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Active M International Equity

as of 12/31/17

Fund Commentary

International equity markets, as measured by the MSCI World ex US IM Index, returned 4.46% over the fourth quarter as growth outperformed value and smaller capitalization companies bested larger capitalization companies within the developed markets. Within the Index, returns were led by companies in Japan and the U.K. While returns were positive across sectors, notwithstanding utilities, the market was led by health care, technology and energy companies.

The Active M International Equity Fund generated 28 basis points (0.28%) of excess performance over the MSCI World ex-US IM Index over the fourth quarter, returning 4.74% compared to the Index return of 4.46%. Issue selection, across geographies and across sectors, was the largest contributor to quarterly performance. On a sector basis, the healthcare and energy sectors were among the leading contributors to relative performance. Geographically, issue selection among Continental European companies added value. An approximate 13.9% off-benchmark allocation to the emerging markets further aided period returns. Over the 2017 calendar year, the Fund returned 29.05%, 388 basis points (3.88%) ahead of the Index, net of fees.

International small cap equity sub-adviser, Victory Capital Management, delivered strong returns over the quarter through positive issue selection. Particular skill was demonstrated among industrials, consumer discretionary, financials and energy companies. International value manager, Causeway Capital Management, enhanced quarterly Fund performance as it added value through positive issue selection. During the quarter two new sub-advisers were added to the Fund, Wellington Management and Brandes Investment Partners. In turn, Cambiar Investors exited the Fund.

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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