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Russell Indexes: 2Q 1999 Report; Small Caps and Value Stocks Rebound But Continue to Face a Performance Gap.

TACOMA, Wash.--(BUSINESS WIRE)--July 5, 1999--

The second quarter reversed several trends in performance as small-cap stocks beat large-cap stocks for the first time in seven quarters, and value stocks outperformed growth stocks for the first time in six quarters, according to performance data from Frank Russell Company's 18 U.S. stock indexes.

"We saw a rebound in small caps and value stocks, especially cyclicals," said David Hintz, senior research analyst for Frank Russell Company.

Both the small-cap Russell 2000(R) Index and the Russell MidCap(R) Index outperformed the large-cap Russell 1000(R) Index. The Russell 2000 gained 15.55% for the quarter, surpassing a 7.12% increase for the Russell 1000.

"It appears from these returns that small stocks aren't dead after all," Hintz said.

Small caps beat large caps in every sector of the market, except materials and processing. But small-cap stocks even performed relatively well in this sector (20.49%).

Despite this quarter's trend reversal, small caps have not fully closed their performance gap with large caps. Prior to the second quarter, small caps as measured by the Russell 2000, were selling at lower valuations than anytime during the 20 years of Russell index data.

"Though the Russell 2000 beat the Russell 1000 by more than 800 basis points in the second quarter, it still lags on a year-to-date basis," Hintz said. "It still has some distance to go to overcome the wide gulf that has grown over the past three years."

Hintz added that most active managers who have small-cap and mid-cap biases just completed their best quarter in a long time. "A lot of these active managers will see that their biases finally paid off in second-quarter performance returns," he said.

Value Outperforms Growth

Reversing another trend, value stocks outperformed growth stocks, particularly in the large-cap arena. The Russell 1000(R) Growth Index gained 3.85% for the quarter, while stocks in the Russell 1000(R) Value Index increased 11.3%.

This trend reversal was even more pronounced among the largest stocks, particularly in the Russell Top 200(TM) Growth Index (2.4%) and the Russell Top 200(TM) Value Index (11.3%). First-quarter performance figures for these two indexes showed growth issues (7%) outperforming value (3.6%).

But similar to the trend in small caps, value stocks still have a gap to close in relation to growth stocks.

"Large-cap value may have beat large-cap growth by more than 700 basis points this quarter, but on a three-year basis it still has a long way to go," Hintz said.

Investors Stick with Technology

Technology stocks continued to outperform, continuing one trend that did not change directions in the second quarter.

"The technology sector in Russell's growth, value, large cap and small cap indexes all showed strength," Hintz said.

Russell indexes serve as performance standards against which money managers and mutual funds can be evaluated. More than $100 billion is invested in index funds that use the Russell indexes as their model. Futures on the Russell 2000 Index and options on those futures trade on the Chicago Mercantile Exchange. Russell 2000 Index options trade on the Chicago Board Options Exchange. Futures and options on the Russell 1000 Index are traded on the New York Board of Trade's futures exchange.

Frank Russell Company, one of the world's leading investment management and advisory firms, provides investment advice, analytical tools and funds to institutional and individual investors in more than 30 countries. Russell's investment management business employs a manager-of-managers approach and has $50 billion in assets under management. The company has retainer consulting relationships with clients representing more than US$1 trillion worldwide. Russell is a subsidiary of The Northwestern Mutual Life Insurance Company. Founded in 1936, the company is headquartered in Tacoma, Wash., and has offices in New York, Toronto, London, Zurich, Paris, Sydney, Auckland and Tokyo.

Editor's note: The accompanying charts provide specific total returns and sector performance data for the Russell indexes. Daily total returns and values are also available for all Russell indexes on Russell's web site: http://www.russell.com

Frank Russell Company, a Washington, USA corporation, operates through subsidiaries worldwide.

-0-
 RUSSELL INDEXES TOTAL RETURNS

 Period ending June 30, 1999
 1Q1999 2Q1999 June YTD

Russell 3000(R)Index 3.39 7.71 5.05 11.36
Russell 1000(R)Index 4.12 7.12 5.10 11.54
Russell 2000(R)Index -5.42 15.55 4.52 9.28
Russell 2500(TM)Index -4.74 16.40 5.20 10.88
Russell Midcap(TM)Index -0.47 10.86 3.53 10.34
Russell Top 200(TM)Index 5.66 5.95 5.60 11.95
Russell 3000(R)Value Index 0.56 11.65 2.96 12.27
Russell 3000(R)Growth Index 5.76 4.60 6.87 10.62
Russell 1000(R)Value Index 1.43 11.28 2.90 12.87
Russell 1000(R)Growth Index 6.36 3.85 7.00 10.45
Russell 2000(R)Value Index -9.69 16.56 3.62 5.26
Russell 2000(R)Growth Index -1.68 14.75 5.27 12.82
Russell 2500(TM)Value Index -8.00 16.02 3.48 6.74
Russell 2500(TM)Growth Index -1.05 16.81 7.07 15.58
Russell Midcap(TM)Value Index -3.11 11.18 1.14 7.72
Russell Midcap(TM)Growth Index 3.42 10.42 6.98 14.19
Russell Top 200(TM)Value Index 3.65 11.31 3.70 15.38
Russell Top 200(TM)Growth Index 7.04 2.41 7.01 9.62


 RUSSELL INDEX SECTOR PERFORMANCE RETURNS

 Quarterly returns as of June 30, 1999
 Russell Russell Russell
 3000 2000 1000

Technology 15.13 21.51 14.70
Health Care -3.91 11.51 -4.76
Consumer Discretionary & Services 2.53 9.53 1.80
Consumer Staples 1.96 6.93 1.84
Integrated Oils 12.17 48.76 12.00
Other Energy 18.94 25.65 17.80
Materials & Processing 21.23 19.92 21.47
Producer Durables 20.99 23.72 20.56
Autos & Transportation 5.55 23.39 3.56
Financial Services 5.85 12.20 5.28
Utilities 12.65 16.69 12.43
Other 6.54 18.02 6.41


 RUSSELL INDEX DEFINITIONS

 The following are definitions of each of the Russell indexes:

-- Russell 3000(R) Index comprises the largest 3,000 stocks and
 represents 98% of the U.S. equity market as determined by market
 capitalization.

-- Russell 1000(R) Index consists of the 1,000 largest stocks in the
 Russell 3000 Index.

-- Russell 2000(R) Index consists of the 2,000 smallest stocks in
 the Russell 3000 Index.

-- Russell Top 200(TM) Index represents the 200 largest stocks in
 the Russell 1000 Index.

-- Russell Midcap(TM) Index represents the 800 smallest stocks in
 the Russell 1000 Index.

-- Russell 2500(TM) Index represents the 500 smallest stocks in the
 Russell 1000 and all 2,000 stocks in the Russell 2000.

-- Russell 3000(R) Value Index contains those Russell 1000 and
 Russell 2000 securities with lower price-to-book ratios and lower
 forecasted growth values. The stocks are also members of either
 the Russell 1000 Value and Russell 2000 Value indexes.

-- Russell 3000(R) Growth Index contains those Russell 1000 and
 Russell 2000 securities with higher price-to-book ratios and
 higher forecasted growth values. The stocks are also members of
 either the Russell 1000 Growth and Russell 2000 Growth indexes.

-- Russell 1000(R) Value Index tracks stocks in the Russell 1000
 Index with lower price-to-book ratios and lower forecasted growth
 values.

-- Russell 1000(R) Growth Index tracks stocks in the Russell 1000
 Index with higher price-to-book ratios and higher forecasted
 growth values.

-- Russell 2000(R) Value Index tracks stocks in the Russell 2000
 Index with lower price-to-book ratios and lower forecasted growth
 values.

-- Russell 2000(R) Growth Index tracks stocks in the Russell 2000
 Index with higher price-to-book ratios and higher forecasted
 growth values.

-- Russell Top 200(TM) Value Index represents stocks from the
 Russell Top 200 Index with less-than-average growth orientation.
 The stocks are also members of the Russell 1000 Value Index.

-- Russell Top 200(TM) Growth Index represents stocks from the
 Russell Top 200 Index with greater-than-average growth
 orientation. The stocks are also members of the Russell 1000
 Growth Index.

-- Russell Midcap(TM) Value Index represents stocks from the Russell
 Midcap Index with lower price-to-book ratios and lower forecasted
 growth values. The stocks are also members of the Russell 1000
 Value Index.

-- Russell Midcap(TM) Growth Index represents stocks from the
 Russell Midcap Index with higher price-to-book ratios and higher
 forecasted growth values. The stocks are also members of the
 Russell 1000 Growth Index.

-- Russell 2500(TM) Value Index contains stocks from the Russell
 2500 Index with a lower price-to-book ratios and lower forecasted
 growth values.

-- Russell 2500(TM) Growth Index contains stocks from the Russell
 2500 Index with a higher price-to-book ratios and higher
 forecasted growth values.
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