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Large Cap Value

as of 12/31/17

Fund Commentary

Stocks continued to climb during the period, with the Russell 1000® Index returning over 6% for the quarter, bringing the total return over the past twelve months to over 21%. The Federal Reserve increased the federal funds rate for the third time this year citing strong economic growth and a declining unemployment rate. Investor sentiment was further bolstered by the sweeping tax reform bill passed by Congress. The value factor turned the corner during the latter half of the quarter after underperforming for much of the year. High-quality stocks outpaced their peers in this environment while low-beta stocks underperformed.

The Large Cap Value Fund posted a total return of 5.63% for the quarter, compared with 5.33% for the Fund's benchmark, the Russell 1000® Value Index. The Fund's strategic allocation to value-oriented stocks that are attractively priced from a normalized valuation prospective accounted for much of the outperformance during the quarter. Avoiding expensive securities in the consumer staples sector, while favoring discounted material and information technology stocks, as identified by our valuation model, contributed to performance. High-quality consumer discretionary names outperformed. The Fund's exposure to value oriented, high-quality industrials and health care however, detracted from performance as investors favored growth names within the sector. Going forward, we will continue to seek exposure to attractively priced securities with strong profitability and good cash flow management. We believe this is a prudent strategic investment philosophy to outperformance of the stated benchmark over a full market cycle.

Not FDIC insured | May lose value | No bank guarantee

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

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