<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>4
<FILENAME>dex13.txt
<DESCRIPTION>2001 ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>

                                                                      EXHIBIT 13



                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Summary of Selected Consolidated Financial Data
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ In Millions Except Per Share Information)       2001      2000      1999      1998      1997
------------------------------------------------------------------------------------------------
<S>                                            <C>       <C>       <C>       <C>       <C>
Noninterest Income
  Trust Fees                                   $1,231.3  $1,201.2  $  974.2  $  816.3  $  689.2
  Foreign Exchange Trading Profits                139.8     152.7     107.7     103.5     104.8
  Treasury Management Fees                         84.1      71.5      67.9      69.9      60.2
  Security Commissions and Trading Income          35.5      34.3      30.2      28.0      26.1
  Other Noninterest Income                         89.3      77.3      55.2      53.9      54.2
---------------------------------------------- --------  --------  --------  --------  --------
Total Noninterest Income                        1,580.0   1,537.0   1,235.2   1,071.6     934.5
---------------------------------------------- --------  --------  --------  --------  --------
Net Interest Income                               595.3     568.6     518.8     477.2     438.2
Provision for Credit Losses                        66.5      24.0      12.5       9.0       9.0
---------------------------------------------- --------  --------  --------  --------  --------
Income before Noninterest Expenses              2,108.8   2,081.6   1,741.5   1,539.8   1,363.7
---------------------------------------------- --------  --------  --------  --------  --------
Noninterest Expenses
  Compensation                                    685.8     689.1     582.6     518.1     448.3
  Employee Benefits                               122.2     109.3      98.5      91.3      79.0
  Occupancy Expense                               100.2      87.3      74.3      67.9      66.7
  Equipment Expense                                85.7      73.1      63.6      62.2      62.2
  Other Operating Expenses                        383.0     392.7     306.0     257.6     235.6
---------------------------------------------- --------  --------  --------  --------  --------
Total Noninterest Expenses                      1,376.9   1,351.5   1,125.0     997.1     891.8
---------------------------------------------- --------  --------  --------  --------  --------
Income before Income Taxes                        731.9     730.1     616.5     542.7     471.9
Provision for Income Taxes                        244.4     245.0     211.5     188.8     162.5
---------------------------------------------- --------  --------  --------  --------  --------
Net Income                                     $  487.5  $  485.1  $  405.0  $  353.9  $  309.4
---------------------------------------------- --------  --------  --------  --------  --------
Net Income Applicable to Common Stock          $  483.4  $  479.4  $  400.2  $  349.0  $  304.4
---------------------------------------------- --------  --------  --------  --------  --------
Per Common Share
Net Income
  Basic                                        $   2.18  $   2.17  $   1.81  $   1.58  $   1.37
  Diluted                                          2.11      2.08      1.74      1.52      1.33
Dividends Declared                                 .635       .56      .495      .435      .375
Book Value-End of Period (EOP)                    11.97     10.54      9.25      8.19      7.27
Market Price-EOP                                  60.22     81.56     53.00     43.66     34.88
---------------------------------------------- --------  --------  --------  --------  --------
Average Total Assets                           $ 35,624  $ 34,043  $ 30,177  $ 27,191  $ 24,052
Senior Notes-EOP                                    450       500       500       700       785
Long-Term Debt-EOP                                  767       638       659       458       440
Debt-Floating Rate Capital Securities-EOP           268       268       268       267       267
---------------------------------------------- --------  --------  --------  --------  --------
Ratios
Dividend Payout Ratio                              29.2%     25.9%     27.6%     27.7%     27.5%
Return on Average Assets                           1.37      1.43      1.34      1.30      1.29
Return on Average Common Equity                   19.34     22.09     20.67     20.47     20.17
Tier 1 Capital to Risk-Weighted Assets-EOP        10.88      9.79      9.92      9.78      9.61
Total Capital to Risk-Weighted Assets-EOP         14.25     12.85     13.60     13.06     12.78
Leverage Ratio                                     7.93      6.91      7.14      6.90      6.87
Average Stockholders' Equity to Average Assets     7.36      6.73      6.81      6.71      6.78
Average Loans and Leases Times Average
  Stockholders' Equity                              6.8x      7.2x      7.1x      7.3x      7.2x
---------------------------------------------- --------  --------  --------  --------  --------
Stockholders-EOP                                  3,183     3,194     3,251     3,373     3,380
Staff-EOP (full-time equivalent)                  9,453     9,466     8,583     8,156     7,553
</TABLE>
   Northern Trust Corporation (Corporation) is a bank holding company organized
in 1971 to hold all of the outstanding capital stock of The Northern Trust
Company (Bank), an Illinois banking corporation with its headquarters located
in the Chicago financial district. The Corporation also owns banks with offices
in Arizona, California, Colorado, Florida
and Texas, a federal savings bank with offices in Michigan, Missouri, Nevada,
Ohio, Washington and Wisconsin, a trust company in New York and various other
nonbank subsidiaries, including a securities brokerage firm, an international
investment consulting firm and a retirement services company. The Bank has
global custody operations in London, offices in the Chicago metropolitan area
and various subsidiaries including an investment management

NORTHERN TRUST CORPORATION

                                       36

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

company, a leasing company, a Canadian trust company, a New York Edge Act
company and a global fund services provider. Although the operations of other
subsidiaries will be of increasing significance to the Corporation, it is
expected that the Bank will, in the foreseeable future continue to be the major
source of the consolidated assets, revenues and net income. Northern Trust has
not utilized unconsolidated special purpose entities in order to provide
financing, improve liquidity, transfer assets or manage credit risk.
   All references to "Northern Trust" refer to Northern Trust Corporation and
its subsidiaries on a consolidated basis.
   The Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with Northern Trust's Consolidated
Financial Statements and Consolidated Financial Statistics included herein.
Certain critical accounting policies involve estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements; and, the reported amounts of revenues and expense during the
reporting period. Actual results could differ from those estimates. Estimates
and judgments regarding the administration of the reserve for credit losses, as
described in Management's Discussion and Analysis of Financial Condition and
Results of Operations, is of particular significance to Northern Trust.

RESULTS OF OPERATIONS

Overview. Net income for 2001 totaled a record $487.5 million, up from $485.1
million earned in 2000 which was 20% greater than the $405.0 million earned in
1999. Diluted net income per common share increased 1% to $2.11 from $2.08 in
2000, which was up 20% from $1.74 in 1999. The 2001 results were achieved
notwithstanding a $66.5 million provision for credit losses compared to $24.0
million in 2000. The record net income performance produced a return on average
common stockholders' equity of 19.34% compared with 22.09% in 2000 and 20.67%
in 1999. The return on average assets was 1.37% in 2001 compared with 1.43% in
2000 and 1.34% in 1999.
   2001 marks the fourteenth consecutive year of record earnings. Trust fees,
net interest income and treasury management fees were all at record levels.
Trust assets under administration of $1.68 trillion at December 31, 2001 were
unchanged from the prior year, despite declines in worldwide equity markets, as
evidenced by the 13% yearly decline in the S&P 500 equity index and 21% fall in
the Nasdaq Com-posite Index. Northern Trust's diversified revenue sources
produced a 3% increase in revenues while operating expenses increased by just
2%, resulting in a 162% productivity ratio, an all-time high.
   Stockholders' equity grew to $2.77 billion, as compared to $2.46 billion at
December 31, 2000 and $2.17 billion at December 31, 1999, primarily through the
retention of earnings, offset in part by the repurchase of common stock
pursuant to the Corporation's share buyback program.
   The Board of Directors increased the quarterly dividend per common share
9.7% in November 2001, to $.17 from $.155, for a new annual rate of $.68. This
is the fifteenth consecutive year in which the dividend rate has been
increased. The Board's action reflects a policy of increasing the dividend rate
with increased profitability while retaining sufficient earnings to allow for
strategic expansion and the maintenance of a strong balance sheet and capital
ratios.
   Northern Trust's strategy will continue to focus on growing its two
principal business units: Corporate and Institutional Services (C&IS) and
Personal Financial Services (PFS). C&IS provides master trust, master custody
and related services to retirement plans, institutional clients and
international clients; a comprehensive array of retirement consulting, actuar-
ial and recordkeeping services; and a full range of commercial banking
services. PFS provides financial services to individuals and closely held
businesses through a unique office network in twelve states. An important
element in this strategy is increasing the penetration of the C&IS and PFS
target markets with investment management and related services and products
provided by a third business unit, Northern Trust Global Investments (NTGI). In
executing this strategy, Northern Trust emphasizes service quality through a
high level of personal service complemented by the effective use of technology.
Operating support for these business units is provided through the Worldwide
Operations and Technology business unit (WWOT). Expense growth and capital
expenditures are closely monitored to ensure that short- and long-term business
strategies and performance objectives are effectively balanced.

Noninterest Income. Noninterest income represented 71% of total taxable
equivalent revenue in both 2001

NORTHERN TRUST CORPORATION

                                       37

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

and 2000, compared with 69% in 1999. Noninterest income totaled $1.58 billion
in 2001, $1.54 billion in 2000, and $1.24 billion in 1999.
   Trust Fees. Trust fees accounted for 78% of total noninterest income and 55%
of total taxable equivalent revenue in 2001. Trust fees for 2001 increased 3%
to $1.23 billion from $1.20 billion in 2000, which was up 23% from $974.2
million in 1999. Trust fees have increased at a compound growth rate of 16% for
the past five years. Total trust assets under administration at December 31,
2001 were $1.68 trillion, virtually unchanged from a year ago, including $452.2
billion of global custody assets. Trust assets under administration included
managed assets of $330.1 billion, down from $338.0 billion at the end of 2000.
   Trust fees are based on the market value of assets managed and administered,
the volume of transactions, securities lending volume and spreads, and fees for
other services rendered. Asset-based fees are typically determined on a sliding
scale so that as the value of a client portfolio grows in size, Northern Trust
receives a smaller percentage of the increasing value as fee income. Therefore,
market value or other changes in a portfolio's size do not typically have a
proportionate impact on the level of trust fees. Certain investment management
fee arrangements also may provide for performance fees which are based on
client portfolio returns exceeding predetermined levels. In addition, C&IS
trust relationships are increasingly priced to reflect earnings from activities
such as custody-related deposits and foreign exchange trading that are not
included in trust fees. Custody-related deposits maintained with bank
subsidiaries and foreign branches are primarily interest-bearing and averaged
$9.4 billion in 2001, $7.7 billion in 2000 and $7.0 billion in 1999.
   Northern Trust's fiduciary business encompasses master trust, master
custody, investment management and retirement services for retirement plans,
institutional clients and international clients, as well as a complete range of
estate planning, fiduciary and asset management services for individuals. Fees
from these services are fairly evenly distributed between C&IS and PFS. A
discussion of the trust-related services provided by each of these business
units and NTGI follows. The operating results, which include both trust and
banking services, for C&IS and PFS are provided on pages 44-48.
   Corporate and Institutional Services. Trust fees in C&IS increased 5% in
2001 to $616.3 million from $587.8 million in 2000, which was up 21% from
$484.6 million in 1999. These fees are derived from the full set of master
trust and master custody services that Northern Trust provides to retirement
plans and institutional clients worldwide. Northern Trust's products include
investment management and worldwide custody, settlement and reporting.
Investment related services include cash management, securities lending,
performance analysis, risk management and a broad range of active and passive
investment products provided through NTGI. In addition to these services,
Northern Trust offers its clients a comprehensive array of retirement
consulting, actuarial and recordkeeping services.
   The following table summarizes C&IS trust fees by product:

Corporate and Institutional Services
Summary of Trust Fees by Product
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
              (In Millions)                    2001   2000   1999
              ---------------------------------------------------
              <S>                            <C>    <C>    <C>
              Custody Services               $199.4 $194.5 $157.4
              Investment Management           180.9  178.6  149.2
              Securities Lending              135.6  117.3   97.6
              Retirement Consulting Services   60.6   59.9   46.7
              Other Services                   39.8   37.5   33.7
              ---------------------------------------------------
              Total Trust Fees               $616.3 $587.8 $484.6
</TABLE>

   All services provided by C&IS contributed to a $28.5 million increase in
trust fees. Fees from custody services increased 3% as a result of new
business, offset in part by the impact of lower market values of assets
administered. Domestic and international securities lending fees were strong,
combining to increase $18.3 million or 16% to $135.6 million, resulting from
both higher volumes and increased spreads earned on the investment of
collateral, due to the 11 decreases in the federal funds rate during the year.
Retirement services recordkeeping and consulting fees increased 1% to $60.6
million.
   C&IS trust fees benefited from new asset management business, offset in
large part by the impact of lower market values of assets under management.
Northern Trust continued to broaden its offerings of both passive and actively
managed investment products to trust and banking clients. Fees from investment
products totaled $180.9 million, up slightly from $178.6 million in 2000.
Investment management fees also include $2.1 million, compared to $11.0 million
in 2000, of performance-based incentive fees for several Northern Trust Global
Advisors' (NTGA) "manager of manager" funds. These fees are largely offset by
performance-based incentive payments to the sub-advisors of these funds that
are reflected in other operating expenses.

                                                     NORTHERN TRUST CORPORATION

                                       38

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Consolidated Trust Assets Under Administration
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       Five-Year
                                                                                        Compound
                                                                             Percent      Growth
                                                December 31                   Change        Rate
-------------------------------------------------------------------------------------------------
($ In Billions)                     2001     2000     1999     1998     1997 2001/00
-------------------------------------------------------------------------------------------------
<S>                             <C>      <C>      <C>      <C>      <C>      <C>       <C>
Corporate & Institutional       $  236.1 $  239.9 $  207.5 $  162.6 $  138.1      (2)%        23%
Personal                            94.0     98.1     91.6     73.4     58.5      (4)         15
-------------------------------------------------------------------------------------------------
Total Managed Trust Assets         330.1    338.0    299.1    236.0    196.6      (2)         20
-------------------------------------------------------------------------------------------------
Corporate & Institutional        1,281.7  1,275.1  1,178.4    975.9    845.3       1          16
Personal                            72.8     70.7     60.4     47.8     37.4       3          19
-------------------------------------------------------------------------------------------------
Total Non-Managed Trust Assets   1,354.5  1,345.8  1,238.8  1,023.7    882.7       1          16
-------------------------------------------------------------------------------------------------
Consolidated Trust Assets Under
  Administration                $1,684.6 $1,683.8 $1,537.9 $1,259.7 $1,079.3      -- %        17%
</TABLE>

   Total C&IS trust assets under administration were virtually unchanged from
the prior year at $1.52 trillion at December 31, 2001. Of the C&IS trust assets
under administration, 37% was invested in equity securities, 23% in fixed
income securities, 11% in cash and other assets and 29% in global equity, fixed
income and cash assets. Included in C&IS assets administered are those for
which Northern Trust has management responsibility. Managed assets were
invested 27% in equity securities, 21% in fixed income securities and 52% in
cash and other assets. The cash and other assets that have been deposited by
investment firms as collateral for securities they have borrowed from trust
clients are invested by Northern Trust and are included in trust assets under
administration as managed assets. The collateral totaled $92.2 billion and
$94.6 billion at December 31, 2001 and 2000, respectively.
   Net new recurring C&IS business sold and transitioned in 2001 was
approximately $71 million in annualized trust fees, compared with $79 million
in 2000. Approximately 47% of the new business sold came from existing clients
and 53% from new relationships.
  Personal Financial Services. Northern Trust has positioned itself in markets
having significant concentrations of wealth and growth potential. During the
year, Northern Trust opened the Weston and Belleair Bluffs offices in Florida,
and expanded or remodeled several existing offices. Its unique network of
Personal Financial Services offices includes 82 locations in twelve states. PFS
also includes the Wealth Management Group, which provides customized products
and services to meet the complex financial needs of families and individuals in
the United States and throughout the world with assets typically exceeding $100
million.
   At December 31, 2001 trust assets under administration in PFS totaled $166.8
billion, compared to $168.8 billion at December 31, 2000. Of the personal trust
assets under administration, 55% was invested in equity securities, 28% in
fixed income securities and 17% in cash and other assets. Included in assets
administered are those for which Northern Trust has management responsibility.
Managed assets were invested 50% in equity securities, 33% in fixed income
securities and 17% in cash and other assets.
   PFS trust fees totaled a record $615.0 million, compared to $613.4 million
in 2000 and $489.6 million in 1999. The modest increase in the current year
reflects new business offset by the impact of the decline in the equity
markets. The Wealth Management Group's trust fees increased 3% to $69.0
million, and at year-end administered $64.9 billion for significant family
asset pools nationwide, up 6% from last year.
   Net recurring new business sold and transitioned in 2001 totaled $63 million
in annualized trust fees, down from the record $89 million in 2000.
   Northern Trust Global Investments. Northern Trust Global Investments brings
together the investment activities of the C&IS and PFS businesses. The revenues
associated with this business unit are fully allocated to C&IS and PFS. NTGI
integrates Northern Trust's portfolio management, research and trading with
client servicing, institutional sales, marketing and product management, while
continuing to emphasize Northern Trust's overall relationship orientation.
   To strengthen further the structure of NTGI and respond to the provisions of
the Gramm-Leach-Bliley Act of 1999 relating to investment advisory activities,
in January 2001 NTGI consolidated certain of its institutional investment
management services

NORTHERN TRUST CORPORATION

                                       39

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

into Northern Trust Investments, Inc. (NTI), a separate subsidiary of the Bank.
This subsidiary, a registered investment advisor, provides investment
management services to Northern Trust's two mutual fund families and
institutional clients. This structure makes the administration of these
activities more efficient as well as accommodates future development of
Northern Trust's investment business.
   In 2001, NTGI entered into, or expanded relationships with three overseas
institutional firms. In August, Northern Trust launched a joint venture with
the asset management arm of Germany's Landesbank Hessen-Thuringen (Helaba), to
provide fixed income management for German institutions. By year-end, Northern
Trust/Helaba had approximately $440 million in assets under management. In
September, Northern launched an alliance with Italian bank, Mediolanum, to
provide manager-of-manager services to Italian investors. Northern also
expanded an existing relationship with Mitsubishi Trust to manage alternative
investments for Japanese international clients, in addition to U.S. equities.
   NTGI's strategic focus on investment management, branding, product
management, distribution and client servicing helped drive Northern Trust's
continued growth in new business. During 2001 Northern Trust continued to
achieve solid investment results across asset classes. For example, 25 of 40
eligible mutual funds advised by Northern Trust received high rankings in 2001
for investment
performance from Morningstar or Lipper Analytical Services.
   New capabilities were added to NTGI's array of investment management
products in 2001. Equity and fixed income product lines were strategically
expanded, complementing the well-established core capabilities in both asset
classes. NTGI also added to its alternative investment capabilities with the
introduction of hedge fund and private equity programs. Northern Trust's
institutional and retail mutual funds continued to enjoy significant growth,
reaching $44.0 billion in assets by year-end.
   At year-end, Northern Trust managed $330.1 billion in trust assets for
personal and institutional clients, down a modest 2% from $338.0 billion at
year-end 2000, despite weaker equity markets as evidenced by the 13% annual
decline in the S&P 500 equity index. Despite the slight decline in 2001, trust
assets under administration have grown at a five-year compound annual rate of
20%.
   Foreign Exchange Trading Profits. Foreign exchange trading profits totaled
$139.8 million, 8% below the record $152.7 million in 2000 and up from $107.7
million in 1999. As custodian, Northern Trust provides foreign exchange
services in the normal course of business. Active management of currency
positions, within conservative limits, also contributes to trading profits. The
current year foreign exchange results reflect reduced market volatility in the
major currencies, offset in part by growth in global assets under custody. The
increase in profits in 2000 primarily reflected market volatility in the major
currencies, including high volatility in the euro throughout the year, as well
as growth in global assets under custody and a higher level of client
transaction volume.
   Treasury Management Fees. The fee portion of treasury management revenues
totaled $84.1 million in 2001, an increase of 18% from the $71.5 million
reported in 2000 compared with $67.9 million in 1999. Total treasury management
revenues, which, in addition to fees, include the computed value of
compensating deposit balances, increased 8% to $115.3 million from $107.2
million in 2000 compared to $99.3 million in 1999, reflecting the continued
growth of new business in both paper-  and electronic-based products. The
increase in the fee portion of the revenue was partly a result of more clients
electing to pay for services in fees rather than in compensating deposit
balances.
   Security Commissions and Trading Income. Security commissions and trading
income totaled $35.5 million in 2001, compared with $34.3 million in 2000 and
$30.2 million in 1999. This income is primarily generated from securities
brokerage services provided by Northern Trust Securities, Inc. (NTSI). The
increase in both years reflects continued growth in securities brokerage
activities, up 5% in 2001 and 13% in 2000.
   Other Operating Income. Other operating income includes loan, letter of
credit and deposit-related service fees and other miscellaneous income from
asset sales. Other operating income in 2001 totaled $89.3 million compared with
$77.1 million in 2000 and $54.5 million in 1999. The current year increase
reflects a $9.2 million nonrecurring gain on the sale of an 80% interest in
Northern Trust's lockbox operations for which it received cash. The joint
venture that was formed in connection with the sale provides receivables
management services to North-

                                                     NORTHERN TRUST CORPORATION

                                       40

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ern Trust clients. Nonrecurring gains from the sale of assets in 2000 totaled
$4.5 million compared to $4.0 million in 1999. Excluding nonrecurring items,
the increase in other operating income in 2001 is primarily attributable to
higher loan service and standby letter of credit fees, gains on the sale of
lease residuals, and banking-related fees.
   Investment Security Gains. Net security gains were zero in 2001. This
compares with net gains of $.2 million in 2000 and $.7 million in 1999.

Net Interest Income. Net interest income is defined as the total of interest
income and amortized fees on earning assets, less interest expense on deposits
and borrowed funds, adjusted for the impact of off-balance sheet hedging
activity. Earning assets, which consist of securities, loans and money market
assets, are financed by a large base of interest-bearing funds, including
retail deposits, wholesale deposits, short-term borrowings, senior notes and
long-term debt. Earning assets are also funded by net noninterest-related
funds. Net noninterest-related funds consist of demand deposits, the reserve
for credit losses and stockholders' equity, reduced by nonearning assets
including cash and due from banks, items in process of collection, buildings
and equipment and other nonearning assets. Variations in the level and mix of
earning assets, interest-bearing funds and net noninterest-related funds, and
their relative sensitivity to interest rate movements, are the dominant factors
affecting net interest income. In addition, net interest income is impacted by
the level of nonperforming assets and client use of compensating deposit
balances to pay for services.
   Net interest income for 2001 was a record $595.3 million, up 5% from $568.6
million in 2000, which was up 10% from $518.8 million in 1999. When adjusted to
a fully taxable equivalent (FTE) basis, yields on taxable, nontaxable and
partially taxable assets are comparable, although the adjustment to a FTE basis
has no impact on net income. Net interest income on a FTE basis for 2001 was a
record $647.9 million, an increase of $26.0 million or 4% from $621.9 million
in 2000 which in turn was up 12% from $557.4 million in 1999. Through steady
asset growth and conservative interest rate risk management, Northern Trust has
been successful in generating year over year improvement in net interest income
as evidenced by the fact that 2001 represents the eighteenth consecutive year
of record performance. The improvement in FTE net interest income in 2001 was
driven primarily by a 4% increase in average earning assets.

   Earning assets averaged $32.0 billion, up 4% from the $30.7 billion reported
in 2000, which was up from $27.2 billion in 1999. The growth in average earning
assets reflects an 8% or $1.3 billion increase in loans. Securities averaged
$8.5 billion, down 12% from $9.7 billion in 2000, which was offset by a $1.2
billion increase in money market assets.
   Loan volume for the year averaged $17.8 billion with the predominant portion
of the growth reflected in the domestic portfolio. The domestic growth came
from residential mortgage activities, up $595 million to $7.1 billion on
average, and commercial and industrial loans, up $176 million to $5.0 billion.
In addition, reflecting growth in lending to Wealth Management and private
banking clients, personal loans increased $190 million, to average $2.2 billion
for the year. International loans increased 10% to average $708 million. The
loan portfolio includes noninterest-bearing domestic and international
overnight advances related to processing certain trust client investments,
which averaged $872 million in 2001, down from $938 million a year ago.
Securities averaged $8.5 billion in 2001, down 12% resulting primarily from
lower levels of federal agency securities. Money market assets averaged $5.7
billion in 2001 versus $4.5 billion in 2000.

   The increase in average earning assets of $1.3 billion was funded through
growth in interest-bearing deposits and noninterest-related funds. The deposit
growth was concentrated primarily in foreign office time deposits, up $585
million resulting from increased global custody activity, and savings and money
market deposits, up $550 million.

NORTHERN TRUST CORPORATION

                                       41

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Analysis of Net Interest Income (FTE)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                  Percent Change
---------------------------------------------------------------------------------
($ In Millions)                  2001       2000       1999  2001/00    2000/99
--------------------------------------------------------------------------------
<S>                         <C>        <C>        <C>        <C>        <C>
Interest Income             $ 1,681.5  $ 2,011.1  $ 1,568.6    (16.4)%     28.2%
FTE Adjustment                   52.6       53.3       38.6     (1.3)      38.1
-------------------------------------------------------------------------------
Interest Income-FTE           1,734.1    2,064.4    1,607.2    (16.0)      28.4
Interest Expense              1,086.2    1,442.5    1,049.8    (24.7)      37.4
--------------------------------------------------------------------------------
Net Interest Income-FTE     $   647.9  $   621.9  $   557.4      4.2 %     11.6%
-------------------------------------------------------------------------------
Average Volume
  Earning Assets            $32,041.8  $30,748.7  $27,241.5      4.2 %     12.9%
  Interest-Related Funds     26,924.6   26,056.2   23,170.1      3.3       12.5
  Noninterest-Related Funds   5,117.2    4,692.5    4,071.4      9.1       15.3
-------------------------------------------------------------------------------
                                                            Change in Percentage
---------------------------------------------------------------------------------
Average Rate
  Earning Assets                 5.41%      6.71%      5.90%   (1.30)       .81
  Interest-Related Funds         4.03       5.54       4.53    (1.51)      1.01
  Interest Rate Spread           1.38       1.17       1.37      .21       (.20)
  Total Source of Funds          3.39       4.69       3.85    (1.30)       .84
-------------------------------------------------------------------------------
Net Interest Margin              2.02%      2.02%      2.05%      --       (.03)
</TABLE>

Refer to pages 94 and 95 for a detailed analysis of net interest income.

Other interest-related funds averaged $9.2 billion, down $352 million,
principally from lower treasury investment program balances, partially offset
by higher levels of federal funds sold, borrowings from the Federal Home Loan
Bank and the issuance of subordinated notes by the Bank. Average net
noninterest-related funds increased $425 million, mainly due to higher demand
deposits and stockholders' equity. Stockholders' equity for the year averaged
$2.6 billion, an increase of $330.5 million or 14% from 2000, principally due
to the retention of earnings, offset in part by the repurchase of common stock
pursuant to the Corporation's share buyback program.
   The net interest spread improved to 1.38% in 2001 from 1.17% in 2000
resulting from loan growth and the favorable impact of the decline in interest
rates on average funding costs. While noninterest-related funds increased $425
million to $5.1 billion, the value of these funds was diminished by the decline
in interest rates as the average return on earning assets fell by 130 basis
points. As a result of the above, the net interest margin of 2.02% in 2001 was
unchanged from the prior year. For a complete analysis of volume and interest
rate changes affecting net interest income, refer to the Average Statement of
Condition with Analysis of Net Interest Income on pages 94 and 95.

Provision for Credit Losses. The provision for credit losses of $66.5 million
was $42.5 million higher than the $24.0 million required in 2000 which in turn
was $11.5 million greater than the $12.5 million provision in 1999. For a
discussion of the reserve and provision for credit losses, refer to pages 52
through 54.

Noninterest Expenses. Noninterest expenses for 2001 totaled $1.38 billion, up
$25.4 million or 2% from $1.35 billion in 2000, which was up 20% from $1.13
billion in 1999. Expense growth in 2001 was significantly reduced from the rate
experienced in recent years as a result of initiatives implemented by
management to reduce certain discretionary expenses. These initiatives included
closely monitoring staffing levels, limiting staff-related and other
discretionary expenses, and modifying certain incentive plans for 2001 to
include a stock option grant component in lieu of cash. This last initiative
resulted in a $20.4 million expense savings for the year when compared to
programs in place prior to this initiative. Incremental expenses for 2001
resulting from two mid-year acquisitions in 2000 totaled $6.5 million.
   Noninterest expenses for 2000 increased $226.5 million or 20% over 1999.
Expenses in 2000 reflect a variety of growth initiatives, including staff
additions and higher operating expenses necessary to support record levels of
new business and growing transaction volumes, investments in technology,
(including e-business initiatives) and PFS office expansion, business promotion
and the expenses of

                                                     NORTHERN TRUST CORPORATION

                                       42

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

co-administration services now being provided to the two mutual fund families.
   Performance-based compensation increased 26% in 2000, resulting from
excellent new business results, record net income, client investment portfolio
performance, and the 54% increase in the price of Northern Trust Corporation
common stock during 2000. Incremental expenses resulting from two mid-year
acquisitions totaled $13.3 million in 2000.
   The productivity ratio, defined as total revenue on a taxable equivalent
basis divided by noninterest expenses, was 162% for 2001, an all-time high, up
from 160% in 2000 and 159% in 1999.
   Compensation and Benefits. Compensation and benefits, which represent 59% of
total noninterest expenses, increased 1% to $808.0 million in 2001 from $798.4
million in 2000, which was up 17% from $681.1 million in 1999. Compensation
costs, the largest component of noninterest expenses, totaled $685.8 million,
down $3.3 million from $689.1 million a year ago. The impact of salary
increases and modest staff growth in 2001 were more than offset by lower
performance-based pay. Performance-based compensation expense for 2001
decreased $50.0 million from 2000, which in turn had increased $38.7 million
from 1999. Compensation levels in 2001 reflect the impact of slower revenue
growth, lower investment portfolio performance, corporate earnings performance
and modifications made to certain cash incentive plans. The increase in 2000
reflected the impact of excellent new business results, strong client
investment portfolio performance, record corporate earnings and the price
increase in Northern Trust Corporation common stock. Staff on a full-time
equivalent basis averaged 9,484 in 2001, up 5% compared with 9,019 in 2000,
which was up 10% from 8,200 in 1999. The increase in staff levels during 2001
was required to support growth initiatives and strong new business in both C&IS
and PFS. Average staff levels in 2001 would have been approximately 7% higher
than in 2000 and compensation expense would have increased more, had Northern
Trust not formed a joint venture to provide lockbox services. These expenses
are now included in outside services purchased and reflected in other operating
expenses. Staff on a full-time equivalent basis totaled 9,453 at December 31,
2001, an annual increase of 3% after adjusting for the impact of the lockbox
joint venture.
   Employee benefit costs for 2001 totaled $122.2 million, up $12.9 million or
12% from $109.3 million in 2000, which was 11% higher than the $98.5 million in
1999. The increase in employee benefits in each of the past two years primarily
reflects higher payroll taxes, medical and dental plan costs, and retirement
plan benefits resulting predominantly from staff growth.
   Occupancy Expense. Net occupancy expense totaled $100.2 million, up 15% or
$12.9 million from $87.3 million in 2000, which was up 18% from $74.3 million
in 1999. The principal components of the 2001 occupancy expense increase were
higher rent, utility costs, depreciation and maintenance. The increase in 2000
resulted from higher rental and utility costs, real estate taxes, and
depreciation and maintenance of buildings and leasehold improvements associated
with office expansion.
   Equipment Expense. Equipment expense, which includes depreciation, rental,
and maintenance costs, totaled $85.7 million, up 17% from $73.1 million in
2000, which was 15% higher than the $63.6 million in 1999. The 2001 results
reflect higher levels of computer hardware depreciation expense, data lease
lines, rental and maintenance costs of computers and equipment. The 2000
results reflect higher levels of computer hardware depreciation expense, rental
and maintenance costs of computers and equipment.
   Other Operating Expenses. Other operating expenses for 2001 totaled $383.0
million, down 2% from $392.7 million in 2000, which was up 28% from $306.0
million in 1999. The decline in the 2001 expense level reflects the net impact
of several factors. These included expense reductions as a result of a decrease
in performance-based fees paid to investment sub-advisors, lower levels of
business development costs, and a reduction in charges associated with
processing errors incurred in servicing and managing financial assets and
performing banking activities. Other operating expenses also benefited from
lower stock-related directors' compensation due to the decline in the common
stock price of Northern Trust Corporation from the end of last year. The prior
year results also included a $3.8 million charge relating to the estimated cost
to exit an existing London location, which will allow for the relocation of the
majority of their staff to a larger facility during 2002. These lower expenses
were partially offset by higher costs associated with continued investment in
technology, expansion of the personal trust and banking office network, and
other expenditures to support business growth. These initiatives resulted in
increases in technical and consulting service fees, legal services and data
processing costs and amortization of software. Other operating expense in 2001
also includes $9.4 million

NORTHERN TRUST CORPORATION

                                       43

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in payments made to the lockbox joint venture in the second half of the year.
Prior to the formation of the joint venture, the majority of these costs were
included in salary and benefit expense.
   Investments in technology are designed principally to support and enhance
the transaction processing, investment management and securities handling
capability of the trust and banking businesses, as well as relationship
management and client interaction. Additional capital expenditures planned for
systems technology will result in future expenses for the depreciation of
hardware and amortization of software. Depreciation and software amortization
are charged to equipment and other operating expenses, respectively.

Provision for Income Taxes. The provision for income taxes was $244.4 million
in 2001 compared with $245.0 million in 2000 and $211.5 million in 1999. The
current year reflects a lower federal provision resulting from benefits derived
from tax-advantaged assets (primarily municipal securities and lease
transactions), offset by an increase in the state provision resulting from a
reduction in income exempt from state tax. The effective tax rate was 33% for
2001 compared with 34% for 2000 and 1999.

BUSINESS SEGMENTS

Northern Trust Corporation, under Chairman and Chief Executive Officer William
A. Osborn, organizes client services around two principal business units, C&IS
and PFS. Investment management services and products are provided to the
clients of these business units by NTGI. Operating and systems support is
provided to each of the business units by WWOT. Each of these four business
units has a president who reports to President and Chief Operating Officer
Barry G. Hastings. For management reporting purposes, the operations of NTGI
and WWOT are allocated to the two principal business units. The Risk Management
Unit includes the Treasury Department and reports directly to Mr. Osborn. Mr.
Osborn has been identified as the chief operating decision maker because he has
final authority over resource allocation decisions and performance assessment.
   Business unit results are presented in order to promote a greater
understanding of their financial performance. The information, presented on an
internal management reporting basis, is derived from internal accounting systems
that support the strategic objectives and management structure. Management has
developed accounting systems to allocate revenue and expenses related to each
segment, as well as certain corporate support services, worldwide operations and
systems development expenses. The management reporting systems also incorporate
processes for allocating assets, liabilities and the applicable interest income
and expense. Tier 1 and tier 2 capital is allocated based on the federal
risk-based capital guidelines at a level that is consistent with Northern
Trust's consolidated capital ratios, coupled with management's judgment of the
operational risks inherent in the business. Allocations of capital and certain
corporate expenses may not be representative of levels that would be required if
the segments were independent entities. The accounting policies used for
management reporting are the same as those described in "Accounting Policies,"
in the Notes to Consolidated Financial Statements. Transfers of income and
expense items are recorded at cost; there is no intercompany profit or loss on
sales or transfers between business units. Northern Trust's presentations are
not necessarily consistent with similar information for other financial
institutions. For management reporting purposes, certain corporate income and
expense items are not allocated to the business units and are presented as part
of "Treasury and Other." These items include the impact of long-term debt,
preferred equity, holding company investments, and certain corporate operating
expenses.
   The following tables reflect the earnings contribution of Northern
Trust's business segments for the years ended December 31, 2001, 2000 and 1999
on the basis described above.

<TABLE>
<CAPTION>
                                   Corporate and Institutional Services
         ---------------------------------------------------------------
         <S>                       <C>          <C>         <C>
         ($ In Millions)                 2001         2000        1999
         --------------------------------------------------------------
         Noninterest Income
           Trust Fees               $   616.3    $   587.8   $   484.6
           Other                        272.0        264.5       199.4
         Net Interest Income after
           Provision for Credit
           Losses*                      149.9        185.2       168.8
         Noninterest Expenses           669.5        630.6       534.4
         --------------------------------------------------------------
         Income before Income
           Taxes*                       368.7        406.9       318.4
         Provision for Income
           Taxes*                       143.1        157.7       124.1
         --------------------------------------------------------------
         Net Income                 $   225.6    $   249.2   $   194.3
         --------------------------------------------------------------
         Percentage Net Income
           Contribution                    46%          51%         48%
         --------------------------------------------------------------
         Average Assets             $17,395.7    $16,518.4   $13,324.0
</TABLE>

                                                     NORTHERN TRUST CORPORATION

                                       44

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
                                         Personal Financial Services
           -----------------------------------------------------------
           ($ In Millions)                2001       2000       1999
           ----------------------------------------------------------
           <S>                       <C>        <C>        <C>
           Noninterest Income
             Trust Fees              $   615.0  $   613.4  $   489.6
             Other                        70.4       68.7       60.1
           Net Interest Income after
             Provision for Credit
             Losses*                     413.6      400.9      375.6
           Noninterest Expenses          676.7      644.1      550.7
           ----------------------------------------------------------
           Income before Income
             Taxes*                      422.3      438.9      374.6
           Provision for Income
             Taxes*                      163.4      170.5      146.7
           ----------------------------------------------------------
           Net Income                $   258.9  $   268.4  $   227.9
           ----------------------------------------------------------
           Percentage Net Income
             Contribution                   53%        55%        56%
           ----------------------------------------------------------
           Average Assets            $14,870.1  $13,430.3  $11,798.2
</TABLE>

<TABLE>
<CAPTION>
                                            Treasury and Other
          -------------------------------------------------------------
          ($ In Millions)                2001       2000        1999
          ------------------------------------------------------------
          <S>                       <C>        <C>         <C>
          Noninterest Income
            Trust Fees              $      --  $      --   $      --
            Other                         6.3        2.6         1.5
          Net Interest Income after
            Provision for Credit
            Losses*                      17.9       11.8          .5
          Noninterest Expenses           30.7       76.8        39.9
          ------------------------------------------------------------
          Loss before Income Taxes*      (6.5)     (62.4)      (37.9)
          Benefit for Income Taxes*      (9.5)     (29.9)      (20.7)
          ------------------------------------------------------------
          Net Income (Loss)         $     3.0  $   (32.5)  $   (17.2)
          ------------------------------------------------------------
          Percentage Net Income
            Contribution                    1%        (6)%        (4)%
          ------------------------------------------------------------
          Average Assets            $ 3,358.2  $ 4,094.6   $ 5,054.8
</TABLE>

<TABLE>
<CAPTION>
                                               Consolidated
           -----------------------------------------------------------
           ($ In Millions)                2001       2000       1999
           ----------------------------------------------------------
           <S>                       <C>        <C>        <C>
           Noninterest Income
             Trust Fees              $ 1,231.3  $ 1,201.2  $   974.2
             Other                       348.7      335.8      261.0
           Net Interest Income after
             Provision for Credit
             Losses*                     581.4      597.9      544.9
           Noninterest Expenses        1,376.9    1,351.5    1,125.0
           ----------------------------------------------------------
           Income before Income
             Taxes*                      784.5      783.4      655.1
           Provision for Income
             Taxes*                      297.0      298.3      250.1
           ----------------------------------------------------------
           Net Income                $   487.5  $   485.1  $   405.0
           ----------------------------------------------------------
           Percentage Net Income
             Contribution                  100%       100%       100%
           ----------------------------------------------------------
           Average Assets            $35,624.0  $34,043.3  $30,177.0
</TABLE>

*Stated on a fully taxable equivalent basis (FTE). The consolidated figures
include $52.6 million, $53.3 million and $38.6 million of FTE adjustment for
2001, 2000 and 1999, respectively.

Note: Certain reclassifications have been made to 2000 and 1999 financial
information to conform to the current year's presentation.

Corporate and Institutional Services. The C&IS business unit, under the
direction of Peter L. Rossiter, President--C&IS, is a leading provider of
master trust, master custody and related services to three targeted markets:
retirement plans, institutional clients and international clients. Master trust
and custody encompasses a full range of state-of-the-art capabilities
including: worldwide custody, settlement and reporting; cash management; and
performance analysis services. Trust and custody relationships managed by C&IS
often include investment management, securities lending, transition management
and commission recapture services provided through the Northern Trust Global
Investments business unit. Services with respect to securities traded in foreign
markets are provided primarily through the Bank's London Branch. Related foreign
exchange services are rendered at the London and Singapore Branches as well as
in Chicago. In addition to master trust and master custody, C&IS offers a
comprehensive array of retirement consulting, actuarial and recordkeeping
services through Northern Trust Retirement Consulting, L.L.C. C&IS also offers a
full range of commercial banking services through the Bank, placing special
emphasis on developing and supporting institutional relationships in two target
markets: large domestic corporations and financial institutions (both domestic
and international). Treasury management services are provided to corporations
and financial institutions and include a variety of products and services to
accelerate cash collections, control disbursement outflows and generate
information to manage cash products.
   Net income for C&IS decreased 9% in 2001 and totaled $225.6 million compared
to $249.2 million in 2000 which was up 28% from the $194.3 million in 1999. The
current year decline in net income was primarily driven by a $36.0 million
increase in the provision for credit losses. For a discussion of the provision
for credit losses, refer to page 52. Trust fees increased 5% and represented 59%
of total C&IS revenues in 2001 compared to 57% in 2000.
   Northern Trust, through C&IS, provides master trust and master custody
services to three targeted markets: retirement plans, institutional clients, and
international clients. Retirement plans include the large corporate market,
middle market and public and union retirement funds. The institutional market
includes insurance companies, foundations and endowments and trust services for
domestic correspondent banks. International clients include asset

NORTHERN TRUST CORPORATION

                                       45

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

pools domiciled outside the U.S. and group trusts. A summary of C&IS trust fees
and trust assets for each market follows.

Corporate and Institutional Services
Summary of Trust Fees

<TABLE>
<CAPTION>
              ---------------------------------------------------
              (In Millions)                2001     2000     1999
              ---------------------------------------------------
              <S>                      <C>      <C>      <C>
              Domestic
                Retirement Plans       $  357.2 $  352.8 $  304.3
                Institutional             115.6    106.8     85.0
              International               143.5    128.2     95.3
              ---------------------------------------------------
              Total Trust Fees         $  616.3 $  587.8 $  484.6

              Corporate and Institutional Services
              Summary of Trust Assets Under Administration

              ----------------------------------------------------
                                              December 31
              ----------------------------------------------------
              (In Billions)                2001     2000     1999
              ---------------------------------------------------
              Domestic
                Retirement Plans       $  782.4 $  849.3 $  800.4
                Institutional             268.4    242.9    250.1
              International               372.1    326.3    253.6
              Securities Lending/Other     94.9     96.5     81.8
              ---------------------------------------------------
              Total Trust Assets       $1,517.8 $1,515.0 $1,385.9
</TABLE>

   The growth in other noninterest income in 2001 resulted primarily from a
$9.2 million nonrecurring gain on the sale of an 80% interest in Northern
Trust's lockbox operations for which it received cash. Also contributing to the
current year performance was a 15% increase in treasury management fees, and
higher levels of loan service and letter of credit fees and gains on the sale
of lease residuals. Offsetting the above were lower levels of foreign exchange
trading profits and trust deposit-related revenues. Net interest income after
provision for credit losses on a FTE basis decreased 19% in 2001 after
increasing 10% in 2000. The current year decline was driven by a $36.0 million
increase in the provision for credit losses. Excluding the additional
provision, net interest income was unchanged from 2000, as the impact of a 5%
increase in earning assets was offset by a decline in the net interest margin
to 1.30% from 1.37% in the prior year. Average loan volume was 8% higher than
last year and money market assets increased 4%. Earning assets in 2000 were up
25% from 1999 primarily the result of growth in loans and money market assets.
   Total noninterest expenses of C&IS, which include both the direct expenses
of the business unit and indirect expense allocations from NTGI and WWOT for
product and operating support, increased 6% in 2001 and 18% in 2000. The
growth in expenses is primarily attributable to increases in compensation and
employee benefits and higher operating costs to support business growth.

Personal Financial Services. The PFS business unit, under the direction of Mark
Stevens, President--PFS, encompasses personal trust and investment management
services, estate administration, banking (including private banking) and
residential mortgage lending offered through the Bank in Illinois and
affiliates in eleven other states. PFS focuses on small/mid-size businesses,
executives, retirees and high net worth individuals in each banking
subsidiary's target market. The financial needs of individuals and families
with assets exceeding $100 million are served through its Wealth Management
Group. The results of NTSI are also included in PFS.
   PFS net income totaled $258.9 million in 2001, a decrease of 4% from 2000
which in turn was 18% above the net income achieved in 1999. Slowing revenue
growth due to the decline in the equity markets, combined with a 5% increase in
expenses and a higher provision for credit losses contributed to the
year-to-year decline. Growth in trust activities was the primary driver of the
record performance in 2000 with trust fees increasing 25%, resulting from
record new business throughout Northern Trust's PFS network. Trust fees for
Illinois in 1999 included $9.6 million of performance-based fees earned by NTGA
as a result of strong investment performance in several funds managed for PFS
clients. A summary of trust fees and trust assets by state and for Wealth
Management follows.

Personal Financial Services
Summary of Trust Fees

<TABLE>
<CAPTION>
                     --------------------------------------
                     (In Millions)       2001   2000   1999
                     --------------------------------------
                     <S>               <C>    <C>    <C>
                     Illinois          $217.8 $219.8 $181.8
                     Florida            173.8  179.1  146.9
                     California          72.2   72.8   59.5
                     Arizona             38.4   38.8   29.2
                     Texas               24.9   24.1   17.9
                     Other States        18.9   12.0    3.3
                     Wealth Management   69.0   66.8   51.0
                     --------------------------------------
                     Total Trust Fees  $615.0 $613.4 $489.6
</TABLE>

                                                     NORTHERN TRUST CORPORATION

                                       46

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Personal Financial Services
Summary of Trust Assets Under Administration

<TABLE>
<CAPTION>
                    ----------------------------------------
                                           December 31
                    ----------------------------------------
                    (In Billions)        2001   2000   1999
                    ---------------------------------------
                    <S>                <C>    <C>    <C>
                    Illinois           $ 39.8 $ 43.7 $ 41.9
                    Florida              28.6   31.3   30.5
                    California           12.3   13.4   12.2
                    Arizona               5.8    6.1    5.9
                    Texas                 4.8    4.4    4.3
                    Other States         10.6    8.5    4.9
                    Wealth Management    64.9   61.4   52.3
                    ---------------------------------------
                    Total Trust Assets $166.8 $168.8 $152.0
</TABLE>

   A significant portion of PFS growth has come from adding business in
established locations. This growth has been supplemented by expansion within
existing and new markets. From its 82 office network, Northern Trust is in
close proximity to approximately 30% of the nation's high net worth households,
defined as those with at least $1 million of investable assets. Over the next
four years, Northern Trust plans to continue its expansion in existing and new
markets with promising demographics. It is currently estimated that there will
be approximately 100 PFS offices operating within as many as 15 states by the
end of 2005.
   The growth in other noninterest revenues in 2001 primarily reflects 5%
growth in brokerage commissions at NTSI. Driven by growth in lending to Wealth
Management and private banking clients, ongoing growth in the residential
mortgage portfolio and an increase in loans to middle market companies, net
interest income after provision for credit losses increased 3% in 2001 and
totaled $413.6 million. The provision for credit losses totaled $17.0 million,
an increase of approximately $7.0 million from the prior year. In 2000, net
interest income totaled $400.9 million and increased 7% over 1999.
   PFS noninterest expenses, which include both the direct expenses of the
business unit and indirect expense allocations from NTGI and WWOT for product
and operating support, increased 5% in 2001 and 17% in 2000. The increase in
2001 primarily reflects merit increases, staff growth and higher employee
benefit charges, in addition to higher operating costs to support business
growth. Partially offsetting the above was a 29% reduction in performance-based
compensation.

Treasury and Other. The Risk Management Unit, under the direction of Perry R.
Pero, Vice Chairman and Chief Financial Officer, includes the treasury
function. The Treasury Department is responsible for managing the Bank's
wholesale funding, capital position and interest rate risk, as well as the
portfolio of interest rate risk management instruments. It is also responsible
for the investment portfolios of the Corporation and the Bank and provides
investment advice and management services to the subsidiary banks. "Other"
corporate income and expenses represent items that are not allocated to the
business units and generally represent certain nonrecurring items and certain
executive level compensation. The improvement in net interest income in 2001 is
primarily a result of lower interest rates which reduced the funding costs
allocated to corporate centers. The changes in net interest income for 2000 are
primarily the result of adjustments in the internal interest rate used to
allocate tier 2 capital to the business units. In 2000, the rate adjustments,
together with the change in the level of tier 2 capital, increased Treasury and
Other net interest income by $7.0 million and decreased C&IS and PFS net
interest income by $4.4 million and $2.6 million, respectively.

   The $46.1 million decrease in noninterest expenses in 2001 is the result of
several factors. Record profits and the significant increase in the price of
Northern Trust Corporation common stock during 2000 drove up incentive
compensation in the prior year. Expenses were also reduced due to lower
stock-related directors' compensation resulting from the decline in the price
of Northern Trust Corporation common stock. In addition, prior year expenses
were higher due to expenses associated with the purchase of the technology
center in January 2000, the planned relocation costs in London and the earlier
than anticipated retirement of certain Bank officers.

Northern Trust Global Investments. The NTGI business unit, under the direction
of Stephen B. Timbers, President--NTGI, provides a broad range of investment
management and related services and products to C&IS and PFS through various
subsidiaries of the Corporation. Clients include institutional and individual
separately managed accounts, bank common and collective funds, registered
investment companies, collective investment schemes and unregistered private
investment funds, including funds of funds. NTGI offers both active and passive
equity and fixed income portfolio management, as well as traditional
multi-manager products and services. NTGI's activities also encompass
brokerage, securities lending and related services. The revenues and expenses
of this business unit are fully allocated to C&IS and PFS.

NORTHERN TRUST CORPORATION

                                       47

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Worldwide Operations and Technology. The WWOT business unit, under the
direction of James J. Mitchell, President--WWOT, supports all of Northern
Trust's business activities including the sales, relationship management, asset
management, securities lending, transaction processing and product management
activities for C&IS, PFS and NTGI. The expenses of this business unit are fully
allocated to other business units.

SUBSEQUENT IMPLEMENTATION OF ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets."
   SFAS No. 141 supercedes Accounting Principles Board (APB) Opinion No. 16,
"Business Combinations" and discontinues the use of the pooling-of-interests
method of accounting for business combinations as permitted under APB No. 16.
The provisions of SFAS No. 141 apply to all business combinations initiated
after June 30, 2001 and require that all business combinations be accounted for
by a single method--the purchase method.
   SFAS No. 142 supercedes APB Opinion No. 17, "Intangible Assets" and
addresses the accounting for goodwill and other intangible assets. The
provisions of this Statement, as they relate to Northern Trust, are required to
be applied beginning January 1, 2002 to all goodwill and other intangible
assets reflected in the financial statements at that date. The Statement
discontinues amortization of goodwill over its estimated useful life and
requires a transitional impairment test of goodwill as of January 1, 2002. An
annual impairment test of goodwill is also required in the year of adoption and
in subsequent years. Impairment losses for goodwill that arise due to the
initial application of this Statement, resulting from the transitional
impairment test, are to be reported as a change in accounting principle and any
subsequent impairment losses are required to be reported as operating expenses.
Goodwill at December 31, 2001 totaled $90.1 million and has been amortized on a
straight-line method primarily over fifteen years. Application of the
nonamortization provisions of the Statement is expected to reduce noninterest
expense by approximately $10.0 million annually, resulting in an increase in
net income of $8.0 million in 2002 compared to 2001. Although management has
not yet fully completed the initial goodwill impairment test, a transitional
impairment charge is not anticipated. Other separately identifiable acquired
intangible assets will continue to be amortized over their estimated useful
lives. At December 31, 2001, acquired intangible assets totaled $35.2 million
and amortization for the year 2001 amounted to $6.6 million.
   In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121 and the
accounting and reporting provisions of APB Opinion No. 30. The Statement
addresses the accounting for a segment of a business accounted for as a
discontinued operation and the accounting for the disposition of long-lived
assets.The provisions of this Statement are effective for financial statements
issued for fiscal years beginning after December 15, 2001. Northern adopted the
requirements of this Statement at the beginning of 2002. It is not anticipated
that the adoption of SFAS No. 144 will have a material effect on Northern
Trust's results of operations.

CAPITAL EXPENDITURES

Northern Trust's Management Committee reviews and approves proposed capital
expenditures that exceed $500,000. This process is designed to assure that the
major projects to which Northern Trust commits its resources produce benefits
compatible with corporate strategic goals.
   Capital expenditures in the current year included ongoing enhancements to
Northern Trust's hardware and software capabilities, and leasehold improvements
and furnishings associated with the opening of our two new offices in Florida,
as well as expansion or remodeling in several existing offices. Capital
expenditures for 2001 totaled $263.4 million, of which $45.9 million was for
building and leasehold improvements, $16.9 million for furnishings,
$65.5 million for computer hardware and machinery and $135.1 million for
software. The unamortized capitalized cost of corporate-wide software
development projects as of December 31, 2001 was $329.8 million, compared to
$267.5 million at the previous year-end.

RISK MANAGEMENT

Asset Quality and Credit Risk Management

Securities. Northern Trust maintains a high quality securities portfolio, with
85% of the total portfolio composed of U.S. Treasury or federal agency secur-

                                                     NORTHERN TRUST CORPORATION

                                       48

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ities. The remainder of the portfolio consists of obligations of states and
political subdivisions, preferred stock and other securities, including
Federal Home Loan Bank stock and Federal Reserve Bank stock. At December 31,
2001, 73% of these securities were rated triple-A or double-A, 6% were rated
single-A and 21% were below A or not rated by Standard and Poor's and/or
Moody's Investors Service.
   Northern Trust is an active participant in the repurchase agreement market.
This market provides a relatively low cost alternative for short-term funding.
Securities purchased under agreements to resell and securities sold under
agreements to repurchase are recorded at the amounts at which the securities
were acquired or sold plus accrued interest. To minimize any potential credit
risk associated with these transactions, the fair value of the securities
purchased or sold is continuously monitored, limits are set on exposure with
counterparties, and the financial condition of counterparties is regularly
assessed. It is Northern Trust's policy to take possession of securities
purchased under agreements to resell. Securities sold under agreements to
repurchase are held by the counterparty until the repurchase transaction
matures.

Loans and Other Extensions of Credit. A certain degree of credit risk is
inherent in Northern Trust's various lending activities. Credit risk is managed
through the Credit Policy function, which is designed to ensure adherence to a
high level of credit standards. The Credit Policy function reports to the
Corporation's Chief Financial Officer. Credit Policy provides a system of
checks and balances for Northern Trust's diverse credit-related activities by
establishing and monitoring all credit-related policies and practices
throughout Northern Trust and ensuring their uniform application. These
activities are designed to ensure that credit exposure is diversified on an
industry and client basis, thus lessening overall credit risk. These credit
management activities also apply to Northern Trust's use of derivative
financial instruments, including foreign exchange contracts and interest risk
management instruments.
   Individual credit authority for commercial and other loans is limited to
specified amounts and maturities. Credit decisions involving commitment
exposure in excess of the specified individual limits are submitted to the
appropriate Credit Approval Committee (Committee). Each Committee is chaired by
the executive in charge of the area and has a Credit Policy officer as a voting
participant. Each Committee's credit approval authority is specified, based on
commitment levels, credit ratings and maturities. Credits involving commitment
exposure in excess of these group credit limits require the approval of the
Senior Credit Committee.
   The Counterparty Risk Management Committee established by Credit Policy
manages counterparty risk. This committee has sole credit authority for
exposure to all foreign banks, certain domestic banks which Credit Policy deems
to be counterparties and which do not have commercial credit relationships
within the Corporation, and certain other exposures.
   Under the auspices of Credit Policy, country exposure limits are reviewed
and approved on a country-by-country basis.
   As part of Northern Trust's ongoing credit granting process, internal credit
ratings are assigned to each client and credit before credit is extended, based
on creditworthiness. Credit Policy performs at least annually a review of
selected significant credit exposures to identify at the earliest possible
stages clients who might be facing financial difficulties. Internal credit
ratings are also reviewed during this process. Above average risk loans, which
will vary from time to time, receive special attention by both lending officers
and Credit Policy. This approach allows management to take remedial action in
an effort to deal with potential problems.
   An integral part of the Credit Policy function is a formal review of past
due and potential problem loans to determine which credits, if any, need to be
placed on nonaccrual status or charged off. As more fully described on pages 52
through 54, the provision for credit losses is reviewed quarterly to determine
the amount necessary to maintain an adequate reserve for credit losses.
   Management of credit risk is reviewed by various bank regulatory agencies.
The Corporation's public accountants also perform a review of credit-related
procedures, the loan portfolio and other extensions of credit, and the reserve
for credit losses as part of their examination of the consolidated financial
statements.
   An important element in managing credit risk is Northern Trust's
relationship-oriented approach to lending. Northern Trust focuses its lending
efforts on clients with existing trust or treasury management relationships or
who are looking to build a full range of financial services. Northern Trust
generally does not participate in syndicated lending, but may enter

NORTHERN TRUST CORPORATION

                                       49

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

into these loans as a result of an existing client relationship.
   A further way in which credit risk is managed is by requiring collateral.
Management's assessment of the borrower's creditworthiness determines whether
collateral is obtained. The amount and type of collateral held varies but may
include deposits held in financial institutions, U.S. Treasury securities,
other marketable securities, income-producing commercial properties, accounts
receivable, property, plant and equipment, and inventory. Collateral values are
monitored on a regular basis to ensure that they are maintained at an
appropriate level.
   The largest component of credit risk relates to the loan portfolio. Although
credit exposure is well-diversified, there are certain groups of loans that
meet the accounting definition under SFAS No. 107 of credit risk
concentrations. According to this statement, group concentrations of credit
risk exist if a number of borrowers or other counterparties are engaged in
similar activities and have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. The fact that an extension of credit
falls into one of these groups does not indicate that the credit has a higher
than normal degree of credit risk. These groups are: residential real estate,
middle market companies and small businesses, banks and bank holding companies
and commercial real estate.
   Residential Real Estate. The residential real estate loan portfolio totaled
$7.4 billion or 43% of total domestic loans at December 31, 2001, compared with
$6.8 billion or 40% at December 31, 2000. Residential real estate loans consist
of conventional home mortgages and equity credit lines, which generally require
a loan to collateral value of no more than 75% to 80% at inception.
   Of the total $7.4 billion in residential real estate loans, $3.5 billion
were in the greater Chicago area with the remainder distributed throughout the
other geographic regions served by Northern Trust. Legally binding commitments
to extend credit, which are primarily equity credit lines, totaled $978.1
million and $644.1 million as of December 31, 2001 and 2000, respectively.
   Middle Market Companies and Small Businesses. Credit exposure to middle
market companies and small businesses is primarily in the form of commercial
loans, which totaled $2.2 billion both at December 31, 2001 and December 31,
2000. These loans are to a diversified group of borrowers that are
predominantly in the manufacturing, wholesaling, distribution and services
industries, most of which have total annual sales of less than $500 million.
The largest component of this group of borrowers is located in the mid-western
areas served by the Bank. Middle market and small businesses have been an
important focus of Northern Trust's business development efforts both for
commercial banking and personal trust/private banking services and it is part
of the strategic plan to continue to selectively grow the portfolio with such
entities. The credit risk associated with middle market and small business
lending is principally influenced by general economic conditions and the
resulting impact on the borrower's operations.
   Legally binding commitments to extend credit, standby letters of credit, and
commercial letters of credit to middle market companies and small businesses
totaled $2.9 billion, $1.3 billion, and $16.5 million, respectively, as of
December 31, 2001, and $2.5 billion, $1.1 billion, and $21.6 million,
respectively, as of December 31, 2000.
   Banks and Bank Holding Companies. On-balance sheet credit risk to banks and
bank holding companies, both domestic and international, totaled $10.7 billion
and $8.0 billion at December 31, 2001 and 2000, respectively. The majority of
this exposure consisted of short-term money market assets, which totaled $9.2
billion at December 31, 2001 and $5.9 billion at December 31, 2000, and
noninterest-bearing demand balances maintained at correspondent banks which
totaled $1.2 billion as of December 31, 2001, compared to $1.5 billion at
year-end 2000. Commercial loans to banks totaled $223.9 million and $380.7
million, respectively, as of December 31, 2001 and 2000. The majority of these
loans were to U.S. bank holding companies, primarily in the seventh Federal
Reserve District, for their acquisition purposes. Such lending activity is
limited to entities which have a substantial business relationship with
Northern Trust. At December 31, 2001, legally binding commitments to extend
credit and standby letters of credit to banks and bank holding companies
totaled $186 million and $10.4 million, respectively. At December 31, 2000,
legally binding commitments were $213 million and standby letters of credit
were $16 million.
   Commercial Real Estate. In managing its credit exposure, management has
defined a commercial real estate loan as one where: (1) the borrower's
principal business activity is the acquisition or the development of real
estate for commercial purposes; (2) the

                                                     NORTHERN TRUST CORPORATION

                                       50

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

principal collateral is real estate held for commercial purposes, and loan
repayment is expected to flow from the operation of the property; or (3) the
loan repayment is expected to flow from the sale or refinance of real estate as
a normal and ongoing part of the business. Unsecured lines of credit to firms
or individuals engaged in commercial real estate endeavors are included without
regard to the use of loan proceeds. The commercial real estate portfolio
consists of interim loans and commercial mortgages.
   Short-term interim loans provide financing for the initial phases of the
acquisition or development of commercial real estate, with the intent that the
borrower will refinance the loan through another financial institution or sell
the project upon its completion. The interim loans are primarily in the Chicago
market where Northern Trust has a strong presence and a thorough knowledge of
the local economy. The interim loans, which totaled $342.0 million and $349.5
million as of December 31, 2001 and 2000, respectively, are composed primarily
of loans to developers that are highly experienced and well-known to Northern
Trust.
   Commercial mortgage financing, which totaled $683.6 million and $561.5
million as of December 31, 2001 and 2000, respectively, is provided for the
acquisition of income producing properties. Cash flows from the properties
generally are sufficient to amortize the loan. These loans average less than
$500,000 each and are primarily located in the suburban Chicago and Florida
markets.
   At December 31, 2001, legally binding commitments to extend credit and
standby letters of credit to commercial real estate developers totaled $79.4
million and $12.7 million, respectively. At December 31, 2000, legally binding
commitments were $64.5 million and standby letters of credit were $22.0 million.

Foreign Outstandings. Short-term interbank time deposits with foreign banks
represent the largest category of foreign outstandings. The Chicago head office
and the London Branch actively participate in the interbank market with U.S.
and foreign banks. In recent years, international commercial lending activities
have been focused on import and export financing for U.S.-based clients.
   Risk related to foreign outstandings is continually monitored and internal
limits are imposed on foreign exposure. The following table provides
information on foreign outstandings by country that exceed 1.00% of Northern
Trust's assets.

Foreign Outstandings
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                             Commercial
                 (In Millions)         Banks  and Other  Total
                 ---------------------------------------------
                 <S>                  <C>    <C>        <C>
                 At December 31, 2001
                   Germany            $  992       $ -- $  992
                   United Kingdom        916         71    987
                   Canada                832         --    832
                   France                762         --    762
                   Netherlands           475         13    488
                   Italy                 433         --    433
                   Belgium               431         --    431
                   Switzerland           409         --    409
                 ---------------------------------------------
                 At December 31, 2000
                   Germany            $1,132       $ -- $1,132
                   United Kingdom        844        158  1,002
                   Italy                 664         --    664
                   Belgium               545         --    545
                 -------------------- ------ ---------- ------
                 At December 31, 1999
                   Germany            $  359       $ -- $  359
</TABLE>

Aggregate foreign outstandings by country falling between .75% and 1.00% of
total assets at December 31, 2001 totaled $654 million to Ireland and Sweden.
This compares to $658 million to Austria and the Netherlands at December 31,
2000 and $217 million to France at December 31, 1999.

   As used in this discussion, foreign outstandings are cross-border
outstandings as defined by the Securities and Exchange Commission. They consist
of loans, acceptances, interest-bearing deposits with financial institutions,
accrued interest and other monetary assets. Not included are letters of credit,
loan commitments, and foreign office local currency claims on residents funded
by local currency liabilities. Foreign outstandings related to a specific
country are net of guarantees given by third parties resident outside the
country and the value of tangible, liquid collateral held outside the country.
However, transactions with branches of foreign banks are included in these
outstandings and are clssified according to the country location of the foreign
banks' head office.

NORTHERN TRUST CORPORATION

                                       51

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Nonperforming Assets and 90 Day Past Due Loans
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                 December 31
          -------------------------------------------------------------
          (In Millions)                   2001  2000  1999  1998  1997
          ------------------------------------------------------------
          <S>                           <C>    <C>   <C>   <C>   <C>
          Nonaccrual Loans
            Domestic
              Residential Real Estate   $  5.0 $ 2.9 $ 6.4 $ 5.2 $ 5.3
              Commercial                  99.3  71.2  50.3  21.8  26.3
              Commercial Real Estate       4.3   1.8   1.9   2.9   7.1
              Personal                      .1    .4    .7    .6    .2
            International                   --    --    --    --    --
          ---------------------------   ----   ----- ----- ----- -----
                                        ------ ----- ----- ----- -----
            Total Nonaccrual Loans       108.7  76.3  59.3  30.5  38.9
          ---------------------------   ------ ----- ----- ----- -----
          Restructured Loans                --    --    --   2.4   2.5
          Other Real Estate Owned           .8   2.2   1.3   2.3   1.9
          ---------------------------   ------ ----- ----- ----- -----
          Total Nonperforming Assets    $109.5 $78.5 $60.6 $35.2 $43.3
          ---------------------------   ------ ----- ----- ----- -----
          Total 90 Day Past Due Loans
            (still accruing)            $ 14.5 $30.5 $15.4 $30.0 $13.9
</TABLE>


Nonperforming Assets and 90 Day Past Due Loans. Nonperforming assets consist of
nonaccrual loans, restructured loans and Other Real Estate Owned (OREO). OREO
is comprised of commercial and residential properties acquired in partial or
total satisfaction of problem loans. Past due loans are loans that are
delinquent 90 days or more and still accruing interest. The level of 90 day
past due loans at any reporting period can fluctuate widely based on the
timing of cash collections, renegotiations and renewals.
   Maintaining a low level of nonperforming assets is important to the ongoing
success of a financial institution. In addition to the negative impact on both
net interest income and credit losses, nonperforming assets also increase
operating costs due to the expense associated with collection efforts. Northern
Trust's comprehensive credit review and approval process is critical to the
ability to minimize nonperforming assets on a long-term basis.
   The table above presents the nonperforming assets and past due loans for the
current year and prior years. Of the total loan portfolio of $18.0 billion at
December 31, 2001, $108.7 million or .6% was nonaccrual, an increase of $32.4
million from year-end 2000. At September 30, 2001, nonaccrual loans totaled
$114.2 million. Nonaccrual loans at the end of 2001 include $19.4 million of
outstandings, net of charge-offs, to Enron Corp. and related entities and $47.4
million to three asbestos producers that have filed for Chapter 11
reorganization.
   Included in the portfolio of nonaccrual loans are those which meet the
criteria as being "impaired" under the definition in SFAS No. 114. A loan is
impaired when, based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the contractual
terms of the loan agreement. As of December 31, 2001, impaired loans, all of
which have been classified as nonaccrual, totaled $98.0 million, with $21.1
million of the reserve for credit losses allocated to these loans.

Provision and Reserve for Credit Losses. Changes in the reserve for credit
losses were as follows:

<TABLE>
<CAPTION>
(In Millions)                 2001    2000    1999
---------------------------------------------------
<S>                         <C>     <C>     <C>
Balance at Beginning of
  Year                      $162.9  $150.9  $146.8
---------------------------------------------------
Charge-Offs                  (69.0)  (13.5)   (9.8)
Recoveries                     1.2     1.5     1.4
---------------------------------------------------
Net Charge-Offs              (67.8)  (12.0)   (8.4)
Provision for Credit Losses   66.5    24.0    12.5
---------------------------------------------------
Balance at End of Year      $161.6  $162.9  $150.9
</TABLE>

   The provision for credit losses is the charge against current earnings that
is determined by management, through a disciplined credit review process, to be
the amount needed to maintain a reserve that is sufficient to absorb credit
losses inherent in Northern Trust's loan and lease portfolios and other credit
undertakings. The reserve provides for probable losses that have been
identified with specific borrower relationships (specific loss component) and
for probable losses that are believed to be inherent in the loan and lease
portfolios and other credit undertakings but that have not yet been
specifically identified (inherent loss component). The table on page 54 shows
(i) the specific portion of the reserve, (ii) the allocated portion of the
inherent reserve and its components by loan category and (iii) the unallocated
portion of the reserve at December 31, 2001 and each of the prior four
year-ends.
   Specific Component of the Reserve. The specific component of the reserve is
determined on a loan-

                                                     NORTHERN TRUST CORPORATION

                                  52


<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

by-loan basis as part of the regular review of impaired loans and potential
charge-offs. The specific reserve is based on a loan's current book value
compared to the present value of its projected future cash flows, collateral
value or market value, as is relevant for the particular loan.
   At December 31, 2001, the specific reserve component amounted to $21.1
million compared to $24.3 million at the end of 2000, a $3.2 million net
decrease. The decrease was primarily caused by the writedown and sale of
certain large commercial loans during the year and the successful workout of
one large middle market loan. These were partially offset by additional
reserves provided on certain large commercial loans with increased exposure to
potential asbestos-related claims, and on several middle market loans
significantly impacted by the recent economic downturn. The increase in the
specific loss component of the reserve in the prior year from $15.0 million in
1999 to $24.3 million in 2000 primarily relates to two large commercial
credits, one of which filed for Chapter 11 reorganization in 2000, and further
deterioration in the second which had commenced reorganization proceedings in
1999.
   Allocated Inherent Component of the Reserve. The allocated portion of the
inherent reserve is based on management's review of historical charge-off
experience as well as its judgment regarding loans in each credit rating
category over a period of time that management determines is adequate to
reflect longer-term economic trends. One building block in reaching the
appropriate allocated inherent reserve is an analysis of loans by credit rating
categories. Credit ratings are determined by members of the Credit Policy Group
at the time each loan is approved. These credit ratings are then subject to
periodic reviews by the Credit Policy Group, which is independent of business
unit management. Credit Policy makes the final determination of each loan's
rating. Credit ratings range from "1" for the strongest credits to "9" for the
weakest credits; a "9" rated loan would normally represent a complete loss.
   Several factors are considered by management to determine the level of the
allocated inherent component of the reserve. One of the factors is the
historical loss ratio for each credit rating category over the prior five
years. The historical loss ratios are evaluated by management and adjusted
based on current facts and circumstances. The historical loss factors on
higher-risk loans, those rated "5" through "8", are also refined by considering
historical loss ratios and regulatory guidelines in order to provide a more
consistent and reliable method for taking account of credit trends in measuring
loss exposure.
   Management also utilizes an "industry base" reserve for the commercial,
commercial real estate and international segments of the portfolio in order to
measure the loss estimated to be inherent in these riskier segments. Because of
the higher degree of uncertainty in these portfolios and Northern Trust's past
experience, which included significant losses in brief periods at particular
points in the economic cycles, management believes it appropriate to use a
reserve higher than recent charge-off experience would suggest. This approach
is supported by what management perceives to be industry practice for minimum
reserve levels, and is intended to prevent an understatement of reserves based
upon over-reliance on recent favorable economic conditions.
   The allocated inherent component of the reserve also covers the credit
exposure associated with undrawn loan commitments and standby letters of
credit. To determine the exposure on these instruments, management uses the
factors applied in risk-based capital calculations to determine the balance
sheet equivalent amount and assigns a reserve provision factor based on the
methodology utilized for outstanding loans.
   The allocated portion of the inherent reserve increased $5.5 million to
$118.0 million at December 31, 2001 and increased $5.9 million during 2000 to
$112.5 million at December 31, 2000. The increase in this component of the
reserve in each year reflects the net impact of several factors. First, the
credit ratings on several commercial loans were lowered due to the decline in
their credit quality primarily resulting from the slowdown in the economy. In
addition, in 2001, the credit rating on one large performing loan was lowered
due to exposure to potential asbestos-related claims. Second, as a result of
management's periodic review of all loss factors utilized in estimating the
allocated inherent reserve, certain loss factors applied primarily to
commercial loans and off-balance sheet exposures were reduced. The loss factor
adjustments reflect management's assessment of the credit risk inherent for
these categories and their historical loss experience.
   Unallocated Inherent Component of the Reserve. The unallocated portion of
the inherent loss reserve is based on management's review of other factors
affecting the determination of probable losses inherent in the portfolio, which
are not necessarily captured by the application of historical loss ratios. This
portion of the reserve analysis involves the exercise of judgment and reflects
considerations such as management's view that the reserve should have a margin
that recognizes the imprecision inherent in the process of estimating expected
credit losses.

NORTHERN TRUST CORPORATION

                                       53

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Allocation of the Reserve for Credit Losses
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                    December 31
-----------------------------------------------------------------------------------------------------------------------
                                   2001              2000              1999              1998              1997
-----------------------------------------------------------------------------------------------------------------------
                                      Percent           Percent           Percent           Percent           Percent
                                     of Loans          of Loans          of Loans          of Loans          of Loans
                             Reserve to Total  Reserve to Total  Reserve to Total  Reserve to Total  Reserve to Total
($ in Millions)               Amount    Loans   Amount    Loans   Amount    Loans   Amount    Loans   Amount    Loans
----------------------------------------------------------------------------------------------------------------------
<S>                          <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>
Specific Reserve              $ 21.1       --%  $ 24.3       --%  $ 15.0       --%  $  5.9       --%  $ 10.7       --%
----------------------------------------------------------------------------------------------------------------------
Allocated Inherent Reserve
  Residential Real Estate        9.7       41      9.6       38     11.5       41     11.0       43      3.7       41
  Commercial                    81.7       27     79.1       27     73.2       31     77.4       29     87.1       30
  Commercial Real Estate        14.8        6     13.2        5     12.2        5     11.8        5      6.4        5
  Personal                       3.8       12      4.3       13      3.3       11      3.2       11       .6       10
  Other                           --        4       --        6       --        4       --        5       --        7
  Lease Financing                3.0        7      2.9        6      2.9        4      2.9        4      2.9        3
  International                  5.0        3      3.4        5      3.5        4      3.6        3       --        4
----------------------------------------------------------------------------------------------------------------------
Total Allocated Inherent      $118.0      100%  $112.5      100%  $106.6      100%  $109.9      100%  $100.7      100%
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Unallocated Inherent Reserve    22.5       --     26.1       --     29.3       --     31.0       --     36.2       --
----------------------------------------------------------------------------------------------------------------------
Total Reserve                 $161.6      100%  $162.9      100%  $150.9      100%  $146.8      100%  $147.6      100%
</TABLE>
   In evaluating the level of the unallocated portion of the reserve in 2001,
management concluded that there were no significant changes in concentration of
credits that impacted asset quality that had not been recognized in the
specific and allocated components of the reserve. In addition, loan growth
during the year came primarily in low-risk residential mortgage loans. Based on
these factors and management's current evaluation of the overall quality of the
portfolio, the unallocated portion of the reserve was lowered from $26.1
million to $22.5 million.
   Other Factors. The total amount of the two highest risk loan groupings,
those rated "7" and "8" (based on Northern Trust's internal rating scale, which
closely parallels that of the banking regulators), declined $16 million in the
fourth quarter to $295 million, of which $97.6 million was classified as
impaired. This compares with $153 million last year-end when $74.7 million was
classified as impaired. The increase primarily reflects rating changes on
certain loans, with approximately 50% related to one large performing
commercial loan whose rating was lowered due to increased risk of potential
exposure to asbestos-related claims. There were no "9" rated loans reported at
any time during the periods because loans are charged-off when they are so
rated. At December 31, 2001, these loans represent 1.6% of outstanding loans.
   Overall Reserve. Management's evaluation of the factors above resulted in a
reserve for credit losses of $161.6 million at December 31, 2001 compared to
$162.9 million at the end of 2000. The reserve as a percentage of total loans
remained at .90% at December 31, 2001, the same as at year-end 2000. This
reserve level recognizes the fact that a significant part of the growth in
Northern Trust's loan portfolio continues to be in lower-risk residential
mortgage loans and collateralized personal loans. In addition, Northern Trust's
underwriting standards have enabled Northern Trust to maintain strong credit
quality in its loan and lease portfolio.
   Provision. The resulting provision for credit losses was $66.5 million for
the year, while net charge-offs totaled $67.8 million. This compares to a
provision for credit losses of $24.0 million and net charge-offs of $12.0
million in 2000. $45.0 million of the current year provision was recognized in
the fourth quarter. This provision was taken to address aggressively credit
exposure to Enron Corp. which filed for bankruptcy on December 2, 2001, as well
as other credit risks stemming from the economic recession. Approximately $24.0
million of the fourth quarter's credit loss provision and charge-offs were
related to the Enron Corp. bankruptcy filing. The higher provision in the
current year also included $6.5 million associated with the sale of $44.5
million of nonperforming loans in the second quarter of the year.

                                                     NORTHERN TRUST CORPORATION

                                       54

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MARKET RISK MANAGEMENT

Overview. The Board of Directors has overall responsibility for Northern
Trust's interest rate and foreign exchange risk management policies. To ensure
adherence to these policies, the Corporate Asset and Liability Policy Committee
(ALCO) establishes and monitors guidelines to control the sensitivity of
earnings to changes in interest rates. The guidelines apply to both on- and
off-balance sheet positions. ALCO also establishes and monitors limits for
foreign exchange risk. The goal of the ALCO process is to maximize earnings
while maintaining a high quality balance sheet and carefully controlling
interest rate and foreign exchange risk.

Asset/Liability Management. Asset/liability management activities include
lending, accepting and placing deposits, investing in securities, issuing debt,
and hedging interest rate risk with off-balance sheet instruments. The primary
market risk associated with asset/liability management activities is interest
rate risk. Sensitivity of earnings to interest rate changes arises when yields
on assets change in a different time period or in a different amount from that
of interest costs on liabilities. To mitigate interest rate risk, the structure
of the balance sheet is managed so that movements of interest rates on assets
and liabilities (adjusted for off-balance sheet hedges) are highly correlated
and contribute to earnings even in periods of volatile interest rates.
   Northern Trust utilizes the following measurement techniques in the
management of interest rate risk: simulation of earnings; simulation of the
economic value of equity; and gap analysis. These three techniques are
complementary and are used in concert to provide a comprehensive interest rate
risk management capability.
   Simulation of earnings is the primary tool used to measure the sensitivity
of earnings to interest rate changes. Using computer modeling techniques,
Northern Trust is able to measure the potential impact of different interest
rate assumptions on pre-tax earnings. All on-balance sheet positions, as well
as derivative financial instruments (principally interest rate swaps) that are
used to manage interest rate risk, are included in the model simulation.
   Northern Trust used model simulations to measure its earnings sensitivity
relative to management's most likely interest rate scenario as of December 31,
2001. This interest rate scenario assumed a stable interest rate environment
during the first half of 2002, with moderately rising interest rates for the
remainder of the year. The interest sensitivity was tested by running
alternative scenarios above and below the most likely interest rate outcome.
The table on page 56 shows the effect on 2002 pre-tax earnings of 100 and 200
basis point upward and downward movements in interest rates relative to
management's interest rate assumptions. Each of the movements in interest rates
was assumed to have occurred gradually over a one year period. The 100 basis
point increase, for example, consisted of twelve consecutive monthly increases
of 8.3 basis points. The following assumptions were also incorporated into the
model simulations:
   . the balance sheet size was assumed to remain constant over the one year
     simulation horizon;
   . maturing assets and liabilities were invested or deposited into identical
     items with the same term;
   . prepayments on mortgage loans were projected under each rate scenario
     using a mortgage analytics system that incorporated market prepayment
     assumptions; and
   . changes in the spreads between retail deposit rates and asset yields were
     estimated based on historical patterns and current competitive trends.

NORTHERN TRUST CORPORATION

                                       55

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Interest Rate Risk Simulation of Pre-Tax Income as of December 31, 2001
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  Estimated Impact
                                                   On 2002 Pre-tax
                                                            Income
              (In Millions)                    Increase/(Decrease)
              ----------------------------------------------------
              <S>                              <C>
              Increase in Interest Rates Above
                Management's Interest Rate
                Forecast
                100 Basis Points                           $ (6.9)
                200 Basis Points                            (14.5)
              Decrease in Interest Rates Below
                Management's Interest Rate
                Forecast
                100 Basis Points                            $  6.2
                200 Basis Points                              10.0
</TABLE>

   The simulations of earnings do not incorporate any management actions that
might moderate the negative consequences of interest rate deviations. For that
reason and others, they do not reflect likely actual results but serve as
conservative estimates of interest rate risk.
   A second technique used to measure interest rate risk is simulation of the
economic value of equity, which provides estimates of the potential future
impact on equity of various changes in interest rates. The potential effect of
interest rate changes on equity is derived from the impact of such changes on
the market values of assets, liabilities and off-balance sheet instruments.
Northern Trust limits aggregate market risk, as measured in this fashion, to an
acceptable level within the context of risk-return trade-offs.
   The third technique that is used to measure interest rate risk is gap
analysis. The calculation of the interest sensitivity gap measures the timing
mismatches between assets and liabilities. This interest sensitivity gap is
determined by subtracting the amount of liabilities from the volume of assets
that reprice in a particular time interval. A liability sensitive position
results when more liabilities than assets reprice or mature within a given
period. Under this scenario, as interest rates decline, increased net interest
revenue will be generated. Conversely, an asset sensitive position results when
more assets than liabilities reprice within a given period; in this instance,
net interest revenue would benefit from an increasing interest rate
environment. The economic impact of creating a liability or asset sensitive
position depends on the magnitude of actual changes in interest rates relative
to the current expectations of market price participants.
   A variety of actions are used to implement risk management strategies
including:
   . purchases of securities;
   . sales of securities that are classified as available for sale;
   . sales of held for sale residential real estate loans;
   . issuance of senior notes;
   . collateralized borrowings from the Federal Home Loan Bank;
   . placing and taking Eurodollar time deposits; and
   . hedging with various types of derivative financial instruments.
   Northern Trust strives to use the most effective instruments for
implementing its interest risk management strategies, considering the costs,
liquidity, collateral and capital requirements of the various alternatives.

Foreign Exchange Trading. Foreign exchange trading activities consist
principally of providing foreign exchange services to clients. Most of these
services are provided in connection with Northern Trust's growing global
custody business. However, in the normal course of business Northern Trust also
engages in proprietary trading of foreign currencies. The primary market risk
associated with these activities is foreign exchange risk.
   Foreign currency positions exist when aggregate obligations to purchase and
sell a currency other than the U.S. dollar do not offset each other, or offset
each other in different time periods. Northern Trust mitigates the risk related
to its foreign currency positions by establishing limits on the amounts of, and
durations of its positions. The limits on overnight inventory positions are
generally lower than the limits established for intra-day trading activity. All
over-

                                                     NORTHERN TRUST CORPORATION

                                       56

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

night positions are monitored by a risk management function, which is separate
from the trading function, to ensure that the limits are not exceeded. Although
position limits are important in controlling foreign exchange risk, they are
not a substitute for the experience or judgment of Northern Trust's senior
management and its foreign currency traders, who have extensive knowledge of
the foreign currency markets. Foreign currency positions and strategies are
adjusted as needed in response to changing market conditions.
   As part of its risk management activities, Northern Trust regularly measures
the risk of loss associated with foreign currency positions using a value at
risk model. This statistical model provides an estimate, based on a 95%
confidence level, of the potential loss in earnings that may be incurred if an
adverse one-day shift in foreign currency exchange rates were to occur. The
model, which is based on a variance/co-variance methodology, incorporates
historical currency price data and historical correlations in price movement
among the currencies. All foreign currency positions, including foreign
denominated assets and liabilities that were not converted to U.S. dollars
through the use of hedge contracts, are included in the model.
   Northern Trust's value at risk based on foreign currency positions totaled
$85 thousand and $107 thousand as of December 31, 2001 and 2000, respectively.
Value at risk totals representing the average, high and low for 2001 were $233
thousand, $463 thousand and $85 thousand, respectively, with the average, high
and low for 2000 being $181 thousand, $345 thousand and $78 thousand,
respectively. These totals indicate the degree of risk inherent in foreign
currency positions as of year-end and during the year, however, it is not a
prediction of an expected gain or loss. Actual future gains and losses will
vary depending on market conditions and the size and duration of future foreign
currency positions.

Other Trading Activities. Market risk associated with other trading activities
is negligible. Northern Trust is a party to various derivative financial
instruments, most of which consist of interest rate swaps entered into to meet
clients' interest risk management needs. When Northern Trust enters into such
swaps, its policy is to mitigate the resulting interest rate risk with an
offsetting swap or with futures contracts. Northern Trust carries in its
trading portfolio a small inventory of securities that are held for sale to its
clients. The interest rate risk associated with these securities is
insignificant.

LIQUIDITY RISK MANAGEMENT

The objectives of liquidity risk management are to ensure that Northern Trust
can meet its cash flow requirements and to capitalize on business opportunities
on a timely and cost effective basis. Management monitors the liquidity
position on a daily basis to make funds available at a minimum cost to meet
loan and deposit cash flows. The liquidity profile is also structured so that
the capital needs of the Corporation and its banking subsidiaries are met.
Management maintains a detailed liquidity contingency plan designed to
adequately respond to dramatic changes in market conditions.
   Liquidity is secured by managing the mix of items on the balance sheet and
expanding potential sources of liquidity. The balance sheet sources of
liquidity include the short-term money market portfolio, unpledged available
for sale securities, maturing loans and the ability to securitize a portion of
the loan portfolio. Further, liquidity arises from the diverse funding base and
the fact that a significant portion of funding comes from clients that have
other relationships with Northern Trust.
   A significant source of liquidity is the ability to draw funding from both
domestic and international markets. The Bank's senior long-term debt is rated
AA- by Standard & Poor's, Aa3 by Moody's Investors Service, and AA by Fitch.
These ratings allow the Bank to access capital markets on favorable terms.
   Northern Trust maintains a liquid balance sheet with loans representing only
45% of total assets. Further, at December 31, 2001, it had a significant
liquidity reserve on its balance sheet in the form of cash and due from banks,
securities available for sale, and money market assets, which in aggregate
totaled $18.8 billion or 47% of total assets. Northern Trust has not utilized
unconsolidated special purpose vehicles for financing purposes or as part of
its liquidity risk management.

NORTHERN TRUST CORPORATION

                                       57

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   The Corporation's uses of cash consist mainly of dividend payments to the
Corporation's common and preferred stockholders, the payment of principal and
interest to note holders, purchases of its common stock and acquisitions. These
cash needs are met largely by dividend payments from its subsidiaries, and by
interest and dividends earned on investment securities and money market assets.
Bank subsidiary dividends are subject to certain restrictions that are
explained in Note 15 on page 76. Bank subsidiaries have the ability to pay
dividends during 2002 equal to their 2002 eligible net profits plus $386.1
million. The Corporation's liquidity, defined as the amount of marketable
assets in excess of commercial paper, was strong at $139.2 million at year-end
2001. The cash flows of the Corporation are shown in Note 30 on page 91. The
Corporation also has a $50 million back-up line of credit for its commercial
paper issuance.
   The following information regarding long-term contractual obligations and
commitments at December 31, 2001 is provided in response to recent SEC
recommendations.

Long-Term Contractual Obligations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                 Payment Due by Period
---------------------------------------------------------------------------------
                                                 One Year    1-3    4-5    After
(In Millions)                              Total and Less  Years  Years  5 Years
--------------------------------------------------------------------------------
<S>                                     <C>      <C>      <C>    <C>    <C>
Bank-Senior Notes                       $  450.0    $  -- $350.0 $100.0 $     --
Long-Term Debt                             750.0       --  100.0  200.0    450.0
Floating Rate Capital Securities           270.0       --     --     --    270.0
Capital Lease Obligations                   25.9      2.4    4.8    4.8     13.9
Operating Leases                           551.4     43.8   82.0   76.3    349.3
--------------------------------------- -------- -------- ------ ------ --------
Total Long-Term Contractual Obligations $2,047.3    $46.2 $536.8 $381.1 $1,083.2
--------------------------------------- -------- -------- ------ ------ --------
</TABLE>

Commitments and Letters of Credit
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                           Amount of Commitment
                                          Expiration Per Period
             -------------------------------------------------------
                                           Total
                                          Amount  One Year     Over
             (In Millions)             Committed  and Less One Year
             ------------------------------------------------------
             <S>                       <C>       <C>       <C>
             Legally Binding
               Commitments to
               Extend Credit           $16,358.5 $ 9,798.8 $6,559.7
             Commercial Letters
               of Credit                    71.8      31.6     40.2
             Standby Letters of Credit   2,473.7   1,705.2    768.5
             ------------------------- --------- --------- --------
             Total Commitments and
               Letters of Credit       $18,904.0 $11,535.6 $7,368.4
             ------------------------- --------- --------- --------
</TABLE>

CAPITAL MANAGEMENT

One of management's primary objectives is to maintain a strong capital position
to merit the confidence of clients, the investing public, bank regulators and
stockholders. A strong capital position helps Northern Trust take advantage of
profitable investment opportunities when they arise and helps withstand
unforeseen adverse developments. In 2001, capital ratios were strengthened as
average common equity increased 15% or $330.5 million reaching a record $2.65
billion at year-end, while total risk-weighted assets rose 2%. Total equity as
of December 31, 2001 was $2.77 billion, including $120 million of auction rate
preferred stock. The average dividend rate declared on the $120 million of
auction rate preferred stock, was 3.40% during 2001. During 2001, the
Corporation purchased 2,547,235 of its own shares as part of its buyback
program. The buyback program is designed, among other things, to help offset
the dilutive effect of the Corporation's incentive stock programs. The
Corporation may purchase up to 4.6 million additional shares after December 31,
2001.

                                                     NORTHERN TRUST CORPORATION

                                       58

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Capital Adequacy
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       December 31
           -----------------------------------------------------------
           ($ In Millions)                             2001     2000
           ----------------------------------------------------------
           <S>                                      <C>      <C>
           Tier 1 Capital
           Common Stockholders' Equity              $ 2,653  $ 2,342
           Debt-Floating Rate Capital Securities        268      267
           Goodwill and Other Intangible Assets        (114)    (126)
           Net Unrealized (Gain) Loss on Securities      (1)       1
           ---------------------------------------- -------  -------
           Total Tier 1 Capital                       2,806    2,484
           ---------------------------------------- -------  -------
           Tier 2 Capital
           Auction Rate Preferred Stock                 120      120
           Reserve for Credit Losses                    162      163
           Reserves Against Identified Losses           (21)     (24)
           Long-Term Debt*                              610      520
           ---------------------------------------- -------  -------
           Total Tier 2 Capital                         871      779
           ---------------------------------------- -------  -------
           Total Risk-Based Capital                   3,677    3,263
           ---------------------------------------- -------  -------
           Risk-Weighted Assets**                   $25,797  $25,385
           ---------------------------------------- -------  -------
           Total Assets-End of Period (EOP)         $39,664  $36,022
           Average Fourth Quarter Assets**           35,373   35,932
           Total Loans-EOP                           17,980   18,145
           ---------------------------------------- -------  -------
           Ratios
           Risk-Based Capital to Risk-
             Weighted Assets
             Tier 1                                    10.9%     9.8%
             Total (Tier 1 and Tier 2)                 14.3     12.9
           Leverage                                     7.9      6.9
           ---------------------------------------- -------  -------
           Common Stockholders' Equity to
             Total Loans EOP                           14.8%    12.9%
             Total Assets EOP                           6.7      6.5
           Stockholders' Equity to
             Total Loans EOP                           15.4%    13.6%
             Total Assets EOP                           7.0      6.8
</TABLE>

Notes:
*Long-Term Debt that qualifies for risk-based capital amortizes for the purpose
of inclusion in tier 2 capital during the five years before maturity.
**Assets have been adjusted for goodwill and other intangible assets, net
unrealized (gain) loss on securities, reserves against identified losses and
excess reserve for credit losses that have been excluded from tier 1 and tier 2
capital, if any.

   The Board of Directors increased the quarterly dividend by 9.7% to $.17 per
common share in November 2001. The common dividend has increased 89% from its
level five years ago.
   The higher capital levels in 2001 were the result of Northern Trust's
ongoing policy of retaining a sufficient percentage of earnings in the
Corporation to allow for strategic expansion while maintaining a strong balance
sheet. All of Northern Trust's capital ratios were well above the ratios that
are a requirement for regulatory treatment as "well capitalized." At December
31, 2001, tier 1 capital was 10.9% and total capital was 14.3% of risk-weighted
assets. These risk-based capital ratios are well above the minimum requirements
of 4.0% for tier 1 and 8.0% for total risk-based capital ratios. Northern
Trust's leverage ratio (tier 1 capital to fourth quarter average assets) of
7.9% is also well above the regulatory requirement of 3.0%. In addition, each
of the subsidiary banks had a ratio of at least 9.3% for tier 1 capital, 11.0%
for total risk-based capital, and 6.7% for the leverage ratio.

OPERATIONAL AND FIDUCIARY
RISK MANAGEMENT

In providing banking and trust services, Northern Trust, in addition to
safekeeping and managing trust and corporate assets, processes cash and
securities transactions exceeding $175 billion on average each business day.
These activities expose Northern Trust to operational and fiduciary risk.
Controls over such processing activities are closely monitored to safeguard the
assets of Northern Trust and its clients. However, from time to time Northern
Trust has incurred losses related to these risks and there can be no assurance
that such losses will not occur in the future.
   Operational risk is the risk of unexpected losses attributable to human
error, systems failures, fraud, or inadequate internal controls and procedures.
This risk is mitigated through a system of internal controls that are designed
to keep operating risk at levels appropriate to Northern Trust's corporate
standards in view of the risks inherent in the markets in which Northern Trust
operates. The system of internal controls includes policies and procedures that
require the proper authorization, approval, documentation and monitoring of
transactions. Each business unit is responsible for complying with corporate
policies and external regulations applicable to the unit, and is responsible
for establishing specific procedures to do so. Northern Trust's internal
auditors monitor the overall effectiveness of the system of internal controls
on an ongoing basis.
   Fiduciary risk is the risk of loss that may occur as a result of breaching a
fiduciary duty to a client. To limit this risk, the Trust Investment Committee
establishes corporate policies and procedures to reduce the risk that
obligations to clients would not be discharged faithfully or in compliance with
applicable legal and regulatory requirements. These policies and procedures
provide guidance and establish standards related to the creation, sale, and
management of investment products, trade execution, and counterparty

NORTHERN TRUST CORPORATION

                                       59

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

selection. Business units have the primary responsibility for adhering to the
policies and procedures applicable to their businesses.

FACTORS AFFECTING FUTURE RESULTS

This annual report contains statements that may be considered forward-looking,
such as the discussion of Northern Trust's financial goals, dividend policy,
expansion and business development plans, business prospects and positioning
with respect to market and pricing trends, new business results and outlook,
credit quality, planned capital expenditures and technology spending, and the
effect of various matters (including changes in accounting standards and
interpretations) on Northern Trust's business and results. These statements
speak of Northern Trust's plans, goals, beliefs or expectations, refer to
estimates or use similar terms. Actual results could differ materially from the
results indicated by these statements because the realization of those results
is subject to many risks and uncertainties including:
   . The future health of the U.S. and international economies and other
     economic factors that affect wealth creation, investment and savings
     patterns.
   . U.S. and international economic factors that may impact Northern Trust's
     interest rate risk exposure and credit risk.
   . Any extraordinary events (such as the September 11, 2001 events and the
     U.S. government's response to the events).
   . Changes in U.S. and worldwide securities markets, with respect to the
     market values of financial assets, the stability of particular securities
     markets and the level of volatility in certain markets such as foreign
     exchange.
   . Changes in the level of cross-border investing by clients resulting from
     changing economic factors, political conditions or currency markets.
   . Regulatory developments and changes in accounting requirements or
     interpretations in the U.S. and other countries where Northern Trust has
     significant business.
   . Changes in the nature of Northern Trust's competition resulting from
     industry consolida tion, enactment of the Gramm-Leach-Bliley Act of 1999
     and other regulatory changes and other factors, as well as actions taken
     by particular competitors.
   . Northern Trust's success in continuing to generate new business in its
     existing markets, as well as its success in identifying and penetrating
     targeted markets, through acquisition or otherwise, and generating a
     profit in those markets in a reasonable time.
   . Northern Trust's ability to continue to generate strong investment results
     for clients and continue to develop its array of investment products,
     internally or through acquisition, in a manner that meets client needs.
   . Northern Trust's success in further developing and executing on
     initiatives that integrate the Internet into its methods of product
     distribution, new business development and client service.
   . Northern Trust's ability to continue to fund and accomplish technological
     innovation, improve processes and controls and attract and retain capable
     staff in order to deal with technology challenges and increasing volume
     and complexity in many of its businesses.
   . Northern Trust's success in integrating recent and future acquisitions and
     using the acquired businesses to execute its business strategy.
   . The ability of each of Northern Trust's principal businesses to maintain a
     product mix that achieves satisfactory margins.
   . Changes in tax laws or other legislation in the U.S. or other countries
     (including pension reform legislation) that could affect Northern Trust or
     clients of its personal and institutional asset administration businesses.
   Some of these risks and uncertainties that may affect future results are
discussed in more detail in the sections of "Item 1--Business" of the 2001
Annual Report on Form 10-K captioned "Government Policies," "Competition" and
"Regulation and Supervision." All forward-looking statements included in this
document are based upon information presently available, and Northern Trust
assumes no obligation to update any forward-looking statements.

                                                     NORTHERN TRUST CORPORATION

                                       60

<PAGE>

                          CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                                               December 31
----------------------------------------------------------------------------------------------------------------
($ In Millions Except Share Information)                                                       2001       2000
---------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>        <C>
Assets
Cash and Due from Banks                                                                   $ 2,592.3  $ 2,287.8
Federal Funds Sold and Securities Purchased under Agreements to Resell (Note 4)             3,565.1      549.8
Time Deposits with Banks                                                                    6,955.9    5,193.8
Other Interest-Bearing                                                                         25.0      121.3
Securities (Notes 3 and 24)
  Available for Sale                                                                        5,648.6    6,477.8
  Held to Maturity (Fair value-$673.1 in 2001 and $782.1 in 2000)                             663.6      778.4
  Trading Account                                                                              18.9       13.4
---------------------------------------------------------------------------------------------------------------
  Total Securities                                                                          6,331.1    7,269.6
---------------------------------------------------------------------------------------------------------------
Loans and Leases (Note 5)
  Commercial and Other                                                                     10,552.0   11,321.8
  Residential Mortgages                                                                     7,427.9    6,822.8
---------------------------------------------------------------------------------------------------------------
  Total Loans and Leases (Net of unearned income-$427.3 in 2001 and $365.3 in 2000)        17,979.9   18,144.6
---------------------------------------------------------------------------------------------------------------
Reserve for Credit Losses (Note 6)                                                           (161.6)    (162.9)
Buildings and Equipment (Notes 7 and 8)                                                       488.7      448.1
Customers' Acceptance Liability                                                                 9.7        9.3
Trust Security Settlement Receivables                                                         571.4      615.2
Other Assets (Note 18)                                                                      1,307.0    1,545.7
---------------------------------------------------------------------------------------------------------------
Total Assets                                                                              $39,664.5  $36,022.3
---------------------------------------------------------------------------------------------------------------
Liabilities
Deposits
  Demand and Other Noninterest-Bearing                                                    $ 6,237.4  $ 4,547.7
  Savings and Money Market                                                                  6,808.5    5,521.7
  Savings Certificates                                                                      2,024.4    2,331.2
  Other Time                                                                                  404.6      427.3
  Foreign Offices--Demand                                                                     872.7      827.5
                  -Time                                                                     8,671.7    9,172.5
---------------------------------------------------------------------------------------------------------------
  Total Deposits                                                                           25,019.3   22,827.9
Federal Funds Purchased                                                                       815.5    3,615.0
Securities Sold under Agreements to Repurchase (Note 4)                                     1,407.4    1,577.1
Commercial Paper                                                                              137.7      142.4
Other Borrowings                                                                            6,841.2    2,629.5
Senior Notes (Note 9)                                                                         450.0      500.0
Long-Term Debt (Note 9)                                                                       766.8      638.1
Debt-Floating Rate Capital Securities (Note 10)                                               267.7      267.6
Liability on Acceptances                                                                        9.7        9.3
Other Liabilities                                                                           1,175.7    1,353.2
---------------------------------------------------------------------------------------------------------------
  Total Liabilities                                                                        36,891.0   33,560.1
---------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred Stock (Note 11)                                                                     120.0      120.0
Common Stock, $1.66 2/3 Par Value; Authorized 560,000,000 shares in 2001 and 2000;
  Outstanding 221,647,260 shares in 2001 and 222,232,395 shares in 2000 (Notes 11 and 14)     379.8      379.8
Capital Surplus                                                                                  --         --
Retained Earnings                                                                           2,520.1    2,200.0
Accumulated Other Comprehensive Income (Note 12)                                               (2.4)     (13.2)
Common Stock Issuable-Stock Incentive Plans (Note 25)                                         147.6      110.2
Deferred Compensation                                                                         (58.1)     (57.9)
Treasury Stock (at cost-6,274,264 shares in 2001 and 5,689,129 shares in 2000)               (333.5)    (276.7)
---------------------------------------------------------------------------------------------------------------
  Total Stockholders' Equity                                                                2,773.5    2,462.2
---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                                                $39,664.5  $36,022.3
</TABLE>

See accompanying notes to consolidated financial statements on pages 65-91.

NORTHERN TRUST CORPORATION

                                       61

<PAGE>

                       CONSOLIDATED STATEMENT OF INCOME


<TABLE>
<CAPTION>
                                                                            For the Year Ended December 31
-----------------------------------------------------------------------------------------------------------
($ In Millions Except Per Share Information)                                  2001        2000        1999
----------------------------------------------------------------------------------------------------------
<S>                                                                    <C>         <C>         <C>
Noninterest Income
  Trust Fees                                                              $1,231.3    $1,201.2    $  974.2
  Foreign Exchange Trading Profits                                           139.8       152.7       107.7
  Treasury Management Fees                                                    84.1        71.5        67.9
  Security Commissions and Trading Income                                     35.5        34.3        30.2
  Other Operating Income (Note 16)                                            89.3        77.1        54.5
  Investment Security Gains, net (Note 3)                                       --          .2          .7
---------------------------------------------------------------------------------- ----------- -----------
Total Noninterest Income                                                   1,580.0     1,537.0     1,235.2
---------------------------------------------------------------------------------- ----------- -----------
Net Interest Income (Note 17)
  Interest Income                                                          1,681.5     2,011.1     1,568.6
  Interest Expense                                                         1,086.2     1,442.5     1,049.8
---------------------------------------------------------------------------------- ----------- -----------
Net Interest Income                                                          595.3       568.6       518.8
Provision for Credit Losses (Note 6)                                          66.5        24.0        12.5
---------------------------------------------------------------------------------- ----------- -----------
Net Interest Income after Provision for Credit Losses                        528.8       544.6       506.3
---------------------------------------------------------------------------------- ----------- -----------
Noninterest Expenses
  Compensation (Notes 25 and 26)                                             685.8       689.1       582.6
  Employee Benefits (Note 19)                                                122.2       109.3        98.5
  Occupancy Expense (Notes 7 and 8)                                          100.2        87.3        74.3
  Equipment Expense (Note 7)                                                  85.7        73.1        63.6
  Other Operating Expenses (Note 18)                                         383.0       392.7       306.0
---------------------------------------------------------------------------------- ----------- -----------
Total Noninterest Expenses                                                 1,376.9     1,351.5     1,125.0
---------------------------------------------------------------------------------- ----------- -----------
Income before Income Taxes                                                   731.9       730.1       616.5
Provision for Income Taxes (Note 13)                                         244.4       245.0       211.5
---------------------------------------------------------------------------------- ----------- -----------
Net Income                                                                $  487.5    $  485.1    $  405.0
---------------------------------------------------------------------------------- ----------- -----------
Net Income Applicable to Common Stock                                     $  483.4    $  479.4    $  400.2
---------------------------------------------------------------------------------- ----------- -----------
Net Income Per Common Share (Note 14)-Basic                               $   2.18    $   2.17    $   1.81
                                     -Diluted                                 2.11        2.08        1.74
---------------------------------------------------------------------------------- ----------- -----------
Average Number of Common Shares Outstanding-Basic                      221,425,584 220,961,477 221,673,316
                                           -Diluted                    228,971,338 230,613,311 229,874,028
</TABLE>

                CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                 For the Year Ended December 31
----------------------------------------------------------------------------------------------------------------
(In Millions)                                                                       2001        2000      1999
---------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>       <C>
Net Income                                                                     $   487.5    $  485.1  $  405.0
  Other Comprehensive Income (net of tax)
    Net Unrealized Gains (Losses) on Securities Available for Sale:
      Unrealized Holding Gains (Losses) Arising During Period                         .8         1.6      (1.4)
      Less: Reclassification Adjustments for Gains Included in Net Income             --         (.1)      (.4)
    Net Unrealized Gains (Losses) on Cash Flow Hedge Designations:
      Cumulative-Effect of Adopting SFAS No. 133                                     (.2)         --        --
      Unrealized Holding Gains Arising During Period                                  .5          --        --
      Less: Reclassification Adjustments for Losses Included in Net Income           1.2          --        --
    Foreign Currency Translation Adjustments                                         (.2)         --        --
    Minimum Pension Liability Adjustment                                             8.7        (1.6)     (3.9)
--------------------------------------------------------------------------------------------------------------
Other Comprehensive Income                                                          10.8         (.1)     (5.7)
--------------------------------------------------------------------------------------------------------------
Comprehensive Income                                                           $   498.3    $  485.0  $  399.3
</TABLE>

See accompanying notes to consolidated financial statements on pages 65-91.

                                                     NORTHERN TRUST CORPORATION

                                       62

<PAGE>

                       CONSOLIDATED STATEMENT OF CHANGES

                            IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                               For the Year Ended December 31
----------------------------------------------------------------------------------------------
(In Millions)                                              2001               2000      1999
---------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>       <C>
Preferred Stock
Balance at January 1                                  $  120.0            $  120.0  $  120.0
---------------------------------------------------------------------------------------------
Balance at December 31                                   120.0               120.0     120.0
---------------------------------------------------------------------------------------------
Common Stock
Balance at January 1                                     379.8               379.8     189.9
Transfer from Capital Surplus-Two-for-One Stock Split       --                  --     189.9
---------------------------------------------------------------------------------------------
Balance at December 31                                   379.8               379.8     379.8
---------------------------------------------------------------------------------------------
Capital Surplus
Balance at January 1                                        --                  --     212.9
Transfer to Common Stock-Two-for-One Stock Split            --                  --    (189.9)
Stock Issued-Incentive Plan and Awards                      --                  --     (23.0)
---------------------------------------------------------------------------------------------
Balance at December 31                                      --                  --        --
---------------------------------------------------------------------------------------------
Retained Earnings
Balance at January 1                                   2,200.0             1,870.7   1,582.9
Net Income                                               487.5               485.1     405.0
Dividends Declared-Common Stock                         (141.1)             (124.3)   (110.3)
Dividends Declared-Preferred Stock                        (3.9)               (5.7)     (4.8)
Stock Issued-Incentive Plan and Awards                   (22.4)              (25.8)     (2.1)
---------------------------------------------------------------------------------------------
Balance at December 31                                 2,520.1             2,200.0   1,870.7
---------------------------------------------------------------------------------------------
Accumulated Other Comprehensive Income
Balance at January 1                                     (13.2)              (13.1)     (7.4)
Other Comprehensive Income                                10.8                 (.1)     (5.7)
---------------------------------------------------------------------------------------------
Balance at December 31                                    (2.4)              (13.2)    (13.1)
---------------------------------------------------------------------------------------------
Common Stock Issuable-Stock Incentive Plans
Balance at January 1                                     110.2                55.0      30.4
Stock Issuable, net of Stock Issued                       37.4                55.2      24.6
---------------------------------------------------------------------------------------------
Balance at December 31                                   147.6               110.2      55.0
---------------------------------------------------------------------------------------------
Deferred Compensation
Balance at January 1                                     (57.9)              (33.5)    (37.5)
Compensation Deferred                                    (36.0)              (52.6)    (13.3)
Compensation Amortized                                    35.8                28.2      17.3
---------------------------------------------------------------------------------------------
Balance at December 31                                   (58.1)              (57.9)    (33.5)
---------------------------------------------------------------------------------------------
Treasury Stock
Balance at January 1                                    (276.7)             (204.2)   (150.9)
Stock Options and Awards                                 100.0               121.6      87.0
Stock Purchased                                         (156.8)             (194.1)   (140.3)
---------------------------------------------------------------------------------------------
Balance at December 31                                  (333.5)             (276.7)   (204.2)
---------------------------------------------------------------------------------------------
Total Stockholders' Equity at December 31             $2,773.5            $2,462.2  $2,174.7
---------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements on pages 65-91.

NORTHERN TRUST CORPORATION

                                       63

<PAGE>

                     CONSOLIDATED STATEMENT OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                   For the Year Ended December 31
-------------------------------------------------------------------------------------------------------------------------------
(In Millions)                                                                        2001            2000            1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>             <C>
Cash Flows From Operating Activities:
Net Income                                                                     $    487.5      $    485.1      $    405.0
  Adjustments to Reconcile Net Income to Net Cash Provided by
    Operating Activities:
  Provision for Credit Losses                                                        66.5            24.0            12.5
  Depreciation on Buildings and Equipment                                            78.6            67.8            58.2
  (Increase) Decrease in Interest Receivable                                         61.0           (34.1)           (9.2)
  Increase (Decrease) in Interest Payable                                           (13.6)           (6.7)           17.5
  Amortization and Accretion of Securities and Unearned Income                     (141.2)         (233.5)          (86.2)
  Amortization of Computer Software                                                  69.9            61.3            48.1
  Amortization of Goodwill and Other Intangibles                                     16.5            15.6            14.2
  Deferred Income Tax                                                               129.5            88.4            95.3
  Net Increase in Trading Account Securities                                         (5.5)           (2.4)           (1.9)
  Other Noncash, net                                                                (23.7)          (94.4)           53.3
-------------------------------------------------------------------------------------------------------------------------
  Net Cash Provided by Operating Activities                                         725.5           371.1           606.8
-------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
  Net (Increase) Decrease in Federal Funds Sold and Securities Purchased
    under Agreements to Resell                                                   (3,015.3)          534.0            80.6
  Net (Increase) Decrease in Time Deposits with Banks                            (1,762.1)       (2,901.6)          972.5
  Net (Increase) Decrease in Other Interest-Bearing Assets                           96.3           (58.1)          (41.4)
  Purchases of Securities-Held to Maturity                                         (150.0)         (146.4)         (201.2)
  Proceeds from Maturity and Redemption of Securities-Held to Maturity               99.5           126.9           160.2
  Purchases of Securities-Available for Sale                                    (65,235.4)      (41,011.9)      (45,965.0)
  Proceeds from Sale, Maturity and Redemption of Securities-Available for Sale   66,441.8        40,297.6        45,777.4
  Net (Increase) Decrease in Loans and Leases                                        33.7        (2,827.7)       (1,834.3)
  Purchases of Buildings and Equipment                                             (128.3)         (137.1)          (99.9)
  Proceeds from Sale of Buildings and Equipment                                       9.1             1.7             1.5
  Purchases and Development of Computer Software                                   (135.1)         (110.3)          (96.3)
  Net (Increase) Decrease in Trust Security Settlement Receivables                   43.8          (292.1)           13.6
  Decrease in Cash Due to Acquisitions                                               (1.5)          (33.0)             --
  Other, net                                                                         24.5            41.5             2.7
-------------------------------------------------------------------------------------------------------------------------
  Net Cash Used in Investing Activities                                          (3,679.0)       (6,516.5)       (1,229.6)
-------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
  Net Increase in Deposits                                                        2,191.4         1,456.9         3,168.3
  Net Increase (Decrease) in Federal Funds Purchased                             (2,799.5)        3,244.8        (1,654.9)
  Net Increase (Decrease) in Securities Sold under Agreements to Repurchase        (169.7)          579.3        (1,117.1)
  Net Decrease in Commercial Paper                                                   (4.7)           (2.7)           (3.0)
  Net Increase (Decrease) in Short-Term Other Borrowings                          3,939.7         2,052.7          (556.1)
  Proceeds from Term Federal Funds Purchased                                      4,675.4        14,215.6         7,516.8
  Repayments of Term Federal Funds Purchased                                     (4,403.4)      (14,794.1)       (6,904.6)
  Proceeds from Senior Notes & Long-Term Debt                                       154.5           102.6           701.4
  Repayments of Senior Notes & Long-Term Debt                                       (75.8)         (123.9)         (700.2)
  Treasury Stock Purchased                                                         (152.8)         (191.5)         (139.7)
  Net Proceeds from Stock Options                                                    19.7            28.4            24.1
  Cash Dividends Paid on Common and Preferred Stock                                (142.3)         (125.8)         (111.4)
  Other, net                                                                         25.5            13.0            11.1
-------------------------------------------------------------------------------------------------------------------------
  Net Cash Provided by Financing Activities                                       3,258.0         6,455.3           234.7
-------------------------------------------------------------------------------------------------------------------------
  Increase (Decrease) in Cash and Due from Banks                                    304.5           309.9          (388.1)
  Cash and Due from Banks at Beginning of Year                                    2,287.8         1,977.9         2,366.0
-------------------------------------------------------------------------------------------------------------------------
Cash and Due From Banks at End of Year                                         $  2,592.3      $  2,287.8      $  1,977.9
-------------------------------------------------------------------------------------------------------------------------
Schedule of Noncash Investing Activities:
  Transfer of Securities from Held to Maturity to Available for Sale           $    167.1      $       --      $       --
  Transfer of Securities from Available for Sale to Held to Maturity                   --              --           239.8
Supplemental Disclosures of Cash Flow Information:
  Interest Paid                                                                $  1,099.9      $  1,449.2      $  1,032.4
  Income Taxes Paid                                                                  60.5           112.7            69.7
</TABLE>

See accompanying notes to consolidated financial statements on pages 65-91.

                                                     NORTHERN TRUST CORPORATION

                                       64

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Accounting Policies--The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
reporting practices prescribed for the banking industry. A description of the
significant accounting policies follows:
   A. Basis of Presentation. The consolidated financial statements include the
accounts of Northern Trust Corporation (Corporation) and its wholly-owned
subsidiary The Northern Trust Company (Bank) and their wholly-owned
subsidiaries. Throughout the notes, the term "Northern Trust" refers to
Northern Trust Corporation and subsidiaries. Significant intercompany balances
and transactions have been eliminated in consolidation. The consolidated
statement of income includes results of acquired subsidiaries from the dates of
acquisition.
   B. Nature of Operations. The Corporation is a bank holding company whose
principal subsidiary is the Chicago-based Bank. The Corporation also owns banks
with offices in Arizona, California, Colorado, Florida, and Texas, a federal
savings bank with offices in Michigan, Missouri, Nevada, Ohio, Washington and
Wisconsin, a trust company in New York and various other nonbank subsidiaries,
including a securities brokerage firm, an international investment consulting
firm and a retirement services company. The Bank has offices in the Chicago
metropolitan area, global custody operations in London and various subsidiaries,
including an investment management company, a leasing company, a Canadian trust
company, a New York Edge Act company and a global fund services provider.
Northern Trust generates the majority of its revenues from its two primary
business units, Corporate and Institutional Services (C&IS) and Personal
Financial Services (PFS). Investment management services and products are
provided to C&IS and PFS through a third business unit, Northern Trust Global
Investments (NTGI). Operating and systems support for these business units are
provided by a fourth business unit, Worldwide Operations and Technology (WWOT).
Northern Trust has not utilized unconsolidated special purpose entities in order
to provide financing, improve liquidity, transfer assets or manage credit risk.
   The C&IS business unit provides master trust and custody-related services in
the United States and foreign markets to corporations and institutions;
investment management services; a full range of commercial banking services to
large domestic corporations and financial institutions; treasury management
services to meet the needs of major corporations and financial institutions; a
comprehensive array of consulting, actuarial and recordkeeping services; and
foreign exchange services for global custody clients and Northern Trust's own
account.
   The PFS business unit provides personal trust, investment management, estate
administration, banking (including private banking) and mortgage lending
services, and also provides commercial banking services to small/mid-size
businesses. These services are delivered through the Bank in Illinois and the
network of subsidiaries with offices in Arizona, California, Colorado, Florida,
Michigan, Missouri, Nevada, Ohio, Texas, Washington and Wisconsin.
   C. Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
   D. Foreign Currency Translation. If the functional currency of a foreign
branch or subsidiary is the U.S. dollar, foreign currency asset and liability
accounts are translated at current rates of exchange, except for buildings and
equipment which are translated at rates in effect at the date of acquisition.
Results from remeasurement are reported in foreign exchange trading profits.
Income and expense accounts are trans-lated at month-end rates of exchange.
   If the functional currency of a foreign branch or subsidiary is its local
currency, the local currency asset and liability accounts are translated at
current rates. Translation adjustments are reported, net of tax, directly to
accumulated other comprehensive income, a component of capital. Income and ex-
pense accounts are translated at month-end rates of exchange.
   E. Securities. Securities Available for Sale consist of debt and equity
securities that are not intended to be held to maturity and are not held for
trading. Securities available for sale are reported at fair value, with
unrealized gains and losses credited or charged, net of the tax effect,
directly to stockholders' equity. Realized gains and losses on securities
available for sale are determined on a specific identification basis and are
reported in the consolidated statement of income as investment security gains
and losses.

NORTHERN TRUST CORPORATION




                                       65

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   Securities Held to Maturity consist of debt securities that management
intends to, and Northern Trust has the ability to, hold until maturity. Such
securities are reported at cost, adjusted for amortization of premium and
accretion of discount.
   Securities Held for Trading are stated at fair value. Realized and
unrealized gains and losses on securities held for trading are reported in the
consolidated statement of income under security commissions and trading income.
   F. Derivative Financial Instruments. Northern Trust adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and its related
amendments on January 1, 2001. Derivative financial instruments include
interest rate swap contracts, futures contracts, forward foreign currency
contracts, options and similar contracts. Northern Trust is a party to various
derivative instruments as part of its asset/liability management activities, to
meet the risk management needs of its clients and as part of its trading
activity for its own account. Unrealized gains and receivables on derivative
instruments are reported as other assets and unrealized losses and payables are
reported as other liabilities in the consolidated balance sheet.
   Asset/Liability Management. Derivatives entered into for asset/liability
management purposes are designated and formally documented as fair value, cash
flow or net investment hedges on the date they are transacted. The formal
documentation describes the hedge relationship and identifies the hedging
instruments and hedged items. Included in the documentation is a discussion of
the risk management objectives and strategies for undertaking such hedges, as
well as a description of the method for assessing hedge effectiveness at
inception and on an ongoing basis. A formal assessment is performed on a
calendar quarter basis to determine that derivatives used in hedging
transactions are highly effective as offsets to changes in fair value or cash
flows of the hedged item. If a derivative ceases to be highly effective or if
hedged forecasted transactions are no longer expected to occur, hedge
accounting is terminated and the derivative is treated as if it were a
client-related or trading instrument.
   Fair value hedge designations are made between a derivative and a recognized
asset or liability. Interest accruals and changes in fair value of the
derivative are recognized as a component of the interest income or expense
classification of the hedged item. Changes in fair value of the hedged asset or
liability attributable to the risk being hedged are reflected in its carrying
amount and are also recognized as a component of its interest income or expense.
   Cash flow hedge designations are made between derivatives and forecasted
cash inflows or outflows so as to hedge against variability due to a specific
risk. The effective portion of unrealized gains and losses on such derivatives
are recognized in accumulated other comprehensive income, a component of
stockholders' equity. When the hedged forecasted transaction impacts earnings,
balances in other comprehensive income are reclassified to the same income and
expense classification of the hedged item. Any hedge ineffectiveness is
recognized in the income or expense classification of the hedged item.
   Net investment hedge designations are made between a forward foreign
currency contract and a net investment in a foreign branch or subsidiary.
Changes in the fair value of the hedging contract are recognized in the foreign
exchange translation gain or loss account of stockholders' equity. Hedge
ineffectiveness is calculated based on changes in forward rates of the
derivative and the hedged net investment. Any ineffectiveness is recorded to
other income only if the notional amount of the derivative does not match the
portion of the net investment designated as being hedged.
   Other derivatives transacted as economic hedges of foreign denominated
assets and liabilities are carried on the balance sheet at fair value and
recognized currently in foreign exchange trading profits. Unrealized gains are
shown as other assets, with unrealized losses reported as other liabilities.
   Client-Related and Trading Instruments. Derivative financial instruments
entered into to meet clients' risk management needs or for trading purposes are
carried at fair value, with realized and unrealized gains and losses included
in security commissions and trading income or foreign exchange trading profits.
   G. Loans and Leases. Loans that are held to maturity are reported at the
principal amount outstanding, net of unearned income. Residential real estate
loans classified as held for sale are reported at the lower of aggregate cost
or market value. Loan commitments for residential real estate loans which will
be classified as held for sale at the time of funding and which have an
interest-rate lock, are recorded on the balance sheet at fair value and
recognized as other income. Unrealized gains are reported as other assets, with
unrealized losses reported as other liabilities. Interest income on loans is
recorded on an accrual basis until, in the opinion of management, there is a
question as to the ability of the debtor to

                                                     NORTHERN TRUST CORPORATION

                                       66

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


meet the terms of the contract, or when interest or principal is more than 90
days past due and the loan is not well-secured and in the process of
collection. At the time a loan is placed on nonaccrual status, interest accrued
but not collected is reversed against interest income of the current period.
Loans are returned to accrual status when factors indicating doubtful
collectibility no longer exist. Interest collected on nonaccrual loans is
applied to principal unless, in the opinion of management, collectibility of
principal is not in doubt.
   Premiums and discounts on loans are recognized as an adjustment of yield
using the interest method based on the contractual terms of the loan.
Commitment fees that are considered to be an adjustment to the loan yield, loan
origination fees and certain direct costs are deferred and accounted for as an
adjustment to the yield.
   Unearned lease income from direct financing and leveraged leases is
recognized using the interest method. This method provides a constant rate of
return on the unrecovered investment over the life of the lease.
   H. Reserve for Credit Losses. The reserve for credit losses represents
management's estimate of probable inherent losses which have occurred as of the
date of the financial statements. The loan and lease portfolio and other credit
exposures are regularly reviewed to evaluate the adequacy of the reserve for
credit losses. In determining the level of the reserve, Northern Trust
evaluates the reserve necessary for specific nonperforming loans and also
estimates losses inherent in other credit exposures.
   The result is a reserve with these components:
   Specific Reserve. The amount of specific reserves is determined through a
loan-by-loan analysis of nonperforming loans that considers expected future
cash flows, the value of collateral and other factors that may impact the
borrower's ability to pay.
   Allocated Inherent Reserve. The amount of the allocated portion of the
inherent loss reserve is based on loss factors assigned to Northern Trust's
credit exposures based on internal credit ratings. These loss factors are
primarily based on management's judgment of estimated credit losses inherent in
the loan portfolio as well as historical charge-off experience.
   Unallocated Inherent Reserve. Management determines the unallocated portion
of the inherent loss reserve based on factors that cannot be associated with a
specific credit or loan categories. These factors include management's
subjective evaluation of local and national economic and business conditions,
portfolio concentration and changes in the character and size of the loan
portfolio. The unallocated portion of the inherent loss reserve reflects
management's attempt to ensure that the overall reserve appropriately reflects
a margin for the imprecision necessarily inherent in estimates of expected
credit losses.
   Loans, leases and other extensions of credit deemed uncollectible are
charged to the reserve. Subsequent recoveries, if any, are credited to the
reserve. Actual losses may vary from current estimates and the amount of the
provision may be either greater than or less than actual net charge-offs. The
related provision for credit losses, which is charged to income, is the amount
necessary to adjust the reserve to the level determined through the above
process.
   The control process maintained by Credit Policy and the lending staff, and
the quarterly analysis of specific and inherent loss components are the
principal methods relied upon by management to ensure that changes in estimated
credit loss levels are adjusted on a timely basis. In addition to Northern
Trust's own experience, management also considers the experience of peer
institutions and regulatory guidance.
   I. Fees on Standby Letters of Credit and Participations in Bankers
Acceptances. Fees on standby letters of credit are recognized in other
operating income on the straight-line method over the lives of the underlying
agreements. Commissions on bankers acceptances are recognized in other
operating income when received.
   J. Buildings and Equipment. Buildings and equipment owned are carried at
original cost less accumulated depreciation. The charge for depreciation is
computed on the straight-line method based on the following range of lives:
buildings--10 to 30 years; equipment--4 to 10 years; and leasehold
improvements--lease term to 15 years. Leased properties meeting certain
criteria are capitalized and amortized using the straight-line method over the
lease period.
   K. Other Real Estate Owned (OREO). OREO is comprised of commercial and
residential real estate properties acquired in partial or total satisfaction of
problem loans. OREO assets are carried at the lower of cost or fair value.
Losses identified at the time of acquisition of such properties are charged
against the reserve for credit losses. Subsequent write-downs that may be
required to the carrying value of these assets and losses realized from asset
sales are charged to other operating expenses.

NORTHERN TRUST CORPORATION

                                       67

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   L. Intangible Assets. Goodwill, arising from the excess of purchase price
over the fair value of net assets of acquired businesses, was amortized using
the straight-line method primarily over fifteen years. Effective January 1,
2002, in accordance with SFAS No. 142, goodwill will not be amortized and the
carrying amount will be subjected to an annual impairment test.
   Other purchased intangible assets arising from acquisitions are amortized
using various methods over the estimated lives of the assets. Purchased
software and salary and other allowable internal costs relating to software
developed for internal use are capitalized. Software is being amortized using
the straight-line method over the estimated useful life of the asset, ranging
from 3 to 10 years.
   M. Trust Assets and Fees. Assets held in fiduciary or agency capacities are
not included in the consolidated balance sheet, since such items are not assets
of Northern Trust. Fees from trust activities are recorded on the accrual basis.
   N. Trust Security Settlement Receivables. These receivables represent other
items in the process of collection presented on behalf of trust clients.
   O. Income Taxes. In accordance with SFAS No. 109, "Accounting for Income
Taxes," an asset and liability approach to accounting for income taxes is
followed. The objective is to recognize the amount of taxes payable or
refundable for the current year, and to recognize deferred tax assets and
liabilities resulting from temporary differences between the amounts reported
in the financial statements and the tax bases of assets and liabilities. The
measurement of tax assets and liabilities is based on enacted tax laws and
applicable tax rates.
   P. Cash Flow Statements. Cash and cash equivalents have been defined as
"Cash and Due from Banks."

2. Reclassifications--Certain reclassifications have been made to prior
periods' consolidated financial statements to place them on a basis comparable
with the current period's consolidated financial statements.

3. Securities--Securities Available for Sale. The following tables summarize
the amortized cost, fair values and remaining maturities of securities
available for sale.

Reconciliation of Amortized Cost to Fair Values of Securities Available for Sale
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                       December 31, 2001
            ---------------------------------------------------------
                                           Gross      Gross
                            Amortized Unrealized Unrealized     Fair
            (In Millions)        Cost      Gains     Losses    Value
            --------------------------------------------------------
            <S>             <C>       <C>        <C>        <C>
            U.S. Government  $  158.2       $ .7       $ -- $  158.9
            Obligations of
              States and
              Political
              Subdivisions       30.7         .1         .8     30.0
            Federal Agency    5,181.1        8.3         .5  5,188.9
            Preferred Stock      82.9         --         --     82.9
            Other               188.0         --         .1    187.9
            --------------------------------------------------------
            Total            $5,640.9       $9.1       $1.4 $5,648.6
</TABLE>

<TABLE>
<CAPTION>
                                       December 31, 2000
            ---------------------------------------------------------
                                           Gross      Gross
                            Amortized Unrealized Unrealized     Fair
            (In Millions)        Cost      Gains     Losses    Value
            --------------------------------------------------------
            <S>             <C>       <C>        <C>        <C>
            U.S. Government  $  174.0       $ .6       $ -- $  174.6
            Obligations of
              States and
              Political
              Subdivisions       16.8         .1        1.2     15.7
            Federal Agency    6,171.2        1.9        1.0  6,172.1
            Preferred Stock     101.3         .2         .3    101.2
            Other                14.2         --         --     14.2
            --------------------------------------------------------
            Total            $6,477.5       $2.8       $2.5 $6,477.8
</TABLE>

Remaining Maturity of Securities Available for Sale
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  December 31, 2001
           ----------------------------------------------------------
                                                  Amortized     Fair
           (In Millions)                               Cost    Value
           ---------------------------------------------------------
           <S>                                    <C>       <C>
           Due in One Year or Less                 $5,331.5 $5,340.1
           Due After One Year Through Five Years        6.9      6.9
           Due After Five Years Through Ten Years      23.5     17.0
           Due After Ten Years                        279.0    284.6
           ---------------------------------------------------------
           Total                                   $5,640.9 $5,648.6
</TABLE>

Mortgage-backed securities were included in the above table taking into account
anticipated future prepayments.

                                                     NORTHERN TRUST CORPORATION

                                       68

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Securities Held to Maturity. The following tables summarize the book values,
fair values and remaining maturities of securities held to maturity.

Reconciliation of Book Values to Fair Values of Securities Held to Maturity
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                          December 31, 2001
           ----------------------------------------------------------
                                             Gross      Gross
                                   Book Unrealized Unrealized   Fair
           (In Millions)          Value      Gains     Losses  Value
           ---------------------------------------------------------
           <S>                   <C>    <C>        <C>        <C>
           U.S. Government       $   --      $  --     $   -- $   --
           Obligations of States
             and Political
             Subdivisions         528.9       14.0         --  542.9
           Federal Agency           4.9         .1         .1    4.9
           Other                  129.8         --        4.5  125.3
           ---------------------------------------------------------
           Total                 $663.6      $14.1     $  4.6 $673.1
</TABLE>

<TABLE>
<CAPTION>
                                          December 31, 2000
           ----------------------------------------------------------
                                             Gross      Gross
                                   Book Unrealized Unrealized   Fair
           (In Millions)          Value      Gains     Losses  Value
           ---------------------------------------------------------
           <S>                   <C>    <C>        <C>        <C>
           U.S. Government       $ 55.0      $  --     $   -- $ 55.0
           Obligations of States
             and Political
             Subdivisions         435.7        9.4         --  445.1
           Federal Agency           5.5         .1         .1    5.5
           Other                  282.2         .1        5.8  276.5
           ---------------------------------------------------------
           Total                 $778.4      $ 9.6     $  5.9 $782.1
</TABLE>

Remaining Maturity of Securities Held to Maturity
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   December 31, 2001
            ---------------------------------------------------------
                                                       Book     Fair
            (In Millions)                             Value    Value
            --------------------------------------------------------
            <S>                                    <C>      <C>
            Due in One Year or Less                $ 34.8   $ 35.2
            Due After One Year Through Five Years   136.9    141.9
            Due After Five Years Through Ten Years  232.4    235.2
            Due After Ten Years                     259.5    260.8
            -------------------------------------- -------- --------
            Total                                  $663.6   $673.1
</TABLE>

Mortgage-backed securities were included in the above table taking into account
anticipated future prepayments.

Investment Security Gains and Losses. Realized gross security gains and losses,
which were included in the consolidated statement of income, totaled $.1
million and $.1 million, respectively, in 2001. Realized gross security gains
and losses totaled $.3 million and $.1 million, respectively, in 2000. Realized
gross gains totaled $.7 million in 1999.

4. Securities Purchased Under Agreements to Resell and Securities Sold Under
Agreements to Repurchase--Securities purchased under agreements to resell and
securities sold under agreements to re purchase are recorded at the amounts at
which the securities were acquired or sold plus accrued interest. To minimize
any potential credit risk associated with these transactions, the fair value of
the securities purchased or sold is continuously monitored, limits are set on
exposure with counterparties, and the financial condition of counterparties is
regularly assessed. It is Northern Trust's policy to take possession of
securities purchased under agreements to resell.
   The following tables summarize information related to securities purchased
under agreements to resell and securities sold under agreements to repurchase.

Securities Purchased Under Agreements to Resell
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                  December 31
             ------------------------------------------------------
             ($ In Millions)                      2001       2000
             -----------------------------------------------------
             <S>                             <C>        <C>
             Average Balance During the Year $   512.5  $   269.9
             Average Interest Rate Earned
               During the Year                    3.26%      6.19%
             Maximum Month-End Balance
               During the Year                 1,668.9      304.3
</TABLE>

Securities Sold Under Agreements to Repurchase
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   December 31
            --------------------------------------------------------
            ($ In Millions)                        2001       2000
            -------------------------------------------------------
            <S>                               <C>        <C>
            Average Balance During the Year   $ 1,474.1  $ 1,476.4
            Average Interest Rate Paid During
              the Year                             3.93%      6.22%
            Maximum Month-End Balance
              During the Year                   2,194.2    3,353.9
</TABLE>

5. Loans and Leases--Amounts outstanding in selected loan categories are shown
below.

<TABLE>
<CAPTION>
                                                   December 31
                 ----------------------------------------------
                 (In Millions)                  2001      2000
                 ---------------------------------------------
                 <S>                       <C>       <C>
                 Domestic
                   Residential Real Estate $ 7,427.9 $ 6,822.8
                   Commercial                4,741.6   4,796.8
                   Broker                       11.8     126.4
                   Commercial Real Estate    1,025.6     911.0
                   Personal                  2,208.8   2,289.3
                   Other                       768.6   1,207.1
                   Lease Financing           1,202.6   1,034.4
                 ---------------------------------------------
                 Total Domestic             17,386.9  17,187.8
                 International                 593.0
                                                         956.8
                 ---------------------------------------------
                 Total Loans and Leases    $17,979.9 $18,144.6
</TABLE>

   Other domestic and international loans include $812.0 million at December
31, 2001, and $1.4 billion at December 31, 2000 of overnight trust-related
advances in connection with next day security

NORTHERN TRUST CORPORATION

                                       69

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


settlements. Lease financing includes leveraged leases of $715.5 million at
December 31, 2001, and $603.5 million at December 31, 2000.
   Residential real estate loans held for sale totaled $14.2 million and $5.6
million at December 31, 2001 and 2000, respectively.
   Refer to Note 21 for detail related to interest risk management instruments
used to hedge loans.

Nonperforming Assets. Presented below are outstanding amounts of nonaccrual
loans, restructured loans and OREO.

<TABLE>
<CAPTION>
                                                     December 31
                 ------------------------------------------------
                 (In Millions)                       2001   2000
                 -----------------------------------------------
                 <S>                               <C>     <C>
                 Nonaccrual Loans
                   Domestic-Commercial Real Estate $  4.3  $ 1.8
                           -Other                   104.4   74.5
                   International                       --     --
                 ----------------------------------------------
                 Total Nonaccrual Loans             108.7   76.3
                 Restructured Loans                    --     --
                 Other Real Estate Owned               .8    2.2
                 ----------------------------------------------
                 Total Nonperforming Assets        $109.5  $78.5
</TABLE>

   Included in nonperforming assets were loans with a recorded investment at
December 31, 2001 and December 31, 2000 of $98.0 million and $74.8 million,
respectively, which were also classified as impaired. At December 31, 2001 and
December 31, 2000, impaired loans totaling $28.8 million and $3.0 million,
respectively, had no portion of the reserve for credit losses specifically
allocated to them, while $69.2 million at December 31, 2001 had a specific
allocated reserve of $21.1 million and $71.8 million at December 31, 2000 had a
specific allocated reserve of $24.3 million. Total recorded investment in
impaired loans averaged $107.1 million in 2001 and $60.6 million in 2000. Total
interest income recognized on impaired loans was $66 thousand and $26 thousand
in 2001 and 2000, respectively.
   There were $29.7 million of unfunded loan commitments and standby letters of
credit issued to borrowers whose loans were classified as nonaccrual at
December 31, 2001, while there were $11.5 million at December 31, 2000.
   Interest income that would have been recorded on domestic nonaccrual loans
in accordance with their original terms amounted to $9.4 million in 2001, $6.5
million in 2000 and $3.2 million in 1999, compared with amounts that were
actually recorded of $66 thousand, $26 thousand and $.2 million, respectively.
   Write-downs and realized losses on OREO of $47 thousand in 2001, $31
thousand in 2000 and $.3 million in 1999 were charged to other operating
expenses.

6. Reserve for Credit Losses--Changes in the reserve for credit losses were as
follows:

<TABLE>
<CAPTION>
              (In Millions)                  2001    2000    1999
              ----------------------------------------------------
              <S>                          <C>     <C>     <C>
              Balance at Beginning of Year $162.9  $150.9  $146.8
              ----------------------------------------------------
              Charge-Offs
                Domestic                    (69.0)  (13.5)   (9.8)
                International                  --      --      --
              ----------------------------------------------------
              Total Charge-Offs             (69.0)  (13.5)   (9.8)
              Recoveries                      1.2     1.5     1.4
              ----------------------------------------------------
              Net Charge-Offs               (67.8)  (12.0)   (8.4)
              Provision for Credit Losses    66.5    24.0    12.5
              ----------------------------------------------------
              Balance at End of Year       $161.6  $162.9  $150.9
</TABLE>

7. Buildings and Equipment--A summary of buildings and equipment is presented
below.

<TABLE>
<CAPTION>
                                            December 31, 2001
             -------------------------------------------------------
                                                                Net
                                       Original  Accumulated   Book
             (In Millions)                 Cost Depreciation  Value
             ------------------------------------------------------
             <S>                       <C>      <C>          <C>
             Land and Improvements       $ 38.1       $   .2 $ 37.9
             Buildings                    159.9         48.6  111.3
             Equipment                    373.7        166.7  207.0
             Leasehold Improvements       113.5         40.3   73.2
             Buildings Leased under
               Capital Leases (Note 8)     81.1         21.8   59.3
             ------------------------------------------------------
             Total Buildings and
               Equipment                 $766.3       $277.6 $488.7

                                            December 31, 2000
             -------------------------------------------------------
                                                                Net
                                       Original  Accumulated   Book
             (In Millions)                 Cost Depreciation  Value
             ------------------------------------------------------
             Land                        $ 37.9       $   -- $ 37.9
             Buildings                    155.8         43.7  112.1
             Equipment                    336.0        149.7  186.3
             Leasehold Improvements        88.5         33.7   54.8
             Buildings Leased under
               Capital Leases (Note 8)     76.6         19.6   57.0
             ------------------------------------------------------
             Total Buildings and
               Equipment                 $694.8       $246.7 $448.1
</TABLE>

   The charge for depreciation, which includes amortization of assets recorded
under capital leases, amounted to $78.6 million in 2001, $67.8 million in 2000
and $58.2 million in 1999.

                                                     NORTHERN TRUST CORPORATION


                                       70

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Lease Commitments--At December 31, 2001, Northern Trust was obligated under
a number of non-cancelable operating leases for premises and equipment. Certain
leases contain rent escalation clauses, based on market indices or increases in
real estate taxes and other operating expenses and renewal option clauses
calling for increased rentals. There are no restrictions imposed by any lease
agreement regarding the payment of dividends, debt financing or Northern Trust
entering into further lease agreements. Minimum annual lease commitments as of
December 31, 2001 for all non-cancelable operating leases are as follows:

<TABLE>
<CAPTION>
                                               Future Minimum
                  (In Millions)                Lease Payments
                  -------------------------------------------
                  <S>                          <C>
                  2002                                 $ 43.8
                  2003                                   42.4
                  2004                                   39.6
                  2005                                   38.8
                  2006                                   37.5
                  Later Years                           349.3
                  ---------------------------- --------------
                  Total Minimum Lease Payments         $551.4
</TABLE>

   Net rental expense for all operating leases is included in occupancy expense
and amounted to $43.4 million in 2001, $36.9 million in 2000 and $31.5 million
in 1999.
   The building and land utilized at the Chicago operations center has been
leased under an agreement that qualifies as a capital lease. The long-term
financing for the property was provided by the Corporation and the Bank. In the
event of sale or refinancing, the Bank will receive all proceeds except for 58%
of any proceeds in excess of the original project costs which will be paid to
the lessor.
   The following table reflects the future minimum lease payments required
under capital leases, net of any payments received on the long-term financing,
and the present value of net capital lease obligations at December 31, 2001.

<TABLE>
<CAPTION>
                                                      Future Minimum
           (In Millions)                         Lease Payments, Net
           ---------------------------------------------------------
           <S>                                   <C>
           2002                                                $ 2.4
           2003                                                  2.4
           2004                                                  2.4
           2005                                                  2.4
           2006                                                  2.4
           Later Years                                          13.9
           ------------------------------------- -------------------
           Total Minimum Lease Payments, net                    25.9
           Less: Amount Representing Interest                    9.1
           ------------------------------------- -------------------
           Net Present Value under Capital Lease
             Obligations                                       $16.8
</TABLE>

9. Senior Notes, Long-Term Debt and Lines of Credit--Senior Notes. A summary of
Bank senior notes outstanding at December 31 is presented below.

<TABLE>
<CAPTION>
                 ($ In Millions)            Rate    2001   2000
                 ----------------------------------------------
                 <S>                       <C>    <C>    <C>
                 Bank-Senior Notes (a) (b)
                   Fixed Rate Due 2001      6.30% $   -- $ 50.0
                   Fixed Rate Due 2003     6.625   200.0  200.0
                   Fixed Rate Due 2004      6.65   150.0  150.0
                   Fixed Rate Due 2005      7.50   100.0  100.0
                 ------------------------- -----  ------ ------
                 Total Bank Senior Notes          $450.0 $500.0
</TABLE>

Long-Term Debt. A summary of long-term debt outstanding at December 31 is
presented below.

<TABLE>
<CAPTION>
               ($ In Millions)                        2001   2000
               --------------------------------------------------
               <S>                                  <C>    <C>
               Corporation-Subordinated Debt
                 9.20% Notes due May 2001 (a)       $   -- $ 25.0
               Bank-Subordinated Debt
                 6.50% Notes due May 2003 (a)        100.0  100.0
                 6.70% Notes due Sept. 2005 (a) (b)  100.0  100.0
                 7.30% Notes due Sept. 2006 (a) (b)  100.0  100.0
                 6.25% Notes due June 2008 (a) (b)   100.0  100.0
                 7.10% Notes due Aug. 2009 (a) (b)   200.0  200.0
                 6.30% Notes due March 2011 (a) (b)  150.0     --
               ------------------------------------ ------ ------
                   Subordinated Long-Term Debt       750.0  625.0
               ------------------------------------ ------ ------
               Capital Lease Obligations (c)          16.8   13.1
               ------------------------------------ ------ ------
               Total Long-Term Debt                 $766.8 $638.1
               ------------------------------------ ------ ------
               Long-Term Debt Qualifying as Risk-
                 Based Capital                      $610.0 $520.0
</TABLE>

(a) Not redeemable prior to maturity.
(b) Under the terms of its current Offering Circular, the Bank has the ability
to offer from time to time its senior bank notes in an aggregate principal
amount of up to $3.7 billion at any one time outstanding and up to an
additional $150 million of subordinated notes. Each senior note will mature
from 30 days to fifteen years and each subordinated note will mature from five
years to fifteen years, following its date of original issuance. Each note will
mature on such date as selected by the initial purchaser and agreed to by
the Bank.
(c) Refer to Note 8.

Lines of Credit. The Corporation currently maintains a commercial paper back-up
line of credit with two banks totaling $50 million. The termination date is
November 2005. The commitment fee is determined by a pricing matrix that is
based on the long-term senior debt ratings of the Corporation. Currently, the
annual fee is 8 basis points of the commitment. There were no borrowings under
commercial paper back-up facilities during 2001 or 2000.

NORTHERN TRUST CORPORATION

                                       71

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Debt--Floating Rate Capital Securities. The following table summarizes the
book value of Floating Rate Capital Securities outstanding.

<TABLE>
<CAPTION>
                                                         December 31
           ----------------------------------------------------------
           (In Millions)                                 2001   2000
           ---------------------------------------------------------
           <S>                                         <C>    <C>
           $150 Million Series A due January 15, 2027  $148.7 $148.7
           $120 Million Series B due April 15, 2027     119.0  118.9
           ------------------------------------------- ------ ------
           Total Debt-Floating Rate Capital Securities $267.7 $267.6
</TABLE>

   In January 1997, the Corporation issued $150 million of Floating Rate
Capital Securities, Series A, through a statutory business trust wholly-owned
by the Corporation ("NTC Capital I"). In April 1997, the Corporation also
issued, through a separate wholly-owned statutory business trust ("NTC Capital
II"), $120 million of Floating Rate Capital Securities, Series B. The sole
assets of the trusts are Subordinated Debentures of Northern Trust Corporation
which have the same interest rates and maturity dates as the corresponding
distribution rates and redemption dates of the Floating Rate Capital
Securities. The outstanding principal amounts of the Subordinated Debentures
held by NTC Capital I and NTC Capital II are $154.6 million and $123.7 million,
respectively. The Series A Securities were issued at a discount to yield 60.5
basis points above the three-month London Interbank Offered Rate (LIBOR), while
the Series B Securities were issued at a discount to yield 67.9 basis points
above the three-month LIBOR. Both Series A and B Securities qualify as tier 1
capital for regulatory purposes.
   The Corporation has fully, irrevocably and unconditionally guaranteed all
payments due on such Capital Securities. The holders of the Capital Securities
are entitled to receive preferential cumulative cash distributions quarterly in
arrears (based on the liquidation amount of $1,000 per Capital Security) at an
interest rate equal to the rate on the corresponding Subordinated Debentures.
The interest rate on the Series A and Series B securities is equal to
three-month LIBOR plus 0.52% and 0.59%, respectively. Subject to certain
exceptions, the Corporation has the right to defer payment of interest on the
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods provided that no extension period
may extend beyond the stated maturity date. If interest is deferred on the
Subordinated Debentures, distributions on the Capital Securities will also be
deferred and the Corporation will not be permitted, subject to certain
exceptions, to pay or declare any cash distributions with respect to the
Corporation's capital stock or debt securities that rank the same as or junior
to the Subordinated Debentures, until all past due distributions are paid. The
Subordinated Debentures are unsecured and subordinated to substantially all of
the Corporation's existing indebtedness.
   The Corporation has the right to redeem the Series A Subordinated Debentures
on or after January 15, 2007 and the Series B Subordinated Debentures on or
after April 15, 2007, in each case in whole or in part. In addition, the
Corporation has the right to redeem the Subordinated Debentures held by either
trust in whole but not in part at any time within 90 days following certain
defined tax or regulatory capital treatment changes, at a price equal to the
principal amount plus accrued and unpaid interest.

11. Stockholders' Equity--Preferred Stock. The Corporation is authorized to
issue 10,000,000 shares of preferred stock without par value. The Board of
Directors of the Corporation is authorized to fix the particular preferences,
rights, qualifications and restrictions for each series of preferred stock
issued. A summary of preferred stock outstanding is presented below.

<TABLE>
<CAPTION>
                                                      December 31
              ----------------------------------------------------
              (In Millions)                           2001   2000
              ---------------------------------------------------
              <S>                                   <C>    <C>
              Auction Rate Preferred Stock Series C
                600 shares @ $100,000 per share     $ 60.0 $ 60.0
              Flexible Auction Rate Cumulative
                Preferred Stock Series D
                600 shares @ $100,000 per share       60.0   60.0
              ------------------------------------- ------ ------
              Total Preferred Stock                 $120.0 $120.0
</TABLE>

Series C--In 1987, 600 shares of Auction Rate Preferred Stock Series C (APS)
were issued, with a $100,000 per share stated value. Dividends on the shares of
APS are cumulative. Rates are determined every 49 days by Dutch auction unless
the Corporation fails to pay a dividend or redeem any shares for which it has
given notice of redemption, in which case the dividend rate will be set at 175%
of the 60-day "AA" Composite Commercial Paper Rate. The dividend rate in any
auction will not exceed a percentage determined by the prevailing credit rating
of the APS. The current maximum dividend rate is 120% of the 60-day "AA"
Composite Commercial Paper Rate. No dividends other than

                                                     NORTHERN TRUST CORPORATION

                                       72

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


dividends payable in junior stock, such as common stock, may be paid on common
stock until full cumulative dividends on the APS have been paid. The average
rate for this issue as declared during 2001 was 3.33%. The shares of APS are
redeemable at the option of the Corporation, in whole or in part, on any
Dividend Payment Date at $100,000 per share, plus accrued and unpaid dividends.

Series D--In 1990, 600 shares of Flexible Auction Rate Cumulative Preferred
Stock Series D (FAPS) were issued with a $100,000 per share stated value. Each
dividend period contains 49 days (the "Short-Term Dividend Period") or a number
of days greater than 49 days (as selected by the Term Selection Agent) which is
divisible by seven (the "Long-Term Dividend Period"). Rates for each dividend
period are determined by Dutch auction unless the Corporation fails to pay the
full amount of any dividend or redemption. The dividend rate in any auction
will not exceed a percentage (currently 125%), determined by the prevailing
credit rating of the FAPS, of the 60-day "AA" Composite Commercial Paper Rate
or the Reference Rate, which rate is the Composite Commercial Paper Rate or the
Treasury Rate, as appropriate for the length of each Short-Term or Long-Term
Dividend Period, respectively. If the Corporation fails to pay the full amount
of any dividend or redemption, each dividend period thereafter (until auctions
are resumed) will be a Short-Term Dividend Period and the dividend rate will be
250% of the 60-day "AA" Composite Commercial Paper Rate; additional dividends
will accrue for the balance of any Long-Term Dividend Period in which such a
failure to pay occurs. No dividends other than dividends payable in junior
stock, such as common stock, may be paid on common stock until full cumulative
dividends on the FAPS have been paid. The average rate for this issue as
declared during 2001 was 3.47%. The shares of FAPS are redeemable at the option
of the Corporation, in whole or in part, at $100,000 per share plus accrued and
unpaid dividends.

Preferred Stock Purchase Rights--On July 21, 1998 the Board of Directors of the
Corporation declared a dividend distribution of one Preferred Stock Purchase
Right for each outstanding share of the Corporation's common stock issuable to
stockholders of record at the close of business on October 31, 1999. As a
result of anti-dilution provisions, each share of common stock now has one-half
of one Right associated with it. Each Right is exercisable for one
one-hundredth of a share of Series A Junior Participating Preferred Stock at an
exercise price of $330.00, subject to adjustment. The Rights will be evidenced
by the common stock certificates and will not be exercisable or transferable
apart from the common stock until twenty days after a person or group acquires
15 percent or more of the shares of common stock then outstanding or announces
a tender or exchange offer which if consummated would result in ownership of 15
percent or more of the outstanding common stock.
   In the event that any person or group acquires 15 percent or more of the
outstanding shares of common stock, each Right entitles the holder, other than
such person or group, to purchase that number of shares of common stock of the
Corporation having a market value of twice the exercise price of the Right. At
any time thereafter if the Corporation consummates a business combination
transaction or sells substantially all of its assets, each Right entitles the
holder, other than the person or group acquiring 15 percent or more of the
outstanding shares of common stock, to purchase that number of shares of
surviving company stock which at the time of the transaction would have a
market value of twice the exercise price of the Right.
   The Rights do not have voting rights and are redeemable at the option of the
Corporation at a price of one-half of one cent per Right at any time prior to
the close of business on the twentieth day following announcement by the
Corporation of the acquisition of 15 percent or more of the outstanding com-
mon stock by a person or group. Unless earlier redeemed, the Rights will expire
on October 31, 2009.

NORTHERN TRUST CORPORATION

                                       73

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Common Stock. An analysis of changes in the number of shares of common stock
outstanding follows:

<TABLE>
<CAPTION>
                                      2001         2000         1999
          -----------------------------------------------------------
          <S>                  <C>          <C>          <C>
          Balance at January 1 222,232,395  222,161,934  111,214,740
            Distribution of
              Two-for-One
              Stock Split               --           --  111,214,740
          Employee Benefit
            Plans:
            Incentive Plan and
              Awards               598,940      490,397      347,518
            Stock Options
              Exercised          1,363,160    2,364,071    2,518,802
            Treasury Stock
              Purchased         (2,547,235)  (2,784,007)  (3,133,866)
          -----------------------------------------------------------
          Balance at
            December 31        221,647,260  222,232,395  222,161,934
</TABLE>

Note: 1999 share activity reflects the December 1999 two-for-one stock split
effected by means of a 100% stock distribution.

Under the current buyback program, the Corporation may purchase up to 4.6
million additional shares after December 31, 2001. The repurchased shares would
be used primarily for management incentive plans and other corporate purposes.

12. Accumulated Other Comprehensive Income.  The following table summarizes the
components of Accumulated Other Comprehensive Income at December 31, 2001 and
2000, and changes during the years then ended, presented on an after-tax basis.

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                       For the Year Ended December 31, 2001
--------------------------------------------------------------------------------------------------------------------
                          Unrealized Gains                                                             Accumulated
                               (Losses) on    Minimum      Gains (Losses)   Foreign Currency                 Other
                      Securities Available    Pension        on Cash Flow        Translation         Comprehensive
(In Millions)                     for Sale  Liability  Hedge Designations        Adjustments                Income
--------------------------------------------------------------------------------------------------------------------
<S>                   <C>                   <C>        <C>                 <C>
Beginning Balance                    $ (.9)    $(12.3)               $ --               $ --                $(13.2)
Cumulative-effect of
  adopting SFAS
  No. 133                               --         --                 (.2)                --                   (.2)
Current-Period Change                   .8        8.7                 1.7                (.2)                 11.0
--------------------------------------------------------------------------------------------------------------------
Ending Balance                       $ (.1)    $ (3.6)               $1.5               $(.2)               $ (2.4)
--------------------------------------------------------------------------------------------------------------------
                                       For the Year Ended December 31, 2000
--------------------------------------------------------------------------------------------------------------------
                          Unrealized Gains                                                             Accumulated
                               (Losses) on    Minimum      Gains (Losses)   Foreign Currency                 Other
                      Securities Available    Pension        on Cash Flow        Translation         Comprehensive
(In Millions)                     for Sale  Liability  Hedge Designations        Adjustments                Income
--------------------------------------------------------------------------------------------------------------------
Beginning Balance                    $(2.4)    $(10.7)               $ --               $ --                $(13.1)
Current-Period Change                  1.5       (1.6)                 --                 --                   (.1)
--------------------------------------------------------------------------------------------------------------------
Ending Balance                       $ (.9)    $(12.3)               $ --               $ --                $(13.2)
</TABLE>

                                                     NORTHERN TRUST CORPORATION

                                       74

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13. Income Taxes--The table below reconciles the total provision for income
taxes recorded in the consolidated statement of income with the amounts
computed at the statutory federal tax rate of 35%.

<TABLE>
<CAPTION>
               (In Millions)                2001    2000    1999
               --------------------------------------------------
               <S>                        <C>     <C>     <C>
               Tax at Statutory Rate      $256.2  $255.5  $215.8
               Tax Exempt Income            (9.5)   (9.4)  (10.5)
               State Taxes, net              9.5     6.1     7.5
               Other                       (11.8)   (7.2)   (1.3)
               -------------------------- ------  ------  ------
               Provision for Income Taxes $244.4  $245.0  $211.5
</TABLE>

   The components of the consolidated provision for income taxes for each of
the three years ended December 31, are as follows:

<TABLE>
<CAPTION>
                (In Millions)                2001   2000    1999
                ------------------------------------------------
                <S>                        <C>    <C>     <C>
                Current Tax Provision:
                  Federal                  $ 81.1 $118.9  $ 92.9
                  State                       7.3   10.3     8.4
                  Foreign                    26.5   27.4    14.9
                -------------------------- ------ ------  ------
                  Total                     114.9  156.6   116.2
                -------------------------- ------ ------  ------
                Deferred Tax Provision:
                  Federal                   122.1   89.3    92.2
                  State                       7.4    (.9)    3.1
                -------------------------- ------ ------  ------
                  Total                     129.5   88.4    95.3
                -------------------------- ------ ------  ------
                Provision for Income Taxes $244.4 $245.0  $211.5
</TABLE>

   In addition to the amounts shown in the above tables, tax liabilities or
(benefits) have been recorded directly to stockholders' equity for the
following items:

<TABLE>
<CAPTION>
           (In Millions)                                2001    2000
           ----------------------------------------------------------
           <S>                                        <C>     <C>
           Current Tax Benefit for Employee Stock
             Options and Other Employee Benefit
             Plans                                    $(26.6) $(45.9)
           Deferred Tax Effect of Unrealized Security
             Gains                                       1.6     1.2
           Deferred Tax Effect of Minimum Pension
             Liabilities                                 5.3    (1.0)
</TABLE>

   Deferred taxes result from temporary differences between the amounts
reported in the consolidated financial statements and the tax bases of assets
and liabilities. Deferred tax liabilities and assets have been computed as
follows:

<TABLE>
<CAPTION>
                                                       December 31
              -----------------------------------------------------
              (In Millions)                            2001   2000
              ----------------------------------------------------
              <S>                                   <C>     <C>
              Deferred Tax Liabilities:
                Lease Financing                     $470.6  $347.5
                Software Development                  84.8    67.7
                Accumulated Depreciation              29.3    19.8
                State Taxes, net                      20.0    14.8
                Other Liabilities                      8.6    10.8
              -------------------------------------  ------ ------
              Gross Deferred Tax Liabilities         613.3   460.6
              -------------------------------------  ------ ------
              Deferred Tax Assets:
                Reserve for Credit Losses             56.6    57.0
                Compensation and Benefits             35.9    31.9
                Other Assets                          21.0    21.6
              -------------------------------------  ------ ------
              Gross Deferred Tax Assets              113.5   110.5
              Valuation Reserve                         --      --
              -------------------------------------  ------ ------
              Deferred Tax Assets, net of Valuation
                Reserve                              113.5   110.5
              -------------------------------------  ------ ------
              Net Deferred Tax Liabilities          $499.8  $350.1
</TABLE>

At December 31, 2001, Northern Trust had a federal net operating loss
carryforward of $2.1 million resulting from the acquisition of businesses that
had existing net operating loss carryforwards. These carryforwards are
available to reduce future tax return liabilities. In addition, Northern Trust
had state net operating loss and tax credit carryforwards of $501.5 million and
$.9 million, respectively. The carryforwards are subject to various limitations
imposed by tax law.

NORTHERN TRUST CORPORATION

                                       75

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



14. Net Income Per Common Share Computations--The computation of net income per
common share is presented below.

<TABLE>
<CAPTION>
($ In Millions Except Per Share Information)        2001         2000         1999
-----------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>
Basic Net Income Per Common Share
Net Income                                        $487.5       $485.1       $405.0
Less: Dividends on Preferred Stock                  (4.1)        (5.7)        (4.8)
-------------------------------------------- -----------  -----------  -----------
Net Income Applicable to Common Stock             $483.4       $479.4       $400.2
Average Number of Common Shares Outstanding  221,425,584  220,961,477  221,673,316
Basic Net Income Per Common Share                $  2.18       $ 2.17      $  1.81
-------------------------------------------- -----------  -----------  -----------
Diluted Net Income Per Common Share
Net Income Applicable to Common Stock             $483.4       $479.4       $400.2
Average Number of Common Shares Outstanding  221,425,584  220,961,477  221,673,316
Plus: Dilutive Potential Common Shares
   Stock Options                               5,310,288    7,181,145    6,021,348
   Performance Shares                          1,526,474    1,677,531    1,457,993
   Other                                         708,992      793,158      721,371
-------------------------------------------- -----------  -----------  -----------
Average Common and Potential Common Shares   228,971,338  230,613,311  229,874,028
-------------------------------------------- -----------  -----------  -----------
Diluted Net Income Per Common Share              $  2.11      $  2.08      $  1.74
</TABLE>

15. Restrictions on Subsidiary Dividends and Loans or Advances--Provisions of
state and federal banking laws restrict the amount of dividends that can be
paid to the Corporation by its banking subsidiaries. Under applicable state and
federal laws, no dividends may be paid in an amount greater than the net
profits then on hand, subject to other applicable provisions of law. In
addition, prior approval from the relevant federal banking regulator is
required if dividends declared by any of the Corporation's banking subsidiaries
in any calendar year will exceed its net profits (as defined) for that year,
combined with its retained net profits for the preceding two years. Based on
these regulations, the Corporation's banking subsidiaries, without regulatory
approval, could declare dividends during 2002 equal to their 2002 eligible net
profits (as defined) plus $386.1 million. The ability of each banking
subsidiary to pay dividends to the Corporation may be further restricted as a
result of regulatory policies and guidelines relating to dividend payments and
capital adequacy.
   State and federal laws limit the transfer of funds by a banking subsidiary
to the Corporation and cer tain of its affiliates in the form of loans or
extensions of credit, investments or purchases of assets. Transfers of this
kind to the Corporation or a nonbanking subsidiary by a banking subsidiary are
each limited to 10% of the banking subsidiary's capital and surplus with
respect to each affiliate and to 20% in the aggregate, and are also subject to
certain collateral requirements. These transactions, as well as other
transactions between a banking subsidiary and the Corporation or its
affiliates, must also be on terms substantially the same as, or at least as
favorable as, those prevailing at the time for comparable transactions with
non-affiliated companies or, in the absence of comparable transactions, on
terms, or under circumstances, including credit standards, that would be
offered to, or would apply to, non-affiliated companies.

16. Other Operating Income--Nonrecurring gains in 2001 totaled $9.2 million
resulting from the sale of an 80% interest in Northern Trust's lockbox
operations. In 2000 and 1999, nonrecurring gains totaled $4.5 million and $4.0
million, respectively.

                                                     NORTHERN TRUST CORPORATION

                                       76

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



17. Net Interest Income--The components of net interest income were as follows:

<TABLE>
<CAPTION>
(In Millions)                                                       2001     2000     1999
------------------------------------------------------------------------------------------
<S>                                                            <C>       <C>      <C>
Interest Income
  Loans and Leases                                              $1,077.7 $1,154.6 $  938.6
  Securities-Taxable                                               352.7    580.6    379.4
            -Non-Taxable                                            26.2     26.1     26.3
  Time Deposits with Banks                                         194.3    206.0    164.3
  Federal Funds Sold and Securities Purchased under Agreements
    to Resell and Other                                             30.6     43.8     60.0
-------------------------------------------------------------- --------- -------- --------
Total Interest Income                                            1,681.5  2,011.1  1,568.6
-------------------------------------------------------------- --------- -------- --------
Interest Expense
  Deposits                                                         645.9    830.3    591.9
  Federal Funds Purchased                                          109.8    167.8    161.0
  Securities Sold under Agreements to Repurchase                    58.0     91.8     95.8
  Commercial Paper                                                   5.6      8.8      7.3
  Other Borrowings                                                 168.6    245.2    109.2
  Senior Notes                                                      33.4     34.4     30.6
  Long-Term Debt                                                    51.4     44.8     37.9
  Debt-Floating Rate Capital Securities                             13.5     19.4     16.1
-------------------------------------------------------------- --------- -------- --------
Total Interest Expense                                           1,086.2  1,442.5  1,049.8
-------------------------------------------------------------- --------- -------- --------
Net Interest Income                                            $   595.3 $  568.6 $  518.8
</TABLE>

18. Other Operating Expenses--The components of other operating expenses were
as follows:

<TABLE>
<CAPTION>
                (In Millions)                2001   2000   1999
                -----------------------------------------------
                <S>                        <C>    <C>    <C>
                Business Promotion         $ 41.6 $ 47.0 $ 41.2
                Outside Services Purchased  145.3  136.4  118.8
                Telecommunications           18.5   17.9   17.8
                Postage and Supplies         29.2   28.8   26.8
                Software Amortization        69.9   61.3   48.1
                Goodwill Amortization         9.9    9.4    8.6
                Other Intangibles
                  Amortization                6.6    6.2    5.6
                Other Expense                62.0   85.7   39.1
                -----------------------------------------------
                Total Other Operating
                  Expenses                 $383.0 $392.7 $306.0
</TABLE>

   Software, goodwill and other intangible assets are included in other assets
in the consolidated balance sheet. Software totaled $329.8 million at December
31, 2001 and $267.5 million at December 31, 2000. Goodwill totaled $90.1
million at December 31, 2001 and $98.0 million at December 31, 2000. Other
intangibles totaled $35.2 million at December 31, 2001 and $41.8 million at
December 31, 2000.

19. Employee Benefits--Pension. A noncontributory qualified pension plan covers
substantially all employees. Assets held by the plan consist primarily of
listed stocks and corporate bonds.
   Effective January 1, 2002, the pension formula was changed from a
traditional final average pay for mula to what is generally known as a pension
equity formula. All employees hired on or after June 1, 2001 are required to
have their pension computed under the pension equity formula. All employees
hired before June 1, 2001 (and continually active throughout 2001) were
entitled to a one-time pension election to either remain with the traditional
pension plan formula or change to the new pension equity formula for accruals
after December 31, 2001. Although these changes are expected to reduce the
long-term cost of the plan, for the next several years it is estimated that the
plan change will increase the annual service cost by approximately 3.5%.
   Northern Trust also maintains a noncontributory nonqualified pension plan
for participants whose retirement benefit payments under the qualified plan are
expected to exceed the limits imposed by federal tax law. Northern Trust has a
nonqualified trust, referred to as a "Rabbi" Trust, to fund benefits in excess
of those permitted in certain of its qualified plans. The primary purpose of
the trust is to fund nonqualified retirement benefits. This arrangement offers
participants a degree of assurance for payment of benefits in excess of those
permitted in the related qualified plans. The assets remain subject to the
claims of creditors and are not the property of the employees. Therefore, they
are accounted for as corporate assets and are included in other assets in the
consolidated balance sheet.

NORTHERN TRUST CORPORATION

                                       77

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   The following tables set forth the status and the net periodic pension cost
of the domestic qualified and nonqualified pension benefit plans for 2001 and
2000. Prior service costs are being amortized on a straight-line basis over the
average future working lifetime of the eligible participants at the time of the
plan change. As of January 1, 2001, the average future working lifetime of the
eligible participants is 11.2 years.

Plan Status
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                        Qualified         Nonqualified
                                          Plan                Plan
          -------------------------------------------------------------
                                                 September 30
          -------------------------------------------------------------
          ($ In Millions)              2001    2000     2001     2000
          ------------------------------------------------------------
          <S>                        <C>     <C>     <C>      <C>
          Accumulated Benefit
            Obligation               $202.8  $183.6   $ 26.4   $ 38.0
          ------------------------------------------------------------
          Projected Benefit           242.9   216.7     46.0     48.8
          Plan Assets at Fair Value   298.1   372.0       --       --
          ------------------------------------------------------------
          Plan Assets In Excess of
            (Less Than) Projected
            Benefit Obligations        55.2   155.3    (46.0)   (48.8)
          Unrecognized Net Liability     .2      .3       --       --
          Unrecognized Net Loss
            (Gain)                     19.4   (88.4)    30.3     35.5
          Unrecognized Prior Service
            Cost (Benefit)              2.5    (1.5)    (3.0)    (3.3)
          Valuation Adjustment          (.1)    (.1)      --       --
          ------------------------------------------------------------
          Prepaid (Accrued) Pension
            Cost at September 30       77.2    65.6    (18.7)   (16.6)
          Net Funding October to
            December                    (.7)   13.8     (1.9)      .8
          Additional Minimum
            Liability at December 31     --      --     (5.7)   (19.8)
          ------------------------------------------------------------
          Prepaid (Accrued) Pension
            Cost at December 31      $ 76.5  $ 79.4   $(26.3)  $(35.6)
          ------------------------------------------------------------
          Assumptions:
            Discount Rates             7.50%   8.00%    6.00%    6.00%
            Rate of Increase in
              Compensation Level       5.00    5.40     5.00     5.40
            Expected Long-Term
              Rate of Return on
              Assets                   9.00    9.00      N/A      N/A
</TABLE>

Net Periodic Pension Cost
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                           Qualified         Nonqualified
                                             Plan                Plan
        -----------------------------------------------------------------
        (In Millions)                    2001    2000     2001     2000
        ----------------------------------------------------------------
        <S>                          <C>      <C>      <C>      <C>
        Service Cost                  $ 13.1   $ 12.8   $  2.0   $  1.7
        Interest Cost                   17.8     15.9      3.0      2.5
        Expected Return on Plan
          Assets                       (27.9)   (24.0)     N/A      N/A
        Amortization:
          Net Loss                        --       --      3.1      2.5
          Prior Service Cost
            (Benefit)                    (.2)     (.2)     (.3)     (.3)
        ----------------------------------------------------------------
        Net Periodic Pension Cost     $  2.8   $  4.5   $  7.8   $  6.4
        Change in Benefit Obligation
        -----------------------------------------------------------------
                                           Qualified         Nonqualified
                                             Plan                Plan
        -----------------------------------------------------------------
        (In Millions)                    2001    2000     2001     2000
        ----------------------------------------------------------------
        Beginning Balance             $216.7   $200.4   $ 48.8   $ 40.7
        Service Cost                    13.1     12.8      2.0      1.7
        Interest Cost                   17.8     15.9      3.0      2.5
        Actuarial (Gain) Loss           24.5      8.2     (2.5)     9.0
        Benefits Paid                  (33.0)   (20.6)    (5.3)    (5.1)
        Plan Change                      3.8       --       --       --
        ----------------------------------------------------------------
        Ending Balance                $242.9   $216.7   $ 46.0   $ 48.8

        Change in Qualified Plan Assets
        ----------------------------------------------------------------
        (In Millions)                                     2001     2000
        ----------------------------------------------------------------
        Fair Value of Assets at Beginning of Plan Year  $372.0   $305.3
        Actual Return on Assets                          (55.8)    79.0
        Employer Contribution                             14.9      8.3
        Benefits Paid                                    (33.0)   (20.6)
        ----------------------------------------------------------------
        Fair Value of Assets at End of Plan Year        $298.1   $372.0
</TABLE>

   Pension expense for 1999 was $6.9 million and $5.4 million for the qualified
and nonqualified plans, respectively.
   Total assets in the "Rabbi" Trust related to the nonqualified pension plan
at December 31, 2001 and 2000 amounted to $31.1 million and $23.3 million,
respectively.
   A defined benefit and a defined contribution plan is maintained for the
London Branch employees. At December 31, 2001, the fair value of assets and the
projected benefit obligation of the defined benefit plan totaled $16.4 million
and $17.3 million, respectively. At December 31, 2000, the fair value of assets
and the projected benefit obligation were $16.9 million and $16.5 million,
respectively. Pension expense for 2001 and 2000 was $3.4 million and $2.2
million, respectively.

                                                     NORTHERN TRUST CORPORATION

                                       78

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Thrift Incentive Plan. The Corporation and its subsidiaries have a defined
contribution Thrift Incentive Plan covering substantially all employees. One
half of the Corporation's matching contribution is contingent upon meeting a
predefined earnings target for the year. In 1999, 2000 and 2001, the maximum
corporate contribution equaled 4% of an employee's salary. The maximum
corporate contribution will increase to 5% in 2002. The estimated contribution
to this plan is charged to employee benefits and totaled $14.6 million in 2001,
$13.2 million in 2000 and $10.7 million in 1999.

Employee Stock Ownership Plan (ESOP). A leveraged ESOP in which substantially
all employees of Northern Trust are eligible to participate was established in
1989. All of the original 18 million shares in the ESOP Trust have been
allocated and all ESOP related debt has been repaid as of December 31, 2001.
Beginning in 2002, the corporate contribution to the ESOP will equal 2% of an
employee's salary. This amount can be increased by up to an additional 3% if
corporate performance exceeds a pre-determined earnings goal.
   The following table presents information related to the ESOP.

<TABLE>
<CAPTION>
              (In Millions)                              2001 2000
              ----------------------------------------------------
              <S>                                        <C>  <C>
              Total ESOP Compensation Expense            $6.1 $5.9
              Dividends and Interest on Unallocated ESOP
                Shares Used for Debt Service               .7  1.2
</TABLE>

Other Postretirement Benefits. Northern Trust maintains an unfunded
postretirement health care plan. Employees retiring under the provisions of The
Northern Trust Pension Plan who have attained 15 years of service are eligible
for postretirement health care coverage. These benefits are provided either
through an indemnity plan, subject to deductibles, co-payment provisions and
other limitations, or through health maintenance organizations. The provisions
may be changed at the discretion of Northern Trust, which also reserves the
right to terminate these benefits at any time.
   The following tables set forth the plan status at December 31 and the net
periodic postretirement benefit cost of the domestic postretirement health care
plan for 2001 and 2000. The transition obligation at January 1, 1993 is being
amortized to expense over a twenty-year period.

Plan Status
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
              (In Millions)                          2001   2000
              ---------------------------------------------------
              <S>                                  <C>     <C>
              Accumulated Postretirement Benefit
                Obligation (APBO) Measured at
                September 30:
                Retirees and Dependents             $17.3  $15.5
                Actives Eligible for Benefits         4.0    3.6
                Actives Not Yet Eligible             13.3   10.9
              ------------------------------------ ------  -----
              Total APBO                             34.6   30.0
                Unamortized Transition Obligation    (6.4)  (7.0)
                Unrecognized Net Gain (Loss)         (3.7)    .3
                Prior Service Cost                    (.3)   (.3)
              ------------------------------------ ------  -----
              Net Postretirement Benefit Liability $ 24.2  $23.0
</TABLE>

Net Periodic Postretirement Benefit Cost
--------------------------------------------------------------------------------
<TABLE>
              <S>                                      <C>   <C>
              (In Millions)                             2001  2000
              ----------------------------------------------------
              Service Cost                             $ 1.0 $  .9
              Interest Cost                              2.4   2.3
              Amortization--Transition Obligation         .6    .6
              ---------------------------------------- ----- -----
              Net Periodic Postretirement Benefit Cost $ 4.0 $ 3.8
</TABLE>

Change in Postretirement Benefit Obligation
--------------------------------------------------------------------------------
<TABLE>
                      <S>                   <C>    <C>
                      (In Millions)          2001   2000
                      -----------------------------------
                      Beginning Balance     $30.0  $29.4
                      Service Cost            1.0     .9
                      Interest Cost           2.4    2.3
                      Actuarial (Gain) Loss   4.0    (.6)
                      Benefits Paid          (2.8)  (2.0)
                      --------------------- -----  -----
                      Ending Balance        $34.6  $30.0
</TABLE>

   Postretirement health care expense for 1999 was $3.7 million.
   The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 2001 and 8.0% at
December 31, 2000. For measurement purposes, a 6.2% annual increase in the cost
of covered health care benefits was assumed for 2002. This rate is assumed to
decrease to 5.5% in 2003 and remain at that level thereafter. The health care
cost trend rate assumption has an effect on the amounts reported. For example,
increasing or decreasing the assumed health care trend rate by one percentage
point in each year would have the following effect.

<TABLE>
<CAPTION>
                                          1--Percentage 1--Percentage
                                                  Point         Point
         (In Millions)                         Increase      Decrease
         -------------------------------------------------------------
         <S>                              <C>           <C>
         Effect on Total Service and
           Interest Cost Components                $ .1         $ (.1)
         Effect on Postretirement Benefit
           Obligation                               1.2          (1.1)
</TABLE>

NORTHERN TRUST CORPORATION

                                       79

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



20. Contingent Liabilities--Because of the nature of its activities, Northern
Trust is subject to pending and threatened legal actions that arise in the
normal course of business. In the judgment of management, after consultation
with legal counsel, none of the litigation to which the Corporation or any of
its subsidiaries is a party, including the litigation described below, will
have a material effect, either individually or in the aggregate, on the
consolidated financial position or results of operations.
   Two subsidiaries of the Corporation have been named as defendants in several
Enron-related class action suits filed in the Federal District Courts for the
Southern District of Texas (Houston), the Eastern District of Texas
(Texarkana), and the Southern District of Florida (Miami). Individual
participants in the employee pension benefit plans sponsored by Enron Corp.
sued various corporate entities and individuals, including The Northern Trust
Company, in its capacity as the former trustee of the Enron Savings Plan, and
Northern Trust Retirement Consulting, L.L.C., in its capacity as the former
record keeper of the plans. The actions make claims, inter alia, for breach of
fiduciary duty to the plan participants, and seek equitable relief and monetary
damages in an unspecified amount against the defendants. The Corporation and
the individual defendant companies intend to defend these actions vigorously.
Based upon the information developed to date and recognizing that the outcome
of complex litigation is uncertain, management believes that the litigation
will be resolved without material impact on the Corporation's consolidated
financial position or results of operations.

21. Off-Balance Sheet and Derivative Financial Instruments--Commitments and
Letters of Credit. Northern Trust, in the normal course of business, enters
into various types of commitments and issues letters of credit to meet the
liquidity and credit enhancement needs of its clients. Credit risk is the
principal risk associated with these instruments. The contractual amounts of
these instruments represent the credit risk should the instrument be fully
drawn upon and the client defaults. To control the credit risk associated with
entering into commitments and issuing letters of credit, Northern Trust
subjects such activities to the same credit quality and monitoring controls as
its lending activities.
   Commitments and letters of credit consist of the following:
   Legally Binding Commitments to Extend Credit generally have fixed expiration
dates or other termination clauses. Since a significant portion of the
commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future loans or liquidity
requirements.
   Participations in Bankers Acceptances obligate Northern Trust, in the event
of default by the counterparty, to reimburse the holder of the acceptance an
amount equal to its participation in the acceptance.
   Commercial Letters of Credit are instruments issued by Northern Trust on
behalf of its clients that authorize a third party (the beneficiary) to draw
drafts up to a stipulated amount under the specified terms and conditions of
the agreement. Commercial letters of credit are issued primarily to facilitate
international trade.
   Standby Letters of Credit obligate Northern Trust to meet certain financial
obligations of its clients, if, under the contractual terms of the agreement,
the clients are unable to do so. These instruments are primarily issued to
support public and private financial commitments, including commercial paper,
bond financing, initial margin requirements on futures exchanges and similar
transactions.
   The following table shows the contractual amounts of commitments and letters
of credit.

Commitments and Letters of Credit
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                    December 31
            -------------------------------------------------------
            (In Millions)                            2001      2000
            -------------------------------------------------------
            <S>                                 <C>       <C>
            Legally Binding Commitments to
              Extend Credit*                    $16,358.5 $15,513.0
            Commercial Letters of Credit             71.8     103.3
            -------------------------------------------------------
            Standby Letters of Credit:
              Corporate                             594.0     563.2
              Industrial Revenue                  1,295.7   1,034.8
              Other                                 584.0     424.5
            -------------------------------------------------------
              Total Standby Letters of Credit** $ 2,473.7 $ 2,022.5
</TABLE>

*These amounts exclude $331.1 million and $433.0 million of commitments
participated to others at December 31, 2001 and 2000, respectively.
**These amounts include $215.5 million and $195.9 million of standby letters of
credit secured by cash deposits or participated to others as of December 31,
2001 and 2000, respectively. The weighted average maturity of standby letters
of credit was 18 months at December 31, 2001 and 20 months at December 31, 2000.

                                                     NORTHERN TRUST CORPORATION

                                       80

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Derivative Financial Instruments. These instruments include foreign exchange
contracts, foreign currency and interest rate futures contracts, and various
interest risk management instruments.
   Northern Trust is a party to various derivative financial instruments that
are used in the normal course of business to meet the risk management needs of
its clients; as part of its trading activity for its own account; and as part
of its asset/liability management activities. The major risk associated with
these instruments is that interest or foreign exchange rates could change in an
unanticipated manner, resulting in higher interest costs or a loss in the
underlying value of the instrument. These risks are mitigated by establishing
limits for risk management positions, monitoring the level of actual positions
taken against such established limits, monitoring the level of any interest
rate sensitivity gaps created by such positions, and by using hedging
techniques. When establishing position limits, market liquidity and volatility,
as well as experience in each market, are all taken into account.
   The estimated credit risk associated with these instruments relates to the
failure of the counterparty to pay based on the contractual terms of the
agreement, and is generally limited to the gross unrealized market value gains
on these instruments. The amount of credit risk will increase or decrease
during the lives of the instruments as interest or foreign exchange rates
fluctuate. This risk is controlled by limiting such activity to an approved
list of counterparties and by subjecting such activity to the same credit and
quality controls as are followed in lending and investment activities.
   Risk management instruments include:
   Foreign Exchange Contracts are agreements to exchange specific amounts of
currencies at a future date, at a specified rate of exchange. Foreign exchange
contracts are entered into primarily to meet the foreign exchange risk
management needs of clients. Foreign exchange contracts are also used for
trading purposes and asset/liability management.
   Foreign Currency and Interest Rate Futures
Contracts are agreements for delayed delivery of foreign currency, securities
or money market instruments in which the buyer agrees to take delivery at a
specified future date of a specified currency, security, or instrument, at a
specified price or yield. All of Northern Trust's futures contracts are traded
on organized exchanges that require the daily settlement of changes in the
value of the contracts. Futures contracts are utilized in trading activities
and asset/ liability management to limit Northern Trust's exposure to
unfavorable fluctuations in foreign exchange rates or interest rates.
   Interest Rate Protection Contracts are agreements that enable clients to
transfer, modify or reduce their interest rate risk. As a seller of interest
rate protection, Northern Trust receives a fee at the outset of the agreement
and then assumes the risk of an unfavorable change in interest rates. Northern
Trust also purchases interest rate protection contracts for asset/liability
management.
   Interest Rate Swap Contracts involve the exchange of fixed and floating rate
interest payment obligations without the exchange of the underlying principal
amounts.
   Forward Sale Contracts represent commitments to sell a specified amount of
securities at an agreed upon date and price. Northern Trust utilizes forward
sale contracts principally in connection with its sale of mortgage loans.
   Exchange-Traded Option Contracts grant the buyer the right, but not the
obligation, to purchase or sell at a specified price, a stated number of units
of an underlying financial instrument, at a future date.
   The following table shows the contractual/notional amounts of risk
management instruments. The notional amounts of risk management instruments do
not represent credit risk, and are not recorded in the consolidated balance
sheet. They are used merely to express the volume of this activity.

Risk Management Instruments
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      Contractual/
                                                    Notional Amounts
                                                      December 31
           ----------------------------------------------------------
           (In Millions)                              2001      2000
           ---------------------------------------------------------
           <S>                                  <C>        <C>
           Asset/Liability Management:
             Foreign Exchange Contracts         $   387.9  $   245.0
             Interest Rate Futures
               Contracts-Sold                         1.7         --
             Interest Rate Swap Contracts           400.0       43.6
             Forward Sale Contracts                  14.9        4.0
           Client-Related and Trading:
             Foreign Exchange Contracts          14,884.3   17,777.8
             Interest Rate Protection Contracts
               -Purchased                             2.3       49.5
               -Sold                                  2.3        4.5
             Interest Rate Swap Contracts           123.9       44.0
</TABLE>

Derivative Financial Instruments Used for Asset/ Liability Management. Northern
Trust adopted SFAS No. 133 and its related amendments on January 1, 2001. In
reviewing the accounting requirements of these statements, Northern Trust
concluded that certain hedge strategies previously used to man-

NORTHERN TRUST CORPORATION

                                       81

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


age fixed interest rate risk would not qualify for special hedge accounting
treatment. Management implemented alternative strategies for managing interest
rate risk that included the termination and run-off of certain interest rate
swap contracts used to hedge fixed rate loans and increased utilization of
longer-term fixed rate liabilities. The cumulative effect of adopting these
statements increased earnings by less than $10 thousand and reduced other
comprehensive income by $.2 million.
   Deferred gains and losses related to derivative financial instruments used
for various asset/liability management purposes and included in the consolidated
balance sheet at year-end 2001 totaled $14.7 million and $3.4 million,
respectively. Deferred gains and losses at year-end 2000 totaled $19.6 million
and $5.8 million, respectively.
   Fair Value Hedge Designations. Northern Trust may designate certain
derivatives as hedges of specific fixed rate assets or liabilities on its
balance sheet. The risk management policy for such hedges is to reduce or
eliminate the exposure to changes in the value of the hedged assets or
liabilities due to a specified risk. As of December 31, 2001, certain interest
rate swaps were designated and qualified as a hedge against changes in LIBOR
interest rates for specific fixed rate agency securities. Hedge ineffectiveness
was negligible through December 31, 2001.
   Cash Flow Hedge Designations. Certain derivatives may be designated as
hedges against exposure to variability in expected future cash flows
attributable to particular risks, such as fluctuations in foreign exchange or
interest rates. Northern Trust currently uses cash flow hedges to reduce or
eliminate the exposure to changes in foreign exchange and LIBOR interest rates.
As of December 31, 2001, certain forward foreign exchange contracts were
designated and qualified as hedges against changes in certain forecasted
transactions denominated in foreign currencies. It is estimated that a net gain
of $50 thousand will be reclassified into earnings within the next twelve
months. The maximum length of time over which these hedges will exist is twelve
months. Hedge ineffectiveness was negligible through December 31, 2001.
   As of December 31, 2001, an interest rate swap was designated and qualified
as a hedge against variability in interest cash flows due to changes in LIBOR
interest rates for specific time deposits with banks. It is estimated that $1.3
million of net gains associated with this hedge will be reclassified into
earnings within the next twelve months. The maximum length of time over which
this hedge will exist is nineteen months. There was no hedge ineffectiveness
through December 31, 2001.
   Net Investment Hedge Designations. Northern Trust has designated specific
forward foreign currency contracts as hedges against foreign currency exposure
for net investments in foreign affiliates. For the year ended December 31,
2001, a net loss of $26 thousand was recorded within foreign currency
translation adjustments, a component of capital.
   Other Derivatives not Designated as Hedges. Forward foreign exchange
contracts were used to reduce exposure to fluctuations in the dollar value of
capital investments in foreign subsidiaries and from foreign currency assets
and obligations. Realized and unrealized gains and losses on such contracts are
recognized as a component of foreign exchange trading profits.

Client and Trading-Related Derivative Financial Instruments. Net revenue
associated with client and trading-related interest rate derivative financial
instruments totaled $.2 million, $.7 million, and $.2 million during 2001,
2000, and 1999, respectively. The majority of these revenues are related to
interest rate swaps, futures contracts, and interest rate protection agreements.

Other Off-Balance Sheet Financial Instruments. As part of securities custody
activities and at the direction of trust clients, Northern Trust lends
securities owned by clients to borrowers who are reviewed by the Credit Policy
Credit Approval Committee. In connection with these activities, Northern Trust
has issued certain indemnifications against loss resulting from the bankruptcy
of the borrower of securities. The borrowing party is required to fully
collateralize securities received with cash, marketable securities, or
irrevocable standby letters of credit. As securities are loaned, collateral is
maintained at a minimum of 100 percent of the fair value of the securities plus
accrued interest, with revaluation of the collateral on a daily basis. The
amount of securities loaned as of December 31, 2001 and 2000 subject to
indemnification was $48.0 billion and $49.5 billion, respectively. Because of
the requirement to fully collateralize securities borrowed, management believes
that the exposure to credit loss from this activity is remote.
   The Bank is a participating member of various cash and securities clearing
organizations such as The Depository Trust Company in New York. It participates
in these organizations on behalf of its clients and on behalf of itself as a
result of its own invest-

                                                     NORTHERN TRUST CORPORATION

                                       82

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


ment and trading activities. A wide variety of cash and securities transactions
are settled through these organizations, including those involving obligations
of states and political subdivisions, asset-backed securities, commercial
paper, dollar placements and securities issued by the Government National
Mortgage Association.
   As a result of its participation in cash and securities clearing
organizations, the Bank could be responsible for a pro rata share of certain
credit-related losses arising out of the clearing activities. The method in
which such losses would be shared by the clearing members is stipulated in each
clearing organization's membership agreement. Credit exposure related to these
agreements varies from day to day, primarily as a result of fluctuations in the
volume of transactions cleared through the organizations. The estimated credit
exposure at December 31, 2001 and 2000 was $23 million and $73 million,
respectively, based on the clearing volume for those days. Controls related to
these clearing transactions are closely monitored to protect the assets of
Northern Trust.

22. Fair Value of Financial Instruments--SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the estimated fair
value of certain financial instruments. Considerable judgment is required to
interpret market data when computing estimates of fair value. Accordingly, the
estimates presented are not necessarily indicative of the amounts Northern
Trust could have realized in a market exchange.
   The information provided below should not be interpreted as an estimate of
the fair value of Northern Trust since the disclosures, in accordance with SFAS
No. 107, exclude the values of nonfinancial assets and liabilities, as well as
a wide range of franchise, relationship, and intangible values, which are
integral to a full assessment of the consolidated financial position.
   The use of different assumptions and/or estimation methods may have a
material effect on the computation of estimated fair values. Therefore,
comparisons between Northern Trust's disclosures and those of other financial
institutions may not be meaningful.
   The following methods and assumptions were used in estimating the fair
values of the financial instruments:
   Securities. Fair values of securities were based on quoted market values,
when available. If quoted mar ket values were not available, fair values were
based on quoted market values for comparable instruments.
   Loans (not including lease financing receivables). The fair values of
one-to-four family residential mortgages were based on quoted market prices of
similar loans sold, adjusted for differences in loan characteristics. The fair
values of the remainder of the loan portfolio were estimated using a discounted
cash flow method in which the discount rate used was the rate at which Northern
Trust would have originated the loan had it been originated as of the financial
statement date, giving effect to current economic conditions on loan
collectibility.
   Savings Certificates, Other Time, Foreign Offices Time Deposits and Other
Borrowings. The fair values of these instruments were estimated using a
discounted cash flow method that incorporated market interest rates.
   Senior Notes, Long-Term Debt, and Floating Rate Capital Securities. Fair
values were based on quoted market prices, when available. If quoted market
prices were not available, fair values were based on quoted market prices for
comparable instruments.
   Off-Balance Sheet Financial Instruments. The fair values of commitments and
letters of credit represent the amount of unamortized fees on these
instruments. The fair values of all other off-balance sheet financial
instruments were estimated using market prices, pricing models, or quoted
market prices of financial instruments with similar characteristics.
   Financial Instruments Valued at Carrying Value. Due to their short maturity,
the respective carrying values of certain on-balance sheet financial
instruments approximated their fair values. These financial instruments include
cash and due from banks; money market assets; customers' acceptance liability;
trust security settlement receivables; federal funds purchased; securities sold
under agreements to repurchase; commercial paper; certain other borrowings; and
liability on acceptances.
   The fair values required to be disclosed for demand, savings, and money
market deposits pursuant to SFAS No. 107 must equal the amounts disclosed in
the consolidated balance sheet, even though such deposits are typically priced
at a premium in banking industry consolidations.

NORTHERN TRUST CORPORATION




                                       83

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   Fair Values of On-Balance Sheet Financial Instruments. The following table
summarizes the fair values of on-balance sheet financial instruments.

<TABLE>
<CAPTION>
                                              December 31
           ----------------------------------------------------------
                                        2001               2000
           ----------------------------------------------------------
                                  Book      Fair      Book      Fair
           (In Millions)         Value     Value     Value     Value
           ---------------------------------------------------------
           <S>               <C>       <C>       <C>       <C>
           Assets
           Cash and Due
             From Banks      $ 2,592.3 $ 2,592.3 $ 2,287.8 $ 2,287.8
           Money Market
             Assets           10,546.0  10,546.0   5,864.9   5,864.9
           Securities:
             Available for
               Sale            5,648.6   5,648.6   6,477.8   6,477.8
             Held to
               Maturity          663.6     673.1     778.4     782.1
             Trading
               Account            18.9      18.9      13.4      13.4
           Loans (excluding
             Leases),
             Net of Credit
             Loss Reserve:
             Held to
               Maturity       16,601.5  16,743.8  16,941.7  17,022.1
             Held for Sale        14.2      14.4       5.6       5.7
           Acceptance
             Liability             9.7       9.7       9.3       9.3
           Trust Security
             Settlement
             Receivables         571.4     571.4     615.2     615.2
           Liabilities
           Deposits:
             Demand,
               Savings and
               Money
               Market         13,918.6  13,918.6  10,896.9  10,896.9
             Savings
               Certificates,
               Other
               Time and
               Foreign
               Offices
               Time           11,100.7  11,129.6  11,931.0  11,933.5
           Federal Funds
             Purchased           815.5     815.5   3,615.0   3,615.0
           Repurchase
             Agreements        1,407.4   1,407.4   1,577.1   1,577.1
           Commercial Paper      137.7     137.7     142.4     142.4
           Other Borrowings    6,841.2   6,931.5   2,629.5   2,647.3
           Senior Notes          450.0     473.0     500.0     512.6
           Long-Term Debt        766.8     800.8     638.1     655.9
           Debt-Floating
             Rate Capital
             Securities          267.7     227.6     267.6     248.6
           Liability on
             Acceptances           9.7       9.7       9.3       9.3
</TABLE>

   Fair Values of Off-Balance Sheet and Derivative Financial Instruments. The
following tables summarize the fair values of off-balance sheet and derivative
financial instruments.

<TABLE>
<CAPTION>
                                              December 31
               --------------------------------------------------
                                            2001            2000
               --------------------------------------------------
                                        Book   Fair   Book  Fair
               (In Millions)           Value  Value  Value Value
               -------------------------------------------------
               <S>                     <C>    <C>    <C>   <C>
               Commitments and Letters
                 of Credit:
                 Loan Commitments       $(.7)  $(.7) $  .1 $  .1
                 Letters of Credit        .4     .4     .7    .7
               Asset/Liability
                 Management:
                 Foreign Exchange
                   Contracts
                   Assets                2.6    2.6   12.5  12.5
                   Liabilities           2.8    2.8    3.2   3.2
                 Interest Rate Swap
                   Contracts
                   Assets                 .5    2.9     --    --
                   Liabilities           1.5    7.1     .1    .7
                 Other Financial
                   Instruments
                   Assets                 --     --     --    --
                   Liabilities            .1     .1     --    --
</TABLE>

<TABLE>
<CAPTION>
                                                    Fair Value
                  ---------------------------------------------
                  (In Millions)                    2001   2000
                  --------------------------------------------
                  <S>                            <C>    <C>
                  Client-Related and Trading:*
                    Foreign Exchange Contracts
                      Assets                     $158.9 $462.7
                      Liabilities                 160.9  454.7
                    Interest Rate Swap Contracts
                      Assets                        1.8     .3
                      Liabilities                   1.9     .3
</TABLE>

*Assets and liabilities associated with foreign exchange contracts averaged
$259.9 million and $259.3 million, respectively, during 2001. Assets and
liabilities associated with other client-related and trading account
instruments averaged $1.1 million and $1.0 million, respectively, during 2001.

23. Concentrations of Credit Risk--The information in the section titled Loans
and Other Extensions of Credit found on pages 49 through 51 is incorporated by
reference.

24. Pledged and Restricted Assets--Certain of Northern Trust's subsidiaries, as
required or permitted by law, pledge assets to secure public and trust
deposits, repurchase agreements and for other purposes. On December 31, 2001,
securities and loans totaling $10.5 billion ($5.3 billion of U.S. Govern-

                                                     NORTHERN TRUST CORPORATION

                                       84

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


ment and agency securities, $513 million of obligations of states and political
subdivisions and $4.7 billion of loans and other securities), were pledged.
Collateral required for these purposes totaled $8.8 billion. Included in the
total pledged collateral is the fair value of $152.3 million of available for
sale securities used in repurchase agreement transactions.
   Northern Trust is permitted to repledge collateral accepted from reverse
repurchase agreement transactions. The total fair value of accepted collateral
as of December 31, 2001 and 2000 was $1.6 billion and $294.4 million,
respectively. The fair value of repledged collateral as of December 31, 2001
and 2000 was $1.2 billion and $125.6 million, respectively. Repledged
collateral was used in other repurchase agreement transactions. Deposits
maintained at the Federal Reserve Bank to meet reserve requirements averaged
$382.2 million in 2001 and $317.6 million in 2000.

25. Stock-Based Compensation Plans--Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," establishes financial
accounting and reporting standards for stock-based compensation plans.
   SFAS No. 123 allows two alternative accounting methods: (1) a
fair-value-based method, or (2) an intrinsic-value-based method which is
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25) and related interpretations. Northern Trust
has elected to account for its stock-based incentive plans and awards under APB
No. 25, and has adopted the disclosure requirements of SFAS No. 123.
   A description of Northern Trust's stock-based compensation is presented
below.

Amended 1992 Incentive Stock Plan (Plan). The Plan was adopted in 1992 and has
been amended on several occasions. The Plan is administered by the Compensation
and Benefits Committee (Committee) of the Board of Directors. Directors and key
officers of the Corporation or its subsidiaries are eligible to receive awards
under the Plan. Awards under the Plan may be granted in any one or a
combination of (a) incentive stock options and nonqualified stock options, (b)
stock appreciation rights, (c) stock awards, (d) performance shares, and (e)
stock units or equivalents.
   The total number of shares of the Corporation's common stock authorized for
distribution under the Plan is 32,000,000. As of December 31, 2001, shares
available for future grants under the Plan totaled 1,323,629.
   Stock Options. Stock options consist of options to purchase common stock at
purchase prices not less than 100% of the fair market value thereof on the date
the option is granted. Options have a maximum ten year life and generally vest
and become exercisable in six months to three years after the date of grant. In
addition, the Plan provides that all options may become exercisable upon a
change of control as defined in the Plan. All options terminate at such time as
determined by the Committee and as provided in the terms and conditions of the
respective option grants.
   Stock and Stock Unit Awards. Under the Plan, stock or stock unit awards can
be granted by the Committee to participants which entitle them to receive a
payment in cash or Northern Trust Corporation common stock under the terms of
the Plan and such other terms and conditions as the Committee deems appropriate.
   Total expense applicable to stock and stock unit awards including dividend
equivalents was $12.7 million in 2001, $8.3 million in 2000, and $4.1 million
in 1999. In 2001, 2000 and 1999, 292,500 stock units, 374,500 stock units and
378,000 stock units, respectively, were granted with a weighted average
grant-date fair value of $67.32, $69.02 and $45.16, respectively. As of
December 31, 2001, restricted stock awards and stock units outstanding totaled
1,457,109 shares, of which 331,626 shares are fully vested with distribution
deferred. These shares vest, subject to continuing employment, over a period of
one to nine years.
   Performance Shares. Under the performance share provisions of the Plan,
participants are entitled to have each award credited to an account maintained
for them if established performance goals are achieved. Distribution of the
award is then made after vesting. The value of shares that have not been
distributed under the Plan is credited to performance share accounts and is
shown in stockholders' equity as Common Stock Issuable-Stock Incentive Plans.
   Total salary expense for performance shares was $19.1 million in 2001, $32.3
million in 2000 and $23.3 million in 1999. As of December 31, 2001, 1,412,000
shares of stock had been credited to performance share accounts subject to
meeting vesting conditions. The last grant under this plan was in 1998.

NORTHERN TRUST CORPORATION




                                       85

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



   A summary of the status of stock options under the Plan at December 31,
2001, 2000 and 1999 and changes during the years then ended is presented in the
table below.

<TABLE>
<CAPTION>
                                                         2001                   2000                 1999
-------------------------------------------------------------------------------------------------------------
                                                          Weighted             Weighted             Weighted
                                                           Average              Average              Average
                                                          Exercise             Exercise             Exercise
                                                  Shares     Price     Shares     Price     Shares     Price
------------------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>      <C>         <C>      <C>         <C>
Options Outstanding, January 1                16,701,201    $35.06 15,992,322    $24.96 15,148,424    $17.83
Granted ($48.62 to $74.44 per share in 2001)   2,756,250     67.83  3,113,450     70.53  3,441,700     45.19
Exercised ($7.75 to $45.16 per share in 2001) (1,363,160)    17.46 (2,364,071)    13.15 (2,518,802)     9.83
Cancelled                                       (106,836)    62.69    (40,500)    49.93    (79,000)    33.95
------------------------------------------------------------------------------------------------------------
Options Outstanding December 31 ($9.42 to
  $83.47 per share)                           17,987,455    $41.27 16,701,201    $35.06 15,992,322    $24.96
------------------------------------------------------------------------------------------------------------
Options Exercisable, December 31              12,104,945    $29.98 10,201,385    $20.91  9,963,322    $15.46
</TABLE>

   The following is a summary of outstanding and exercisable options under the
Plan at December 31, 2001.

<TABLE>
<CAPTION>
                                              Options Outstanding
-----------------------------------------------------------------------------------
                                                           Weighted
                                                            Average       Weighted
                                Number                    Remaining        Average
                           Outstanding Exercisable Contractual Life Exercise Price
----------------------------------------------------------------------------------
<S>                        <C>         <C>         <C>              <C>
$9.42 to $20.00 per share    4,748,109   4,748,109        3.3 years         $12.65
$20.01 to $40.00 per share   4,139,457   4,139,457        6.1 years          31.85
$40.01 to $60.00 per share   3,358,185   2,201,365        7.2 years          45.23
$60.01 to $83.47 per share   5,741,704   1,016,014        8.8 years          69.41
</TABLE>


Director Stock Plan. In January 2000, each non-employee director received a
grant of 2,400 stock units under the Amended 1992 Incentive Stock Plan, with
800 stock units vesting on election or reelection as a director of the
Corporation in each of the years 2000, 2001 and 2002. In 1999, each
non-employee director received a grant of 1,000 shares of common stock under a
prior plan. Directors may elect to defer the payment of their annual stock unit
grant and cash-based compensation until termination of services as director.
Amounts deferred are converted into stock units representing shares of common
stock of the Corporation. Distributions of deferred stock units will be made in
stock. Distributions of the stock unit account that relates to cash-based
compensation will be made in cash based on the fair value of the stock units.

Other Stock-Based Compensation Arrangements. Total salary expense related to
restricted shares granted in conjunction with an acquisition was $2.2 million
in 2001, $2.4 million in 2000 and $2.1 million in 1999. As of December 31,
2001, restricted stock outstanding totaled 535,790 shares.

Pro Forma Information. Pro forma information regarding net income and earnings
per share is required by SFAS No. 123, and has been determined as if the
Corporation had accounted for its stock-based compensation under SFAS No. 123.
For purposes of estimating the fair value of the Corporation's employee stock
options at the grant-date, a Black-Scholes option pricing model was used with
the following weighted average assumptions for 2001, 2000 and 1999,
respectively: risk-free interest rates of 5.36%, 6.41% and 6.60%; dividend
yields of 1.00%, .88% and 1.20%; volatility factors of the expected market
price of the Corporation's common stock of 30.0%, 30.0% and 26.5%; and a
weighted average expected life of the options of 5.9 years, 5.4 years and
5.3 years.
   The weighted average fair value of options granted in 2001, 2000 and 1999
was $24.30, $25.92 and $15.13, respectively. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' six months to three year vesting period. Under SFAS No. 123,
options and awards granted prior to 1995 are not required to be included in the
pro forma information. Because the SFAS No. 123 method of accounting has not
been applied to options and other stock-based compensation granted prior to
January 1, 1995,

                                                     NORTHERN TRUST CORPORATION

                                       86

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the resulting pro forma compensation cost may not be representative of that to
be expected in future years.
   The Corporation's pro forma information follows:

<TABLE>
<CAPTION>
             (In Millions Except
             Per Share Information)          2001    2000    1999
             -----------------------------------------------------
             <S>                           <C>     <C>     <C>
             Net Income as Reported        $487.5  $485.1  $405.0
             Pro Forma Adjustments
               Increase (Decrease) Due To:
               Stock Options                (49.9)  (47.4)  (28.5)
               Performance Shares and
                 Other Arrangements           6.6    13.3     9.7
             ----------------------------- ------  ------  ------
             Pro Forma Net Income          $444.2  $451.0  $386.2
             ----------------------------- ------  ------  ------
             Earnings Per Share as
               Reported:
               Basic                       $ 2.18  $ 2.17  $ 1.81
               Diluted                       2.11    2.08    1.74
             Pro Forma Earnings Per
               Share:
               Basic                       $ 1.99  $ 2.01  $ 1.72
               Diluted                       1.92    1.93    1.66
</TABLE>

26. Cash-Based Compensation Plans--Various incentive plans provide for cash
incentives and bonuses to selected employees based upon accomplishment of
corporate net income objectives, business unit goals and individual
performance. The plans provide for acceleration of benefits in certain
circumstances including a change in control. The estimated contributions to
these plans are charged to salary expense and totaled $99.7 million in 2001,
$139.4 million in 2000 and $116.1 million in 1999.

27. Business Segments and Related Information--Information describing the
Corporation's major business segments is contained in the section titled
Business Segments, found on pages 44 through 48, and is incorporated by
reference.
   The operations of Northern Trust are managed on a business unit basis and
include components of both domestic and foreign source income and assets.
Foreign source income and assets are not separately identified in its internal
management reporting system. However, in order to comply with the financial
reporting requirements of the Securities and Exchange Commission, Northern
Trust is required to disclose foreign activities based on the domicile of the
customer. Due to the complex and integrated nature of its foreign and domestic
activities, it is impossible to segregate with precision revenues, expenses and
assets between its U.S. and foreign domiciled customers. Therefore, certain
subjective estimates and assumptions have been made to allocate revenues,
expenses and assets between domestic and international operations as described
below.
   Northern Trust's international activities are centered in the commercial
banking, treasury activities, foreign exchange, investment management and
global custody businesses of the Bank, three overseas branches, one Edge Act
subsidiary, foreign subsidiaries located in Canada, United Kingdom, Ireland and
Hong Kong, NTGA, and Northern Trust Bank of Florida. Net income from
international operations includes the direct net income contributions of
foreign branches, foreign subsidiaries and the Edge Act subsidiary. The Bank
and Northern Trust Bank of Florida international profit contributions reflect
direct salary and other expenses of the business units, plus expense
allocations for interest, occupancy, overhead and the provision for credit
losses. For purposes of this disclosure, all foreign exchange profits have been
allocated to international operations. The interest expense is allocated to
international operations based on specifically matched or pooled funding.
Allocations of indirect noninterest expenses related to international
activities are not significant but, when made, are based on various methods
such as time, space and number of employees.

NORTHERN TRUST CORPORATION

                                       87

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



   The table below summarizes international performance based on the domicile
of the primary obligor without regard to guarantors or the location of
collateral.

Distribution of Total Assets and Operating Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                            2001                              2000                              1999
------------- --------------------------------- --------------------------------- ---------------------------------
                                  Income                            Income                            Income
                  Total Operating before    Net     Total Operating before    Net     Total Operating before    Net
(In Millions)    Assets   Income*  Taxes Income    Assets   Income*  Taxes Income    Assets   Income*  Taxes Income
-------------------------------------------------------------------------------------------------------------------
<S>           <C>       <C>       <C>    <C>    <C>       <C>       <C>    <C>    <C>       <C>       <C>    <C>
International $ 8,253.2 $  344.5  $188.5 $117.6 $ 7,293.9 $  334.9  $174.5 $108.9 $ 3,244.6 $  256.9  $126.3 $ 78.8
Domestic       31,411.3  1,830.8   543.4  369.9  28,728.4  1,770.7   555.6  376.2  25,463.6  1,497.1   490.2  326.2
-------------------------------------------------------------------------------------------------------------------
Total         $39,664.5 $2,175.3  $731.9 $487.5 $36,022.3 $2,105.6  $730.1 $485.1 $28,708.2 $1,754.0  $616.5 $405.0
</TABLE>

*Operating Income is comprised of net interest income and noninterest income.

28. Acquisitions--On May 2, 2000, Northern Trust completed the purchase
acquisition of Carl Domino Associates, L.P., a registered investment advisor in
West Palm Beach, Florida, for $21 million. Subsequent to acquisition, the
company became an operating division of Northern Trust Investments, Inc. known
as Northern Trust Value Investors. The transaction was recorded under the
purchase method of accounting. Included in the acquisition cost was $15 million
of goodwill and $4 million of other intangibles.
   On May 15, 2000, Northern Trust completed the purchase acquisition of Ulster
Bank Investment Services Limited (UBIS), the IFSC (International Financial
Service Centre) licensed custody and fund administration subsidiary of Ulster
Bank Group for $14.3 million. Subsequent to the acquisition, the company was
renamed Northern Trust (Ireland) Limited. The transaction was recorded under
the purchase method of accounting. Included in the acquisition cost was $4.3
million of goodwill and $4.5 million of other intangibles.
   In accordance with SFAS No. 142, goodwill balances as of January 1, 2002
will not be amortized, and the carrying amount will be subjected to an annual
impairment test. Other intangibles related to these acquisitions, will be
amortized over eight years.

29. Regulatory Capital Requirements--Northern Trust and its subsidiary banks
are subject to various regulatory capital requirements administered by the
federal bank regulatory authorities. Under these requirements, banks must
maintain specific ratios of total and tier 1 capital to risk-weighted assets
and of tier 1 capital to average assets in order to be classified as "well
capitalized." The regulatory capital requirements impose certain restrictions
upon banks that meet minimum capital requirements but are not "well
capitalized" and obligate the federal bank regulatory authorities to take
"prompt corrective action" with respect to banks that do not maintain such
minimum ratios. Such prompt corrective action could have a direct material
effect on a bank's financial statements.
   As of December 31, 2001, each of Northern's subsidiary banks had capital
ratios above the level required for classification as a "well capitalized"
institution and had not received any regulatory notification of a lower
classification. There are no conditions or events since that date that
management believes have adversely affected the capital categorization of any
subsidiary bank for these purposes. The table on the following page summarizes
the risk-based capital amounts and ratios for Northern Trust and for each of
its subsidiary banks whose net income for 2001 exceeded 10% of the consolidated
total.

                                                     NORTHERN TRUST CORPORATION

                                       88

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                         Minimum to Qualify as
                                                        Actual             Well Capitalized
-----------------------------------------------------------------------------------------------
($ In Millions)                                     Amount Ratio           Amount        Ratio
----------------------------------------------------------------------------------------------
<S>                                                 <C>    <C>             <C>        <C>
As of December 31, 2001:
  Total Capital to Risk-Weighted Assets
    Consolidated                                    $3,677  14.3%          $2,580      10.0%
    The Northern Trust Company                       2,662  12.8            2,079      10.0
    Northern Trust Bank of Florida N.A.                340  11.0              309      10.0
  Tier 1 Capital to Risk-Weighted Assets
    Consolidated                                     2,806  10.9            1,548       6.0
    The Northern Trust Company                       1,943   9.3            1,248       6.0
    Northern Trust Bank of Florida N.A.                322  10.4              185       6.0
  Tier 1 Capital (to Fourth Quarter Average Assets)
    Consolidated                                     2,806   7.9            1,769       5.0
    The Northern Trust Company                       1,943   6.7            1,440       5.0
    Northern Trust Bank of Florida N.A.                322   7.7              210       5.0
As of December 31, 2000:
  Total Capital to Risk-Weighted Assets
    Consolidated                                    $3,263  12.9%          $2,539      10.0%
    The Northern Trust Company                       2,430  11.7            2,076      10.0
    Northern Trust Bank of Florida N.A.                304  11.1              275      10.0
  Tier 1 Capital to Risk-Weighted Assets
    Consolidated                                     2,484   9.8            1,523       6.0
    The Northern Trust Company                       1,806   8.7            1,245       6.0
    Northern Trust Bank of Florida N.A.                287  10.4              165       6.0
  Tier 1 Capital (to Fourth Quarter Average Assets)
    Consolidated                                     2,484   6.9            1,797       5.0
    The Northern Trust Company                       1,806   6.0            1,501       5.0
    Northern Trust Bank of Florida N.A.                287   7.6              190       5.0
</TABLE>

   Domestic bank regulatory authorities and international bank supervisory
organizations, principally the Basel Committee on Banking Supervision
(Committee), have proposed for comment and are considering changes to the
risk-based capital adequacy framework that could affect the capital guidelines
applicable to bank holding companies and banks. In December 2001, the Committee
indicated its desire to issue a new consultative package on the new Basel
Capital Accord (BCA) and to complete the BCA by year-end 2002, with
implementation of the BCA capital adequacy framework beginning in 2005. The
Corporation is monitoring the status and progress of the proposed rule and
evaluating the potential impact the BCA, if adopted, would have on the
financial condition or results of the operations of the Corporation and its
banking subsidiaries.

NORTHERN TRUST CORPORATION

                                       89

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



30. Northern Trust Corporation (Corporation only) Condensed financial
information is presented below. Investments in wholly-owned subsidiaries are
carried on the equity method of accounting.

Condensed Balance Sheet
<TABLE>
<CAPTION>
          -------------------------------------------------------------
                                                          December 31
          -------------------------------------------------------------
          (In Millions)                                  2001     2000
          ------------------------------------------------------------
          <S>                                        <C>      <C>
          Assets
          Cash on Deposit with Subsidiary Bank       $     .1 $     .1
          Time Deposits with Banks                      193.9    125.6
          Securities                                     90.1    109.0
          Investments in Wholly-Owned
            Subsidiaries-Bank                         2,554.3  2,360.8
                        -Nonbank                        152.1    151.8
          Loans-Nonbank Subsidiaries                     12.8      9.7
                        -Other                            1.1      2.1
          Buildings and Equipment                         6.8      7.0
          Other Assets                                  279.1    278.3
          ------------------------------------------------------------
          Total Assets                               $3,290.3 $3,044.4
          ------------------------------------------------------------
          Liabilities
          Commercial Paper                           $  137.7 $  142.4
          Long-Term Debt                                276.0    301.0
          Other Liabilities                             103.1    138.8
          ------------------------------------------------------------
          Total Liabilities                             516.8    582.2
          Stockholders' Equity                        2,773.5  2,462.2
          ------------------------------------------------------------
          Total Liabilities and Stockholders' Equity $3,290.3 $3,044.4
</TABLE>

Condensed Statement of Income
<TABLE>
<CAPTION>
        -----------------------------------------------------------------
                                          For the Year Ended December 31
        -----------------------------------------------------------------
        (In Millions)                           2001      2000      1999
        -----------------------------------------------------------------
        <S>                               <C>        <C>       <C>
        Operating Income
        Dividends-Bank Subsidiaries       $310.0     $259.7    $112.0
                 -Nonbank Subsidiaries       7.9       10.7      19.3
        Intercompany Interest and
          Other Charges                      5.8        8.3       7.2
        Interest and Other Income            5.6       10.5       6.1
        -------------------------------------------------------------
        Total Operating Income             329.3      289.2     144.6
        -------------------------------------------------------------
        Operating Expenses
          Interest Expense                  20.3       31.1      26.2
          Other Operating Expenses          10.6       16.4      13.2
        -------------------------------------------------------------
        Total Operating Expenses            30.9       47.5      39.4
        -------------------------------------------------------------
        Income before Income Taxes
          and Equity in Undistributed
          Net Income of Subsidiaries       298.4      241.7     105.2
        Benefit for Income Taxes            13.1       16.9      15.1
        -------------------------------------------------------------
        Income before Equity in
          Undistributed Net Income
          of Subsidiaries                  311.5      258.6     120.3
        Equity in Undistributed
          Net Income of
          Subsidiaries-Bank                170.7      211.0     274.9
                      -Nonbank               5.3       15.5       9.8
        -------------------------------------------------------------
        Net Income                        $487.5     $485.1    $405.0
        -------------------------------------------------------------
        Net Income Applicable to
          Common Stock                    $483.4     $479.4    $400.2
</TABLE>

                                                     NORTHERN TRUST CORPORATION

                                       90

<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Condensed Statement of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        For the Year Ended December 31
-------------------------------------------------------------------------------------------------------
(In Millions)                                                             2001          2000       1999
-------------------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>        <C>
Operating Activities:
Net Income                                                             $ 487.5       $ 485.1    $ 405.0
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
  Activities:
  Equity in Undistributed Net Income of Subsidiaries                    (176.0)       (226.5)    (284.7)
  (Increase) Decrease in Accrued Income                                     .3            .1        (.1)
  Decrease in Prepaid Expenses                                              .8            .8        1.7
  Other, net                                                              46.4          23.5       65.4
-------------------------------------------------------------------------------------------------------
  Net Cash Provided by Operating Activities                              359.0         283.0      187.3
-------------------------------------------------------------------------------------------------------
Investing Activities:
  Net (Increase) Decrease in Time Deposits with Banks                    (68.3)         14.0      (16.1)
  Purchases of Securities                                                (90.3)        (92.6)    (134.6)
  Sales of Securities                                                     49.7          88.6      166.8
  Proceeds from Maturity and Redemption of Securities                     59.0           6.5       10.0
  Net (Increase) Decrease in Capital Investments in Subsidiaries         (15.6)        (25.9)       8.8
  Net Increase in Loans to Subsidiaries                                   (3.1)         (1.4)       (.7)
  Net (Increase) Decrease in Other Loans                                   1.0           1.4       (2.2)
  Other, net                                                             (19.1)         (1.3)       (.3)
-------------------------------------------------------------------------------------------------------
  Net Cash Provided by (Used in) Investing Activities                    (86.7)        (10.7)      31.7
-------------------------------------------------------------------------------------------------------
Financing Activities:
  Net Decrease in Commercial Paper                                        (4.7)         (2.7)      (3.0)
  Repayment of Long-Term Debt                                            (25.0)           --         --
  Repayment of Long-Term Debt Issued to Subsidiaries                        --            --         --
  Treasury Stock Purchased                                              (152.8)       (191.5)    (139.7)
  Cash Dividends Paid on Common and Preferred Stock                     (142.3)       (125.8)    (111.4)
  Net Proceeds from Stock Options                                         19.7          28.4       24.1
  Other, net                                                              32.8          19.3       10.7
-------------------------------------------------------------------------------------------------------
  Net Cash Used in Financing Activities                                 (272.3)       (272.3)    (219.3)
-------------------------------------------------------------------------------------------------------
Net Change in Cash on Deposit with Subsidiary Bank                          --            --        (.3)
Cash on Deposit with Subsidiary Bank at Beginning of Year                   .1            .1         .4
-------------------------------------------------------------------------------------------------------
Cash on Deposit with Subsidiary Bank at End of Year                    $    .1       $    .1    $    .1
</TABLE>

NORTHERN TRUST CORPORATION

                                       91

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of Northern Trust Corporation:
We have audited the accompanying consolidated balance sheet of Northern Trust
Corporation (a Delaware Corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of income, comprehensive
income, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Northern Trust Corporation
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.

                                                            Arthur Andersen LLP

Chicago, Illinois,
January 14, 2002


NORTHERN TRUST CORPORATION

                                       92

<PAGE>

                       CONSOLIDATED FINANCIAL STATISTICS



Quarterly Financial Data
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Income                                     2001                                     2000
----------------------------------------------------------------------------------------------------------------------
($ In Millions Except Per Share        Fourth     Third    Second     First     Fourth     Third    Second     First
Information)                          Quarter   Quarter   Quarter   Quarter    Quarter   Quarter   Quarter   Quarter
---------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>       <C>       <C>       <C>        <C>       <C>       <C>
Trust Fees                          $   304.1     304.3     317.7     305.2  $   304.9     304.7     305.6     286.0
Other Noninterest Income                 82.3      85.5      96.6      84.3       84.9      87.2      87.3      76.4
Net Interest Income
  Interest Income                       342.3     396.1     449.7     493.4      544.1     531.3     499.9     435.8
  Interest Expense                      190.5     247.1     303.3     345.3      398.5     388.5     359.1     296.4
---------------------------------------------------------------------------------------------------------------------
Net Interest Income                     151.8     149.0     146.4     148.1      145.6     142.8     140.8     139.4
Provision for Credit Losses              45.0       5.0      11.5       5.0        5.0       5.0      10.0       4.0
Noninterest Expenses                    339.9     343.6     351.8     341.6      342.3     344.9     338.2     326.1
Provision for Income Taxes               50.9      63.6      66.1      63.8       62.6      61.5      62.5      58.4
---------------------------------------------------------------------------------------------------------------------
Net Income                          $   102.4     126.6     131.3     127.2  $   125.5     123.3     123.0     113.3
---------------------------------------------------------------------------------------------------------------------
Net Income Applicable to
 Common Stock                       $   101.7     125.7     130.2     125.8  $   124.0     121.8     121.6     112.0
---------------------------------------------------------------------------------------------------------------------
Per Common Share
Net Income-Basic                    $     .46       .57       .59       .57  $     .56       .55       .55       .51
          -Diluted                        .45       .55       .57       .55        .54       .53       .53       .49
---------------------------------------------------------------------------------------------------------------------
Average Balance Sheet
Assets
Cash and Due from Banks             $ 1,633.3   1,586.2   1,474.2   1,448.6  $ 1,477.0   1,257.8   1,550.2   1,401.2
Money Market Assets                   7,825.9   5,726.3   4,511.2   4,530.1    5,426.7   3,712.3   4,374.7   4,537.5
Securities                            6,229.9   7,736.6  10,338.7   9,878.4    9,701.0  10,841.8  10,174.6   8,017.9
Loans and Leases                     17,837.5  17,887.6  17,961.4  17,713.9   17,404.0  16,825.3  16,375.4  15,577.2
Reserve for Credit Losses              (159.8)   (158.9)   (163.8)   (165.4)    (160.4)   (158.6)   (157.0)   (152.8)
Other Assets                          2,119.8   2,282.2   2,180.7   2,249.4    2,234.5   1,996.6   2,010.3   1,879.0
---------------------------------------------------------------------------------------------------------------------
Total Assets                        $35,486.6  35,060.0  36,302.4  35,655.0  $36,082.8  34,475.2  34,328.2  31,260.0
---------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders'
  Equity
Deposits
  Demand and Other
    Noninterest-Bearing             $ 4,286.5   3,912.3   4,052.9   4,104.0  $ 4,107.4   3,890.8   3,958.8   3,923.6
  Savings and Other
    Interest-Bearing                  8,092.3   7,840.0   7,925.0   7,971.9    7,618.0   7,366.1   7,444.1   7,439.8
  Other Time                            569.7   1,066.3   1,519.3   1,293.0      732.3   1,197.3   1,139.6     789.2
  Foreign Offices                     9,332.5   9,984.7   9,201.9   9,289.0    9,400.7   8,212.5   8,608.0   8,354.9
---------------------------------------------------------------------------------------------------------------------
  Total Deposits                     22,281.0  22,803.3  22,699.1  22,657.9   21,858.4  20,666.7  21,150.5  20,507.5
Purchased Funds                       7,816.0   6,850.2   8,335.9   7,828.4    9,192.9   8,883.0   8,381.3   6,121.1
Senior Notes                            450.0     492.4     500.0     500.0      500.0     500.0     500.0     512.1
Long-Term Debt                          766.9     767.0     779.3     684.5      638.2     638.3     638.4     644.7
Debt-Floating Rate Capital
 Securities                             267.7     267.7     267.7     267.7      267.6     267.6     267.6     267.6
Other Liabilities                     1,173.6   1,218.7   1,125.5   1,225.7    1,239.0   1,209.0   1,125.7   1,011.6
Stockholders' Equity                  2,731.4   2,660.7   2,594.9   2,490.8    2,386.7   2,310.6   2,264.7   2,195.4
---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders'
 Equity                             $35,486.6  35,060.0  36,302.4  35,655.0  $36,082.8  34,475.2  34,328.2  31,260.0
---------------------------------------------------------------------------------------------------------------------
Analysis of Net Interest Income
Earning Assets                      $31,893.3  31,350.5  32,811.3  32,122.4  $32,531.7  31,379.4  30,924.7  28,132.6
Interest-Related Funds               26,663.8  26,226.3  27,634.1  27,187.6   27,677.3  26,567.6  26,315.3  23,641.3
Noninterest-Related Funds             5,229.5   5,124.2   5,177.2   4,934.8    4,854.4   4,811.8   4,609.4   4,491.3
Net Interest Income (Taxable
 equivalent)                            163.6     161.6     160.7     162.0      159.9     157.1     154.1     150.8
Net Interest Margin (Taxable
 equivalent)                             2.04%     2.05      1.96      2.05       1.96%     1.99      2.00      2.16
---------------------------------------------------------------------------------------------------------------------
Common Stock Dividend and
  Market Price
Dividends                           $    .170      .155      .155      .155  $    .155      .135      .135      .135
Market Price Range-High                 61.44     65.35     70.05     82.25      92.13     90.88     73.31     77.25
                  -Low                  47.70     41.40     57.13     51.94      70.75     64.88     57.38     46.75
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Note: The common stock of Northern Trust Corporation is traded on the Nasdaq
National Market under the symbol NTRS.

                                                     NORTHERN TRUST CORPORATION

                                  93

<PAGE>

                       CONSOLIDATED FINANCIAL STATISTICS


Average Statement of Condition with Analysis of Net Interest Income
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Interest and Rate on a Taxable Equivalent Basis)            2001                      2000
-------------------------------------------------------------------------------------------------------
($ In Millions)                                    Interest    Volume  Rate  Interest    Volume  Rate
------------------------------------------------------------------------------------------------------
<S>                                                <C>      <C>        <C>   <C>      <C>        <C>
Average Earning Assets
Money Market Assets
  Federal Funds Sold and Resell Agreements         $   29.5 $   800.9  3.68% $   40.4 $   642.5  6.29%
  Time Deposits with Banks                            194.3   4,832.0  4.02     206.0   3,822.8  5.39
  Other                                                 1.1      24.7  4.67       3.4      47.8  6.95
------------------------------------------------------------------------------------------------------
Total Money Market Assets                             224.9   5,657.6  3.98     249.8   4,513.1  5.53
------------------------------------------------------------------------------------------------------
Securities
  U.S. Government                                      10.3     186.1  5.52      14.6     237.7  6.13
  Obligations of States and Political Subdivisions     39.8     495.1  8.04      38.7     475.9  8.14
  Federal Agency                                      339.2   7,434.2  4.56     567.6   8,551.9  6.64
  Other                                                27.5     404.7  6.80      31.4     409.4  7.68
  Trading Account                                        .7      13.6  5.45        .9      12.1  7.35
------------------------------------------------------------------------------------------------------
Total Securities                                      417.5   8,533.7  4.89     653.2   9,687.0  6.74
------------------------------------------------------------------------------------------------------
Loans and Leases                                    1,091.7  17,850.5  6.12   1,161.4  16,548.6  7.02
------------------------------------------------------------------------------------------------------
Total Earning Assets                               $1,734.1  32,041.8  5.41% $2,064.4  30,748.7  6.71%
------------------------------------------------------------------------------------------------------
Reserve for Credit Losses                                --    (162.0)   --        --    (157.2)   --
Cash and Due from Banks                                  --   1,536.2    --        --   1,421.3    --
Other Assets                                             --   2,208.0    --        --   2,030.5    --
------------------------------------------------------------------------------------------------------
Total Assets                                             -- $35,624.0    --        -- $34,043.3    --
------------------------------------------------------------------------------------------------------
Average Source of Funds
Deposits
  Savings and Money Market                         $  163.4 $ 5,753.6  2.84% $  206.8 $ 5,203.9  3.97%
  Savings Certificates                                114.2   2,203.7  5.18     133.0   2,263.3  5.88
  Other Time                                           55.0   1,110.0  4.96      59.1     964.6  6.13
  Foreign Offices Time                                313.3   8,649.2  3.62     431.4   8,064.5  5.35
------------------------------------------------------------------------------------------------------
Total Deposits                                        645.9  17,716.5  3.65     830.3  16,496.3  5.03
Federal Funds Purchased                               109.8   2,839.0  3.87     167.8   2,644.7  6.34
Securities Sold under Agreements to Repurchase         58.0   1,474.1  3.93      91.8   1,476.4  6.22
Commercial Paper                                        5.6     137.5  4.05       8.8     138.3  6.40
Other Borrowings                                      168.6   3,254.6  5.18     245.2   3,890.0  6.30
Senior Notes                                           33.4     485.5  6.88      34.4     503.0  6.82
Long-Term Debt                                         51.4     749.7  6.86      44.8     639.9  7.01
Debt-Floating Rate Capital Securities                  13.5     267.7  5.03      19.4     267.6  7.25
------------------------------------------------------------------------------------------------------
Total Interest-Related Funds                        1,086.2  26,924.6  4.03   1,442.5  26,056.2  5.54
------------------------------------------------------------------------------------------------------
Interest Rate Spread                                     --        --  1.38        --        --  1.17
Noninterest-Related Deposits                             --   4,893.4    --        --   4,550.6    --
Other Liabilities                                        --   1,185.8    --        --   1,146.8    --
Stockholders' Equity                                     --   2,620.2    --        --   2,289.7    --
------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity               -- $35,624.0    --        -- $34,043.3    --
------------------------------------------------------------------------------------------------------
Net Interest Income/Margin                         $  647.9        --  2.02% $  621.9        --  2.02%
------------------------------------------------------------------------------------------------------
Net Interest Income/Margin Components
Domestic                                           $  602.3 $26,363.8  2.29% $  606.0 $26,143.9  2.32%
International                                          45.6   5,678.0   .80      15.9   4,604.8   .35
------------------------------------------------------------------------------------------------------
Consolidated                                       $  647.9 $32,041.8  2.02% $  621.9 $30,748.7  2.02%
------------------------------------------------------------------------------------------------------
</TABLE>

Notes-Average volume includes nonaccrual loans.
     -Total interest income includes adjustments on loans and securities to a
      taxable equivalent basis. Such adjustments are based on the U.S. federal
      income tax rate (35%) and State of Illinois income tax rate (7.18%). Lease
      financing receivable balances are reduced by deferred income. Total
      taxable equivalent interest adjustments amounted to $52.6 million in 2001,
      $53.3 million in 2000, $38.6 million in 1999, $35.9 million in 1998 and
      $32.7 million in 1997.

NORTHERN TRUST CORPORATION

                                       94

<PAGE>


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
           1999                        1998                      1997
---------------------------------------------------------------------------------
 Interest      Volume  Rate  Interest    Volume  Rate  Interest    Volume  Rate
--------------------------------------------------------------------------------
<S>         <C>        <C>   <C>      <C>        <C>   <C>      <C>        <C>
$    55.8   $ 1,095.7  5.09% $   53.0 $   967.5  5.48% $   45.9 $   815.3  5.63%
    164.3     3,562.0  4.61     155.0   2,827.1  5.48     133.5   2,574.7  5.18
      4.2        79.6  5.36       2.7      44.1  6.14       3.0      52.6  5.68
-------------------------------------------------------------------------------
    224.3     4,737.3  4.74     210.7   3,838.7  5.49     182.4   3,442.6  5.30
-------------------------------------------------------------------------------
     15.5       285.3  5.43      22.4     374.2  5.99      48.8     822.9  5.94
     40.5       497.4  8.15      38.2     434.0  8.81      38.1     408.8  9.32
    363.6     6,838.5  5.32     362.1   6,385.0  5.67     281.9   4,890.1  5.77
     21.7       322.7  6.72      18.3     265.8  6.87      14.9     243.4  6.11
       .8        12.5  6.58        .8      11.8  6.53        .7       9.0  7.33
-------------------------------------------------------------------------------
    442.1     7,956.4  5.56     441.8   7,470.8  5.91     384.4   6,374.2  6.03
-------------------------------------------------------------------------------
    940.8    14,547.8  6.47     886.5  13,315.0  6.66     798.7  11,812.9  6.76
-------------------------------------------------------------------------------
 $1,607.2    27,241.5  5.90% $1,539.0  24,624.5  6.25% $1,365.5  21,629.7  6.32%
-------------------------------------------------------------------------------
       --      (148.4)   --        --    (147.1)   --        --    (148.1)   --
       --     1,368.0    --        --   1,205.7    --        --   1,095.4    --
       --     1,715.9    --        --   1,507.6    --        --   1,474.7    --
-------------------------------------------------------------------------------
       --   $30,177.0    --        -- $27,190.7    --        -- $24,051.7    --
-------------------------------------------------------------------------------
$   155.6   $ 4,845.3  3.21% $  141.3 $ 4,263.3  3.31% $  125.8 $ 3,895.4  3.23%
    117.3     2,191.0  5.35     122.1   2,144.5  5.69     117.2   2,035.8  5.76
     32.7       650.5  5.03      30.6     571.8  5.35      39.4     717.3  5.50
    286.3     6,592.1  4.34     286.4   5,781.7  4.95     239.8   4,971.2  4.82
-------------------------------------------------------------------------------
    591.9    14,278.9  4.15     580.4  12,761.3  4.55     522.2  11,619.7  4.49
    161.0     3,226.1  4.99     139.8   2,620.6  5.34      92.4   1,690.2  5.47
     95.8     1,954.5  4.90      80.2   1,506.0  5.33      81.7   1,519.9  5.38
      7.3       141.0  5.15       8.0     145.9  5.51       7.9     142.7  5.54
    109.2     2,177.3  5.02     132.3   2,540.4  5.21     112.4   2,120.9  5.30
     30.6       579.5  5.28      36.5     653.3  5.58      30.9     539.3  5.75
     37.9       545.3  6.96      31.8     445.8  7.14      32.6     435.8  7.48
     16.1       267.5  6.02      16.9     267.4  6.32      14.5     224.1  6.49
-------------------------------------------------------------------------------
  1,049.8    23,170.1  4.53   1,025.9  20,940.7  4.90     894.6  18,292.6  4.89
-------------------------------------------------------------------------------
       --          --  1.37        --        --  1.35        --        --  1.43
       --     4,086.0    --        --   3,731.8    --        --   3,450.3    --
       --       865.2    --        --     693.6    --        --     679.3    --
       --     2,055.7    --        --   1,824.6    --        --   1,629.5    --
-------------------------------------------------------------------------------
       --   $30,177.0    --        -- $27,190.7    --        -- $24,051.7    --
-------------------------------------------------------------------------------
$   557.4          --  2.05% $  513.1        --  2.08% $  470.9        --  2.18%
-------------------------------------------------------------------------------
$   545.7   $23,131.3  2.36% $  502.7 $21,118.7  2.38% $  466.0 $18,492.2  2.52%
     11.7     4,110.2   .30      10.4   3,505.8   .30       4.9   3,137.5   .16
-------------------------------------------------------------------------------
$   557.4   $27,241.5  2.05% $  513.1 $24,624.5  2.08% $  470.9 $21,629.7  2.18%
-------------------------------------------------------------------------------
</TABLE>

                                                     NORTHERN TRUST CORPORATION

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<PAGE>


CORPORATE STRUCTURE

NORTHERN TRUST CORPORATION
50 South La Salle Street, Chicago, Illinois 60675
(312) 630-6000

Principal Subsidiary

The Northern Trust Company
50 South La Salle Street, Chicago, Illinois 60675

        120 East Oak Street, Chicago, Illinois 60611
        201 East Huron Street, Chicago, Illinois 60611
        125 South Wacker Drive, Chicago, Illinois 60675
        2814 West Fullerton Avenue, Chicago, Illinois 60647
        7801 South State Street, Chicago, Illinois 60619
        8501 West Higgins Road, Chicago, Illinois 60631
        770 W. Northwest Highway, Barrington, Illinois 60010
        2550 Waukegan Road, Glenview, Illinois 60025
        579 Central Avenue, Highland Park, Illinois 60035
        4 North Washington Street, Hinsdale, Illinois 60521
        120 East Scranton Avenue, Lake Bluff, Illinois 60044
        265 Deerpath Road, Lake Forest, Illinois 60045
        959 South Waukegan Road, Lake Forest, Illinois 60045
        701 South McKinley Road, Lake Forest, Illinois 60045
        400 East Diehl Road, Naperville, Illinois 60563
        One Oakbrook Terrace, Oakbrook Terrace, Illinois 60181
        1501 Woodfield Road, Schaumburg, Illinois 60173
        62 Green Bay Road, Winnetka, Illinois 60093

        London Branch
        155 Bishopsgate, London EC2M 3XS, United Kingdom

        Cayman Islands Branch
        P.O. Box 501, Georgetown, Cayman Islands,
        British West Indies

        Singapore Branch
        80 Raffles Place 46th Floor, UOB Plaza 1,
        Singapore 048624


Subsidiaries of The Northern Trust Company

The Northern Trust
International Banking Corporation
40 Broad Street, 10th Floor
New York, New York 10004

        The Northern Trust Company
        of Hong Kong Limited
        Suite 703-4 One Pacific Place
        88 Queensway, Hong Kong

        Northern Trust Trade Services Limited
        7/F CITIC Tower, 1 Tim Mei Avenue,
        Central, Hong Kong

        Northern Trust Fund Managers (Ireland) Limited
        George's Quay House
        43 Townsend Street
        Dublin 2, Ireland

        Northern Trust Global Investments (Europe) Limited
        6 Devonshire Square
        London, EC2A 4YE, United Kingdom

        Northern Trust (Ireland) Limited
                Northern Trust Investor Services (Ireland) Limited
                Northern Trust Custodial Services (Ireland) Limited
                Northern Trust Fund Services (Ireland) Limited
                George's Quay House
                43 Townsend Street
                Dublin 2, Ireland

Northern Trust Investments, Inc.
50 South La Salle Street, Chicago, Illinois 60675

Norlease, Inc.
50 South La Salle Street, Chicago, Illinois 60675

The Northern Trust Company, Canada
161 Bay Street, Suite 4540, B.C.E. Place
Toronto, Ontario, Canada M5J 2S1

NTG Services LLC
155 Bishopsgate, London
EC2M 3XS, United Kingdom

        NT Mortgage Holdings LLC
        50 South La Salle Street
        Chicago, Illinois 60675


Other Subsidiaries of the Corporation

Northern Trust Bank of Florida N.A.

700 Brickell Avenue, Miami, Florida 33131
595 Biltmore Way, Coral Gables, Florida 33134
328 Crandon Boulevard, Suite 101,
        Key Biscayne, Florida 33149
3001 Aventura Boulevard, Aventura, Florida 33180
8600 NW 17th Street, Suite 120, Miami, Florida 33126
1100 East Las Olas Boulevard,
        Fort Lauderdale, Florida 33301
2601 East Oakland Park Boulevard,
        Fort Lauderdale, Florida 33306
2300 Weston Road, Weston, Florida 33326
301 Yamato Road, Boca Raton, Florida 33431
770 East Atlantic Avenue, Delray Beach, Florida 33483
440 Royal Palm Way, Palm Beach, Florida 33480
11301 U.S. Highway 1, Suite 100,
        North Palm Beach, Florida 33408
2201 S.E. Kingswood Terrace, Monterey Commons,
        Stuart, Florida 34996
755 Beachland Boulevard, Vero Beach, Florida 32963
1440 South AlA, Vero Beach, Florida 32963
4001 Tamiami Trail North, Naples, Florida 34103
375 Fifth Avenue South, Naples, Florida 34102
26790 South Tamiami Trail, Bonita Springs, Florida 34134
8060 College Parkway S.W., Fort Myers, Florida 33919
1515 Ringling Boulevard, Sarasota, Florida 34236

                                       98

<PAGE>

901  Venetia Bay Boulevard, Suite 100, Venice, Florida 34292
540  Bay Isles Road, Longboat Key, Florida 34228
233  15th Street West, Bradenton, Florida 34205
6320 Venture Drive, Suite 100, Bradenton, Florida 34202
525  Indian Rocks Road, Belleair Bluffs, Florida 33770
100  Second Avenue South, St. Petersburg, Florida 33701
425  North Florida Avenue, Tampa, Florida 33602

Northern Trust Cayman International, Ltd.
P.O. Box 1586, Georgetown, Grand Cayman,
Cayman Islands, British West Indies

Northern Trust Bank, N.A.

2398 East Camelback Road, Phoenix, Arizona 85016
7600 E. Doubletree Ranch Road, Scottsdale, Arizona 85258
7501 East Thompson Peak Parkway, Scottsdale, Arizona 85255
8525 East Pinnacle Peak Road, Scottsdale, Arizona 85255
10220 West Bell Road, Sun City, Arizona 85351
10015 West Royal Oak Road, Sun City, Arizona 85351
19432 R. H. Johnson Boulevard, Sun City West, Arizona 85375
1525 South Greenfield Road, Mesa, Arizona 85206
23714 South Alma School Road, Sun Lakes, Arizona 85248
6373 East Tanque Verde Road, Tucson, Arizona 85715
3450 East Sunrise Drive, Tucson, Arizona 85718
16  Market Square, 1573 Market Street, Denver, Colorado 80202

Northern Trust Bank of California N.A.

355 South Grand Avenue, Suite 2600, Los Angeles, California 90071
16 Corporate Plaza, Newport Beach, California 92660
4370 La Jolla Village Drive, Suite 1000, San Diego, California 92122
1125 Wall Street, La Jolla, California 92037
206 East Anapamu Street, Santa Barbara, California 93101
1485 East Valley Road, (Montecito), Santa Barbara, California 93 108
580 California Street, Suite 1800, San Francisco, California 94104
575 Redwood Highway, Mill Valley, California 94941
10877 Wilshire Boulevard (Westwood), Los Angeles, California 90024
74-900 Highway 111, Suite 121, Indian Wells, California 92210
300 Third Street, Suite 11, Los Altos, California 94022

Northern Trust Bank of Texas N.A.

2020 Ross Avenue, Dallas, Texas 75201
5540 Preston Road, Dallas, Texas 75205
16475 Dallas Parkway, Addison, Texas
75001 2701 Kirby Drive, Houston, Texas 77098
600 Bering Drive, Houston, Texas 77057
10000 Memorial Drive, Houston, Texas 77024
600 Congress Avenue, Austin, Texas 78701

Northern Trust Bank, FSB

      Michigan
      40701 Woodward Avenue, Suite 110, Bloomfield Hills, Michigan 48304
      161 Ottawa Avenue, Northwest, Suites 111 and 114, Grand Rapids,
            Michigan 49503
      16980 Kercheval, Grosse Pointe, Michigan 48230

      Missouri
      190 Carondelet Plaza, St. Louis, Missouri 63105

      Nevada
      725 1 West Lake Mead Boulevard, 3rd Floor, Las Vegas, Nevada 89128

      Ohio
      127 Public Square, Suite 5150, Cleveland, Ohio 44114

      Washington
      1414 Fourth Avenue, Seattle, Washington 98101 Wisconsin
      526 East Wisconsin Avenue, Milwaukee, Wisconsin 53202

Northern Trust Global Advisors, Inc.
300 Atlantic Street, Suite 400, Stamford, Connecticut 06901

      The Northern Trust Company of Connecticut
      300 Atlantic Street, Suite 400, Stamford, Connecticut 06901

      NT Global Advisors, Inc.
      161 Bay Street, Suite 4540, B.C.E. Place, Toronto, Ontario, Canada M5J 2S1

      NT Fund Advisors of Quebec, Inc.
      770 Sherbrooke Street West, Suite 1420, Montreal, Quebec, Canada H3A 1Gl

      Northern Trust Global Advisors, Limited
      155 Bishopsgate, London EC2M 3XS, United Kingdom

The Northern Trust Company of New York
40 Broad Street, New York, New York 10004

Northern Trust Securities, Inc.
50 South La Salle Street, Chicago, Illinois 60675

Northern Trust Retirement Consulting LLC
3003 Summit Boulevard, Suite 100, Atlanta, Georgia 30319
20020 120th Avenue Northeast, Suite 200 Bothell, Washington 98011

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</TEXT>
</DOCUMENT>
