International Equity (formerly International Growth Equity Fund) Fund

International Equity (formerly International Growth Equity Fund)

as of June 30, 2010

Following strong performance in 2009, global equity markets declined substantially during the first half of 2010. Concerns regarding slowing growth in China and European sovereign debt deterioration led to worries about the sustainability of the burgeoning economic recovery. Key interest rates throughout the world remained at low levels, further highlighting the risk aversion prevalent in the market. Within the developed international stock market, as measured by the MSCI EAFE Index, the consumer staples (-7.27%) and telecommunications services (-9.41%) sectors performed the best during the quarter, while energy (-22.52%) and materials (-18.12%) performed the worst.

The International Equity Fund posted a total return of -13.89% for the quarter, compared with -13.97% for the Fund's benchmark, the MSCI EAFE Index. The Fund's largest overweights were in the United States and the United Kingdom, and its largest underweights were in Australia and France. Although we do not take large sector bets, our largest overweighted position was in the consumer discretionary sector, and our greatest underweighted positions were in the financials and consumer staples sectors.

The current state of heightened volatility has enabled us to take profits among stocks we believe no longer offer adequate fundamental or valuation support and initiate positions in stocks offering attractive performance potential. In this context, we are focusing on companies we believe have the ability to grow throughout an economic cycle, due to their strong competitive positions and solid balance sheets.

If you are a growth-oriented investor who is interested in the opportunities and portfolio diversification international investing offers, you may find this Fund suitable. You should have a more aggressive risk profile and be able to tolerate the above-average volatility and special risks that investing in foreign markets entails.

Seek outstanding companies through fundamental research that is based on a deep understanding of industry and sector dynamics.
Combine creativity in stock analysis and selection with intelligent portfolio construction.
Seek to provide consistent results through disciplined risk management.

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.