Large Cap Growth Fund

Large Cap Growth

as of March 31, 2013

Stocks started 2013 on a positive note, with a strong first-quarter rally. Investors looked past possible negative outcomes from higher federal payroll taxes and cuts in government spending and the renewed instability in Europe, focusing instead on the recovering U.S. housing market and improvements in the unemployment rate. One unusual aspect of the market performance was the leadership of more-defensive sectors, such as health care, consumer staples and utilities. In this environment, value stocks outpaced growth stocks. The Large Cap Growth Fund posted a total return of 7.48% for the quarter, compared with 9.54% for the Fund’s benchmark, the Russell 1000® Growth Index. Stock selection was weak overall, particularly in the information technology, consumer staples and consumer discretionary sectors. Stock selection and an overweight position in the healthcare sector contributed favorably to relative results, with the biotechnology industry leading the way. Stock selection also lifted relative performance in the materials sector, where our focus on agriculture aided results, and the industrials sector, where our railroad-industry exposure helped.

Our outlook toward large-cap growth stocks remains favorable. Despite the market’s strong first-quarter rally, overall valuations still appear reasonable, and we believe they should provide support if current corporate earnings estimates prove to be too optimistic. Nevertheless, valuation is not a catalyst for a rallying market, so we remain opportunistic, rather than aggressive, in our security selection efforts. Relative to the benchmark, we maintained the Fund’s risk at levels below our long-term targets in the first quarter, and we will continue to search for attractive, long-term secular growth companies available at attractive prices.

If you fit the profile of a more aggressive investor able to accept greater volatility in exchange for higher potential return than is offered by the Growth Equity Fund, you will want to consider this Fund as a core holding for your portfolio. Because companies with these characteristics often retain their earnings, investors should expect low to no dividends.

Combine top-down, theme-driven approach with bottom-up fundamental stock selection to construct a portfolio of primarily large-cap growth stocks.
Select stocks with emphasis on growth potential, quality of earnings and management experience.
Seek to provide long-term capital appreciation for investors looking to participate in longer-term investment themes, which may contribute to increased volatility.

Not FDIC insured | May lose value | No bank guarantee

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Please carefully read the prospectus and summary prospectus and consider the investment objectives, risks, charges and expenses of Northern Funds before investing. Call 800-595-9111 to obtain a prospectus and summary prospectus, which contains this and other information about the funds.