Copyright © 2005 by Northern Trust CorporationCopyright © 2005 by Northern Trust Corporation
Strategic Differentiation
The Hilton New YorkThe Hilton New YorkSeptember 14, 2005September 14, 2005
Lehman Brothers2005 Financial Services Conference
PAGE PAGE 22 2Northern Trust Lehman Brothers – 2005 Financial Services Conference
Forward Looking Statement
This presentation may include forwardThis presentation may include forward--looking statements such as statements that looking statements such as statements that relate to Northern Trust’s financial goals, dividend policy, exprelate to Northern Trust’s financial goals, dividend policy, expansion and business ansion and business development plans, anticipated expense levels and projected profdevelopment plans, anticipated expense levels and projected profit improvements, it improvements, business prospects and positioning with respect to market and prbusiness prospects and positioning with respect to market and pricing trends, icing trends, strategic initiatives, restrategic initiatives, re--engineering and outsourcing activities, new business results engineering and outsourcing activities, new business results and outlook, changes in securities market prices, credit qualityand outlook, changes in securities market prices, credit quality including reserve including reserve levels, planned capital expenditures and technology spending, anlevels, planned capital expenditures and technology spending, and the effects of any d the effects of any extraordinary events and various other matters (including develoextraordinary events and various other matters (including developments in litigation pments in litigation and regulation involving Northern Trust and changes in accountinand regulation involving Northern Trust and changes in accounting policies, g policies, standards and interpretations) on Northern Trust’s business and standards and interpretations) on Northern Trust’s business and results. These results. These statements speak of Northern Trust’s plans, goals, strategies, bstatements speak of Northern Trust’s plans, goals, strategies, beliefs, and eliefs, and expectations, and refer to estimates or use similar terms. Actuexpectations, and refer to estimates or use similar terms. Actual results could differ al results could differ materially from those indicated by these statements because the materially from those indicated by these statements because the realization of those realization of those results is subject to many risks and uncertainties. Our 2004 anresults is subject to many risks and uncertainties. Our 2004 annual report and nual report and periodic reports to the SEC contain information about specific periodic reports to the SEC contain information about specific factors that could factors that could cause actual results to differ, and you are urged to read them. cause actual results to differ, and you are urged to read them.
PAGE PAGE 33 3Northern Trust Lehman Brothers – 2005 Financial Services Conference
Strategic DifferentiationA Consistent, Focused Strategy
Two Client DistributionTwo Client DistributionChannelsChannels
One Core BusinessOne Core Business
Single Global SecuritiesSingle Global SecuritiesProcessing and Processing and
Information PlatformInformation Platform
Asset Asset ServicingServicing
Asset Asset ManagementManagement
Information Information ServicesServices
Asset AdministrationAsset Administration
Worldwide Operations and Technology
Personal Financial Services
Corporate & Institutional Services
PAGE PAGE 44 4Northern Trust Lehman Brothers – 2005 Financial Services Conference
Financial Highlights Reflect Excellent Performance
Assets Under CustodyAssets Under Custody $2.7 Trillion$2.7 Trillion +22%+22% +22%+22%Global Custody AssetsGlobal Custody Assets $1.1 Trillion$1.1 Trillion +35%+35% +35%+35%Assets Under ManagementAssets Under Management $590 Billion$590 Billion +12%+12% +12%+12%
Trust, Inv. & Other Servicing FeesTrust, Inv. & Other Servicing Fees $402 Million$402 Million +20%+20% +10%+10%Net Interest IncomeNet Interest Income $180 Million$180 Million +23%+23% +23%+23%
Total RevenuesTotal Revenues $687 Million$687 Million +17%+17% +11%+11%Noninterest ExpensesNoninterest Expenses $442 Million$442 Million +17%+17% +8%+8%
Net IncomeNet Income $150 Million$150 Million +15%+15% +15%+15%Earnings Per ShareEarnings Per Share $0.68$0.68 +15%+15% +15%+15%
Second Quarter Second Quarter 20052005
% Change vs. Prior Year% Change vs. Prior YearReportedReported excl. FSG*excl. FSG*
* Excludes impact of the Financial Services Group acquisition
PAGE PAGE 55 5Northern Trust Lehman Brothers – 2005 Financial Services Conference
Client Assets at Record Levels
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
2000 2001 2002 2003 2004 2Q05
Assets Under Assets Under CustodyCustody
$2.7 Trillion$2.7 Trillion
R E
C O
R D
R E
C O
R D
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
2000 2001 2002 2003 2004 2Q05
Global Custody Global Custody AssetsAssets
$1.1 Trillion$1.1 Trillion
$0
$100
$200
$300
$400
$500
$600
$700
2000 2001 2002 2003 2004 2Q05
Assets Under Assets Under ManagementManagement
$590 Billion$590 Billion
R E
C O
R D
R E
C O
R D
R E
C O
R D
R E
C O
R D
…in stark contrast to equity markets
5 Year CAGR5 Year CAGR(6/30/00 (6/30/00 –– 6/30/05)6/30/05)
+11%+11%
5 Year CAGR5 Year CAGR(6/30/00 (6/30/00 –– 6/30/05)6/30/05)
+25%+25%
5 Year CAGR5 Year CAGR(6/30/00 (6/30/00 –– 6/30/05)6/30/05)
+13%+13%
5 Year5 YearCAGR:CAGR:
Dow JonesDow Jones S&P 500S&P 500 NASDAQNASDAQ EAFEEAFE0%0% --4%4% --12%12% --3%3%
PAGE PAGE 66 6Northern Trust Lehman Brothers – 2005 Financial Services Conference
The recognized leader in providing sophisticated The recognized leader in providing sophisticated financial solutions to high net worth families.financial solutions to high net worth families.Target market: Individuals or families with Target market: Individuals or families with $75+ million in investable assets$75+ million in investable assets
$1 Million $25 Million $75 Million
Delivering highDelivering high--touch trust, investment management and banking solutions touch trust, investment management and banking solutions to individuals through 84 offices in 18 states.to individuals through 84 offices in 18 states.Target market: Affluent individuals with at least $1 million in Target market: Affluent individuals with at least $1 million in investable assetsinvestable assets
Delivering comprehensive, investment solutions through Delivering comprehensive, investment solutions through a multia multi--manager investment program.manager investment program.Target market: Individuals or families with Target market: Individuals or families with $25 to $75 million in investable assets$25 to $75 million in investable assets
Wealth Wealth ManagementManagement
Wealth Wealth AdvisoryAdvisory
PrivatePrivateClientClient
C L I E N T I N V E S T A B L E A S S C L I E N T I N V E S T A B L E A S S E T SE T S
Personal Financial ServicesIndustry Leader in Serving the Affluent Market
Largest Personal Largest Personal Trust Bank in U.S. Trust Bank in U.S.
SOURCE: SNL Financial
PAGE PAGE 77 7Northern Trust Lehman Brothers – 2005 Financial Services Conference
Source: Claritas
1.1
1.6
2004 2009
Projected MillionaireHousehold Growth(Within PFS Footprint, Millions)
52%52%IncreaseIncrease
84 Offices in 18 States
40% of millionaire market resides within a 45 minutedrive of Northern Trust offices.
Massachusetts (1)Massachusetts (1)
IllinoisIllinois(18)(18)ColoradoColorado
(1)(1)
GeorgiaGeorgia(1)(1)
NevadaNevada(1)(1)
MissouriMissouri(1)(1)
WisconsinWisconsin(1)(1)
MinnesotaMinnesota(1)(1)
WashingtonWashington(1)(1)
MichiganMichigan(3)(3)
FloridaFlorida(25)(25)
TexasTexas(7)(7)
ArizonaArizona(8)(8)
CaliforniaCalifornia(11)(11)
New York (1)New York (1)Connecticut (1)Connecticut (1)
Delaware (1)Delaware (1)OhioOhio(1)(1)
Personal Financial ServicesStrong Demographic Tailwinds
PAGE PAGE 88 8Northern Trust Lehman Brothers – 2005 Financial Services Conference
…to achieve growth objectives
Event Marketing & Strategic PhilanthropyEvent Marketing & Strategic Philanthropy
Sophisticated SolutionsSophisticated Solutions
Integrated Local Delivery ModelIntegrated Local Delivery Model
Personal Financial Services Strategically Differentiated…
PAGE PAGE 99 9Northern Trust Lehman Brothers – 2005 Financial Services Conference
Personal Financial ServicesEvent Marketing & Strategic Philanthropy
Philanthropic Educational Entertainment
PAGE PAGE 1010 10Northern Trust Lehman Brothers – 2005 Financial Services Conference
Retirement ServicesQualified Plan ServicesDefined Benefit PlansDefined Contribution PlansIRA RolloversInvestment ManagementIndividual 401(k) Plans
Private PassportOnline access to banking, trust, investment management, mutual funds, and brokerage information
Corporate BankingWorking Capital and General Corporate LoansSecured and Cash Flow LendingAcquisition FinancingIndustrial Development BondsEquipment Finance and Leasing
Checking & Deposit ServicesPersonal LoansReal Estate Development LoansMargin Loans
Stock Option LendingHome MortgagesEquity Credit Lines
Private BankingStructured InvestmentServicesAsset AllocationEquity InvestingFixed-Income Investing
Short-Term Asset ManagementIndexingAlternative InvestmentsSingle Stock Strategies
Investment Management
Comprehensive Trust ServicesFamily Business ServicesReal Estate and Farm ManagementMinerals ManagementCharitable ServicesTrust and Estate Settlement ServicesGuardianship Services
BrokerageFull Service BrokerageManaged Account10b5-1 PlansMoney Market InstrumentsSafekeeping
Financial ConsultingRetirement PlanningEstate PlanningTax PlanningAsset AllocationStock Option Planning
Client
Personal Financial ServicesSophisticated Solutions – Breadth of Services
PAGE PAGE 1111 11Northern Trust Lehman Brothers – 2005 Financial Services Conference
Portfolio Portfolio ManagerManager
TrustTrustAdministratorAdministrator
PrivatePrivateBankerBanker
Northern Trust:Northern Trust:Integrated Local DeliveryIntegrated Local Delivery
FiduciaryFiduciarySpecialistSpecialist
Regional HQRegional HQ
Broker/Broker/FinancialFinancialAdvisorAdvisor
PrivatePrivateBankerBanker
PortfolioPortfolioManagerManager
Local OfficeLocal Office Local OfficeLocal Office National HQNational HQ
CompetitorsCompetitorsVirtual IntegrationVirtual Integration
ClientClientClientClient
WealthWealthStrategistStrategist
BrokerBroker
Personal Financial ServicesIntegrated Service Delivery Model
PAGE PAGE 1212 12Northern Trust Lehman Brothers – 2005 Financial Services Conference
Personal Financial ServicesSpotlight: Wealth Management Group
$65 $65
$82
$101$106
2001 2002 2003 2004 2Q05
Assets Under Custody($Billions)
1Penetration equals Northern Trust AUC divided by total investable assets, U.S. ultra high net worth households2Source: The VIP Forum
Total Investable Assets2
U.S. Households $75 MM+$700 BN $581 BN $715 BN $792 BN
Northern Trust Penetration1 9% 11% 11% 13%
Northern Trust Serves
24% of the Forbes 400
3 Year CAGR: 16%
PAGE PAGE 1313 13Northern Trust Lehman Brothers – 2005 Financial Services Conference
Asset ServicingAsset Servicing
Information ServicesInformation Services
Risk ManagementRisk Management
AssetAssetManagementManagement
Corporate & Institutional ServicesPositioned for Success and Profitability
CashCashActiveActivePassivePassiveSecurities LendingSecurities Lending
Manager of ManagersManager of ManagersForeign ExchangeForeign ExchangeTransition ManagementTransition ManagementCommission RecaptureCommission Recapture
SafekeepingSafekeepingSettlementSettlementInvestment Operations Investment Operations OutsourcingOutsourcing
AccountingAccountingReportingReportingValuationValuation
Attribution AnalysisAttribution AnalysisValue at RiskValue at RiskCrossCross--Border Pension Border Pension PoolingPooling
Rates of ReturnRates of ReturnFund ServicesFund ServicesMultinational HQ ReportingMultinational HQ Reporting
Income CollectionIncome CollectionCorporate ActionsCorporate Actions
Compliance MonitoringCompliance MonitoringMarket Event AnalyticsMarket Event Analytics
PAGE PAGE 1414 14Northern Trust Lehman Brothers – 2005 Financial Services Conference
Clients in Clients in 39 Countries39 Countries
Trade Settlement Trade Settlement ~90 Markets~90 Markets
16 Locations16 LocationsWorldwideWorldwide
Staff Outside U.S.: Staff Outside U.S.: 1,750+ FTE1,750+ FTE
Toronto
London
Hong Kong
Singapore
DublinTokyoChicago
New York
LuxembourgBeijing
Isle of Man
GuernseyJersey
San Francisco
DetroitLos Angeles
Corporate & Institutional ServicesPositioned to Attract Global Opportunities
PAGE PAGE 1515 15Northern Trust Lehman Brothers – 2005 Financial Services Conference
25% 25% -- 38% 38% Across Target SegmentsAcross Target Segments
Sources: Pensions & Investments, Investment & Pensions Europe, Pension Funds & Their Advisors, S&P Money MarketDirectory, Nelson Marketplace, and WM Company Local Authority Pension Fund Universe
34%34%
Top 200 U.S. Top 200 U.S. Pension FundsPension Funds
38%38%
Top 100 U.S. Top 100 U.S. Corporate PlansCorporate Plans
28%28%
U.K. Local U.K. Local Authority MarketAuthority Market
25%25%
31%31%
Top 100 U.S. Top 100 U.S. Public FundsPublic Funds
32%32%
Top 25 TaftTop 25 Taft--Hartley PlansHartley Plans
32%32%
Top 50 U.S. Top 50 U.S. FoundationsFoundations
28%28%
Top 50 U.S. Top 50 U.S. EndowmentsEndowments
Top 200 U.K. Top 200 U.K. Pension FundsPension Funds
Corporate & Institutional ServicesCompelling Performance in Target Segments
PAGE PAGE 1616 16Northern Trust Lehman Brothers – 2005 Financial Services Conference
…to achieve growth objectives
Client Service HeritageClient Service Heritage
Innovative SolutionsInnovative Solutions
Organic Growth…Organic Growth…Complemented by Strategic AcquisitionsComplemented by Strategic Acquisitions
Corporate & Institutional ServicesStrategically Differentiated…
PAGE PAGE 1717 17Northern Trust Lehman Brothers – 2005 Financial Services Conference
Product
Capabilities
Relationship
Focus
Client
Northern Trust’s ApproachCompetition
ClientProduct
Product
Product
Product
Product
ProductProduct
Corporate & Institutional ServicesServicing Philosophy Centers on Clients
PAGE PAGE 1818 18Northern Trust Lehman Brothers – 2005 Financial Services Conference
Corporate & Institutional ServicesClient Service is the Heritage of Northern Trust
50% 60% 70% 80% 90% 100%
Client Satisfaction SurveyMelior Group Assessment(Reported January, 2005)
93%
96%
95%
Overall ClientSatisfaction
Expectations AreMet / Exceeded
95% Would HireNorthern Trust Again
PAGE PAGE 1919 19Northern Trust Lehman Brothers – 2005 Financial Services Conference
Custodian
In the Past: Northern Trust Solution:
Pension Funds
Pension Funds Mutual Funds
SvenskaHandelsbanken
Northern Trustas Custodian
SwedishCustodian
Mutual Funds
Corporate & Institutional ServicesInnovative Solution in the Nordic Region
PAGE PAGE 2020 20Northern Trust Lehman Brothers – 2005 Financial Services Conference
$0
$20
$40
$60
$80
$100
1991 2001 2004 2Q05
Nordic Region Client Assets($Billions)
$0.02
$21
$86
$67
$19
Corporate & Institutional ServicesInnovation Fuels Growth in the Nordic Region
$97
PAGE PAGE 2121 21Northern Trust Lehman Brothers – 2005 Financial Services Conference
ANB IMC 1997 $ 53.0
Trustbank Financial Corp. 1998 15.0
Carl Domino Associates, LP 2000 21.3
Ulster Bank Investment Services 2000 14.3
Deutsche Bank Index Business 2003 121.6
Legacy South 2003 13.2
Financial Services Group (FSG) 2005 475.0
Acquisition strategy continues to focus on enhancement of capabilities and access to new geographies, as exemplified by most recent transactions:
PriceAcquisition Year ($ mil) Capability Geography
Corporate & Institutional ServicesOrganic Growth Complemented by Strategic Acquisitions
PAGE PAGE 2222 22Northern Trust Lehman Brothers – 2005 Financial Services Conference
Expanding RelationshipsExpanding Relationships
Traditional Asset Servicing Products Traditional Asset Servicing Products
Hedge Fund AdministrationHedge Fund Administration
Property Fund AdministrationProperty Fund Administration
Private TrusteePrivate Trustee
Offshore Private BankingOffshore Private Banking
Private Equity AdministrationPrivate Equity Administration
New RelationshipsNew Relationships
New WinsNew Wins
New GeographiesNew Geographies
FSG ClientsFSG Clients
Northern TrustNorthern TrustClientsClients
Corporate & Institutional ServicesFSG Acquisition Fuels Growth Opportunities
PAGE PAGE 2323 23Northern Trust Lehman Brothers – 2005 Financial Services Conference
OtherOther$5 Billion (1%)$5 Billion (1%)
(Alternative Asset Classes)(Alternative Asset Classes)
$231 Billion$231 Billion(39%)(39%)
$101 Billion$101 Billion(17%)(17%)$253 Billion$253 Billion
(43%)(43%)
$360 Billion$360 Billion(61%)(61%)
ActiveActive
$199 Billion$199 Billion(34%)(34%)
QuantitativeQuantitative
$31 Billion$31 Billion(5%)(5%)
Manager of ManagersManager of Managers
A Diversified Asset ManagerA Diversified Asset Manager
Across Asset ClassesAcross Asset Classes Across StylesAcross Styles
$590 Billion$590 BillionAssets Under Management as of June 30, 2005Assets Under Management as of June 30, 2005
EquitiesEquities
FixedFixedIncomeIncome
ShortShortDurationDuration
Northern Trust Global InvestmentsWorld Class Investment Manager
PAGE PAGE 2424 24Northern Trust Lehman Brothers – 2005 Financial Services Conference
1Global Investor GI 1002Pension & Investments3FRC Monitor; based on long-term funds
99thth largest worldwide asset managerlargest worldwide asset manager1,21,2
44thth largest U.S. taxlargest U.S. tax--exempt asset managerexempt asset manager22
33rdrd largest institutional index managerlargest institutional index manager22
66thth largest banklargest bank--managed mutual fund familymanaged mutual fund family33
$590 Billion$590 BillionAssets Under Management as of June 30, 2005Assets Under Management as of June 30, 2005
Northern Trust Global InvestmentsEstablished Industry Leader
PAGE PAGE 2525 25Northern Trust Lehman Brothers – 2005 Financial Services Conference
$112 Billion$112 Billion
$478 Billion$478 Billion
EquitiesEquities 37%37%Fixed IncomeFixed Income 13%13%Short DurationShort Duration 50%50%
EquitiesEquities 50%50%Fixed IncomeFixed Income 35%35%Short DurationShort Duration 12%12%OtherOther 3%3%
Total AUMTotal AUM
PersonalPersonal
InstitutionalInstitutional
EquitiesEquities 39%39%Fixed IncomeFixed Income 17%17%Short DurationShort Durationand Otherand Other 44%44%
Northern Trust Global InvestmentsBroad Client Base
$590 Billion$590 BillionAssets Under Management as of June 30, 2005Assets Under Management as of June 30, 2005
PAGE PAGE 2626 26Northern Trust Lehman Brothers – 2005 Financial Services Conference
$590
$292
$572
$326 $320 $303
$479
$233
$0
$100
$200
$300
$400
$500
$600
1998 1999 2000 2001 2002 2003 2004 2Q05
($ Billions)
$404
Acquired Index
Assets
12/31/98 to 6/30/05% Change CAGR
Assets Under Management +153% +15%Excluding Index Acquisition +121% +13%S&P 500 -3% -0.5%
Northern Trust Global InvestmentsExcellent Growth in Assets Under Management
PAGE PAGE 2727 27Northern Trust Lehman Brothers – 2005 Financial Services Conference
$12.4
$17.7
$26.8
$30.7
$0
$5
$10
$15
$20
$25
$30
2002 2003 2004 2Q05
Northern Trust Global AdvisorsNorthern Trust Global AdvisorsAssets Under ManagementAssets Under Management
$30.7 Billion$30.7 Billion$ Billions$ Billions
NTGA Highlights:NTGA Highlights:AUM have more than doubled in AUM have more than doubled in last two yearslast two years
Capabilities include:Capabilities include:
Emerging and Minority ManagersEmerging and Minority Managers
Hedge FundsHedge Funds
Private EquityPrivate Equity
Investment Program OutsourcingInvestment Program Outsourcing
Strategic SubStrategic Sub--AdvisoryAdvisory
Specialized U.S. and international Specialized U.S. and international equity programsequity programs
Northern Trust Global InvestmentsSpotlight: Manager of Managers Program
PAGE PAGE 2828 28Northern Trust Lehman Brothers – 2005 Financial Services Conference
Northern Trust:A Compelling Investment Proposition
Rich HistoryRich History116 Year Heritage116 Year HeritageUndiluted by Mergers & AcquisitionsUndiluted by Mergers & Acquisitions
Focused StrategyFocused StrategyExclusively Focused on the Management and Administration of ClieExclusively Focused on the Management and Administration of Client Assetsnt Assets
Conservative CultureConservative CultureOne of only 5 independent U.S. Bank Holding Companies Rated AAOne of only 5 independent U.S. Bank Holding Companies Rated AA-- by S&Pby S&P
Seasoned Management TeamSeasoned Management Team Northern TrustNorthern Trust IndustryIndustry
Bill Osborn Bill Osborn -- Chairman, President & CEO Chairman, President & CEO 35 Years35 Years 35 Years35 YearsSteve Fradkin Steve Fradkin -- Executive Vice President & CFOExecutive Vice President & CFO 20 Years20 Years 20 Years20 YearsBill Morrison Bill Morrison -- President President -- PFSPFS 9 Years9 Years 32 Years32 Years
Tim Tim TheriaultTheriault -- President President -- WWOTWWOT 22 Years22 Years 26 Years26 YearsTerry Terry TothToth -- President President -- NTGINTGI 16 Years16 Years 23 Years23 YearsRick Waddell Rick Waddell -- President President -- C&ISC&IS 30 Years30 Years 30 Years30 Years