Russell Investment Manager Outlook September 2007 (Russell.com)

Russell Survey:
Heightened Market Volatility Does Not Shake Manager Bullishness

Tacoma, WA — September 27, 2007 — Manager bullishness for the U.S. equity market remained strong despite recent volatility in the financial markets and the wave of credit concerns that struck this summer. According to the latest Investment Manager Outlook, Russell Investment Group's quarterly survey of investment managers, basic attitudes about U.S. equity markets have not significantly eroded from those seen earlier this year and, if anything, are even more positive than those seen in the second quarter. The percentage of managers who say the market is undervalued climbed to 28 percent from 21 percent last quarter.

"The summer brought several troubling financial issues to the forefront, but professional investment managers appear to be responding with steadiness and restraint," said Randy Lert, chief portfolio strategist, Russell Investment Group. "The most basic attitudes of investment managers toward U.S. equity markets have not significantly eroded despite a remarkable upswing in volatility."

While manager outlook for the equities market remained steady and positive, sentiment toward some individual sectors swung wildly. Manager bullishness for the technology sector reached an all-time high of 73 percent while manager bullishness toward financial services fell for the fourth straight quarter to an all-time low of 30 percent. Manager bullishness for consumer discretionary and services tumbled from 40 percent to 25 percent and positive sentiment for materials and processing slipped from 44 percent to 33 percent.

"Managers are looking at sectors that withstand times of uncertainty and slower growth and at companies that have a global footprint with exposure to economies outside the United States," said Lert. "Managers in the Russell survey were bearish on the financial services well before this summer, but the subprime crisis has accelerated and reinforced concerns over this sector."

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 340 managers participated in this survey.

Additional findings from the Investment Manager Outlook include:

New opportunity in fixed income or flight to safety?
Even as 85 percent of managers call equity markets either fairly valued or undervalued, managers participating in the Russell survey suggested that there may be new reasons to begin considering fixed income investments. Manager bullishness for corporate bonds more than doubled from 15 percent to 31 percent, while the same measure nearly doubled for high yield bonds, rising from 12 percent to 21 percent. U.S. Treasuries recorded one of their highest bullish scores of the past 14 quarters, 33 percent, up from 19 percent last quarter.

"We believe the surge in manager bullishness for fixed income represents a flight to safety and that managers fundamentally believe that the bigger opportunity still lies in the equity markets," said Lert. "It is true that risk is being re-priced and a base of support for fixed income is being built, but rates remain too low to motivate managers to migrate to fixed income. So-called early adopters may see glimmers of light in the corporate bond market, but until more investors—the early majority—perceive stocks to be overvalued, it is unlikely we will see bullishness for fixed income move to the next level."

Managers are bullish on large cap growth
The majority of managers (69 percent) are bullish on large cap growth stocks, the asset class that has consistently received the widest measure of support since the survey began more than three years ago. In addition to large cap growth, managers remain in favor of non-U.S. developed market equities (57 percent) and U.S. midcap growth stocks (53 percent). Manager bullishness for U.S. small cap value fell to 13 percent from 27 percent last quarter and U.S. midcap value fell to 25 percent from 34 percent. Manager bearishness was most strong for real estate; 79 percent of managers surveyed by Russell indicated their disfavor with this asset class.

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 August 27 and September 4, 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 provides strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. With more than $220 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.

Contacts:
Matt Burkhard, 718-875-2122
Jennifer Tice, 253-439-1858

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.

Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

This is not an offer, solicitation, or recommendation to purchase any security or the services of any organization.

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.

Middle capitalization (middle cap) investments involve stocks of companies generally having a market capitalization between $2 billion and $10 billion and considered more volatile than large cap companies. Mid cap investments are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps).

Small capitalization (small cap) investments involve stocks of companies with smaller levels of market capitalization (generally less than $2 billion) than larger company stocks (large cap). Small cap investments are subject to considerable price fluctuations and are more volatile than large company stocks. Investors should consider the additional risks involved in small cap investments.

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.

Bond investors should carefully consider risks such as interest rate risk, credit risk, securities lending, repurchase and reverse repurchase transaction risk. Greater risk is inherent in portfolios that invest primarily in high yield bonds. They are subject to additional risks, such as limited liquidity and increased volatility.

Specific sector investing such as real estate can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes and tax laws and interest rates all present potential risks to real estate investments.

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

Financial services sector consists of companies that provide financial services including banking, finance, life insurance, and securities brokerage, and services companies.

Consumer discretionary and services sector are made up of companies that manufacture products and provide discretionary services directly to the consumer. Some industries included in this sector are jewelry, watches and gemstones, advertising agencies, cosmetics and household furnishings.

Materials and processing sector contains companies that extract or process raw materials. Some industries included in this sector are agriculture, fishing and ranching, building materials, forest products, and steel.

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—07-7069 First used: September 2007

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