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Small Cap Core

as of 6/30/14

Fund Commentary

A strong rally among lower-quality small-cap stocks in June altered the second quarter’s results meaningfully. Expectations for continued easy monetary conditions on the back of weaker economic news gave life to the riskier elements in the market.

The Small Cap Core Fund posted a total return of 1.98% for the quarter, compared with 2.05% for the Fund’s benchmark, the Russell 2000® Index. Stock selection in the materials, consumer discretionary and utilities sectors primarily accounted for the Fund’s lagging results. Within each sector, underperformance was generally focused on a single industry — chemicals in the materials sector, media in the consumer discretionary sector and independent power producers in the utilities sector. Stock selection contributed to Fund performance in the financials and industrials sectors. Lower-quality stocks generally outperformed the Index, as strong performance in May and June more than offset lagging results in April. The Fund’s underweight position in lower-quality stocks detracted from results. Meanwhile, micro-cap stocks, defined as stocks of companies with market caps of less than $150 million, outperformed the Index, which helped lift Fund performance. Overall, deeper valuation stocks generally outperformed, as did stocks with higher return on equity and profit margins.

We will continue to focus on providing diverse exposure to domestic small-cap stocks, including those within the smallest segments of the market, while maintaining a disciplined process to manage active risk and transaction costs.

Not FDIC insured | May lose value | No bank guarantee

View investment terms definitions

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.