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Active M U.S. Equity

as of 9/30/17

Fund Commentary

Despite tensions with North Korea and a series of destructive hurricanes, U.S. equity markets continued to rally in the third quarter. Stable economic growth, subdued inflation, a weakening U.S. dollar and better-than-expected corporate earnings propelled the Russell 3000® Index to a series of record highs and a gain of 4.57%. The positive return marked the eighth straight quarter in which the Index has posted a gain.

Information technology was the top-performing sector with a return of 8.3%, while consumer staples, which fell 1.2%, was the only sector that suffered a loss. In a reversal of the trend from the first half of the year, smaller companies outperformed both mid- and large-cap stocks. Growth outperformed value, and the higher-beta, momentum and volatility factors also performed well. However, higher-yielding securities continued to underperform.

The Active M U.S. Equity Fund finished behind the Index with a return of 4.26% for the period ending September 30. The Fund’s lower beta and lower momentum weighed on short-term relative performance, as did its higher dividend yield. Although the Fund held a slight overweight in information technology, its positions struggled to keep pace with the overall sector. Two of the Fund’s four sub-advisers trailed their benchmarks. The London Company’s yield-oriented strategy lagged, and Polen’s substantial overweight in technology was not sufficient to offset the adverse effect of its stock selection in the sector. Conversely, both Delaware’s large-cap value strategy and Granite’s small-cap strategy outpaced their respective benchmarks on the strength of positive individual stock selection.

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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