tower 3, International Towers,
300 Barangaroo Ave., Barangaroo NSW Australia, 2000.
Grantham
Mayo Van Otterloo & Co. LLC, 40 Rowes Wharf, Boston, MA 02110.
RREEF
America L.L.C., 222 S. Riverside Plaza, Chicago, IL 60606, operating under the
brand name DWS.
Opportunistic
Credit Fund
Barings
LLC, 300 S. Tyron Street, Suite 2500, Charlotte, NC 28202 and Baring
International Investment Limited, 20 Old Bailey, London EC4M 7BF, United
Kingdom.
DuPont
Capital Management Corporation, Chestnut Run Plaza, Building C735-1, 974 Centre
Road, Wilmington, DE 19805.
Voya
Investment Management Co. LLC, 230 Park Avenue, New York, NY 10169.
Unconstrained
Total Return Fund
Ardea
Investment Management Pty Ltd, Level 2, 5 Martin Place, Sydney, NSW 2000,
Australia.
Hermes
Investment Management Limited, 150 Cheapside, London, EC2V 6ET, United
Kingdom.
Strategic
Bond Fund
BlueBay
Asset Management LLP, 77 Grosvenor Street, London, W1K 3JR, United
Kingdom.
Schroder
Investment Management North America Inc., 7 Bryant Park, 19th Floor,
New York, NY 10018.
Western
Asset Management Company LLC, 385 East Colorado Boulevard, Pasadena, CA 91101,
and Western Asset Management Company Limited, 10 Exchange Square, Primrose
Street, London, EC2A 2EN, United Kingdom.
Investment
Grade Bond Fund
MetLife
Investment Management, LLC, One MetLife Way, Whippany, NJ 07981.
Schroder
Investment Management North America Inc., 7 Bryant Park, 19th Floor,
New York, NY 10018.
Short
Duration Bond Fund
Scout
Investments, Inc., 1201 Walnut St., 21st Floor,
Kansas City, MO, 64106.
Western
Asset Management Company LLC, 385 East Colorado Boulevard, Pasadena, CA 91101,
and Western Asset Management Company Limited, 10 Exchange Square, Primrose
Street, London, EC2A 2EN, United Kingdom.
341
Tax-Exempt
High Yield Bond Fund
Goldman
Sachs Asset Management, L.P., 200 West Street, New York, NY 10282-2198.
MacKay
Shields LLC, 1345 Avenue of the Americas, 43rd Floor,
New York, NY 10105.
Tax-Exempt
Bond Fund
Goldman
Sachs Asset Management, L.P., 200 West Street, New York, NY 10282-2198.
MacKay
Shields LLC, 1345 Avenue of the Americas, 43rd Floor,
New York, NY 10105.
Global
Infrastructure Fund
Cohen
& Steers Capital Management, Inc., 280 Park Avenue, 10th Floor, New York, NY
10017-1216, Cohen & Steers UK Limited, 50 Pall Mall, 7th Floor, London SW1Y
5JH, United Kingdom and Cohen & Steers Asia Limited, Suites 1201-02
Champion Tower, 3 Garden Road, Central Hong Kong.
First
Sentier Investors (Australia) IM Ltd, Level 5, Tower 3, International Towers,
300 Barangaroo Ave., Barangaroo NSW Australia, 2000.
Nuveen
Asset Management, LLC, 333 West Wacker Drive, Chicago, IL 60606-1286.
Global
Real Estate Securities Fund
Cohen
& Steers Capital Management, Inc., 280 Park Avenue, 10th Floor, New York, NY
10017-1216, Cohen & Steers UK Limited, 50 Pall Mall, 7th Floor, London, SW1Y
5JH, United Kingdom and Cohen & Steers Asia Limited, Suites 1201-02
Champion Tower, 3 Garden Road, Central Hong Kong.
RREEF
America L.L.C. 222 S. Riverside Plaza, Chicago, IL 60606, DWS Investments
Australia Limited, Deutsche Bank Place, Level 16, Corner of Hunter and Phillip
Streets, Sydney, NSW 2000, Australia and DWS Alternatives Global Limited, 30
Fenchurch Avenue, The Willis Building, Floor 6, London EC3M 5AD, United Kingdom,
operating under the brand name DWS.
Real
Assets Fund
First
Sentier Investors (Australia) IM Ltd, Level 5, Tower 3, International Towers,
300 Barangaroo Ave., Barangaroo NSW Australia, 2000.
Grantham
Mayo Van Otterloo & Co. LLC, 40 Rowes Wharf, Boston, MA 02110.
RREEF
America L.L.C. 222 S. Riverside Plaza, Chicago, IL 60606, DWS Investments
Australia Limited, Deutsche Bank Place, Level 16, Corner of Hunter and Phillip
Streets, Sydney, NSW 2000, Australia and DWS Alternatives Global Limited, 30
Fenchurch Avenue, The Willis Building, Floor 6, London EC3M 5AD, United Kingdom,
operating under the brand name DWS.
342
Multi-Strategy
Income Fund
Berenberg
Asset Management LLC, 1251 6th Ave
53rd
Floor, New York, NY 10020.
Boston
Partners Global Investors, Inc., 1 Beacon Street, 30th Floor,
Boston, MA 02108.
Cohen
& Steers Capital Management, Inc., 280 Park Avenue, 10th Floor, New York, NY
10017-1216, Cohen & Steers UK Limited, 50 Pall Mall, 7th Floor, London SW1Y
5JH, United Kingdom and Cohen & Steers Asia Limited, Suites 1201-02
Champion Tower, 3 Garden Road, Central Hong Kong.
Easterly
Investment Partners LLC, 138 Conant Street, Beverly, MA 01915.
GLG
LLC, 452 Fifth Avenue, 27th Floor,
New York, NY 10018.
Kopernik
Global Investors, LLC, Two Harbour Place, 302 Knights Run Avenue, Suite 1225,
Tampa, FL 33602.
Man
Investments Australia Limited, Level 27, Chifley Square Sydney NSW 2000
Australia.
Oaktree
Fund Advisors, LLC, 333 South Grand Avenue, 28th Floor, Los Angeles, CA
90071.
Putnam
Investment Management, LLC, 100 Federal Street, Boston, MA 02110.
RiverPark
Advisors, LLC, 156 West 56th Street, 17th Floor, New York, NY 10019.
Sompo
Asset Management Co., Ltd., Kyoritsu Nihonbashi Bldg., 2-2-16 Nihonbashi,
Chuo-Ku, Toyko 1030027 Japan.
Multi-Asset
Growth Strategy Fund
Atlantic
Investment Management, Inc., 1301 Avenue of the Americas, 38th Floor,
New York, NY 10019.
Berenberg
Asset Management LLC, 1251 6th Ave
53rd
Floor, New York, NY 10020.
Boston
Partners Global Investors, Inc., 1 Beacon Street, 30th Floor,
Boston, MA 02108.
Cohen
& Steers Capital Management, Inc., 280 Park Avenue, 10th Floor, New York, NY
10017-1216, Cohen & Steers UK Limited, 50 Pall Mall, 7th Floor, London SW1Y
5JH, United Kingdom and Cohen & Steers Asia Limited, Suites 1201-02
Champion Tower, 3 Garden Road, Central Hong Kong.
Easterly
Investment Partners LLC, 138 Conant Street, Beverly, MA 01915.
First
Sentier Investors (Australia) IM Ltd, Level 5, Tower 3, International Towers,
300 Barangaroo Ave., Barangaroo NSW Australia, 2000.
GLG
LLC, 452 Fifth Avenue, 27th Floor,
New York, NY 10018.
Hermes
Investment Management Limited, 150 Cheadside, London, EC2V 6ET, United
Kingdom.
Kopernik
Global Investors, LLC, Two Harbour Place, 302 Knights Run Avenue, Suite 1225,
Tampa, FL 33602.
Man
Investments Australia Limited, Level 27, Chifley Square Sydney NSW 2000
Australia.
Oaktree
Fund Advisors, LLC, 333 South Grand Avenue, 28th Floor, Los Angeles, CA
90071.
Putnam
Investment Management, LLC, 100 Federal Street, Boston, MA 02109.
RiverPark
Advisors, LLC, 156 West 56th Street, 17th Floor, New York, NY 10019.
Sompo
Asset Management Co., Ltd., Kyoritsu Nihonbashi Bldg., 2-2-16 Nihonbashi,
Chuo-Ku, Toyko 1030027 Japan.
When
considering an investment in the Funds, do not rely on any information unless it
is contained in this Prospectus or in the Funds' Statement of Additional
Information. The Funds have not authorized anyone to add any information or to
make any additional statements about the Funds. The Funds may not be available
in some jurisdictions or to some persons. The fact that you have received this
Prospectus should not, in itself, be treated as
343
an
offer to sell Shares to you. Changes in the affairs of the Funds or in the
Funds' money managers may occur after the date on the cover page of this
Prospectus. This Prospectus will be amended or supplemented to reflect any
material changes to the information it contains.
344
EXPENSE
NOTES
The
following notes supplement the Annual Fund Operating Expenses tables in the
Risk/Return Summary and provide additional information necessary to understand
the expenses provided in those tables:
| • | If you purchase Shares through a Financial Intermediary, such as a bank or an investment adviser, you may also pay additional fees to the intermediary for services provided by the intermediary. You should contact your Financial Intermediary for information concerning what additional fees, if any, will be charged. |
| • | Pursuant to the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on Class A, Class C and Class C1 Shares of the Funds may not exceed 7.25%, 6.25% and 6.25%, respectively, of total gross sales, subject to certain exclusions. These limitations are imposed at the class level on each Class of Shares of each Fund rather than on a per shareholder basis. Therefore, long-term shareholders of the Class A, Class C and Class C1 Shares may pay more than the economic equivalent of the maximum sales charges permitted by FINRA. |
| • | “Acquired Fund Fees and Expenses” are indirect expenses borne by a Fund as a result of its investment in another fund or funds, including any Subsidiary. The fees payable by a Fund with respect to the investment of cash reserves are included in “Acquired Fund Fees and Expenses” if they are at least 0.01% of the Fund’s average net assets. If such fees are less than 0.01% of the Fund’s average net assets, they are included in “Other Expenses.” |
| • | “Other Expenses” includes a shareholder services fee of 0.25% of average daily net assets for Class C Shares and an administrative fee of up to 0.05% of average daily net assets for all Classes of Shares. |
| • | In addition to the advisory and administrative fees payable by the Funds to RIM and RIFUS, each Fund that invests its cash reserves in the U.S. Cash Management Fund, an unregistered fund advised by RIM, will bear indirectly a proportionate share of that Fund’s operating expenses, which include the administrative fees that the U.S. Cash Management Fund pays to RIFUS. The cash reserves for all Funds are invested in the U.S. Cash Management Fund. The annual rate of administrative fees payable to RIFUS on the cash reserves invested in the U.S. Cash Management Fund is 0.05%. |
| • | Dividend expense on securities sold short is the cost of paying the value of dividends on those securities to the lender of the security. This expense is offset by gains on the decrease in the market value of the securities sold short as a result of the dividend declaration. Interest expense on securities sold short is the amount paid to the lender of the security for making the loan. This may be partially offset by the interest earned from investment of cash collateral posted for the borrowed securities. While the Fund is obligated to record the dividend expense and interest as an expense from an accounting perspective, these expenses are not charged directly to the Fund but are similar to transaction charges for buying and selling securities. |
345
| • | For the Sustainable Equity Fund, a portion of “Other Expenses” is attributable to interest expense and dividend expense from short sales as follows: |
| Interest
Expense on Short Sales |
Dividend
Expense on Short Sales |
Total
Dividend and Interest Expenses on Short Sales | |||
|
Class A Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class C Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class C1 Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class M Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class R6 Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class S Shares
|
0.06% | 0.11% | 0.17% | ||
|
Class Y Shares
|
0.06% | 0.11% | 0.17% |
| • | For the U.S. Small Cap Equity Fund, a portion of “Other Expenses” is attributable to interest expense and dividend expense from short sales as follows: |
| Interest
Expense on Short Sales |
Dividend
Expense on Short Sales |
Total
Dividend and Interest Expenses on Short Sales | |||
|
Class A Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class C Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class C1 Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class M Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class R6 Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class S Shares
|
0.04% | 0.06% | 0.10% | ||
|
Class Y Shares
|
0.04% | 0.06% | 0.10% |
346
PERFORMANCE
NOTES
The
following notes supplement the Performance tables in the Risk/Return Summary and
provide additional information necessary to understand the returns provided in
those tables:
The
calculation of total return after taxes on distributions and sale of Fund Shares
assumes that a shareholder has sufficient capital gains of the same character to
offset any capital losses on a sale of Fund Shares and that the shareholder may
therefore deduct the entire capital loss.
Equity
Income Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund has not yet issued Class M Shares. The returns shown for Class M Shares are
the returns of the Fund’s Class S Shares. Class M Shares will have substantially
similar annual returns as the Class S Shares because the Shares of each Class
are invested in the same portfolio of securities. Annual returns for each Class
will differ only to the extent that the Class M Shares do not have the same
expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
The
Fund first issued Class Y Shares on March 30, 2000, closed its Class Y Shares on
May 4, 2015 and reopened its Class Y Shares on March 1, 2017. The returns
shown for Class Y Shares for the period May 5, 2015 through February 28,
2017 are the returns of the Fund’s Class I Shares. Class Y Shares will have
substantially similar annual returns as the Class I Shares because the Shares of
each Class are invested in the same portfolio of securities. Annual returns for
each Class will differ only to the extent that the Class Y Shares do not have
the same expenses as the Class I Shares. Class I Shares were reclassified as
Class S Shares on August 18, 2017.
Sustainable
Equity Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund has not yet issued Class M Shares. The returns shown for Class M Shares are
the returns of the Fund’s Class S Shares. Class M Shares will have substantially
similar annual returns as the Class S Shares because the Shares of each Class
are invested in the same portfolio of securities. Annual returns for each Class
will differ only to the extent that the Class M Shares do not have the same
expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
U.S.
Strategic Equity Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
The
Fund first issued Class Y Shares on July 30, 2018. The returns shown prior to
that date are the returns of the Fund’s Class S Shares. Class Y Shares had no
Shares outstanding as of September 11, 2019. The returns shown after that
date are the returns of the Fund’s Class S Shares. Class Y Shares will have
substantially similar annual returns as the Class S Shares because the Shares of
each Class are invested in the same portfolio of securities. Annual returns for
each Class will differ only to the extent that the Class Y Shares do not have
the same expenses as the Class S Shares.
U.S.
Small Cap Equity Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S
Shares
347
because
the Shares of each Class are invested in the same portfolio of securities.
Annual returns for each Class will differ only to the extent that the Class M
Shares do not have the same expenses as the Class S Shares.
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual returns as the Class Y Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class R6 Shares do not have the same expenses as the Class Y Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
International
Developed Markets Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Global
Equity Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Emerging
Markets Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual returns as the Class Y Shares
because Class Y Shares are invested in the same portfolio of securities. Annual
returns for each Class will differ only to the extent that the Class R6 Shares
do not have the same expenses as Class Y Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Tax-Managed
U.S. Large Cap Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
348
Tax-Managed
U.S. Mid & Small Cap Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Tax-Managed
International Equity Fund
The
Fund first issued Class A, C, E and S Shares on June 1, 2015.
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Tax-Managed
Real Assets Fund
The
Fund first issued Class A, C, M and S Shares on June 10, 2019.
No
Class C1 Shares were issued as of the date of this Prospectus.
Opportunistic
Credit Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Unconstrained
Total Return Fund
The
Fund first issued Class A, C, S, and Y Shares on September 22, 2016.
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund's Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Strategic
Bond Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because Shares of each Class are invested in the same portfolio of securities.
Annual returns for each Class will differ only to the extent that the Class M
Shares do not have the same expenses as Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual
349
returns
as the Class Y Shares because the Shares of each Class are invested in the same
portfolio of securities. Annual returns for each Class will differ only to the
extent that the Class R6 Shares do not have the same expenses as Class Y
Shares.
Investment
Grade Bond Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because Shares of each Class are invested in the same portfolio of securities.
Annual returns for each Class will differ only to the extent that the Class M
Shares do not have the same expenses as Class S Shares.
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual returns as the Class Y Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class R6 Shares do not have the same expenses as Class Y Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Short
Duration Bond Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because Shares of each Class are invested in the same portfolio of securities.
Annual returns for each Class will differ only to the extent that the Class M
Shares do not have the same expenses as Class S Shares.
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual returns as the Class Y Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class R6 Shares do not have the same expenses as Class Y Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Tax-Exempt
High Yield Bond Fund
The
Fund first issued Class A, C, E and S Shares on June 1, 2015.
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Tax-Exempt
Bond Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Global
Infrastructure Fund
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
first issued Class M Shares on March 17, 2017. The returns shown for Class M
Shares prior to that date are the returns of the
350
Fund’s
Class S Shares. Class M Shares will have substantially similar annual returns as
the Class S Shares because the Shares of each Class are invested in the same
portfolio of securities. Annual returns for each Class will differ only to the
extent that the Class M Shares do not have the same expenses as the Class S
Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Global
Real Estate Securities Fund
The
Fund first issued Class R6 Shares on March 1, 2016. The returns shown for Class
R6 Shares prior to that date are the returns of the Fund’s Class Y Shares. Class
R6 Shares will have substantially similar annual returns as the Class Y Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
Class R6 Shares do not have the same expenses as Class Y Shares.
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as Class S Shares.
No
Class C1 Shares were issued as of the date of this Prospectus.
Multi-Strategy
Income Fund
The
Fund first issued Class A, C, E, S and Y Shares on May 1, 2015.
No
Class C1 or Class R6 Shares were issued as of the date of this Prospectus.
Prior
to September 15, 2017, Class M Shares were designated as Class T Shares. The
Fund first issued Class M Shares on March 17, 2017. The returns shown for Class
M Shares prior to that date are the returns of the Fund’s Class S Shares. Class
M Shares will have substantially similar annual returns as the Class S Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class M Shares do not have the same expenses as the Class S Shares.
Multi-Asset
Growth Strategy Fund
The
Fund first issued Class A Shares on September 28, 2017. The returns shown prior
to that date are the returns of the Fund’s Class S Shares. The performance shown
has been adjusted to reflect the deduction of the maximum Class A sales charge
of 5.75%. Class A Shares will have substantially similar annual returns as the
Class S Shares because the Shares of each Class are invested in the same
portfolio of securities. Annual returns for each Class will differ only to the
extent that the Class A Shares do not have the same expenses as the Class S
Shares.
The
Fund first issued Class C Shares on September 28, 2017. The returns shown prior
to that date are the returns of the Fund’s Class S Shares and do not reflect
deduction of the Rule 12b-1 distribution fees that apply to Class C Shares.
Class C Shares will have substantially similar annual returns as the Class S
Shares because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class C Shares do not have the same expenses as the Class S Shares.
The
Fund first issued Class M Shares on March 16, 2017. The returns shown prior to
that date are the returns of the Fund’s Class S Shares. Class M Shares will have
substantially similar annual returns as the Class S Shares because the Shares of
each Class are invested in the same portfolio of securities. Annual returns for
each Class will differ only to the extent that the Class M Shares do not have
the same expenses as the Class S Shares.
The
Fund first issued Class S Shares on March 7, 2017.
The
Fund first issued Class Y Shares on August 30, 2017. The returns shown prior to
that date are the returns of the Fund’s Class S Shares. Class Y Shares will have
substantially similar annual returns as the Class S
351
Shares
because the Shares of each Class are invested in the same portfolio of
securities. Annual returns for each Class will differ only to the extent that
the Class Y Shares do not have the same expenses as the Class S Shares.
No
Class C1 or Class R6 Shares were issued as of the date of this
Prospectus.
352
APPENDIX
A
additional
information about financial Intermediary-specific sales charge variations,
waivers and discounts
This
Appendix A discloses Financial Intermediary-specific sales charge variations,
waivers and discounts, if any. Please see the Front-End Sales Charges and
Deferred Sales Charges sections of the Prospectus for information about sales
charge waivers and discounts available if you invest directly with a Fund or
through Financial Intermediaries not discussed in this Appendix A. The terms or
availability of waivers or discounts may be changed at any time.
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from a Fund or through a Financial
Intermediary. Financial Intermediaries may have different policies and
procedures regarding the availability of front-end sales load waivers or
contingent deferred (back-end) sales load (“CDSC”) waivers. In all instances, it
is the purchaser’s responsibility to notify the Fund or the purchaser’s
Financial Intermediary at the time of purchase of any relationship or other
facts qualifying the purchaser for sales charge waivers or discounts. For
waivers and discounts not available through a particular intermediary,
shareholders will have to purchase Fund shares directly from the Fund or through
another intermediary.
Purchases
through any Financial Intermediary discussed below are subject to sales charge
waivers and/or discounts that are different from the sales charge waivers and/or
discounts available for Shares purchased directly from the Funds (or the
Distributor). Financial Intermediary-specific sales charge waivers and/or
discounts are implemented and administered by each Financial Intermediary. This
Appendix A may be updated from time to time to add additional Financial
Intermediaries.
In
all instances, it is the shareholder’s responsibility to notify the Fund or
Financial Intermediary of any relationship or other facts that may qualify the
shareholder for sales charge waivers or discounts at the time of purchase. You
may wish to contact your Financial Intermediary to ensure that you have the most
current information regarding the sales charge waivers and discounts available
to you and the steps you must take to qualify for available waivers and
discounts.
Ameriprise
Financial
Effective
June 1, 2018, shareholders purchasing Fund Shares through an Ameriprise
Financial platform or account will be eligible for the following front-end sales
charge waivers, which may differ from those disclosed elsewhere in this Fund’s
Prospectus or SAI:
Class
A Shares Front-End Sales Charge Waivers Available at Ameriprise Financial:
| • | Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs. |
| • | Shares purchased through an Ameriprise Financial investment advisory program (if an Advisory or similar share class for such investment advisory program is not available). |
| • | Shares purchased by third party investment advisors on behalf of their advisory clients through Ameriprise Financial’s platform (if an Advisory or similar share class for such investment advisory program is not available). |
| • | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same Fund (but not any other fund within the same fund family). |
| • | Shares exchanged from Class C and Class C1 Shares of the same Fund in the month of or following the 10-year anniversary of the purchase date. To the extent that this Prospectus elsewhere provides for a waiver with respect to such shares following a shorter holding period, that waiver will apply to exchanges following such shorter period. To the extent that this prospectus elsewhere provides for a waiver with respect to exchanges of Class C and Class C1 Shares for load waived shares, that waiver will also apply to such exchanges. |
| • | Employees and registered representatives of Ameriprise Financial or its affiliates and their immediate family members. |
| • | Shares purchased by or through qualified accounts (including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit plans) that are held by a covered family member, defined as an Ameriprise Financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant (mother, father, |
353
| grandmother, grandfather, great grandmother, great grandfather), advisor’s lineal descendant (son, step-son, daughter, step-daughter, grandson, granddaughter, great grandson, great granddaughter) or any spouse of a covered family member who is a lineal descendant. | |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e. Rights of Reinstatement). |
BAIRD
Effective
June 15, 2020, shareholders purchasing Fund shares through a Baird platform or
account will only be eligible for the following sales charge waivers (front-end
sales charge waivers and CDSC waivers) and discounts, which may differ from
those disclosed elsewhere in this Prospectus or the SAI.
Front-End
Sales Charge Waivers on Class A Shares Available at Baird
| • | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same Fund |
| • | Shares purchased by employees and registered representatives of Baird or its affiliate and their family members as designated by Baird |
| • | Shares purchased from the proceeds of redemptions from another Russell Investment Company Fund, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement) |
| • | A shareholder in the Funds’ Class C Shares or C1 Shares will have their shares converted at net asset value to Class A Shares of the Fund if the shares are no longer subject to CDSC and the conversion is in line with the policies and procedures of Baird |
| • | Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans. For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs |
CDSC
Waivers on Class A and C1 Shares Available at Baird
| • | Shares sold due to death or disability of the shareholder |
| • | Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus |
| • | Shares bought due to returns of excess contributions from an IRA Account |
| • | Shares sold as part of a required minimum distribution for IRA and retirement accounts pursuant to the Internal Revenue Code |
| • | Shares sold to pay Baird fees but only if the transaction is initiated by Baird |
| • | Shares acquired through a right of reinstatement |
Front-End
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
| • | Breakpoints as described in this Prospectus |
| • | Rights of accumulations which entitles shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of Russell Investment Company Funds’ assets held by accounts within the purchaser’s household at Baird. Eligible Russell Investment Company Funds’ assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets |
| • | Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases of Russell Investment Company Funds through Baird, over a 13-month period of time |
D.A.
Davidson & Co.
Effective
March 1, 2021, shareholders purchasing Fund shares, including existing Fund
shareholders, through a D.A. Davidson & Co. (“D.A. Davidson”) platform or
account, or through an introducing broker-dealer or independent
354
registered
investment advisor for which D.A. Davidson provides trade execution, clearance,
and/or custody services, will be eligible for the following sales charge waivers
(front-end sales charge waivers and contingent deferred, or back-end, sales
charge waivers) and discounts, which may differ from those disclosed elsewhere
in this Prospectus or the Funds’ SAI.
Front-End
Sales Charge Waivers on Class A Shares available at D.A. Davidson
| • | Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions. |
| • | Employees and registered representatives of D.A. Davidson or its affiliates and their family members as designated by D.A. Davidson. |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as Rights of Reinstatement). |
| • | A shareholder in the Funds' Class C Shares or Class C1 Shares will have their shares converted at net asset value to Class A Shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is consistent with D.A. Davidson’s policies and procedures. |
CDSC
Waivers on Class A and Class C1 Shares available at D.A. Davidson
| • | Death or disability of the shareholder. |
| • | Shares sold as part of a systematic withdrawal plan as described in the Fund’s prospectus. |
| • | Return of excess contributions from an IRA account. |
| • | Shares sold as part of a required minimum distribution for IRA or other qualifying retirement accounts pursuant to the Internal Revenue Code. |
| • | Shares acquired through a right of reinstatement. |
Front-end
sales charge discounts available at D.A. Davidson: breakpoints, rights of
accumulation and/or letters of intent
| • | Breakpoints as described in this Prospectus. |
| • | Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at D.A. Davidson. Eligible fund family assets not held at D.A. Davidson may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor about such assets. |
| • | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at D.A. Davidson may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
Janney
Montgomery Scott LLC
Effective
May 1, 2020, if you purchase Fund shares through a Janney Montgomery Scott LLC
(“Janney”) brokerage account, you will be eligible for the following load
waivers (front-end sales charge waivers and contingent deferred sales charge
(“CDSC”), or back-end sales charge, waivers) and discounts, which may differ
from those disclosed elsewhere in this Prospectus or the SAI.
Front-End
Sales Charge* Waivers on Class A Shares Available at Janney
| • | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other Fund within the fund family). |
| • | Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney. |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement). |
355
| • | Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans. |
| • | Shares acquired through a right of reinstatement. |
| • | Class C or Class C1 Shares that are no longer subject to a contingent deferred sales charge and are converted to Class A Shares of the same Fund pursuant to Janney’s policies and procedures. |
CDSC
Waivers on Class A, Class C or Class C1 Shares Available at Janney
| • | Shares sold upon the death or disability of the shareholder. |
| • | Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus. |
| • | Shares purchased in connection with a return of excess contributions from an IRA account. |
| • | Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable Internal Revenue Service regulations as described in the Fund’s Prospectus. |
| • | Shares sold to pay Janney fees but only if the transaction is initiated by Janney. |
| • | Shares acquired through a right of reinstatement. |
| • | Shares exchanged into the same share class of a different Fund. |
Front-End
Sales Charge* Discounts Available at Janney: Breakpoints, Rights of Accumulation
and/or Letters of Intent
| • | Breakpoints as described in the Fund’s Prospectus. |
| • | Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
| • | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
*
Also referred to as an “initial sales charge.”
MERRILL
LYNCH
Shareholders
purchasing Fund Shares through a Merrill Lynch platform or account will be
eligible only for the following load waivers (front-end sales charge waivers and
contingent deferred, or back-end, sales charge waivers) and discounts, which may
differ from those disclosed elsewhere in this Fund’s Prospectus or SAI.
Front-end
Sales Load Waivers on Class A Shares available at Merrill Lynch
| • | Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan |
| • | Shares purchased by a 529 Plan (does not include 529 Plan units or 529-specific share classes or equivalents) |
| • | Shares purchased through a Merrill Lynch affiliated investment advisory program |
| • | Shares exchanged due to the holdings moving from a Merrill Lynch affiliated investment advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers. |
| • | Shares purchased by third party investment advisors on behalf of their advisory clients through Merrill Lynch’s platform |
| • | Shares of funds purchased through the Merrill Edge Self-Directed platform |
| • | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family) |
356
| • | Shares exchanged for Class C or Class C1 (i.e. level-load) Shares of the same fund pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers |
| • | Employees and registered representatives of Merrill Lynch or its affiliates and their family members |
| • | Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in this prospectus |
| • | Eligible Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement). Automated transactions (i.e. systematic purchases and withdrawals) and purchases made after shares are automatically sold to pay Merrill Lynch’s account maintenance fees are not eligible for reinstatement |
CDSC
Waivers on Class A and Class C1 Shares Available at Merrill Lynch
| • | Death or disability of the shareholder |
| • | Shares sold as part of a systematic withdrawal plan as described in the Fund’s prospectus |
| • | Return of excess contributions from an IRA Account |
| • | Shares sold as part of a required minimum distribution for IRA and retirement accounts pursuant to the Internal Revenue Code |
| • | Shares sold to pay Merrill Lynch fees but only if the transaction is initiated by Merrill Lynch |
| • | Shares acquired through a right of reinstatement |
| • | Shares held in retirement brokerage accounts, that are exchanged for a lower cost share class due to transfer to certain fee based accounts or platforms (applicable to Class A and Class C1 Shares only) |
| • | Shares received through an exchange due to the holdings moving from a Merrill Lynch affiliated investment advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers |
Front-end
load Discounts Available at Merrill Lynch: Breakpoints, Rights of Accumulation
& Letters of Intent
| • | Breakpoints as described in this Prospectus. |
| • | Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts as described in the Fund’s prospectus will be automatically calculated based on the aggregated holding of fund family assets held by accounts (including 529 program holdings, where applicable) within the purchaser’s household at Merrill Lynch. Eligible fund family assets not held at Merrill Lynch may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets |
| • | Letters of Intent (LOI) which allow for breakpoint discounts based on anticipated purchases within a fund family, through Merrill Lynch, over a 13-month period of time |
Morgan
stanley wealth management
Effective
March 1, 2019, shareholders purchasing Fund Shares through a Morgan Stanley
Wealth Management transactional brokerage account will be eligible only for the
following front-end sales charge waivers with respect to Class A Shares, which
may differ from and may be more limited than those disclosed elsewhere in this
Fund’s Prospectus or SAI.
Front-end
Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth
Management
| • | Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans |
| • | Morgan Stanley employee and employee-related accounts according to Morgan Stanley’s account linking rules |
| • | Shares purchased through reinvestment of dividends and capital gains distributions when purchasing shares of the same fund |
| • | Shares purchased through a Morgan Stanley self-directed brokerage account |
357
| • | Class C or Class C1 (i.e., level-load) Shares that are no longer subject to a contingent deferred sales charge and are converted to Class A Shares of the same fund pursuant to Morgan Stanley Wealth Management’s share class conversion program |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90 days following the redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares were subject to a front-end or deferred sales charge. |
OPPENHEIMER
& CO. INC.
Effective
May 1, 2020, shareholders purchasing Fund shares through an Oppenheimer &
Co. Inc. (“OPCO”) platform or account are eligible only for the following load
waivers (front-end sales charge waivers and contingent deferred, or back-end,
sales charge waivers) and discounts, which may differ from those disclosed
elsewhere in this Prospectus or the SAI.
Front-end
Sales Load Waivers on Class A Shares available at OPCO
| • | Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan |
| • | Shares purchased by or through a 529 Plan |
| • | Shares purchased through a OPCO affiliated investment advisory program |
| • | Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family) |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Restatement). |
| • | A shareholder in the Fund’s Class C or Class C1 Shares will have their shares converted at net asset value to Class A Shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of OPCO |
| • | Employees and registered representatives of OPCO or its affiliates and their family members |
| • | Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in this Prospectus |
CDSC
Waivers on Class A and C1 Shares available at OPCO
| • | Death or disability of the shareholder |
| • | Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus |
| • | Return of excess contributions from an IRA Account |
| • | Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the Prospectus |
| • | Shares sold to pay OPCO fees but only if the transaction is initiated by OPCO |
| • | Shares acquired through a right of reinstatement |
Front-end
load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
| • | Breakpoints as described in this Prospectus. |
| • | Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at OPCO. Eligible fund family assets not held at OPCO may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets. |
358
Raymond
James & Associates, Inc., Raymond James Financial Services, Inc. and each
entity’s affiliates (“Raymond James”)
Effective
March 1, 2019, shareholders purchasing Fund Shares through a Raymond James
platform or account, or through an introducing broker-dealer or independent
registered investment adviser for which Raymond James provides trade execution,
clearance, and/or custody services, will be eligible only for the following load
waivers (front-end sales charge waivers and contingent deferred, or back-end,
sales charge waivers) and discounts, which may differ from those disclosed
elsewhere in this fund’s Prospectus or SAI.
Front-end
sales load waivers on Class A Shares available at Raymond James
| • | Shares purchased in an investment advisory program. |
| • | Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions. |
| • | Employees and registered representatives of Raymond James or its affiliates and their family members as designated by Raymond James. |
| • | Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement). |
| • | A shareholder in the Fund’s Class C or Class C1 Shares will have their shares converted at net asset value to Class A Shares (or the appropriate share class) of the Fund if the Shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of Raymond James. |
CDSC
Waivers on Class A and Class C1 Shares available at Raymond James
| • | Death or disability of the shareholder. |
| • | Shares sold as part of a systematic withdrawal plan as described in the fund’s prospectus. |
| • | Return of excess contributions from an IRA Account. |
| • | Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the fund’s prospectus. |
| • | Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James. |
| • | Shares acquired through a right of reinstatement. |
Front-end
load discounts available at Raymond James: breakpoints, rights of accumulation,
and/or letters of intent
| • | Breakpoints as described in this Prospectus. |
| • | Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Raymond James. Eligible fund family assets not held at Raymond James may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor about such assets. |
| • | Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Raymond James may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets. |
359
For
more information about the Funds, the following documents are available without
charge:
ANNUAL/SEMIANNUAL
REPORTS: Additional information about each Fund’s investments is available in
the Funds' annual and semiannual reports to shareholders. In each Fund’s annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected each Fund’s performance during its last
fiscal year.
STATEMENT
OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information
about the Funds.
The
annual
and semiannual
reports for each Fund and the SAI are incorporated into this Prospectus by
reference. You may obtain free copies of the annual report, semiannual report or
the Funds' SAI, and may request other information or make other inquiries, by
contacting your Financial Intermediary or the Funds at:
Russell
Investments
PO Box 219430
Kansas City, MO 64121-9430
Telephone: 1-800-787-7354
PO Box 219430
Kansas City, MO 64121-9430
Telephone: 1-800-787-7354
The
Funds' SAI and annual and semiannual reports to shareholders are available, free
of charge, on the Funds' website at https://russellinvestments.com.
Each
year you are automatically sent an updated Prospectus. In addition, unless you
specifically request paper copies of the annual and semiannual reports from the
Funds or your financial intermediary, you will be notified by mail each time the
annual and semiannual reports are posted and provided with a website link to
access the reports. You may also occasionally receive notifications of
Prospectus changes and proxy statements for the Funds. In order to reduce the
volume of mail you receive, when possible, only one copy or one mailing of these
documents will be sent to shareholders who are part of the same family, sharing
the same name and the same household address. If you would like to opt out of
the household-based mailings, please call your Financial Intermediary.
Some
Financial Intermediaries may offer electronic delivery of the Funds' Prospectus
and annual and semiannual reports. Please contact your Financial Intermediary
for further details.
You
can review reports and other information about the Funds on the EDGAR Database
on the Securities and Exchange Commission’s website at http://www.sec.gov.
Copies of this information may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address:
[email protected].
Frank
Russell Company is the owner of the Russell trademarks contained in this
material and all trademark rights related to the Russell trademarks, which the
members of the Russell Investments group of companies are permitted to use under
license from Frank Russell Company. The members of the Russell Investments group
of companies are not affiliated in any manner with Frank Russell Company or any
entity operating under the “FTSE RUSSELL” brand.
