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U.S. Quality ESG

as of 12/31/17

Fund Commentary

The close of the fourth quarter brought many U.S. indices to all-time highs, with strong earnings, historically low unemployment, an accommodative Federal Reserve, and tax reform providing a welcome environment for equity investors. Belying this positive market backdrop were a slew of catastrophic natural disasters, such as the California wildfires and hurricane Harvey. The magnitude and frequency of these events suggest that climate change isn't coming, it's already here. Investors, be they conservationists or those simply focused on the bottom line, have begun taking matters into their own hands. With a seat at the table, their collective voices have been heard through proxy voting, as several major oil and gas companies announced their commitments to reporting on the effects of climate change related to their businesses.

The U.S. Quality ESG Fund officially launched investment operations on October 2, 2017 posting a since inception total return of 5.83%, compared with 6.15% for the Fund's benchmark, the Russell 1000® Index. The Fund's allocation to high-quality companies was a slight detractor from performance for the quarter, as these stocks lagged the market. The Fund's allocation to higher-rated ESG companies provided positive relative performance during this time, as these companies outperformed.

Both sustainably minded and total return focused investors continue to seek ways to incorporate an environmental, social and governance approach within their equity portfolios. While the motivations may differ, both seek the same end goal: sustainability. Investing in financially sound companies who manage their nonfinancial risks well is a trend we believe will continue unabated into the new year.

Not FDIC insured | May lose value | No bank guarantee

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Please carefully read the prospectus and summary prospectus and consider the investment objectives, risks, charges and expenses of Northern Funds before investing. Call 800-595-9111 to obtain a prospectus and summary prospectus, which contains this and other information about the funds.

©2018 Northern Funds | Northern Funds are distributed by Northern Funds Distributors, LLC, not affiliated with Northern Trust.