I just found this answer on another post by Russ valentine which answers the
question. i haven't tried it yet:
There is little reason to create a DL if you've already gone to the trouble
of creating categories. Categories can be used the same way you would a DL.
Just switch to the By Category View, select the Category Header, then
Actions > New Message to Contact...
If you still feel you must create a DL from a Category, there is a clumsy
way to do so. Change the Contacts Folder View to by Category. Right click
and drag the Category required to a newly created Contacts subfolder then
choose Copy. Make sure the new subfolder has been enabled as an email
address book by right clicking on it and choosing Properties > Outlook
Address Book Tab > and check the box to enable as email address book. Create
your new Distribution List, give it a name and make sure the Show Names drop
down field points to this new subfolder. Then shift select all the contacts
and add them to the DL.
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