Large Cap Value Fund

Large Cap Value

as of March 31, 2013

Despite lingering risks related to sluggish U.S. growth, rising federal debt/deficits, higher taxes, rising oil prices and continued weakness in Europe, the positive forces of Federal Reserve monetary policy, low inflation and improving housing market and employment trends, drove stocks higher during the first quarter. The broad market, as measured by the S&P 500®, recorded a double-digit return — and a new all-time high — as valuations remained below their long-term average.

The Large Cap Value Fund posted a total return of 11.64% for the quarter, compared with 12.31% for the Fund’s benchmark, the Russell 1000® Value Index. Stock selection in the energy, industrials and materials sectors was the primary driver of the Fund’s underperformance. Stock selection in the financials, telecommunications services and consumer discretionary sectors contributed favorably to performance. The Fund ended the quarter with overweight positions in the consumer discretionary, information technology and healthcare sectors and underweight positions in the consumer staples and utilities sectors.

In the current slow-growth economy, we believe the Fund has the potential to generate above-market yield which could provide a consistent stream of current cash for income or reinvestment as well as income growth when companies raise their dividend payments. Because we favor large-cap companies that pay attractive dividends, the Fund generally consists of industry leaders with well-established brands, operations and market positions. These companies also tend to have long operating histories, strong balance sheets and the ability to generate consistent cash flows in various economic environments. As such, we believe they have the resources and ability to effectively respond to changing economic and regulatory environments.

If you are a value-oriented investor seeking long-term capital appreciation with the relatively lower risks of large, dividend-paying stocks, this Fund may be ideal for you. With its emphasis on relatively low-priced, high-yielding stocks, it can work in tandem with a growth-oriented fund to create a well-balanced, diversified stock portfolio.

Focus on valuation and dividend yield, which is designed to contribute positively to total return and provide a cushion against market volatility.
Select stocks based on valuation levels, financial strength and earnings growth potential, identifying a catalyst for potential appreciation, such as a new product line or corporate restructuring.
Maintain a strict sell discipline — systematically sell stocks that we believe have achieved their true value.

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.