Mid Cap Index Fund

Mid Cap Index

as of June 30, 2010

The S&P MidCap 400® Index returned -9.59% during the second quarter, erasing its first quarter gain and putting its year-to-date return into negative territory at -1.36%. While the quarter began with a better-than-expected earnings season and multiple merger and acquisition announcements, a number of issues—including disappointing macroeconomic data, sovereign credit downgrades in Europe, and the SEC's fraud charges against Goldman Sachs—began to weigh on the market by mid-April. In May, continued uncertainty over the European debt situation, the Gulf oil spill and pending financial regulation put further pressure on U.S. equities. While the stock market attempted to rally briefly in early June, it reversed course in the second half of the month following a string of disappointing economic releases and several corporate earnings announcements that came in below expectations.

The Fund's -9.69% return closely tracked the S&P MidCap 400 Index, with the difference in returns driven by transaction costs and Fund expenses.

Mid caps continued to outperform large caps, based on the -11.43% return of the S&P 500 Index. All mid-cap sectors posted negative returns for the quarter. Financials and information technology—the two largest sectors in the Index with weights of 20.79% and 15.12%, respectively—posted returns of -8.66% and -8.63%. The consumer discretionary and industrials sectors, which together account for just under 30% of the Index, posted returns of -12.95% and -11.52%. Utilities were the top performing sector with a return of -5.27%.

If you're a moderate risk investor seeking competitive long-term investment returns through a broadly diversified portfolio, this Fund may be appropriate for you. It offers a high degree of relative predictability in an uncertain stock market by seeking investment results, before expenses, approximating the aggregate price and dividend performance of the securities included in the S&P MidCap 400 Index.

Passively managed, the Fund seeks to duplicate the investment composition and overall performance of the stocks included in the S&P MidCap 400 Index.
Invest at least 80% of its net assets in equity securities in the Index, in weightings that approximate the relative composition of the Index.
Use proprietary quantitative techniques designed to minimize trading costs.

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.