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Every year at the end of June, The Frank Russell Company reconstitutes its series of equity indexes. This processtypically results in significant changes to both the capi-talization and style indexes. The 2004 reconstitution

took place on June 25, the last Friday in June. With morethan $350 billion indexed to Russell strategies, this annualtrade is a significant event that draws the attention of bothindex managers and other market participants. Index managertrading alone is estimated to be more than $30 billion. Thisyears reconstitution was larger than in past years due to theincreased value of the assets managed to these benchmarks.

Additionally, several changes were instituted this year. As inmost years, early predictions of the modifications to the index changed as market dynamics made the 2004 reconstitutiona constantly evolving process.

2004 ChangesThis year The Frank Russell Company introduced a provisionalindex in an attempt to get index managers to rebalance early and reduce the market impact on the effective date. Theprovisional index was announced on June 14 and reflectedall of the changes that would be official on June 25. Whilethe concept behind introducing a provisional index is to providean available benchmark for those seeking to rebalance early,there was not much of a noticeable impact. This likely was

due to the fact that assets managed within fund vehicles, as comparedto separate accounts, would still bemeasured against official benchmarks,

which would not reflect changes untilthe effective date. A second change

instituted this year was to hold the reconstitution on the lastFriday of June rather than on the last business day of themonth. This was done to provide additional time for tradesettlement purposes. Finally, the effective prices for NASDAQstocks were based on the new NASDAQ Closing Crossmechanism. Because NASDAQ is a dealer market, there hasnever been an effective auction mechanism for determining closing prices. In April 2004, NASDAQ introduced a new closing cross to facilitate the ability of investors to execute atclosing prices. Prior to this, there was no way to guaranteean execution of a NASDAQ stock at closing prices, althoughsome broker-dealers provided this as an accommodation forindex managers. Based on hourly volume analysis, approxi-mately 30-40% of this years trade, both in listed and NASDAQ stocks, was executed at closing prices. This is indicative of

the desire of index managers to limit risk by trading at closeto the effective price.

Turnover AnalysisCapitalization turnover in the large cap core indexes wasslightly higher than last year, while turnover in the small capRussell 2000 index was lower. Within the style indexes, largecap turnover was higher primarily due to the reclassificationof GE from 100% growth to predominantly value.

2004 Russell

Reconstitution Recap Alexander J. Matturri, Jr. CFA

Director, Global Equity IndexQuantitative Management

Northern Trust Global Investments

July 2004

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Changes to the Russell 1000 & Russell 2000 Indexes2004 2003 2002 2001 2000

New Additions to R1000 16 7 21 24 76New Additions to R2000 308 282 378 495 545Deletions from R2000 205 180 222 276 322R1000 to R2000 67 83 105 110 139R2000 to R1000 67 94 136 151 118Source: Lehman Brothers & Goldman Sachs

Index Construction Methodology The Russell indexes are capitalization-weighted equity indexescovering approximately 98% of the investable market cap inthe United States. At the time of the annual reconstitution, all

the stocks in the Frank Russell universe are ranked by marketcapitalization using the May 31 cutoff date. The largest 1000companies become the Russell 1000 index while the next2000 companies comprise the Russell 2000 index. Thecombined list makes up the Russell 3000 index.

The Russell style indexes are also reconstituted at the endof June, using a proprietary methodology. Each capitalizationindex is divided into a growth and a value style index. At thetime of the reconstitution, approximately 50% of the capi-talization weight of each index is assigned to a style index.

Approximately 30% of the companies in each capitalizationindex are represented in both style indexes, while the remaining 70% are represented in one or the other style index, but notboth. Companies are deemed to be either growth or valuebased on their adjusted price-to-book ratio and their long-termearnings growth rate as determined by I/B/E/S. This processcontrasts with the methodology used by Standard & Poors

which bases its style determination strictly on price-to-book and uses a mutually exclusive policy which places a company in one or the other index, but not both.

Review of Index Changes As of the June 25 effective date there were 16 new directadditions to the Russell 1000 index and 67 companiesmigrating up from the Russell 2000 index. This comparesto 2002 when there were only seven new additions and94 issues migrating up from the Russell 2000 index.

Sector Profiles Within the large cap core and style indexes there werent any major shifts in sector weightings from our earlier forecast. Inthe large cap indexes, the Financial Services sector continues

to be the largest weight in the Russell 1000 index and Russell1000 Value index at 22.52% and 33.64%, respectively. TheConsumer Staples sector had the largest drop in the core index,dropping 0.22%, while the Producer Durables sector had the

greatest increase at 0.15%. In the Russell 1000 Value index,the Other sector was up the most (+5.08%) while FinancialServices had the largest decline (-1.42%). The increase in theOther sector can be attributed primarily to the reassignmentof General Electric (which is classified in Other), from 100%growth to predominantly value. The reverse took place inthe Russell 1000 Growth index as Other declined the most(-4.98%) in response to this move. The General Electric

weighting was spread across the other sectors of the Russell1000 Growth index with the Consumer Discretionary sectorgaining the most (+1.61%). The Health Care sector contin-ues to be the largest weighting in the large cap growth index

at 24.31%.Changes from our preliminary analysis of the small

capitalization indexes, while greater than in the large capindexes, were still generally close to our original projections.Similar to the large cap indexes, the Financial Services sector

will continue to be the largest weight, accounting for 22.54%of the Russell 2000 index and 33.89% of the Russell 2000Value index. The increase in weighting for Financial Servicesin both the Russell 2000 index (+0.89%) and Russell 2000Value index (+3.06%) was the greatest for each index. Withinthe core index, the Producer Durables sector declined the most(-0.69%) while in the Russell 2000 Value index, ProducerDurables (-2.57%) and Consumer Discretionary (-2.29%)

were the largest decreases. In the Russell 2000 Growth index,Consumer Discretionary increased the most (+1.75%) whileHealth Care decreased the most (-1.62%). ConsumerDiscretionary will now be the largest weight in the smallcapitalization growth index at 22.67%, overtaking HealthCare, which will account for 21.38%.

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Core Indexes Sector WeightsRUSSELL 1000 RUSSELL 2000

Sector Pre-Recon. Post-Recon. Change Pre-Recon. Post-Recon. ChangeAuto & Transportation 2.27% 2.31% 0.04% 4.35% 4.42% 0.07%

Consumer Discretionary 13.94% 14.05% 0.11% 19.00% 18.68% -0.32%Consumer Staples 7.43% 7.21% -0.22% 1.87% 1.77% -0.10%Financial Services 22.66% 22.52% -0.14% 21.65% 22.54% 0.89%Health Care 13.93% 13.87% -0.06% 13.55% 12.89% -0.66%Integrated Oils 4.61% 4.47% -0.14% 0.06% 0.13% 0.07%Materials & Processing 3.52% 3.50% -0.02% 9.02% 9.33% 0.31%Other 4.49% 4.56% 0.07% 0.28% 0.40% 0.12%Other Energy 1.78% 1.88% 0.10% 4.42% 4.40% -0.02%Producer Durables 4.07% 4.21% 0.14% 8.47% 7.78% -0.69%Technology 14.49% 14.57% 0.08% 13.27% 13.57% 0.30%Utilities 6.81% 6.84% 0.03% 4.05% 4.08% 0.03%Source: Goldman Sachs

Style Indexes Sector WeightsRUSSELL 1000 VALUE RUSSELL 1000 GROWTH

Sector Pre-Recon. Post-Recon. Change Pre-Recon. Post-Recon. ChangeAuto & Transportation 2.82% 2.59% -0.23% 1.72% 2.02% 0.30%Consumer Discretionary 10.56% 9.29% -1.27% 17.30% 18.91% 1.61%Consumer Staples 5.96% 5.35% -0.61% 8.90% 9.11% 0.21%Financial Services 35.07% 33.64% -1.43% 10.30% 11.16% 0.86%Health Care 3.50% 3.66% 0.16% 24.33% 24.31% -0.02%Integrated Oils 9.23% 8.84% -0.39% 0.00% 0.00% 0.00%Materials & Processing 5.73% 5.42% -0.31% 1.32% 1.54% 0.22%Other 1.68% 6.77% 5.09% 7.28% 2.30% -4.98%Other Energy 2.27% 2.48% 0.21% 1.30% 1.27% -0.03%Producer Durables 4.51% 3.61% -0.90% 3.63% 4.83% 1.20%Technology 6.59% 6.14% -0.45% 22.37% 23.18% 0.81%Utilities 12.07% 12.21% 0.14% 1.57% 1.36% -0.21%Source: Goldman Sachs

RUSSELL 2000 VALUE RUSSELL 2000 GROWTHSector Pre-Recon. Post-Recon. Change Pre-Recon. Post-Recon. ChangeAuto & Transportation 5.26% 5.39% 0.14% 3.42% 3.40% -0.02%Consumer Discretionary 17.15% 14.86% -2.28% 20.92% 22.67% 1.75%Consumer Staples 2.65% 2.74% 0.09% 1.07% 0.75% -0.32%Financial Services 30.83% 33.89% 3.06% 12.17% 10.65% -1.52%Health Care 4.39% 4.80% 0.41% 23.00% 21.38% -1.62%Integrated Oils 0.06% 0.04% -0.02% 0.06% 0.22% 0.16%Materials & Processing 12.91% 12.27% -0.64% 5.00% 6.26% 1.26%Other 0.50% 0.70% 0.20% 0.06% 0.08% 0.02%Other Energy 5.02% 4.95% -0.07% 3.80% 3.83% 0.03%Producer Durables 8.84% 6.27% -2.57% 8.10% 9.37% 1.27%Technology 6.45% 6.97% 0.53% 20.31% 20.48% 0.17%Utilities 5.95% 7.11% 1.16% 2.09% 0.91% -1.18%Source: Goldman Sachs

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Performance Review of the 2004Reconstitution TradeThe 2004 Reconstitution trade performance was in line withour expectations. During the month of June, performance of

the various segments was generally in line with rebalancing flows. The buys went up relative to their benchmark whilethe sales went down. The big exception was the new additionsto the Russell 2000 index. Throughout the full month, theRussell 2000 index additions declined 2.8% relative to theindex, with most of the underperformance coming in thelast week when they declined 1.6%. Typically, this segmentposts positive relative performance as investors need to buy these stocks. This years performance was worse than 2003

when the Russell 2000 index additions were up 1.7% on a relative basis during June.

On the large cap side, the 16 stocks making up theRussell 1000 index additions were up 3.1% relative to theindex during the last week, and up 8.1% for the full month.The rebalance date saw positive relative performance for theRussell 1000 index additions while the Russell 2000 index additions declined 1.3%. Overall, as previously stated, trading volume was light as market participants waited until very close to the effective date to rebalance.

Intra-Day Performance June 25Last years reconstitution was affected by the strong relativeperformance of smaller capitalization and lower-quality issuesCounter to expectations and historical trends, issues being

dropped from the Russell 2000 index in 2003 outperformedthe benchmark during the final week (+2.4%) and for theentire month of June (+5.1%). This year a more traditionalpattern returned as stocks dropped from the Russell 2000index declined 3.4% during the month, and 4.1% during the last week.

PERFORMANCE PERFORMANCERELATIVE TO THE RUSSELL 2000 RELATIVE TO THE RUSSELL 1000

Period Year R2 Adds R2 Deletes Adds vs. Deletes R1 Adds R2 to R1 Shifts R1 to R2 Shifts

5/31 to Friday before 2000 14.4% -7.6% 22.0% 14.9% 17.6% 0.2%last week of June 2001 -3.4% -4.9% 1.5% -7.5% 0.1% -8.4%

2002 3.4% -4.4% 7.8% 4.4% 3.4% -9.3%2003 2.5% 2.0% 0.5% 1.1% -3.6% 3.6%2004 0.5% -0.6% 1.1% 5.6% -2.6% 0.8%

Month of June 2000 19.8% -9.0% 28.8% 20.7% 15.1% -3.7%2001 -0.4% -10.6% 10.2% 2.3% -0.4% 5.0%2002 6.5% -13.7% 20.2% 5.2% -0.7% -3.6%2003 1.7% 5.1% -3.4% 6.1% -3.2% 4.3%2004 -2.8% -3.4% 0.6% 8.4% 1.6% 0.4%

Last week of June 2000 5.4% -1.4% 6.8% 5.8% -2.5% -3.8%2001 3.3% -5.9% 9.1% 10.9% -0.6% 15.1%2002 3.0% -9.2% 12.2% 0.6% -2.8% 1.1%2003 -0.8% 2.4% -3.2% 2.8% 1.3% 0.7%2004 -1.6% -4.1% 2.5% 3.1% 3.0% 0.0%

Rebalance Day 2000 -2.6% 1.1% -3.7% 2.1% 2.6% -6.6%2001 6.1% -6.8% 12.9% 8.4% -1.8% 9.4%2002 0.6% -5.7% 6.3% 3.5% -0.2% 2.5%2003 -0.1% 0.2% -0.3% 2.0% -0.9% 0.0%2004 -1.3% -2.5% 1.2% 2.3% 2.5% -1.0%

Expected Flow Buy Sell Buy Buy Sell Buy

Source: Goldman Sachs

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Northern Trust Global InvestmentsThe Northern Trust Company 50 South LaSalle StreetChicago, Illinois 60675www.northerntrust.com

Q7731 (07/04)

Northern Trust Global Investments comprises Northern Trust Investments, N.A., Northern Trust Global Investments (Europe), Ltd.,Northern Trust Global Investments Japan, K.K., the investment advisor division of The Northern Trust Company and Northern TrustGlobal Advisors, Inc. and its subsidiaries to offer investment products and services to personal and institutional markets. This infomation has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinioexpressed herein are subject to change at any time without notice. This report is for informational purposes only.

To discuss the 2004 Russell Reconstitution or any other investment issue you may have, please contact your Investment Relationship Manager.