as of June 30, 2014
Fund Commentary
In the United States, economic growth returned following a disappointing first-quarter contraction. However, the acceleration in consumer spending that many anticipated has yet to materialize. Major central banks kept monetary policy accommodative during the quarter. The sharp first-quarter contraction in U.S. growth caused the U.S. Federal Reserve (Fed) to lower its economic forecast for the year. Nonetheless, the Fed noted continued progress in labor market conditions, and voted to continue tapering its bond purchases. The Fed reaffirmed its view that a highly accommodative monetary policy remained appropriate in order to support continued progress toward the goals of maximum employment and price stability.

The Fund returned 0.49% during the quarter, compared with a 0.33% return for the Fund’s benchmark.

Issuers in the investment-grade corporate bond market took advantage of tight credit spreads and declining interest rates to issue a record amount of debt for the first half of the year. The flood of new corporate supply was well received by investors, who continue to search for yield in the low-rate environment. Issuance in other investment-grade asset classes such as U.S. Treasuries, U.S. government agencies, mortgage-backed securities and asset-backed securities disappointed investor expectations. The large inflow of money into investment-grade strategies coupled with these supply shortfalls helped to keep interest rates low and credit spreads tight.
Investor Profile

If you are an income-oriented investor who is looking to diversify your investments by gaining broad exposure to the U.S. bond market, through shorter-term maturities, then this Fund may be right for you. It offers a diversified portfolio of bond securities invested primarily in U.S. investment-grade debt.

Philosophy
  • Invest primarily in domestic investment-grade debt obligations with an average maturity, under normal circumstances, between one and three years.
  • Buy and sell securities using a relative value approach that employs models that analyze and compare expected returns and assumed risks.
  • Emphasize securities and types of securities (such as Treasury, agency, asset-backed, mortgage-related and corporate securities) that we believe have the potential to provide a favorable return.
 
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Not FDIC insured | May lose value | No bank guarantee

†Northern tax-exempt fixed income funds' and Northern High Yield Fixed Income Fund's Average Duration is calculated using the modified duration formula. Other Northern fixed income funds show the option-adjusted duration. Duration is a measure of a bond fund's sensitivity to changes in interest rates.

*Distribution rate and tax-equivalent distribution rate represent the annualization of the Fund's distributions for the prior month ending on the date shown, including capital gain distributions. The 30-day SEC yield and tax-equivalent 30-day SEC yield represent the annualization of the Fund's net investment income, excluding capital gain income. The tax-equivalent distribution rate and tax-equivalent 30-day SEC yield are based on an assumed tax rate of 47.9% for Arizona, 55.7% for California and 43.4% for national municipal funds.

**Per share paid out May 27 with a record date of May 23. The amount shown represents dividends paid for net investment income and excludes distributions from capital gain income.

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.

©2014 Northern Funds | Northern Funds are distributed by Northern Funds Distributors, LLC, not affiliated with Northern Trust.