NORTHERN FIXED INCOME INDEX FUNDS

Transcription

1 NORTHERN FIXED INCOME INDEX FUNDS ANNUAL REPORT MARCH 31, 2017 MANAGED BY

2 A MESSAGE FROM BOB BROWNE CHIEF INVESTMENT OFFICER The 12-month period ended March 31, 2017 (the Period ), brought a wide dispersion of returns within the bond market. Even as credit-sensitive asset categories produced gains highlighted by a double-digit return for high-yield bonds more rate-sensitive segments of the market came under significant pressure. The evolving outlook for economic growth was the primary reason for this divergence. When the Period began, investors were fixated on the recent sharp drop in commodity prices, and its negative signal with regard to the world economy. As the Period progressed, however, the markets grew increasingly optimistic about the prospects for global growth. Central banks overseas took aggressive steps to spur growth in early 2016, leading to a rebound in commodities and improving economic data around the globe. Growth expectations were further boosted by the results of the November 2016 U.S. election, when the Republican party sweep raised hopes for lower taxes, higher infrastructure spending and a relaxation of federal government regulations. The improvement in growth and the rebound in commodities also contributed to an uptick in inflation, which represented a major departure from previous deflationary concerns that had cropped up at various points since the 2008 financial crisis. These developments prompted the U.S. Federal Reserve to move off of its longstanding policy of holding shortterm rates near zero. The U.S. Federal Reserve increased rates by a quarter point in December 2016 and again in March 2017, bringing the benchmark fed funds rate to a range of.75% to 1.00%. As of March 31, 2017 the consensus expectation was that the U.S. Federal Reserve would continue to raise rates gradually until it had achieved a normalized policy stance (i.e., one consistent with the level of growth and inflation). These circumstances acted as a headwind to U.S. Treasuries due to their above-average interest-rate risk. Yields rose and prices fell across the full maturity spectrum, highlighted by a move in the 10-year Treasury note to 2.40% at March 31, 2017 versus 1.78% a year earlier. The downturn in government issues, in turn, translated to weakness in other rate-sensitive asset classes such as mortgage-backed securities and municipal bonds. In contrast, investment-grade corporate issues bucked the broader trend by producing a positive return and outpacing U.S. Treasuries by a wide margin. Corporate issues were helped by the improvement in the economy, which contributed to stronger fundamentals for issuing companies, as well as a backdrop of healthy investor sentiment that supported demand for higher-yielding assets. High-yield bonds gained an even larger benefit from these trends, and they received an additional boost from the recovery in commodities. These factors contributed to a 12-month return of 16.39% for the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index. In comparison, the Bloomberg Barclays U.S. Aggregate Index (which represents investmentgrade issues, including corporate securities) produced a gain of just 0.44%. At the close of the Period, the combination of healthier economic data, rising inflation and better corporate results were all factors contributing to upward pressure on bond yields. While the impact of these trends has been offset by investor demand for lower-risk assets, we would expect periods of volatility as the markets react to headlines and shifting expectations for U.S. Federal Reserve policy. However, it is important to keep in mind that if yields rise, they are rising for a positive reason such as: stronger economic growth. In this environment, we urge investors to remain focused on the importance of bonds in providing portfolio diversification, liquidity and the means to fund near-term goals. Bob Browne Chief Investment Officer Northern Trust

3 FIXED INCOME INDEX FUNDS TABLE OF CONTENTS 2 PORTFOLIO MANAGEMENT COMMENTARY 4 STATEMENTS OF ASSETS AND LIABILITIES 5 STATEMENTS OF OPERATIONS 6 STATEMENTS OF CHANGES IN NET ASSETS 7 FINANCIAL HIGHLIGHTS 9 SCHEDULES OF INVESTMENTS 9 BOND INDEX FUND Ticker Symbol: NOBOX 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 the Northern Funds 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 Northern 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 forwardlooking 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. 80 U.S. TREASURY INDEX FUND Ticker Symbol: BTIAX 84 NOTES TO THE FINANCIAL STATEMENTS 90 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 91 TAX INFORMATION 92 FUND EXPENSES 93 TRUSTEES AND OFFICERS 99 INVESTMENT CONSIDERATIONS 100 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 ANNUAL REPORT 1 FIXED INCOME INDEX FUNDS

4 FIXED INCOME INDEX FUNDS BOND INDEX FUND (UNAUDITED) PORTFOLIO MANAGEMENT COMMENTARY During the 12-month reporting period ended March 31, 2017, financial markets were heavily influenced by political events ranging from the United Kingdom vote to leave the European Union ( Brexit ) to the U.S. presidential election. While the initial reaction to the June 23, 2016 Brexit was a sell-off in risk markets, sentiment rebounded by the end of June Equity markets to rally in the summer, and hit highs in August Markets then traded off until the November U.S. presidential election, when the surprise result caused a rally in risk assets as investors anticipated that business-friendly policies would lead to stronger economic growth. The stock market to rally, and corporate credit spreads tightened into March of However, the failure of the Republicans to agree on a health care bill raised broader concerns that U.S. President Trump s economic agenda could be more difficult to implement than previously believed, leading risk markets to soften as March 2017 progressed. The U.S. Federal Reserve raised its benchmark overnight lending rate in December of 2016 and March of 2017, and signaled the likelihood of two more increases by the end of calendar year For the 12-month reporting period, yields rose along the U.S. Treasury curve, and the curve steepened between two and 10 years while flattening between 10 and 30 years. The yield on the two-year Treasury rose from 0.73% to 1.27%, while the 10-year yield rose from 1.21% to 1.93%, and the 30-year rose from 1.78% to 2.40%. On a duration-adjusted basis, the Bloomberg Barclays U.S. Aggregate Bond Index return of 0.44% for the 12-month reporting period outperformed U.S. Treasury securities, with credit providing the strongest performance within the Index, followed by commercial mortgage-backed securities. For the 12-month period ended March 31, 2017, the Fund returned 0.14% versus the 0.44% return of the Fund s benchmark Bloomberg Barclays U.S. Aggregate Bond Index, with the difference in returns driven largely by the deduction of fees and transaction costs. We will continue to invest in a sample of securities that are representative of the Index in an effort to provide returns that closely approximate those of the Index. INVESTMENT PERFORMANCE PORTFOLIO MANAGERS AVERAGE ANNUAL RETURNS for periods ended March 31, 2017 TOTAL RETURN ONE YEAR FIVE YEAR TEN YEAR SINCE INCEPTION 02/27/07 BOND INDEX FUND 0.14% 2.17% 4.05% 4.00% BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX Fund Performance reflects contractual expense reimbursements in effect. In their absence, performance would be reduced. Performance quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown here. Performance data current to the most recent month-end is available at northerntrust.com/funds. LOUIS D ARIENZO With Northern Trust since 2003 BRANDON P. FERGUSON With Northern Trust since 2007 GROWTH OF A $10,000 INVESTMENT $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 2/27/07 $14,851 $15,173 3/31/17 The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Unlike the Index, the Fund s total returns are reduced by operating expenses, such as transaction costs and management fees. A direct investment in an Index is not possible. BOND INDEX FUND BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), assetbacked securities, and commercial mortgage-backed securities. Information about Investment Considerations can be found on page 99. FIXED INCOME INDEX FUNDS 2 NORTHERN FUNDS ANNUAL REPORT

5 FIXED INCOME INDEX FUNDS U.S. TREASURY INDEX FUND* (UNAUDITED) PORTFOLIO MANAGEMENT COMMENTARY During the 12-month reporting period ended March 31, 2017, the Federal Reserve raised the range of its target federal funds rate by 25 basis points when it met in December 2016, and again in March The Federal Open Market Committee ( FOMC ) also signaled its intention to begin curtailing its holdings of U.S. mortgage-backed securities and U.S. Treasuries in the second half of calendar year The FOMC s median projected federal funds rate for the end of 2017 rose to 1.375%, indicating a total of three rate hikes during Its projection is for 2.125% at the end of 2018, reflecting its expectations for three more rate hikes next year. U.S. nonfarm payrolls surged to start 2017, averaging 185,000 jobs per month in the first quarter of 2017, up from 163,000 jobs per month in the fourth quarter of Unemployment fell to 4.5% to end the first quarter of Fourth-quarter gross domestic product slowed to 2.0% from the third quarter s robust 3.5%, mimicking the trend of the last two quarters of United Kingdom voters elected to invoke Article 50 of the European Union ( EU ) treaty, effectively removing the country from the European Union and sending pound sterling tumbling against major currencies. The Bank of Japan sought to target yield levels in its Yield Curve Control objective, while the European Central Bank kept rates in negative territory but declined to extend its asset purchase program. The U.S. Treasury yield curve steepened during the 12-month period ended March 31, 2017, as the yield of the benchmark two-year Treasury rose 54 basis points, from 0.72% to 1.26%, while 10-year yields rose 61 basis points, from 1.77% to 2.38%. Yields of five-year Treasuries rose 71 basis points, from 1.21% to 1.92%, and 30-year yields rose 40 basis points, from 2.61% to 3.01%. The Bloomberg Barclays U.S. Treasury Index returned -1.44% during the 12-month period ended March 31, As designed, the Fund performed in line with the Index, with a return of -1.63%. INVESTMENT PERFORMANCE PORTFOLIO MANAGERS AVERAGE ANNUAL RETURNS for periods ended March 31, 2017 TOTAL RETURN ONE YEAR FIVE YEAR TEN YEAR SINCE INCEPTION 01/11/93 U.S. TREASURY INDEX FUND 1.63% 1.42% 3.73% 5.05% BLOOMBERG BARCLAYS U.S. TREASURY INDEX Fund Performance reflects contractual expense reimbursements in effect. In their absence, performance would be reduced. Performance quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown here. Performance data current to the most recent month-end is available at northerntrust.com/funds. MICHAEL R. CHICO With Northern Trust since 2005 BRANDON P. FERGUSON With Northern Trust since 2007 * The Fund commenced operations on January 11, 1993 as a separate portfolio of Northern Institutional Funds (the Predecessor Fund ). On November 16, 2012, the Predecessor Fund was reorganized into the Fund, which was a new portfolio of Northern Funds with the same investment objective, strategies and policies as the Predecessor Fund. Performance information for the period prior to November 17, 2012, represents the performance of Class A shares of the Predecessor Fund. GROWTH OF A $10,000 INVESTMENT $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 1/11/93 $32,945 $34,491 3/31/17 The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Unlike the Index, the Fund s total returns are reduced by operating expenses, such as transaction costs and management fees. A direct investment in an Index is not possible. U.S. TREASURY INDEX FUND BLOOMBERG BARCLAYS U.S. TREASURY INDEX The Bloomberg Barclays U.S. Treasury Index is an unmanaged index of prices of U.S. Treasury bonds with maturities of one to thirty years. Information about Investment Considerations can be found on page 99. NORTHERN FUNDS ANNUAL REPORT 3 FIXED INCOME INDEX FUNDS

6 FIXED INCOME INDEX FUNDS STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2017 Amounts in thousands, except per share data BOND INDEX FUND U.S. TREASURY INDEX FUND ASSETS: Investments, at value $2,457,487 $107,779 Investments in affiliates, at value 62, Interest income receivable 14, Dividend income receivable 23 Receivable for securities sold 24,923 2,114 Receivable for fund shares sold Receivable from investment adviser 13 4 Prepaid and other assets 2 1 Total Assets 2,560, ,316 LIABILITIES: Payable for securities purchased 3,483 2,647 Payable for when-issued securities 55,349 Payable for fund shares redeemed 3,821 Distributions payable to shareholders 1, Payable to affiliates: Management fees 63 3 Custody fees 8 3 Shareholder servicing fees 37 Transfer agent fees 7 Trustee fees 9 4 Accrued other liabilities Total Liabilities 64,290 2,717 Net Assets $2,496,618 $108,599 ANALYSIS OF NET ASSETS: Capital stock $2,477,179 $109,590 Accumulated undistributed net investment loss (68) (5) Accumulated undistributed net realized loss (4,867) (431) Net unrealized appreciation (depreciation) 24,374 (555) Net Assets $2,496,618 $108,599 Shares Outstanding ($.0001 par value, unlimited authorization) 238,358 5,087 Net Asset Value, Redemption and Offering Price Per Share $10.47 $21.35 Investments, at cost $2,433,113 $108,334 Investments in affiliates, at cost 62, FIXED INCOME INDEX FUNDS 4 NORTHERN FUNDS ANNUAL REPORT

7 FIXED INCOME INDEX FUNDS STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 2017 Amounts in thousands BOND INDEX FUND U.S. TREASURY INDEX FUND INVESTMENT INCOME: Interest income $68,631 $2,030 Dividend income from investments in affiliates Total Investment Income 68,828 2,032 EXPENSES: Management fees 3, Custody fees Transfer agent fees Blue sky fees Printing fees Audit fees Legal fees Shareholder servicing fees 190 Trustee fees Other Total Expenses 4, Less expenses reimbursed by investment adviser (537) (109) Net Expenses 4, Net Investment Income 64,667 1,839 NET REALIZED AND UNREALIZED GAINS (LOSSES): Net realized gains (losses) on: Investments 2,716 (21) Net change in unrealized appreciation (depreciation) on: Investments (68,979) (3,896) Net Losses (66,263) (3,917) Net Decrease in Net Assets Resulting from Operations $(1,596) $(2,078) NORTHERN FUNDS ANNUAL REPORT 5 FIXED INCOME INDEX FUNDS

8 FIXED INCOME INDEX FUNDS STATEMENTS OF CHANGES IN NET ASSETS FOR THE FISCAL YEARS ENDED MARCH 31, BOND INDEX FUND U.S. TREASURY INDEX FUND Amounts in thousands OPERATIONS: Net investment income $64,667 $63,653 $1,839 $1,465 Net realized gains (losses) 2,716 9,513 (21) 645 Net change in unrealized appreciation (depreciation) (68,979) (24,780) (3,896) 493 Net Increase (Decrease) in Net Assets Resulting from Operations (1,596) 48,386 (2,078) 2,603 CAPITAL SHARE TRANSACTIONS: Net increase (decrease) in net assets resulting from capital share transactions (58,214) (72,988) (10,540) 32,038 Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions (58,214) (72,988) (10,540) 32,038 DISTRIBUTIONS PAID: From net investment income (70,351) (68,203) (1,839) (1,467) From net realized gains (3,236) (5,855) (460) (912) Total Distributions Paid (73,587) (74,058) (2,299) (2,379) Total Increase (Decrease) in Net Assets (133,397) (98,660) (14,917) 32,262 NET ASSETS: Beginning of year 2,630,015 2,728, ,516 91,254 End of year $2,496,618 $2,630,015 $108,599 $123,516 Accumulated Undistributed Net Investment Loss $(68) $(64) $(5) $(5) FIXED INCOME INDEX FUNDS 6 NORTHERN FUNDS ANNUAL REPORT

9 FIXED INCOME INDEX FUNDS FINANCIAL HIGHLIGHTS FOR THE FISCAL YEARS ENDED MARCH 31, BOND INDEX FUND Selected per share data Net Asset Value, Beginning of Year $10.74 $10.84 $10.54 $10.87 $10.86 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.24) (0.06) 0.32 (0.29) 0.12 Total from Investment Operations (0.04) 0.39 LESS DISTRIBUTIONS PAID: From net investment income (0.27) (0.27) (0.28) (0.28) (0.29) From net realized gains (0.01) (0.02) (0.01) (0.01) (0.09) Total Distributions Paid (0.28) (0.29) (0.29) (0.29) (0.38) Net Asset Value, End of Year $10.47 $10.74 $10.84 $10.54 $10.87 Total Return (1) 0.14% 1.90% 5.64% (0.31)% 3.62% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of year $2,496,618 $2,630,015 $2,728,675 $2,248,542 $2,636,178 Ratio to average net assets of: Expenses, net of reimbursements and credits (2) 0.15% 0.15% 0.15% 0.15% 0.14% Expenses, before reimbursements and credits 0.17% 0.17% 0.23% 0.44% 0.44% Net investment income, net of reimbursements and credits (2) 2.35% 2.40% 2.44% 2.43% 2.45% Net investment income, before reimbursements and credits 2.33% 2.38% 2.36% 2.14% 2.15% Portfolio Turnover Rate 65.28% 88.99% 81.30% 88.79% % (1) (2) Assumes investment at net asset value at the beginning of the year, reinvestment of all dividends and distributions, and a complete redemption of the investment at net asset value at the end of the 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 $126,000, $87,000, $26,000, $101,000 and $296,000, which represent less than 0.01, less than 0.005, less than 0.005, less than and 0.01 percent of average net assets for the fiscal years ended March 31, 2017, 2016, 2015, 2014 and 2013, 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 ANNUAL REPORT 7 FIXED INCOME INDEX FUNDS

10 FIXED INCOME INDEX FUNDS FINANCIAL HIGHLIGHTS U.S. TREASURY INDEX FUND Selected per share data FISCAL YEAR ENDED MAR 31, 2017 FISCAL YEAR ENDED MAR 31, 2016 FISCAL YEAR ENDED MAR 31, 2015 FISCAL YEAR ENDED MAR 31, 2014 SHARES/CLASS A SHARES FOUR MONTHS ENDED MAR 31, 2013 FISCAL YEAR ENDED NOV 30, 2012 Net Asset Value, Beginning of Period $22.13 $22.17 $21.43 $22.25 $23.29 $23.38 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income Net realized and unrealized gains (losses) (0.70) (0.59) (0.24) 0.39 Total from Investment Operations (0.36) (0.33) (0.15) 0.72 LESS DISTRIBUTIONS PAID: From net investment income (0.34) (0.32) (0.29) (0.26) (0.09) (0.34) From net realized gains (0.08) (0.20) (0.07) (0.23) (0.80) (0.47) Total Distributions Paid (0.42) (0.52) (0.36) (0.49) (0.89) (0.81) Net Asset Value, End of Period $21.35 $22.13 $22.17 $21.43 $22.25 $23.29 Total Return (1) (1.63)% 2.25% 5.20% (1.44)% (0.70)% 3.17% SUPPLEMENTAL DATA AND RATIOS: Net assets, in thousands, end of period $108,599 $123,516 $91,254 $114,262 $132,160 $139,579 Ratio to average net assets of: (2) Expenses, net of reimbursements and credits 0.16% (3) 0.16% (3) 0.16% 0.15% (3) 0.15% (3) 0.26% (3) Expenses, before reimbursements and credits 0.25% 0.26% 0.40% 0.68% 0.68% 0.52% Net investment income, net of reimbursements and credits 1.53% (3) 1.47% (3) 1.34% 1.20% (3) 1.20% (3) 1.43% (3) Net investment income, before reimbursements and credits 1.44% 1.37% 1.10% 0.67% 0.67% 1.17% Portfolio Turnover Rate 38.93% 68.57% 50.58% 69.65% 21.88% 74.49% (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 $1,000, which represents less than 0.01 percent of average net assets for the fiscal year ended March 31, 2017, less than $1,000, less than $1,000, $1,000 and $1,000, which represent less than percent of average net assets for the fiscal years ended March 31, 2016, 2014, four months ended March 31, 2013 and fiscal year ended November 30, 2012, 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. FIXED INCOME INDEX FUNDS 8 NORTHERN FUNDS ANNUAL REPORT

11 SCHEDULE OF INVESTMENTS BOND INDEX FUND MARCH 31, 2017 ASSET-BACKED SECURITIES 1.6% Automobile 0.2% AmeriCredit Automobile Receivables Trust, Series , Class C 2.58%, 9/8/20 $100 $101 AmeriCredit Automobile Receivables Trust, Series , Class D 3.13%, 10/8/ Americredit Automobile Receivables Trust, Series , Class D 3.07%, 11/9/ AmeriCredit Automobile Receivables Trust, Series , Class C 2.40%, 1/8/ Americredit Automobile Receivables Trust, Series , Class A3 1.53%, 7/8/ Americredit Automobile Receivables Trust, Series , Class B 1.83%, 12/8/ Americredit Automobile Receivables Trust, Series , Class C 2.41%, 7/8/ Americredit Automobile Receivables Trust, Series , Class D 2.74%, 12/8/ BMW Vehicle Owner Trust, Series 2016-A, Class A3 1.16%, 11/25/ CarMax Auto Owner Trust, Series , Class A3 1.52%, 2/16/ CarMax Auto Owner Trust, Series , Class A3 1.39%, 5/17/ CarMax Auto Owner Trust, Series , Class A3 1.40%, 8/15/ Ford Credit Auto Owner Trust, Series 2016-B, Class A3 1.33%, 10/15/ Ford Credit Auto Owner Trust, Series 2016-B, Class A4 1.52%, 8/15/ Ford Credit Auto Owner Trust, Series 2016-B, Class B 1.85%, 9/15/ ASSET-BACKED SECURITIES - 1.6% Automobile 0.2% Ford Credit Auto Owner Trust, Series 2016-C, Class A3 1.22%, 3/15/21 $100 $99 Ford Credit Auto Owner Trust, Series 2017-A, Class A3 1.67%, 6/15/ Ford Credit Auto Owner Trust, Series 2017-A, Class B 2.24%, 6/15/ Honda Auto Receivables Owner Trust, Series , Class A3 1.23%, 9/23/ Honda Auto Receivables Owner Trust, Series , Class A3 1.39%, 4/15/ Honda Auto Receivables Owner Trust, Series , Class A4 1.62%, 8/15/ Honda Auto Receivables Owner Trust, Series , Class A3 1.16%, 5/18/ Huntington Auto Trust, Series , Class A3 1.59%, 11/16/ Hyundai Auto Receivables Trust, Series 2016-A, Class A3 1.56%, 9/15/ Hyundai Auto Receivables Trust, Series 2016-A, Class A4 1.73%, 5/16/ Nissan Auto Lease Trust, Series 2016-B, Class A3 1.50%, 7/15/ Nissan Auto Receivables Owner Trust, Series 2014-B, Class A4 1.66%, 3/15/ Nissan Auto Receivables Owner Trust, Series 2016-B, Class A4 1.54%, 10/17/ Santander Drive Auto Receivables Trust, Series , Class D 2.76%, 2/18/ Santander Drive Auto Receivables Trust, Series , Class D 2.65%, 8/17/ NORTHERN FUNDS ANNUAL REPORT 9 FIXED INCOME INDEX FUNDS

12 SCHEDULE OF INVESTMENTS BOND INDEX FUND ASSET-BACKED SECURITIES - 1.6% Automobile 0.2% Santander Drive Auto Receivables Trust, Series , Class D 3.10%, 11/16/20 $50 $51 Santander Drive Auto Receivables Trust, Series , Class C 2.97%, 3/15/ Santander Drive Auto Receivables Trust, Series , Class B 1.89%, 6/15/ Santander Drive Auto Receivables Trust, Series , Class C 2.46%, 3/15/ Santander Drive Auto Receivables Trust, Series , Class D 2.80%, 8/15/ Toyota Auto Receivables Owner Trust, Series 2016-A, Class A3 1.25%, 3/16/ Toyota Auto Receivables Owner Trust, Series 2016-A, Class A4 1.47%, 9/15/ Toyota Auto Receivables Owner Trust, Series 2016-D, Class A3 1.23%, 10/15/ World Omni Auto Receivables Trust, Series 2015-B, Class A3 1.49%, 12/15/ World Omni Auto Receivables Trust, Series 2016-A, Class A4 1.95%, 5/16/ ,007 Commercial Mortgage-Backed Securities 1.1% Banc of America Commercial Mortgage Trust, Series 2016-UB10, Class A4 3.17%, 7/15/ CFCRE Commercial Mortgage Trust, Series 2016-C3, Class A3 3.87%, 1/10/ CFCRE Commercial Mortgage Trust, Series 2016-C4, Class A4 3.28%, 5/10/ Citigroup Commercial Mortgage Trust, Series 2012-GC8, Class A4 3.02%, 9/10/ ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% Citigroup Commercial Mortgage Trust, Series 2013-GC15, Class A4 4.37%, 9/10/46 (1) $350 $379 Citigroup Commercial Mortgage Trust, Series 2013-GC15, Class AS 4.65%, 9/10/46 (1) Citigroup Commercial Mortgage Trust, Series 2014-GC25, Class A4 3.64%, 10/10/ Citigroup Commercial Mortgage Trust, Series2015-GC27,ClassA5 3.14%, 2/10/ Citigroup Commercial Mortgage Trust, Series 2015-P1, Class A5 3.72%, 9/15/ Citigroup Commercial Mortgage Trust, Series 2016-C1, Class A4 3.21%, 5/10/ Citigroup Commercial Mortgage Trust, Series2016-C3,ClassA4 3.15%, 11/15/ Citigroup Commercial Mortgage Trust, Series 2016-GC36, Class A5 3.62%, 2/10/ Citigroup Commercial Mortgage Trust, Series 2016-GC37, Class A4 3.31%, 4/10/ Citigroup Commercial Mortgage Trust, Series 2016-P3, Class A4 3.33%, 4/15/ Commercial Mortgage Pass Through Certificates, Series 2012-CR3, Class A3 2.82%, 10/15/ Commercial Mortgage Trust, Series 2012-CR2, Class A4 3.15%, 8/15/ Commercial Mortgage Trust, Series 2012-CR4, Class A3 2.85%, 10/15/ Commercial Mortgage Trust, Series 2012-CR5, Class A4 2.77%, 12/10/ Commercial Mortgage Trust, Series 2012-LC4, Class A4 3.29%, 12/10/ FIXED INCOME INDEX FUNDS 10 NORTHERN FUNDS ANNUAL REPORT

13 MARCH 31, 2017 ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% Commercial Mortgage Trust, Series 2013-CR10, Class A4 4.21%, 8/10/46 (1) $100 $108 Commercial Mortgage Trust, Series 2013-CR12, Class A4 4.05%, 10/10/ Commercial Mortgage Trust, Series 2013-CR9, Class A4 4.23%, 7/10/45 (1) Commercial Mortgage Trust, Series 2013-LC6, Class A4 2.94%, 1/10/ Commercial Mortgage Trust, Series 2014-CR19, Class A5 3.80%, 8/10/ Commercial Mortgage Trust, Series 2014-UBS5, Class A4 3.84%, 9/10/ Commercial Mortgage Trust, Series 2014-UBS6, Class A5 3.64%, 12/10/ Commercial Mortgage Trust, Series 2015-CR24, Class A5 3.70%, 8/10/ Commercial Mortgage Trust, Series 2015-DC1, Class A2 2.87%, 2/10/ Commercial Mortgage Trust, Series 2015-DC1, Class A5 3.35%, 2/10/ Commercial Mortgage Trust, Series 2015-LC19, Class A4 3.18%, 2/10/ Commercial Mortgage Trust, Series 2015-PC1, Class A5 3.90%, 7/10/ CSAIL Commercial Mortgage Trust, Series 2015-C1, Class A4 3.51%, 4/15/ CSAIL Commercial Mortgage Trust, Series 2015-C3, Class A4 3.72%, 8/15/ CSAIL Commercial Mortgage Trust, Series 2016-C6, Class A5 3.09%, 1/15/ ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% CSAIL Commercial Mortgage Trust, Series 2016-C7, Class A5 3.50%, 11/15/49 $200 $202 GS Mortgage Securities Corp II, Series 2015-GC30, Class A4 3.38%, 5/10/ GS Mortgage Securities Corp. II, Series 2013-GC10, Class A5 2.94%, 2/10/ GS Mortgage Securities Trust, Series 2011-GC5, Class A4 3.71%, 8/10/ GS Mortgage Securities Trust, Series 2012-GC6, Class A3 3.48%, 1/10/ GS Mortgage Securities Trust, Series 2012-GCJ9, Class A3 2.77%, 11/10/ GS Mortgage Securities Trust, Series 2013-GC12, Class A4 3.14%, 6/10/ GS Mortgage Securities Trust, Series 2013-GC13, Class A5 4.03%, 7/10/46 (1) GS Mortgage Securities Trust, Series 2013-GC14, Class A5 4.24%, 8/10/ GS Mortgage Securities Trust, Series 2014-GC18, Class A4 4.07%, 1/10/ GS Mortgage Securities Trust, Series 2014-GC20, Class A5 4.00%, 4/10/ GS Mortgage Securities Trust, Series 2014-GC24, Class A5 3.93%, 9/10/ GS Mortgage Securities Trust, Series 2014-GC26, Class A5 3.63%, 11/10/ GS Mortgage Securities Trust, Series 2015-GC28, Class A2 2.90%, 2/10/ GS Mortgage Securities Trust, Series 2016-GS2, Class A4 3.05%, 5/10/ NORTHERN FUNDS ANNUAL REPORT 11 FIXED INCOME INDEX FUNDS

14 SCHEDULE OF INVESTMENTS BOND INDEX FUND ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% GS Mortgage Securities Trust, Series 2016-GS3, Class A4 2.85%, 10/10/49 $200 $194 JP Morgan Chase Commercial Mortgage Securities Trust, Series 2011-C5, Class A3 4.17%, 8/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-C6, Class A3 3.51%, 5/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2012-CBX, Class A4 3.48%, 6/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2013-C10, Class A5 3.14%, 12/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2013-C10, Class AS 3.37%, 12/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2013-C13, Class A4 3.99%, 1/15/46 (1) JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C19, Class A2 3.05%, 4/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C19, Class A4 4.00%, 4/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C20, Class A5 3.80%, 7/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C22, Class A4 3.80%, 9/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C24, Class A2 2.94%, 11/15/ ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C24, Class A5 3.64%, 11/15/47 $200 $207 JP Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C25, Class A5 3.67%, 11/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2015-C30, Class A5 3.82%, 7/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2016-JP3, Class A5 2.87%, 8/15/ JP Morgan Chase Commercial Mortgage Securities Trust, Series 2016-JP3, Class AS 3.14%, 8/15/ JPMDB Commercial Mortgage Securities Trust, Series 2016-C2, Class A2 2.66%, 6/15/ JPMDB Commercial Mortgage Securities Trust, Series 2016-C2, Class A4 3.14%, 6/15/ JPMDB Commercial Mortgage Securities Trust, Series 2016-C4, Class A3 3.14%, 12/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C11, Class A4 4.17%, 8/15/46 (1) Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C7, Class A4 2.92%, 2/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C9, Class A4 3.10%, 5/15/ FIXED INCOME INDEX FUNDS 12 NORTHERN FUNDS ANNUAL REPORT

15 MARCH 31, 2017 ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, Class A2 2.92%, 2/15/47 $200 $203 Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, Class A3 3.67%, 2/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, Class A5 4.06%, 2/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C17, Class A5 3.74%, 8/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C18, Class A2 3.19%, 10/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C20, Class A2 2.79%, 2/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2015-C26, Class A5 3.53%, 10/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2016-C29, Class A4 3.33%, 5/15/ Morgan Stanley Bank of America Merrill Lynch Trust, Series 2016-C30, Class A5 2.86%, 9/15/ Morgan Stanley Capital I Trust, Series 2012-C4, Class A4 3.24%, 3/15/ UBS Commercial Mortgage Trust, Series 2012-C1, Class A3 3.40%, 5/10/ UBS-Barclays Commercial Mortgage Trust, Series 2012-C3, Class A4 3.09%, 8/10/ ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% UBS-Barclays Commercial Mortgage Trust, Series 2012-C4, Class A5 2.85%, 12/10/45 $100 $101 UBS-Barclays Commercial Mortgage Trust, Series 2013-C5, Class A4 3.18%, 3/10/ UBS-Barclays Commercial Mortgage Trust, Series 2013-C6, Class A4 3.24%, 4/10/ UBS-Citigroup Commercial Mortgage Trust, Series 2011-C1, Class A3 3.60%, 1/10/ Wells Fargo Commercial Mortgage Trust, Series 2012-LC5, Class A3 2.92%, 10/15/ Wells Fargo Commercial Mortgage Trust, Series 2013-LC12, Class A4 4.22%, 7/15/46 (1) Wells Fargo Commercial Mortgage Trust, Series 2015-C26, Class A4 3.17%, 2/15/ Wells Fargo Commercial Mortgage Trust, Series 2015-C30, Class A4 3.66%, 9/15/ Wells Fargo Commercial Mortgage Trust, Series 2015-LC20, Class A5 3.18%, 4/15/ Wells Fargo Commercial Mortgage Trust, Series 2015-NXS1, Class A2 2.63%, 5/15/ Wells Fargo Commercial Mortgage Trust, Series 2015-NXS2, Class A5 3.77%, 7/15/58 (1) Wells Fargo Commercial Mortgage Trust, Series 2015-NXS4, Class A4 3.72%, 12/15/ Wells Fargo Commercial Mortgage Trust, Series 2016-C32, Class A4 3.56%, 1/15/ Wells Fargo Commercial Mortgage Trust, Series 2016-C33, Class A4 3.43%, 3/15/ Wells Fargo Commercial Mortgage Trust, Series 2016-C35, Class A4 2.93%, 7/15/ NORTHERN FUNDS ANNUAL REPORT 13 FIXED INCOME INDEX FUNDS

16 SCHEDULE OF INVESTMENTS BOND INDEX FUND ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% Wells Fargo Commercial Mortgage Trust, Series 2016-C36, Class A4 3.07%, 11/15/59 $250 $245 Wells Fargo Commercial Mortgage Trust, Series 2016-LC24, Class A4 2.94%, 10/15/ Wells Fargo Commercial Mortgage Trust, Series 2016-NXS6, Class A4 2.92%, 11/15/ WFRBS Commercial Mortgage Trust, Series 2011-C5, Class A4 3.67%, 11/15/ WFRBS Commercial Mortgage Trust, Series 2012-C6, Class A4 3.44%, 4/15/ WFRBS Commercial Mortgage Trust, Series 2012-C7, Class A2 3.43%, 6/15/ WFRBS Commercial Mortgage Trust, Series 2013-C12, Class A4 3.20%, 3/15/ WFRBS Commercial Mortgage Trust, Series 2013-C12, Class AS 3.56%, 3/15/ WFRBS Commercial Mortgage Trust, Series 2013-C13, Class A4 3.00%, 5/15/ WFRBS Commercial Mortgage Trust, Series 2013-C14, Class A5 3.34%, 6/15/ WFRBS Commercial Mortgage Trust, Series 2013-C16, Class A2 3.22%, 9/15/ WFRBS Commercial Mortgage Trust, Series 2013-C16, Class A5 4.42%, 9/15/ WFRBS Commercial Mortgage Trust, Series 2014-C22, Class A5 3.75%, 9/15/ ASSET-BACKED SECURITIES - 1.6% Commercial Mortgage-Backed Securities 1.1% WFRBS Commercial Mortgage Trust, Series 2014-C25, Class A5 3.63%, 11/15/47 $250 $257 WFRBS Commercial Mortgage Trust, Series2014-LC14,ClassA5 4.05%, 3/15/ ,579 Credit Card 0.3% Barclays Dryrock Issuance Trust, Series , Class A 2.41%, 7/15/ Barclays Dryrock Issuance Trust, Series , Class A 1.56%, 3/15/ Capital One Multi-Asset Execution Trust, Series 2015-A5, Class A5 1.60%, 5/17/ Capital One Multi-Asset Execution Trust, Series 2016-A3, Class A3 1.34%, 4/15/ Capital One Multi-Asset Execution Trust, Series 2016-A4, Class A4 1.33%, 6/15/ Capital One Multi-Asset Execution Trust, Series 2016-A5, Class A5 1.66%, 6/17/ Chase Issuance Trust, Series 2012-A4, Class A4 1.58%, 8/16/ Chase Issuance Trust, Series 2012-A7, Class A7 2.16%, 9/16/ Chase Issuance Trust, Series 2014-A2, Class A2 2.77%, 3/15/ Chase Issuance Trust, Series 2015-A4, Class A4 1.84%, 4/15/ Chase Issuance Trust, Series 2016-A2, Class A 1.37%, 6/15/ Chase Issuance Trust, Series 2016-A4, Class A4 1.49%, 7/15/ FIXED INCOME INDEX FUNDS 14 NORTHERN FUNDS ANNUAL REPORT

17 MARCH 31, 2017 ASSET-BACKED SECURITIES - 1.6% Credit Card 0.3% Chase Issuance Trust, Series 2016-A5, Class A5 1.27%, 7/15/21 $250 $247 Citibank Credit Card Issuance Trust, Series 2007-A3, Class A3 6.15%, 6/15/ Citibank Credit Card Issuance Trust, Series 2014-A1, Class A1 2.88%, 1/23/ Citibank Credit Card Issuance Trust, Series 2014-A5, Class A5 2.68%, 6/7/ Citibank Credit Card Issuance Trust, Series 2014-A6, Class A6 2.15%, 7/15/ Citibank Credit Card Issuance Trust, Series 2016-A1, Class A1 1.75%, 11/19/ Citibank Credit Card Issuance Trust, Series 2017-A2, Class A2 1.74%, 1/19/ Discover Card Execution Note Trust, Series 2012-A6, Class A6 1.67%, 1/18/ Discover Card Execution Note Trust, Series 2014-A4, Class A4 2.12%, 12/15/ Discover Card Execution Note Trust, Series 2015-A2, Class A 1.90%, 10/17/ Discover Card Execution Note Trust, Series 2015-A3, Class A 1.45%, 3/15/ Discover Card Execution Note Trust, Series 2015-A4, Class A4 2.19%, 4/17/ Discover Card Execution Note Trust, Series 2016-A1, Class A1 1.64%, 7/15/ Discover Card Execution Note Trust, Series 2016-A4, Class A4 1.39%, 3/15/ Discover Card Execution Note Trust, Series 2017-A2, Class A2 2.39%, 7/15/ ASSET-BACKED SECURITIES - 1.6% Credit Card 0.3% Synchrony Credit Card Master Note Trust, Series , Class A 1.76%, 9/15/22 $100 $100 Synchrony Credit Card Master Note Trust, Series , Class A 2.37%, 3/15/ Synchrony Credit Card Master Note Trust, Series , Class A 2.04%, 3/15/ Synchrony Credit Card Master Note Trust, Series , Class A 2.21%, 5/15/ World Financial Network Credit Card Master Trust, Series 2015-B, Class A 2.55%, 6/17/ ,548 Other 0.0% AEP Texas Central Transition Funding lll LLC, Series , Class A3 2.84%, 3/1/ CenterPoint Energy Restoration Bond Co. LLC, Series , Class A3 4.24%, 8/15/ CenterPoint Energy Transition Bond Co. IV LLC, Series , Class A3 3.03%, 10/15/ Entergy Texas Restoration Funding LLC, Series 2009-A, Class A3 4.38%, 11/1/ Total Asset-Backed Securities (Cost $38,583) 38,600 CORPORATE BONDS 24.5% Advertising & Marketing 0.0% Interpublic Group of (The) Cos., Inc., 4.20%, 4/15/ Omnicom Group, Inc., 6.25%, 7/15/ %, 5/1/ %, 4/15/ NORTHERN FUNDS ANNUAL REPORT 15 FIXED INCOME INDEX FUNDS

18 SCHEDULE OF INVESTMENTS BOND INDEX FUND Aerospace & Defense 0.5% Boeing (The) Co., 0.95%, 5/15/18 $200 $ %, 8/15/ %, 10/30/ %, 2/15/ %, 3/1/ %, 2/15/ %, 2/15/ %, 3/1/ General Dynamics Corp., 3.88%, 7/15/ %, 11/15/ %, 8/15/ %, 11/15/ Harris Corp., 4.40%, 12/15/ ,010 L3 Technologies, Inc., 5.20%, 10/15/ %, 2/15/ Lockheed Martin Corp., 4.25%, 11/15/ %, 11/23/ %, 1/15/26 1,100 1, %, 3/1/ %, 12/15/ Northrop Grumman Corp., 1.75%, 6/1/ %, 8/1/ %, 11/15/ %, 6/1/ Precision Castparts Corp., 2.50%, 1/15/ %, 1/15/ %, 6/15/ Raytheon Co., 4.40%, 2/15/ %, 12/15/22 1,150 1, %, 12/15/ United Technologies Corp., 7.50%, 9/15/ %, 6/1/ %, 7/15/ Aerospace & Defense 0.5% 5.70%, 4/15/40 $500 $ %, 6/1/ %, 11/1/ ,369 Airlines 0.0% Continental Airlines Pass Through Trust, Series , Class A, 7.25%, 11/10/ Southwest Airlines Co. Pass Through Trust, Series , 6.15%, 8/1/ Apparel & Textile Products 0.0% Cintas Corp. No 2, 2.90%, 4/1/ NIKE, Inc., 2.38%, 11/1/ %, 5/1/ %, 11/1/ VF Corp., 3.50%, 9/1/ %, 10/15/ %, 11/1/ ,146 Auto Parts Manufacturing 0.0% BorgWarner, Inc., 4.38%, 3/15/ Delphi Corp., 4.15%, 3/15/ Automobiles Manufacturing 0.8% American Honda Finance Corp., 1.60%, 7/13/ %, 10/10/ %, 8/15/ %, 3/13/ %, 7/12/ %, 9/9/ Daimler Finance North America LLC, 8.50%, 1/18/ Ford Motor Co., 7.45%, 7/16/ FIXED INCOME INDEX FUNDS 16 NORTHERN FUNDS ANNUAL REPORT

19 MARCH 31, 2017 Automobiles Manufacturing 0.8% 4.75%, 1/15/43 $500 $470 Ford Motor Credit Co. LLC, 2.88%, 10/1/ %, 5/3/ %, 8/12/ %, 11/4/ %, 3/27/ %, 8/4/ %, 1/15/21 1,200 1, %, 3/18/ %, 8/2/ %, 1/9/ %, 9/20/22 1,300 1, %, 5/4/23 1, General Motors Co., 3.50%, 10/2/18 3,000 3, %, 10/2/ %, 4/1/ General Motors Financial Co., Inc., 6.75%, 6/1/ %, 7/13/ %, 7/6/ %, 9/25/ %, 4/10/ %, 5/9/ %, 1/17/ Toyota Motor Credit Corp., 1.55%, 7/13/ %, 10/24/ %, 1/17/ %, 2/19/ %, 7/18/ %, 6/17/ %, 4/8/ %, 10/18/ ,947 Banks 0.9% Bank of America N.A., 6.00%, 10/15/ Bank One Corp., 7.75%, 7/15/ BB&T Corp., 2.05%, 6/19/ Banks 0.9% 2.25%, 2/1/19 $100 $ %, 1/15/ %, 4/1/ Branch Banking & Trust Co., 2.30%, 10/15/ %, 4/1/ %, 9/16/ %, 10/30/ Capital One N.A., 2.40%, 9/5/ %, 1/31/ Citizens Bank N.A., 2.50%, 3/14/ %, 5/13/ Comerica Bank, 2.50%, 6/2/ Discover Bank, 2.60%, 11/13/ %, 8/9/ Fifth Third Bancorp, 2.88%, 7/27/ %, 3/15/ %, 1/16/ %, 3/1/ Fifth Third Bank, 1.63%, 9/27/ %, 6/14/ %, 10/1/ HSBC Bank USA N.A., 4.88%, 8/24/ %, 1/15/ HSBC USA, Inc., 2.63%, 9/24/ %, 11/13/ %, 3/5/ %, 8/7/ %, 6/23/24 1,000 1,019 Huntington Bancshares, Inc., 3.15%, 3/14/ KeyBank N.A., 2.50%, 12/15/ %, 3/16/20 1,000 1, %, 6/1/ NORTHERN FUNDS ANNUAL REPORT 17 FIXED INCOME INDEX FUNDS

20 SCHEDULE OF INVESTMENTS BOND INDEX FUND Banks 0.9% KeyCorp, 2.30%, 12/13/18 $250 $ %, 3/24/ MUFG Americas Holdings Corp., 2.25%, 2/10/ %, 6/18/ MUFG Union Bank N.A., 2.63%, 9/26/ PNC Bank N.A., 1.85%, 7/20/ %, 7/29/ %, 6/1/ %, 11/1/ %, 1/30/ %, 7/25/ PNC Financial Services Group (The), Inc., 6.70%, 6/10/ %, 8/11/ %, 3/8/ %, 11/9/22 (2) SunTrust Bank, 2.25%, 1/31/ %, 5/1/ SunTrust Banks, Inc., 2.35%, 11/1/ %, 5/1/ US Bancorp, 1.95%, 11/15/ %, 5/24/ %, 3/15/ %, 7/15/22 1,200 1, %, 7/22/26 1, Wells Fargo Bank N.A., 5.85%, 2/1/ %, 1/15/ Wells Fargo Capital X, 5.95%, 12/15/ ,517 Biotechnology 0.5% Amgen, Inc., 5.70%, 2/1/ %, 5/22/ Biotechnology 0.5% 4.50%, 3/15/20 $425 $ %, 6/15/ %, 8/19/ %, 11/15/ %, 6/1/ %, 2/1/ %, 3/15/ , %, 11/15/ %, 6/15/ %, 5/15/ %, 5/1/ Baxalta, Inc., 2.88%, 6/23/ %, 6/23/ Biogen, Inc., 2.90%, 9/15/ %, 9/15/ %, 9/15/ Celgene Corp., 2.13%, 8/15/ %, 8/15/ %, 5/15/ %, 5/15/24 1,000 1, %, 8/15/ %, 8/15/ %, 8/15/ Gilead Sciences, Inc., 2.05%, 4/1/ %, 2/1/ %, 9/1/ %, 4/1/ %, 9/1/ %, 2/1/ %, 3/1/ %, 9/1/35 1,000 1, %, 12/1/ %, 2/1/ %, 3/1/46 1,015 1,035 12,351 FIXED INCOME INDEX FUNDS 18 NORTHERN FUNDS ANNUAL REPORT

21 MARCH 31, 2017 Cable & Satellite 0.5% Charter Communications Operating LLC/Charter Communications Operating Capital, 4.46%, 7/23/22 $2,025 $2, %, 7/23/25 1,285 1,358 Comcast Corp., 3.38%, 2/15/25 1,320 1, %, 8/15/25 1,000 1, %, 3/1/ %, 2/1/ %, 3/15/ %, 6/15/ %, 3/15/ %, 8/15/ %, 5/15/ %, 3/1/ %, 3/1/ Time Warner Cable LLC, 8.75%, 2/14/ %, 5/1/ %, 7/1/ %, 6/15/ Time Warner Entertainment Co. L.P., 8.38%, 7/15/ ,982 Chemicals 0.4% Air Products & Chemicals, Inc., 3.00%, 11/3/ %, 2/3/ Airgas, Inc., 2.90%, 11/15/ %, 7/15/ Dow Chemical (The) Co., 4.25%, 11/15/ %, 11/15/ %, 11/15/ %, 11/1/ %, 10/1/ %, 5/15/ %, 11/15/ %, 11/15/ E.I. du Pont de Nemours & Co., 4.63%, 1/15/ Chemicals 0.4% 2.80%, 2/15/23 $630 $ %, 1/15/ %, 12/15/ %, 2/15/ Eastman Chemical Co., 2.70%, 1/15/ %, 9/1/ %, 10/15/ Lubrizol (The) Corp., 6.50%, 10/1/ Monsanto Co., 5.13%, 4/15/ %, 7/15/ %, 8/15/ %, 7/15/ %, 4/15/ %, 7/15/ Mosaic (The) Co., 3.75%, 11/15/21 1,000 1, %, 11/15/ %, 11/15/ PPG Industries, Inc., 2.30%, 11/15/ Praxair, Inc., 1.25%, 11/7/ %, 8/15/ %, 3/15/ %, 2/15/ %, 8/15/ %, 2/21/ %, 11/7/ Sherwin-Williams (The) Co., 4.55%, 8/1/ Westlake Chemical Corp., 3.60%, 7/15/ ,055 Commercial Finance 0.2% Air Lease Corp., 3.38%, 1/15/ %, 2/1/ %, 9/15/ %, 9/15/ NORTHERN FUNDS ANNUAL REPORT 19 FIXED INCOME INDEX FUNDS

22 SCHEDULE OF INVESTMENTS BOND INDEX FUND Commercial Finance 0.2% GATX Corp., 2.38%, 7/30/18 $35 $ %, 3/15/ International Lease Finance Corp., 8.25%, 12/15/20 1,000 1,180 Private Export Funding Corp., 1.45%, 8/15/19 2,000 1,993 4,042 Communications Equipment 0.6% Apple, Inc., 2.10%, 5/6/ %, 2/9/ %, 2/23/ %, 5/3/ %, 2/9/24 1,665 1, %, 5/6/24 3,555 3, %, 2/9/ %, 2/23/26 1,030 1, %, 8/4/ %, 2/9/ %, 5/4/ %, 5/6/ %, 2/9/ Cisco Systems, Inc., 1.65%, 6/15/ %, 2/15/ %, 3/1/ %, 6/15/ %, 3/4/ %, 9/20/21 1,575 1, %, 9/20/ %, 2/15/ Juniper Networks, Inc., 4.60%, 3/15/ %, 3/15/ ,731 Construction Materials Manufacturing 0.0% Martin Marietta Materials, Inc., 6.60%, 4/15/ Construction Materials Manufacturing 0.0% Owens Corning, 4.20%, 12/15/22 $190 $ %, 8/15/ Consumer Finance 0.4% American Express Co., 2.65%, 12/2/ %, 12/5/ American Express Credit Corp., 1.80%, 7/31/ %, 10/30/ %, 5/26/ %, 5/5/21 1,180 1,169 Capital One Bank USA N.A., 2.25%, 2/13/ %, 6/5/ Capital One Financial Corp., 2.45%, 4/24/ %, 7/15/ %, 4/24/24 1,000 1,017 Discover Financial Services, 4.10%, 2/9/ Fidelity National Information Services, Inc., 2.00%, 4/15/ Fiserv, Inc., 4.63%, 10/1/ %, 10/1/ HSBC Finance Corp., 6.68%, 1/15/ Mastercard, Inc., 2.00%, 11/21/ Synchrony Financial, 2.70%, 2/3/ %, 8/4/26 1, Total System Services, Inc., 2.38%, 6/1/ Visa, Inc., 2.20%, 12/14/ %, 12/14/22 1,250 1,261 FIXED INCOME INDEX FUNDS 20 NORTHERN FUNDS ANNUAL REPORT