NORTHERN TAX-EXEMPT FIXED INCOME FUNDS

Transcription

1 NORTHERN TAX-EXEMPT FIXED INCOME FUNDS SEMI-ANNUAL REPORT SEPTEMBER 30, 2018

2 A MESSAGE FROM BOB BROWNE CHIEF INVESTMENT OFFICER The six-month reporting period ended September 30, 2018 brought a divergence of returns within the U.S. bond market. While U.S. Treasuries lost ground across all segments of the yield curve, the more credit-sensitive segments of the market held up much better. A backdrop of improvingeconomicgrowthinthe United States was the primary reason for the variations in performance. Buoyed by federal tax cuts passed in late 2017, the U.S. economy to expand at a pace well above the rest of the world. The U.S. economy fired on all cylinders, with the industrial, housing and consumer sectors all playing a role in gross domestic product ( GDP ) growth that exceeded 4% in the second quarter of 2018 and was expected to surpass 3% for the full year Favorableeconomicconditionsgave the U.S. Federal Reserve (the Fed ) latitude to continue the process of normalizing its monetary policy. The Fed raised short-term interest rates by a quarter point in both June and September 2018, bringing the total number of increases in the current cycle to eight. In addition, the Fed to wind down its stimulative quantitative easing policy by gradually reducing its balance sheet. Although it is unknown how long or how far the Fed may raise rates, the market was in general agreement that the central bank will continue the process of tightening its monetary policy through These developments weighed on the performance of U.S. Treasuries and other rate-sensitive investments. The yield on the two-year Treasury note rose from 2.27% to 2.81% as its price fell, while the yield on the benchmark 10-year Treasury note climbed from 2.74% to 3.05%. A notable result of these yield movements was the flattening of the yield curve, as the spread between two- and 10-year yields fell from 47 basis points to 24 basis points. The narrowing of this gap raised eyebrows by introducing the possibility of a yield curve inversion in which the two-year yield might exceed that of the 10-year yield a circumstance that has often been a precursor to a recession. Still, these concerns waned somewhat in September 2018 when 10-year yields begantotickup. Municipal bonds produced a small gain despite the increase in U.S. Treasury yields. Municipals remained well supported by a favorable balance of low new-issue supply and healthy investor demand, as well as the positive credit fundamentals of state and local issuers. Investment-grade corporate issues also performed reasonably well, posting a narrow gain and outpacing U.S. Treasuries. High-yield corporate issues, for their part, generated a low-single-digit return and finished as the top-performing major category in the U.S. market. Both segments of the corporatemarketwereboostedbya combination of robust economic conditions and rising earnings, which resulted in stronger company balance sheets, a low default rate and improving credit ratings. Money market funds are an area of the fixed-income category that, we believe, has been overlooked in recent years. With the Fed holding interest ratesinarangeof0%to1%fromthe 2008 financial crisis through mid-2017, investors had little reason to invest in this area other than liquidity and principal preservation. More recently, however, Fed tightening has brought yieldsuptoamoreattractivelevel.in many cases, yields have finally begun to exceed the rate of inflation indicating that investors can now earn positive real returns. While money market funds do not typically generate relatively much yield, they have once again become a vehicle for providing investors with an opportunity to earn a modest yield consistent with preserving capital at the same time. Bob Browne Chief Investment Officer Northern Trust

3 TAX-EXEMPT FIXED INCOME FUNDS TABLE OF CONTENTS 2 STATEMENTS OF ASSETS AND LIABILITIES 4 STATEMENTS OF OPERATIONS 6 STATEMENTS OF CHANGES IN NET ASSETS 8 FINANCIAL HIGHLIGHTS 15 SCHEDULES OF INVESTMENTS 15 ARIZONA TAX-EXEMPT FUND Ticker Symbol: NOAZX This report has been prepared for the general information of Northern Funds shareholders. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current Northern Funds summary prospectus or prospectus, which contains more complete information about a fund s investment objectives, risks, fees and expenses. Investors are reminded to read a summary prospectus or prospectus carefully before investing or sending money. This report contains certain forward-looking statements about factors that may affect the performance of the funds in the future. These statements are based on Northern Funds management predictions and expectations concerning certain future events, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in Northern Funds management strategies from those currently expected to be employed. 19 CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND Ticker Symbol: NCITX 27 CALIFORNIA TAX-EXEMPT FUND Ticker Symbol: NCATX 32 HIGH YIELD MUNICIPAL FUND Ticker Symbol: NHYMX 40 INTERMEDIATE TAX-EXEMPT FUND Ticker Symbol: NOITX 62 SHORT-INTERMEDIATE TAX-EXEMPT FUND Ticker Symbol: NSITX 74 TAX-EXEMPT FUND Ticker Symbol: NOTEX 89 NOTES TO THE FINANCIAL STATEMENTS 97 SHAREHOLDER MEETING RESULTS 98 FUND EXPENSES 100 APPROVAL OF MANAGEMENT AGREEMENT 104 FOR MORE INFORMATION Northern Funds are distributed by Northern Funds Distributors, LLC, Three Canal Plaza, Suite 100, Portland, Maine 04101, not affiliated with Northern Trust. NOT FDIC INSURED May lose value / No bank guarantee NORTHERN FUNDS SEMIANNUAL REPORT 1 TAX-EXEMPT FIXED INCOME FUNDS

4 TAX-EXEMPT FIXED INCOME FUNDS STATEMENTS OF ASSETS AND LIABILITIES Amounts in thousands, except per share data ARIZONA TAX-EXEMPT FUND CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND CALIFORNIA TAX-EXEMPT FUND ASSETS: Investments, at value $109,134 $479,875 $165,020 Investments in affiliates, at value 6,391 15,808 8,326 Interest income receivable 1,164 5,734 1,798 Dividend income receivable Receivable for securities sold Receivable for fund shares sold Receivable from investment adviser Prepaid and other assets Total Assets 117, , ,208 LIABILITIES: Payable for securities purchased Payable for when-issued securities 4,683 Payable for fund shares redeemed Distributions payable to shareholders Payable to affiliates: Management fees Custody fees Shareholder servicing fees Transfer agent fees 1 1 Trustee fees Accrued other liabilities Total Liabilities 179 5, Net Assets $117,140 $496,944 $174,845 ANALYSIS OF NET ASSETS: Capital stock $118,051 $499,466 $171,598 Accumulated undistributed net investment loss (10) (4) (1) Accumulated undistributed net realized loss (1,376) (3,324) (1,769) Net unrealized appreciation (depreciation) ,017 Net Assets $117,140 $496,944 $174,845 Shares Outstanding ($.0001 par value, unlimited authorization) 11,343 47,794 15,528 Net Asset Value, Redemption and Offering Price Per Share $10.33 $10.40 $11.26 Investments, at cost $108,659 $479,069 $160,003 Investments in affiliates, at cost 6,391 15,808 8,326 TAX-EXEMPT FIXED INCOME FUNDS 2 NORTHERN FUNDS SEMIANNUAL REPORT

5 SEPTEMBER 30, 2018 (UNAUDITED) HIGH YIELD MUNICIPAL FUND INTERMEDIATE TAX-EXEMPT FUND SHORT- INTERMEDIATE TAX-EXEMPT FUND TAX-EXEMPT FUND $421,792 $2,415,451 $800,114 $1,066,628 7, ,296 55,131 40,268 5,911 26,859 8,155 13, ,546 43,151 5,648 24,280 1,980 10, , ,697 2,844, ,407 1,146,183 4,627 11,496 11,810 14,205 20,835 7,959 22, , , ,215 34,763 20,177 40,814 $437,482 $2,809,752 $849,230 $1,105,369 $447,489 $2,850,375 $855,595 $1,121,344 (1) (199) (168) (255) (18,628) (27,487) (1,024) (11,646) 8,622 (12,937) (5,173) (4,074) $437,482 $2,809,752 $849,230 $1,105,369 51, ,261 83, ,945 $8.57 $10.28 $10.18 $10.34 $413,170 $2,428,388 $805,287 $1,070,702 7, ,296 55,131 40,268 NORTHERN FUNDS SEMIANNUAL REPORT 3 TAX-EXEMPT FIXED INCOME FUNDS

6 TAX-EXEMPT FIXED INCOME FUNDS STATEMENTS OF OPERATIONS CALIFORNIA Amounts in thousands ARIZONA TAX-EXEMPT FUND INTERMEDIATE TAX-EXEMPT FUND INVESTMENT INCOME: Interest Income $1,947 $7,591 Dividend income from investments in affiliates Total Investment Income 2,002 7,729 EXPENSES: Management fees 245 1,069 Custody fees Transfer agent fees 9 37 Registration fees 8 6 Printing fees 8 8 Professional fees Shareholder servicing fees Trustee fees 5 5 Other 6 6 Total Expenses 343 1,232 Less expenses reimbursed by investment adviser (79) (106) Net Expenses 264 1,126 Net Investment Income 1,738 6,603 NET REALIZED AND UNREALIZED GAINS (LOSSES): Net realized gains (losses) on: Investments (293) (823) Net changes in unrealized appreciation (depreciation) on: Investments (836) (2,504) Net Losses (1,129) (3,327) NetIncreaseinNetAssetsResultingfromOperations $609 $3,276 TAX-EXEMPT FIXED INCOME FUNDS 4 NORTHERN FUNDS SEMIANNUAL REPORT

7 FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2018 (UNAUDITED) CALIFORNIA TAX-EXEMPT FUND HIGH YIELD MUNICIPAL FUND INTERMEDIATE TAX-EXEMPT FUND SHORT- INTERMEDIATE TAX-EXEMPT FUND TAX-EXEMPT FUND $3,398 $10,093 $37,232 $7,619 $20, , ,466 10,184 39,847 8,085 20, ,618 6,094 1,866 2, ,740 6,873 2,086 2,614 (100) (472) (347) (127) (131) 400 1,268 6,526 1,959 2,483 3,066 8,916 33,321 6,126 18, ,227 (7,152) (714) (2,068) (2,360) (7,205) (16,043) (983) (14,009) (2,224) (5,978) (23,195) (1,697) (16,077) $842 $2,938 $10,126 $4,429 $2,093 NORTHERN FUNDS SEMIANNUAL REPORT 5 TAX-EXEMPT FIXED INCOME FUNDS

8 TAX-EXEMPT FIXED INCOME FUNDS STATEMENTS OF CHANGES IN NET ASSETS ARIZONA TAX-EXEMPT FUND CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND Amounts in thousands SEP 30, 2018 MAR 31, 2018 SEP 30, 2018 MAR 31, 2018 OPERATIONS: Net investment income $1,738 $3,138 $6,603 $12,444 Net realized gains (losses) (293) 656 (823) 2,101 Net change in unrealized depreciation (836) (1,945) (2,504) (7,074) Net Increase in Net Assets Resulting from Operations 609 1,849 3,276 7,471 CAPITAL SHARE TRANSACTIONS: Net increase (decrease) in net assets resulting from capital share transactions 6,648 9,982 5,899 29,019 Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions 6,648 9,982 5,899 29,019 DISTRIBUTIONS PAID: From net investment income (1,738) (3,138) (6,603) (12,444) From net realized gains Total Distributions Paid (1,738) (3,138) (6,603) (12,444) Total Increase (Decrease) in Net Assets 5,519 8,693 2,572 24,046 NET ASSETS: Beginning of period 111, , , ,326 End of period $117,140 $111,621 $496,944 $494,372 Accumulated Undistributed Net Investment Loss $(10) $(10) $(4) $(4) TAX-EXEMPT FIXED INCOME FUNDS 6 NORTHERN FUNDS SEMIANNUAL REPORT

9 FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2018, (UNAUDITED) OR THE FISCAL YEAR ENDED MARCH 31, 2018 SEP 30, 2018 CALIFORNIA TAX-EXEMPT FUND MAR 31, 2018 SEP 30, 2018 HIGH YIELD MUNICIPAL FUND MAR 31, 2018 SEP 30, 2018 INTERMEDIATE TAX-EXEMPT FUND MAR 31, 2018 SHORT- INTERMEDIATE TAX-EXEMPT FUND SEP 30, 2018 MAR 31, 2018 SEP 30, 2018 TAX-EXEMPT FUND MAR 31, 2018 $3,066 $6,041 $8,916 $18,079 $33,321 $56,432 $6,126 $12,172 $18,170 $33, ,227 2,048 (7,152) 15,468 (714) 2,200 (2,068) 5,033 (2,360) (2,104) (7,205) (1,335) (16,043) (23,328) (983) (13,352) (14,009) (11,012) 842 4,777 2,938 18,792 10,126 48,572 4,429 1,020 2,093 27,180 (4,203) 4,679 30,861 (64,949) (102,191) 190,429 (58,268) (125,575) 46,187 3,981 (4,203) 4,679 30,861 (64,949) (102,191) 190,429 (58,268) (125,575) 46,187 3,981 (3,066) (6,041) (8,916) (18,079) (33,323) (56,430) (6,124) (12,172) (18,169) (33,159) (1,330) (3,066) (6,041) (8,916) (18,079) (33,323) (56,430) (6,124) (13,502) (18,169) (33,159) (6,427) 3,415 24,883 (64,236) (125,388) 182,571 (59,963) (138,057) 30,111 (1,998) 181, , , ,835 2,935,140 2,752, ,193 1,047,250 1,075,258 1,077,256 $174,845 $181,272 $437,482 $412,599 $2,809,752 $2,935,140 $849,230 $909,193 $1,105,369 $1,075,258 $(1) $(1) $(1) $(1) $(199) $(197) $(168) $(170) $(255) $(256) NORTHERN FUNDS SEMIANNUAL REPORT 7 TAX-EXEMPT FIXED INCOME FUNDS

10 TAX-EXEMPT FIXED INCOME FUNDS FINANCIAL HIGHLIGHTS ARIZONA TAX-EXEMPT FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $10.43 $10.54 $10.96 $10.93 $10.66 $11.03 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.10) (0.11) (0.30) (0.33) Total from Investment Operations (0.01) LESS DISTRIBUTIONS PAID: From net investment income (0.16) (0.31) (0.29) (0.34) (0.36) (0.36) From net realized gains (0.12) (0.06) (0.03) (0.04) Total Distributions Paid (0.16) (0.31) (0.41) (0.40) (0.39) (0.40) Net Asset Value, End of Period $10.33 $10.43 $10.54 $10.96 $10.93 $10.66 Total Return (1) 0.57% 1.95% (0.17)% 4.06% 6.26% 0.41% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $117,140 $111,621 $102,928 $109,495 $90,046 $78,914 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.46% (3) 0.46% (3) 0.46% (3) 0.46% 0.46% (3) 0.45% (3) Expenses, before reimbursements and credits 0.60% 0.61% 0.62% 0.59% 0.70% 0.96% Net investment income, net of reimbursements and credits 3.05% (3) 2.89% (3) 2.65% (3) 3.17% 3.32% (3) 3.38% (3) Net investment income, before reimbursements and credits 2.91% 2.74% 2.49% 3.04% 3.08% 2.87% Portfolio Turnover Rate 28.11% 85.89% 83.45% 60.73% 85.31% 30.69% (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $4,000, which represents less than 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $13,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2018, and less than $16,000, which represents less than 0.02 percent of average net assets for the fiscal years ended March 31, 2017, and less than $1,000, which represents less than percent of average net assets for each of the fiscal years ended March 31, 2015 and 2014, respectively. Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increased by a corresponding amount. TAX-EXEMPT FIXED INCOME FUNDS 8 NORTHERN FUNDS SEMIANNUAL REPORT

11 CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND SIX MONTHS ENDED SEP 30, 2018 Selected per share data (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $10.47 $10.57 $11.03 $10.90 $10.57 $10.84 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.07) (0.10) (0.36) (0.25) Total from Investment Operations (0.10) LESS DISTRIBUTIONS PAID: From net investment income (0.14) (0.28) (0.26) (0.28) (0.28) (0.30) From net realized gains (0.10) (0.02) (0.02) Total Distributions Paid (0.14) (0.28) (0.36) (0.30) (0.28) (0.32) Net Asset Value, End of Period $10.40 $10.47 $10.57 $11.03 $10.90 $10.57 Total Return (1) 0.66% 1.67% (0.87)% 4.03% 5.84% 0.54% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $496,944 $494,372 $470,326 $508,152 $476,061 $359,151 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.45% (3) 0.45% (3) 0.45% (3) 0.45% 0.45% (3) 0.45% (3) Expenses, before reimbursements and credits 0.50% 0.50% 0.51% 0.50% 0.58% 0.86% Net investment income, net of reimbursements and credits 2.66% (3) 2.61% (3) 2.42% (3) 2.59% 2.61% (3) 2.90% (3) Net investment income, before reimbursements and credits 2.61% 2.56% 2.36% 2.54% 2.48% 2.49% Portfolio Turnover Rate 16.46% 52.17% 64.62% 81.80% % 98.76% (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $11,000, which represents less than 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $25,000 and $28,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2018 and March 31, 2017, respectively, less than $1,000, which represents less than percent of average net assets for the fiscal year ended March 31, 2015, and approximately $3,000, which represents less than percent of average net assets for the fiscal year ended March 31, Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increasedbya corresponding amount. NORTHERN FUNDS SEMIANNUAL REPORT 9 TAX-EXEMPT FIXED INCOME FUNDS

12 TAX-EXEMPT FIXED INCOME FUNDS FINANCIAL HIGHLIGHTS CALIFORNIA TAX-EXEMPT FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $11.40 $11.48 $12.06 $11.86 $11.26 $11.78 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.14) (0.08) (0.45) (0.31) Total from Investment Operations (0.10) LESS DISTRIBUTIONS PAID: From net investment income (0.20) (0.39) (0.35) (0.38) (0.38) (0.40) From net realized gains (0.13) (0.21) Total Distributions Paid (0.20) (0.39) (0.48) (0.38) (0.38) (0.61) Net Asset Value, End of Period $11.26 $11.40 $11.48 $12.06 $11.86 $11.26 Total Return (1) 0.53% 2.69% (0.83)% 4.97% 8.84% 0.97% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $174,845 $181,272 $177,857 $189,741 $145,831 $119,640 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.46% (3) 0.46% (3) 0.46% (3) 0.46% 0.46% (3) 0.45% (3) Expenses, before reimbursements and credits 0.57% 0.58% 0.61% 0.60% 0.71% 0.99% Net investment income, net of reimbursements and credits 3.51% (3) 3.36% (3) 2.95% (3) 3.18% 3.29% (3) 3.55% (3) Net investment income, before reimbursements and credits 3.40% 3.24% 2.80% 3.04% 3.04% 3.01% Portfolio Turnover Rate 20.37% 83.27% 97.34% % % % (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $5,000, which represents less than 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $21,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2018, approximately $16,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2017, less than $1,000, which represents less than percent of average net assets for the fiscal year ended March 31, 2015, and approximately $1,000, which represents less than percent of average net assets for the fiscal year ended March 31, Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increased by a corresponding amount. TAX-EXEMPT FIXED INCOME FUNDS 10 NORTHERN FUNDS SEMIANNUAL REPORT

13 HIGH YIELD MUNICIPAL FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $8.69 $8.69 $9.02 $8.93 $8.49 $9.04 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.12) (0.33) (0.55) Total from Investment Operations (0.01) (0.15) LESS DISTRIBUTIONS PAID: From net investment income (0.18) (0.35) (0.32) (0.33) (0.38) (0.40) Total Distributions Paid (0.18) (0.35) (0.32) (0.33) (0.38) (0.40) Net Asset Value, End of Period $8.57 $8.69 $8.69 $9.02 $8.93 $8.49 Total Return (1) 0.74% 4.03% (0.10)% 4.80% 9.79% (1.51)% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $437,482 $412,599 $476,835 $575,904 $336,608 $240,728 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.60% (3) 0.80% (3) 0.80% (3) 0.80% 0.80% (3) 0.80% (3) Expenses, before reimbursements and credits 0.83% 0.83% 0.82% 0.83% 0.89% 0.98% Net investment income, net of reimbursements and credits 4.25% (3) 3.96% (3) 3.60% (3) 3.67% 4.29% (3) 4.73% (3) Net investment income, before reimbursements and credits 4.02% 3.93% 3.58% 3.64% 4.20% 4.55% Portfolio Turnover Rate 9.43% 9.69% 39.67% 7.20% 8.16% 10.66% (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $7,000, which represents less than 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $12,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2018, approximately $42,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2017, less than $1,000, which represents less than percent of average net assets for the fiscal year ended March 31, 2015, and approximately $1,000,which represents less than percent of average net assets for the fiscal year ended March 31, NORTHERN FUNDS SEMIANNUAL REPORT 11 TAX-EXEMPT FIXED INCOME FUNDS

14 TAX-EXEMPT FIXED INCOME FUNDS FINANCIAL HIGHLIGHTS INTERMEDIATE TAX-EXEMPT FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $10.37 $10.40 $10.82 $10.71 $10.44 $10.70 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.09) (0.03) (0.26) (0.21) Total from Investment Operations (0.05) LESS DISTRIBUTIONS PAID: From net investment income (0.12) (0.22) (0.21) (0.22) (0.21) (0.23) From net realized gains (0.16) (0.04) (0.03) (0.05) Total Distributions Paid (0.12) (0.22) (0.37) (0.26) (0.24) (0.28) Net Asset Value, End of Period $10.28 $10.37 $10.40 $10.82 $10.71 $10.44 Total Return (1) 0.29% 1.75% (0.48)% 3.54% 4.90% 0.26% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $2,809,752 $2,935,140 $2,752,569 $3,160,485 $3,142,905 $2,369,509 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.45% (3) 0.45% (3) 0.45% (3) 0.45% 0.45% (3) 0.44% (3) Expenses, before reimbursements and credits 0.48% 0.48% 0.49% 0.49% 0.57% 0.85% Net investment income, net of reimbursements and credits 2.31% (3) 2.03% (3) 1.94% (3) 2.04% 1.95% (3) 2.27% (3) Net investment income, before reimbursements and credits 2.28% 2.00% 1.90% 2.00% 1.83% 1.86% Portfolio Turnover Rate 62.78% % % % % % (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $197,000, which represents approximately 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $278,000, which represents approximately 0.01 percent of the average net assets for the fiscal year ended March 31, 2018 and approximately $261,000, $6,000 and $38,000, which represent less than 0.01, and percent of average net assets for each of the fiscal years ended March 31, 2017, 2015 and 2014, respectively. Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increased by a corresponding amount. TAX-EXEMPT FIXED INCOME FUNDS 12 NORTHERN FUNDS SEMIANNUAL REPORT

15 SHORT-INTERMEDIATE TAX-EXEMPT FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $10.20 $10.33 $10.48 $10.46 $10.46 $10.58 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.02) (0.11) (0.13) 0.02 (0.12) Total from Investment Operations (0.01) LESS DISTRIBUTIONS PAID: From net investment income (0.07) (0.13) (0.12) (0.12) (0.14) (0.15) From net realized gains (0.01) (0.02) (1) (1) Total Distributions Paid (0.07) (0.14) (0.14) (0.12) (0.14) (0.15) Net Asset Value, End of Period $10.18 $10.20 $10.33 $10.48 $10.46 $10.46 Total Return (2) 0.51% 0.07% (0.10)% 1.41% 1.33% 0.33% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $849,230 $909,193 $1,047,250 $1,160,549 $1,392,725 $1,329,074 Ratio to average net assets of: (3) Expenses, net of reimbursements and credits 0.45% (4) 0.45% (4) 0.45% (4) 0.45% 0.45% (4) 0.45% (4) Expenses, before reimbursements and credits 0.48% 0.48% 0.48% 0.48% 0.55% 0.79% Net investment income, net of reimbursements and credits 1.41% (4) 1.21% (4) 1.18% (4) 1.18% 1.32% (4) 1.45% (4) Net investment income, before reimbursements and credits 1.38% 1.18% 1.15% 1.15% 1.22% 1.11% Portfolio Turnover Rate 51.88% 36.55% 21.23% 20.01% 23.13% 20.44% (1) (2) (3) (4) Per share amounts from distributions paid from net realized gains were less than $0.01 per share. Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $46,000, which represents less than 0.01 percent of average net assets for the six months ended September 30, 2018, approximately $96,000 and $46,000, which represent less than 0.01 percent of average net assets for the fiscal year ended March 31, 2018 and 2017, respectively and approximately $1,000 and $13,000, which represent less than percent of average net assets for each of the fiscal years ended March 31, 2015 and 2014, respectively. Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increased by a corresponding amount. NORTHERN FUNDS SEMIANNUAL REPORT 13 TAX-EXEMPT FIXED INCOME FUNDS

16 TAX-EXEMPT FIXED INCOME FUNDS FINANCIAL HIGHLIGHTS TAX-EXEMPT FUND Selected per share data SIX MONTHS ENDED SEP 30, 2018 (UNAUDITED) FISCAL YEAR ENDED MAR 31, 2018 FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 Net Asset Value, Beginning of Period $10.49 $10.55 $10.89 $10.80 $10.44 $10.95 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.15) (0.06) (0.33) (0.37) Total from Investment Operations (0.02) LESS DISTRIBUTIONS PAID: From net investment income (0.17) (0.33) (0.31) (0.36) (0.38) (0.38) From net realized gains (0.01) (0.14) Total Distributions Paid (0.17) (0.33) (0.32) (0.36) (0.38) (0.52) Net Asset Value, End of Period $10.34 $10.49 $10.55 $10.89 $10.80 $10.44 Total Return (1) 0.22% 2.57% (0.16)% 4.29% 7.16% 0.30% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $1,105,369 $1,075,258 $1,077,256 $1,064,728 $864,091 $746,780 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.45% (3) 0.45% (3) 0.45% (3) 0.45% 0.45% (3) 0.45% (3) Expenses, before reimbursements and credits 0.48% 0.48% 0.48% 0.48% 0.58% 0.86% Net investment income, net of reimbursements and credits 3.31% (3) 3.12% (3) 2.91% (3) 3.37% 3.53% (3) 3.62% (3) Net investment income, before reimbursements and credits 3.28% 3.09% 2.88% 3.34% 3.40% 3.21% Portfolio Turnover Rate 54.82% % 99.52% % % % (1) (2) (3) Assumes investment at net asset value at the beginning of the period, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the period. The total return is not annualized for periods less than one year. Annualized for periods less than one year. The net expenses and net investment income ratios include additional reimbursements of management or advisory fees, as applicable, incurred in connection with the investment of uninvested cash in affiliated money market funds of approximately $35,000, $64,000, $103,000, $1,000 and $13,000 which represent less than 0.01, 0.01, 0.01, and percent of average net assets for the six months ended September 30, 2018 and fiscal years ended March 31, 2018, 2017, 2015 and 2014, respectively. Absent the additional reimbursements, net investment income and reimbursements would have been decreased and net expenses would have been increased by a corresponding amount. TAX-EXEMPT FIXED INCOME FUNDS 14 NORTHERN FUNDS SEMIANNUAL REPORT

17 SCHEDULE OF INVESTMENTS ARIZONA TAX-EXEMPT FUND SEPTEMBER 30, 2018 (UNAUDITED) MUNICIPAL BONDS 93.2% Arizona 93.2% Arizona Board of Regents Refunding COPS, University of Arizona Project, 5.00%, 6/1/26 $600 $ %, 6/1/ %, 6/1/ Arizona Board of Regents State University System Revenue Bonds, Series A, 5.00%, 7/1/ %, 7/1/ %, 7/1/ Arizona Board of Regents State University System Revenue Bonds, Series D, 5.00%, 7/1/ Arizona Board of Regents State University System Revenue Refunding Bonds, Series A, Green Bonds, 5.00%, 7/1/35 1,000 1, %, 7/1/41 1,000 1,115 Arizona Board of Regents State University System Revenue Refunding Bonds, Series B, 5.00%, 7/1/28 1,860 2, %, 7/1/31 2,000 2, %, 7/1/ Arizona Board of Regents University System Revenue Bonds, Series A, 5.00%, 6/1/ %, 6/1/32 1,500 1,698 Arizona Board of Regents University System Revenue Refunding Bonds, 5.00%, 6/1/33 1,710 1,946 Arizona State Health Facilities Authority Revenue Bonds, Series A, Banner Health, 4.00%, 1/1/43 3,000 3,017 Arizona State Transportation Board Excise TRB, Maricopa County Regional Area, 5.00%, 7/1/24 2,500 2,853 MUNICIPAL BONDS % Arizona 93.2% Coconino & Yavapai Counties Joint Unified School District No. 9 G.O. Unlimited Bonds, Series B, School Improvement Project of 2007 (AGC Insured), 5.00%, 7/1/22 $1,345 $1,375 Gilbert Public Facilities Municipal Property Corp. Revenue Bonds, 5.00%, 7/1/ Gilbert Public Facilities Municipal Property Corp. Revenue Bonds, Prerefunded, 5.50%, 7/1/19 (1) 1,000 1,027 Gilbert Public Facilities Municipal Property Corp. Revenue Refunding Bonds, 5.00%, 7/1/26 3,000 3,516 Gilbert Water Resource Municipal Property Corp. Utility System Revenue Bonds, 5.00%, 7/1/ %, 7/1/ %, 7/1/ %, 7/1/ Goodyear McDowell Road Commercial Corridor Improvement District Special Assessment Refunding Bonds (BAM Insured), 3.35%, 1/1/28 1,000 1,011 Goodyear Water & Sewer Revenue Bonds, Subordinate Lien Obligations (AGM Insured), 5.25%, 7/1/31 1,000 1,077 Maricopa County Elementary School District No. 1 Phoenix G.O. Unlimited Bonds, Series B, School Improvement Project of 2006, Prerefunded, 4.50%, 7/1/19 (1) 1,190 1,213 Maricopa County Elementary School District No. 28 Kyrene G.O. Unlimited Bonds, Series B, School Improvement Project of 2010, 5.25%, 7/1/28 (2) 940 1, %, 7/1/29 (2) %, 7/1/30 (2) NORTHERN FUNDS SEMIANNUAL REPORT 15 TAX-EXEMPT FIXED INCOME FUNDS

18 SCHEDULE OF INVESTMENTS ARIZONA TAX-EXEMPT FUND MUNICIPAL BONDS % Arizona 93.2% Maricopa County High School District No. 210 Phoenix G.O. Unlimited Bonds, School Improvement Project of2011&2017, 5.00%, 7/1/34 $1,000 $1,150 Maricopa County IDA Revenue Refunding Bonds, Banner Health Obligation Group, 5.00%, 1/1/38 1,000 1,113 Maricopa County School District No. 17 Tolleson Elementary G.O. Unlimited Bonds, Series A, School Improvement Project of 2017 (BAM Insured), 5.00%, 7/1/ Maricopa County School District No. 3 Tempe Elementary G.O. Unlimited Bonds, Series A, School Improvement Project, 5.00%, 7/1/26 2,250 2,627 Maricopa County School District No. 6 Washington Elementary G.O. Unlimited Bonds, Series A, 5.00%, 7/1/25 1,000 1,146 Maricopa County Unified School District No. 11 Peoria G.O. Unlimited Bonds, School Improvement (BAM Insured), 4.00%, 7/1/36 1,000 1,034 Maricopa County Unified School District No. 41 Gilbert G.O. Unlimited Bonds, Series B, School Improvement Project of 2015, 5.00%, 7/1/ %, 7/1/ %, 7/1/ Maricopa County Unified School District No. 69 Paradise Valley G.O. Unlimited Bonds, Series D, School Improvement Project of 2011, 4.50%, 7/1/27 1,700 1,838 Maricopa County Unified School District No. 80 Chandler G.O. Unlimited Bonds, Series A-1, School Improvement Project of 2010, 4.00%, 7/1/22 1,040 1,094 MUNICIPAL BONDS % Arizona 93.2% Maricopa County Unified School District No. 95 Queen Creek G.O. Limited Refunding Bonds, 5.00%, 7/1/26 $400 $459 Maricopa County Unified School District No. 95 Queen Creek G.O. Unlimited Bonds, School Improvement, 5.00%, 7/1/27 1,020 1, %, 7/1/ %, 7/1/ Maricopa County Unified School District No. 95 Queen Creek G.O. Unlimited Bonds, School Improvement Projects of 2010 & 2014, 2.25%, 7/1/ Maricopa County Union High School District No. 216 Agua Fria G.O. Unlimited Bonds, Series B, School Improvement Project of 2015, 5.00%, 7/1/29 1,000 1,165 Mesa Street & Highway Revenue Refunding Bonds (AGM Insured), 5.00%, 7/1/23 1,000 1,119 Mohave County Unified School District No. 20 Kingman G.O. Unlimited Bonds, Series C, School Improvement Project of 2006 (AGC Insured), 5.50%, 7/1/21 1,000 1, %, 7/1/23 1,000 1,023 Phoenix Civic Airport Improvement Corp. Revenue Refunding Bonds, Series B, 5.00%, 7/1/34 5,000 5,682 Phoenix Civic Improvement Corp. Airport Revenue Refunding Bonds, Junior Lien, 4.00%, 7/1/40 2,000 2,037 Phoenix Civic Improvement Corp. Subordinated Excise Tax Revenue Refunding Bonds, Series A, 5.00%, 7/1/28 1,125 1,290 Phoenix Civic Improvement Corp. Wastewater System Revenue Bonds, Series A, Junior Lien, 3.50%, 7/1/43 2,000 1,917 TAX-EXEMPT FIXED INCOME FUNDS 16 NORTHERN FUNDS SEMIANNUAL REPORT

19 SEPTEMBER 30, 2018 (UNAUDITED) MUNICIPAL BONDS % Arizona 93.2% Phoenix Civic Improvement Corp. Water System Revenue Bonds, Series A, Junior Lien, 5.00%, 7/1/39 $1,000 $1,108 Phoenix Civic Improvement Corp. Water System Revenue Bonds, Series A, Junior Lien, Prerefunded, 5.00%, 7/1/19 (1) Phoenix Civic Improvement Corp. Water System Revenue Refunding Bonds, 5.00%, 7/1/30 1,200 1,390 Phoenix IDA Healthcare Facilities Variable Revenue Bonds, Series B, Mayo Clinic, 1.53%, 10/1/18 (3) (4) (5) 5,000 5,000 Pima County Sewer Revenue Bonds, Series B, Prerefunded, 5.00%, 7/1/21 (1) 1,000 1,078 Pima County Sewer System Revenue Bonds, 5.00%, 7/1/25 1,000 1,117 Pima County Sewer System Revenue Bonds (AGM Insured), Prerefunded, 5.00%, 7/1/20 (1) 1,350 1,418 Pima County Street & Highway Revenue Bonds, Prerefunded, 4.00%, 7/1/19 (1) 1,970 2,000 Pima County Unified School District No. 10 Amphitheater G.O. Unlimited Bonds, Series D, School Improvement Project of 2007, 5.00%, 7/1/24 1,005 1,116 Pinal County Community College District Revenue Bonds, Central Arizona Collage (BAM Insured), 5.00%, 7/1/ Pinal County Unified School District No. 43 Apache Junction G.O. Unlimited Refunding Bonds (AGM Insured), 5.00%, 7/1/22 1,000 1,090 Prescott Valley Municipal Property Corp. Facilities Revenue Refunding Bonds, 5.00%, 1/1/24 1,835 1,941 MUNICIPAL BONDS % Arizona 93.2% Queen Creek Excise Tax & State Shared Revenue Bonds, Series A, 5.00%, 8/1/42 $2,500 $2,832 Queen Creek Excise Tax & State Shared Revenue Bonds, Series B, 5.00%, 8/1/47 2,540 2,774 Salt River Project Agricultural Improvement & Power District Electric System Revenue Refunding Bonds, 5.00%, 1/1/31 2,500 2, %, 1/1/36 1,500 1,730 Santa Cruz County Jail District Pledged Revenue Refunding Bonds (AGM Insured), 5.00%, 7/1/25 1,000 1, %, 7/1/27 2,290 2, %, 7/1/31 1,285 1,449 Scottsdale Municipal Property Corp. Excise Tax Revenue Refunding Bonds, 5.00%, 7/1/30 2,675 3,220 Tucson COPS (AGC Insured), Prerefunded, 5.00%, 7/1/19 (1) 1,000 1, %, 7/1/19 (1) 1,000 1,023 Tucson Water System Revenue Bonds, Prerefunded, 5.00%, 7/1/21 (1) 1,825 1, ,134 Total Municipal Bonds (Cost $108,659) 109,134 NUMBER OF SHARES INVESTMENT COMPANIES 5.4% Northern Institutional Funds - U.S. Government Portfolio (Shares), 1.87% (6) (7) 6,391,166 $6,391 Total Investment Companies (Cost $6,391) 6,391 Total Investments 98.6% (Cost $115,050) 115,525 Other Assets less Liabilities 1.4% 1,615 NET ASSETS 100.0% $117,140 (1) Maturity date represents the prerefunded date. NORTHERN FUNDS SEMIANNUAL REPORT 17 TAX-EXEMPT FIXED INCOME FUNDS

20 SCHEDULE OF INVESTMENTS ARIZONA TAX-EXEMPT FUND SEPTEMBER 30, 2018 (UNAUDITED) (2) (3) (4) (5) (6) (7) Security has converted to a fixed rate as of July 1, 2015, and is a fixed rate going forward. Maturity date represents the puttable date. Rate is determined by a remarketing agent which, in its judgment, on the basis of prevailing financial markets, will be the lowest interest rate necessary to enable the remarketing agent to sell the bonds at a price equal to 100% of the principal amount. Variable rate security. Rate as of September 30, 2018 is disclosed. Investment in affiliated Portfolio. Northern Trust Investments, Inc. is the investment adviser to the Fund and the investment adviser to Northern Institutional Funds. 7-day current yield as of September 30, 2018 is disclosed. Percentages shown are based on Net Assets. At September 30, 2018, the credit quality distribution for the Fund as a percentage of investments including cash was: QUALITY DISTRIBUTION* %OFINVESTMENTS AAA 5.2% AA 81.0 A 8.3 Cash Equivalents 5.5 Total 100.0% * Credit quality ratings are based on converting the available Moody s, S&P Global, and/or Fitch ratings to a common numerical basis and averaging that result. If none of these three rating agencies has assigned a rating, the Fund will assign a rating of not rated. The ratings, expressed in S&P Global s nomenclature, range from AAA (extremely strong capacity to meet its financial commitment) to D (in default). Short-term ratings, expressed in S&P Global s nomenclature, range from A-1 (obligor s capacity to meet its financial commitment on the obligation is strong) to D (in default). The S&P Global s short-term municipal rating of SP1 reflects a strong capacity to pay principal and interest (an issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation). The Moody s short-term municipal rating of MIG1 denotes superior credit quality (excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing). The ratings represent the rating agencies opinions of the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. Various inputs are used in determining the value of the Fund s investments. These inputs are summarized in three levels listed below: Level 1 - Unadjusted quoted market prices in active markets for identical securities on the measurement date. Level 2 - Other observable inputs (e.g., quoted prices in active markets for similar securities, securities valuations based on commonly quoted benchmark interest rates and yield curves, maturities, ratings and/or securities indices). Level 3 - Significant unobservable inputs (e.g., information about assumptions, including risk, market participants would use in pricing a security). The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and other financial instruments, if any. The following table summarizes the valuations of the Fund s investments by the above fair value hierarchy as of September 30, 2018: INVESTMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Municipal Bonds (1) $ $109,134 $ $109,134 Investment Companies 6,391 6,391 Total Investments $6,391 $109,134 $ $115,525 (1) Classifications as defined in the Schedule of Investments. EXPLANATION OF ABBREVIATIONS AND ACRONYMS USED THROUGHOUT THE SCHEDULE OF INVESTMENTS: AGC - Assured Guaranty Corporation AGM - Assured Guaranty Municipal Corporation BAM - Build America Mutual COPS - Certificates of Participation G.O. - General Obligation IDA - Industrial Development Authority TRB - Tax Revenue Bonds At September 30, 2018, the industry sectors for the Fund were: INDUSTRY SECTOR %OFINVESTMENTS Facilities 6.6% General 30.2 Higher Education 13.3 Medical 8.4 School District 23.0 Water 7.9 All other sectors less than 5% 10.6 Total 100.0% TAX-EXEMPT FIXED INCOME FUNDS 18 NORTHERN FUNDS SEMIANNUAL REPORT

21 SCHEDULE OF INVESTMENTS CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND SEPTEMBER 30, 2018 (UNAUDITED) MUNICIPAL BONDS 94.5% California 94.5% Alameda County Joint Powers Authority Lease Revenue Bonds, Series A, Multiple Capital Projects, 4.00%, 12/1/24 $850 $928 Alameda Unified School District G.O. Unlimited Bonds, Series B, Election of 2014, 5.00%, 8/1/42 4,000 4,560 Albany Unified School District G.O. Unlimited Bonds, Series B, Measure B, Election of 2016, 5.00%, 8/1/43 1,000 1,125 Alvord Unified School District G.O. Unlimited Refunding Bonds (AGM Insured), 5.00%, 8/1/29 1,500 1,796 Anaheim Housing & Public Improvement Authority Revenue Refunding Bonds, Series B, 5.00%, 10/1/28 2,000 2,223 Bay Area Toll Bridge Authority Revenue Bonds, Series F-1, Prerefunded, 5.00%, 4/1/19 (1) 2,000 2, %, 4/1/19 (1) 1,000 1,017 Bay Area Toll Bridge Authority Revenue Refunding Bonds, 2.00%, 4/1/24 (2) (3) (4) 7,620 7, %, 4/1/25 (2) (3) (4) 16,700 16,151 Bay Area Toll Bridge Authority Revenue Refunding Bonds, Series A, 2.85%, 4/1/25 (2) (3) (4) 5,800 5, %, 4/1/26 (2) (3) (4) 19,975 20,381 Bay Area Toll Bridge Authority Revenue Refunding Bonds, Series E, 2.00%, 4/1/21 (2) (3) (4) California State Department of Water Resources Central Valley Project Revenue Bonds, Series AR, 4.00%, 12/1/34 1,795 1,903 California State Department of Water Resources Power Supply Revenue Bonds, Series L, 5.00%, 5/1/19 5,000 5,096 MUNICIPAL BONDS % California 94.5% California State Economic Recovery G.O. Unlimited Refunding Bonds, Series A, Escrowed to Maturity, 5.00%, 7/1/19 $5,000 $5,123 California State G.O. Unlimited Bonds, 5.00%, 3/1/26 1,250 1, %, 11/1/40 8,500 9,056 California State G.O. Unlimited Bonds (NATL Insured), Unrefunded Balance, 4.75%, 2/1/ California State G.O. Unlimited Bonds, Series 2007 (FGIC Insured), Unrefunded Balance, 5.38%, 6/1/26 2,220 2,233 California State G.O. Unlimited Refunding Bonds, 5.00%, 8/1/25 5,000 5, %, 9/1/27 1,845 2, %, 8/1/28 4,000 4,760 California State G.O. Unlimited Refunding Bonds, Bid Group C, 5.00%, 8/1/27 5,000 5, %, 8/1/28 7,000 8,199 California State G.O. Unlimited Refunding Bonds, Group C, 5.00%, 8/1/26 1,000 1,154 California State G.O. Unlimited Refunding Bonds, Series B, 5.00%, 9/1/23 3,375 3,833 California State G.O. Unlimited Refunding Bonds, Series C, 5.00%, 9/1/26 3,500 4,084 California State Health Facilities Financing Authority Revenue Bonds, Series A, Sutter Health, 5.00%, 11/15/32 1,200 1,365 California State Health Facilities Financing Authority Revenue Refunding Bonds, Cedars-Sinai Medical Center, 5.00%, 11/15/ California State Health Facilities Financing Authority Revenue Refunding Bonds, Providence St. Joseph Health System, 2.00%, 10/1/25 (2) (3) (4) 2,450 2,357 NORTHERN FUNDS SEMIANNUAL REPORT 19 TAX-EXEMPT FIXED INCOME FUNDS

22 SCHEDULE OF INVESTMENTS CALIFORNIA INTERMEDIATE TAX-EXEMPT FUND MUNICIPAL BONDS % California 94.5% California State Health Facilities Financing Authority Revenue Refunding Bonds, Series B, Sutter Health, 5.00%, 11/15/35 $2,500 $2,835 California State Infrastructure & Economic Development Bank Revenue Refunding Bonds, Series E, Pacific Gas & Electric, 1.75%, 6/1/22 (2) (3) (4) 2,000 1,893 California State Public Works Board Lease Revenue Bonds, Series D, Judicial Council Projects, 4.25%, 12/1/20 1,000 1,051 California State Public Works Board Lease Revenue Bonds, Subseries I-1, Various Capital Projects, Prerefunded, 6.38%, 11/1/19 (1) 2,500 2,624 California State University Revenue Refunding Bonds, Series A, 5.00%, 11/1/32 1,000 1,154 California State University Systemwide Revenue Refunding Bonds, Series A, 4.00%, 11/1/45 2,600 2,695 California State University Systemwide Revenue Refunding Bonds, Series B-3, 4.00%, 11/1/23 (2) (3) (4) 5,750 6,167 California State Various Purpose G.O. Unlimited Bonds, 5.50%, 4/1/19 1,000 1, %, 9/1/19 4,720 4, %, 9/1/20 1,690 1, %, 10/1/20 6,000 6, %, 5/1/23 1,485 1, %, 10/1/ %, 5/1/24 1,450 1, %, 11/1/28 4,000 4, %, 3/1/30 1,500 1, %, 10/1/39 1,500 1,721 California State Various Purpose G.O. Unlimited Bonds, Bidding Group, 5.00%, 9/1/28 5,000 5,865 MUNICIPAL BONDS % California 94.5% California State Various Purpose G.O. Unlimited Bonds, Unrefunded Balance, 6.50%, 4/1/33 $2,435 $2,489 California State Various Purpose G.O. Unlimited Refunding Bonds, 5.00%, 9/1/23 1,480 1, %, 12/1/23 2,450 2, %, 10/1/26 2,750 3, %, 11/1/28 1,000 1,194 California Statewide Communities Development Authority Revenue Bonds, Viamonte Senior Living Project (California Mortgage Insured), 3.00%, 7/1/26 5,500 5,554 Carlsbad Unified School District G.O. Unlimited Bonds, 0.00%, 5/1/19 (5) 1,250 1,237 Centinela Valley Union High School District G.O. Unlimited Bonds, Series B, Election of 2008, Prerefunded, 5.75%, 8/1/23 (1) 1,000 1,173 Cotati-Rohnert Park Unified School District G.O. Unlimited Bonds, Series E, Election of 2014 (BAM Insured), 4.00%, 8/1/ Desert Community College District G.O. Unlimited Bonds, Riverside & Imperial County, 5.00%, 8/1/43 1,125 1,241 El Camino Community College District G.O. Unlimited CABS, Series C, Election of 2002, 0.00%, 8/1/23 (5) 9,940 8,875 Escondido Union School District G.O. Unlimited Bonds, Series B, Election of 2014, 4.00%, 8/1/43 1,595 1,646 Evergreen School District G.O. Unlimited Bonds, Election of 2014, 5.00%, 8/1/46 1,000 1,144 Foothill Eastern Transportation Corridor Agency Toll Road Revenue CABS, Series A, Senior Lien, Escrowed to Maturity, 0.00%, 1/1/20 (5) 2,150 2,099 TAX-EXEMPT FIXED INCOME FUNDS 20 NORTHERN FUNDS SEMIANNUAL REPORT