July 2011

For Doug McEldowney, portfolio manager of the Northern International Equity Fund, opportunity knows no boundaries.

McEldowney researches and invests in companies based outside the United States — a universe that represents 60% of the world's stock market capitalization.

"When investors limit their equity investments to U.S.-based companies, they limit their growth potential to a single country," he said. "We believe investors should explore the rest of the world's investment opportunities, thereby enhancing their long-term return potential."

A quest for mispriced securities
McEldowney and his team seek to narrow their stock universe by investing in what they believe are attractive mispriced securities. Specifically, they look for large-cap stocks selling at discounts to their intrinsic value. Most are located in developed markets, but the team will consider emerging market stocks, too, if the relationship between current price and intrinsic value is compelling.

The process of determining a stock's intrinsic value is what McEldowney believes sets apart the Northern International Equity Fund from its competitors. It's a disciplined, security-by-security, fundamental research process that examines and analyzes each company's competitive positioning within its industry. McEldowney and his team look for companies they believe have sustainable competitive advantages that could help the company realize its intrinsic value within a three- to five-year time horizon.

"Our research is deep, and it's proprietary. We own it," McEldowney said. "No other firm has our view on the stocks in our portfolio."

Navigating a different world
Indeed, the foreign equity market is a vast universe where government oversight, accounting standards, political events, currency movements and customer behaviors differ from country to country, making the stock research effort a dynamic process.

"There are many factors that make researching foreign companies different than researching U.S.-based corporations," McEldowney said. "For example, we always have to be aware of how foreign companies are presenting their financial statements, where their sales are coming from, how their currency values fluctuate and what their various financial standards are."

Discipline matters
McEldowney has managed global and international stock portfolios since 1999. He believes bottom-up stock selection supported by a disciplined, fundamental research process is critical.

"Our disciplined, consistent approach seeks to highlight mispriced securities and gives them the time to achieve their true, intrinsic value," he said. "It's a strategy designed to bring a world of investment opportunity to Northern International Equity Fund shareholders."

Past performance is no guarantee of future performance.

Equity Risk: Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes.

International Risk: International investing involves increased risk and volatility.

Value Risk: Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value.