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Global Tactical Asset Allocation

as of 12/31/17

Fund Commentary

Global market momentum continued in the fourth quarter, capping a strong year for financial markets. U.S. equity markets benefitted from tax cut legislation eventually being signed into law, while improving growth in Europe helped markets overcome uncertainty. The economic backdrop of synchronized global growth and subdued inflation has allowed major central banks to continue normalizing policy.

The Global Tactical Asset Allocation Fund posted a total return of 3.70% for the quarter, compared with 3.57% for the Fund's blended static benchmark. Our tactical positioning led to the slight overall outperformance for the Fund, offsetting slight implementation vehicle underperformance and modest underperformance from strategic positioning. Our tactical positioning benefitted from underweight positioning in investment grade fixed income and overweight positioning across all major global equity regions (U.S., non-U.S. developed markets and emerging markets). We made one change in asset allocation during the quarter. In November, we increased our positions in emerging market equities and investment grade fixed income, while decreasing our high yield fixed income allocation. The increase to emerging market equities reflected our expectation that the asset class would continue to benefit from the improving global growth environment, while the increase to investment grade fixed income was designed to help maintain the risk profile of the portfolio. These tactical changes leave the Fund with a continued appetite for risk including overweight positioning across all major equity regions (U.S., non-U.S. developed markets and emerging markets) and an overweight to high yield fixed income, funded by a underweight to investment grade fixed income.

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.

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