3rd Quarter 2003: Small Growth Stocks Outperform; Russell 2000 Growth Index Gains 10.5% to Lead Positive Quarter.

Business Editors

TACOMA, Wash.--(BUSINESS WIRE)--Oct. 1, 2003

Small cap and growth stocks outperformed other investment styles during the third quarter as all 21 of Russell's U.S. equity indexes turned in a positive performance for the period. The small-cap Russell 2000(R) Growth Index led the way with a 10.5% increase for the quarter, and it now has surged 46% since reaching a low March 12.

"Small caps definitely won the third quarter and by a significant margin over large caps," said Dave Hintz, research analyst.

The Russell 2000(R) Index (9.1%) outpaced the large-cap Russell 1000(R) Index (3%) for the third quarter and year-to-date it leads by nearly double, 28.6% to 15.7%. The performance spread between the two indexes for the quarter nearly matched the spread for the second quarter (770 basis points). By contrast, the spread between the two indexes for the first quarter was only 155 basis points and the spread for 2002 was a paltry 117 basis points.

"Investors continued to show a larger appetite for what are perceived as riskier stocks through most of the third quarter," said Hintz. "But they seemed to sit back and take a deep breath toward the end of the quarter as the Russell 2000 actually turned slightly negative for the month of September."

The Russell 1000 actually outperformed the Russell 2000 for the month, -1% to -1.9%.

Still, being lower in capitalization and more growth oriented produced better results across various market segments for the third quarter.

"The largest of the large performed the worst," said Hintz.

The Russell Top 200 (which comprises the largest 200 stocks in the Russell 1000) only gained 1.9% for the third quarter, while the Russell 1000 improved 3%. The Russell Midcap Index (which comprises the bottom 800 stocks in the Russell 1000) jumped 6.4% and the Russell 2500 (which measures the bottom 2,500 stocks in the Russell 3000) increased 8.8% and the Russell 2000 led the way with its 10.5% gain.

Similarly, growth stocks outperformed value stocks for the quarter at every capitalization tier. The broad-market Russell 3000(R) Growth Index (4.4%), for example, beat the Russell 3000(R) Value Index (2.5%), continuing a tug of war between the two styles that has left each with five wins in the past 10 quarters.

"The technology sector in the growth indexes definitely was the driving force behind the gap, especially when you consider its weighting in the growth indexes relative to the value indexes," said Hintz.

The technology sector in the Russell 3000 Growth Index, which comprises 22.9% of the weight of the index, increased 14.4% for the quarter, while the technology sector in the Russell 3000 Value Index, which comprises just 6.6% of the index, increased 5.2%.

"Technology was the big disparity story in performance between growth and value, but there also was a pronounced benefit to owning stocks in economically sensitive sectors in either value or growth indexes," said Hintz.

The health care sector, for example, was one of only two sectors in both the broad-market value and growth indexes to reflect a negative performance for the quarter.

"Investors generally were hurt in health care regardless of investment style," said Hintz. "By contrast, sectors such as producer durables, autos & transportation and materials & processing performed relatively well in either style."

Russell indexes serve as performance standards against which money managers and mutual funds can be evaluated. Russell estimates more than $850 billion of assets are benchmarked to Russell indexes. In addition, more than $220 billion is invested in passive index funds that use the Russell indexes as their model.

Russell Investment Group, global leader in multi-manager investment services, provides investment products and services in more than 35 countries. Russell manages more than $76 billion in assets and advises clients worldwide representing more than US$1.6 trillion. 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, Singapore, Sydney, Auckland and Tokyo. For more information, go to www.russell.com.

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

Russell's indexes are unmanaged and cannot be invested in directly.

Russell 3000(R) Index: Measures the performance of the 3,000 largest U.S. securities based on total market capitalization.

Russell 2000(R) Index: Measures the performance of the 2,000 smallest companies in the Russell 3000, representative of the U.S. small capitalization securities market.

Russell 1000(R) Index: Measures the performance of the 1,000 largest companies in the Russell 3000, representative of the U.S. large capitalization securities market.

Russell 2000(R) Growth Index : Measures the performance of those Russell 2000 securities with higher price-to-book ratios and higher forecasted growth values, representative of U.S. securities exhibiting growth characteristics.

Russell 3000(R) Growth Index : Measures the performance of those Russell 3000 securities with higher price-to-book ratios and higher forecasted growth values, representative of U.S. securities exhibiting growth characteristics.

Russell 3000(R) Value Index: Measures the performance of those Russell 3000 securities with lower price-to-book ratios and lower forecasted growth values, representative of U.S. securities exhibiting value characteristics.

Russell 2500(TM) Index: Measures the performance of the 2,500 smallest companies in the Russell 3000(R) Index, representative of the U.S. small to medium-small capitalization securities market.

Russell Midcap(R) Index: Measures the performance of the 800 smallest securities in the Russell 1000(R) Index.

Russell Top 200(R) Index: Measures the performance of the 200 largest securities in the Russell 1000(R) Index.