Russell Investment Manager Outlook June 2007 (Russell.com)

Russell Survey:
Bulls Keep Charging, But With Less Steam

Tacoma, WA — June 27, 2007 — Despite 18 consecutive quarters of stock market growth, money managers are still bullish, but a growing number now say the market is overvalued, according to the latest Investment Manager Outlook, Russell Investment Group's quarterly survey of investment managers. Seventeen percent of managers believe the market has become overvalued, a new high for the three-year survey and double that of the 8 percent exactly one year ago. At the same time, only 21 percent of managers believe the market is undervalued, as compared to 30 percent at this same time last year and 36 percent only two quarters ago.

"Given that most bull markets run out of steam after three or four years, it's a bit surprising that more managers have not begun to question the run's length. The current bull market may be graying at the temples, but — thanks to robust global growth and disciplined domestic economic engineering — it seems to be aging well," said Randy Lert, chief portfolio strategist, Russell Investment Group. "Current economic conditions appear similar to those of the mid-1980s and mid-1990s, and, in both instances, the U.S. economy and the stock market went on to experience a period of continued expansion."

When asked about the potential for a summer rally, 70 percent of managers indicated that they expect stock market returns to stay within a range of zero to less than 5 percent. Twenty-two percent of those surveyed indicated that they expect the market to fall during the third quarter, but only one-quarter of these pessimistic managers thought the market would tumble more than 5 percent.

"By all appearances, the managers seem ready to settle in for the summer and wait to see what develops," said Lert. "On the one hand, employment is high, consumers are spending and inflation is somewhat contained. On the other, the U.S. economy continues to decelerate but a recession does not appear to be in sight."

Russell's Investment Manager Outlook is intended to generate a meaningful snapshot of investment manager sentiment each quarter. For the current installment of the survey, Russell collected the opinions of senior-level investment decision-makers at U.S. large and small-cap equity investment managers, as well as U.S. fixed-income investment managers. More than 350 managers participated in this survey.

Additional findings from the Investment Manager Outlook include:

While U.S. economy relies on global growth, U.S. managers see investment opportunity abroad
The managers surveyed by Russell have become increasingly bullish toward emerging markets. Manager bullishness for this asset class increased to 50 percent in the most recent survey. This measure of optimism reflects an 11 percentage point increase from 39 percent last quarter and a 20 percentage point increase from 30 percent at the same time last year. Managers maintained their support for non-U.S. (developed market) equities, increasing their bullishness for this asset class slightly from 59 percent last quarter to 62 percent this quarter.

"Global growth and low world-wide interest rates have helped fuel domestic corporate earnings," said Lert. "The managers recognize that global markets — both developed and emerging — are playing leading roles in the current growth cycle with the United States playing a supporting role."

Managers are bullish on large-cap growth; manager sentiment toward energy stocks on rise
The vast majority of managers (74 percent) are bullish on large-cap growth stocks, once again the asset class that received the widest measure of support for the life of the survey. A majority of managers have lost interest in large-cap value, with bullishness for that asset class dropping 11 percentage points, from 54 percent a year ago to 43 percent in the current survey.

"Multi-national companies are well-placed to take advantage of the global growth cycle, providing an additional reason why three out of four managers are bullish on large cap growth," said Lert. "The managers have preferred large to small and growth to value for quite some time now, and growth stocks may finally be making their move."

Although the managers remained most bullish on the health care and technology sectors, at 70 percent and 62 percent, respectively, two energy sectors received the biggest boost in manager support. Manager bullishness for integrated oils, which includes domestic and international companies involved in all parts of the oil industry, moved up 15 points from 34 percent last quarter to 49 percent this quarter. Other energy, which includes gas distributors and other businesses closely related to the oil industry, jumped 19 points from 42 percent last quarter to 55 percent.

About Investment Manager Outlook
Prior to the end of each quarter, Russell polls a sample of investment managers to collect their top-line opinions about their outlook for the direction of the markets, sectors and asset classes to watch, and trends on the horizon that could impact investment strategy. In addition to the quantitative results, the Investment Manager Outlook provides qualitative analysis and commentary from one of Russell's senior investment strategists. Detailed results and analysis from the Investment Manager Outlook are available on Russell.com/IMO. For Index data, please visit www.russell.com.

Russell conducted the current Investment Manager Outlook between May 31 and June 7, 2007. The manager research that Russell conducts for investment purposes is done entirely independent of the Investment Manager Outlook, and responses to the survey are on a purely voluntary basis.

About Russell
Russell Investment Group aims to improve financial security for people by providing strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. With more than $200 billion in assets under management, Russell serves individual, institutional and advisor clients in more than 40 countries. Russell provides access to some of the world's best money managers. It helps investors put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors.

Founded in 1936, Russell is a subsidiary of Northwestern Mutual and is headquartered in Tacoma, Wash., with additional offices in New York, Toronto, London, Paris, Sydney, Singapore, Auckland and Tokyo.

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Large capitalization (large cap) investments involve stocks of companies generally having a market capitalization between $10 billion and $200 billion. The value of securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions.

Value investments focus on stocks of income-producing companies whose price is low relative to one or more valuation factors, such as earnings or book value. Such investments are subject to risks that their intrinsic values may never be realized by the market, or, such stock may turn out not to have been undervalued. Investors should carefully consider the additional risks involved in value investments.

Growth investments focus on stocks of companies whose earnings/profitability are accelerating in the short term or have grown consistently over the long term. Such investments may provide minimal dividends which could otherwise cushion stock prices in a market decline. Stock value may rise and fall significantly based, in part, on investors' perceptions of the company, rather than on fundamental analysis of the stocks. Investors should carefully consider the additional risks involved in growth investments.

Non-US markets entail different risks than those typically associated with US markets, including currency fluctuations, political and economic instability, accounting changes, and foreign taxation. Securities may be less liquid and more volatile. If applicable, please see a Prospectus for further detail.

Integrated Oils sector includes domestic and international integrated oil companies involved in all parts of the exploration, production and refining process.

Other Energy sector includes all energy related businesses other than those included in the integrated oils sector. Two distinct groups are: (1) gas distributors and gas pipelines and (2) other energy companies which include mining, producing, servicing, and drilling companies.

Health Care sector consists of companies involved in medical services or health care including biotechnology research and production, drugs and pharmaceuticals, and health care facilities and services.

Technology sector primarily consists of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.

Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than US and longer-established non-US markets.

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

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

RFD#-7-6861 First used: June 2007

Securities distributed through Russell Fund Distributors, Inc. member NASD, part of Russell Investment Group.