Strategic Diversification in One Investment

June 30, 2008

About the Fund
In this fund, you can see Russell's proven investment process in action. Russell aims for consistent, risk-managed performance by assembling a complete portfolio of bond, stock and real estate funds for moderate investors. Russell's blended funds that help provide stability through exposure to investments in core bonds, but also help to provide return potential over more conservative selections. By allocating 40% of the fund to investments in U.S. large and small cap, non-U.S. and real estate securities, Russell aims to capture these asset classes' potential for higher returns. The fund also has a small allocation to a global equity fund to capture this additional investment strategy.

Investment Strategy

• Seeks to provide high current income and moderate long-term capital appreciation.
• A diversified fund of funds, investing in a combination of underlying funds consisting of approximately 40% stocks and 60% bonds.
• Core equity exposure blends growth, market-oriented and value styles with exposure to stock investments in both U.S. and non-U.S. markets.

Fund Highlights

• Balances bond stability and income with a moderate allocation to stocks for growth potential.
• Diversifies across 4 asset classes, 8 funds and more than 40 manager products.
• Maintains an optimal target asset allocation for a moderate investor through regular rebalancing.

Managing Money Differently
The Russell approach has been trusted for decades by many of the world's largest investors; Russell's mutual funds allow you to employ that same approach. Russell identifies investment managers they believe have exceptional capabilities, blending them to help manage risk through diversification, and constantly monitoring them. Regardless of market conditions, Russell's investment approach remains constant.

Your Challenge: Where Should You Be?

As you move from left to right on the graph — increasing risk — there are different investment strategies that may offer potentially higher returns. However, as with any type of portfolio structuring, attempting to manage risk and increase return could, at certain times, either unintentionally reduce returns or increase volatility.

Underlying Fund and Asset Allocation

The LifePoints® Funds are a series of fund of funds which expose an investor to the risks of the underlying funds proportionate to their allocation. Investment in LifePoints Funds involves direct expenses of each fund and indirect expenses of the underlying funds, which together can be higher than those incurred when investing directly in an underlying fund.

Russell U.S. Core Equity Fund
Growth
Columbus Circle Investors
Marsico Capital Management, LLC
Montag & Caldwell, Inc.
Turner Investment Partners, Inc.
Market-Oriented
Arnhold and S. Bleichroeder Advisors, LLC
Russell Investment Management Company*
Suffolk Capital Management, LLC
Value
AllianceBernstein, L.P.
Institutional Capital, LLC
MFS Institutional Advisors, Inc.
Schneider Capital Management Corporation

Russell U.S. Small & Mid Cap Fund¹
Growth
Gould Investment Partners, LLC
Ranger Investment Management, L.P.
Tygh Capital Management, Inc.
Market-Oriented
ClariVest Asset Management, LLC
PanAgora Asset Management, Inc.
Value
Delphi Management, Inc.
DePrince, Race & Zollo, Inc.
Jacobs Levy Equity Management, Inc.
Signia Capital Management, LLC

Russell U.S. Quantitative Equity Fund
Market-Oriented
Aronson+Johnson+Ortiz, L.P.
Franklin Portfolio Associates, LLC
Goldman Sachs Asset Management, L.P.
Jacobs Levy Equity Management, Inc.
Russell Investment Management Company*

Russell Global Equity Fund²
Growth
Gartmore Global Partners
T. Rowe Price International, Inc.
Market-Oriented
ClariVest Asset Management, LLC
Value
Harris Associates, L.P.
Tradewinds Global Investors, LLC

Russell International Developed Markets Fund²
Growth
Axiom International Investors, LLC
Marsico Capital Management, LLC
UBS Global Asset Management (Americas), Inc.
Wellington Management Company, LLP
Market-Oriented
AQR Capital Management, LLC
MFS Institutional Advisors, Inc.
Russell Investment Management Company*
Value
AllianceBernstein, L.P.
Altrinsic Global Advisors, LLC
Mondrian Investment Partners, Limited

Russell Emerging Markets Fund²
Growth
T. Rowe Price International, Inc.
UBS Global Asset Management (Americas), Inc.
Market-Oriented
Arrowstreet Capital, Limited Partnership
Genesis Asset Managers, LLP
Harding Loevner Management, L.P.
Value
AllianceBernstein, L.P.

Russell Real Estate Securities Fund³
Global — Market-Oriented
Cohen & Steers Capital Management, Inc.
Growth
Heitman Real Estate Securities, LLC
Market-Oriented
INVESCO Institutional (N.A.), Inc., through INVESCO Real Estate Division
RREEF America, LLC
Value
AEW Management and Advisors, L.P.

Russell Strategic Bond Fund⁴
Fully Discretionary
Drake Capital Management, LLC
Goldman Sachs Asset Management, L.P.
Pacific Investment Management Company, LLC
Sector Rotation
Hyperion Brookfield Asset Management, Inc.
Logan Circle Partners, L.P.
Metropolitan West Asset Management, LLC

*The Fund's adviser may employ a "select holdings" strategy for a portion of the Fund's assets that it determines not to allocate to the money managers. The strategy is designed to increase the Fund's exposure to stocks that are viewed as attractive by multiple money managers. The use of the select holdings strategy will amplify the Fund's security risk and potential underperformance.

Money managers listed are current as of 06/30/08. Subject to the fund's Board approval, Russell has the right to engage or terminate a money manager at any time and without a shareholder vote, based on an exemptive order from the Securities and Exchange Commission.

¹ 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.

² The fund's return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country. Investments in non-U.S. markets can involve risks of currency fluctuation, political and economic instability, different accounting standards and foreign taxation. Such securities may be less liquid and more volatile. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and political systems with less stability than in more developed countries.

³ 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, tax laws and interest rates all present potential risks to real estate investments. Fund investments in non-U.S. markets can involve risks of currency fluctuation, political and economic instability, different accounting standards and foreign taxation.

⁴ Bond investors should carefully consider risks such as interest rate, credit, repurchase and reverse repurchase transaction risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest primarily in high yield ("junk") bonds or mortgage-backed securities, especially mortgage-backed securities with exposure to subprime mortgages.

Annualized returns as of June 30, 2008

¹ The LifePoints® Moderate Strategy Fund is exposed to the specific risks of the underlying funds in proportion to their allocation.

Net annual operating expense ratio reflects the actual expenses that will be borne by shareholders. At least until February 28, 2009, the Fund's annual direct and indirect fund-level operating expenses are capped at the greater of (a) a specified percentage of the Fund's average daily net assets on an annual basis or (b) an amount equal to the current "Acquired Funds Fees and Expenses" on an annual basis. The cap may not be terminated during the relevant period except at the Board's discretion. Details of the cap are in the current prospectus.

Growth of $10,000 — Class S shares

Performance information is historical and does not guarantee future results. Investment return and principal value will fluctuate so that redeemed shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Month-end performance for Russell mutual funds is available by choosing fund performance from the left-hand navigation.

Characteristics
Total Market Value: $1.19 billion
Net Asset Value: $10.68
Beta¹: 0.43
30-Day SEC Yield²: 4.01
¹ A statistical measure of a stock's volatility compared with the overall market, as measured by the Russell 3000® Index. A beta of less than one indicates lower risk than the market; a beta of more than one indicates higher risk than the market. The Russell 3000® Index measures the performance of the 3,000 largest U.S. securities based on total market capitalization.

² The fund's current yield for the 30-day period ending June 30, 2008

The Fund offers other classes of shares with higher fees and expenses. These other classes may charge up to a 5.75% sales charge and a 0.25% distribution fee (Class A) or up to a 0.75% distribution fee and a 0.25% shareholder servicing fee (Class C), which will result in a higher expense ratio and lower performance than that shown above. For a full description of other available classes, please see the prospectus.

Fund objectives, risks, charges, and expenses should be carefully considered before investing.

For more complete information, including a contract and fund prospectus that gives investment objectives, risks, charges, expenses, and other information about the investment company, contact a Northwestern Mutual Financial Network Representative, who is a Registered Representative of Northwestern Mutual Investment Services, LLC (NMIS). Read the prospectuses carefully before you invest or send money.

Consult the  Prospectus.
Consult the  Statement of Additional Information.

Download the  Moderate Strategy Fund PDF.

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Effective September 8, 2008, the Diversified Equity Fund merges into the Equity I Fund (the Equity I Fund changes its name to the Russell U.S. Core Equity Fund on September 2, 2008), the Special Growth Fund merges into the Equity II Fund (the Equity II Fund changes its name to the Russell U.S. Small Cap & Mid Cap Fund on September 2, 2008), and the International Securities Fund merges into the International Fund (the International Fund changes its name to the Russell International Developed Markets Fund on September 2, 2008).

Effective September 22, 2008, the Quantitative Equity Fund merges into the Equity Q Fund (the Equity Q Fund changes its name to the Russell U.S. Quantitative Equity Fund on September 2, 2008) and the Multistrategy Bond Fund merges into the Fixed Income III Fund (the Fixed Income III Fund changes its name to the Russell Strategic Bond Fund on September 2, 2008).