Large Cap Equity (formerly Growth Equity Fund) Fund

Large Cap Equity (formerly Growth Equity Fund)

as of June 30, 2010

The quarter started strong, with the S&P 500® Index reaching a 52-week high in late April. But returns soured in May and June, as soft economic data, ongoing sovereign debt problems in Europe and the oil spill in the Gulf of Mexico continued to make headlines. All index sectors posted negative returns for the quarter, with utilities, telecommunications services and consumer staples performing the best, and materials, financials and energy performing the worst.

The Large Cap Equity Fund posted a total return of -12.24% for the quarter, compared with -11.43% for the Fund's benchmark, the S&P 500® Index. Stock selection accounted for the bulk of the Fund's underperformance, particularly in the financials, consumer discretionary and energy sectors. On a relative basis, stock selection was a modest contributor in the consumer staples, industrials and information technology sectors.

Concerns regarding sovereign credit weakness, fiscal austerity and regulatory uncertainty continue to threaten the economic recovery. While a sluggish recovery may not result in a substantial improvement in employment, a jobless recovery does not necessarily portend poor market returns. With high levels of unemployment, wage-led inflation should be muted. Consumer spending and credit will suffer, but corporations can control costs, and the Federal Reserve can maintain an accommodative monetary policy. These factors should promote corporate profit growth.

While we expect continued losses in the real estate and consumer lending arenas, most institutions strengthened their capital positions in anticipation of these losses. The aggregate health of the corporate sector coupled with improving financial liquidity and compelling valuations cause us to remain constructive on long-term equity returns, but we will monitor the housing market and its impact on the economy. We will continue to take advantage of heightened market volatility to opportunistically purchase attractive assets.

If you are a growth-oriented, moderate-risk investor looking for long-term capital appreciation without concern for current income, you will want to consider this fund as a core holding for your portfolio.

Combine forward looking fundamental stock analysis and intelligent portfolio construction with the goal of providing consistent returns over time.
Actively manage risk levels to be commensurate with performance objectives and avoid unintended risks.
Maintain a core-style fund that invests primarily in large-cap stocks with some mid-cap exposure.

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.